Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

2013 State Income Tax Forms

Free Tax Amended ReturnHr Block Free Tax FilePrior Year Tax ReturnForm 1040ez 20122011 Form 1040Form 1040ez More:label_form_201040ez More:taxesEfile 2012Irs Gov Forms 1040xWww Gov Freefile2012 Federal Tax Return FormsFile Last Years TaxesMyfreetaxes De ComFiling An Amended Tax Return1040x OnlineHow Much Does H And R Block Charge For TaxesHow To File An Amended ReturnFiling Amended Tax ReturnFile State And Federal Taxes Online Free2011 Federal Tax Forms 1040 Ez1040ez Help1040 Income Tax FormAmend My Tax Return OnlineIl 1040xEz1040Irs Amended Tax ReturnAmend 2011 Tax ReturnAmended Tax Return More:label_amended_20tax_20return More:bizfinanceE File 2010 Taxes For FreeHow To File 1040ez Online For FreeAmend Federal TaxesAmended Tax Return 20122011 Form 1040Filing Tax Return OnlineHr Block Free State FileHow To File An Amended Federal Tax Return2011 1040Irs 1040ez 2013 Form And InstructionsHow To File 2009 Taxes In 2013Free Turbo Tax 2011Free Tax Returns

2013 State Income Tax Forms

2013 state income tax forms Publication 502 - Main Content Table of Contents What Are Medical Expenses? What Expenses Can You Include This Year?Community property states. 2013 state income tax forms How Much of the Expenses Can You Deduct? Whose Medical Expenses Can You Include?Spouse Dependent Decedent What Medical Expenses Are Includible?Abortion Acupuncture Alcoholism Ambulance Annual Physical Examination Artificial Limb Artificial Teeth Bandages Birth Control Pills Body Scan Braille Books and Magazines Breast Pumps and Supplies Breast Reconstruction Surgery Capital Expenses Car Chiropractor Christian Science Practitioner Contact Lenses Crutches Dental Treatment Diagnostic Devices Disabled Dependent Care Expenses Drug Addiction Drugs Eye Exam Eyeglasses Eye Surgery Fertility Enhancement Founder's Fee Guide Dog or Other Service Animal Health Institute Health Maintenance Organization (HMO) Hearing Aids Home Care Home Improvements Hospital Services Insurance Premiums Intellectually and Developmentally Disabled, Special Home for Laboratory Fees Lactation Expenses Lead-Based Paint Removal Learning Disability Legal Fees Lifetime Care—Advance Payments Lodging Long-Term Care Meals Medical Conferences Medical Information Plan Medicines Nursing Home Nursing Services Operations Optometrist Organ Donors Osteopath Oxygen Physical Examination Pregnancy Test Kit Prosthesis Psychiatric Care Psychoanalysis Psychologist Special Education Sterilization Stop-Smoking Programs Surgery Telephone Television Therapy Transplants Transportation Trips Tuition Vasectomy Vision Correction Surgery Weight-Loss Program Wheelchair Wig X-ray What Expenses Are Not Includible?Baby Sitting, Childcare, and Nursing Services for a Normal, Healthy Baby Controlled Substances Cosmetic Surgery Dancing Lessons Diaper Service Electrolysis or Hair Removal Flexible Spending Account Funeral Expenses Future Medical Care Hair Transplant Health Club Dues Health Coverage Tax Credit Health Savings Accounts Household Help Illegal Operations and Treatments Insurance Premiums Maternity Clothes Medical Savings Account (MSA) Medicines and Drugs From Other Countries Nonprescription Drugs and Medicines Nutritional Supplements Personal Use Items Swimming Lessons Teeth Whitening Veterinary Fees Weight-Loss Program How Do You Treat Reimbursements?Insurance Reimbursement How Do You Figure and Report the Deduction on Your Tax Return?What Tax Form Do You Use? Sale of Medical Equipment or Property Damages for Personal Injuries Impairment-Related Work Expenses Health Insurance Costs for Self-Employed Persons COBRA Premium Assistance Health Coverage Tax CreditWho Can Take This Credit? Qualifying Family Member Qualified Health Insurance Nonqualified Health Insurance Eligible Coverage Month How To Take the Credit How To Get Tax HelpLow Income Taxpayer Clinics What Are Medical Expenses? Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. 2013 state income tax forms These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. 2013 state income tax forms They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. 2013 state income tax forms Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. 2013 state income tax forms They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation. 2013 state income tax forms Medical expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for transportation to get medical care. 2013 state income tax forms Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract. 2013 state income tax forms What Expenses Can You Include This Year? You can include only the medical and dental expenses you paid this year, regardless of when the services were provided. 2013 state income tax forms (But see Decedent under Whose Medical Expenses Can You Include, for an exception. 2013 state income tax forms ) If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. 2013 state income tax forms 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. 2013 state income tax forms If you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged. 2013 state income tax forms If you did not claim a medical or dental expense that would have been deductible in an earlier year, you can file Form 1040X, Amended U. 2013 state income tax forms S. 2013 state income tax forms Individual Income Tax Return, for the year in which you overlooked the expense. 2013 state income tax forms Do not claim the expense on this year's return. 2013 state income tax forms Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. 2013 state income tax forms You cannot include medical expenses that were paid by insurance companies or other sources. 2013 state income tax forms This is true whether the payments were made directly to you, to the patient, or to the provider of the medical services. 2013 state income tax forms Separate returns. 2013 state income tax forms   If you and your spouse live in a noncommunity property state and file separate returns, each of you can include only the medical expenses each actually paid. 2013 state income tax forms Any medical expenses paid out of a joint checking account in which you and your spouse have the same interest are considered to have been paid equally by each of you, unless you can show otherwise. 2013 state income tax forms Community property states. 2013 state income tax forms   If you and your spouse live in a community property state and file separate returns or are registered domestic partners in Nevada, Washington, or California, any medical expenses paid out of community funds are divided equally. 2013 state income tax forms Generally, each of you should include half the expenses. 2013 state income tax forms If medical expenses are paid out of the separate funds of one individual, only the individual who paid the medical expenses can include them. 2013 state income tax forms If you live in a community property state and are not filing a joint return, see Publication 555, Community Property. 2013 state income tax forms How Much of the Expenses Can You Deduct? Generally, you can deduct on Schedule A (Form 1040) only the amount of your medical and dental expenses that is more than 10% of your AGI. 2013 state income tax forms But if either you or your spouse was born before January 2, 1949, you can deduct the amount of your medical and dental expenses that is more than 7. 2013 state income tax forms 5% of your AGI. 2013 state income tax forms Example. 2013 state income tax forms You are unmarried and were born after January 2, 1949, and your AGI is $40,000, 10% of which is $4,000. 2013 state income tax forms You paid medical expenses of $2,500. 2013 state income tax forms You cannot deduct any of your medical expenses because they are not more than 10% of your AGI. 2013 state income tax forms Whose Medical Expenses Can You Include? You can generally include medical expenses you pay for yourself, as well as those you pay for someone who was your spouse or your dependent either when the services were provided or when you paid for them. 2013 state income tax forms There are different rules for decedents and for individuals who are the subject of multiple support agreements. 2013 state income tax forms See Support claimed under a multiple support agreement , later under Qualifying Relative. 2013 state income tax forms Spouse You can include medical expenses you paid for your spouse. 2013 state income tax forms To include these expenses, you must have been married either at the time your spouse received the medical services or at the time you paid the medical expenses. 2013 state income tax forms Example 1. 2013 state income tax forms Mary received medical treatment before she married Bill. 2013 state income tax forms Bill paid for the treatment after they married. 2013 state income tax forms Bill can include these expenses in figuring his medical expense deduction even if Bill and Mary file separate returns. 2013 state income tax forms If Mary had paid the expenses, Bill could not include Mary's expenses in his separate return. 2013 state income tax forms Mary would include the amounts she paid during the year in her separate return. 2013 state income tax forms If they filed a joint return, the medical expenses both paid during the year would be used to figure their medical expense deduction. 2013 state income tax forms Example 2. 2013 state income tax forms This year, John paid medical expenses for his wife Louise, who died last year. 2013 state income tax forms John married Belle this year and they file a joint return. 2013 state income tax forms Because John was married to Louise when she received the medical services, he can include those expenses in figuring his medical expense deduction for this year. 2013 state income tax forms Dependent You can include medical expenses you paid for your dependent. 2013 state income tax forms For you to include these expenses, the person must have been your dependent either at the time the medical services were provided or at the time you paid the expenses. 2013 state income tax forms A person generally qualifies as your dependent for purposes of the medical expense deduction if both of the following requirements are met. 2013 state income tax forms The person was a qualifying child (defined later) or a qualifying relative (defined later), and The person was a U. 2013 state income tax forms S. 2013 state income tax forms citizen or national or a resident of the United States, Canada, or Mexico. 2013 state income tax forms If your qualifying child was adopted, see Exception for adopted child , later. 2013 state income tax forms You can include medical expenses you paid for an individual that would have been your dependent except that: He or she received gross income of $3,900 or more in 2013, He or she filed a joint return for 2013, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. 2013 state income tax forms Exception for adopted child. 2013 state income tax forms   If you are a U. 2013 state income tax forms S. 2013 state income tax forms citizen or national and your adopted child lived with you as a member of your household for 2013, that child does not have to be a U. 2013 state income tax forms S. 2013 state income tax forms citizen or national, or a resident of the United States, Canada, or Mexico. 2013 state income tax forms Qualifying Child A qualifying child is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a full-time student, and younger than you (or your spouse, if filing jointly), or Any age and permanently and totally disabled, Lived with you for more than half of 2013, Did not provide over half of his or her own support for 2013, and Did not file a joint return, other than to claim a refund. 2013 state income tax forms Adopted child. 2013 state income tax forms   A legally adopted child is treated as your own child. 2013 state income tax forms This child includes a child lawfully placed with you for legal adoption. 2013 state income tax forms   You can include medical expenses that you paid for a child before adoption if the child qualified as your dependent when the medical services were provided or when the expenses were paid. 2013 state income tax forms   If you pay back an adoption agency or other persons for medical expenses they paid under an agreement with you, you are treated as having paid those expenses provided you clearly substantiate that the payment is directly attributable to the medical care of the child. 2013 state income tax forms   But if you pay the agency or other person for medical care that was provided and paid for before adoption negotiations began, you cannot include them as medical expenses. 2013 state income tax forms    You may be able to take a credit for other expenses related to an adoption. 2013 state income tax forms See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. 2013 state income tax forms Child of divorced or separated parents. 2013 state income tax forms   For purposes of the medical and dental expenses deduction, a child of divorced or separated parents can be treated as a dependent of both parents. 2013 state income tax forms Each parent can include the medical expenses he or she pays for the child, even if the other parent claims the child's dependency exemption, if: The child is in the custody of one or both parents for more than half the year, The child receives over half of his or her support during the year from his or her parents, and The child's parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Live apart at all times during the last 6 months of the year. 2013 state income tax forms This does not apply if the child's exemption is being claimed under a multiple support agreement (discussed later). 2013 state income tax forms Qualifying Relative A qualifying relative is a person: Who is your: Son, daughter, stepchild, or foster child, or a descendant of any of them (for example, your grandchild), Brother, sister, half brother, half sister, or a son or daughter of any of them, Father, mother, or an ancestor or sibling of either of them (for example, your grandmother, grandfather, aunt, or uncle), Stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, or Any other person (other than your spouse) who lived with you all year as a member of your household if your relationship did not violate local law, Who was not a qualifying child (see Qualifying Child, earlier) of any taxpayer for 2013, and For whom you provided over half of the support in 2013. 2013 state income tax forms But see Child of divorced or separated parents , earlier, Support claimed under a multiple support agreement, next, and Kidnapped child under Qualifying Relative in Publication 501. 2013 state income tax forms Support claimed under a multiple support agreement. 2013 state income tax forms   If you are considered to have provided more than half of a qualifying relative's support under a multiple support agreement, you can include medical expenses you pay for that person. 2013 state income tax forms A multiple support agreement is used when two or more people provide more than half of a person's support, but no one alone provides more than half. 2013 state income tax forms   Any medical expenses paid by others who joined you in the agreement cannot be included as medical expenses by anyone. 2013 state income tax forms However, you can include the entire unreimbursed amount you paid for medical expenses. 2013 state income tax forms Example. 2013 state income tax forms You and your three brothers each provide one-fourth of your mother's total support. 2013 state income tax forms Under a multiple support agreement, you treat your mother as your dependent. 2013 state income tax forms You paid all of her medical expenses. 2013 state income tax forms Your brothers repaid you for three-fourths of these expenses. 2013 state income tax forms In figuring your medical expense deduction, you can include only one-fourth of your mother's medical expenses. 2013 state income tax forms Your brothers cannot include any part of the expenses. 2013 state income tax forms However, if you and your brothers share the nonmedical support items and you separately pay all of your mother's medical expenses, you can include the unreimbursed amount you paid for her medical expenses in your medical expenses. 2013 state income tax forms Decedent Medical expenses paid before death by the decedent are included in figuring any deduction for medical and dental expenses on the decedent's final income tax return. 2013 state income tax forms This includes expenses for the decedent's spouse and dependents as well as for the decedent. 2013 state income tax forms The survivor or personal representative of a decedent can choose to treat certain expenses paid by the decedent's estate for the decedent's medical care as paid by the decedent at the time the medical services were provided. 2013 state income tax forms The expenses must be paid within the 1-year period beginning with the day after the date of death. 2013 state income tax forms If you are the survivor or personal representative making this choice, you must attach a statement to the decedent's Form 1040 (or the decedent's amended return, Form 1040X) saying that the expenses have not been and will not be claimed on the estate tax return. 2013 state income tax forms Qualified medical expenses paid before death by the decedent are not deductible if paid with a tax-free distribution from any Archer MSA, Medicare Advantage MSA, or health savings account. 2013 state income tax forms What if the decedent's return had been filed and the medical expenses were not included?   Form 1040X can be filed for the year or years the expenses are treated as paid, unless the period for filing an amended return for that year has passed. 2013 state income tax forms Generally, an amended return must be filed within 3 years of the date the original return was filed, or within 2 years from the time the tax was paid, whichever date is later. 2013 state income tax forms Example. 2013 state income tax forms John properly filed his 2012 income tax return. 2013 state income tax forms He died in 2013 with unpaid medical expenses of $1,500 from 2012 and $1,800 in 2013. 2013 state income tax forms If the expenses are paid within the 1-year period, his survivor or personal representative can file an amended return for 2012 claiming a deduction based on the $1,500 medical expenses. 2013 state income tax forms The $1,800 of medical expenses from 2013 can be included on the decedent's final return for 2013. 2013 state income tax forms What if you pay medical expenses of a deceased spouse or dependent?   If you paid medical expenses for your deceased spouse or dependent, include them as medical expenses on your Form 1040 in the year paid, whether they are paid before or after the decedent's death. 2013 state income tax forms The expenses can be included if the person was your spouse or dependent either at the time the medical services were provided or at the time you paid the expenses. 2013 state income tax forms What Medical Expenses Are Includible? Following is a list of items that you can include in figuring your medical expense deduction. 2013 state income tax forms The items are listed in alphabetical order. 2013 state income tax forms This list does not include all possible medical expenses. 2013 state income tax forms To determine if an expense not listed can be included in figuring your medical expense deduction, see What Are Medical Expenses , earlier. 2013 state income tax forms Abortion You can include in medical expenses the amount you pay for a legal abortion. 2013 state income tax forms Acupuncture You can include in medical expenses the amount you pay for acupuncture. 2013 state income tax forms Alcoholism You can include in medical expenses amounts you pay for an inpatient's treatment at a therapeutic center for alcohol addiction. 2013 state income tax forms This includes meals and lodging provided by the center during treatment. 2013 state income tax forms You can also include in medical expenses amounts you pay for transportation to and from Alcoholics Anonymous meetings in your community if the attendance is pursuant to medical advice that membership in Alcoholics Anonymous is necessary for the treatment of a disease involving the excessive use of alcoholic liquors. 2013 state income tax forms Ambulance You can include in medical expenses amounts you pay for ambulance service. 2013 state income tax forms Annual Physical Examination See Physical Examination , later. 2013 state income tax forms Artificial Limb You can include in medical expenses the amount you pay for an artificial limb. 2013 state income tax forms Artificial Teeth You can include in medical expenses the amount you pay for artificial teeth. 2013 state income tax forms Bandages You can include in medical expenses the cost of medical supplies such as bandages. 2013 state income tax forms Birth Control Pills You can include in medical expenses the amount you pay for birth control pills prescribed by a doctor. 2013 state income tax forms Body Scan You can include in medical expenses the cost of an electronic body scan. 2013 state income tax forms Braille Books and Magazines You can include in medical expenses the part of the cost of Braille books and magazines for use by a visually impaired person that is more than the cost of regular printed editions. 2013 state income tax forms Breast Pumps and Supplies You can include in medical expenses the cost of breast pumps and supplies that assist lactation. 2013 state income tax forms Breast Reconstruction Surgery You can include in medical expenses the amounts you pay for breast reconstruction surgery, as well as breast prosthesis, following a mastectomy for cancer. 2013 state income tax forms See Cosmetic Surgery , later. 2013 state income tax forms Capital Expenses You can include in medical expenses amounts you pay for special equipment installed in a home, or for improvements, if their main purpose is medical care for you, your spouse, or your dependent. 2013 state income tax forms The cost of permanent improvements that increase the value of your property may be partly included as a medical expense. 2013 state income tax forms The cost of the improvement is reduced by the increase in the value of your property. 2013 state income tax forms The difference is a medical expense. 2013 state income tax forms If the value of your property is not increased by the improvement, the entire cost is included as a medical expense. 2013 state income tax forms Certain improvements made to accommodate a home to your disabled condition, or that of your spouse or your dependents who live with you, do not usually increase the value of the home and the cost can be included in full as medical expenses. 2013 state income tax forms These improvements include, but are not limited to, the following items. 2013 state income tax forms Constructing entrance or exit ramps for your home. 2013 state income tax forms Widening doorways at entrances or exits to your home. 2013 state income tax forms Widening or otherwise modifying hallways and interior doorways. 2013 state income tax forms Installing railings, support bars, or other modifications to bathrooms. 2013 state income tax forms Lowering or modifying kitchen cabinets and equipment. 2013 state income tax forms Moving or modifying electrical outlets and fixtures. 2013 state income tax forms Installing porch lifts and other forms of lifts (but elevators generally add value to the house). 2013 state income tax forms Modifying fire alarms, smoke detectors, and other warning systems. 2013 state income tax forms Modifying stairways. 2013 state income tax forms Adding handrails or grab bars anywhere (whether or not in bathrooms). 2013 state income tax forms Modifying hardware on doors. 2013 state income tax forms Modifying areas in front of entrance and exit doorways. 2013 state income tax forms Grading the ground to provide access to the residence. 2013 state income tax forms Only reasonable costs to accommodate a home to a disabled condition are considered medical care. 2013 state income tax forms Additional costs for personal motives, such as for architectural or aesthetic reasons, are not medical expenses. 2013 state income tax forms Capital expense worksheet. 2013 state income tax forms   Use Worksheet A to figure the amount of your capital expense to include in your medical expenses. 2013 state income tax forms Worksheet A. 2013 state income tax forms Capital Expense Worksheet Instructions: Use this worksheet to figure the amount, if any, of your medical expenses due to a home improvement. 2013 state income tax forms 1. 2013 state income tax forms Enter the amount you paid for the home improvement 1. 2013 state income tax forms   2. 2013 state income tax forms Enter the value of your home immediately after the improvement 2. 2013 state income tax forms       3. 2013 state income tax forms Enter the value of your home immediately before the improvement 3. 2013 state income tax forms       4. 2013 state income tax forms Subtract line 3 from line 2. 2013 state income tax forms This is the increase in the value of your home due to the improvement 4. 2013 state income tax forms     • If line 4 is more than or equal to line 1, you have no medical expenses due to the home improvement; stop here. 2013 state income tax forms       • If line 4 is less than line 1, go to line 5. 2013 state income tax forms     5. 2013 state income tax forms Subtract line 4 from line 1. 2013 state income tax forms These are your medical expenses due to the home improvement 5. 2013 state income tax forms   Operation and upkeep. 2013 state income tax forms   Amounts you pay for operation and upkeep of a capital asset qualify as medical expenses, as long as the main reason for them is medical care. 2013 state income tax forms This rule applies even if none or only part of the original cost of the capital asset qualified as a medical care expense. 2013 state income tax forms Improvements to property rented by a person with a disability. 2013 state income tax forms   Amounts paid to buy and install special plumbing fixtures for a person with a disability, mainly for medical reasons, in a rented house are medical expenses. 2013 state income tax forms Example. 2013 state income tax forms John has arthritis and a heart condition. 2013 state income tax forms He cannot climb stairs or get into a bathtub. 2013 state income tax forms On his doctor's advice, he installs a bathroom with a shower stall on the first floor of his two-story rented house. 2013 state income tax forms The landlord did not pay any of the cost of buying and installing the special plumbing and did not lower the rent. 2013 state income tax forms John can include in medical expenses the entire amount he paid. 2013 state income tax forms Car You can include in medical expenses the cost of special hand controls and other special equipment installed in a car for the use of a person with a disability. 2013 state income tax forms Special design. 2013 state income tax forms   You can include in medical expenses the difference between the cost of a regular car and a car specially designed to hold a wheelchair. 2013 state income tax forms Cost of operation. 2013 state income tax forms   The includible costs of using a car for medical reasons are explained under Transportation , later. 2013 state income tax forms Chiropractor You can include in medical expenses fees you pay to a chiropractor for medical care. 2013 state income tax forms Christian Science Practitioner You can include in medical expenses fees you pay to Christian Science practitioners for medical care. 2013 state income tax forms Contact Lenses You can include in medical expenses amounts you pay for contact lenses needed for medical reasons. 2013 state income tax forms You can also include the cost of equipment and materials required for using contact lenses, such as saline solution and enzyme cleaner. 2013 state income tax forms See Eyeglasses and Eye Surgery , later. 2013 state income tax forms Crutches You can include in medical expenses the amount you pay to buy or rent crutches. 2013 state income tax forms Dental Treatment You can include in medical expenses the amounts you pay for the prevention and alleviation of dental disease. 2013 state income tax forms Preventive treatment includes the services of a dental hygienist or dentist for such procedures as teeth cleaning, the application of sealants, and fluoride treatments to prevent tooth decay. 2013 state income tax forms Treatment to alleviate dental disease include services of a dentist for procedures such as X-rays, fillings, braces, extractions, dentures, and other dental ailments. 2013 state income tax forms But see Teeth Whitening under What Expenses Are Not Includible, later. 2013 state income tax forms Diagnostic Devices You can include in medical expenses the cost of devices used in diagnosing and treating illness and disease. 2013 state income tax forms Example. 2013 state income tax forms You have diabetes and use a blood sugar test kit to monitor your blood sugar level. 2013 state income tax forms You can include the cost of the blood sugar test kit in your medical expenses. 2013 state income tax forms Disabled Dependent Care Expenses Some disabled dependent care expenses may qualify as either: Medical expenses, or Work-related expenses for purposes of taking a credit for dependent care. 2013 state income tax forms (See Publication 503, Child and Dependent Care Expenses. 2013 state income tax forms ) You can choose to apply them either way as long as you do not use the same expenses to claim both a credit and a medical expense deduction. 2013 state income tax forms Drug Addiction You can include in medical expenses amounts you pay for an inpatient's treatment at a therapeutic center for drug addiction. 2013 state income tax forms This includes meals and lodging at the center during treatment. 2013 state income tax forms Drugs See Medicines , later. 2013 state income tax forms Eye Exam You can include in medical expenses the amount you pay for eye examinations. 2013 state income tax forms Eyeglasses You can include in medical expenses amounts you pay for eyeglasses and contact lenses needed for medical reasons. 2013 state income tax forms See Contact Lenses , earlier, for more information. 2013 state income tax forms Eye Surgery You can include in medical expenses the amount you pay for eye surgery to treat defective vision, such as laser eye surgery or radial keratotomy. 2013 state income tax forms Fertility Enhancement You can include in medical expenses the cost of the following procedures to overcome an inability to have children. 2013 state income tax forms Procedures such as in vitro fertilization (including temporary storage of eggs or sperm). 2013 state income tax forms Surgery, including an operation to reverse prior surgery that prevented the person operated on from having children. 2013 state income tax forms Founder's Fee See Lifetime Care—Advance Payments , later. 2013 state income tax forms Guide Dog or Other Service Animal You can include in medical expenses the costs of buying, training, and maintaining a guide dog or other service animal to assist a visually impaired or hearing disabled person, or a person with other physical disabilities. 2013 state income tax forms In general, this includes any costs, such as food, grooming, and veterinary care, incurred in maintaining the health and vitality of the service animal so that it may perform its duties. 2013 state income tax forms Health Institute You can include in medical expenses fees you pay for treatment at a health institute only if the treatment is prescribed by a physician and the physician issues a statement that the treatment is necessary to alleviate a physical or mental defect or illness of the individual receiving the treatment. 2013 state income tax forms Health Maintenance Organization (HMO) You can include in medical expenses amounts you pay to entitle you, your spouse, or a dependent to receive medical care from an HMO. 2013 state income tax forms These amounts are treated as medical insurance premiums. 2013 state income tax forms See Insurance Premiums , later. 2013 state income tax forms Hearing Aids You can include in medical expenses the cost of a hearing aid and batteries, repairs, and maintenance needed to operate it. 2013 state income tax forms Home Care See Nursing Services , later. 2013 state income tax forms Home Improvements See Capital Expenses , earlier. 2013 state income tax forms 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. 2013 state income tax forms This includes amounts paid for meals and lodging. 2013 state income tax forms Also see Lodging , later. 2013 state income tax forms Insurance Premiums You can include in medical expenses insurance premiums you pay for policies that cover medical care. 2013 state income tax forms Medical care policies can provide payment for treatment that includes: Hospitalization, surgical services, X-rays, Prescription drugs and insulin, Dental care, Replacement of lost or damaged contact lenses, and Long-term care (subject to additional limitations). 2013 state income tax forms See Qualified Long-Term Care Insurance Contracts under Long-Term Care, later. 2013 state income tax forms 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. 2013 state income tax forms The cost of the medical part must be separately stated in the insurance contract or given to you in a separate statement. 2013 state income tax forms Health coverage tax credit. 2013 state income tax forms   If, during 2013, you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient, you must complete Form 8885 before completing Schedule A. 2013 state income tax forms When figuring the amount of insurance premiums you can deduct on Schedule A, do not include: Any amounts you included on Form 8885, Any qualified health insurance premiums you paid to “U. 2013 state income tax forms S. 2013 state income tax forms Treasury–HCTC,” or Any health coverage tax credit advance payments shown on Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. 2013 state income tax forms Employer-Sponsored Health Insurance Plan Do not include in your medical and dental expenses any insurance premiums paid by an employer-sponsored health insurance plan unless the premiums are included on your Form W-2, Wage and Tax Statement. 2013 state income tax forms Also, do not include any other medical and dental expenses paid by the plan unless the amount paid is included on your Form W-2. 2013 state income tax forms Example. 2013 state income tax forms You are a federal employee participating in the premium conversion plan of the Federal Employee Health Benefits (FEHB) program. 2013 state income tax forms Your share of the FEHB premium is paid by making a pre-tax reduction in your salary. 2013 state income tax forms Because you are an employee whose insurance premiums are paid with money that is never included in your gross income, you cannot deduct the premiums paid with that money. 2013 state income tax forms Long-term care services. 2013 state income tax forms   Contributions made by your employer to provide coverage for qualified long-term care services under a flexible spending or similar arrangement must be included in your income. 2013 state income tax forms This amount will be reported as wages on your Form W-2. 2013 state income tax forms Retired public safety officers. 2013 state income tax forms   If you are a retired public safety officer, do not include as medical expenses any health or long-term care insurance premiums that you elected to have paid with tax-free distributions from a retirement plan. 2013 state income tax forms This applies only to distributions that would otherwise be included in income. 2013 state income tax forms Health reimbursement arrangement (HRA). 2013 state income tax forms   If you have medical expenses that are reimbursed by a health reimbursement arrangement, you cannot include those expenses in your medical expenses. 2013 state income tax forms This is because an HRA is funded solely by the employer. 2013 state income tax forms Medicare A If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare A. 2013 state income tax forms The payroll tax paid for Medicare A is not a medical expense. 2013 state income tax forms If you are not covered under social security (or were not a government employee who paid Medicare tax), you can voluntarily enroll in Medicare A. 2013 state income tax forms In this situation you can include the premiums you paid for Medicare A as a medical expense. 2013 state income tax forms Medicare B Medicare B is a supplemental medical insurance. 2013 state income tax forms Premiums you pay for Medicare B are a medical expense. 2013 state income tax forms Check the information you received from the Social Security Administration to find out your premium. 2013 state income tax forms Medicare D Medicare D is a voluntary prescription drug insurance program for persons with Medicare A or B. 2013 state income tax forms You can include as a medical expense premiums you pay for Medicare D. 2013 state income tax forms Prepaid Insurance Premiums Premiums you pay before you are age 65 for insurance 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). 2013 state income tax forms Unused Sick Leave Used To Pay Premiums You must include in gross income cash payments you receive at the time of retirement for unused sick leave. 2013 state income tax forms You also must include in gross income the value of unused sick leave that, at your option, your employer applies to the cost of your continuing participation in your employer's health plan after you retire. 2013 state income tax forms You can include this cost of continuing participation in the health plan as a medical expense. 2013 state income tax forms If you participate in a health plan where your employer automatically applies the value of unused sick leave to the cost of your continuing participation in the health plan (and you do not have the option to receive cash), do not include the value of the unused sick leave in gross income. 2013 state income tax forms You cannot include this cost of continuing participation in that health plan as a medical expense. 2013 state income tax forms Insurance Premiums You Cannot Include You cannot include premiums you pay for: Life insurance policies, Policies providing payment for loss of earnings, Policies for loss of life, limb, sight, etc. 2013 state income tax forms , Policies that pay you a guaranteed amount each week for a stated number of weeks if you are hospitalized for sickness or injury, The part of your car insurance that provides medical insurance coverage for all persons injured in or by your car because the part of the premium providing insurance for you, your spouse, and your dependents is not stated separately from the part of the premium providing insurance for medical care for others, or Health or long-term care insurance if you elected to pay these premiums with tax-free distributions from a retirement plan made directly to the insurance provider and these distributions would otherwise have been included in income. 2013 state income tax forms Taxes imposed by any governmental unit, such as Medicare taxes, are not insurance premiums. 2013 state income tax forms Coverage for nondependents. 2013 state income tax forms   Generally, you cannot deduct any additional premium you pay as the result of including on your policy someone who is not your spouse or dependent, even if that person is your child under age 27. 2013 state income tax forms However, you can deduct the additional premium if that person is: Your child whom you do not claim as a dependent because of the rules for children of divorced or separated parents, Any person you could have claimed as a dependent on your return except that person received $3,900 or more of gross income or filed a joint return, or Any person you could have claimed as a dependent except that you, or your spouse if filing jointly, can be claimed as a dependent on someone else's 2013 return. 2013 state income tax forms  Also, if you had family coverage when you added this individual to your policy and your premiums did not increase, you can enter on Schedule A (Form 1040) the full amount of your medical and dental insurance premiums. 2013 state income tax forms Intellectually and Developmentally Disabled, Special Home for You can include in medical expenses the cost of keeping a person who is intellectually and developmentally disabled in a special home, not the home of a relative, on the recommendation of a psychiatrist to help the person adjust from life in a mental hospital to community living. 2013 state income tax forms Laboratory Fees You can include in medical expenses the amounts you pay for laboratory fees that are part of medical care. 2013 state income tax forms Lactation Expenses See Breast Pumps and Supplies , earlier. 2013 state income tax forms Lead-Based Paint Removal You can include in medical expenses the cost of removing lead-based paints from surfaces in your home to prevent a child who has or had lead poisoning from eating the paint. 2013 state income tax forms These surfaces must be in poor repair (peeling or cracking) or within the child's reach. 2013 state income tax forms The cost of repainting the scraped area is not a medical expense. 2013 state income tax forms If, instead of removing the paint, you cover the area with wallboard or paneling, treat these items as capital expenses. 2013 state income tax forms See Capital Expenses , earlier. 2013 state income tax forms Do not include the cost of painting the wallboard as a medical expense. 2013 state income tax forms Learning Disability See Special Education , later. 2013 state income tax forms Legal Fees You can include in medical expenses legal fees you paid that are necessary to authorize treatment for mental illness. 2013 state income tax forms However, you cannot include in medical expenses fees for the management of a guardianship estate, fees for conducting the affairs of the person being treated, or other fees that are not necessary for medical care. 2013 state income tax forms Lifetime Care—Advance Payments You can include in medical expenses a part of a life-care fee or “founder's fee” you pay either monthly or as a lump sum under an agreement with a retirement home. 2013 state income tax forms The part of the payment you include is the amount properly allocable to medical care. 2013 state income tax forms The agreement must require that you pay a specific fee as a condition for the home's promise to provide lifetime care that includes medical care. 2013 state income tax forms You can use a statement from the retirement home to prove the amount properly allocable to medical care. 2013 state income tax forms The statement must be based either on the home's prior experience or on information from a comparable home. 2013 state income tax forms Dependents with disabilities. 2013 state income tax forms   You can include in medical expenses advance payments to a private institution for lifetime care, treatment, and training of your physically or mentally impaired child upon your death or when you become unable to provide care. 2013 state income tax forms The payments must be a condition for the institution's future acceptance of your child and must not be refundable. 2013 state income tax forms Payments for future medical care. 2013 state income tax forms   Generally, you cannot include in medical expenses current payments for medical care (including medical insurance) to be provided substantially beyond the end of the year. 2013 state income tax forms This rule does not apply in situations where the future care is purchased in connection with obtaining lifetime care of the type described earlier. 2013 state income tax forms Lodging You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if a principal reason for being there is to receive medical care. 2013 state income tax forms See Nursing Home , later. 2013 state income tax forms You may be able to include in medical expenses the cost of lodging not provided in a hospital or similar institution. 2013 state income tax forms You can include the cost of such lodging while away from home if all of the following requirements are met. 2013 state income tax forms The lodging is primarily for and essential to medical care. 2013 state income tax forms 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. 2013 state income tax forms The lodging is not lavish or extravagant under the circumstances. 2013 state income tax forms There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. 2013 state income tax forms The amount you include in medical expenses for lodging cannot be more than $50 for each night for each person. 2013 state income tax forms You can include lodging for a person traveling with the person receiving the medical care. 2013 state income tax forms 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. 2013 state income tax forms Meals are not included. 2013 state income tax forms Do not include the cost of lodging while away from home for medical treatment if that treatment is not received from a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital or if that lodging is not primarily for or essential to the medical care received. 2013 state income tax forms 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. 2013 state income tax forms Qualified Long-Term Care Services 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 pursuant to a plan of care prescribed by a licensed health care practitioner. 2013 state income tax forms Chronically ill individual. 2013 state income tax forms   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. 2013 state income tax forms 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. 2013 state income tax forms Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. 2013 state income tax forms He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. 2013 state income tax forms Maintenance and personal care services. 2013 state income tax forms    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). 2013 state income tax forms Qualified Long-Term Care Insurance Contracts A qualified long-term care insurance contract is an insurance contract that provides only coverage of qualified long-term care services. 2013 state income tax forms 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. 2013 state income tax forms The amount of qualified long-term care premiums you can include is limited. 2013 state income tax forms You can include the following as medical expenses on Schedule A (Form 1040). 2013 state income tax forms Qualified long-term care premiums up to the following amounts. 2013 state income tax forms Age 40 or under – $360. 2013 state income tax forms Age 41 to 50 – $680. 2013 state income tax forms Age 51 to 60 – $1,360. 2013 state income tax forms Age 61 to 70 – $3,640. 2013 state income tax forms Age 71 or over – $4,550. 2013 state income tax forms Unreimbursed expenses for qualified long-term care services. 2013 state income tax forms Note. 2013 state income tax forms The limit on premiums is for each person. 2013 state income tax forms Also, if you are an eligible retired public safety officer, you cannot include premiums for long-term care insurance if you elected to pay these premiums with tax-free distributions from a qualified retirement plan made directly to the insurance provider and these distributions would otherwise have been included in your income. 2013 state income tax forms Meals You can include in medical expenses the cost of meals at a hospital or similar institution if a principal reason for being there is to get medical care. 2013 state income tax forms You cannot include in medical expenses the cost of meals that are not part of inpatient care. 2013 state income tax forms Also see Weight-Loss Program and Nutritional Supplements , later. 2013 state income tax forms Medical Conferences You can include in medical expenses amounts paid for admission and transportation to a medical conference if the medical conference concerns the chronic illness of yourself, your spouse, or your dependent. 2013 state income tax forms The costs of the medical conference must be primarily for and necessary to the medical care of you, your spouse, or your dependent. 2013 state income tax forms The majority of the time spent at the conference must be spent attending sessions on medical information. 2013 state income tax forms The cost of meals and lodging while attending the conference is not deductible as a medical expense. 2013 state income tax forms Medical Information Plan You can include in medical expenses amounts paid to a plan that keeps medical information in a computer data bank and retrieves and furnishes the information upon request to an attending physician. 2013 state income tax forms Medicines You can include in medical expenses amounts you pay for prescribed medicines and drugs. 2013 state income tax forms A prescribed drug is one that requires a prescription by a doctor for its use by an individual. 2013 state income tax forms You can also include amounts you pay for insulin. 2013 state income tax forms Except for insulin, you cannot include in medical expenses amounts you pay for a drug that is not prescribed. 2013 state income tax forms Imported medicines and drugs. 2013 state income tax forms   If you imported medicines or drugs from other countries, see Medicines and Drugs From Other Countries , under What Expenses Are Not Includible, later. 2013 state income tax forms Nursing Home You can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. 2013 state income tax forms This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care. 2013 state income tax forms Do not include the cost of meals and lodging if the reason for being in the home is personal. 2013 state income tax forms You can, however, include in medical expenses the part of the cost that is for medical or nursing care. 2013 state income tax forms Nursing Services You can include in medical expenses wages and other amounts you pay for nursing services. 2013 state income tax forms The services need not be performed by a nurse as long as the services are of a kind generally performed by a nurse. 2013 state income tax forms 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. 2013 state income tax forms These services can be provided in your home or another care facility. 2013 state income tax forms Generally, only the amount spent for nursing services is a medical expense. 2013 state income tax forms 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. 2013 state income tax forms For example, because of your medical condition you pay a visiting nurse $300 per week for medical and household services. 2013 state income tax forms She spends 10% of her time doing household services such as washing dishes and laundry. 2013 state income tax forms You can include only $270 per week as medical expenses. 2013 state income tax forms The $30 (10% × $300) allocated to household services cannot be included. 2013 state income tax forms However, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. 2013 state income tax forms See Maintenance and personal care services under Long-Term Care, earlier. 2013 state income tax forms 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. 2013 state income tax forms See Publication 503. 2013 state income tax forms You can also include in medical expenses part of the amount you pay for that attendant's meals. 2013 state income tax forms Divide the food expense among the household members to find the cost of the attendant's food. 2013 state income tax forms Then divide that cost in the same manner as in the preceding paragraph. 2013 state income tax forms If you had to pay additional amounts for household upkeep because of the attendant, you can include the extra amounts with your medical expenses. 2013 state income tax forms This includes extra rent or utilities you pay because you moved to a larger apartment to provide space for the attendant. 2013 state income tax forms Employment taxes. 2013 state income tax forms   You can include as a medical expense social security tax, FUTA, Medicare tax, and state employment taxes you pay for an attendant who provides medical care. 2013 state income tax forms 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. 2013 state income tax forms For information on employment tax responsibilities of household employers, see Publication 926, Household Employer's Tax Guide. 2013 state income tax forms Operations You can include in medical expenses amounts you pay for legal operations that are not for unnecessary cosmetic surgery. 2013 state income tax forms See Cosmetic Surgery under What Expenses Are Not Includible, later. 2013 state income tax forms Optometrist See Eyeglasses , earlier. 2013 state income tax forms Organ Donors See Transplants , later. 2013 state income tax forms Osteopath You can include in medical expenses amounts you pay to an osteopath for medical care. 2013 state income tax forms Oxygen You can include in medical expenses amounts you pay for oxygen and oxygen equipment to relieve breathing problems caused by a medical condition. 2013 state income tax forms Physical Examination You can include in medical expenses the amount you pay for an annual physical examination and diagnostic tests by a physician. 2013 state income tax forms You do not have to be ill at the time of the examination. 2013 state income tax forms Pregnancy Test Kit You can include in medical expenses the amount you pay to purchase a pregnancy test kit to determine if you are pregnant. 2013 state income tax forms Prosthesis See Artificial Limb and Breast Reconstruction Surgery , earlier. 2013 state income tax forms Psychiatric Care You can include in medical expenses amounts you pay for psychiatric care. 2013 state income tax forms This includes the cost of supporting a mentally ill dependent at a specially equipped medical center where the dependent receives medical care. 2013 state income tax forms See Psychoanalysis, next, and Transportation , later. 2013 state income tax forms Psychoanalysis You can include in medical expenses payments for psychoanalysis. 2013 state income tax forms However, you cannot include payments for psychoanalysis that is part of required training to be a psychoanalyst. 2013 state income tax forms Psychologist You can include in medical expenses amounts you pay to a psychologist for medical care. 2013 state income tax forms Special Education You can include in medical expenses fees you pay on a doctor's recommendation for a child's tutoring by a teacher who is specially trained and qualified to work with children who have learning disabilities caused by mental or physical impairments, including nervous system disorders. 2013 state income tax forms You can include in medical expenses the cost (tuition, meals, and lodging) of attending a school that furnishes special education to help a child to overcome learning disabilities. 2013 state income tax forms A doctor must recommend that the child attend the school. 2013 state income tax forms Overcoming the learning disabilities must be a principal reason for attending the school, and any ordinary education received must be incidental to the special education provided. 2013 state income tax forms Special education includes: Teaching Braille to a visually impaired person, Teaching lip reading to a hearing disabled person, or Giving remedial language training to correct a condition caused by a birth defect. 2013 state income tax forms Sterilization You can include in medical expenses the cost of a legal sterilization (a legally performed operation to make a person unable to have children). 2013 state income tax forms Also see Vasectomy , later. 2013 state income tax forms Stop-Smoking Programs You can include in medical expenses amounts you pay for a program to stop smoking. 2013 state income tax forms However, you cannot include in medical expenses amounts you pay for drugs that do not require a prescription, such as nicotine gum or patches, that are designed to help stop smoking. 2013 state income tax forms Surgery See Operations , earlier. 2013 state income tax forms Telephone You can include in medical expenses the cost of special telephone equipment that lets a person who is deaf, hard of hearing or has a speech disability communicate over a regular telephone. 2013 state income tax forms This includes teletypewriter (TTY) and telecommunications device for the deaf (TDD) equipment. 2013 state income tax forms You can also include the cost of repairing the equipment. 2013 state income tax forms Television You can include in medical expenses the cost of equipment that displays the audio part of television programs as subtitles for persons with a hearing disability. 2013 state income tax forms This may be the cost of an adapter that attaches to a regular set. 2013 state income tax forms It also may be the part of the cost of a specially equipped television that exceeds the cost of the same model regular television set. 2013 state income tax forms Therapy You can include in medical expenses amounts you pay for therapy received as medical treatment. 2013 state income tax forms Transplants You can include in medical expenses amounts paid for medical care you receive because you are a donor or a possible donor of a kidney or other organ. 2013 state income tax forms This includes transportation. 2013 state income tax forms You can include any expenses you pay for the medical care of a donor in connection with the donating of an organ. 2013 state income tax forms This includes transportation. 2013 state income tax forms Transportation You can include in medical expenses amounts paid for transportation primarily for, and essential to, medical care. 2013 state income tax forms You can include:    Bus, taxi, train, or plane fares or ambulance service, Transportation expenses of a parent who must go with a child who needs medical care, 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, and Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment. 2013 state income tax forms Car expenses. 2013 state income tax forms   You can include out-of-pocket expenses, such as the cost of gas and oil, when you use a car for medical reasons. 2013 state income tax forms You cannot include depreciation, insurance, general repair, or maintenance expenses. 2013 state income tax forms   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. 2013 state income tax forms    You can also include parking fees and tolls. 2013 state income tax forms You can add these fees and tolls to your medical expenses whether you use actual expenses or the standard mileage rate. 2013 state income tax forms Example. 2013 state income tax forms In 2013, Bill Jones drove 2,800 miles for medical reasons. 2013 state income tax forms He spent $500 for gas, $30 for oil, and $100 for tolls and parking. 2013 state income tax forms He wants to figure the amount he can include in medical expenses both ways to see which gives him the greater deduction. 2013 state income tax forms He figures the actual expenses first. 2013 state income tax forms He adds the $500 for gas, the $30 for oil, and the $100 for tolls and parking for a total of $630. 2013 state income tax forms He then figures the standard mileage amount. 2013 state income tax forms He multiplies 2,800 miles by 24 cents a mile for a total of $672. 2013 state income tax forms He then adds the $100 tolls and parking for a total of $772. 2013 state income tax forms Bill includes the $772 of car expenses with his other medical expenses for the year because the $772 is more than the $630 he figured using actual expenses. 2013 state income tax forms Transportation expenses you cannot include. 2013 state income tax forms    You cannot include in medical expenses the cost of transportation in the following situations. 2013 state income tax forms Going to and from work, even if your condition requires an unusual means of transportation. 2013 state income tax forms Travel for purely personal reasons to another city for an operation or other medical care. 2013 state income tax forms Travel that is merely for the general improvement of one's health. 2013 state income tax forms The costs of operating a specially equipped car for other than medical reasons. 2013 state income tax forms Trips You can include in medical expenses amounts you pay for transportation to another city if the trip is primarily for, and essential to, receiving medical services. 2013 state income tax forms You may be able to include up to $50 for each night for each person. 2013 state income tax forms You can include lodging for a person traveling with the person receiving the medical care. 2013 state income tax forms 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. 2013 state income tax forms Meals are not included. 2013 state income tax forms See Lodging , earlier. 2013 state income tax forms You cannot include in medical expenses a trip or vacation taken merely for a change in environment, improvement of morale, or general improvement of health, even if the trip is made on the advice of a doctor. 2013 state income tax forms However, see Medical Conferences , earlier. 2013 state income tax forms Tuition Under special circumstances, you can include charges for tuition in medical expenses. 2013 state income tax forms See Special Education , earlier. 2013 state income tax forms You can include charges for a health plan included in a lump-sum tuition fee if the charges are separately stated or can easily be obtained from the school. 2013 state income tax forms Vasectomy You can include in medical expenses the amount you pay for a vasectomy. 2013 state income tax forms Vision Correction Surgery See Eye Surgery , earlier. 2013 state income tax forms Weight-Loss Program You can include in medical expenses amounts you pay to lose weight if it is a treatment for a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease). 2013 state income tax forms This includes fees you pay for membership in a weight reduction group as well as fees for attendance at periodic meetings. 2013 state income tax forms You cannot include membership dues in a gym, health club, or spa as medical expenses, but you can include separate fees charged there for weight loss activities. 2013 state income tax forms You cannot include the cost of diet food or beverages in medical expenses because the diet food and beverages substitute for what is normally consumed to satisfy nutritional needs. 2013 state income tax forms You can include the cost of special food in medical expenses only if: The food does not satisfy normal nutritional needs, The food alleviates or treats an illness, and The need for the food is substantiated by a physician. 2013 state income tax forms The amount you can include in medical expenses is limited to the amount by which the cost of the special food exceeds the cost of a normal diet. 2013 state income tax forms See also Weight-Loss Program under What Expenses Are Not Includible, later. 2013 state income tax forms Wheelchair You can include in medical expenses amounts you pay for a wheelchair used mainly for the relief of sickness or disability, and not just to provide transportation to and from work. 2013 state income tax forms The cost of operating and maintaining the wheelchair is also a medical expense. 2013 state income tax forms Wig You can include in medical expenses the cost of a wig purchased upon the advice of a physician for the mental health of a patient who has lost all of his or her hair from disease. 2013 state income tax forms X-ray You can include in medical expenses amounts you pay for X-rays for medical reasons. 2013 state income tax forms What Expenses Are Not Includible? Following is a list of some items that you cannot include in figuring your medical expense deduction. 2013 state income tax forms The items are listed in alphabetical order. 2013 state income tax forms Baby Sitting, Childcare, and Nursing Services for a Normal, Healthy Baby You cannot include in medical expenses amounts you pay for the care of children, even if the expenses enable you, your spouse, or your dependent to get medical or dental treatment. 2013 state income tax forms Also, any expense allowed as a childcare credit cannot be treated as an expense paid for medical care. 2013 state income tax forms Controlled Substances You cannot include in medical expenses amounts you pay for controlled substances (such as marijuana, laetrile, etc. 2013 state income tax forms ), even if such substances are legalized by state law. 2013 state income tax forms Such substances are not legal under federal law and cannot be included in medical expenses. 2013 state income tax forms Cosmetic Surgery Generally, you cannot include in medical expenses the amount you pay for unnecessary cosmetic surgery. 2013 state income tax forms This includes any procedure that is directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease. 2013 state income tax forms You generally cannot include in medical expenses the amount you pay for procedures such as face lifts, hair transplants, hair removal (electrolysis), and liposuction. 2013 state income tax forms You can include in medical expenses the amount you pay for cosmetic surgery if it is necessary to improve a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease. 2013 state income tax forms Example. 2013 state income tax forms An individual undergoes surgery that removes a breast as part of treatment for cancer. 2013 state income tax forms She pays a surgeon to reconstruct the breast. 2013 state income tax forms The surgery to reconstruct the breast corrects a deformity directly related to the disease. 2013 state income tax forms The cost of the surgery is includible in her medical expenses. 2013 state income tax forms Dancing Lessons You cannot include in medical expenses the cost of dancing lessons, swimming lessons, etc. 2013 state income tax forms , even if they are recommended by a doctor, if they are only for the improvement of general health. 2013 state income tax forms Diaper Service You cannot include in medical expenses the amount you pay for diapers or diaper services, unless they are needed to relieve the effects of a particular disease. 2013 state income tax forms Electrolysis or Hair Removal See Cosmetic Surgery , earlier. 2013 state income tax forms Flexible Spending Account You cannot include in medical expenses amounts for which you are fully reimbursed by your flexible spending account if you contribute a part of your income on a pre-tax basis to pay for the qualified benefit. 2013 state income tax forms Funeral Expenses You cannot include in medical expenses amounts you pay for funerals. 2013 state income tax forms Future Medical Care Generally, you cannot include in medical expenses current payments for medical care (including medical insurance) to be provided substantially beyond the end of the year. 2013 state income tax forms This rule does not apply in situations where the future care is purchased in connection with obtaining lifetime care or long-term care of the type described at Lifetime Care—Advance Payments or Long-Term Care, earlier under What Medical Expenses Are Includible. 2013 state income tax forms Hair Transplant See Cosmetic Surgery , earlier. 2013 state income tax forms Health Club Dues You cannot include in medical expenses health club dues or amounts paid to improve one's general health or to relieve physical or mental discomfort not related to a particular medical condition. 2013 state income tax forms You cannot include in medical expenses the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. 2013 state income tax forms Health Coverage Tax Credit You cannot include in medical expenses amounts you pay for health insurance that you use in figuring your health coverage tax credit. 2013 state income tax forms For more information, see Health Coverage Tax Credit , later. 2013 state income tax forms Health Savings Accounts You cannot include in medical expenses any payment or distribution for medical expenses out of a health savings account. 2013 state income tax forms Contributions to health savings accounts are deducted separately. 2013 state income tax forms See Publication 969. 2013 state income tax forms Household Help You cannot include in medical expenses the cost of household help, even if such help is recommended by a doctor. 2013 state income tax forms This is a personal expense that is not deductible. 2013 state income tax forms However, you may be able to include certain expenses paid to a person providing nursing-type services. 2013 state income tax forms For more information, see Nursing Services , earlier under What Medical Expenses Are Includible. 2013 state income tax forms Also, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. 2013 state income tax forms For more information, see Long-Term Care , earlier under What Medical Expenses Are Includible. 2013 state income tax forms Illegal Operations and Treatments You cannot include in medical expenses amounts you pay for illegal operations, treatments, or controlled substances whether rendered or prescribed by licensed or unlicensed practitioners. 2013 state income tax forms Insurance Premiums See Insurance Premiums under What Medical Expenses Are Includible, earlier. 2013 state income tax forms Maternity Clothes You cannot include in medical expenses amounts you pay for maternity clothes. 2013 state income tax forms Medical Savings Account (MSA) You cannot include in medical expenses amounts you contribute to an Archer MSA. 2013 state income tax forms You cannot include expenses you pay for with a tax-free distribution from your Archer MSA. 2013 state income tax forms You also cannot use other funds equal to the amount of the distribution and include the expenses. 2013 state income tax forms For more information on Archer MSAs, see Publication 969. 2013 state income tax forms Medicines and Drugs From Other Countries In general, you cannot include in your medical expenses the cost of a prescribed drug brought in (or ordered shipped) from another country. 2013 state income tax forms You can only include the cost of a drug that was imported legally. 2013 state income tax forms For example, you can include the cost of a prescribed drug the Food and Drug Administration announces can be legally imported by individuals. 2013 state income tax forms You can include the cost of a prescribed drug you purchase and consume in another country if the drug is legal in both the other country and the United States. 2013 state income tax forms Nonprescription Drugs and Medicines Except for insulin, you cannot include in medical expenses amounts you pay for a drug that is not prescribed. 2013 state income tax forms Example. 2013 state income tax forms Your doctor recommends that you take aspirin. 2013 state income tax forms Because aspirin is a drug that does not require a physician's prescription, you cannot include its cost in your medical expenses. 2013 state income tax forms Nutritional Supplements You cannot include in medical expenses the cost of nutritional supplements, vitamins, herbal supplements, “natural medicines,” etc. 2013 state income tax forms unless they are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a physician. 2013 state income tax forms Otherwise, these items are taken to maintain your ordinary good health, and are not for medical care. 2013 state income tax forms Personal Use Items You cannot include in medical expenses the cost of an item ordinarily used for personal, living, or family purposes unless it is used primarily to prevent or alleviate a physical or mental defect or illness. 2013 state income tax forms For example, the cost of a toothbrush and toothpaste is a nondeductible personal expense. 2013 state income tax forms In order to accommodate an individual with a physical defect, you may have to purchase an item ordinarily used as a personal, living, or family item in a special form. 2013 state income tax forms You can include the excess of the cost of the item in a special form over the cost of the item in normal form as a medical expense. 2013 state income tax forms (See Braille Books and Magazines under What Medical Expenses Are Includible, earlier. 2013 state income tax forms ) Swimming Lessons See Dancing Lessons , earlier. 2013 state income tax forms Teeth Whitening You cannot include in medical expenses amounts paid to whiten teeth. 2013 state income tax forms See Cosmetic Surgery , earlier. 2013 state income tax forms Veterinary Fees You generally cannot include veterinary fees in your medical expenses, but see Guide Dog or Other Service Animal under What Medical Expenses Are Includible, earlier. 2013 state income tax forms Weight-Loss Program You cannot include in medical expenses the cost of a weight-loss program if the purpose of the weight loss is the improvement of appearance, general health, or sense of well-being. 2013 state income tax forms You cannot include amounts you pay to lose weight unless the weight loss is a treatment for a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease). 2013 state income tax forms If the weight-loss treatment is not for a specific disease diagnosed by a physician, you cannot include either the fees you pay for membership in a weight reduction group or fees for attendance at periodic meetings. 2013 state income tax forms Also, you cannot include membership dues in a gym, health club, or spa. 2013 state income tax forms You cannot include the cost of diet food or beverages in medical expenses because the diet food and beverages substitute for what is normally consumed to satisfy nutritional needs. 2013 state income tax forms See Weight-Loss Program under What Medical Expenses Are Includible, earlier. 2013 state income tax forms How Do You Treat Reimbursements? You can include in medical expenses only those amounts paid during the tax year for which you received no insurance or other reimbursement. 2013 state income tax forms Insurance Reimbursement You must reduce your total medical expenses for the year by all reimbursements for medical expenses that you receive from insurance or other sources during the year. 2013 state income tax forms This includes payments from Medicare. 2013 state income tax forms Even if a policy provides reimbursement only for certain specific medical expenses, you must use amounts you receive from that policy to reduce your total medical expenses, including those it does not reimburse. 2013 state income tax forms Example. 2013 state income tax forms You have insurance policies that cover your hospital and doctors' bills but not your nursing bills. 2013 state income tax forms The insurance you receive for the hospital and doctors' bills is more than their charges. 2013 state income tax forms In figuring your medical deduction, you must reduce the total amount you spent for medical care by the total amount of insurance you received, even if the policies do not cover some of your medical expenses. 2013 state income tax forms Health reimbursement arrange
Español

For Federal Employees

Find resources on benefits, pay, policies, training, travel, collaboration, information technology, and more.



The 2013 State Income Tax Forms

2013 state income tax forms 3. 2013 state income tax forms   Investment Expenses Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Limits on DeductionsPassive activity. 2013 state income tax forms Other income (nonpassive income). 2013 state income tax forms Expenses. 2013 state income tax forms Additional information. 2013 state income tax forms Interest ExpensesInvestment Interest Limit on Deduction Bond Premium AmortizationSpecial rules to determine amounts payable on a bond. 2013 state income tax forms Basis. 2013 state income tax forms How To Figure Amortization Choosing To Amortize How To Report Amortization Expenses of Producing IncomeFees to buy or sell. 2013 state income tax forms Including mutual fund or REMIC expenses in income. 2013 state income tax forms Nondeductible ExpensesUsed as collateral. 2013 state income tax forms Short-sale expenses. 2013 state income tax forms Expenses for both tax-exempt and taxable income. 2013 state income tax forms State income taxes. 2013 state income tax forms Nondeductible amount. 2013 state income tax forms Basis adjustment. 2013 state income tax forms How To Report Investment Expenses When To Report Investment Expenses Topics - This chapter discusses: Limits on Deductions , Interest Expenses , Bond Premium Amortization , Expenses of Producing Income , Nondeductible Expenses , How To Report Investment Expenses , and When To Report Investment Expenses . 2013 state income tax forms Useful Items - You may want to see: Publication 535 Business Expenses 925 Passive Activity and At-Risk Rules 929 Tax Rules for Children and Dependents Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 4952 Investment Interest Expense Deduction See chapter 5, How To Get Tax Help , for information about getting these publications and forms. 2013 state income tax forms Limits on Deductions Your deductions for investment expenses may be limited by: The at-risk rules, The passive activity loss limits, The limit on investment interest, or The 2% limit on certain miscellaneous itemized deductions. 2013 state income tax forms The at-risk rules and passive activity rules are explained briefly in this section. 2013 state income tax forms The limit on investment interest is explained later in this chapter under Interest Expenses . 2013 state income tax forms The 2% limit is explained later in this chapter under Expenses of Producing Income . 2013 state income tax forms At-risk rules. 2013 state income tax forms   Special at-risk rules apply to most income-producing activities. 2013 state income tax forms These rules limit the amount of loss you can deduct to the amount you risk losing in the activity. 2013 state income tax forms Generally, this is the cash and the adjusted basis of property you contribute to the activity. 2013 state income tax forms It also includes money you borrow for use in the activity if you are personally liable for repayment or if you use property not used in the activity as security for the loan. 2013 state income tax forms For more information, see Publication 925. 2013 state income tax forms Passive activity losses and credits. 2013 state income tax forms   The amount of losses and tax credits you can claim from passive activities is limited. 2013 state income tax forms Generally, you are allowed to deduct passive activity losses only up to the amount of your passive activity income. 2013 state income tax forms Also, you can use credits from passive activities only against tax on the income from passive activities. 2013 state income tax forms There are exceptions for certain activities, such as rental real estate activities. 2013 state income tax forms Passive activity. 2013 state income tax forms   A passive activity generally is any activity involving the conduct of any trade or business in which you do not materially participate and any rental activity. 2013 state income tax forms However, if you are involved in renting real estate, the activity is not a passive activity if both of the following are true. 2013 state income tax forms More than one-half of the personal services you perform during the year in all trades or businesses are performed in real property trades or businesses in which you materially participate. 2013 state income tax forms You perform more than 750 hours of services during the year in real property trades or businesses in which you materially participate. 2013 state income tax forms  The term “trade or business” generally means any activity that involves the conduct of a trade or business, is conducted in anticipation of starting a trade or business, or involves certain research or experimental expenditures. 2013 state income tax forms However, it does not include rental activities or certain activities treated as incidental to holding property for investment. 2013 state income tax forms   You are considered to materially participate in an activity if you are involved on a regular, continuous, and substantial basis in the operations of the activity. 2013 state income tax forms Other income (nonpassive income). 2013 state income tax forms    Generally, you can use losses from passive activities only to offset income from passive activities. 2013 state income tax forms You cannot use passive activity losses to offset your other income, such as your wages or your portfolio income. 2013 state income tax forms Portfolio income includes gross income from interest, dividends, annuities, or royalties that is not derived in the ordinary course of a trade or business. 2013 state income tax forms It also includes gains or losses (not derived in the ordinary course of a trade or business) from the sale or trade of property (other than an interest in a passive activity) producing portfolio income or held for investment. 2013 state income tax forms This includes capital gain distributions from mutual funds (and other regulated investment companies) and real estate investment trusts. 2013 state income tax forms   You cannot use passive activity losses to offset Alaska Permanent Fund dividends. 2013 state income tax forms Expenses. 2013 state income tax forms   Do not include in the computation of your passive activity income or loss: Expenses (other than interest) that are clearly and directly allocable to your portfolio income, or Interest expense properly allocable to portfolio income. 2013 state income tax forms However, this interest and other expenses may be subject to other limits. 2013 state income tax forms These limits are explained in the rest of this chapter. 2013 state income tax forms Additional information. 2013 state income tax forms   For more information about determining and reporting income and losses from passive activities, see Publication 925. 2013 state income tax forms Interest Expenses This section discusses interest expenses you may be able to deduct as an investor. 2013 state income tax forms For information on business interest, see chapter 4 of Publication 535. 2013 state income tax forms You cannot deduct personal interest expenses other than qualified home mortgage interest, as explained in Publication 936, Home Mortgage Interest Deduction, and interest on certain student loans, as explained in Publication 970. 2013 state income tax forms Investment Interest If you borrow money to buy property you hold for investment, the interest you pay is investment interest. 2013 state income tax forms You can deduct investment interest subject to the limit discussed later. 2013 state income tax forms However, you cannot deduct interest you incurred to produce tax-exempt income. 2013 state income tax forms See Tax-exempt income under Nondeductible Expenses, later. 2013 state income tax forms You also cannot deduct interest expenses on straddles discussed under Interest expense and carrying charges on straddles , later. 2013 state income tax forms Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. 2013 state income tax forms Investment property. 2013 state income tax forms   Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. 2013 state income tax forms It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). 2013 state income tax forms Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). 2013 state income tax forms Partners, shareholders, and beneficiaries. 2013 state income tax forms   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. 2013 state income tax forms Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. 2013 state income tax forms Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. 2013 state income tax forms The allocation is not affected by the use of property that secures the debt. 2013 state income tax forms Example 1. 2013 state income tax forms You borrow $10,000 and use $8,000 to buy stock. 2013 state income tax forms You use the other $2,000 to buy items for your home. 2013 state income tax forms Since 80% of the debt is used for, and allocated to, investment purposes, 80% of the interest on that debt is investment interest. 2013 state income tax forms The other 20% is nondeductible personal interest. 2013 state income tax forms Debt proceeds received in cash. 2013 state income tax forms   If you receive debt proceeds in cash, the proceeds are generally not treated as investment property. 2013 state income tax forms Debt proceeds deposited in account. 2013 state income tax forms   If you deposit debt proceeds in an account, that deposit is treated as investment property, regardless of whether the account bears interest. 2013 state income tax forms But, if you withdraw the funds and use them for another purpose, you must reallocate the debt to determine the amount considered to be for investment purposes. 2013 state income tax forms Example 2. 2013 state income tax forms Assume in Example 1 that you borrowed the money on March 1 and immediately bought the stock for $8,000. 2013 state income tax forms You did not buy the household items until June 1. 2013 state income tax forms You had deposited the $2,000 in the bank. 2013 state income tax forms You had no other transactions on the bank account until June. 2013 state income tax forms You did not sell the stock, and you made no principal payments on the debt. 2013 state income tax forms You paid interest from another account. 2013 state income tax forms The $8,000 is treated as being used for an investment purpose. 2013 state income tax forms The $2,000 is treated as being used for an investment purpose for the 3-month period. 2013 state income tax forms Your total interest expense for 3 months on this debt is investment interest. 2013 state income tax forms In June, when you spend the $2,000 for household items, you must begin to allocate 80% of the debt and the interest expense to investment purposes and 20% to personal purposes. 2013 state income tax forms Amounts paid within 30 days. 2013 state income tax forms   If you receive loan proceeds in cash or if the loan proceeds are deposited in an account, you can treat any payment (up to the amount of the proceeds) made from any account you own, or from cash, as made from those proceeds. 2013 state income tax forms This applies to any payment made within 30 days before or after the proceeds are received in cash or deposited in your account. 2013 state income tax forms   If you received the loan proceeds in cash, you can treat the payment as made on the date you received the cash instead of the date you actually made the payment. 2013 state income tax forms Payments on debt may require new allocation. 2013 state income tax forms   As you repay a debt used for more than one purpose, you must reallocate the balance. 2013 state income tax forms You must first reduce the amount allocated to personal purposes by the repayment. 2013 state income tax forms You then reallocate the rest of the debt to find what part is for investment purposes. 2013 state income tax forms Example 3. 2013 state income tax forms If, in Example 2 , you repay $500 on November 1, the entire repayment is applied against the amount allocated to personal purposes. 2013 state income tax forms The debt balance is now allocated as $8,000 for investment purposes and $1,500 for personal purposes. 2013 state income tax forms Until the next reallocation is necessary, 84% ($8,000 ÷ $9,500) of the debt and the interest expense is allocated to investment. 2013 state income tax forms Pass-through entities. 2013 state income tax forms   If you use borrowed funds to buy an interest in a partnership or S corporation, then the interest on those funds must be allocated based on the assets of the entity. 2013 state income tax forms If you contribute to the capital of the entity, you can make the allocation using any reasonable method. 2013 state income tax forms Additional allocation rules. 2013 state income tax forms   For more information about allocating interest expense, see chapter 4 of Publication 535. 2013 state income tax forms When To Deduct Investment Interest If you use the cash method of accounting, you must pay the interest before you can deduct it. 2013 state income tax forms If you use an accrual method of accounting, you can deduct interest over the period it accrues, regardless of when you pay it. 2013 state income tax forms For an exception, see Unpaid expenses owed to related party under When To Report Investment Expenses, later in this chapter. 2013 state income tax forms Example. 2013 state income tax forms You borrowed $1,000 on August 26, 2013, payable in 90 days at 12% interest. 2013 state income tax forms On November 26, 2013, you paid this with a new note for $1,030, due on February 26, 2014. 2013 state income tax forms If you use the cash method of accounting, you cannot deduct any part of the $30 interest on your return for 2013 because you did not actually pay it. 2013 state income tax forms If you use an accrual method, you may be able to deduct a portion of the interest on the loans through December 31, 2013, on your return for 2013. 2013 state income tax forms Interest paid in advance. 2013 state income tax forms   Generally, if you pay interest in advance for a period that goes beyond the end of the tax year, you must spread the interest over the tax years to which it belongs under the OID rules discussed in chapter 1. 2013 state income tax forms You can deduct in each year only the interest for that year. 2013 state income tax forms Interest on margin accounts. 2013 state income tax forms   If you are a cash method taxpayer, you can deduct interest on margin accounts to buy taxable securities as investment interest in the year you paid it. 2013 state income tax forms You are considered to have paid interest on these accounts only when you actually pay the broker or when payment becomes available to the broker through your account. 2013 state income tax forms Payment may become available to the broker through your account when the broker collects dividends or interest for your account, or sells securities held for you or received from you. 2013 state income tax forms   You cannot deduct any interest on money borrowed for personal reasons. 2013 state income tax forms Limit on interest deduction for market discount bonds. 2013 state income tax forms   The amount you can deduct for interest expense you paid or accrued during the year to buy or carry a market discount bond may be limited. 2013 state income tax forms This limit does not apply if you accrue the market discount and include it in your income currently. 2013 state income tax forms   Under this limit, the interest is deductible only to the extent it is more than: The total interest and OID includible in gross income for the bond for the year, plus The market discount for the number of days you held the bond during the year. 2013 state income tax forms Figure the amount in (2) above using the rules for figuring accrued market discount in chapter 1 under Market Discount Bonds . 2013 state income tax forms Interest not deducted due to limit. 2013 state income tax forms   In the year you dispose of the bond, you can deduct any interest expense you were not allowed to deduct in earlier years because of the limit. 2013 state income tax forms Choosing to deduct disallowed interest expense before the year of disposition. 2013 state income tax forms   You can choose to deduct disallowed interest expense in any year before the year you dispose of the bond, up to your net interest income from the bond during the year. 2013 state income tax forms The rest of the disallowed interest expense remains deductible in the year you dispose of the bond. 2013 state income tax forms Net interest income. 2013 state income tax forms   This is the interest income (including OID) from the bond that you include in income for the year, minus the interest expense paid or accrued during the year to purchase or carry the bond. 2013 state income tax forms Limit on interest deduction for short-term obligations. 2013 state income tax forms   If the current income inclusion rules discussed in chapter 1 under Discount on Short-Term Obligations do not apply to you, the amount you can deduct for interest expense you paid or accrued during the year to buy or carry a short-term obligation is limited. 2013 state income tax forms   The interest is deductible only to the extent it is more than: The amount of acquisition discount or OID on the obligation for the tax year, plus The amount of any interest payable on the obligation for the year that is not included in income because of your accounting method (other than interest taken into account in determining the amount of acquisition discount or OID). 2013 state income tax forms The method of determining acquisition discount and OID for short-term obligations is discussed in chapter 1 under Discount on Short-Term Obligations . 2013 state income tax forms Interest not deducted due to limit. 2013 state income tax forms   In the year you dispose of the obligation, or, if you choose, in another year in which you have net interest income from the obligation, you can deduct any interest expense you were not allowed to deduct for an earlier year because of the limit. 2013 state income tax forms Follow the same rules provided in the earlier discussion under Limit on interest deduction for market discount bonds , earlier. 2013 state income tax forms Limit on Deduction Generally, your deduction for investment interest expense is limited to your net investment income. 2013 state income tax forms You can carry over the amount of investment interest you could not deduct because of this limit to the next tax year. 2013 state income tax forms The interest carried over is treated as investment interest paid or accrued in that next year. 2013 state income tax forms You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. 2013 state income tax forms Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. 2013 state income tax forms Investment income. 2013 state income tax forms   This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). 2013 state income tax forms Investment income does not include Alaska Permanent Fund dividends. 2013 state income tax forms It also does not include qualified dividends or net capital gain unless you choose to include them. 2013 state income tax forms Choosing to include qualified dividends. 2013 state income tax forms   Investment income generally does not include qualified dividends, discussed in chapter 1. 2013 state income tax forms However, you can choose to include all or part of your qualified dividends in investment income. 2013 state income tax forms   You make this choice by completing Form 4952, line 4g, according to its instructions. 2013 state income tax forms   If you choose to include any of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. 2013 state income tax forms Choosing to include net capital gain. 2013 state income tax forms    Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). 2013 state income tax forms However, you can choose to include all or part of your net capital gain in investment income. 2013 state income tax forms   You make this choice by completing Form 4952, line 4g, according to its instructions. 2013 state income tax forms   If you choose to include any of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. 2013 state income tax forms   For more information about the capital gains rates, see Capital Gain Tax Rates in chapter 4. 2013 state income tax forms    Before making either choice, consider the overall effect on your tax liability. 2013 state income tax forms Compare your tax if you make one or both of these choices with your tax if you do not. 2013 state income tax forms Investment income of child reported on parent's return. 2013 state income tax forms   Investment income includes the part of your child's interest and dividend income you choose to report on your return. 2013 state income tax forms If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814. 2013 state income tax forms Include it on line 4a of Form 4952. 2013 state income tax forms Example. 2013 state income tax forms Your 8-year-old son has interest income of $2,200, which you choose to report on your own return. 2013 state income tax forms You enter $2,200 on Form 8814, lines 1a and 4, and $200 on lines 6 and 12 and complete Part II. 2013 state income tax forms Also enter $200 on Form 1040, line 21. 2013 state income tax forms Your investment income includes this $200. 2013 state income tax forms Child's qualified dividends. 2013 state income tax forms   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. 2013 state income tax forms However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. 2013 state income tax forms   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). 2013 state income tax forms Child's Alaska Permanent Fund dividends. 2013 state income tax forms   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. 2013 state income tax forms To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. 2013 state income tax forms Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. 2013 state income tax forms Subtract the result from the amount on Form 8814, line 12. 2013 state income tax forms Example. 2013 state income tax forms Your 10-year-old child has taxable interest income of $4,000 and Alaska Permanent Fund dividends of $2,000. 2013 state income tax forms You choose to report this on your return. 2013 state income tax forms You enter $4,000 on Form 8814, line 1a, $2,000 on line 2a, and $6,000 on line 4. 2013 state income tax forms You then enter $4,000 on Form 8814, lines 6 and 12, and Form 1040, line 21. 2013 state income tax forms You figure the amount of your child's income that you can consider your investment income as follows: $4,000 − ($4,000 × ($2,000 ÷ $6,000)) = $2,667 You include the result, $2,667, on Form 4952, line 4a. 2013 state income tax forms Child's capital gain distributions. 2013 state income tax forms   If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D (Form 1040), line 13, or Form 1040, line 13) generally does not count as investment income. 2013 state income tax forms However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. 2013 state income tax forms   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). 2013 state income tax forms Investment expenses. 2013 state income tax forms   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. 2013 state income tax forms Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. 2013 state income tax forms Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A (Form 1040), line 27. 2013 state income tax forms See Expenses of Producing Income , later, for a discussion of the 2% limit. 2013 state income tax forms Losses from passive activities. 2013 state income tax forms   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). 2013 state income tax forms See Publication 925 for information about passive activities. 2013 state income tax forms Example. 2013 state income tax forms Ted is a partner in a partnership that operates a business. 2013 state income tax forms However, he does not materially participate in the partnership's business. 2013 state income tax forms Ted's interest in the partnership is considered a passive activity. 2013 state income tax forms Ted's investment income from interest and dividends (other than qualified dividends) is $10,000. 2013 state income tax forms His investment expenses (other than interest) are $3,200 after taking into account the 2% limit on miscellaneous itemized deductions. 2013 state income tax forms His investment interest expense is $8,000. 2013 state income tax forms Ted also has income from the partnership of $2,000. 2013 state income tax forms Ted figures his net investment income and the limit on his investment interest expense deduction in the following way: Total investment income $10,000 Minus: Investment expenses (other than interest) 3,200 Net investment income $6,800 Deductible investment interest expense for the year $6,800 The $2,000 of income from the passive activity is not used in determining Ted's net investment income. 2013 state income tax forms His investment interest deduction for the year is limited to $6,800, the amount of his net investment income. 2013 state income tax forms Form 4952 Use Form 4952 to figure your deduction for investment interest. 2013 state income tax forms See Form 4952 for more information. 2013 state income tax forms Exception to use of Form 4952. 2013 state income tax forms   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. 2013 state income tax forms Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. 2013 state income tax forms You do not have any other deductible investment expenses. 2013 state income tax forms You have no carryover of investment interest expense from 2012. 2013 state income tax forms   If you meet all of these tests, you can deduct all of your investment interest. 2013 state income tax forms    Bond Premium Amortization If you pay a premium to buy a bond, the premium is part of your basis in the bond. 2013 state income tax forms If the bond yields taxable interest, you can choose to amortize the premium. 2013 state income tax forms This generally means that each year, over the life of the bond, you use a part of the premium to reduce the amount of interest includible in your income. 2013 state income tax forms If you make this choice, you must reduce your basis in the bond by the amortization for the year. 2013 state income tax forms If the bond yields tax-exempt interest, you must amortize the premium. 2013 state income tax forms This amortized amount is not deductible in determining taxable income. 2013 state income tax forms However, each year you must reduce your basis in the bond (and tax-exempt interest otherwise reportable on Form 1040, line 8b) by the amortization for the year. 2013 state income tax forms Bond premium. 2013 state income tax forms   Bond premium is the amount by which your basis in the bond right after you get it is more than the total of all amounts payable on the bond after you get it (other than payments of qualified stated interest). 2013 state income tax forms For example, a bond with a maturity value of $1,000 generally would have a $50 premium if you buy it for $1,050. 2013 state income tax forms Special rules to determine amounts payable on a bond. 2013 state income tax forms   For special rules that apply to determine the amounts payable on a variable rate bond, an inflation-indexed debt instrument, a bond that provides for certain alternative payment schedules (for example, a bond callable prior to the stated maturity date of the bond), or a bond that provides for remote or incidental contingencies, see Regulations section 1. 2013 state income tax forms 171-3. 2013 state income tax forms Basis. 2013 state income tax forms   In general, your basis for figuring bond premium amortization is the same as your basis for figuring any loss on the sale of the bond. 2013 state income tax forms However, you may need to use a different basis for: Convertible bonds, Bonds you got in a trade, and Bonds whose basis has to be determined using the basis of the person who transferred the bond to you. 2013 state income tax forms See Regulations section 1. 2013 state income tax forms 171-1(e). 2013 state income tax forms Dealers. 2013 state income tax forms   A dealer in taxable bonds (or anyone who holds them mainly for sale to customers in the ordinary course of a trade or business or who would properly include bonds in inventory at the close of the tax year) cannot claim a deduction for amortizable bond premium. 2013 state income tax forms   See section 75 of the Internal Revenue Code for the treatment of bond premium by a dealer in tax-exempt bonds. 2013 state income tax forms How To Figure Amortization For bonds issued after September 27, 1985, you must amortize bond premium using a constant yield method on the basis of the bond's yield to maturity, determined by using the bond's basis and compounding at the close of each accrual period. 2013 state income tax forms Constant yield method. 2013 state income tax forms   Figure the bond premium amortization for each accrual period as follows. 2013 state income tax forms Step 1: Determine your yield. 2013 state income tax forms   Your yield is the discount rate that, when used in figuring the present value of all remaining payments to be made on the bond (including payments of qualified stated interest), produces an amount equal to your basis in the bond. 2013 state income tax forms Figure the yield as of the date you got the bond. 2013 state income tax forms It must be constant over the term of the bond and must be figured to at least two decimal places when expressed as a percentage. 2013 state income tax forms   If you do not know the yield, consult your broker or tax advisor. 2013 state income tax forms Databases available to them are likely to show the yield at the date of purchase. 2013 state income tax forms Step 2: Determine the accrual periods. 2013 state income tax forms   You can choose the accrual periods to use. 2013 state income tax forms They may be of any length and may vary in length over the term of the bond, but each accrual period can be no longer than 1 year and each scheduled payment of principal or interest must occur either on the first or the final day of an accrual period. 2013 state income tax forms The computation is simplest if accrual periods are the same as the intervals between interest payment dates. 2013 state income tax forms Step 3: Determine the bond premium for the accrual period. 2013 state income tax forms   To do this, multiply your adjusted acquisition price at the beginning of the accrual period by your yield. 2013 state income tax forms Then subtract the result from the qualified stated interest for the period. 2013 state income tax forms   Your adjusted acquisition price at the beginning of the first accrual period is the same as your basis. 2013 state income tax forms After that, it is your basis decreased by the amount of bond premium amortized for earlier periods and the amount of any payment previously made on the bond other than a payment of qualified stated interest. 2013 state income tax forms Example. 2013 state income tax forms On February 1, 2012, you bought a taxable bond for $110,000. 2013 state income tax forms The bond has a stated principal amount of $100,000, payable at maturity on February 1, 2019, making your premium $10,000 ($110,000 − $100,000). 2013 state income tax forms The bond pays qualified stated interest of $10,000 on February 1 of each year. 2013 state income tax forms Your yield is 8. 2013 state income tax forms 07439% compounded annually. 2013 state income tax forms You choose to use annual accrual periods ending on February 1 of each year. 2013 state income tax forms To find your bond premium amortization for the accrual period ending on February 1, 2013, you multiply the adjusted acquisition price at the beginning of the period ($110,000) by your yield. 2013 state income tax forms When you subtract the result ($8,881. 2013 state income tax forms 83) from the qualified stated interest for the period ($10,000), you find that your bond premium amortization for the period is $1,118. 2013 state income tax forms 17. 2013 state income tax forms Special rules to figure amortization. 2013 state income tax forms   For special rules to figure the bond premium amortization on a variable rate bond, an inflation-indexed debt instrument, a bond that provides for certain alternative payment schedules (for example, a bond callable prior to the stated maturity date of the bond), or a bond that provides for remote or incidental contingencies, see Regulations section 1. 2013 state income tax forms 171-3. 2013 state income tax forms Bonds Issued Before September 28, 1985 For these bonds, you can amortize bond premium using any reasonable method. 2013 state income tax forms Reasonable methods include: The straight-line method, and The Revenue Ruling 82-10 method. 2013 state income tax forms Straight-line method. 2013 state income tax forms   Under this method, the amount of your bond premium amortization is the same each month. 2013 state income tax forms Divide the number of months you held the bond during the year by the number of months from the beginning of the tax year (or, if later, the date of acquisition) to the date of maturity or earlier call date. 2013 state income tax forms Then multiply the result by the bond premium (reduced by any bond premium amortization claimed in earlier years). 2013 state income tax forms This gives you your bond premium amortization for the year. 2013 state income tax forms Revenue Ruling 82-10 method. 2013 state income tax forms   Under this method, the amount of your bond premium amortization increases each month over the life of the bond. 2013 state income tax forms This method is explained in Revenue Ruling 82-10, 1982-1 C. 2013 state income tax forms B. 2013 state income tax forms 46. 2013 state income tax forms Choosing To Amortize You choose to amortize the premium on taxable bonds by reporting the amortization for the year on your income tax return for the first tax year you want the choice to apply. 2013 state income tax forms You should attach a statement to your return that you are making this choice under section 171. 2013 state income tax forms See How To Report Amortization, next. 2013 state income tax forms This choice is binding for the year you make it and for later tax years. 2013 state income tax forms It applies to all taxable bonds you own in the year you make the choice and also to those you acquire in later years. 2013 state income tax forms You can change your decision to amortize bond premium only with the written approval of the IRS. 2013 state income tax forms To request approval, use Form 3115. 2013 state income tax forms For more information on requesting approval, see section 5 of the Appendix to Revenue Procedure 2011-14 in Internal Revenue Bulletin 2011-4. 2013 state income tax forms You can find Revenue Procedure 2011-14 at www. 2013 state income tax forms irs. 2013 state income tax forms gov/irb/2011-04_IRB/ar08. 2013 state income tax forms html. 2013 state income tax forms How To Report Amortization Subtract the bond premium amortization from your interest income from these bonds. 2013 state income tax forms Report the bond's interest on Schedule B (Form 1040A or 1040), line 1. 2013 state income tax forms Under your last entry on line 1, put a subtotal of all interest listed on line 1. 2013 state income tax forms Below this subtotal, print “ABP Adjustment,” and the total interest you received. 2013 state income tax forms Subtract this amount from the subtotal, and enter the result on line 2. 2013 state income tax forms Bond premium amortization more than interest. 2013 state income tax forms   If the amount of your bond premium amortization for an accrual period is more than the qualified stated interest for the period, you can deduct the difference as a miscellaneous itemized deduction on Schedule A (Form 1040), line 28. 2013 state income tax forms    But your deduction is limited to the amount by which your total interest inclusions on the bond in prior accrual periods is more than your total bond premium deductions on the bond in prior periods. 2013 state income tax forms Any amount you cannot deduct because of this limit can be carried forward to the next accrual period. 2013 state income tax forms Pre-1998 election to amortize bond premium. 2013 state income tax forms   Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988. 2013 state income tax forms Bonds acquired before October 23, 1986. 2013 state income tax forms   The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2%-of-adjusted-gross-income limit. 2013 state income tax forms Bonds acquired after October 22, 1986, but before 1988. 2013 state income tax forms    The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you choose to treat it as an offset to interest income on the bond. 2013 state income tax forms Expenses of Producing Income You deduct investment expenses (other than interest expenses) as miscellaneous itemized deductions on Schedule A (Form 1040). 2013 state income tax forms To be deductible, these expenses must be ordinary and necessary expenses paid or incurred: To produce or collect income, or To manage property held for producing income. 2013 state income tax forms The expenses must be directly related to the income or income-producing property, and the income must be taxable to you. 2013 state income tax forms The deduction for most income-producing expenses is subject to a 2% limit that also applies to certain other miscellaneous itemized deductions. 2013 state income tax forms The amount deductible is limited to the total of these miscellaneous deductions that is more than 2% of your adjusted gross income. 2013 state income tax forms For information on how to report expenses of producing income, see How To Report Investment Expenses , later. 2013 state income tax forms Attorney or accounting fees. 2013 state income tax forms   You can deduct attorney or accounting fees that are necessary to produce or collect taxable income. 2013 state income tax forms However, in some cases, attorney or accounting fees are part of the basis of property. 2013 state income tax forms See Basis of Investment Property in chapter 4. 2013 state income tax forms Automatic investment service and dividend reinvestment plans. 2013 state income tax forms   A bank may offer its checking account customers an automatic investment service so that, for a charge, each customer can choose to invest a part of the checking account each month in common stock. 2013 state income tax forms Or a bank that is a dividend disbursing agent for a number of publicly-owned corporations may set up an automatic dividend reinvestment service. 2013 state income tax forms Through that service, cash dividends are reinvested in more shares of stock after the bank deducts a service charge. 2013 state income tax forms   A corporation in which you own stock also may have a dividend reinvestment plan. 2013 state income tax forms This plan lets you choose to use your dividends to buy more shares of stock in the corporation instead of receiving the dividends in cash. 2013 state income tax forms   You can deduct the monthly service charge you pay to a bank to participate in an automatic investment service. 2013 state income tax forms If you participate in a dividend reinvestment plan, you can deduct any service charge subtracted from your cash dividends before the dividends are used to buy more shares of stock. 2013 state income tax forms Deduct the charges in the year you pay them. 2013 state income tax forms Clerical help and office rent. 2013 state income tax forms   You can deduct office expenses, such as rent and clerical help, you incurred in connection with your investments and collecting the taxable income on your investments. 2013 state income tax forms Cost of replacing missing securities. 2013 state income tax forms   To replace your taxable securities that are mislaid, lost, stolen, or destroyed, you may have to post an indemnity bond. 2013 state income tax forms You can deduct the premium you pay to buy the indemnity bond and the related incidental expenses. 2013 state income tax forms   You may, however, get a refund of part of the bond premium if the missing securities are recovered within a specified time. 2013 state income tax forms Under certain types of insurance policies, you can recover some of the expenses. 2013 state income tax forms   If you receive the refund in the tax year you pay the amounts, you can deduct only the difference between the expenses paid and the amount refunded. 2013 state income tax forms If the refund is made in a later tax year, you must include the refund in income in the year you received it, but only to the extent that the expenses decreased your tax in the year you deducted them. 2013 state income tax forms Fees to collect income. 2013 state income tax forms   You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect investment income, such as your taxable bond or mortgage interest, or your dividends on shares of stock. 2013 state income tax forms Fees to buy or sell. 2013 state income tax forms   You cannot deduct a fee you pay to a broker to acquire investment property, such as stocks or bonds. 2013 state income tax forms You must add the fee to the cost of the property. 2013 state income tax forms See Basis of Investment Property in chapter 4. 2013 state income tax forms    You cannot deduct any broker's fees, commissions, or option premiums you pay (or that were netted out) in connection with the sale of investment property. 2013 state income tax forms They can be used only to figure gain or loss from the sale. 2013 state income tax forms See Reporting Capital Gains and Losses , in chapter 4, for more information about the treatment of these sale expenses. 2013 state income tax forms Investment counsel and advice. 2013 state income tax forms   You can deduct fees you pay for counsel and advice about investments that produce taxable income. 2013 state income tax forms This includes amounts you pay for investment advisory services. 2013 state income tax forms Safe deposit box rent. 2013 state income tax forms   You can deduct rent you pay for a safe deposit box if you use the box to store taxable income-producing stocks, bonds, or other investment-related papers and documents. 2013 state income tax forms If you also use the box to store tax-exempt securities or personal items, you can deduct only part of the rent. 2013 state income tax forms See Tax-exempt income under Nondeductible Expenses, later, to figure what part you can deduct. 2013 state income tax forms State and local transfer taxes. 2013 state income tax forms   You cannot deduct the state and local transfer taxes you pay when you buy or sell securities. 2013 state income tax forms If you pay these transfer taxes when you buy securities, you must treat them as part of the cost of the property. 2013 state income tax forms If you pay these transfer taxes when you sell securities, you must treat them as a reduction in the amount realized. 2013 state income tax forms Trustee's commissions for revocable trust. 2013 state income tax forms   If you set up a revocable trust and have its income distributed to you, you can deduct the commission you pay the trustee for managing the trust to the extent it is to produce or collect taxable income or to manage property. 2013 state income tax forms However, you cannot deduct any part of the commission used for producing or collecting tax-exempt income or for managing property that produces tax-exempt income. 2013 state income tax forms   If you are a cash-basis taxpayer and pay the commissions for several years in advance, you must deduct a part of the commission each year. 2013 state income tax forms You cannot deduct the entire amount in the year you pay it. 2013 state income tax forms Investment expenses from pass-through entities. 2013 state income tax forms   If you hold an interest in a partnership, S corporation, real estate mortgage investment conduit (REMIC), or a nonpublicly offered mutual fund, you can deduct your share of that entity's investment expenses. 2013 state income tax forms A partnership or S corporation will show your share of these expenses on your Schedule K-1 (Form 1065) or Schedule K-1 (Form 1120S). 2013 state income tax forms A nonpublicly offered mutual fund will indicate your share of these expenses in box 5 of Form 1099-DIV (or substitute statement). 2013 state income tax forms Publicly-offered mutual funds are discussed later. 2013 state income tax forms   If you hold an interest in a REMIC, any expenses relating to your residual interest investment will be shown on Schedule Q (Form 1066), line 3b. 2013 state income tax forms Any expenses relating to your regular interest investment will appear in box 5 of Form 1099-INT (or substitute statement) or box 9 of Form 1099-OID (or substitute statement). 2013 state income tax forms   Report your share of these investment expenses on Schedule A (Form 1040), subject to the 2% limit, in the same manner as your other investment expenses. 2013 state income tax forms Including mutual fund or REMIC expenses in income. 2013 state income tax forms   Your share of the investment expenses of a REMIC or a nonpublicly offered mutual fund, as described above, are considered to be indirect deductions through that pass-through entity. 2013 state income tax forms You must include in your gross income an amount equal to the expenses allocated to you, whether or not you are able to claim a deduction for those expenses. 2013 state income tax forms If you are a shareholder in a nonpublicly offered mutual fund, you must include on your return the full amount of ordinary dividends or other distributions of stock, as shown in box 1a of Form 1099-DIV (or substitute statement). 2013 state income tax forms If you are a residual interest holder in a REMIC, you must report as ordinary income on Schedule E (Form 1040) the total amounts shown on Schedule Q (Form 1066), lines 1b and 3b. 2013 state income tax forms If you are a REMIC regular interest holder, you must include the amount of any expense allocation you received on Form 1040, line 8a. 2013 state income tax forms Publicly-offered mutual funds. 2013 state income tax forms   Most mutual funds are publicly offered. 2013 state income tax forms These mutual funds, generally, are traded on an established securities exchange. 2013 state income tax forms These funds do not pass investment expenses through to you. 2013 state income tax forms Instead, the dividend income they report to you in box 1a of Form 1099-DIV (or substitute statement) is already reduced by your share of investment expenses. 2013 state income tax forms As a result, you cannot deduct the expenses on your return. 2013 state income tax forms   Include the amount from box 1a of Form 1099-DIV (or substitute statement) in your income. 2013 state income tax forms    A publicly offered mutual fund is one that: Is continuously offered pursuant to a public offering, Is regularly traded on an established securities market, and Is held by or for no fewer than 500 persons at any time during the year. 2013 state income tax forms Contact your mutual fund if you are not sure whether it is publicly offered. 2013 state income tax forms Nondeductible Expenses Some expenses that you incur as an investor are not deductible. 2013 state income tax forms Stockholders' meetings. 2013 state income tax forms   You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you have no interest other than owning stock. 2013 state income tax forms This is true even if your purpose in attending is to get information that would be useful in making further investments. 2013 state income tax forms Investment-related seminar. 2013 state income tax forms   You cannot deduct expenses for attending a convention, seminar, or similar meeting for investment purposes. 2013 state income tax forms Single-premium life insurance, endowment, and annuity contracts. 2013 state income tax forms   You cannot deduct interest on money you borrow to buy or carry a single-premium life insurance, endowment, or annuity contract. 2013 state income tax forms Used as collateral. 2013 state income tax forms   If you use a single premium annuity contract as collateral to obtain or continue a mortgage loan, you cannot deduct any interest on the loan that is collateralized by the annuity contract. 2013 state income tax forms Figure the amount of interest expense disallowed by multiplying the current interest rate on the mortgage loan by the lesser of the amount of the annuity contract used as collateral or the amount of the loan. 2013 state income tax forms Borrowing on insurance. 2013 state income tax forms   Generally, you cannot deduct interest on money you borrow to buy or carry a life insurance, endowment, or annuity contract if you plan to systematically borrow part or all of the increases in the cash value of the contract. 2013 state income tax forms This rule applies to the interest on the total amount borrowed to buy or carry the contract, not just the interest on the borrowed increases in the cash value. 2013 state income tax forms Tax-exempt income. 2013 state income tax forms   You cannot deduct expenses you incur to produce tax-exempt income. 2013 state income tax forms Nor can you deduct interest on money you borrow to buy tax-exempt securities or shares in a mutual fund or other regulated investment company that distributes only exempt-interest dividends. 2013 state income tax forms Short-sale expenses. 2013 state income tax forms   The rule disallowing a deduction for interest expenses on tax-exempt securities applies to amounts you pay in connection with personal property used in a short sale or amounts paid by others for the use of any collateral in connection with the short sale. 2013 state income tax forms However, it does not apply to the expenses you incur if you deposit cash as collateral for the property used in the short sale and the cash does not earn a material return during the period of the sale. 2013 state income tax forms Short sales are discussed in Short Sales in chapter 4. 2013 state income tax forms Expenses for both tax-exempt and taxable income. 2013 state income tax forms   You may have expenses that are for both tax-exempt and taxable income. 2013 state income tax forms If you cannot specifically identify what part of the expenses is for each type of income, you can divide the expenses, using reasonable proportions based on facts and circumstances. 2013 state income tax forms You must attach a statement to your return showing how you divided the expenses and stating that each deduction claimed is not based on tax-exempt income. 2013 state income tax forms   One accepted method for dividing expenses is to do it in the same proportion that each type of income is to the total income. 2013 state income tax forms If the expenses relate in part to capital gains and losses, include the gains, but not the losses, in figuring this proportion. 2013 state income tax forms To find the part of the expenses that is for the tax-exempt income, divide your tax-exempt income by the total income and multiply your expenses by the result. 2013 state income tax forms Example. 2013 state income tax forms You received $6,000 interest; $4,800 was tax-exempt and $1,200 was taxable. 2013 state income tax forms In earning this income, you had $500 of expenses. 2013 state income tax forms You cannot specifically identify the amount of each expense item that is for each income item, so you must divide your expenses. 2013 state income tax forms 80% ($4,800 tax-exempt interest divided by $6,000 total interest) of your expenses is for the tax-exempt income. 2013 state income tax forms You cannot deduct $400 (80% of $500) of the expenses. 2013 state income tax forms You can deduct $100 (the rest of the expenses) because they are for the taxable interest. 2013 state income tax forms State income taxes. 2013 state income tax forms   If you itemize your deductions, you can deduct, as taxes, state income taxes on interest income that is exempt from federal income tax. 2013 state income tax forms But you cannot deduct, as either taxes or investment expenses, state income taxes on other exempt income. 2013 state income tax forms Interest expense and carrying charges on straddles. 2013 state income tax forms   You cannot deduct interest and carrying charges allocable to personal property that is part of a straddle. 2013 state income tax forms The nondeductible interest and carrying charges are added to the basis of the straddle property. 2013 state income tax forms However, this treatment does not apply if: All the offsetting positions making up the straddle either consist of one or more qualified covered call options and the optioned stock, or consist of section 1256 contracts (and the straddle is not part of a larger straddle); or The straddle is a hedging transaction. 2013 state income tax forms  For information about straddles, including definitions of the terms used in this discussion, see Straddles in chapter 4. 2013 state income tax forms   Interest includes any amount you pay or incur in connection with personal property used in a short sale. 2013 state income tax forms However, you must first apply the rules discussed in Payments in lieu of dividends under Short Sales in chapter 4. 2013 state income tax forms   To determine the interest on market discount bonds and short-term obligations that are part of a straddle, you must first apply the rules discussed under Limit on interest deduction for market discount bonds and Limit on interest deduction for short-term obligations (both under Interest Expenses, earlier). 2013 state income tax forms Nondeductible amount. 2013 state income tax forms   Figure the nondeductible interest and carrying charges on straddle property as follows. 2013 state income tax forms Add: Interest on indebtedness incurred or continued to buy or carry the personal property, and All other amounts (including charges to insure, store, or transport the personal property) paid or incurred to carry the personal property. 2013 state income tax forms Subtract from the amount in (1): Interest (including OID) includible in gross income for the year on the personal property, Any income from the personal property treated as ordinary income on the disposition of short-term government obligations or as ordinary income under the market discount and short-term bond provisions — see Discount on Debt Instruments in chapter 1, The dividends includible in gross income for the year from the personal property, and Any payment on a loan of the personal property for use in a short sale that is includible in gross income. 2013 state income tax forms Basis adjustment. 2013 state income tax forms   Add the nondeductible amount to the basis of your straddle property. 2013 state income tax forms How To Report Investment Expenses To deduct your investment expenses, you must itemize deductions on Schedule A (Form 1040). 2013 state income tax forms Enter your deductible investment interest expense on Schedule A (Form1040), line 14. 2013 state income tax forms Include any deductible short sale expenses. 2013 state income tax forms (See Short Sales in chapter 4 for information on these expenses. 2013 state income tax forms ) Also attach a completed Form 4952 if you used that form to figure your investment interest expense. 2013 state income tax forms Enter the total amount of your other investment expenses (other than interest expenses) on Schedule A (Form 1040), line 23. 2013 state income tax forms List the type and amount of each expense on the dotted lines next to line 23. 2013 state income tax forms (If necessary, you can show the required information on an attached statement. 2013 state income tax forms ) For information on how to report amortizable bond premium, see Bond Premium Amortization , earlier in this chapter. 2013 state income tax forms When To Report Investment Expenses If you use the cash method to report income and expenses, you generally deduct your expenses, except for certain prepaid interest, in the year you pay them. 2013 state income tax forms If you use an accrual method, you generally deduct your expenses when you incur a liability for them, rather than when you pay them. 2013 state income tax forms Also see When To Deduct Investment Interest , earlier in this chapter. 2013 state income tax forms Unpaid expenses owed to related party. 2013 state income tax forms   If you use an accrual method, you cannot deduct interest and other expenses owed to a related cash-basis person until payment is made and the amount is includible in the gross income of that person. 2013 state income tax forms The relationship, for purposes of this rule, is determined as of the end of the tax year for which the interest or expense would otherwise be deductible. 2013 state income tax forms If a deduction is denied under this rule, this rule will continue to apply even if your relationship with the person ceases to exist before the amount is includible in the gross income of that person. 2013 state income tax forms   This rule generally applies to those relationships listed in chapter 4 under Related Party Transactions . 2013 state income tax forms It also applies to accruals by partnerships to partners, partners to partnerships, shareholders to S corporations, and S corporations to shareholders. 2013 state income tax forms   The postponement of deductions for unpaid expenses and interest under the related party rule does not apply to OID, regardless of when payment is made. 2013 state income tax forms This rule also does not apply to loans with below-market interest rates or to certain payments for the use of property and services when the lender or recipient has to include payments periodically in income, even if a payment has not been made. 2013 state income tax forms Prev  Up  Next   Home   More Online Publications