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File 2011 Taxes Turbotax

File 2011 taxes turbotax 4. File 2011 taxes turbotax   Special Situations Table of Contents Condominiums CooperativesDepreciation Property Changed to Rental UseBasis of Property Changed to Rental Use Figuring the Depreciation Deduction Renting Part of Property Not Rented for ProfitPostponing decision. File 2011 taxes turbotax Example—Property Changed to Rental Use This chapter discusses some rental real estate activities that are subject to additional rules. File 2011 taxes turbotax Condominiums A condominium is most often a dwelling unit in a multi-unit building, but can also take other forms, such as a townhouse or garden apartment. File 2011 taxes turbotax If you own a condominium, you also own a share of the common elements, such as land, lobbies, elevators, and service areas. File 2011 taxes turbotax You and the other condominium owners may pay dues or assessments to a special corporation that is organized to take care of the common elements. File 2011 taxes turbotax Special rules apply if you rent your condominium to others. File 2011 taxes turbotax You can deduct as rental expenses all the expenses discussed in chapters 1 and 2. File 2011 taxes turbotax In addition, you can deduct any dues or assessments paid for maintenance of the common elements. File 2011 taxes turbotax You cannot deduct special assessments you pay to a condominium management corporation for improvements. File 2011 taxes turbotax However, you may be able to recover your share of the cost of any improvement by taking depreciation. File 2011 taxes turbotax Cooperatives If you live in a cooperative, you do not own your apartment. File 2011 taxes turbotax Instead, a corporation owns the apartments and you are a tenant-stockholder in the cooperative housing corporation. File 2011 taxes turbotax If you rent your apartment to others, you usually can deduct, as a rental expense, all the maintenance fees you pay to the cooperative housing corporation. File 2011 taxes turbotax In addition to the maintenance fees paid to the cooperative housing corporation, you can deduct your direct payments for repairs, upkeep, and other rental expenses, including interest paid on a loan used to buy your stock in the corporation. File 2011 taxes turbotax Depreciation You will be depreciating your stock in the corporation rather than the apartment itself. File 2011 taxes turbotax Figure your depreciation deduction as follows. File 2011 taxes turbotax Figure the depreciation for all the depreciable real property owned by the corporation. File 2011 taxes turbotax (Depreciation methods are discussed in chapter 2 of this publication and Publication 946. File 2011 taxes turbotax ) If you bought your cooperative stock after its first offering, figure the depreciable basis of this property as follows. File 2011 taxes turbotax Multiply your cost per share by the total number of outstanding shares. File 2011 taxes turbotax Add to the amount figured in (a) any mortgage debt on the property on the date you bought the stock. File 2011 taxes turbotax Subtract from the amount figured in (b) any mortgage debt that is not for the depreciable real property, such as the part for the land. File 2011 taxes turbotax Subtract from the amount figured in (1) any depreciation for space owned by the corporation that can be rented but cannot be lived in by tenant-stockholders. File 2011 taxes turbotax Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. File 2011 taxes turbotax Multiply the result of (2) by the percentage you figured in (3). File 2011 taxes turbotax This is your depreciation on the stock. File 2011 taxes turbotax Your depreciation deduction for the year cannot be more than the part of your adjusted basis (defined in chapter 2) in the stock of the corporation that is allocable to your rental property. File 2011 taxes turbotax Payments added to capital account. File 2011 taxes turbotax   Payments earmarked for a capital asset or improvement, or otherwise charged to the corporation's capital account are added to the basis of your stock in the corporation. File 2011 taxes turbotax For example, you cannot deduct a payment used to pave a community parking lot, install a new roof, or pay the principal of the corporation's mortgage. File 2011 taxes turbotax   Treat as a capital cost the amount you were assessed for capital items. File 2011 taxes turbotax This cannot be more than the amount by which your payments to the corporation exceeded your share of the corporation's mortgage interest and real estate taxes. File 2011 taxes turbotax   Your share of interest and taxes is the amount the corporation elected to allocate to you, if it reasonably reflects those expenses for your apartment. File 2011 taxes turbotax Otherwise, figure your share in the following manner. File 2011 taxes turbotax Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. File 2011 taxes turbotax Multiply the corporation's deductible interest by the number you figured in (1). File 2011 taxes turbotax This is your share of the interest. File 2011 taxes turbotax Multiply the corporation's deductible taxes by the number you figured in (1). File 2011 taxes turbotax This is your share of the taxes. File 2011 taxes turbotax Property Changed to Rental Use If you change your home or other property (or a part of it) to rental use at any time other than the beginning of your tax year, you must divide yearly expenses, such as taxes and insurance, between rental use and personal use. File 2011 taxes turbotax You can deduct as rental expenses only the part of the expense that is for the part of the year the property was used or held for rental purposes. File 2011 taxes turbotax You cannot deduct depreciation or insurance for the part of the year the property was held for personal use. File 2011 taxes turbotax However, you can include the home mortgage interest, qualified mortgage insurance premiums, and real estate tax expenses for the part of the year the property was held for personal use as an itemized deduction on Schedule A (Form 1040). File 2011 taxes turbotax Example. File 2011 taxes turbotax Your tax year is the calendar year. File 2011 taxes turbotax You moved from your home in May and started renting it out on June 1. File 2011 taxes turbotax You can deduct as rental expenses seven-twelfths of your yearly expenses, such as taxes and insurance. File 2011 taxes turbotax Starting with June, you can deduct as rental expenses the amounts you pay for items generally billed monthly, such as utilities. File 2011 taxes turbotax When figuring depreciation, treat the property as placed in service on June 1. File 2011 taxes turbotax Basis of Property Changed to Rental Use When you change property you held for personal use to rental use (for example, you rent your former home), the basis for depreciation will be the lesser of fair market value or adjusted basis on the date of conversion. File 2011 taxes turbotax Fair market value. File 2011 taxes turbotax   This is the price at which the property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. File 2011 taxes turbotax Sales of similar property, on or about the same date, may be helpful in figuring the fair market value of the property. File 2011 taxes turbotax Figuring the basis. File 2011 taxes turbotax   The basis for depreciation is the lesser of: The fair market value of the property on the date you changed it to rental use, or Your adjusted basis on the date of the change—that is, your original cost or other basis of the property, plus the cost of permanent additions or improvements since you acquired it, minus deductions for any casualty or theft losses claimed on earlier years' income tax returns and other decreases to basis. File 2011 taxes turbotax For other increases and decreases to basis, see Adjusted Basis in chapter 2. File 2011 taxes turbotax Example. File 2011 taxes turbotax Several years ago you built your home for $140,000 on a lot that cost you $14,000. File 2011 taxes turbotax Before changing the property to rental use this year, you added $28,000 of permanent improvements to the house and claimed a $3,500 casualty loss deduction for damage to the house. File 2011 taxes turbotax Part of the improvements qualified for a $500 residential energy credit, which you claimed on your 2010 tax return. File 2011 taxes turbotax Because land is not depreciable, you can only include the cost of the house when figuring the basis for depreciation. File 2011 taxes turbotax The adjusted basis of the house at the time of the change in its use was $164,000 ($140,000 + $28,000 − $3,500 − $500). File 2011 taxes turbotax On the date of the change in use, your property had a fair market value of $168,000, of which $21,000 was for the land and $147,000 was for the house. File 2011 taxes turbotax The basis for depreciation on the house is the fair market value on the date of the change ($147,000), because it is less than your adjusted basis ($164,000). File 2011 taxes turbotax Cooperatives If you change your cooperative apartment to rental use, figure your allowable depreciation as explained earlier. File 2011 taxes turbotax (Depreciation methods are discussed in chapter 2 of this publication and Publication 946. File 2011 taxes turbotax ) The basis of all the depreciable real property owned by the cooperative housing corporation is the smaller of the following amounts. File 2011 taxes turbotax The fair market value of the property on the date you change your apartment to rental use. File 2011 taxes turbotax This is considered to be the same as the corporation's adjusted basis minus straight line depreciation, unless this value is unrealistic. File 2011 taxes turbotax The corporation's adjusted basis in the property on that date. File 2011 taxes turbotax Do not subtract depreciation when figuring the corporation's adjusted basis. File 2011 taxes turbotax If you bought the stock after its first offering, the corporation's adjusted basis in the property is the amount figured in (1) under Depreciation (under Cooperatives, near the beginning of this chapter). File 2011 taxes turbotax The fair market value of the property is considered to be the same as the corporation's adjusted basis figured in this way minus straight line depreciation, unless the value is unrealistic. File 2011 taxes turbotax Figuring the Depreciation Deduction To figure the deduction, use the depreciation system in effect when you convert your residence to rental use. File 2011 taxes turbotax Generally, that will be MACRS for any conversion after 1986. File 2011 taxes turbotax Treat the property as placed in service on the conversion date. File 2011 taxes turbotax Example. File 2011 taxes turbotax Your converted residence (see previous example under Figuring the basis) was available for rent on August 1. File 2011 taxes turbotax Using Table 2-2d (see chapter 2), the percentage for Year 1 beginning in August is 1. File 2011 taxes turbotax 364% and the depreciation deduction for Year 1 is $2,005 ($147,000 × . File 2011 taxes turbotax 01364). File 2011 taxes turbotax Renting Part of Property If you rent part of your property, you must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes, as though you actually had two separate pieces of property. File 2011 taxes turbotax You can deduct the expenses related to the part of the property used for rental purposes, such as home mortgage interest, qualified mortgage insurance premiums, and real estate taxes, as rental expenses on Schedule E (Form 1040). File 2011 taxes turbotax You can also deduct as rental expenses a portion of other expenses that normally are nondeductible personal expenses, such as expenses for electricity, or painting the outside of the house. File 2011 taxes turbotax There is no change in the types of expenses deductible for the personal-use part of your property. File 2011 taxes turbotax Generally, these expenses may be deducted only if you itemize your deductions on Schedule A (Form 1040). File 2011 taxes turbotax You cannot deduct any part of the cost of the first phone line even if your tenants have unlimited use of it. File 2011 taxes turbotax You do not have to divide the expenses that belong only to the rental part of your property. File 2011 taxes turbotax For example, if you paint a room that you rent, or if you pay premiums for liability insurance in connection with renting a room in your home, your entire cost is a rental expense. File 2011 taxes turbotax If you install a second phone line strictly for your tenant's use, all of the cost of the second line is deductible as a rental expense. File 2011 taxes turbotax You can deduct depreciation on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes. File 2011 taxes turbotax How to divide expenses. File 2011 taxes turbotax   If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between rental use and personal use. File 2011 taxes turbotax You can use any reasonable method for dividing the expense. File 2011 taxes turbotax It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. File 2011 taxes turbotax The two most common methods for dividing an expense are (1) the number of rooms in your home, and (2) the square footage of your home. File 2011 taxes turbotax Example. File 2011 taxes turbotax You rent a room in your house. File 2011 taxes turbotax The room is 12 × 15 feet, or 180 square feet. File 2011 taxes turbotax Your entire house has 1,800 square feet of floor space. File 2011 taxes turbotax You can deduct as a rental expense 10% of any expense that must be divided between rental use and personal use. File 2011 taxes turbotax If your heating bill for the year for the entire house was $600, $60 ($600 × . File 2011 taxes turbotax 10) is a rental expense. File 2011 taxes turbotax The balance, $540, is a personal expense that you cannot deduct. File 2011 taxes turbotax Duplex. File 2011 taxes turbotax   A common situation is the duplex where you live in one unit and rent out the other. File 2011 taxes turbotax Certain expenses apply to the entire property, such as mortgage interest and real estate taxes, and must be split to determine rental and personal expenses. File 2011 taxes turbotax Example. File 2011 taxes turbotax You own a duplex and live in one half, renting the other half. File 2011 taxes turbotax Both units are approximately the same size. File 2011 taxes turbotax Last year, you paid a total of $10,000 mortgage interest and $2,000 real estate taxes for the entire property. File 2011 taxes turbotax You can deduct $5,000 mortgage interest and $1,000 real estate taxes on Schedule E (Form 1040), and if you itemize your deductions, you can deduct the other $5,000 mortgage interest and $1,000 real estate taxes on Schedule A (Form 1040). File 2011 taxes turbotax Not Rented for Profit If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. File 2011 taxes turbotax You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year. File 2011 taxes turbotax Where to report. File 2011 taxes turbotax   Report your not-for-profit rental income on Form 1040 or 1040NR, line 21. File 2011 taxes turbotax For example, if you are filing Form 1040, you can include your mortgage interest and any qualified mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses on the appropriate lines of Schedule A (Form 1040) if you itemize your deductions. File 2011 taxes turbotax   If you itemize your deductions, claim your other rental expenses, subject to the rules explained in chapter 1 of Publication 535, as miscellaneous itemized deductions on Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9. File 2011 taxes turbotax You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income. File 2011 taxes turbotax Presumption of profit. File 2011 taxes turbotax   If your rental income is more than your rental expenses for at least 3 years out of a period of 5 consecutive years, you are presumed to be renting your property to make a profit. File 2011 taxes turbotax Postponing decision. File 2011 taxes turbotax   If you are starting your rental activity and do not have 3 years showing a profit, you can elect to have the presumption made after you have the 5 years of experience required by the test. File 2011 taxes turbotax You may choose to postpone the decision of whether the rental is for profit by filing Form 5213. File 2011 taxes turbotax You must file Form 5213 within 3 years after the due date of your return (determined without extensions) for the year in which you first carried on the activity or, if earlier, within 60 days after receiving written notice from the Internal Revenue Service proposing to disallow deductions attributable to the activity. File 2011 taxes turbotax More information. File 2011 taxes turbotax   For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Publication 535. File 2011 taxes turbotax Example—Property Changed to Rental Use In January, Eileen Johnson bought a condominium apartment to live in. File 2011 taxes turbotax Instead of selling the house she had been living in, she decided to change it to rental property. File 2011 taxes turbotax Eileen selected a tenant and started renting the house on February 1. File 2011 taxes turbotax Eileen charges $750 a month for rent and collects it herself. File 2011 taxes turbotax Eileen also received a $750 security deposit from her tenant. File 2011 taxes turbotax Because she plans to return it to her tenant at the end of the lease, she does not include it in her income. File 2011 taxes turbotax Her rental expenses for the year are as follows. File 2011 taxes turbotax   Mortgage interest $1,800     Fire insurance (1-year policy) 100     Miscellaneous repairs (after renting) 297     Real estate taxes imposed and paid 1,200   Eileen must divide the real estate taxes, mortgage interest, and fire insurance between the personal use of the property and the rental use of the property. File 2011 taxes turbotax She can deduct eleven-twelfths of these expenses as rental expenses. File 2011 taxes turbotax She can include the balance of the allowable taxes and mortgage interest on Schedule A (Form 1040) if she itemizes. File 2011 taxes turbotax She cannot deduct the balance of the fire insurance because it is a personal expense. File 2011 taxes turbotax Eileen bought this house in 1984 for $35,000. File 2011 taxes turbotax Her property tax was based on assessed values of $10,000 for the land and $25,000 for the house. File 2011 taxes turbotax Before changing it to rental property, Eileen added several improvements to the house. File 2011 taxes turbotax She figures her adjusted basis as follows:   Improvements Cost     House $25,000     Remodeled kitchen 4,200     Recreation room 5,800     New roof 1,600     Patio and deck 2,400     Adjusted basis $39,000   On February 1, when Eileen changed her house to rental property, the property had a fair market value of $152,000. File 2011 taxes turbotax Of this amount, $35,000 was for the land and $117,000 was for the house. File 2011 taxes turbotax Because Eileen's adjusted basis is less than the fair market value on the date of the change, Eileen uses $39,000 as her basis for depreciation. File 2011 taxes turbotax As specified for residential rental property, Eileen must use the straight line method of depreciation over the GDS or ADS recovery period. File 2011 taxes turbotax She chooses the GDS recovery period of 27. File 2011 taxes turbotax 5 years. File 2011 taxes turbotax She uses Table 2-2d to find her depreciation percentage. File 2011 taxes turbotax Since she placed the property in service in February, the percentage is 3. File 2011 taxes turbotax 182%. File 2011 taxes turbotax On April 1, Eileen bought a new dishwasher for the rental property at a cost of $425. File 2011 taxes turbotax The dishwasher is personal property used in a rental real estate activity, which has a 5-year recovery period. File 2011 taxes turbotax She uses Table 2-2a to find the percentage for Year 1 under “Half-year convention” (20%) to figure her depreciation deduction. File 2011 taxes turbotax On May 1, Eileen paid $4,000 to have a furnace installed in the house. File 2011 taxes turbotax The furnace is residential rental property. File 2011 taxes turbotax Because she placed the property in service in May, the percentage from Table 2-2d is 2. File 2011 taxes turbotax 273%. File 2011 taxes turbotax Eileen figures her net rental income or loss for the house as follows: Total rental income received  ($750 × 11) $8,250 Minus: Expenses     Mortgage interest ($1,800 × 11/12) $1,650   Fire insurance ($100 × 11/12) 92   Miscellaneous repairs 297   Real estate taxes ($1,200 × 11/12) 1,100   Total expenses 3,139 Balance $5,111 Minus: Depreciation     House ($39,000 × . File 2011 taxes turbotax 03182) $1,241   Dishwasher ($425 × . File 2011 taxes turbotax 20) 85   Furnace ($4,000 × . File 2011 taxes turbotax 02273) 91   Total depreciation 1,417 Net rental income for house   $3,694       Eileen uses Schedule E, Part I, to report her rental income and expenses. File 2011 taxes turbotax She enters her income, expenses, and depreciation for the house in the column for Property A. File 2011 taxes turbotax Since all property was placed in service this year, Eileen must use Form 4562 to figure the depreciation. File 2011 taxes turbotax See the Instructions for Form 4562 for more information on preparing the form. File 2011 taxes turbotax Prev  Up  Next   Home   More Online Publications
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The File 2011 Taxes Turbotax

File 2011 taxes turbotax 3. File 2011 taxes turbotax   Limit on Annual Additions Table of Contents Ministers and church employees. File 2011 taxes turbotax Includible Compensation for Your Most Recent Year of ServiceMost Recent Year of Service Includible Compensation The first component of MAC is the limit on annual additions. File 2011 taxes turbotax This is a limit on the total contributions (elective deferrals, nonelective contributions, and after-tax contributions) that can be made to your 403(b) account. File 2011 taxes turbotax The limit on annual additions generally is the lesser of: $51,000 for 2013 and $52,000 for 2014, or 100% of your includible compensation for your most recent year of service. File 2011 taxes turbotax More than one 403(b) account. File 2011 taxes turbotax If you contributed to more than one 403(b) account, you must combine the contributions made to all 403(b) accounts on your behalf by your employer. File 2011 taxes turbotax Ministers and church employees. File 2011 taxes turbotax   If you are a minister or a church employee, you may be able to increase your limit on annual additions or use different rules when figuring your limit on annual additions. File 2011 taxes turbotax For more information, see chapter 5. File 2011 taxes turbotax Participation in a qualified plan. File 2011 taxes turbotax If you participated in a 403(b) plan and a qualified plan, you must combine contributions made to your 403(b) account with contributions to a qualified plan and simplified employee pensions of all corporations, partnerships, and sole proprietorships in which you have more than 50% control. File 2011 taxes turbotax You can use Part I of Worksheet 1 in chapter 9 to figure your limit on annual additions. File 2011 taxes turbotax Includible Compensation for Your Most Recent Year of Service Definition. File 2011 taxes turbotax   Generally, includible compensation for your most recent year of service is the amount of taxable wages and benefits you received from the employer that maintained a 403(b) account for your benefit during your most recent year of service. File 2011 taxes turbotax When figuring your includible compensation for your most recent year of service, keep in mind that your most recent year of service may not be the same as your employer's most recent annual work period. File 2011 taxes turbotax This can happen if your tax year is not the same as your employer's annual work period. File 2011 taxes turbotax When figuring includible compensation for your most recent year of service, do not mix compensation or service of one employer with compensation or service of another employer. File 2011 taxes turbotax Most Recent Year of Service Your most recent year of service is your last full year of service, ending on the last day of your tax year that you worked for the employer that maintained a 403(b) account on your behalf. File 2011 taxes turbotax Tax year different from employer's annual work period. File 2011 taxes turbotax   If your tax year is not the same as your employer's annual work period, your most recent year of service is made up of parts of at least two of your employer's annual work periods. File 2011 taxes turbotax Example. File 2011 taxes turbotax A professor who reports her income on a calendar-year basis is employed on a full-time basis by a university that operates on an academic year (October through May). File 2011 taxes turbotax To figure her includible compensation for 2013, the professor's most recent year of service is her service from January through May 2013 and from October through December 2013. File 2011 taxes turbotax Figuring Your Most Recent Year of Service To figure your most recent year of service, begin by determining what is a full year of service for your position. File 2011 taxes turbotax A full year of service is equal to full-time employment for your employer's annual work period. File 2011 taxes turbotax After identifying a full year of service, begin counting the service you have provided for your employer starting with the service provided in the current year. File 2011 taxes turbotax Part-time or employed only part of the year. File 2011 taxes turbotax   If you are a part-time or a full-time employee who is employed for only part of the year, your most recent year of service is your service this year and your service for as many previous years as is necessary to total 1 full year of service. File 2011 taxes turbotax To determine your most recent year of service, add the following periods of service: Your service during the year for which you are figuring the limit on annual additions, and Your service during your preceding tax years until the total service equals 1 year of service or you have figured all of your service with the employer. File 2011 taxes turbotax Example. File 2011 taxes turbotax You were employed on a full-time basis from July through December 2011 (1/2 year of service), July through December 2012 (1/2 year of service), and October through December 2013 (1/4 year of service). File 2011 taxes turbotax Your most recent year of service for computing your limit on annual additions for 2013 is the total of your service during 2013 (1/4 year of service), your service during 2012 (1/2 year of service), and your service during the months October through December 2011 (1/4 year of service). File 2011 taxes turbotax Not yet employed for 1 year. File 2011 taxes turbotax   If, at the close of the year, you have not yet worked for your employer for 1 year (including time you worked for the same employer in all earlier years), use the period of time you have worked for the employer as your most recent year of service. File 2011 taxes turbotax Includible Compensation After identifying your most recent year of service, the next step is to identify the includible compensation associated with that full year of service. File 2011 taxes turbotax Includible compensation is not the same as income included on your tax return. File 2011 taxes turbotax Compensation is a combination of income and benefits received in exchange for services provided to your employer. File 2011 taxes turbotax Generally, includible compensation is the amount of income and benefits: Received from the employer who maintains your 403(b) account, and Must be included in your income. File 2011 taxes turbotax Includible compensation includes the following amounts. File 2011 taxes turbotax Elective deferrals (employer's contributions made on your behalf under a salary reduction agreement). File 2011 taxes turbotax Amounts contributed or deferred by your employer under a section 125 cafeteria plan. File 2011 taxes turbotax Amounts contributed or deferred, at the election of the employee, under an eligible section 457 nonqualified deferred compensation plan (state or local government or tax-exempt organization plan). File 2011 taxes turbotax  Note. File 2011 taxes turbotax For information about treating elective deferrals under section 457 plans as Roth contributions, see Publication 575. File 2011 taxes turbotax Wages, salaries, and fees for personal services earned with the employer maintaining your 403(b) account. File 2011 taxes turbotax Income otherwise excluded under the foreign earned income exclusion. File 2011 taxes turbotax Pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan. File 2011 taxes turbotax Includible compensation does not include the following items. File 2011 taxes turbotax Your employer's contributions to your 403(b) account. File 2011 taxes turbotax Compensation earned while your employer was not an eligible employer. File 2011 taxes turbotax Your employer's contributions to a qualified plan that: Are on your behalf, and Are excludable from income. File 2011 taxes turbotax The cost of incidental life insurance. File 2011 taxes turbotax See Cost of Incidental Life Insurance, later. File 2011 taxes turbotax If you are a church employee or a foreign missionary, figure includible compensation using the rules explained in chapter 5. File 2011 taxes turbotax Contributions after retirement. File 2011 taxes turbotax   Nonelective contributions may be made for an employee for up to 5 years after retirement. File 2011 taxes turbotax These contributions would be based on includible compensation for the last year of service before retirement. File 2011 taxes turbotax Cost of Incidental Life Insurance Includible compensation does not include the cost of incidental life insurance. File 2011 taxes turbotax If all of your 403(b) accounts invest only in mutual funds, then you have no incidental life insurance. File 2011 taxes turbotax If you have an annuity contract, a portion of the cost of that contract may be for incidental life insurance. File 2011 taxes turbotax If so, the cost of the insurance is taxable to you in the year contributed and is considered part of your basis when distributed. File 2011 taxes turbotax Your employer will include the cost of your insurance as taxable wages in box 1 of Form W-2. File 2011 taxes turbotax Not all annuity contracts include life insurance. File 2011 taxes turbotax Contact your plan administrator to determine if your contract includes incidental life insurance. File 2011 taxes turbotax If it does, you will need to figure the cost of life insurance each year the policy is in effect. File 2011 taxes turbotax Figuring the cost of incidental life insurance. File 2011 taxes turbotax If you have determined that part of the cost of your annuity contract is for an incidental life insurance premium, you will need to determine the amount of the premium and subtract it from your includible compensation. File 2011 taxes turbotax To determine the amount of the life insurance premiums, you will need to know the following information. File 2011 taxes turbotax The value of your life insurance contract, which is the amount payable upon your death. File 2011 taxes turbotax The cash value of your life insurance contract at the end of the tax year. File 2011 taxes turbotax Your age on your birthday nearest the beginning of the policy year. File 2011 taxes turbotax Your current life insurance protection under an ordinary retirement income life insurance policy, which is the amount payable upon your death minus the cash value of the contract at the end of the year. File 2011 taxes turbotax You can use Worksheet A, in chapter 9, to determine the cost of your incidental life insurance. File 2011 taxes turbotax Example. File 2011 taxes turbotax Your new contract provides that your beneficiary will receive $10,000 if you should die before retirement. File 2011 taxes turbotax Your cash value in the contract at the end of the first year is zero. File 2011 taxes turbotax Your current life insurance protection for the first year is $10,000 ($10,000 − 0). File 2011 taxes turbotax The cash value in the contract at the end of year two is $1,000, and the current life insurance protection for the second year is $9,000 ($10,000 – $1,000). File 2011 taxes turbotax The 1-year cost of the protection can be calculated by using Figure 3-1, Table of One-Year Term Premiums for $1,000 Life Insurance Protection . File 2011 taxes turbotax The premium rate is determined based on your age on your birthday nearest the beginning of the policy year. File 2011 taxes turbotax Figure 3-1. File 2011 taxes turbotax Table of One-Year Term Premiums for $1,000 Life Insurance Protection Age Cost   Age Cost   Age Cost 0 $0. File 2011 taxes turbotax 70   35 $0. File 2011 taxes turbotax 99   70 $20. File 2011 taxes turbotax 62 1 0. File 2011 taxes turbotax 41   36 1. File 2011 taxes turbotax 01   71 22. File 2011 taxes turbotax 72 2 0. File 2011 taxes turbotax 27   37 1. File 2011 taxes turbotax 04   72 25. File 2011 taxes turbotax 07 3 0. File 2011 taxes turbotax 19   38 1. File 2011 taxes turbotax 06   73 27. File 2011 taxes turbotax 57 4 0. File 2011 taxes turbotax 13   39 1. File 2011 taxes turbotax 07   74 30. File 2011 taxes turbotax 18 5 0. File 2011 taxes turbotax 13   40 1. File 2011 taxes turbotax 10   75 33. File 2011 taxes turbotax 05 6 0. File 2011 taxes turbotax 14   41 1. File 2011 taxes turbotax 13   76 36. File 2011 taxes turbotax 33 7 0. File 2011 taxes turbotax 15   42 1. File 2011 taxes turbotax 20   77 40. File 2011 taxes turbotax 17 8 0. File 2011 taxes turbotax 16   43 1. File 2011 taxes turbotax 29   78 44. File 2011 taxes turbotax 33 9 0. File 2011 taxes turbotax 16   44 1. File 2011 taxes turbotax 40   79 49. File 2011 taxes turbotax 23 10 0. File 2011 taxes turbotax 16   45 1. File 2011 taxes turbotax 53   80 54. File 2011 taxes turbotax 56 11 0. File 2011 taxes turbotax 19   46 1. File 2011 taxes turbotax 67   81 60. File 2011 taxes turbotax 51 12 0. File 2011 taxes turbotax 24   47 1. File 2011 taxes turbotax 83   82 66. File 2011 taxes turbotax 74 13 0. File 2011 taxes turbotax 28   48 1. File 2011 taxes turbotax 98   83 73. File 2011 taxes turbotax 07 14 0. File 2011 taxes turbotax 33   49 2. File 2011 taxes turbotax 13   84 80. File 2011 taxes turbotax 35 15 0. File 2011 taxes turbotax 38   50 2. File 2011 taxes turbotax 30   85 88. File 2011 taxes turbotax 76 16 0. File 2011 taxes turbotax 52   51 2. File 2011 taxes turbotax 52   86 99. File 2011 taxes turbotax 16 17 0. File 2011 taxes turbotax 57   52 2. File 2011 taxes turbotax 81   87 110. File 2011 taxes turbotax 40 18 0. File 2011 taxes turbotax 59   53 3. File 2011 taxes turbotax 20   88 121. File 2011 taxes turbotax 85 19 0. File 2011 taxes turbotax 61   54 3. File 2011 taxes turbotax 65   89 133. File 2011 taxes turbotax 40 20 0. File 2011 taxes turbotax 62   55 4. File 2011 taxes turbotax 15   90 144. File 2011 taxes turbotax 30 21 0. File 2011 taxes turbotax 62   56 4. File 2011 taxes turbotax 68   91 155. File 2011 taxes turbotax 80 22 0. File 2011 taxes turbotax 64   57 5. File 2011 taxes turbotax 20   92 168. File 2011 taxes turbotax 75 23 0. File 2011 taxes turbotax 66   58 5. File 2011 taxes turbotax 66   93 186. File 2011 taxes turbotax 44 24 0. File 2011 taxes turbotax 68   59 6. File 2011 taxes turbotax 06   94 206. File 2011 taxes turbotax 70 25 0. File 2011 taxes turbotax 71   60 6. File 2011 taxes turbotax 51   95 228. File 2011 taxes turbotax 35 26 0. File 2011 taxes turbotax 73   61 7. File 2011 taxes turbotax 11   96 250. File 2011 taxes turbotax 01 27 0. File 2011 taxes turbotax 76   62 7. File 2011 taxes turbotax 96   97 265. File 2011 taxes turbotax 09 28 0. File 2011 taxes turbotax 80   63 9. File 2011 taxes turbotax 08   98 270. File 2011 taxes turbotax 11 29 0. File 2011 taxes turbotax 83   64 10. File 2011 taxes turbotax 41   99 281. File 2011 taxes turbotax 05 30 0. File 2011 taxes turbotax 87   65 11. File 2011 taxes turbotax 90       31 0. File 2011 taxes turbotax 90   66 13. File 2011 taxes turbotax 51       32 0. File 2011 taxes turbotax 93   67 15. File 2011 taxes turbotax 20       33 0. File 2011 taxes turbotax 96   68 16. File 2011 taxes turbotax 92       34 0. File 2011 taxes turbotax 98   69 18. File 2011 taxes turbotax 70                       If the current published premium rates per $1,000 of insurance protection charged by an insurer for individual 1-year term life insurance premiums available to all standard risks are lower than those in the preceding table, you can use the lower rates for figuring the cost of insurance in connection with individual policies issued by the same insurer. File 2011 taxes turbotax Example 1. File 2011 taxes turbotax Lynne Green, age 44, and her employer enter into a 403(b) plan that will provide her with a $500 a month annuity upon retirement at age 65. File 2011 taxes turbotax The agreement also provides that if she should die before retirement, her beneficiary will receive the greater of $20,000 or the cash surrender value in the life insurance contract. File 2011 taxes turbotax Using the facts presented we can determine the cost of Lynne's life insurance protection as shown in Table 3-1. File 2011 taxes turbotax Lynne's employer has included $28 for the cost of the life insurance protection in her current year's income. File 2011 taxes turbotax When figuring her includible compensation for this year, Lynne will subtract $28. File 2011 taxes turbotax Table 3-1. File 2011 taxes turbotax Worksheet A. File 2011 taxes turbotax Cost of Incidental Life Insurance Note. File 2011 taxes turbotax Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. File 2011 taxes turbotax This amount will be used to figure includible compensation for your most recent year of service. File 2011 taxes turbotax 1. File 2011 taxes turbotax Enter the value of the contract (amount payable upon your death) 1. File 2011 taxes turbotax $20,000. File 2011 taxes turbotax 00 2. File 2011 taxes turbotax Enter the cash value in the contract at the end of the year 2. File 2011 taxes turbotax 0. File 2011 taxes turbotax 00 3. File 2011 taxes turbotax Subtract line 2 from line 1. File 2011 taxes turbotax This is the value of your current life insurance protection 3. File 2011 taxes turbotax $20,000. File 2011 taxes turbotax 00 4. File 2011 taxes turbotax Enter your age on your birthday nearest the beginning of the policy year 4. File 2011 taxes turbotax 44 5. File 2011 taxes turbotax Enter the 1-year term premium for $1,000 of life insurance based on your age. File 2011 taxes turbotax (From Figure 3-1) 5. File 2011 taxes turbotax $1. File 2011 taxes turbotax 40 6. File 2011 taxes turbotax Divide line 3 by $1,000 6. File 2011 taxes turbotax 20 7. File 2011 taxes turbotax Multiply line 6 by line 5. File 2011 taxes turbotax This is the cost of your incidental life insurance 7. File 2011 taxes turbotax $28. File 2011 taxes turbotax 00 Example 2. File 2011 taxes turbotax Lynne's cash value in the contract at the end of the second year is $1,000. File 2011 taxes turbotax In year two, the cost of Lynne's life insurance is calculated as shown in Table 3-2. File 2011 taxes turbotax In year two, Lynne's employer will include $29. File 2011 taxes turbotax 07 in her current year's income. File 2011 taxes turbotax Lynne will subtract this amount when figuring her includible compensation. File 2011 taxes turbotax Table 3-2. File 2011 taxes turbotax Worksheet A. File 2011 taxes turbotax Cost of Incidental Life Insurance Note. File 2011 taxes turbotax Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. File 2011 taxes turbotax This amount will be used to figure includible compensation for your most recent year of service. File 2011 taxes turbotax 1. File 2011 taxes turbotax Enter the value of the contract (amount payable upon your death) 1. File 2011 taxes turbotax $20,000. File 2011 taxes turbotax 00 2. File 2011 taxes turbotax Enter the cash value in the contract at the end of the year 2. File 2011 taxes turbotax $1,000. File 2011 taxes turbotax 00 3. File 2011 taxes turbotax Subtract line 2 from line 1. File 2011 taxes turbotax This is the value of your current life insurance protection 3. File 2011 taxes turbotax $19,000. File 2011 taxes turbotax 00 4. File 2011 taxes turbotax Enter your age on your birthday nearest the beginning of the policy year 4. File 2011 taxes turbotax 45 5. File 2011 taxes turbotax Enter the 1-year term premium for $1,000 of life insurance based on your age. File 2011 taxes turbotax (From Figure 3-1) 5. File 2011 taxes turbotax $1. File 2011 taxes turbotax 53 6. File 2011 taxes turbotax Divide line 3 by $1,000 6. File 2011 taxes turbotax 19 7. File 2011 taxes turbotax Multiply line 6 by line 5. File 2011 taxes turbotax This is the cost of your incidental life insurance 7. File 2011 taxes turbotax $29. File 2011 taxes turbotax 07 Figuring Includible Compensation for Your Most Recent Year of Service You can use Worksheet B in chapter 9 to determine your includible compensation for your most recent year of service. File 2011 taxes turbotax Example. File 2011 taxes turbotax Floyd has been periodically working full-time for a local hospital since September 2011. File 2011 taxes turbotax He needs to figure his limit on annual additions for 2014. File 2011 taxes turbotax The hospital's normal annual work period for employees in Floyd's general type of work runs from January to December. File 2011 taxes turbotax During the periods that Floyd was employed with the hospital, the hospital has always been eligible to provide a 403(b) plan to employees. File 2011 taxes turbotax Additionally, the hospital has never provided the employees with a 457 deferred compensation plan, a transportation fringe benefit plan, or a cafeteria plan. File 2011 taxes turbotax Floyd has never worked abroad and there is no life insurance provided under the plan. File 2011 taxes turbotax Table 3-3 shows the service Floyd provided to his employer, his compensation for the periods worked, his elective deferrals, and his taxable wages. File 2011 taxes turbotax Table 3-3. File 2011 taxes turbotax Floyd's Compensation Note. File 2011 taxes turbotax This table shows information Floyd will use to figure includible compensation for his most recent year of service. File 2011 taxes turbotax   Year Years of Service Taxable Wages Elective Deferrals 2014 6/12 of  a year $42,000 $2,000 2013 4/12 of  a year $16,000 $1,650 2012 4/12 of  a year $16,000 $1,650 Before Floyd can figure his limit on annual additions, he must figure includible compensation for his most recent year of service. File 2011 taxes turbotax Because Floyd is not planning to work the entire 2014 year, his most recent year of service will include the time he is planning to work in 2014 plus time he worked in the preceding 3 years until the time he worked for the hospital totals 1 year. File 2011 taxes turbotax If the total time he worked is less than 1 year, Floyd will treat it as if it were 1 year. File 2011 taxes turbotax He figures his most recent year of service shown in the following list. File 2011 taxes turbotax Time he will work in 2014 is 6/12 of a year. File 2011 taxes turbotax Time worked in 2013 is 4/12 of a year. File 2011 taxes turbotax All of this time will be used to determine Floyd's most recent year of service. File 2011 taxes turbotax Time worked in 2012 is 4/12 of a year. File 2011 taxes turbotax Floyd only needs 2 months of the 4 months he worked in 2012 to have enough time to total 1 full year. File 2011 taxes turbotax Because he needs only one-half of the actual time he worked, Floyd will use only one-half of his income earned during that period to calculate wages that will be used in figuring his includible compensation. File 2011 taxes turbotax Using the information provided in Table 3-3, wages for Floyd's most recent year of service are $66,000 ($42,000 + $16,000 + $8,000). File 2011 taxes turbotax His includible compensation for his most recent year of service is figured as shown in Table 3-4. File 2011 taxes turbotax After figuring his includible compensation, Floyd determines his limit on annual additions for 2014 to be $52,000, the lesser of his includible compensation, $70,475 (Table 3-4), and the maximum amount of $52,000. File 2011 taxes turbotax Table 3-4. File 2011 taxes turbotax Worksheet B. File 2011 taxes turbotax Includible Compensation for Your Most Recent Year of Service1 Note. File 2011 taxes turbotax Use this worksheet to figure includible compensation for your most recent year of service. File 2011 taxes turbotax 1. File 2011 taxes turbotax Enter your includible wages from the employer maintaining your 403(b) account for your most recent year of service 1. File 2011 taxes turbotax $66,000 2. File 2011 taxes turbotax Enter elective deferrals excluded from your gross income for your most recent year of service2 2. File 2011 taxes turbotax 4,4753 3. File 2011 taxes turbotax Enter amounts contributed or deferred by your employer under a cafeteria plan for your most recent year of service 3. File 2011 taxes turbotax -0- 4. File 2011 taxes turbotax Enter amounts contributed or deferred by your employer according to your election to your 457 account (a nonqualified plan of a state or local government, or of a tax-exempt organization) for your most recent year of service 4. File 2011 taxes turbotax -0- 5. File 2011 taxes turbotax Enter pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan for your most recent year of service 5. File 2011 taxes turbotax -0- 6. File 2011 taxes turbotax Enter your foreign earned income exclusion for your most recent year of service 6. File 2011 taxes turbotax -0- 7. File 2011 taxes turbotax Add lines 1, 2, 3, 4, 5, and 6 7. File 2011 taxes turbotax 70,475 8. File 2011 taxes turbotax Enter the cost of incidental life insurance that is part of your annuity contract for your most recent year of service 8. File 2011 taxes turbotax -0- 9. File 2011 taxes turbotax Enter compensation that was both: Earned during your most recent year of service, and Earned while your employer was not qualified to maintain a 403(b) plan 9. File 2011 taxes turbotax -0- 10. File 2011 taxes turbotax Add lines 8 and 9 10. File 2011 taxes turbotax -0- 11. File 2011 taxes turbotax Subtract line 10 from line 7. File 2011 taxes turbotax This is your includible compensation for your most recent year of service 11. File 2011 taxes turbotax 70,475 1Use estimated amounts if figuring includible compensation before the end of the year. File 2011 taxes turbotax 2Elective deferrals made to a designated Roth account are not excluded from your gross income and should not be included on this line. File 2011 taxes turbotax  3$4,475 ($2,000 + $1,650 + $825). File 2011 taxes turbotax Prev  Up  Next   Home   More Online Publications