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Federal Income Tax Instructions 1040ez

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Federal Income Tax Instructions 1040ez

Federal income tax instructions 1040ez Publication 587 - Main Content Table of Contents Qualifying for a DeductionExclusive Use Regular Use Trade or Business Use Principal Place of Business Place To Meet Patients, Clients, or Customers Separate Structure Figuring the DeductionUsing Actual Expenses Using the Simplified Method Daycare Facility Standard meal and snack rates. Federal income tax instructions 1040ez Sale or Exchange of Your HomeGain on Sale Depreciation Basis Adjustment Reporting the Sale More Information Business Furniture and EquipmentListed Property Property Bought for Business Use Personal Property Converted to Business Use Recordkeeping Where To DeductSelf-Employed Persons Employees Partners How To Get Tax HelpLow Income Taxpayer Clinics Worksheet To Figure the Deduction for Business Use of Your HomeInstructions for the Worksheet Worksheets To Figure the Deduction for Business Use of Your Home (Simplified Method) Instructions for the Simplified Method Worksheet Instructions for the Daycare Facility Worksheet Instructions for the Area Adjustment Worksheet Qualifying for a Deduction Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. Federal income tax instructions 1040ez However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. Federal income tax instructions 1040ez Even then, the deductible amount of these types of expenses may be limited. Federal income tax instructions 1040ez Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. Federal income tax instructions 1040ez To qualify to deduct expenses for business use of your home, you must use part of your home: Exclusively and regularly as your principal place of business (defined later), Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, In the case of a separate structure which is not attached to your home, in connection with your trade or business, On a regular basis for certain storage use (see Storage of inventory or product samples , later), For rental use (see Publication 527), or As a daycare facility (see Daycare Facility , later). Federal income tax instructions 1040ez Additional tests for employee use. Federal income tax instructions 1040ez   If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. Federal income tax instructions 1040ez You must meet the tests discussed earlier plus: Your business use must be for the convenience of your employer, and You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer. Federal income tax instructions 1040ez If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. Federal income tax instructions 1040ez Exclusive Use To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Federal income tax instructions 1040ez The area used for business can be a room or other separately identifiable space. Federal income tax instructions 1040ez The space does not need to be marked off by a permanent partition. Federal income tax instructions 1040ez You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. Federal income tax instructions 1040ez Example. Federal income tax instructions 1040ez You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. Federal income tax instructions 1040ez Your family also uses the den for recreation. Federal income tax instructions 1040ez The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. Federal income tax instructions 1040ez Exceptions to Exclusive Use You do not have to meet the exclusive use test if either of the following applies. Federal income tax instructions 1040ez You use part of your home for the storage of inventory or product samples (discussed next). Federal income tax instructions 1040ez You use part of your home as a daycare facility, discussed later under Daycare Facility . Federal income tax instructions 1040ez Note. Federal income tax instructions 1040ez With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. Federal income tax instructions 1040ez Storage of inventory or product samples. Federal income tax instructions 1040ez    If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. Federal income tax instructions 1040ez However, you must meet all the following tests. Federal income tax instructions 1040ez You sell products at wholesale or retail as your trade or business. Federal income tax instructions 1040ez You keep the inventory or product samples in your home for use in your trade or business. Federal income tax instructions 1040ez Your home is the only fixed location of your trade or business. Federal income tax instructions 1040ez You use the storage space on a regular basis. Federal income tax instructions 1040ez The space you use is a separately identifiable space suitable for storage. Federal income tax instructions 1040ez Example. Federal income tax instructions 1040ez Your home is the only fixed location of your business of selling mechanics' tools at retail. Federal income tax instructions 1040ez You regularly use half of your basement for storage of inventory and product samples. Federal income tax instructions 1040ez You sometimes use the area for personal purposes. Federal income tax instructions 1040ez The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. Federal income tax instructions 1040ez Regular Use To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. Federal income tax instructions 1040ez Incidental or occasional business use is not regular use. Federal income tax instructions 1040ez You must consider all facts and circumstances in determining whether your use is on a regular basis. Federal income tax instructions 1040ez Trade or Business Use To qualify under the trade-or-business-use test, you must use part of your home in connection with a trade or business. Federal income tax instructions 1040ez If you use your home for a profit-seeking activity that is not a trade or business, you cannot take a deduction for its business use. Federal income tax instructions 1040ez Example. Federal income tax instructions 1040ez You use part of your home exclusively and regularly to read financial periodicals and reports, clip bond coupons, and carry out similar activities related to your own investments. Federal income tax instructions 1040ez You do not make investments as a broker or dealer. Federal income tax instructions 1040ez So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. Federal income tax instructions 1040ez Principal Place of Business You can have more than one business location, including your home, for a single trade or business. Federal income tax instructions 1040ez To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. Federal income tax instructions 1040ez To determine whether your home is your principal place of business, you must consider: The relative importance of the activities performed at each place where you conduct business, and The amount of time spent at each place where you conduct business. Federal income tax instructions 1040ez Your home office will qualify as your principal place of business if you meet the following requirements. Federal income tax instructions 1040ez You use it exclusively and regularly for administrative or management activities of your trade or business. Federal income tax instructions 1040ez You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Federal income tax instructions 1040ez If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Federal income tax instructions 1040ez However, see the later discussions under Place To Meet Patients, Clients, or Customers and Separate Structure for other ways to qualify to deduct home office expenses. Federal income tax instructions 1040ez Administrative or management activities. Federal income tax instructions 1040ez   There are many activities that are administrative or managerial in nature. Federal income tax instructions 1040ez The following are a few examples. Federal income tax instructions 1040ez Billing customers, clients, or patients. Federal income tax instructions 1040ez Keeping books and records. Federal income tax instructions 1040ez Ordering supplies. Federal income tax instructions 1040ez Setting up appointments. Federal income tax instructions 1040ez Forwarding orders or writing reports. Federal income tax instructions 1040ez Administrative or management activities performed at other locations. Federal income tax instructions 1040ez   The following activities performed by you or others will not disqualify your home office from being your principal place of business. Federal income tax instructions 1040ez You have others conduct your administrative or management activities at locations other than your home. Federal income tax instructions 1040ez (For example, another company does your billing from its place of business. Federal income tax instructions 1040ez ) You conduct administrative or management activities at places that are not fixed locations of your business, such as in a car or a hotel room. Federal income tax instructions 1040ez You occasionally conduct minimal administrative or management activities at a fixed location outside your home. Federal income tax instructions 1040ez You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. Federal income tax instructions 1040ez (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home. Federal income tax instructions 1040ez ) You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. Federal income tax instructions 1040ez Please click here for the text description of the image. Federal income tax instructions 1040ez Can you deduct business use of the home expenses? Example 1. Federal income tax instructions 1040ez John is a self-employed plumber. Federal income tax instructions 1040ez Most of John's time is spent at customers' homes and offices installing and repairing plumbing. Federal income tax instructions 1040ez He has a small office in his home that he uses exclusively and regularly for the administrative or management activities of his business, such as phoning customers, ordering supplies, and keeping his books. Federal income tax instructions 1040ez John writes up estimates and records of work completed at his customers' premises. Federal income tax instructions 1040ez He does not conduct any substantial administrative or management activities at any fixed location other than his home office. Federal income tax instructions 1040ez John does not do his own billing. Federal income tax instructions 1040ez He uses a local bookkeeping service to bill his customers. Federal income tax instructions 1040ez John's home office qualifies as his principal place of business for deducting expenses for its use. Federal income tax instructions 1040ez He uses the home office for the administrative or managerial activities of his plumbing business and he has no other fixed location where he conducts these administrative or managerial activities. Federal income tax instructions 1040ez His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. Federal income tax instructions 1040ez He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. Federal income tax instructions 1040ez Example 2. Federal income tax instructions 1040ez Pamela is a self-employed sales representative for several different product lines. Federal income tax instructions 1040ez She has an office in her home that she uses exclusively and regularly to set up appointments and write up orders and other reports for the companies whose products she sells. Federal income tax instructions 1040ez She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. Federal income tax instructions 1040ez Pamela's business is selling products to customers at various locations throughout her territory. Federal income tax instructions 1040ez To make these sales, she regularly visits customers to explain the available products and take orders. Federal income tax instructions 1040ez Pamela's home office qualifies as her principal place of business for deducting expenses for its use. Federal income tax instructions 1040ez She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. Federal income tax instructions 1040ez The fact that she conducts some administrative or management activities in her hotel room (not a fixed location) does not disqualify her home office from being her principal place of business. Federal income tax instructions 1040ez She meets all the qualifications, including principal place of business, so she can deduct expenses (subject to certain limitations, explained later) for the business use of her home. Federal income tax instructions 1040ez Example 3. Federal income tax instructions 1040ez Paul is a self-employed anesthesiologist. Federal income tax instructions 1040ez He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. Federal income tax instructions 1040ez One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. Federal income tax instructions 1040ez Paul very rarely uses the office the hospital provides. Federal income tax instructions 1040ez He uses a room in his home that he has converted to an office. Federal income tax instructions 1040ez He uses this room exclusively and regularly to conduct all the following activities. Federal income tax instructions 1040ez Contacting patients, surgeons, and hospitals regarding scheduling. Federal income tax instructions 1040ez Preparing for treatments and presentations. Federal income tax instructions 1040ez Maintaining billing records and patient logs. Federal income tax instructions 1040ez Satisfying continuing medical education requirements. Federal income tax instructions 1040ez Reading medical journals and books. Federal income tax instructions 1040ez Paul's home office qualifies as his principal place of business for deducting expenses for its use. Federal income tax instructions 1040ez He conducts administrative or management activities for his business as an anesthesiologist there and he has no other fixed location where he conducts substantial administrative or management activities for this business. Federal income tax instructions 1040ez His choice to use his home office instead of the one provided by the hospital does not disqualify his home office from being his principal place of business. Federal income tax instructions 1040ez His performance of substantial nonadministrative or nonmanagement activities at fixed locations outside his home also does not disqualify his home office from being his principal place of business. Federal income tax instructions 1040ez He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. Federal income tax instructions 1040ez Example 4. Federal income tax instructions 1040ez Kathleen is employed as a teacher. Federal income tax instructions 1040ez She is required to teach and meet with students at the school and to grade papers and tests. Federal income tax instructions 1040ez The school provides her with a small office where she can work on her lesson plans, grade papers and tests, and meet with parents and students. Federal income tax instructions 1040ez The school does not require her to work at home. Federal income tax instructions 1040ez Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. Federal income tax instructions 1040ez She uses this home office exclusively and regularly for the administrative duties of her teaching job. Federal income tax instructions 1040ez Kathleen must meet the convenience-of-the-employer test, even if her home qualifies as her principal place of business for deducting expenses for its use. Federal income tax instructions 1040ez Her employer provides her with an office and does not require her to work at home, so she does not meet the convenience-of-the-employer test and cannot claim a deduction for the business use of her home. Federal income tax instructions 1040ez More Than One Trade or Business The same home office can be the principal place of business for two or more separate business activities. Federal income tax instructions 1040ez Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. Federal income tax instructions 1040ez You must use the home office exclusively and regularly for one or more of the following purposes. Federal income tax instructions 1040ez As the principal place of business for one or more of your trades or businesses. Federal income tax instructions 1040ez As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses. Federal income tax instructions 1040ez If your home office is a separate structure, in connection with one or more of your trades or businesses. Federal income tax instructions 1040ez You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i. Federal income tax instructions 1040ez e. Federal income tax instructions 1040ez , personal) activities. Federal income tax instructions 1040ez If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. Federal income tax instructions 1040ez See Rental to employer , later, if you rent part of your home to your employer. Federal income tax instructions 1040ez Example. Federal income tax instructions 1040ez Tracy White is employed as a teacher. Federal income tax instructions 1040ez Her principal place of work is the school, which provides her office space to do her school work. Federal income tax instructions 1040ez She also has a mail order jewelry business. Federal income tax instructions 1040ez All her work in the jewelry business is done in her home office and the office is used exclusively for that business. Federal income tax instructions 1040ez If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. Federal income tax instructions 1040ez If Tracy also uses the office for work related to her teaching, she must meet the exclusive use test for both businesses to qualify for the deduction. Federal income tax instructions 1040ez As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. Federal income tax instructions 1040ez She does not meet this test for her work as a teacher, so she cannot claim a deduction for the business use of her home for either activity. Federal income tax instructions 1040ez Place To Meet Patients, Clients, or Customers If you meet or deal with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business if you meet both the following tests. Federal income tax instructions 1040ez You physically meet with patients, clients, or customers on your premises. Federal income tax instructions 1040ez Their use of your home is substantial and integral to the conduct of your business. Federal income tax instructions 1040ez Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. Federal income tax instructions 1040ez Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. Federal income tax instructions 1040ez The part of your home you use exclusively and regularly to meet patients, clients, or customers does not have to be your principal place of business. Federal income tax instructions 1040ez Example. Federal income tax instructions 1040ez June Quill, a self-employed attorney, works 3 days a week in her city office. Federal income tax instructions 1040ez She works 2 days a week in her home office used only for business. Federal income tax instructions 1040ez She regularly meets clients there. Federal income tax instructions 1040ez Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. Federal income tax instructions 1040ez Separate Structure You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business. Federal income tax instructions 1040ez The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. Federal income tax instructions 1040ez Example. Federal income tax instructions 1040ez John Berry operates a floral shop in town. Federal income tax instructions 1040ez He grows the plants for his shop in a greenhouse behind his home. Federal income tax instructions 1040ez He uses the greenhouse exclusively and regularly in his business, so he can deduct the expenses for its use, subject to certain limitations, explained later. Federal income tax instructions 1040ez Figuring the Deduction After you determine that you meet the tests under Qualifying for a Deduction , you can begin to figure how much you can deduct. Federal income tax instructions 1040ez When figuring the amount you can deduct for the business use of your home, you will use either your actual expenses or a simplified method. Federal income tax instructions 1040ez Electing to use the simplified method. Federal income tax instructions 1040ez   The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Federal income tax instructions 1040ez You choose whether or not to figure your deduction using the simplified method each taxable year. Federal income tax instructions 1040ez See Using the Simplified Method , later. Federal income tax instructions 1040ez Rental to employer. Federal income tax instructions 1040ez   If you rent part of your home to your employer and you use the rented part in performing services for your employer as an employee, your deduction for the business use of your home is limited. Federal income tax instructions 1040ez You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. Federal income tax instructions 1040ez However, you cannot deduct otherwise allowable trade or business expenses, business casualty losses, or depreciation related to the use of your home (or use the simplified method as an alternative to deducting these actual expenses) in performing services for your employer. Federal income tax instructions 1040ez Using Actual Expenses If you do not or cannot elect to use the simplified method for a home, you will figure your deduction for that home using your actual expenses. Federal income tax instructions 1040ez You will also need to figure the percentage of your home used for business and the limit on the deduction. Federal income tax instructions 1040ez If you are an employee or a partner, or you use your home in your farming business and you file Schedule F (Form 1040), you can use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to help you figure your deduction. Federal income tax instructions 1040ez If you use your home in a trade or business and you file Schedule C (Form 1040), you will use Form 8829 to figure your deduction. Federal income tax instructions 1040ez Part-year use. Federal income tax instructions 1040ez   You cannot deduct expenses for the business use of your home incurred during any part of the year you did not use your home for business purposes. Federal income tax instructions 1040ez For example, if you begin using part of your home for business on July 1, and you meet all the tests from that date until the end of the year, consider only your expenses for the last half of the year in figuring your allowable deduction. Federal income tax instructions 1040ez Expenses related to tax-exempt income. Federal income tax instructions 1040ez   Generally, you cannot deduct expenses that are related to tax-exempt allowances. Federal income tax instructions 1040ez However, if you receive a tax-exempt parsonage allowance or a tax-exempt military allowance, your expenses for mortgage interest and real estate taxes are deductible under the normal rules. Federal income tax instructions 1040ez No deduction is allowed for other expenses related to the tax-exempt allowance. Federal income tax instructions 1040ez   If your housing is provided free of charge and the value of the housing is tax exempt, you cannot deduct the rental value of any portion of the housing. Federal income tax instructions 1040ez Actual Expenses You must divide the expenses of operating your home between personal and business use. Federal income tax instructions 1040ez The part of a home operating expense you can use to figure your deduction depends on both of the following. Federal income tax instructions 1040ez Whether the expense is direct, indirect, or unrelated. Federal income tax instructions 1040ez The percentage of your home used for business. Federal income tax instructions 1040ez Table 1, next, describes the types of expenses you may have and the extent to which they are deductible. Federal income tax instructions 1040ez Table 1. Federal income tax instructions 1040ez Types of Expenses  Expense  Description  Deductibility Direct Expenses only for  the business part  of your home. Federal income tax instructions 1040ez Deductible in full. Federal income tax instructions 1040ez *   Examples:  Painting or repairs  only in the area  used for business. Federal income tax instructions 1040ez Exception: May be only partially  deductible in a daycare facility. Federal income tax instructions 1040ez See Daycare Facility , later. Federal income tax instructions 1040ez Indirect Expenses for  keeping up and running your  entire home. Federal income tax instructions 1040ez Deductible based on the percentage of your home used for business. Federal income tax instructions 1040ez *   Examples:  Insurance, utilities, and  general repairs. Federal income tax instructions 1040ez   Unrelated Expenses only for  the parts of your  home not used  for business. Federal income tax instructions 1040ez Not deductible. Federal income tax instructions 1040ez   Examples:  Lawn care or painting  a room not used  for business. Federal income tax instructions 1040ez   *Subject to the deduction limit, discussed later. Federal income tax instructions 1040ez Form 8829 and the Worksheet To Figure the Deduction for Business Use of Your Home have separate columns for direct and indirect expenses. Federal income tax instructions 1040ez Certain expenses are deductible whether or not you use your home for business. Federal income tax instructions 1040ez If you qualify to deduct business use of the home expenses, use the business percentage of these expenses to figure your total business use of the home deduction. Federal income tax instructions 1040ez These expenses include the following. Federal income tax instructions 1040ez Real estate taxes. Federal income tax instructions 1040ez Qualified mortgage insurance premiums. Federal income tax instructions 1040ez Deductible mortgage interest. Federal income tax instructions 1040ez Casualty losses. Federal income tax instructions 1040ez Other expenses are deductible only if you use your home for business. Federal income tax instructions 1040ez You can use the business percentage of these expenses to figure your total business use of the home deduction. Federal income tax instructions 1040ez These expenses generally include (but are not limited to) the following. Federal income tax instructions 1040ez Depreciation (covered under Depreciating Your Home , later). Federal income tax instructions 1040ez Insurance. Federal income tax instructions 1040ez Rent paid for the use of property you do not own but use in your trade or business. Federal income tax instructions 1040ez Repairs. Federal income tax instructions 1040ez Security system. Federal income tax instructions 1040ez Utilities and services. Federal income tax instructions 1040ez Real estate taxes. Federal income tax instructions 1040ez   To figure the business part of your real estate taxes, multiply the real estate taxes paid by the percentage of your home used for business. Federal income tax instructions 1040ez   For more information on the deduction for real estate taxes, see Publication 530, Tax Information for Homeowners. Federal income tax instructions 1040ez Deductible mortgage interest. Federal income tax instructions 1040ez   To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. Federal income tax instructions 1040ez You can include interest on a second mortgage in this computation. Federal income tax instructions 1040ez If your total mortgage debt is more than $1,000,000 or your home equity debt is more than $100,000, your deduction may be limited. Federal income tax instructions 1040ez For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction. Federal income tax instructions 1040ez Qualified mortgage insurance premiums. Federal income tax instructions 1040ez   To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. Federal income tax instructions 1040ez You can include premiums for insurance on a second mortgage in this computation. Federal income tax instructions 1040ez If your adjusted gross income is more than $100,000 ($50,000 if your filing status is married filing separately), your deduction may be limited. Federal income tax instructions 1040ez For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040). Federal income tax instructions 1040ez Casualty losses. Federal income tax instructions 1040ez    If you have a casualty loss on your home that you use for business, treat the casualty loss as a direct expense, an indirect expense, or an unrelated expense, depending on the property affected. Federal income tax instructions 1040ez A direct expense is the loss on the portion of the property you use only in your business. Federal income tax instructions 1040ez Use the entire loss to figure the business use of the home deduction. Federal income tax instructions 1040ez An indirect expense is the loss on property you use for both business and personal purposes. Federal income tax instructions 1040ez Use only the business portion to figure the deduction. Federal income tax instructions 1040ez An unrelated expense is the loss on property you do not use in your business. Federal income tax instructions 1040ez Do not use any of the loss to figure the deduction. Federal income tax instructions 1040ez Example. Federal income tax instructions 1040ez You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. Federal income tax instructions 1040ez A storm damages your roof. Federal income tax instructions 1040ez This is an indirect expense as the roof is part of the whole house and is considered to be used both for business and personal purposes. Federal income tax instructions 1040ez You would complete Form 4684, Casualties and Thefts, to report your loss. Federal income tax instructions 1040ez You complete both section A (Personal Use Property) and section B (Business and Income-Producing Property) as your home is used both for business and personal purposes. Federal income tax instructions 1040ez Since you use 90% of your home for personal purposes, use 90% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 2, 3, 5, and 6 of Form 4684. Federal income tax instructions 1040ez Since you use 10% of your home for business purposes, use 10% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 20, 21, 23, and 24 of Form 4684. Federal income tax instructions 1040ez Forms and worksheets to use. Federal income tax instructions 1040ez   If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. Federal income tax instructions 1040ez If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. Federal income tax instructions 1040ez You will also need to get Form 4684. Federal income tax instructions 1040ez More information. Federal income tax instructions 1040ez   For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts. Federal income tax instructions 1040ez Insurance. Federal income tax instructions 1040ez   You can deduct the cost of insurance that covers the business part of your home. Federal income tax instructions 1040ez However, if your insurance premium gives you coverage for a period that extends past the end of your tax year, you can deduct only the business percentage of the part of the premium that gives you coverage for your tax year. Federal income tax instructions 1040ez You can deduct the business percentage of the part that applies to the following year in that year. Federal income tax instructions 1040ez Rent. Federal income tax instructions 1040ez   If you rent the home you occupy and meet the requirements for business use of the home, you can deduct part of the rent you pay. Federal income tax instructions 1040ez To figure your deduction, multiply your rent payments by the percentage of your home used for business. Federal income tax instructions 1040ez   If you own your home, you cannot deduct the fair rental value of your home. Federal income tax instructions 1040ez However, see Depreciating Your Home , later. Federal income tax instructions 1040ez Repairs. Federal income tax instructions 1040ez   The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. Federal income tax instructions 1040ez For example, a furnace repair benefits the entire home. Federal income tax instructions 1040ez If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. Federal income tax instructions 1040ez   Repairs keep your home in good working order over its useful life. Federal income tax instructions 1040ez Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. Federal income tax instructions 1040ez However, repairs are sometimes treated as a permanent improvement and are not deductible. Federal income tax instructions 1040ez See Permanent improvements , later, under Depreciating Your Home. Federal income tax instructions 1040ez Security system. Federal income tax instructions 1040ez   If you install a security system that protects all the doors and windows in your home, you can deduct the business part of the expenses you incur to maintain and monitor the system. Federal income tax instructions 1040ez You also can take a depreciation deduction for the part of the cost of the security system relating to the business use of your home. Federal income tax instructions 1040ez Utilities and services. Federal income tax instructions 1040ez   Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. Federal income tax instructions 1040ez However, if you use part of your home for business, you can deduct the business part of these expenses. Federal income tax instructions 1040ez Generally, the business percentage for utilities is the same as the percentage of your home used for business. Federal income tax instructions 1040ez Telephone. Federal income tax instructions 1040ez   The basic local telephone service charge, including taxes, for the first telephone line into your home (i. Federal income tax instructions 1040ez e. Federal income tax instructions 1040ez , landline) is a nondeductible personal expense. Federal income tax instructions 1040ez However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Federal income tax instructions 1040ez Do not include these expenses as a cost of using your home for business. Federal income tax instructions 1040ez Deduct these charges separately on the appropriate form or schedule. Federal income tax instructions 1040ez For example, if you file Schedule C (Form 1040), deduct these expenses on line 25, Utilities (instead of line 30, Expenses for business use of your home). Federal income tax instructions 1040ez Depreciating Your Home If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. Federal income tax instructions 1040ez Depreciation is an allowance for the wear and tear on the part of your home used for business. Federal income tax instructions 1040ez You cannot depreciate the cost or value of the land. Federal income tax instructions 1040ez You recover its cost when you sell or otherwise dispose of the property. Federal income tax instructions 1040ez Before you figure your depreciation deduction, you need to know the following information. Federal income tax instructions 1040ez The month and year you started using your home for business. Federal income tax instructions 1040ez The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. Federal income tax instructions 1040ez The cost of any improvements before and after you began using the property for business. Federal income tax instructions 1040ez The percentage of your home used for business. Federal income tax instructions 1040ez See Business Percentage , later. Federal income tax instructions 1040ez Adjusted basis defined. Federal income tax instructions 1040ez   The adjusted basis of your home is generally its cost, plus the cost of any permanent improvements you made to it, minus any casualty losses or depreciation deducted in earlier tax years. Federal income tax instructions 1040ez For a discussion of adjusted basis, see Publication 551. Federal income tax instructions 1040ez Permanent improvements. Federal income tax instructions 1040ez   A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. Federal income tax instructions 1040ez Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. Federal income tax instructions 1040ez    You must carefully distinguish between repairs and improvements. Federal income tax instructions 1040ez See Repairs , earlier, under Actual Expenses. Federal income tax instructions 1040ez You also must keep accurate records of these expenses. Federal income tax instructions 1040ez These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. Federal income tax instructions 1040ez However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. Federal income tax instructions 1040ez Example. Federal income tax instructions 1040ez You buy an older home and fix up two rooms as a beauty salon. Federal income tax instructions 1040ez You patch the plaster on the ceilings and walls, paint, repair the floor, install an outside door, and install new wiring, plumbing, and other equipment. Federal income tax instructions 1040ez Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. Federal income tax instructions 1040ez However, because the work gives your property a new use, the entire remodeling job is a permanent improvement and its cost is added to the basis of the property. Federal income tax instructions 1040ez You cannot deduct any portion of it as a repair expense. Federal income tax instructions 1040ez Adjusting for depreciation deducted in earlier years. Federal income tax instructions 1040ez   Decrease the basis of your property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you properly selected. Federal income tax instructions 1040ez If you deducted less depreciation than you could have under the method you selected, decrease the basis by the amount you could have deducted under that method. Federal income tax instructions 1040ez If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. Federal income tax instructions 1040ez   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted, plus the part of the excess depreciation you deducted that actually decreased your tax liability for any year. Federal income tax instructions 1040ez   If you deducted the incorrect amount of depreciation, see Publication 946. Federal income tax instructions 1040ez Fair market value defined. Federal income tax instructions 1040ez   The fair market value of your home is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Federal income tax instructions 1040ez Sales of similar property, on or about the date you begin using your home for business, may be helpful in determining the property's fair market value. Federal income tax instructions 1040ez Figuring the depreciation deduction for the current year. Federal income tax instructions 1040ez   If you began using your home for business before 2013, continue to use the same depreciation method you used in past tax years. Federal income tax instructions 1040ez   If you began using your home for business for the first time in 2013, depreciate the business part as nonresidential real property under the modified accelerated cost recovery system (MACRS). Federal income tax instructions 1040ez Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. Federal income tax instructions 1040ez For more information on MACRS and other methods of depreciation, see Publication 946. Federal income tax instructions 1040ez   To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). Federal income tax instructions 1040ez The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. Federal income tax instructions 1040ez The adjusted basis of your home (excluding land) on the date you began using your home for business. Federal income tax instructions 1040ez The fair market value of your home (excluding land) on the date you began using your home for business. Federal income tax instructions 1040ez Depreciation table. Federal income tax instructions 1040ez   If 2013 was the first year you used your home for business, you can figure your 2013 depreciation for the business part of your home by using the appropriate percentage from the following table. Federal income tax instructions 1040ez Table 2. Federal income tax instructions 1040ez MACRS Percentage Table for 39-Year Nonresidential Real Property Month First Used for Business Percentage To Use 1 2. Federal income tax instructions 1040ez 461% 2 2. Federal income tax instructions 1040ez 247% 3 2. Federal income tax instructions 1040ez 033% 4 1. Federal income tax instructions 1040ez 819% 5 1. Federal income tax instructions 1040ez 605% 6 1. Federal income tax instructions 1040ez 391% 7 1. Federal income tax instructions 1040ez 177% 8 0. Federal income tax instructions 1040ez 963% 9 0. Federal income tax instructions 1040ez 749% 10 0. Federal income tax instructions 1040ez 535% 11 0. Federal income tax instructions 1040ez 321% 12 0. Federal income tax instructions 1040ez 107%   Multiply the depreciable basis of the business part of your home by the percentage from the table for the first month you use your home for business. Federal income tax instructions 1040ez See Publication 946 for the percentages for the remaining tax years of the recovery period. Federal income tax instructions 1040ez Example. Federal income tax instructions 1040ez In May, George Miller began to use one room in his home exclusively and regularly to meet clients. Federal income tax instructions 1040ez This room is 8% of the square footage of his home. Federal income tax instructions 1040ez He bought the home in 2003 for $125,000. Federal income tax instructions 1040ez He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. Federal income tax instructions 1040ez In May, the house had a fair market value of $165,000. Federal income tax instructions 1040ez He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. Federal income tax instructions 1040ez The result is $9,200, his depreciable basis for the business part of the house. Federal income tax instructions 1040ez George files his return based on the calendar year. Federal income tax instructions 1040ez May is the 5th month of his tax year. Federal income tax instructions 1040ez He multiplies his depreciable basis of $9,200 by 1. Federal income tax instructions 1040ez 605% (. Federal income tax instructions 1040ez 01605), the percentage from the table for the 5th month. Federal income tax instructions 1040ez His depreciation deduction is $147. Federal income tax instructions 1040ez 66. Federal income tax instructions 1040ez Depreciating permanent improvements. Federal income tax instructions 1040ez   Add the costs of permanent improvements made before you began using your home for business to the basis of your property. Federal income tax instructions 1040ez Depreciate these costs as part of the cost of your home as explained earlier. Federal income tax instructions 1040ez The costs of improvements made after you begin using your home for business (that affect the business part of your home, such as a new roof) are depreciated separately. Federal income tax instructions 1040ez Multiply the cost of the improvement by the business-use percentage and depreciate the result over the recovery period that would apply to your home if you began using it for business at the same time as the improvement. Federal income tax instructions 1040ez For improvements made this year, the recovery period is 39 years. Federal income tax instructions 1040ez For the percentage to use for the first year, see Table 2, earlier. Federal income tax instructions 1040ez For more information on recovery periods, see Publication 946. Federal income tax instructions 1040ez Business Percentage To find the business percentage, compare the size of the part of your home that you use for business to your whole house. Federal income tax instructions 1040ez Use the resulting percentage to figure the business part of the expenses for operating your entire home. Federal income tax instructions 1040ez You can use any reasonable method to determine the business percentage. Federal income tax instructions 1040ez The following are two commonly used methods for figuring the percentage. Federal income tax instructions 1040ez Divide the area (length multiplied by the width) used for business by the total area of your home. Federal income tax instructions 1040ez If the rooms in your home are all about the same size, you can divide the number of rooms used for business by the total number of rooms in your home. Federal income tax instructions 1040ez Example 1. Federal income tax instructions 1040ez Your office is 240 square feet (12 feet × 20 feet). Federal income tax instructions 1040ez Your home is 1,200 square feet. Federal income tax instructions 1040ez Your office is 20% (240 ÷ 1,200) of the total area of your home. Federal income tax instructions 1040ez Your business percentage is 20%. Federal income tax instructions 1040ez Example 2. Federal income tax instructions 1040ez You use one room in your home for business. Federal income tax instructions 1040ez Your home has 10 rooms, all about equal size. Federal income tax instructions 1040ez Your office is 10% (1 ÷ 10) of the total area of your home. Federal income tax instructions 1040ez Your business percentage is 10%. Federal income tax instructions 1040ez Use lines 1-7 of Form 8829, or lines 1-3 on the Worksheet To Figure the Deduction for Business Use of Your Home (near the end of this publication) to figure your business percentage. Federal income tax instructions 1040ez Deduction Limit If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. Federal income tax instructions 1040ez If your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. Federal income tax instructions 1040ez Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation of your home (with depreciation of your home taken last), that are allocable to the business, is limited to the gross income from the business use of your home minus the sum of the following. Federal income tax instructions 1040ez The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). Federal income tax instructions 1040ez These expenses are discussed in detail under Actual Expenses , earlier. Federal income tax instructions 1040ez The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. Federal income tax instructions 1040ez If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. Federal income tax instructions 1040ez Carryover of unallowed expenses. Federal income tax instructions 1040ez   If your deductions are greater than the current year's limit, you can carry over the excess to the next year in which you use actual expenses. Federal income tax instructions 1040ez They are subject to the deduction limit for that year, whether or not you live in the same home during that year. Federal income tax instructions 1040ez Figuring the deduction limit and carryover. Federal income tax instructions 1040ez   If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. Federal income tax instructions 1040ez If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. Federal income tax instructions 1040ez Example. Federal income tax instructions 1040ez You meet the requirements for deducting expenses for the business use of your home. Federal income tax instructions 1040ez You use 20% of your home for business. Federal income tax instructions 1040ez In 2013, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order. Federal income tax instructions 1040ez    Gross income from business $6,000 Minus:   Deductible mortgage interest and real estate taxes (20%) 3,000 Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment) 2,000 Deduction limit $1,000 Minus other expenses allocable to business use of home:   Maintenance, insurance, and utilities (20%) 800 Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit) 200 Other expenses up to the deduction limit $1,000 Depreciation carryover to 2014 ($1,600 − $200) (subject to deduction limit in 2014) $1,400   You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). Federal income tax instructions 1040ez You also can deduct all of your business expenses not related to the use of your home ($2,000). Federal income tax instructions 1040ez Additionally, you can deduct all of the business part of your expenses for maintenance, insurance, and utilities, because the total ($800) is less than the $1,000 deduction limit. Federal income tax instructions 1040ez Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. Federal income tax instructions 1040ez You can carry over the $1,400 balance and add it to your depreciation for 2014, subject to your deduction limit in 2014. Federal income tax instructions 1040ez More than one place of business. Federal income tax instructions 1040ez   If part of the gross income from your trade or business is from the business use of part of your home and part is from a place other than your home, you must determine the part of your gross income from the business use of your home before you figure the deduction limit. Federal income tax instructions 1040ez In making this determination, consider the time you spend at each location, the business investment in each location, and any other relevant facts and circumstances. Federal income tax instructions 1040ez If your home office qualifies as your principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. Federal income tax instructions 1040ez For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Federal income tax instructions 1040ez Using the Simplified Method The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Federal income tax instructions 1040ez In most cases, you will figure your deduction by multiplying $5, the prescribed rate, by the area of your home used for a qualified business use. Federal income tax instructions 1040ez The area you use to figure your deduction is limited to 300 square feet. Federal income tax instructions 1040ez See Simplified Amount , later, for information about figuring the amount of the deduction. Federal income tax instructions 1040ez For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I. Federal income tax instructions 1040ez R. Federal income tax instructions 1040ez B. Federal income tax instructions 1040ez 478, available at www. Federal income tax instructions 1040ez irs. Federal income tax instructions 1040ez gov/irb/2013-06_IRB/ar09. Federal income tax instructions 1040ez html. Federal income tax instructions 1040ez Actual expenses and depreciation of your home. Federal income tax instructions 1040ez   If you elect to use the simplified method, you cannot deduct any actual expenses for the business except for business expenses that are not related to the use of the home. Federal income tax instructions 1040ez You also cannot deduct any depreciation (including any additional first-year depreciation) or section 179 expense for the portion of the home that is used for a qualified business use. Federal income tax instructions 1040ez The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. Federal income tax instructions 1040ez If you figure your deduction for business use of the home using actual expenses in a subsequent year, you will have to use the appropriate optional depreciation table for MACRS to figure your depreciation. Federal income tax instructions 1040ez More information. Federal income tax instructions 1040ez   For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I. Federal income tax instructions 1040ez R. Federal income tax instructions 1040ez B. Federal income tax instructions 1040ez 478, available at www. Federal income tax instructions 1040ez irs. Federal income tax instructions 1040ez gov/irb/2013-06_IRB/ar09. Federal income tax instructions 1040ez html. Federal income tax instructions 1040ez See Publication 946 for the optional depreciation tables Although you cannot deduct any depreciation or section 179 expense for the portion of your home used for a qualified business use, you may still claim depreciation or the section 179 expense deduction on other assets used in the business (for example, furniture and equipment). Federal income tax instructions 1040ez Expenses deductible without regard to business use. Federal income tax instructions 1040ez   When using the simplified method, treat as personal expenses those business expenses related to the use of the home that are deductible without regard to whether there is a qualified business use of the home. Federal income tax instructions 1040ez These expenses include mortgage interest, real estate taxes, and casualty losses, subject to any limitations. Federal income tax instructions 1040ez See Where To Deduct , later. Federal income tax instructions 1040ez If you also rent part of your home, you must still allocate these expenses between rental use and personal use (for this purpose, personal use includes business use reported using the simplified method). Federal income tax instructions 1040ez No deduction of carryover of actual expenses. Federal income tax instructions 1040ez   If you used actual expenses to figure your deduction for business use of the home in a prior year and your deduction was limited, you cannot deduct the disallowed amount carried over from the prior year during a year you figure your deduction using the simplified method. Federal income tax instructions 1040ez Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. Federal income tax instructions 1040ez Electing the Simplified Method You choose whether or not to figure your deduction using the simplified method each taxable year. Federal income tax instructions 1040ez Make the election for a home by using the simplified method to figure the deduction for the qualified business use of that home on a timely filed, original federal income tax return. Federal income tax instructions 1040ez An election for a taxable year, once made, is irrevocable. Federal income tax instructions 1040ez A change from using the simplified method in one year to actual expenses in a succeeding taxable year, or vice-versa, is not a change in method of accounting and does not require the consent of the Commissioner. Federal income tax instructions 1040ez Shared use. Federal income tax instructions 1040ez   If you share your home with someone else who also uses the home in a business that qualifies for this deduction, each of you make your own election. Federal income tax instructions 1040ez More than one qualified business use. Federal income tax instructions 1040ez   If you conduct more than one business that qualifies for this deduction in your home, your election to use the simplified method applies to all your qualified business uses of that home. Federal income tax instructions 1040ez More than one home. Federal income tax instructions 1040ez   If you used more than one home during the year (for example, you moved during the year), you can elect to use the simplified method for only one of the homes. Federal income tax instructions 1040ez You must figure the deduction for any other home using actual expenses. Federal income tax instructions 1040ez Simplified Amount Your deduction for the qualified business use of a home is the sum of each amount you figure for a separate qualified business use of your home. Federal income tax instructions 1040ez To figure your deduction for the business use of a home using the simplified method, you will need to know the following information for each qualified business use of the home. Federal income tax instructions 1040ez The allowable area of your home used in conducting the business. Federal income tax instructions 1040ez If you did not conduct the business for the entire year in the home or the area changed during the year, you will need to know the allowable area you used and the number of days you conducted the business for each month. Federal income tax instructions 1040ez The gross income from the business use of your home. Federal income tax instructions 1040ez The amount of the business expenses that are not related to the use of your home. Federal income tax instructions 1040ez If the qualified business use is for a daycare facility that uses space in your home on a regular (but not exclusive) basis, you will also need to know the percentage of time that part of your home is used for daycare. Federal income tax instructions 1040ez To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these 3 steps. Federal income tax instructions 1040ez Multiply the allowable area by $5 (or less than $5 if the qualified business use is for a daycare that uses space in your home on a regular, but not exclusive, basis). Federal income tax instructions 1040ez See Allowable area and Space used regularly for daycare , later. Federal income tax instructions 1040ez Subtract the expenses from the business that are not related to the use of the home from the gross income related to the business use of the home. Federal income tax instructions 1040ez If these expenses are greater than the gross income from the business use of the home, then you cannot take a deduction for this business use of the home. Federal income tax instructions 1040ez See Gross income limitation , later. Federal income tax instructions 1040ez Take the smaller of the amounts from (1) and (2). Federal income tax instructions 1040ez This is the amount you can deduct for this qualified business use of your home using the simplified method. Federal income tax instructions 1040ez If you are an employee or a partner, or you use your home in your farming business and file Schedule F (Form 1040), you can use the Simplified Method Worksheet, near the end of this publication, to help you figure your deduction. Federal income tax instructions 1040ez If you use your home in a trade or business and you file Schedule C (Form 1040), you will use the Simplified Method Worksheet in your Instructions for Schedule C to figure your deduction. Federal income tax instructions 1040ez Allowable area. Federal income tax instructions 1040ez   In most cases, the allowable area is the smaller of the actual area (in square feet) of your home used in conducting the business and 300 square feet. Federal income tax instructions 1040ez Your allowable area may be smaller if you conducted the business as a qualified joint venture with your spouse, the area used by the business was shared with another qualified business use, you used the home for the business for only part of the year, or the area used by the business changed during the year. Federal income tax instructions 1040ez You can use the Area Adjustment Worksheet (for simplified method), near the end of this publication, to help you figure your allowable area for a qualified business use. Federal income tax instructions 1040ez Area used by a qualified joint venture. Federal income tax instructions 1040ez   If the qualified business use of the home is also a qualified joint venture, you and your spouse will figure the deduction for the business use separately. Federal income tax instructions 1040ez Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. Federal income tax instructions 1040ez Then, each spouse will figure the allowable area separately. Federal income tax instructions 1040ez For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. Federal income tax instructions 1040ez Shared use. Federal income tax instructions 1040ez   If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person. Federal income tax instructions 1040ez You must allocate the shared space between you and the other person in a reasonable manner. Federal income tax instructions 1040ez Example. Federal income tax instructions 1040ez Kristin and Lindsey are roommates. Federal income tax instructions 1040ez Kristin uses 300 square feet of their home for a qualified business use. Federal income tax instructions 1040ez Lindsey uses 200 square feet of their home for a separate qualified business use. Federal income tax instructions 1040ez The qualified business uses share 100 square feet. Federal income tax instructions 1040ez In addition to the portion that they do not share, Kristin and Lindsey can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. Federal income tax instructions 1040ez If divided evenly, Kristin could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. Federal income tax instructions 1040ez More than one qualified business use. Federal income tax instructions 1040ez   If you conduct more than one business qualifying for the deduction, you are limited to a maximum of 300 square feet for all of the businesses. Federal income tax instructions 1040ez Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. Federal income tax instructions 1040ez However, do not allocate more square feet to a qualified business use than you actually use for that business. Federal income tax instructions 1040ez Rental use. Federal income tax instructions 1040ez   The simplified method does not apply to rental use. Federal income tax instructions 1040ez A rental use that qualifies for the deduction must be figured using actual expenses. Federal income tax instructions 1040ez If the rental use and a qualified business use share the same area, you will have to allocate the actual area used between the two uses. Federal income tax instructions 1040ez You cannot use the same area to figure a deduction for the qualified business use as you are using to figure the deduction for the rental use. Federal income tax instructions 1040ez Part-year use or area changes. Federal income tax instructions 1040ez   If your qualified business use was for a portion of the taxable year (for example, a seasonal business or a business that begins during the taxable year) or you changed the square footage of your qualified business use, your deduction is limited to the average monthly allowable square footage. Federal income tax instructions 1040ez You calculate the average monthly allowable square footage by adding the amount of allowable square feet you used in each month and dividing the sum by 12. Federal income tax instructions 1040ez When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. Federal income tax instructions 1040ez Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. Federal income tax instructions 1040ez Example 1. Federal income tax instructions 1040ez Andy files his federal income tax return on a calendar year basis. Federal income tax instructions 1040ez On July 20, he began using 420 square feet of his home for a qualified business use. Federal income tax instructions 1040ez He continued to use the 420 square feet until the end of the year. Federal income tax instructions 1040ez His average monthly allowable square footage is 125 square feet, which is figured using 300 square feet for each month August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 0 + 0 + 0 + 300 + 300 + 300 + 300 + 300)/12). Federal income tax instructions 1040ez Example 2. Federal income tax instructions 1040ez Amy files her federal income tax return on a calendar year basis. Federal income tax instructions 1040ez On April 20, she began using 100 square feet of her home for a qualified business use. Federal income tax instructions 1040ez On August 5, she expanded the area of her qualified use to 330 square feet. Federal income tax instructions 1040ez Amy continued to use the 330 square feet until the end of the year. Federal income tax instructions 1040ez Her average monthly allowable square footage is 150 square feet, which is figured using 100 square feet for May through July and 300 square feet for August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 100 + 100 +100 + 300 + 300 + 300 + 300 + 300)/12). Federal income tax instructions 1040ez Gross income limitation. Federal income tax instructions 1040ez   Your deduction for business use of the home is limited to an amount equal to the gross income derived from the qualified business use of the home reduced by the business deductions that are unrelated to the use of your home. Federal income tax instructions 1040ez If the business deductions that are unrelated to the use of your home are greater than the gross income derived from the qualified business use of your home, then you cannot take a deduction for this qualified business use of your home. Federal income tax instructions 1040ez Business expenses not related to use of the home. Federal income tax instructions 1040ez   These expenses relate to the business activity in the home, but not to the use of the home itself. Federal income tax instructions 1040ez You can still deduct business expenses that are unrelated to the use of the home. Federal income tax instructions 1040ez See Where To Deduct , later. Federal income tax instructions 1040ez Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. Federal income tax instructions 1040ez Space used regularly for daycare. Federal income tax instructions 1040ez   If you do not use the area of your home exclusively for daycare, you must reduce the prescribed rate (maximum $5 per square foot) before figuring your deduction. Federal income tax instructions 1040ez The reduced rate will equal the prescribed rate times a fraction. Federal income tax instructions 1040ez The numerator of the fraction is the number of hours that the space was used during the year for daycare and the denominator is the total number of hours during the year that the space was available for all uses. Federal income tax instructions 1040ez You can use the Daycare Facility Worksheet (for simplified method), near the end of this publication, to help you figure the reduced rate. Federal income tax instructions 1040ez    If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to reduce the prescribed rate or complete the Daycare Facility Worksheet. Federal income tax instructions 1040ez Daycare Facility If you use space in your home on a regular basis for providing daycare, you may be able to claim a deduction for that part of your home even if you use the same space for nonbusiness purposes. Federal income tax instructions 1040ez To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. Federal income tax instructions 1040ez You must be in the trade or business of providing daycare for children, persons age 65 or older, or persons who are physically or mentally unable to care for themselves. Federal income tax instructions 1040ez You must have applied for, been granted, or be exempt from having, a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law. Federal income tax instructions 1040ez You do not meet this requirement if your application was rejected or your license or other authorization was revoked. Federal income tax instructions 1040ez Figuring the deduction. Federal income tax instructions 1040ez   If you elect to use the simplified method for your home, figure your deduction as described earlier in Using the Simplified Method under Figuring the Deduction. Federal income tax instructions 1040ez    If you are figuring your deduction using actual expenses and you regularly use part of your home for daycare, figure what part is used for daycare, as explained in Business Percentage , earlier, under Figuring the Deduction. Federal income tax instructions 1040ez If you also use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. Federal income tax instructions 1040ez   If the use of part of your home as a daycare facility is regular, but not exclusive, you must figure the percentage of time that part of your home is used for daycare. Federal income tax instructions 1040ez A room that is available for use throughout each business day and that you regularly use in your business is considered to be used for daycare throughout each business day. Federal income tax instructions 1040ez You do not have to keep records to show the specific hours the area was used for business. Federal income tax instructions 1040ez You can use the area occasionally for personal reasons. Federal income tax instructions 1040ez However, a room you use only occasionally for business does not qualify for the deduction. Federal income tax instructions 1040ez To find the percentage of time you actually use your home for business, compare the total time used for business to the total time that part of your home can be used for all purposes. Federal income tax instructions 1040ez You can compare the hours of business use in a week with the number of hours in a week (168). Federal income tax instructions 1040ez Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2013). Federal income tax instructions 1040ez If you started or stopped using your home for daycare in 2013, you must prorate the number of hours based on the number of days the home was available for daycare. Federal income tax instructions 1040ez Example 1. Federal income tax instructions 1040ez Mary Lake used her basement to operate a daycare business for children. Federal income tax instructions 1040ez She figures the business percentage of the basement as follows. Federal income tax instructions 1040ez Square footage of the basement Square footage of her home = 1,600 3,200 = 50%           She used the basement for daycare an average of 12 hours a day, 5 days a week, for 50 weeks a year. Federal income tax instructions 1040ez During the other 12 hours a day, the family could use the basement. Federal income tax instructions 1040ez She figures the percentage of time the basement was used for daycare as follows. Federal income tax instructions 1040ez Number of hours used for daycare (12 x 5 x 50) Total number of hours in the year (24 x 365) = 3,000 8,760 = 34. Federal income tax instructions 1040ez 25%           Mary can deduct 34. Federal income tax instructions 1040ez 25% of any direct expenses for the basement. Federal income tax instructions 1040ez However, because her indirect expenses are for the entire house, she can deduct only 17. Federal income tax instructions 1040ez 13% of the indirect expenses. Federal income tax instructions 1040ez She figures the percentage for her indirect expenses as follows. Federal income tax instructions 1040ez Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 34. Federal income tax instructions 1040ez 25% Percentage for indirect expenses 17. Federal income tax instructions 1040ez 13% Mary completes Form 8829, Part I, figuring the percentage of her home used for business, including the percentage of time the basement was used. Federal income tax instructions 1040ez In Part II, Mary figures her deductible expenses. Federal income tax instructions 1040ez She uses the following information to complete Part II. Federal income tax instructions 1040ez Gross income from her daycare business $50,000 Expenses not related to the business use of the home $25,000 Tentative profit $25,000 Rent $8,400 Utilities $850 Painting the basement $500 Mary enters her tentative profit, $25,000, on line 8. Federal income tax instructions 1040ez (This figure is the same as the amount on line 29 of her Schedule C (Form 1040). Federal income tax instructions 1040ez ) The expenses she paid for rent and utilities relate to her entire home. Federal income tax instructions 1040ez Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). Federal income tax instructions 1040ez She shows the total of these expenses on line 22, column (b). Federal income tax instructions 1040ez For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. Federal income tax instructions 1040ez Mary paid $500 to have the basement painted. Federal income tax instructions 1040ez The painting is a direct expense. Federal income tax instructions 1040ez However, because she did not use the basement exclusively for daycare, she must multiply $500 by the percentage of time the basement was used for daycare (34. Federal income tax instructions 1040ez 25% – line 6). Federal income tax instructions 1040ez She enters $171 (34. Federal income tax instructions 1040ez 25% × $500) on line 19, column (a). Federal income tax instructions 1040ez She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. Federal income tax instructions 1040ez This is less than her deduction limit (line 15), so she can deduct the entire amount. Federal income tax instructions 1040ez She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. Federal income tax instructions 1040ez She then carries the $1,756 to line 30 of her Schedule C (Form 1040). Federal income tax instructions 1040ez Example 2. Federal income tax instructions 1040ez Assume the same facts as in Example 1 except that Mary also has another room that was available each business day for children to take naps in. Federal income tax instructions 1040ez Although she did not keep a record of the number of hours the room was actually used for naps, it was used for part of each business day. Federal income tax instructions 1040ez Since the room was available for business use during regular operating hours each business day and was used regularly in the business, it is considered used for daycare throughout each business day. Federal income tax instructions 1040ez The basement and room are 60% of the total area of her home. Federal income tax instructions 1040ez In figuring her expenses, 34. Federal income tax instructions 1040ez 25% of any direct expenses for the basement and room are deductible. Federal income tax instructions 1040ez In addition, 20. Federal income tax instructions 1040ez 55% (34. Federal income tax instructions 1040ez 25% × 60%) of her indirect expenses are deductible. Federal income tax instructions 1040ez Example 3. Federal income tax instructions 1040ez Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2013. Federal income tax instructions 1040ez She used the basement for daycare an average of 12 hours a day, 5 days a week, but for only 25 weeks of the year. Federal income tax instructions 1040ez During the other 12 hours a day, the family could still use the basement. Federal income tax instructions 1040ez She figures the percentage of time the basement was used for business as follows. Federal income tax instructions 1040ez Number of hours used for daycare (12 x 5 x 25) Total number of hours during period used (24 x 175) = 1,500 4,200 = 35. Federal income tax instructions 1040ez 71%           Mary can deduct 35. Federal income tax instructions 1040ez 71% of any direct expenses for the basement. Federal income tax instructions 1040ez However, because her indirect expenses are for the entire house, she can deduct only 17. Federal income tax instructions 1040ez 86% of the indirect expenses. Federal income tax instructions 1040ez She figures the percentage for her indirect expenses as follows. Federal income tax instructions 1040ez Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 35. Federal income tax instructions 1040ez 71% Percentage for indirect expenses 17. Federal income tax instructions 1040ez 86% Meals. Federal income tax instructions 1040ez   If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. Federal income tax instructions 1040ez Claim it as a separate deduction on your Schedule C (Form 1040). Federal income tax instructions 1040ez You can never deduct the cost of food consumed by you or your family. Federal income tax instructions 1040ez You can deduct as a business expense 100% of the actual cost of food consumed by your daycare recipients (see Standard meal and snack rates , later, for an optional method for eligible children) and generally only 50% of the cost of food consumed by your employees. Federal income tax instructions 1040ez However, you can deduct 100% of the cost of food consumed by your employees if its value can be excluded from their wages as a de minimis fringe benefit. Federal income tax instructions 1040ez For more information on meals that meet these requirements, see Meals in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits. Federal income tax instructions 1040ez   If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family's food costs. Federal income tax instructions 1040ez   Reimbursements you receive from a sponsor under the Child and Adult Care Food Program of the Department of Agriculture are taxable only to the extent they exceed your expenses for food for eligible children. Federal income tax instructions 1040ez If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). Federal income tax instructions 1040ez If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). Federal income tax instructions 1040ez Do not include payments or expenses for your own children if they are eligible for the program. Federal income tax instructions 1040ez Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. Federal income tax instructions 1040ez Standard meal and snack rates. Federal income tax instructions 1040ez   If you qualify as a family daycare provider, you can use the standard meal and snack rates, instead of actual costs, to compute the deductible cost of meals and snacks provided to eligible children. Federal income tax instructions 1040ez For these purposes: A family daycare provider is a person engaged in the business of providing family daycare. Federal income tax instructions 1040ez Family daycare is childcare provided to eligible children in the home of the family daycare provider. Federal income tax instructions 1040ez The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. Federal income tax instructions 1040ez Eligible children are minor children receiving family daycare in the home of the family daycare provider. Federal income tax instructions 1040ez Eligible children do not include children who are full-time or part-time residents in the home where the childcare is provided or children whose parents or guardians are residents of the same home. Federal income tax instructions 1040ez Eligible children do not include children who receive daycare services for personal reasons of the provider. Federal income tax instructions 1040ez For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child. Federal income tax instructions 1040ez   You can compute the deductible cost of each meal and snack you actually purchased and served to an eligible child during the time period you provided family daycare using the standard meal and snack rates shown in Table 3, later. Federal income tax instructions 1040ez You can use the standard meal and snack rates for a maximum of one breakfast, one lunch, one dinner, and three snacks per eligible child per day. Federal income tax instructions 1040ez If you receive reimbursement for a particular meal or snack, you can deduct only the portion of the applicable standard meal or snack rate that is more than the amount of the reimbursement. Federal income tax instructions 1040ez   You can use either the standard meal and snack rates or actual costs to calculate the deductible cost of food provided to eligible children in the family daycare for any particular tax year. Federal income tax instructions 1040ez If you choose to use the standard meal and snack rates for a particular tax year, you must use the rates for all your deductible food costs for eligible children during that tax year. Federal income tax instructions 1040ez However, if you use the standard meal and snack rates in any tax year, you can use actual costs to compute the deductible cost of food in any other tax year. Federal income tax instructions 1040ez   If you use the standard meal and snack rates, you must maintain records to substantiate the computation of the total amount deducted for the cost of food provided to eligible children. Federal income tax instructions 1040ez The records kept should include the name of each child, dates and hours of attendance in the daycare, and the type and quantity of meals and snacks served. Federal income tax instructions 1040ez This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. Federal income tax instructions 1040ez   The standard meal and snack rates include beverages, but do not include non-food supplies used for food preparation, service, or storage, such as containers, paper products, or utensils. Federal income tax instructions 1040ez These expenses can be claimed as a separate deduction on your Schedule C (Form 1040). Federal income tax instructions 1040ez     Table 3. Federal income tax instructions 1040ez Standard Meal and Snack Rates1 Location of Family Daycare Provider Breakfast Lunch Dinner Snack States other than Alaska an
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IRS - Taxpayer Compliance Research

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The IRS seeks to help taxpayers comply with their tax obligations voluntarily and timely. The articles and publications on this page contain research related to taxpayer compliance. Compliance measurement research, also known as the tax gap, examines how much tax is not paid voluntarily and timely. Another set of research looks at the causes of taxpayer compliance.

All files on this page are available in Adobe® PDF format, which requires the free Adobe Acrobat® reader to view and print the file.


Tax Gap

Federal Tax Compliance Research: Individual Income Tax Gap Estimates for 1985, 1988, and 1992

Author:

IRS, Compliance Research

Publication date: April 1996, revised
Written for:

Publication 1415

Federal Tax Compliance Research: Gross and Net Employment Tax Gap Estimates for 1984-1997

Author:

IRS, Research Division

Publication date: October 1993, revised
Written for: Publication 1415-E

Income Tax Compliance Research: Net Tax Gap and Remittance Gap Estimates

Author:

IRS Research Division

Publication date: April 1990, revised
Written for:

Publication 1415


Compliance Analysis

Statistical Analysis of Compliance Using the NRP Data: Detection Controlled Models

Author:

Jonathan Feinstein
Yale University

Publication date: June 2004
Written for: 2004 IRS Research Conference
       
Trends as Changes in Variance: The Case of Tax Noncompliance
Author: Kim M. Bloomquist
IRS
Publication date: June 2003
Written for: 2003 IRS Research Conference
                                                   
IRS's Comprehensive Approach to Compliance Measurement
Authors: Robert E. Brown, IRS, National Research Program,
Mark J. Mazur, IRS, Research, Analysis, and Statistics
Publication date: June 2003
Written for: 2003 National Tax Association Spring Symposium
                                                  
Developing an Econometric Model for Measuring Tax Noncompliance Using Operational Audit Data
Authors: Brian Erard, B. Erard and Associates,
Chih-Chin Ho, IRS
Publication date: August 2002
Written for: 2002 American Statistical Association Conference
                                                                 
Compliance Estimates for Earned Income Tax Credit Claimed on 1999 Returns
Author: IRS
Publication date: June 2002
Written for: 2002 IRS Research Conference
                                                  
Compliance Measurement and Workload Selection with Operational Audit Data
Author: Brian Erard, B. Erard and Associates
Publication date: June 2002
Written for: 2002 IRS Research Conference
                                  
Trends in Book-Tax Income and Balance Sheet Differences
Authors:

Lillian Mills and Kaye Newberry, University of Arizona,
William B. Trautman, IRS, Large and Mid-Size Business Division

Publication date: June 2002
Written for: 2002 IRS Research Conference
                                        
Nonfiler Profiles, Fiscal Year 1993: A Focus on Repeaters
Author: Laura R. Rosage
IRS
Publication date: 1996
Written for: SOI Bulletin, Summer Issue
                                                


Determinants of Taxpayer Compliance

Audit Information Dissemination, Taxpayer Communication, and Compliance: An Experimental Approach
Authors:

James Alm, Georgia State University,
Betty Jackson, University of Colorado at Boulder,
Michael McKee, University of Tennessee at Knoxville

Publication date: June 2004 
Written for: 2004 IRS Research Conference 
    
                          
Criminal Investigation Enforcement Activities and Taxpayer Noncompliance
Author:

Jeffrey Dubin
California Institute of Technology

Publication date: June 2004
Written for: 2004 IRS Research Conference
                                                   
Tax Evasion, Income Inequality and Opportunity Costs of Compliance
Author: Kim M. Bloomquist,
IRS, Office of Research
Publication date: November 2003
Written for: 2003 National Tax Association Annual Conference
                                                  
Economic and Behavioral Determinants of Tax Compliance: Evidence from the 1997 Arkansas Tax Penalty Amnesty Program
Authors: Christina M. Ritsema, Hope College,
Deborah W. Thomas and Gary D. Ferrier, University of Arkansas
Publication date: June 2003
Written for: 2003 IRS Research Conference
                                                                 
The Impact of the IRS on Voluntary Tax Compliance: Preliminary Empirical Results
Author: Alan H. Plumley, Technical Advisor,
IRS, Office of Research
Publication date: November 2002
Written for: 2002 National Tax Association Conference
                                                  
The Determinants of Individual Income Tax Compliance: Estimating the Impacts of Tax Policy, Enforcement and IRS Responsiveness
Author: Alan H. Plumley, Technical Advisor,
IRS, Office of Research
Publication date: November 1996, revised
Written for: IRS Publication 1916



 

 

 

  

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Page Last Reviewed or Updated: 12-Mar-2014

The Federal Income Tax Instructions 1040ez

Federal income tax instructions 1040ez 10. Federal income tax instructions 1040ez   Employees of Foreign Governments and International Organizations Table of Contents Exemption Under Tax Treaty Exemption Under U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez Tax LawCertification. Federal income tax instructions 1040ez Employees of foreign governments (including foreign municipalities) have two ways to get exemption of their governmental wages from U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez income tax: By a provision in a tax treaty or consular convention between the United States and their country, or By meeting the requirements of U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez tax law. Federal income tax instructions 1040ez Employees of international organizations can exempt their wages either by a provision, if one exists, in the international agreement creating the international organization, or by meeting the requirements of U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez tax law. Federal income tax instructions 1040ez The exemption discussed in this chapter applies only to pay received for services performed for a foreign government or international organization. Federal income tax instructions 1040ez Other U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez income received by persons who qualify for this exemption may be fully taxable or given favorable treatment under an applicable tax treaty provision. Federal income tax instructions 1040ez The proper treatment of this kind of income (interest, dividends, etc. Federal income tax instructions 1040ez ) is discussed earlier in this publication. Federal income tax instructions 1040ez Exemption Under Tax Treaty If you are from a country that has a tax treaty with the United States, you should first look at the treaty to see if there is a provision that exempts your income. Federal income tax instructions 1040ez The income of U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez citizens and resident aliens working for foreign governments usually is not exempt. Federal income tax instructions 1040ez However, in a few instances, the income of a U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez citizen with dual citizenship may qualify. Federal income tax instructions 1040ez Often the exemption is limited to the income of persons who also are nationals of the foreign country involved. Federal income tax instructions 1040ez Exemption Under U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez Tax Law Employees of foreign governments who do not qualify under a tax treaty provision and employees of international organizations may qualify for exemption by meeting the following requirements of U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez tax law. Federal income tax instructions 1040ez The exemption under U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez tax law applies only to current employees and not to former employees. Federal income tax instructions 1040ez Pensions received by former employees living in the United States do not qualify for the exemption discussed here. Federal income tax instructions 1040ez Employees of foreign governments. Federal income tax instructions 1040ez   If you are not a U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez citizen, or if you are a U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez citizen but also a citizen of the Philippines, and you work for a foreign government in the United States, your foreign government salary is exempt from U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez tax if you perform services similar to those performed by U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez government employees in that foreign country and that foreign government grants an equivalent exemption to U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez government employees. Federal income tax instructions 1040ez Certification. Federal income tax instructions 1040ez   To qualify for the exemption under U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez tax law, either the Department of State must certify that you perform services similar to those performed by employees of the government of the United States in foreign countries and that your foreign government employer grants an equivalent exemption to U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez government employees performing similar services in its country or you must establish those facts. Federal income tax instructions 1040ez However, see Aliens who keep immigrant status , later, for a special rule that may affect your qualifying for this exemption. Federal income tax instructions 1040ez Employees of international organizations. Federal income tax instructions 1040ez   If you work for an international organization in the United States and you are not a U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez citizen (or you are a U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez citizen but are also a citizen of the Philippines), your salary from that organization is exempt from U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez tax. Federal income tax instructions 1040ez However, see Aliens who keep immigrant status , later, for a special rule that may affect your qualifying for this exemption. Federal income tax instructions 1040ez   An international organization is an organization designated by the President of the United States through Executive Order to qualify for the privileges, exemptions, and immunities provided in the International Organizations Immunities Act. Federal income tax instructions 1040ez   You should find out if you have been made known to, and have been accepted by, the Secretary of State as an officer or an employee of that organization, or if you have been designated by the Secretary of State, before formal notification and acceptance, as a prospective officer or employee. Federal income tax instructions 1040ez   If you are claiming exemption, you should know the number of the Executive Order covering the international organization and should have some written evidence of your acceptance or designation by the Secretary of State. Federal income tax instructions 1040ez   The exemption is denied when, because the Secretary of State determines your presence in the United States is no longer desirable, you leave the United States (or after a reasonable time allowed for leaving the United States). Federal income tax instructions 1040ez The exemption is also denied when a foreign country does not allow similar exemptions to U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez citizens. Federal income tax instructions 1040ez Then the Secretary of State can withdraw the privileges, exemptions, and immunities from the nationals of that foreign country. Federal income tax instructions 1040ez Aliens who keep immigrant status. Federal income tax instructions 1040ez   If you file the waiver provided by section 247(b) of the Immigration and Nationality Act (USCIS Form I-508) to keep your immigrant status (green card), you no longer qualify for the exemption from U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez tax under U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez tax law from the date of filing the waiver with the Attorney General. Federal income tax instructions 1040ez   However, you do not lose the exemption if you file the waiver, and meet either of the following conditions. Federal income tax instructions 1040ez You are exempt from U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez tax under an income tax treaty, consular agreement, or international agreement between the United States and your foreign government employer. Federal income tax instructions 1040ez You work for an international organization and the international organization agreement creating the international organization provides that alien employees are exempt from U. Federal income tax instructions 1040ez S. Federal income tax instructions 1040ez income tax. Federal income tax instructions 1040ez Two international organizations that have such a provision are the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank). Federal income tax instructions 1040ez . Federal income tax instructions 1040ez   For more information about a specific foreign country or international organization, send an email to embassy@irs. Federal income tax instructions 1040ez gov. Federal income tax instructions 1040ez Prev  Up  Next   Home   More Online Publications