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Free E File State And Federal Taxes

Free e file state and federal taxes Publication 521 - Main Content Table of Contents Who Can Deduct Moving ExpensesMove Related to Start of Work Distance Test Time Test Retirees or Survivors Who Move to the United States Deductible Moving ExpensesMoves to Locations in the United States Moves to Locations Outside the United States Nondeductible Expenses ReimbursementsTypes of Reimbursement Plans Tax Withholding and Estimated Tax How and When To ReportForm 3903 When To Deduct Expenses Illustrated Example Members of the Armed Forces How To Get Tax Help Who Can Deduct Moving Expenses You can deduct your moving expenses if you meet all three of the following requirements. Free e file state and federal taxes Your move is closely related to the start of work. Free e file state and federal taxes You meet the distance test. Free e file state and federal taxes You meet the time test. Free e file state and federal taxes After you have read these rules, you may want to use Figure B to help you decide if you can deduct your moving expenses. Free e file state and federal taxes Retirees, survivors, and Armed Forces members. Free e file state and federal taxes   Different rules may apply if you are a member of the Armed Forces or a retiree or survivor moving to the United States. Free e file state and federal taxes These rules are discussed later in this publication. Free e file state and federal taxes Move Related to Start of Work Your move must be closely related, both in time and in place, to the start of work at your new job location. Free e file state and federal taxes Closely related in time. Free e file state and federal taxes   In most cases, you can consider moving expenses incurred within 1 year from the date you first reported to work at the new location as closely related in time to the start of work. Free e file state and federal taxes It is not necessary that you arrange to work before moving to a new location, as long as you actually go to work in that location. Free e file state and federal taxes    Figure A. Free e file state and federal taxes Illustration of Distance Test Please click here for the text description of the image. Free e file state and federal taxes Figure A   If you do not move within 1 year of the date you begin work, you ordinarily cannot deduct the expenses unless you can show that circumstances existed that prevented the move within that time. Free e file state and federal taxes Example. Free e file state and federal taxes Your family moved more than a year after you started work at a new location. Free e file state and federal taxes You delayed the move for 18 months to allow your child to complete high school. Free e file state and federal taxes You can deduct your moving expenses. Free e file state and federal taxes Closely related in place. Free e file state and federal taxes   You can generally consider your move closely related in place to the start of work if the distance from your new home to the new job location is not more than the distance from your former home to the new job location. Free e file state and federal taxes If your move does not meet this requirement, you may still be able to deduct moving expenses if you can show that: You are required to live at your new home as a condition of your employment, or You will spend less time or money commuting from your new home to your new job location. Free e file state and federal taxes Home defined. Free e file state and federal taxes   Your home means your main home (residence). Free e file state and federal taxes It can be a house, apartment, condominium, houseboat, house trailer, or similar dwelling. Free e file state and federal taxes It does not include other homes owned or kept up by you or members of your family. Free e file state and federal taxes It also does not include a seasonal home, such as a summer beach cottage. Free e file state and federal taxes Your former home means your home before you left for your new job location. Free e file state and federal taxes Your new home means your home within the area of your new job location. Free e file state and federal taxes Retirees or survivors. Free e file state and federal taxes   You may be able to deduct the expenses of moving to the United States or its possessions even though the move is not related to the start of work at a new job location. Free e file state and federal taxes You must have worked outside the United States or be a survivor of someone who did. Free e file state and federal taxes See Retirees or Survivors Who Move to the United States, later. Free e file state and federal taxes Distance Test Your move will meet the distance test if your new main job location is at least 50 miles farther from your former home than your old main job location was from your former home. Free e file state and federal taxes For example, if your old main job location was 3 miles from your former home, your new main job location must be at least 53 miles from that former home. Free e file state and federal taxes You can use Worksheet 1 to see if you meet this test. Free e file state and federal taxes Worksheet 1. Free e file state and federal taxes Distance Test   Note. Free e file state and federal taxes Members of the Armed Forces may not have to meet this test. Free e file state and federal taxes See Members of the Armed Forces. Free e file state and federal taxes     1. Free e file state and federal taxes Enter the number of miles from your old home to your new workplace 1. Free e file state and federal taxes miles 2. Free e file state and federal taxes Enter the number of miles from your old home to your old workplace 2. Free e file state and federal taxes miles 3. Free e file state and federal taxes Subtract line 2 from line 1. Free e file state and federal taxes If zero or less, enter -0- 3. Free e file state and federal taxes miles 4. Free e file state and federal taxes Is line 3 at least 50 miles? □ Yes. Free e file state and federal taxes You meet this test. Free e file state and federal taxes  □ No. Free e file state and federal taxes You do not meet this test. Free e file state and federal taxes You cannot deduct your moving expenses. Free e file state and federal taxes The distance between a job location and your home is the shortest of the more commonly traveled routes between them. Free e file state and federal taxes The distance test considers only the location of your former home. Free e file state and federal taxes It does not take into account the location of your new home. Free e file state and federal taxes See Figure A, earlier. Free e file state and federal taxes Example. Free e file state and federal taxes You moved to a new home less than 50 miles from your former home because you changed main job locations. Free e file state and federal taxes Your old main job location was 3 miles from your former home. Free e file state and federal taxes Your new main job location is 60 miles from that home. Free e file state and federal taxes Because your new main job location is 57 miles farther from your former home than the distance from your former home to your old main job location, you meet the distance test. Free e file state and federal taxes First job or return to full-time work. Free e file state and federal taxes   If you go to work full time for the first time, your place of work must be at least 50 miles from your former home to meet the distance test. Free e file state and federal taxes   If you go back to full-time work after a substantial period of part-time work or unemployment, your place of work also must be at least 50 miles from your former home. Free e file state and federal taxes Armed Forces. Free e file state and federal taxes   If you are in the Armed Forces and you moved because of a permanent change of station, you do not have to meet the distance test. Free e file state and federal taxes See Members of the Armed Forces, later. Free e file state and federal taxes Main job location. Free e file state and federal taxes   Your main job location is usually the place where you spend most of your working time. Free e file state and federal taxes This could be your office, plant, store, shop, or other location. Free e file state and federal taxes If there is no one place where you spend most of your working time, your main job location is the place where your work is centered, such as where you report for work or are otherwise required to “base” your work. Free e file state and federal taxes Union members. Free e file state and federal taxes   If you work for several employers on a short-term basis and you get work under a union hall system (such as a construction or building trades worker), your main job location is the union hall. Free e file state and federal taxes More than one job. Free e file state and federal taxes   If you have more than one job at any time, your main job location depends on the facts in each case. Free e file state and federal taxes The more important factors to be considered are: The total time you spend at each place, The amount of work you do at each place, and How much money you earn at each place. Free e file state and federal taxes    Table 1. Free e file state and federal taxes Satisfying the Time Test for Employees and Self-Employed Persons IF you are. Free e file state and federal taxes . Free e file state and federal taxes . Free e file state and federal taxes THEN you satisfy the time test by meeting the. Free e file state and federal taxes . Free e file state and federal taxes . Free e file state and federal taxes an employee 39-week test for employees. Free e file state and federal taxes self-employed 78-week test for self-employed persons. Free e file state and federal taxes both self-employed and an employee at the same time 78-week test for a self-employed person or the 39-week  test for an employee. Free e file state and federal taxes Your principal place of work  determines which test applies. Free e file state and federal taxes both self-employed and an employee, but unable to satisfy the 39-week test for employees 78-week test for self-employed persons. Free e file state and federal taxes Time Test To deduct your moving expenses, you also must meet one of the following two time tests. Free e file state and federal taxes The time test for employees. Free e file state and federal taxes The time test for self-employed persons. Free e file state and federal taxes Both of these tests are explained below. Free e file state and federal taxes See Table 1, below, for a summary of these tests. Free e file state and federal taxes You can deduct your moving expenses before you meet either of the time tests. Free e file state and federal taxes See Time Test Not Yet Met, later. Free e file state and federal taxes Time Test for Employees If you are an employee, you must work full time for at least 39 weeks during the first 12 months after you arrive in the general area of your new job location (39-week test). Free e file state and federal taxes Full-time employment depends on what is usual for your type of work in your area. Free e file state and federal taxes For purposes of this test, the following four rules apply. Free e file state and federal taxes You count only your full-time work as an employee, not any work you do as a self-employed person. Free e file state and federal taxes You do not have to work for the same employer for all 39 weeks. Free e file state and federal taxes You do not have to work 39 weeks in a row. Free e file state and federal taxes You must work full time within the same general commuting area for all 39 weeks. Free e file state and federal taxes Temporary absence from work. Free e file state and federal taxes   You are considered to have worked full time during any week you are temporarily absent from work because of illness, strikes, lockouts, layoffs, natural disasters, or similar causes. Free e file state and federal taxes You are also considered to have worked full time during any week you are absent from work for leave or vacation provided for in your work contract or agreement. Free e file state and federal taxes Seasonal work. Free e file state and federal taxes   If your work is seasonal, you are considered to be working full time during the off-season only if your work contract or agreement covers an off-season period of less than 6 months. Free e file state and federal taxes For example, a school teacher on a 12-month contract who teaches on a full-time basis for more than 6 months is considered to have worked full time for the entire 12 months. Free e file state and federal taxes    Figure B. Free e file state and federal taxes Can You Deduct Expenses for a Non-Military Move Within the United States? Please click here for the text description of the image. Free e file state and federal taxes Figure B Time Test for Self-Employed Persons If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after you arrive in the general area of your new job location (78-week test). Free e file state and federal taxes For purposes of the time test for self-employed persons, the following three rules apply. Free e file state and federal taxes You count any full-time work you do either as an employee or as a self-employed person. Free e file state and federal taxes You do not have to work for the same employer or be self-employed in the same trade or business for the 78 weeks. Free e file state and federal taxes You must work within the same general commuting area for all 78 weeks. Free e file state and federal taxes Example. Free e file state and federal taxes You are a self-employed accountant who moves from Atlanta to New York City, and begin to work there on December 1, 2013. Free e file state and federal taxes You pay moving expenses in 2013 and 2014 in connection with this move. Free e file state and federal taxes On April 15, 2014, when you file your income tax return for the year 2013, you have been performing services as a self-employed individual on a full-time basis in New York City for approximately 20 weeks. Free e file state and federal taxes Although you have not satisfied the 78-week employment condition at this time, you can deduct your 2013 moving expenses on your 2013 income tax return as there is still sufficient time remaining before December 1, 2015, to satisfy such condition. Free e file state and federal taxes You can deduct any moving expenses you pay in 2014 on your 2014 income tax return even if you have not met the 78-week test. Free e file state and federal taxes You have until December 1, 2015, to satisfy this requirement. Free e file state and federal taxes Self-employment. Free e file state and federal taxes   You are self-employed if you work as the sole owner of an unincorporated business or as a partner in a partnership carrying on a business. Free e file state and federal taxes You are not considered self-employed if you are semi-retired, are a part-time student, or work only a few hours each week. Free e file state and federal taxes Full-time work. Free e file state and federal taxes   You can count only those weeks during which you work full time as a week of work. Free e file state and federal taxes Whether you work full time during any week depends on what is usual for your type of work in your area. Free e file state and federal taxes For example, you are a self-employed dentist and maintain office hours 4 days a week. Free e file state and federal taxes You are considered to perform services full time if maintaining office hours 4 days a week is not unusual for other self-employed dentists in your area. Free e file state and federal taxes Temporary absence from work. Free e file state and federal taxes   You are considered to be self-employed on a full-time basis during any week you are temporarily absent from work because of illness, strikes, natural disasters, or similar causes. Free e file state and federal taxes Seasonal trade or business. Free e file state and federal taxes   If your trade or business is seasonal, the off-season weeks when no work is required or available may be counted as weeks during which you worked full time. Free e file state and federal taxes The off-season must be less than 6 months and you must work full time before and after the off-season. Free e file state and federal taxes Example. Free e file state and federal taxes You own and operate a motel at a beach resort. Free e file state and federal taxes The motel is closed for 5 months during the off-season. Free e file state and federal taxes You work full time as the operator of the motel before and after the off-season. Free e file state and federal taxes You are considered self-employed on a full-time basis during the weeks of the off-season. Free e file state and federal taxes   If you were both an employee and self-employed, see Table 1 earlier, for the requirements. Free e file state and federal taxes Example. Free e file state and federal taxes Justin quit his job and moved from the east coast to the west coast to begin a full-time job as a cabinet-maker for C and L Cabinet Shop. Free e file state and federal taxes He generally worked at the shop about 40 hours each week. Free e file state and federal taxes Shortly after the move, Justin also began operating a cabinet-installation business from his home for several hours each afternoon and all day on weekends. Free e file state and federal taxes Because Justin's principal place of business is the cabinet shop, he can satisfy the time test by meeting the 39-week test. Free e file state and federal taxes    If Justin is unable to satisfy the requirements of the 39-week test during the 12-month period immediately following his arrival in the general location of his new principal place of work, he can satisfy the 78-week test. Free e file state and federal taxes Joint Return If you are married, file a joint return, and both you and your spouse work full-time, either of you can satisfy the full-time work test. Free e file state and federal taxes However, you cannot add the weeks your spouse worked to the weeks you worked to satisfy that test. Free e file state and federal taxes Time Test Not Yet Met You can deduct your moving expenses on your 2013 tax return even though you have not met the time test by the date your 2013 return is due. Free e file state and federal taxes You can do this if you expect to meet the 39-week test in 2014 or the 78-week test in 2014 or 2015. Free e file state and federal taxes If you do not deduct your moving expenses on your 2013 return, and you later meet the time test, you can file an amended return for 2013 to take the deduction. Free e file state and federal taxes See When To Deduct Expenses later, for more details. Free e file state and federal taxes Failure to meet the time test. Free e file state and federal taxes    If you deduct moving expenses but do not meet the time test in 2014 or 2015, you must either: Report your moving expense deduction as other income on your Form 1040 for the year you cannot meet the test, or Use Form 1040X to amend your 2013 return, figuring your tax without the moving expense deduction. Free e file state and federal taxes Example. Free e file state and federal taxes You arrive in the general area of your new job location, as an employee, on September 15, 2013. Free e file state and federal taxes You deduct your moving expenses on your 2013 return, the year of the move, even though you have not yet met the time test by the date your return is due. Free e file state and federal taxes If you do not meet the 39-week test during the 12-month period following your arrival in the general area of your new job location, you must either: Report your moving expense deduction as other income on your Form 1040 for 2014, or Use Form 1040X to amend your 2013 return, figuring your tax without the moving expense deduction. Free e file state and federal taxes Exceptions to the Time Test You do not have to meet the time test if one of the following applies. Free e file state and federal taxes You are in the Armed Forces and you moved because of a permanent change of station. Free e file state and federal taxes See Members of the Armed Forces , later. Free e file state and federal taxes Your main job location was outside the United States and you moved to the United States because you retired. Free e file state and federal taxes See Retirees or Survivors Who Move to the United States, later. Free e file state and federal taxes You are the survivor of a person whose main job location at the time of death was outside the United States. Free e file state and federal taxes See Retirees or Survivors Who Move to the United States, later. Free e file state and federal taxes Your job at the new location ends because of death or disability. Free e file state and federal taxes You are transferred for your employer's benefit or laid off for a reason other than willful misconduct. Free e file state and federal taxes For this exception, you must have obtained full-time employment and you must have expected to meet the test at the time you started the job. Free e file state and federal taxes Retirees or Survivors Who Move to the United States If you are a retiree who was working abroad or a survivor of a decedent who was working abroad and you move to the United States or one of its possessions, you do not have to meet the time test, discussed earlier. Free e file state and federal taxes However, you must meet the requirements discussed below under Retirees who were working abroad or Survivors of decedents who were working abroad. Free e file state and federal taxes If you are living in the United States, retire, and then move and remain retired, you cannot claim a moving expense deduction for that move. Free e file state and federal taxes United States defined. Free e file state and federal taxes   For this section of this publication, the term “United States” includes the possessions of the United States. Free e file state and federal taxes Retirees who were working abroad. Free e file state and federal taxes   You can deduct moving expenses for a move to a new home in the United States when you permanently retire. Free e file state and federal taxes However, both your former main job location and your former home must have been outside the United States. Free e file state and federal taxes Permanently retired. Free e file state and federal taxes   You are considered permanently retired when you cease gainful full-time employment or self-employment. Free e file state and federal taxes If, at the time you retire, you intend your retirement to be permanent, you will be considered retired even though you later return to work. Free e file state and federal taxes Your intention to retire permanently may be determined by: Your age and health, The customary retirement age for people who do similar work, Whether you receive retirement payments from a pension or retirement fund, and The length of time before you return to full-time work. Free e file state and federal taxes Decedents. Free e file state and federal taxes   Qualified deductible moving expenses are allowed on a final return (Form 1040 or 1040NR) when a taxpayer has moved and dies within the same calendar year. Free e file state and federal taxes The personal representative filing on behalf of that taxpayer should complete and attach Form 3903 to the final return. Free e file state and federal taxes   A personal representative can be an executor, administrator, or anyone who is in charge of the deceased person's property. Free e file state and federal taxes For more information, see Publication 559, Survivors, Executors, and Administrators. Free e file state and federal taxes Survivors of decedents who were working abroad. Free e file state and federal taxes   If you are the spouse or the dependent of a person whose main job location at the time of death was outside the United States, you can deduct moving expenses if the following five requirements are met. Free e file state and federal taxes The move is to a home in the United States. Free e file state and federal taxes The move begins within 6 months after the decedent's death. Free e file state and federal taxes (When a move begins is described below. Free e file state and federal taxes ) The move is from the decedent's former home. Free e file state and federal taxes The decedent's former home was outside the United States. Free e file state and federal taxes The decedent's former home was also your home. Free e file state and federal taxes When a move begins. Free e file state and federal taxes   A move begins when one of the following events occurs. Free e file state and federal taxes You contract for your household goods and personal effects to be moved to your home in the United States, but only if the move is completed within a reasonable time. Free e file state and federal taxes Your household goods and personal effects are packed and on the way to your home in the United States. Free e file state and federal taxes You leave your former home to travel to your new home in the United States. Free e file state and federal taxes Deductible Moving Expenses If you meet the requirements discussed earlier under Who Can Deduct Moving Expenses, you can deduct the reasonable expenses of: Moving your household goods and personal effects (including in-transit or foreign-move storage expenses), and Traveling (including lodging but not meals) to your new home. Free e file state and federal taxes You cannot deduct any expenses for meals. Free e file state and federal taxes Reasonable expenses. Free e file state and federal taxes   You can deduct only those expenses that are reasonable for the circumstances of your move. Free e file state and federal taxes For example, the cost of traveling from your former home to your new one should be by the shortest, most direct route available by conventional transportation. Free e file state and federal taxes If during your trip to your new home, you stop over, or make side trips for sightseeing, the additional expenses for your stopover or side trips are not deductible as moving expenses. Free e file state and federal taxes Example. Free e file state and federal taxes Beth's employer transferred her from Boston, Massachusetts, to Buffalo, New York. Free e file state and federal taxes On her way to Buffalo, Beth drove into Canada to visit the Toronto Zoo. Free e file state and federal taxes Since Beth's excursion into Canada was away from the usual Boston-Buffalo route, the expenses paid or incurred for the excursion are not deductible. Free e file state and federal taxes Beth can only deduct what it would have cost to drive directly from Boston to Buffalo. Free e file state and federal taxes Likewise, Beth cannot deduct any expenses, such as the cost of a hotel room, caused by the delay for sightseeing. Free e file state and federal taxes Travel by car. Free e file state and federal taxes   If you use your car to take yourself, members of your household, or your personal effects to your new home, you can figure your expenses by deducting either: Your actual expenses, such as the amount you pay for gas and oil for your car, if you keep an accurate record of each expense, or The standard mileage rate of 24 cents per mile. Free e file state and federal taxes Whether you use actual expenses or the standard mileage rate to figure your expenses, you can deduct the parking fees and tolls you pay to move. Free e file state and federal taxes You cannot deduct any part of general repairs, general maintenance, insurance, or depreciation for your car. Free e file state and federal taxes Member of your household. Free e file state and federal taxes   You can deduct moving expenses you pay for yourself and members of your household. Free e file state and federal taxes A member of your household is anyone who has both your former and new home as his or her home. Free e file state and federal taxes It does not include a tenant or employee, unless that person is your dependent. Free e file state and federal taxes Moves to Locations in the United States If you meet the requirements under Who Can Deduct Moving Expenses, earlier, you can deduct expenses for a move to the area of a new main job location within the United States or its possessions. Free e file state and federal taxes Your move may be from one U. Free e file state and federal taxes S. Free e file state and federal taxes location to another or from a foreign country to the United States. Free e file state and federal taxes Household goods and personal effects. Free e file state and federal taxes   You can deduct the cost of packing, crating, and transporting your household goods and personal effects and those of the members of your household from your former home to your new home. Free e file state and federal taxes For purposes of moving expenses, the term “personal effects” includes, but is not limited to, movable personal property that the taxpayer owns and frequently uses. Free e file state and federal taxes   If you use your own car to move your things, see Travel by car, earlier. Free e file state and federal taxes   You can deduct any costs of connecting or disconnecting utilities required because you are moving your household goods, appliances, or personal effects. Free e file state and federal taxes   You can deduct the cost of shipping your car and your household pets to your new home. Free e file state and federal taxes   You can deduct the cost of moving your household goods and personal effects from a place other than your former home. Free e file state and federal taxes Your deduction is limited to the amount it would have cost to move them from your former home. Free e file state and federal taxes Example. Free e file state and federal taxes Paul Brown has been living and working in North Carolina for the last 4 years. Free e file state and federal taxes Because he has been renting a small apartment, he stored some furniture at his parents' home in Georgia. Free e file state and federal taxes Paul got a job in Washington, DC. Free e file state and federal taxes It cost him $900 to move the furniture from his North Carolina apartment to Washington and $3,000 to move the stored furniture from Georgia to Washington. Free e file state and federal taxes It would have cost $1,800 to ship the stored furniture from North Carolina to Washington. Free e file state and federal taxes He can deduct only $1,800 of the $3,000 he paid. Free e file state and federal taxes The amount he can deduct for moving his furniture is $2,700 ($900 + $1,800). Free e file state and federal taxes You cannot deduct the cost of moving furniture you buy on the way to your new home. Free e file state and federal taxes   Storage expenses. Free e file state and federal taxes   You can include the cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the day your things are moved from your former home and before they are delivered to your new home. Free e file state and federal taxes Travel expenses. Free e file state and federal taxes   You can deduct the cost of transportation and lodging for yourself and members of your household while traveling from your former home to your new home. Free e file state and federal taxes This includes expenses for the day you arrive. Free e file state and federal taxes    The day of arrival is the day you secure lodging at the new place of residence, even if the lodging is on a temporary basis. Free e file state and federal taxes   You can include any lodging expenses you had in the area of your former home within one day after you could no longer live in your former home because your furniture had been moved. Free e file state and federal taxes   The members of your household do not have to travel together or at the same time. Free e file state and federal taxes However, you can only deduct expenses for one trip per person. Free e file state and federal taxes If you use your own car, see Travel by car, earlier. Free e file state and federal taxes Example. Free e file state and federal taxes   In February 2013, Josh and Robyn Black moved from Minneapolis to Washington, DC, where Josh was starting a new job. Free e file state and federal taxes Josh drove the family car to Washington, DC, a trip of 1,100 miles. Free e file state and federal taxes His expenses were $264. Free e file state and federal taxes 00 for mileage (1,100 miles x 24 cents per mile) plus $40 for tolls and $150 for lodging, for a total of $454. Free e file state and federal taxes 00. Free e file state and federal taxes One week later, Robyn flew from Minneapolis to Washington, DC. Free e file state and federal taxes Her only expense was her $400 plane ticket. Free e file state and federal taxes The Blacks' deduction is $854. Free e file state and federal taxes 00 (Josh's $454. Free e file state and federal taxes 00 + Robyn's $400). Free e file state and federal taxes Moves to Locations Outside the United States To deduct expenses for a move outside the United States, you must move to the area of a new place of work outside the United States and its possessions. Free e file state and federal taxes You must meet the requirements under Who Can Deduct Moving Expenses , earlier. Free e file state and federal taxes Deductible expenses. Free e file state and federal taxes   If your move is to a location outside the United States and its possessions, you can deduct the following expenses. Free e file state and federal taxes The cost of moving household goods and personal effects from your former home to your new home. Free e file state and federal taxes The cost of traveling (including lodging) from your former home to your new home. Free e file state and federal taxes The cost of moving household goods and personal effects to and from storage. Free e file state and federal taxes The cost of storing household goods and personal effects while you are at the new job location. Free e file state and federal taxes The first two items were explained earlier under Moves to Locations in the United States . Free e file state and federal taxes The last two items are discussed, later. Free e file state and federal taxes Moving goods and effects to and from storage. Free e file state and federal taxes   You can deduct the reasonable expenses of moving your personal effects to and from storage. Free e file state and federal taxes Storage expenses. Free e file state and federal taxes   You can deduct the reasonable expenses of storing your household goods and personal effects for all or part of the time the new job location remains your main job location. Free e file state and federal taxes Moving expenses allocable to excluded foreign income. Free e file state and federal taxes   If you live and work outside the United States, you may be able to exclude from income part or all of the income you earn in the foreign country. Free e file state and federal taxes You may also be able to claim a foreign housing exclusion or deduction. Free e file state and federal taxes If you claim the foreign earned income or foreign housing exclusion, you cannot deduct the part of your moving expenses that relates to the excluded income. Free e file state and federal taxes    Publication 54, Tax Guide for U. Free e file state and federal taxes S. Free e file state and federal taxes Citizens and Resident Aliens Abroad, explains how to figure the part of your moving expenses that relates to excluded income. Free e file state and federal taxes You can get the publication from most U. Free e file state and federal taxes S. Free e file state and federal taxes embassies and consulates, or see How To Get Tax Help at the end of this publication. Free e file state and federal taxes Nondeductible Expenses You cannot deduct the following items as moving expenses. Free e file state and federal taxes Any part of the purchase price of your new home. Free e file state and federal taxes Car tags. Free e file state and federal taxes Driver's license. Free e file state and federal taxes Expenses of buying or selling a home (including closing costs, mortgage fees, and points). Free e file state and federal taxes Expenses of entering into or breaking a lease. Free e file state and federal taxes Home improvements to help sell your home. Free e file state and federal taxes Loss on the sale of your home. Free e file state and federal taxes Losses from disposing of memberships in clubs. Free e file state and federal taxes Mortgage penalties. Free e file state and federal taxes Pre-move househunting expenses. Free e file state and federal taxes Real estate taxes. Free e file state and federal taxes Refitting of carpet and draperies. Free e file state and federal taxes Return trips to your former residence. Free e file state and federal taxes Security deposits (including any given up due to the move). Free e file state and federal taxes Storage charges except those incurred in transit and for foreign moves. Free e file state and federal taxes No double deduction. Free e file state and federal taxes   You cannot take a moving expense deduction and a business expense deduction for the same expenses. Free e file state and federal taxes You must decide if your expenses are deductible as moving expenses or as business expenses. Free e file state and federal taxes For example, expenses you have for travel, meals, and lodging while temporarily working at a place away from your regular place of work may be deductible as business expenses if you are considered away from home on business. Free e file state and federal taxes In most cases, your work at a single location is considered temporary if it is realistically expected to last (and does in fact last) for one year or less. Free e file state and federal taxes   See Publication 463, Travel, Entertainment, Gift, and Car Expenses, for information on deducting your business expenses. Free e file state and federal taxes Reimbursements This section explains how to report a reimbursement (including advances and allowances) on your tax return. Free e file state and federal taxes It covers reimbursements for any of your moving expenses discussed in this publication. Free e file state and federal taxes It also explains the types of reimbursements on which your employer must withhold income, social security, and Medicare taxes. Free e file state and federal taxes Types of Reimbursement Plans If you receive a reimbursement for your moving expenses, how you report this amount and your expenses depends on whether the reimbursement is paid to you under an accountable plan or a nonaccountable plan. Free e file state and federal taxes For a quick overview of how to report your reimbursement and moving expenses, see Table 2 in the section on How and When To Report, later. Free e file state and federal taxes Your employer should tell you what method of reimbursement is used and what records are required. Free e file state and federal taxes Accountable Plans To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules. Free e file state and federal taxes Your expenses must have a business connection – that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Free e file state and federal taxes Two examples of this are the reasonable expenses of moving your possessions from your former home to your new home, and traveling from your former home to your new home. Free e file state and federal taxes You must adequately account to your employer for these expenses within a reasonable period of time. Free e file state and federal taxes You must return any excess reimbursement or allowance within a reasonable period of time. Free e file state and federal taxes Adequate accounting. Free e file state and federal taxes   You adequately account for your moving expenses by giving your employer documentation of those expenses, such as a statement of expense, an account book, a diary, or a similar record in which you entered each expense at or near the time you had it. Free e file state and federal taxes Documentation includes receipts, canceled checks, and bills. Free e file state and federal taxes Reasonable period of time. Free e file state and federal taxes   What constitutes a “reasonable period of time” depends on the facts and circumstances of your situation. Free e file state and federal taxes However, regardless of the facts and circumstances, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. Free e file state and federal taxes You receive an advance within 30 days of the time you have an expense. Free e file state and federal taxes You adequately account for your expenses within 60 days after they were paid or incurred. Free e file state and federal taxes You return any excess reimbursement within 120 days after the expense was paid or incurred. Free e file state and federal taxes You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement. Free e file state and federal taxes Excess reimbursement. Free e file state and federal taxes   This includes any amount you are paid (including advances and allowances) that is more than the moving expenses that you adequately accounted for to your employer within a reasonable period of time. Free e file state and federal taxes Returning excess reimbursements. Free e file state and federal taxes   You must be required to return any excess reimbursement for your moving expenses to the person paying the reimbursement. Free e file state and federal taxes Excess reimbursement includes any amount for which you did not adequately account within a reasonable period of time. Free e file state and federal taxes For example, if you received an advance and you did not spend all the money on deductible moving expenses, or you do not have proof of all your expenses, you have an excess reimbursement. Free e file state and federal taxes You meet accountable plan rules. Free e file state and federal taxes   If for all reimbursements you meet the three rules for an accountable plan (listed earlier), your employer should not include any reimbursements of expenses in your income in box 1 of your Form W-2, Wage and Tax Statement. Free e file state and federal taxes Instead, your employer should include the reimbursements in box 12 of your Form W-2. Free e file state and federal taxes Example. Free e file state and federal taxes You lived in Boston and accepted a job in Atlanta. Free e file state and federal taxes Under an accountable plan, your employer reimbursed you for your actual traveling expenses from Boston to Atlanta and the cost of moving your furniture to Atlanta. Free e file state and federal taxes Your employer will include the reimbursement on your Form W-2, box 12, with Code P. Free e file state and federal taxes If your moving expenses are more than your reimbursement, you may be able to deduct your additional expenses (see How and When To Report, later). Free e file state and federal taxes You do not meet accountable plan rules. Free e file state and federal taxes   You may be reimbursed by your employer, but you may not meet all three rules for part of your expenses. Free e file state and federal taxes   If your deductible expenses are reimbursed under an otherwise accountable plan but you do not return, within a reasonable period, any reimbursement of expenses for which you did not adequately account, then only the amount for which you did adequately account is considered as paid under an accountable plan. Free e file state and federal taxes The remaining expenses are treated as having been reimbursed under a nonaccountable plan (discussed below). Free e file state and federal taxes Reimbursement of nondeductible expenses. Free e file state and federal taxes   You may be reimbursed by your employer for moving expenses, some of which are deductible expenses and some of which are not deductible. Free e file state and federal taxes The reimbursements you receive for the nondeductible expenses and any allowances for miscellaneous or unspecified expenses are treated as paid under a nonaccountable plan (see below) and are included in your income. Free e file state and federal taxes If you are reimbursed by your employer for the taxes you must pay (including social security and Medicare taxes) because you have received taxable moving expense reimbursements, you must pay tax on this reimbursement as well, and it is treated as paid under a nonaccountable plan. Free e file state and federal taxes Nonaccountable Plans A nonaccountable plan is a reimbursement arrangement that does not meet the three rules listed earlier under Accountable Plans. Free e file state and federal taxes In addition, the following payments will be treated as paid under a nonaccountable plan. Free e file state and federal taxes Excess reimbursements you fail to return to your employer. Free e file state and federal taxes Reimbursements of nondeductible expenses. Free e file state and federal taxes See Reimbursement of nondeductible expenses, earlier. Free e file state and federal taxes If an arrangement pays for your moving expenses by reducing your wages, salary, or other pay, the amount of the reduction will be treated as a payment made under a nonaccountable plan. Free e file state and federal taxes This is because you are entitled to receive the full amount of your pay regardless of whether you had any moving expenses. Free e file state and federal taxes If you are not sure if the moving expense reimbursement arrangement is an accountable or nonaccountable plan, ask your employer. Free e file state and federal taxes Your employer will add the amount of any reimbursement paid to you under a nonaccountable plan to your wages, salary, or other pay. Free e file state and federal taxes Your employer will report the total in box 1 of your Form W-2. Free e file state and federal taxes Example. Free e file state and federal taxes To get you to work in another city, your new employer reimburses you under an accountable plan for the $7,500 loss on the sale of your home. Free e file state and federal taxes Because this is a reimbursement of a nondeductible expense, it is treated as paid under a nonaccountable plan and must be included as income in box 1 of your Form W-2. Free e file state and federal taxes Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 Do not include in income any moving expense payment you received under the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970. Free e file state and federal taxes These payments are made to persons displaced from their homes, businesses, or farms by federal projects. Free e file state and federal taxes Tax Withholding and Estimated Tax Your employer must withhold income, social security, and Medicare taxes from reimbursements and allowances paid to you that are included in your income. Free e file state and federal taxes See Reimbursements included in income, later. Free e file state and federal taxes Reimbursements excluded from income. Free e file state and federal taxes   Your employer should not include in your wages reimbursements paid under an accountable plan (explained earlier) for moving expenses that you: Could deduct if you had paid or incurred them, and Did not deduct in an earlier year. Free e file state and federal taxes These reimbursements are fringe benefits excludable from your income as qualified moving expense reimbursements. Free e file state and federal taxes Your employer should report these reimbursements on your Form W-2, box 12, with Code P. Free e file state and federal taxes    You cannot claim a moving expense deduction for expenses covered by reimbursements excluded from income (see Accountable Plans under Types of Reimbursement Plans, earlier). Free e file state and federal taxes Expenses deducted in earlier year. Free e file state and federal taxes   If you receive a reimbursement this year for moving expenses deducted in an earlier year, and the reimbursement is not included as wages in box 1 of your Form W-2, you must include the reimbursement in income on Form 1040, line 21. Free e file state and federal taxes Your employer should show the amount of your reimbursement in box 12 of your Form W-2. Free e file state and federal taxes Reimbursements included in income. Free e file state and federal taxes   Your employer must include in your income any reimbursements made (or treated as made) under a nonaccountable plan, even though they are for deductible moving expenses. Free e file state and federal taxes See Nonaccountable Plans under Types of Reimbursement Plans, earlier. Free e file state and federal taxes Your employer also must include in your gross income as wages any reimbursements of, or payments for, nondeductible moving expenses. Free e file state and federal taxes This includes amounts your employer reimbursed you under an accountable plan (explained earlier) for meals, househunting trips, and real estate expenses. Free e file state and federal taxes It also includes reimbursements that exceed your deductible expenses and that you do not return to your employer. Free e file state and federal taxes Reimbursement for deductible and nondeductible expenses. Free e file state and federal taxes    If your employer reimburses you for both deductible and nondeductible moving expenses, your employer must determine the amount of the reimbursement that is not taxable and not subject to withholding. Free e file state and federal taxes Your employer must treat any remaining amount as taxable wages and withhold income, social security, and Medicare taxes. Free e file state and federal taxes Amount of income tax withheld. Free e file state and federal taxes   If the reimbursements or allowances you receive are taxable, the amount of income tax your employer will withhold depends on several factors. Free e file state and federal taxes It depends in part on whether income tax is withheld from your regular wages, on whether the reimbursements and allowances are added to your regular wages, and on any information you have given to your employer on Form W-4, Employee's Withholding Allowance Certificate. Free e file state and federal taxes   Your employer can treat your reimbursements as supplemental wages and not include the reimbursements and allowances in your regular wages. Free e file state and federal taxes The employer can withhold income tax on supplemental wages at a flat rate which may be different from your regular tax rate. Free e file state and federal taxes Estimated tax. Free e file state and federal taxes    If you must make estimated tax payments, you need to take into account any taxable reimbursements and deductible moving expenses in figuring your estimated tax. Free e file state and federal taxes For details about estimated taxes, see Publication 505, Tax Withholding and Estimated Tax. Free e file state and federal taxes How and When To Report This section explains how and when to report your moving expenses and any reimbursements or allowances you received for your move. Free e file state and federal taxes For a quick overview, see Table 2, later. Free e file state and federal taxes Form 3903 Use Form 3903 to figure your moving expense deduction. Free e file state and federal taxes Use a separate Form 3903 for each move for which you are deducting expenses. Free e file state and federal taxes Do not file Form 3903 if all of the following apply. Free e file state and federal taxes You moved to a location outside the United States in an earlier year. Free e file state and federal taxes You are claiming only storage fees while you were away from the United States. Free e file state and federal taxes Any amount your employer paid for the storage fees is included as wages in box 1 of your Form W-2. Free e file state and federal taxes Instead, enter the storage fees (after the reduction for the part that is allocable to excluded income) on Form 1040, line 26, and enter “Storage” on the dotted line next to the amount. Free e file state and federal taxes If you meet the special rules for members of the Armed Forces, see How to complete Form 3903 for members of the Armed Forces under Members of the Armed Forces, later. Free e file state and federal taxes Completing Form 3903. Free e file state and federal taxes   Complete Worksheet 1, earlier, or the Distance Test Worksheet in the instructions for Form 3903 to see whether you meet the distance test. Free e file state and federal taxes If so, complete lines 1 through 3 of the form using your actual expenses (except, if you use your own car, you can figure expenses based on the standard mileage rate, instead of actual amounts for gas and oil). Free e file state and federal taxes Enter on line 4 the total amount of your moving expense reimbursement that was excluded from your wages. Free e file state and federal taxes This excluded amount should be identified on Form W-2, box 12, with code P. Free e file state and federal taxes Expenses greater than reimbursement. Free e file state and federal taxes   If line 3 is more than line 4, subtract line 4 from line 3 and enter the result on line 5 and on Form 1040, line 26. Free e file state and federal taxes This is your moving expense deduction. Free e file state and federal taxes Expenses equal to or less than reimbursement. Free e file state and federal taxes    If line 3 is equal to or less than line 4, you have no moving expense deduction. Free e file state and federal taxes Subtract line 3 from line 4 and, if the result is more than zero, include it as income on Form 1040, line 7. Free e file state and federal taxes Table 2. Free e file state and federal taxes Reporting Your Moving Expenses and Reimbursements IF your Form W-2 shows. Free e file state and federal taxes . Free e file state and federal taxes . Free e file state and federal taxes AND you have. Free e file state and federal taxes . Free e file state and federal taxes . Free e file state and federal taxes THEN. Free e file state and federal taxes . Free e file state and federal taxes . Free e file state and federal taxes your reimbursement reported only  in box 12 with code P moving expenses greater than the  amount in box 12 file Form 3903 showing all allowable  expenses* and reimbursements. Free e file state and federal taxes your reimbursement reported only  in box 12 with code P moving expenses equal to the amount  in box 12 do not file Form 3903. Free e file state and federal taxes your reimbursement divided  between box 12 and box 1 moving expenses greater than the  amount in box 12 file Form 3903 showing all allowable  expenses,* but only the  reimbursements reported in box 12 of  Form W-2. Free e file state and federal taxes your entire reimbursement reported  as wages in box 1 moving expenses file Form 3903 showing all allowable  expenses,* but do not show any  reimbursements. Free e file state and federal taxes no reimbursement moving expenses file Form 3903 showing all allowable  expenses. Free e file state and federal taxes * * See Deductible Moving Expenses, earlier, for allowable expenses. Free e file state and federal taxes    Where to deduct. Free e file state and federal taxes   Deduct your moving expenses on Form 1040, line 26. Free e file state and federal taxes The amount of moving expenses you can deduct is shown on Form 3903, line 5. Free e file state and federal taxes    You cannot deduct moving expenses on Form 1040EZ or Form 1040A. Free e file state and federal taxes   When To Deduct Expenses You may have a choice of when to deduct your moving expenses. Free e file state and federal taxes Expenses not reimbursed. Free e file state and federal taxes   If you were not reimbursed, deduct your moving expenses in the year you paid or incurred the expenses. Free e file state and federal taxes Example. Free e file state and federal taxes In December 2012, your employer transferred you to another city in the United States, where you still work. Free e file state and federal taxes You are single and were not reimbursed for your moving expenses. Free e file state and federal taxes In 2012, you paid for moving your furniture and deducted these expenses on your 2012 tax return. Free e file state and federal taxes In January 2013, you paid for travel to the new city. Free e file state and federal taxes You can deduct these additional expenses on your 2013 tax return. Free e file state and federal taxes Expenses reimbursed. Free e file state and federal taxes   If you are reimbursed for your expenses and you use the cash method of accounting, you can deduct your expenses either in the year you paid them or in the year you received the reimbursement. Free e file state and federal taxes If you use the cash method of accounting, you can choose to deduct the expenses in the year you are reimbursed even though you paid the expenses in a different year. Free e file state and federal taxes See Choosing when to deduct, next. Free e file state and federal taxes   If you deduct your expenses and you receive the reimbursement in a later year, you must include the reimbursement in your income on Form 1040, line 21. Free e file state and federal taxes Choosing when to deduct. Free e file state and federal taxes   If you use the cash method of accounting, which is used by most individuals, you can choose to deduct moving expenses in the year your employer reimburses you if: You paid the expenses in a year before the year of reimbursement, or You paid the expenses in the year immediately after the year of reimbursement but by the due date, including extensions, for filing your return for the reimbursement year. Free e file state and federal taxes How to make the choice. Free e file state and federal taxes   You choose to deduct moving expenses in the year you received reimbursement by taking the deduction on your return, or amended return, for that year. Free e file state and federal taxes    You cannot deduct any moving expenses for which you received a reimbursement that was not included in your income. Free e file state and federal taxes Illustrated Example Tom and Peggy Smith are married and have two children. Free e file state and federal taxes They owned a home in Detroit where Tom worked. Free e file state and federal taxes On February 8, 2013, Tom's employer told him that he would be transferred to San Diego as of April 10 that year. Free e file state and federal taxes Peggy flew to San Diego on March 1 to look for a new home. Free e file state and federal taxes She put a down payment of $25,000 on a house being built and returned to Detroit on March 4. Free e file state and federal taxes The Smiths sold their Detroit home for $1,500 less than they paid for it. Free e file state and federal taxes They contracted to have their personal effects moved to San Diego on April 3. Free e file state and federal taxes The family drove to San Diego where they found that their new home was not finished. Free e file state and federal taxes They stayed in a nearby motel until the house was ready on May 1. Free e file state and federal taxes On April 10, Tom went to work in the San Diego plant where he still works. Free e file state and federal taxes Their records for the move show: 1) Peggy's pre-move househunting  trip:       Travel and lodging   $ 449       Meals   75   $ 524 2) Down payment on San Diego  home 25,000 3) Real estate commission paid on  sale of Detroit home 3,500 4) Loss on sale of Detroit home (not  including real estate commission) 1,500 5) Amount paid for moving personal  effects (furniture, other household  goods, etc. Free e file state and federal taxes ) 8,000 6) Expenses of driving to San Diego:       Mileage (Start 14,278;  End 16,478) 2,200 miles at 24 cents a mile   $ 528       Lodging   180       Meals   320   1,028 7) Cost of temporary living  expenses in San Diego:       Motel rooms   $1,450       Meals   2,280   3,730 Total $43,282   Tom was reimbursed $10,907 under an accountable plan. Free e file state and federal taxes His employer gave him the following breakdown of the reimbursement that was allowed under the employer's plan. Free e file state and federal taxes Moving personal effects   $6,800 Travel (and lodging) to San Diego   708 Travel (and lodging) for househunting trip   449 Lodging for temporary quarters   1,450 Loss on sale of home   1,500 Total reimbursement   $10,907 The employer included this reimbursement on Tom's Form W-2 for the year. Free e file state and federal taxes The reimbursement of allowable expenses, $7,508 for moving household goods and travel to San Diego, was included in box 12 of Form W-2. Free e file state and federal taxes His employer identified this amount with code P. Free e file state and federal taxes The employer included the balance, $3,399 reimbursement of nonallowable expenses, in box 1 of Form W-2 with Tom's other wages. Free e file state and federal taxes Tom must include this amount on Form 1040, line 7. Free e file state and federal taxes The employer withholds taxes from the $3,399, as discussed under Reimbursement for deductible and nondeductible expenses under Tax Withholding and Estimated Tax, earlier. Free e file state and federal taxes Also, Tom's employer could have given him a separate Form W-2 for his moving expense reimbursement. Free e file state and federal taxes To figure his tax deduction for moving expenses, Tom enters the following amounts on Form 3903. Free e file state and federal taxes Item 5 — moving personal effects (line 1)   $8,000 Item 6 — driving to San Diego ($528 + $180)  (line 2)   708 Total tax deductible moving expenses (line 3)   $8,708 Minus: Reimbursement included in box 12  of Form W-2 (line 4)   7,508 Tax deduction for moving expenses (line 5)   $1,200   Tom's Form 3903 is shown, later. Free e file state and federal taxes He also enters his deduction, $1,200, on Form 1040, line 26. Free e file state and federal taxes Nondeductible expenses. Free e file state and federal taxes   Of the $43,282 expenses that Tom and Peggy incurred, the following items totaling $34,574 ($43,282 – $8,708) cannot be deducted. Free e file state and federal taxes Item 1 — pre-move househunting expenses of $524. Free e file state and federal taxes Item 2 — the $25,000 down payment on the San Diego home. Free e file state and federal taxes If any part of it were for payment of deductible taxes or interest on the mortgage on the house, that part would be deductible as an itemized deduction. Free e file state and federal taxes Item 3 — the $3,500 real estate commission paid on the sale of the Detroit home. Free e file state and federal taxes The commission is used to figure the gain or loss on the sale. Free e file state and federal taxes Item 4 — the $1,500 loss on the sale of the Detroit home. Free e file state and federal taxes Item 6 — the $320 expense for meals while driving to San Diego. Free e file state and federal taxes (However, the lodging and car expenses are deductible. Free e file state and federal taxes ) Item 7 — temporary living expenses of $3,730. Free e file state and federal taxes    This image is too large to be displayed in the current screen. Free e file state and federal taxes Please click the link to view the image. Free e file state and federal taxes 2012 Form 3903 Moving Expenses Members of the Armed Forces If you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you do not have to meet the distance and time tests, discussed earlier. Free e file state and federal taxes You can deduct your unreimbursed moving expenses. Free e file state and federal taxes A permanent change of station includes: A move from your home to your first post of active duty, A move from one permanent post of duty to another, and A move from your last post of duty to your home or to a nearer point in the United States. Free e file state and federal taxes The move must occur within one year of ending your active duty or within the period allowed under the Joint Travel Regulations. Free e file state and federal taxes Spouse and dependents. Free e file state and federal taxes   If a member of the Armed Forces dies, is imprisoned, or deserts, a permanent change of station for the spouse or dependent includes a move to: The place of enlistment, The member's, spouse's, or dependent's home of record, or A nearer point in the United States. Free e file state and federal taxes   If the military moves you, your spouse, and dependents, to or from separate locations, the moves are treated as a single move to your new main job location. Free e file state and federal taxes Services or reimbursements provided by government. Free e file state and federal taxes   Do not include in income the value of moving and storage services provided by the government because of a permanent change of station. Free e file state and federal taxes In general, if the total reimbursements or allowances you receive from the government because of the move are more than your actual moving expenses, the government must include the excess in your wages on Form W-2. Free e file state and federal taxes However, the excess portion of a dislocation allowance, a temporary lodging allowance, a temporary lodging expense, or a move-in housing allowance is not included in income and should not be included in box 1 of Form W-2. Free e file state and federal taxes   If your reimbursements or allowances are less than your actual moving expenses, do not include the reimbursements or allowances in income. Free e file state and federal taxes You can deduct the expenses that are more than your reimbursements. Free e file state and federal taxes See Deductible Moving Expenses, earlier. Free e file state and federal taxes How to complete Form 3903 for members of the Armed Forces. Free e file state and federal taxes    Take the following steps. Free e file state and federal taxes Complete lines 1 through 3 of the form, using your actual expenses. Free e file state and federal taxes Do not include any expenses for moving services provided by the government. Free e file state and federal taxes Also, do not include any expenses that were reimbursed by an allowance you do not have to include in your income. Free e file state and federal taxes Enter on line 4 the total reimbursements and allowances you received from the government for the expenses claimed on lines 1 and 2. Free e file state and federal taxes Do not include the value of moving or storage services provided by the government. Free e file state and federal taxes Also, do not include any part of a dislocation allowance, a temporary lodging allowance, a temporary lodging expense, or a move-in housing allowance. Free e file state and federal taxes Complete line 5. Free e file state and federal taxes If line 3 is more than line 4, subtract line 4 from line 3 and enter the result on line 5 and on Form 1040, line 26. Free e file state and federal taxes This is your moving expense deduction. Free e file state and federal taxes If line 3 is equal to or less than line 4, you do not have a moving expense deduction. Free e file state and federal taxes Subtract line 3 from line 4 and, if the result is more than zero, enter it on Form 1040, line 7. Free e file state and federal taxes If the military moves you, your spouse and dependents, to or from different locations, treat these moves as a single move. Free e file state and federal taxes    Do not deduct any expenses for moving or storage services provided by the government. Free e file state and federal taxes How To Get Tax Help Go online, use a smart phone, call or walk in to an office near you. Free e file state and federal taxes Whether it's help with a tax issue, preparing your tax return or picking up a free publication or form, get the help you need the way you want it. Free e file state and federal taxes Free help with your tax return. Free e file state and federal taxes   Free help in preparing your return is available nationwide from IRS-certified volunteers. Free e file state and federal taxes The Volunteer Income Tax Assistance (VITA) program is designed to help low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers. Free e file state and federal taxes The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Free e file state and federal taxes Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Free e file state and federal taxes Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. Free e file state and federal taxes To find the nearest VITA or TCE site, visit IRS. Free e file state and federal taxes gov or call 1-800-906-9887. Free e file state and federal taxes   As part of the TCE program, AARP offers the Tax-Aide counseling program. Free e file state and federal taxes To find the nearest AARP Tax-Aide site, visit AARP's website at www. Free e file state and federal taxes aarp. Free e file state and federal taxes org/money/taxaide or call 1-888-227-7669. Free e file state and federal taxes   For more information on these programs, go to IRS. Free e file state and federal taxes gov and enter “VITA” in the search box. Free e file state and federal taxes Internet. Free e file state and federal taxes IRS. Free e file state and federal taxes gov and IRS2Go are ready when you are — every day, every night, 24 hours a day, 7 days a week. Free e file state and federal taxes Apply for an Employer Identification Number (EIN). Free e file state and federal taxes Go to IRS. Free e file state and federal taxes gov and enter Apply for an EIN in the search box. Free e file state and federal taxes Request an Electronic Filing PIN by going to IRS. Free e file state and federal taxes gov and entering Electronic Filing PIN in the search box. Free e file state and federal taxes Check the status of your 2013 refund with Where's My Refund? Go to IRS. Free e file state and federal taxes gov or the IRS2Go app, and click on Where's My Refund? You'll get a personalized refund date as soon as the IRS processes your tax return and approves your refund. Free e file state and federal taxes If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Free e file state and federal taxes Check the status of your amended return. Free e file state and federal taxes Go to IRS. Free e file state and federal taxes gov and enter Where's My Amended Return in the search box. Free e file state and federal taxes Download forms, instructions, and publications, including some accessible versions. Free e file state and federal taxes Order free transcripts of your tax returns or tax account using the Order a Transcript tool on IRS. Free e file state and federal taxes gov or IRS2Go. Free e file state and federal taxes Tax return and tax account transcripts are generally available for the current year and past three years. Free e file state and federal taxes Figure your income tax withholding with the IRS Withholding Calculator on IRS. Free e file state and federal taxes gov. Free e file state and federal taxes Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Free e file state and federal taxes Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Free e file state and federal taxes gov. Free e file state and federal taxes Locate the nearest Taxpayer Assistance Center using the Office Locator tool on IRS. Free e file state and federal taxes gov or IRS2Go. Free e file state and federal taxes Stop by most business days for face-to-face tax help, no appointment necessary — just walk in. Free e file state and federal taxes An employee can explain IRS letters, request adjustments to your tax account or help you set up a payment plan. Free e file state and federal taxes Before you visit, check the Office Locator for the address, phone number, hours of operation and the services provided. Free e file state and federal taxes If you have an ongoing tax account problem or a special need, such as a disability, you can request an appointment. Free e file state and federal taxes Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Free e file state and federal taxes Locate the nearest volunteer help site with the VITA Locator Tool on IRS. Free e file state and federal taxes gov. Free e file state and federal taxes Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Free e file state and federal taxes The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. Free e file state and federal taxes Most VITA and TCE sites offer free electronic filing and some provide IRS-certified volunteers who can help prepare your tax return. Free e file state and federal taxes AARP offers the Tax-Aide counseling program as part of the TCE program. Free e file state and federal taxes Visit AARP's website to find the nearest Tax-Aide location. Free e file state and federal taxes Research your tax questions. Free e file state and federal taxes Search publications and instructions by topic or keyword. Free e file state and federal taxes Read the Internal Revenue Code, regulations, or other official guidance. Free e file state and federal taxes Read Internal Revenue Bulletins. Free e file state and federal taxes Sign up to receive local and national tax news by email. Free e file state and federal taxes Phone. Free e file state and federal taxes You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Free e file state and federal taxes Download the free IRS2Go mobile app from the iTunes app store or from Google Play. Free e file state and federal taxes Use it to watch the IRS YouTube channel, get IRS news as soon as it's released to the public, order transcripts of your tax returns or tax account, check your refund status, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Free e file state and federal taxes Call to locate the nearest volunteer help site, 1-800-906-9887. Free e file state and federal taxes Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Free e file state and federal taxes The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. Free e file state and federal taxes Most VITA and TCE sites offer free electronic filing. Free e file state and federal taxes Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Free e file state and federal taxes Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Free e file state and federal taxes Call to check the status of your 2013 refund, 1-800-829-1954 or 1-800-829-4477. Free e file state and federal taxes The automated Where's My Refund? information is available 24 hours a day, 7 days a week. Free e file state and federal taxes If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Free e file state and federal taxes Before you call, have your 2013 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Free e file state and federal taxes Where's My Refund? can give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. Free e file state and federal taxes Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. Free e file state and federal taxes Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. Free e file state and federal taxes Call to order forms, instructions and publications, 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions and publications, and prior-year forms and instructions (limited to 5 years). Free e file state and federal taxes You should receive your order within 10 business days. Free e file state and federal taxes Call to order transcripts of your tax returns or tax account, 1-800-908-9946. Free e file state and federal taxes Follow the prompts to provide your Social Security Number or Individual Taxpayer Identification Number, date of birth, street address and ZIP code. Free e file state and federal taxes Call for TeleTax topics, 1-800-829-4477, to listen to pre-recorded messages covering various tax topics. Free e file state and federal taxes Call to ask tax questions, 1-800-829-1040. Free e file state and federal taxes Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Free e file state and federal taxes The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Free e file state and federal taxes These individuals can also contact the IRS through relay services such as the Federal Relay Service available at www. Free e file state and federal taxes gsa. Free e file state and federal taxes gov/fedrelay. Free e file state and federal taxes Walk-in. Free e file state and federal taxes You can find a selection of forms, publications and services — in-person, face-to-face. Free e file state and federal taxes Products. Free e file state and federal taxes You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Free e file state and federal taxes Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Free e file state and federal taxes Services. Free e file state and federal taxes You can walk in to your local TAC most business days for personal, face-to-face tax help. Free e file state and federal taxes An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Free e file state and federal taxes If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local TAC where you can talk with an IRS representative face-to-face. Free e file state and federal taxes No appointment is necessary—just walk in. Free e file state and federal taxes Before visiting, check www. Free e file state and federal taxes irs. Free e file state and federal taxes gov/localcontacts for hours of operation and services provided. Free e file state and federal taxes Mail. Free e file state and federal taxes You can send your order for forms, instructions, and publications to the address below. Free e file state and federal taxes You should receive a response within 10 business days after your request is received. Free e file state and federal taxes  Internal Revenue Service 1201 N. Free e file state and federal taxes Mitsubishi Motorway Bloomington, IL 61705-6613 The Taxpayer Advocate Service Is Here to Help You. Free e file state and federal taxes   The Taxpayer Advocate Service (TAS) is your voice at the IRS. Free e file state and federal taxes Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Free e file state and federal taxes What can TAS do for you?   We can offer you free help with IRS problems that you can't resolve on your own. Free e file state and federal taxes We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. Free e file state and federal taxes You face (or your business is facing) an immediate threat of adverse action. Free e file state and federal taxes You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Free e file state and federal taxes   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. Free e file state and federal taxes Here's why we can help: TAS is an independent organization within the IRS. Free e file state and federal taxes Our advocates know how to work with the IRS. Free e file state and federal taxes Our services are free and tailored to meet your needs. Free e file state and federal taxes We have offices in every state, the District of Columbia, and Puerto Rico. Free e file state and federal taxes How can you reach us?   If you think TAS can help you, call your local advocate, whose number is in your local directory and at www. Free e file state and federal taxes irs. Free e file state and federal taxes gov/advocate, or call us toll-free at 1-877-777-4778. Free e file state and federal taxes How else does TAS help taxpayers?   TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Free e file state and federal taxes If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. Free e file state and federal taxes irs. Free e file state and federal taxes gov/sams. Free e file state and federal taxes Low Income Taxpayer Clinics. Free e file state and federal taxes   Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. Free e file state and federal taxes Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Free e file state and federal taxes Visit www. Free e file state and federal taxes TaxpayerAdvocate. Free e file state and federal taxes irs. Free e file state and federal taxes gov or see IRS Publication 4134, Low Income Taxpayer Clinic List. Free e file state and federal taxes Prev  Up  Next   Home   More Online Publications
 
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Taxpayer Assistance Center Locations Where In-Person Document Review is Provided

Alabama

Birmingham 

Dothan 

Mobile 

Montgomery

 

Alaska

Anchorage

 

Arizona

Glendale

Mesa

Phoenix-Central

Tucson 

 

Arkansas

Fayetteville 

Little Rock

 

California

Bakersfield

Camarillo

El Centro 

El Monte

Fresno

Long Beach

Los Angeles

Modesto 

Oakland

Sacramento

Salinas

San Bernardino

San Diego

San Francisco

San Jose

San Marcos

Santa Ana

Santa Rosa

Stockton

Van Nuys

Walnut Creek

 

Colorado

Colorado Springs 

Denver

 

Connecticut

Bridgeport

Danbury 

Hartford 

New Haven 

New London 

 

Delaware

Dover 

Wilmington 

 

District of Columbia

Washington

 

Florida

Fort Myers

Jacksonville 

Maitland 

Miami

Ocala 

Pensacola

Plantation

Saint Petersburg

Sarasota

Tampa

West Palm Beach

 

Georgia

Albany 

Atlanta- Koger

Atlanta-Smyrna

Atlanta-Summit

Augusta 

Columbus 

Macon

Savannah  

 

Hawaii

Honolulu 

 

Idaho

Boise 

 

Illinois

Chicago

Downers Grove

Orland Park

Schiller Park

Springfield 

 

Indiana

Evansville 

Ft. Wayne 

Indianapolis

Merrillville 

South Bend 

 

Iowa

Des Moines 

 

Kansas

Overland Park 

Wichita 

 

Kentucky

Lexington 

Louisville 

 

Louisiana

Baton Rouge 

New Orleans 

Shreveport

 

Maine

Augusta

South Portland

 

Maryland

Baltimore

Salisbury 

Wheaton

 

Massachusetts

Boston

Brockton

Springfield

 

Michigan

Detroit 

Flint 

Grand Rapids 

 

Minnesota

Bloomington

Minneapolis

Saint Paul

 

Mississippi

Jackson 

 

Missouri

Earth City 

Kansas City 

Springfield

St. Louis 

 

Nebraska

Omaha 

 

Nevada

Las Vegas

Reno 

 

New Hampshire

Portsmouth 

 

New Jersey

Cherry Hill

Edison

Mountainside

Newark

Paramus

Parsippany

Paterson

Trenton

 

New Mexico

Albuquerque 

 

New York

Albany 

Bethpage (Garden City)

Bronx

Brooklyn

Buffalo 

Hauppauge

New York- Broadway

New York- Midtown

New York- Harlem

Rego Park/Queens/Corona

Rochester

White Plains

 

North Carolina

Charlotte

Durham

Fayetteville

Greensboro 

Raleigh

Wilmington

 

North Dakota

Fargo 

 

Ohio

Akron 

Cincinnati 

Cleveland 

Columbus 

Dayton

 

Oklahoma

Oklahoma City 

Tulsa 

 

Oregon

Eugene 

Portland

Salem 

 

Pennsylvania

Bethlehem 

Erie 

Philadelphia 

Pittsburgh

Scranton 

 

Puerto Rico

Guaynabo 

 

Rhode Island

Providence

 

South Carolina

Charleston 

Columbia 

Greenville

 

South Dakota

Sioux Falls 

 

Tennessee

Chattanooga 

Knoxville

Memphis 

Nashville

 

Texas

Amarillo

Austin

Corpus Christi

Dallas

El Paso

Farmers Branch

Harlingen

Fort Worth

Houston-Downtown

Houston-Northwest

Houston-Southeast

Houston-Southwest

Lubbock

San Antonio 

 

Utah

Salt Lake City

 

Vermont

Burlington

 

Virginia

Baileys Crossroads

Hampton 

Norfolk 

Richmond

Roanoke 

 

Washington

Bellevue 

Everett 

Olympia 

Seattle 

Spokane 

Tacoma

Vancouver 

 

West Virginia

Charleston 

Parkersburg

 

Wisconsin

Milwaukee

 

For complete addresses and more information about services provided, return to Contact Your Local IRS Office and click services provided under your preferred location.

Page Last Reviewed or Updated: 28-Mar-2014

The Free E File State And Federal Taxes

Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. Free e file state and federal taxes Even then, the deductible amount of these types of expenses may be limited. Free e file state and federal taxes Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. Free e file state and federal taxes 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). Free e file state and federal taxes Additional tests for employee use. Free e file state and federal taxes   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. Free e file state and federal taxes 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. Free e file state and federal taxes If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. Free e file state and federal taxes Exclusive Use To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Free e file state and federal taxes The area used for business can be a room or other separately identifiable space. Free e file state and federal taxes The space does not need to be marked off by a permanent partition. Free e file state and federal taxes 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. Free e file state and federal taxes Example. Free e file state and federal taxes You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. Free e file state and federal taxes Your family also uses the den for recreation. Free e file state and federal taxes The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. Free e file state and federal taxes Exceptions to Exclusive Use You do not have to meet the exclusive use test if either of the following applies. Free e file state and federal taxes You use part of your home for the storage of inventory or product samples (discussed next). Free e file state and federal taxes You use part of your home as a daycare facility, discussed later under Daycare Facility . Free e file state and federal taxes Note. Free e file state and federal taxes With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. Free e file state and federal taxes Storage of inventory or product samples. Free e file state and federal taxes    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. Free e file state and federal taxes However, you must meet all the following tests. Free e file state and federal taxes You sell products at wholesale or retail as your trade or business. Free e file state and federal taxes You keep the inventory or product samples in your home for use in your trade or business. Free e file state and federal taxes Your home is the only fixed location of your trade or business. Free e file state and federal taxes You use the storage space on a regular basis. Free e file state and federal taxes The space you use is a separately identifiable space suitable for storage. Free e file state and federal taxes Example. Free e file state and federal taxes Your home is the only fixed location of your business of selling mechanics' tools at retail. Free e file state and federal taxes You regularly use half of your basement for storage of inventory and product samples. Free e file state and federal taxes You sometimes use the area for personal purposes. Free e file state and federal taxes The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. Free e file state and federal taxes Regular Use To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. Free e file state and federal taxes Incidental or occasional business use is not regular use. Free e file state and federal taxes You must consider all facts and circumstances in determining whether your use is on a regular basis. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes Example. Free e file state and federal taxes 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. Free e file state and federal taxes You do not make investments as a broker or dealer. Free e file state and federal taxes So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. Free e file state and federal taxes Principal Place of Business You can have more than one business location, including your home, for a single trade or business. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes Your home office will qualify as your principal place of business if you meet the following requirements. Free e file state and federal taxes You use it exclusively and regularly for administrative or management activities of your trade or business. Free e file state and federal taxes You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Free e file state and federal taxes If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Free e file state and federal taxes 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. Free e file state and federal taxes Administrative or management activities. Free e file state and federal taxes   There are many activities that are administrative or managerial in nature. Free e file state and federal taxes The following are a few examples. Free e file state and federal taxes Billing customers, clients, or patients. Free e file state and federal taxes Keeping books and records. Free e file state and federal taxes Ordering supplies. Free e file state and federal taxes Setting up appointments. Free e file state and federal taxes Forwarding orders or writing reports. Free e file state and federal taxes Administrative or management activities performed at other locations. Free e file state and federal taxes   The following activities performed by you or others will not disqualify your home office from being your principal place of business. Free e file state and federal taxes You have others conduct your administrative or management activities at locations other than your home. Free e file state and federal taxes (For example, another company does your billing from its place of business. Free e file state and federal taxes ) 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. Free e file state and federal taxes You occasionally conduct minimal administrative or management activities at a fixed location outside your home. Free e file state and federal taxes You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. Free e file state and federal taxes (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home. Free e file state and federal taxes ) You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. Free e file state and federal taxes Please click here for the text description of the image. Free e file state and federal taxes Can you deduct business use of the home expenses? Example 1. Free e file state and federal taxes John is a self-employed plumber. Free e file state and federal taxes Most of John's time is spent at customers' homes and offices installing and repairing plumbing. Free e file state and federal taxes 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. Free e file state and federal taxes John writes up estimates and records of work completed at his customers' premises. Free e file state and federal taxes He does not conduct any substantial administrative or management activities at any fixed location other than his home office. Free e file state and federal taxes John does not do his own billing. Free e file state and federal taxes He uses a local bookkeeping service to bill his customers. Free e file state and federal taxes John's home office qualifies as his principal place of business for deducting expenses for its use. Free e file state and federal taxes 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. Free e file state and federal taxes His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. Free e file state and federal taxes 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. Free e file state and federal taxes Example 2. Free e file state and federal taxes Pamela is a self-employed sales representative for several different product lines. Free e file state and federal taxes 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. Free e file state and federal taxes She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. Free e file state and federal taxes Pamela's business is selling products to customers at various locations throughout her territory. Free e file state and federal taxes To make these sales, she regularly visits customers to explain the available products and take orders. Free e file state and federal taxes Pamela's home office qualifies as her principal place of business for deducting expenses for its use. Free e file state and federal taxes She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes Example 3. Free e file state and federal taxes Paul is a self-employed anesthesiologist. Free e file state and federal taxes He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. Free e file state and federal taxes One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. Free e file state and federal taxes Paul very rarely uses the office the hospital provides. Free e file state and federal taxes He uses a room in his home that he has converted to an office. Free e file state and federal taxes He uses this room exclusively and regularly to conduct all the following activities. Free e file state and federal taxes Contacting patients, surgeons, and hospitals regarding scheduling. Free e file state and federal taxes Preparing for treatments and presentations. Free e file state and federal taxes Maintaining billing records and patient logs. Free e file state and federal taxes Satisfying continuing medical education requirements. Free e file state and federal taxes Reading medical journals and books. Free e file state and federal taxes Paul's home office qualifies as his principal place of business for deducting expenses for its use. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes Example 4. Free e file state and federal taxes Kathleen is employed as a teacher. Free e file state and federal taxes She is required to teach and meet with students at the school and to grade papers and tests. Free e file state and federal taxes 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. Free e file state and federal taxes The school does not require her to work at home. Free e file state and federal taxes Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. Free e file state and federal taxes She uses this home office exclusively and regularly for the administrative duties of her teaching job. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes More Than One Trade or Business The same home office can be the principal place of business for two or more separate business activities. Free e file state and federal taxes 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. Free e file state and federal taxes You must use the home office exclusively and regularly for one or more of the following purposes. Free e file state and federal taxes As the principal place of business for one or more of your trades or businesses. Free e file state and federal taxes 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. Free e file state and federal taxes If your home office is a separate structure, in connection with one or more of your trades or businesses. Free e file state and federal taxes You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i. Free e file state and federal taxes e. Free e file state and federal taxes , personal) activities. Free e file state and federal taxes If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. Free e file state and federal taxes See Rental to employer , later, if you rent part of your home to your employer. Free e file state and federal taxes Example. Free e file state and federal taxes Tracy White is employed as a teacher. Free e file state and federal taxes Her principal place of work is the school, which provides her office space to do her school work. Free e file state and federal taxes She also has a mail order jewelry business. Free e file state and federal taxes All her work in the jewelry business is done in her home office and the office is used exclusively for that business. Free e file state and federal taxes If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. Free e file state and federal taxes 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. Free e file state and federal taxes As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes You physically meet with patients, clients, or customers on your premises. Free e file state and federal taxes Their use of your home is substantial and integral to the conduct of your business. Free e file state and federal taxes Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. Free e file state and federal taxes Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. Free e file state and federal taxes 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. Free e file state and federal taxes Example. Free e file state and federal taxes June Quill, a self-employed attorney, works 3 days a week in her city office. Free e file state and federal taxes She works 2 days a week in her home office used only for business. Free e file state and federal taxes She regularly meets clients there. Free e file state and federal taxes Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. Free e file state and federal taxes 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. Free e file state and federal taxes The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. Free e file state and federal taxes Example. Free e file state and federal taxes John Berry operates a floral shop in town. Free e file state and federal taxes He grows the plants for his shop in a greenhouse behind his home. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes Electing to use the simplified method. Free e file state and federal taxes   The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Free e file state and federal taxes You choose whether or not to figure your deduction using the simplified method each taxable year. Free e file state and federal taxes See Using the Simplified Method , later. Free e file state and federal taxes Rental to employer. Free e file state and federal taxes   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. Free e file state and federal taxes You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes You will also need to figure the percentage of your home used for business and the limit on the deduction. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes Part-year use. Free e file state and federal taxes   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. Free e file state and federal taxes 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. Free e file state and federal taxes Expenses related to tax-exempt income. Free e file state and federal taxes   Generally, you cannot deduct expenses that are related to tax-exempt allowances. Free e file state and federal taxes 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. Free e file state and federal taxes No deduction is allowed for other expenses related to the tax-exempt allowance. Free e file state and federal taxes   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. Free e file state and federal taxes Actual Expenses You must divide the expenses of operating your home between personal and business use. Free e file state and federal taxes The part of a home operating expense you can use to figure your deduction depends on both of the following. Free e file state and federal taxes Whether the expense is direct, indirect, or unrelated. Free e file state and federal taxes The percentage of your home used for business. Free e file state and federal taxes Table 1, next, describes the types of expenses you may have and the extent to which they are deductible. Free e file state and federal taxes Table 1. Free e file state and federal taxes Types of Expenses  Expense  Description  Deductibility Direct Expenses only for  the business part  of your home. Free e file state and federal taxes Deductible in full. Free e file state and federal taxes *   Examples:  Painting or repairs  only in the area  used for business. Free e file state and federal taxes Exception: May be only partially  deductible in a daycare facility. Free e file state and federal taxes See Daycare Facility , later. Free e file state and federal taxes Indirect Expenses for  keeping up and running your  entire home. Free e file state and federal taxes Deductible based on the percentage of your home used for business. Free e file state and federal taxes *   Examples:  Insurance, utilities, and  general repairs. Free e file state and federal taxes   Unrelated Expenses only for  the parts of your  home not used  for business. Free e file state and federal taxes Not deductible. Free e file state and federal taxes   Examples:  Lawn care or painting  a room not used  for business. Free e file state and federal taxes   *Subject to the deduction limit, discussed later. Free e file state and federal taxes Form 8829 and the Worksheet To Figure the Deduction for Business Use of Your Home have separate columns for direct and indirect expenses. Free e file state and federal taxes Certain expenses are deductible whether or not you use your home for business. Free e file state and federal taxes 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. Free e file state and federal taxes These expenses include the following. Free e file state and federal taxes Real estate taxes. Free e file state and federal taxes Qualified mortgage insurance premiums. Free e file state and federal taxes Deductible mortgage interest. Free e file state and federal taxes Casualty losses. Free e file state and federal taxes Other expenses are deductible only if you use your home for business. Free e file state and federal taxes You can use the business percentage of these expenses to figure your total business use of the home deduction. Free e file state and federal taxes These expenses generally include (but are not limited to) the following. Free e file state and federal taxes Depreciation (covered under Depreciating Your Home , later). Free e file state and federal taxes Insurance. Free e file state and federal taxes Rent paid for the use of property you do not own but use in your trade or business. Free e file state and federal taxes Repairs. Free e file state and federal taxes Security system. Free e file state and federal taxes Utilities and services. Free e file state and federal taxes Real estate taxes. Free e file state and federal taxes   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. Free e file state and federal taxes   For more information on the deduction for real estate taxes, see Publication 530, Tax Information for Homeowners. Free e file state and federal taxes Deductible mortgage interest. Free e file state and federal taxes   To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. Free e file state and federal taxes You can include interest on a second mortgage in this computation. Free e file state and federal taxes 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. Free e file state and federal taxes For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction. Free e file state and federal taxes Qualified mortgage insurance premiums. Free e file state and federal taxes   To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. Free e file state and federal taxes You can include premiums for insurance on a second mortgage in this computation. Free e file state and federal taxes 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. Free e file state and federal taxes For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040). Free e file state and federal taxes Casualty losses. Free e file state and federal taxes    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. Free e file state and federal taxes A direct expense is the loss on the portion of the property you use only in your business. Free e file state and federal taxes Use the entire loss to figure the business use of the home deduction. Free e file state and federal taxes An indirect expense is the loss on property you use for both business and personal purposes. Free e file state and federal taxes Use only the business portion to figure the deduction. Free e file state and federal taxes An unrelated expense is the loss on property you do not use in your business. Free e file state and federal taxes Do not use any of the loss to figure the deduction. Free e file state and federal taxes Example. Free e file state and federal taxes You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. Free e file state and federal taxes A storm damages your roof. Free e file state and federal taxes 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. Free e file state and federal taxes You would complete Form 4684, Casualties and Thefts, to report your loss. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes Forms and worksheets to use. Free e file state and federal taxes   If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. Free e file state and federal taxes 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. Free e file state and federal taxes You will also need to get Form 4684. Free e file state and federal taxes More information. Free e file state and federal taxes   For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts. Free e file state and federal taxes Insurance. Free e file state and federal taxes   You can deduct the cost of insurance that covers the business part of your home. Free e file state and federal taxes 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. Free e file state and federal taxes You can deduct the business percentage of the part that applies to the following year in that year. Free e file state and federal taxes Rent. Free e file state and federal taxes   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. Free e file state and federal taxes To figure your deduction, multiply your rent payments by the percentage of your home used for business. Free e file state and federal taxes   If you own your home, you cannot deduct the fair rental value of your home. Free e file state and federal taxes However, see Depreciating Your Home , later. Free e file state and federal taxes Repairs. Free e file state and federal taxes   The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. Free e file state and federal taxes For example, a furnace repair benefits the entire home. Free e file state and federal taxes If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. Free e file state and federal taxes   Repairs keep your home in good working order over its useful life. Free e file state and federal taxes Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. Free e file state and federal taxes However, repairs are sometimes treated as a permanent improvement and are not deductible. Free e file state and federal taxes See Permanent improvements , later, under Depreciating Your Home. Free e file state and federal taxes Security system. Free e file state and federal taxes   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. Free e file state and federal taxes 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. Free e file state and federal taxes Utilities and services. Free e file state and federal taxes   Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. Free e file state and federal taxes However, if you use part of your home for business, you can deduct the business part of these expenses. Free e file state and federal taxes Generally, the business percentage for utilities is the same as the percentage of your home used for business. Free e file state and federal taxes Telephone. Free e file state and federal taxes   The basic local telephone service charge, including taxes, for the first telephone line into your home (i. Free e file state and federal taxes e. Free e file state and federal taxes , landline) is a nondeductible personal expense. Free e file state and federal taxes 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. Free e file state and federal taxes Do not include these expenses as a cost of using your home for business. Free e file state and federal taxes Deduct these charges separately on the appropriate form or schedule. Free e file state and federal taxes 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). Free e file state and federal taxes Depreciating Your Home If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. Free e file state and federal taxes Depreciation is an allowance for the wear and tear on the part of your home used for business. Free e file state and federal taxes You cannot depreciate the cost or value of the land. Free e file state and federal taxes You recover its cost when you sell or otherwise dispose of the property. Free e file state and federal taxes Before you figure your depreciation deduction, you need to know the following information. Free e file state and federal taxes The month and year you started using your home for business. Free e file state and federal taxes The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. Free e file state and federal taxes The cost of any improvements before and after you began using the property for business. Free e file state and federal taxes The percentage of your home used for business. Free e file state and federal taxes See Business Percentage , later. Free e file state and federal taxes Adjusted basis defined. Free e file state and federal taxes   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. Free e file state and federal taxes For a discussion of adjusted basis, see Publication 551. Free e file state and federal taxes Permanent improvements. Free e file state and federal taxes   A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. Free e file state and federal taxes Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. Free e file state and federal taxes    You must carefully distinguish between repairs and improvements. Free e file state and federal taxes See Repairs , earlier, under Actual Expenses. Free e file state and federal taxes You also must keep accurate records of these expenses. Free e file state and federal taxes These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. Free e file state and federal taxes However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. Free e file state and federal taxes Example. Free e file state and federal taxes You buy an older home and fix up two rooms as a beauty salon. Free e file state and federal taxes 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. Free e file state and federal taxes Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. Free e file state and federal taxes 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. Free e file state and federal taxes You cannot deduct any portion of it as a repair expense. Free e file state and federal taxes Adjusting for depreciation deducted in earlier years. Free e file state and federal taxes   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. Free e file state and federal taxes 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. Free e file state and federal taxes If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. Free e file state and federal taxes   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. Free e file state and federal taxes   If you deducted the incorrect amount of depreciation, see Publication 946. Free e file state and federal taxes Fair market value defined. Free e file state and federal taxes   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. Free e file state and federal taxes 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. Free e file state and federal taxes Figuring the depreciation deduction for the current year. Free e file state and federal taxes   If you began using your home for business before 2013, continue to use the same depreciation method you used in past tax years. Free e file state and federal taxes   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). Free e file state and federal taxes Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. Free e file state and federal taxes For more information on MACRS and other methods of depreciation, see Publication 946. Free e file state and federal taxes   To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). Free e file state and federal taxes The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. Free e file state and federal taxes The adjusted basis of your home (excluding land) on the date you began using your home for business. Free e file state and federal taxes The fair market value of your home (excluding land) on the date you began using your home for business. Free e file state and federal taxes Depreciation table. Free e file state and federal taxes   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. Free e file state and federal taxes Table 2. Free e file state and federal taxes MACRS Percentage Table for 39-Year Nonresidential Real Property Month First Used for Business Percentage To Use 1 2. Free e file state and federal taxes 461% 2 2. Free e file state and federal taxes 247% 3 2. Free e file state and federal taxes 033% 4 1. Free e file state and federal taxes 819% 5 1. Free e file state and federal taxes 605% 6 1. Free e file state and federal taxes 391% 7 1. Free e file state and federal taxes 177% 8 0. Free e file state and federal taxes 963% 9 0. Free e file state and federal taxes 749% 10 0. Free e file state and federal taxes 535% 11 0. Free e file state and federal taxes 321% 12 0. Free e file state and federal taxes 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. Free e file state and federal taxes See Publication 946 for the percentages for the remaining tax years of the recovery period. Free e file state and federal taxes Example. Free e file state and federal taxes In May, George Miller began to use one room in his home exclusively and regularly to meet clients. Free e file state and federal taxes This room is 8% of the square footage of his home. Free e file state and federal taxes He bought the home in 2003 for $125,000. Free e file state and federal taxes He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. Free e file state and federal taxes In May, the house had a fair market value of $165,000. Free e file state and federal taxes He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. Free e file state and federal taxes The result is $9,200, his depreciable basis for the business part of the house. Free e file state and federal taxes George files his return based on the calendar year. Free e file state and federal taxes May is the 5th month of his tax year. Free e file state and federal taxes He multiplies his depreciable basis of $9,200 by 1. Free e file state and federal taxes 605% (. Free e file state and federal taxes 01605), the percentage from the table for the 5th month. Free e file state and federal taxes His depreciation deduction is $147. Free e file state and federal taxes 66. Free e file state and federal taxes Depreciating permanent improvements. Free e file state and federal taxes   Add the costs of permanent improvements made before you began using your home for business to the basis of your property. Free e file state and federal taxes Depreciate these costs as part of the cost of your home as explained earlier. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes For improvements made this year, the recovery period is 39 years. Free e file state and federal taxes For the percentage to use for the first year, see Table 2, earlier. Free e file state and federal taxes For more information on recovery periods, see Publication 946. Free e file state and federal taxes 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. Free e file state and federal taxes Use the resulting percentage to figure the business part of the expenses for operating your entire home. Free e file state and federal taxes You can use any reasonable method to determine the business percentage. Free e file state and federal taxes The following are two commonly used methods for figuring the percentage. Free e file state and federal taxes Divide the area (length multiplied by the width) used for business by the total area of your home. Free e file state and federal taxes 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. Free e file state and federal taxes Example 1. Free e file state and federal taxes Your office is 240 square feet (12 feet × 20 feet). Free e file state and federal taxes Your home is 1,200 square feet. Free e file state and federal taxes Your office is 20% (240 ÷ 1,200) of the total area of your home. Free e file state and federal taxes Your business percentage is 20%. Free e file state and federal taxes Example 2. Free e file state and federal taxes You use one room in your home for business. Free e file state and federal taxes Your home has 10 rooms, all about equal size. Free e file state and federal taxes Your office is 10% (1 ÷ 10) of the total area of your home. Free e file state and federal taxes Your business percentage is 10%. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes 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)). Free e file state and federal taxes These expenses are discussed in detail under Actual Expenses , earlier. Free e file state and federal taxes 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. Free e file state and federal taxes If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. Free e file state and federal taxes Carryover of unallowed expenses. Free e file state and federal taxes   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. Free e file state and federal taxes They are subject to the deduction limit for that year, whether or not you live in the same home during that year. Free e file state and federal taxes Figuring the deduction limit and carryover. Free e file state and federal taxes   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. Free e file state and federal taxes If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. Free e file state and federal taxes Example. Free e file state and federal taxes You meet the requirements for deducting expenses for the business use of your home. Free e file state and federal taxes You use 20% of your home for business. Free e file state and federal taxes 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. Free e file state and federal taxes    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). Free e file state and federal taxes You also can deduct all of your business expenses not related to the use of your home ($2,000). Free e file state and federal taxes 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. Free e file state and federal taxes Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. Free e file state and federal taxes You can carry over the $1,400 balance and add it to your depreciation for 2014, subject to your deduction limit in 2014. Free e file state and federal taxes More than one place of business. Free e file state and federal taxes   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. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Free e file state and federal taxes Using the Simplified Method The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Free e file state and federal taxes 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. Free e file state and federal taxes The area you use to figure your deduction is limited to 300 square feet. Free e file state and federal taxes See Simplified Amount , later, for information about figuring the amount of the deduction. Free e file state and federal taxes For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I. Free e file state and federal taxes R. Free e file state and federal taxes B. Free e file state and federal taxes 478, available at www. Free e file state and federal taxes irs. Free e file state and federal taxes gov/irb/2013-06_IRB/ar09. Free e file state and federal taxes html. Free e file state and federal taxes Actual expenses and depreciation of your home. Free e file state and federal taxes   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. Free e file state and federal taxes 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. Free e file state and federal taxes The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. Free e file state and federal taxes 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. Free e file state and federal taxes More information. Free e file state and federal taxes   For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I. Free e file state and federal taxes R. Free e file state and federal taxes B. Free e file state and federal taxes 478, available at www. Free e file state and federal taxes irs. Free e file state and federal taxes gov/irb/2013-06_IRB/ar09. Free e file state and federal taxes html. Free e file state and federal taxes 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). Free e file state and federal taxes Expenses deductible without regard to business use. Free e file state and federal taxes   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. Free e file state and federal taxes These expenses include mortgage interest, real estate taxes, and casualty losses, subject to any limitations. Free e file state and federal taxes See Where To Deduct , later. Free e file state and federal taxes 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). Free e file state and federal taxes No deduction of carryover of actual expenses. Free e file state and federal taxes   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. Free e file state and federal taxes Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. Free e file state and federal taxes Electing the Simplified Method You choose whether or not to figure your deduction using the simplified method each taxable year. Free e file state and federal taxes 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. Free e file state and federal taxes An election for a taxable year, once made, is irrevocable. Free e file state and federal taxes 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. Free e file state and federal taxes Shared use. Free e file state and federal taxes   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. Free e file state and federal taxes More than one qualified business use. Free e file state and federal taxes   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. Free e file state and federal taxes More than one home. Free e file state and federal taxes   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. Free e file state and federal taxes You must figure the deduction for any other home using actual expenses. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes The allowable area of your home used in conducting the business. Free e file state and federal taxes 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. Free e file state and federal taxes The gross income from the business use of your home. Free e file state and federal taxes The amount of the business expenses that are not related to the use of your home. Free e file state and federal taxes 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. Free e file state and federal taxes To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these 3 steps. Free e file state and federal taxes 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). Free e file state and federal taxes See Allowable area and Space used regularly for daycare , later. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes See Gross income limitation , later. Free e file state and federal taxes Take the smaller of the amounts from (1) and (2). Free e file state and federal taxes This is the amount you can deduct for this qualified business use of your home using the simplified method. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes Allowable area. Free e file state and federal taxes   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. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes Area used by a qualified joint venture. Free e file state and federal taxes   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. Free e file state and federal taxes Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. Free e file state and federal taxes Then, each spouse will figure the allowable area separately. Free e file state and federal taxes For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. Free e file state and federal taxes Shared use. Free e file state and federal taxes   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. Free e file state and federal taxes You must allocate the shared space between you and the other person in a reasonable manner. Free e file state and federal taxes Example. Free e file state and federal taxes Kristin and Lindsey are roommates. Free e file state and federal taxes Kristin uses 300 square feet of their home for a qualified business use. Free e file state and federal taxes Lindsey uses 200 square feet of their home for a separate qualified business use. Free e file state and federal taxes The qualified business uses share 100 square feet. Free e file state and federal taxes 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. Free e file state and federal taxes If divided evenly, Kristin could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. Free e file state and federal taxes More than one qualified business use. Free e file state and federal taxes   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. Free e file state and federal taxes Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. Free e file state and federal taxes However, do not allocate more square feet to a qualified business use than you actually use for that business. Free e file state and federal taxes Rental use. Free e file state and federal taxes   The simplified method does not apply to rental use. Free e file state and federal taxes A rental use that qualifies for the deduction must be figured using actual expenses. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes Part-year use or area changes. Free e file state and federal taxes   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. Free e file state and federal taxes 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. Free e file state and federal taxes When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. Free e file state and federal taxes Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. Free e file state and federal taxes Example 1. Free e file state and federal taxes Andy files his federal income tax return on a calendar year basis. Free e file state and federal taxes On July 20, he began using 420 square feet of his home for a qualified business use. Free e file state and federal taxes He continued to use the 420 square feet until the end of the year. Free e file state and federal taxes 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). Free e file state and federal taxes Example 2. Free e file state and federal taxes Amy files her federal income tax return on a calendar year basis. Free e file state and federal taxes On April 20, she began using 100 square feet of her home for a qualified business use. Free e file state and federal taxes On August 5, she expanded the area of her qualified use to 330 square feet. Free e file state and federal taxes Amy continued to use the 330 square feet until the end of the year. Free e file state and federal taxes 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). Free e file state and federal taxes Gross income limitation. Free e file state and federal taxes   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. Free e file state and federal taxes 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. Free e file state and federal taxes Business expenses not related to use of the home. Free e file state and federal taxes   These expenses relate to the business activity in the home, but not to the use of the home itself. Free e file state and federal taxes You can still deduct business expenses that are unrelated to the use of the home. Free e file state and federal taxes See Where To Deduct , later. Free e file state and federal taxes Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. Free e file state and federal taxes Space used regularly for daycare. Free e file state and federal taxes   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. Free e file state and federal taxes The reduced rate will equal the prescribed rate times a fraction. Free e file state and federal taxes 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. Free e file state and federal taxes You can use the Daycare Facility Worksheet (for simplified method), near the end of this publication, to help you figure the reduced rate. Free e file state and federal taxes    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. Free e file state and federal taxes 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. Free e file state and federal taxes To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes You do not meet this requirement if your application was rejected or your license or other authorization was revoked. Free e file state and federal taxes Figuring the deduction. Free e file state and federal taxes   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. Free e file state and federal taxes    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. Free e file state and federal taxes If you also use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. Free e file state and federal taxes   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. Free e file state and federal taxes 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. Free e file state and federal taxes You do not have to keep records to show the specific hours the area was used for business. Free e file state and federal taxes You can use the area occasionally for personal reasons. Free e file state and federal taxes However, a room you use only occasionally for business does not qualify for the deduction. Free e file state and federal taxes 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. Free e file state and federal taxes You can compare the hours of business use in a week with the number of hours in a week (168). Free e file state and federal taxes Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2013). Free e file state and federal taxes 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. Free e file state and federal taxes Example 1. Free e file state and federal taxes Mary Lake used her basement to operate a daycare business for children. Free e file state and federal taxes She figures the business percentage of the basement as follows. Free e file state and federal taxes 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. Free e file state and federal taxes During the other 12 hours a day, the family could use the basement. Free e file state and federal taxes She figures the percentage of time the basement was used for daycare as follows. Free e file state and federal taxes 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. Free e file state and federal taxes 25%           Mary can deduct 34. Free e file state and federal taxes 25% of any direct expenses for the basement. Free e file state and federal taxes However, because her indirect expenses are for the entire house, she can deduct only 17. Free e file state and federal taxes 13% of the indirect expenses. Free e file state and federal taxes She figures the percentage for her indirect expenses as follows. Free e file state and federal taxes Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 34. Free e file state and federal taxes 25% Percentage for indirect expenses 17. Free e file state and federal taxes 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. Free e file state and federal taxes In Part II, Mary figures her deductible expenses. Free e file state and federal taxes She uses the following information to complete Part II. Free e file state and federal taxes 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. Free e file state and federal taxes (This figure is the same as the amount on line 29 of her Schedule C (Form 1040). Free e file state and federal taxes ) The expenses she paid for rent and utilities relate to her entire home. Free e file state and federal taxes Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). Free e file state and federal taxes She shows the total of these expenses on line 22, column (b). Free e file state and federal taxes For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. Free e file state and federal taxes Mary paid $500 to have the basement painted. Free e file state and federal taxes The painting is a direct expense. Free e file state and federal taxes 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. Free e file state and federal taxes 25% – line 6). Free e file state and federal taxes She enters $171 (34. Free e file state and federal taxes 25% × $500) on line 19, column (a). Free e file state and federal taxes She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. Free e file state and federal taxes This is less than her deduction limit (line 15), so she can deduct the entire amount. Free e file state and federal taxes She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. Free e file state and federal taxes She then carries the $1,756 to line 30 of her Schedule C (Form 1040). Free e file state and federal taxes Example 2. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes The basement and room are 60% of the total area of her home. Free e file state and federal taxes In figuring her expenses, 34. Free e file state and federal taxes 25% of any direct expenses for the basement and room are deductible. Free e file state and federal taxes In addition, 20. Free e file state and federal taxes 55% (34. Free e file state and federal taxes 25% × 60%) of her indirect expenses are deductible. Free e file state and federal taxes Example 3. Free e file state and federal taxes Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2013. Free e file state and federal taxes 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. Free e file state and federal taxes During the other 12 hours a day, the family could still use the basement. Free e file state and federal taxes She figures the percentage of time the basement was used for business as follows. Free e file state and federal taxes 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. Free e file state and federal taxes 71%           Mary can deduct 35. Free e file state and federal taxes 71% of any direct expenses for the basement. Free e file state and federal taxes However, because her indirect expenses are for the entire house, she can deduct only 17. Free e file state and federal taxes 86% of the indirect expenses. Free e file state and federal taxes She figures the percentage for her indirect expenses as follows. Free e file state and federal taxes Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 35. Free e file state and federal taxes 71% Percentage for indirect expenses 17. Free e file state and federal taxes 86% Meals. Free e file state and federal taxes   If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. Free e file state and federal taxes Claim it as a separate deduction on your Schedule C (Form 1040). Free e file state and federal taxes You can never deduct the cost of food consumed by you or your family. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes   If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family's food costs. Free e file state and federal taxes   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. Free e file state and federal taxes If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). Free e file state and federal taxes If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). Free e file state and federal taxes Do not include payments or expenses for your own children if they are eligible for the program. Free e file state and federal taxes Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. Free e file state and federal taxes Standard meal and snack rates. Free e file state and federal taxes   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. Free e file state and federal taxes For these purposes: A family daycare provider is a person engaged in the business of providing family daycare. Free e file state and federal taxes Family daycare is childcare provided to eligible children in the home of the family daycare provider. Free e file state and federal taxes The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. Free e file state and federal taxes Eligible children are minor children receiving family daycare in the home of the family daycare provider. Free e file state and federal taxes 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. Free e file state and federal taxes Eligible children do not include children who receive daycare services for personal reasons of the provider. Free e file state and federal taxes For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child. Free e file state and federal taxes   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. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes   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. Free e file state and federal taxes 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. Free e file state and federal taxes 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. Free e file state and federal taxes   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. Free e file state and federal taxes 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. Free e file state and federal taxes This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. Free e file state and federal taxes   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. Free e file state and federal taxes These expenses can be claimed as a separate deduction on your Schedule C (Form 1040). Free e file state and federal taxes     Table 3. Free e file state and federal taxes Standard Meal and Snack Rates1 Location of Family Daycare Provider Breakfast Lunch Dinner Snack States other than Alaska an