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Free Income Tax Filing For Seniors

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Free Income Tax Filing For Seniors

Free income tax filing for seniors 4. Free income tax filing for seniors   Filing U. Free income tax filing for seniors S. Free income tax filing for seniors Tax Returns Table of Contents Who Must FileFiling Requirement if Possession Income Is Excluded When To FileExtension of Time To File Where To File Special Rules for Completing Your U. Free income tax filing for seniors S. Free income tax filing for seniors Tax ReturnU. Free income tax filing for seniors S. Free income tax filing for seniors Armed Forces. Free income tax filing for seniors Deductions if Possession Income Is Excluded Foreign Tax Credit if Possession Income Is Excluded Self-Employment Tax Additional Medicare Tax Net Investment Income Tax Paying Your TaxesEstimated Tax Double TaxationCompetent Authority Assistance The information in chapter 3 will tell you if a U. Free income tax filing for seniors S. Free income tax filing for seniors income tax return is required for your situation. Free income tax filing for seniors If a U. Free income tax filing for seniors S. Free income tax filing for seniors return is required, your next step is to see if you meet the filing requirements. Free income tax filing for seniors If you do meet the filing requirements, the information presented in this chapter will help you understand the special procedures involved. Free income tax filing for seniors This chapter discusses: Filing requirements, When to file your return, Where to send your return, How to adjust your deductions and credits if you are excluding income from American Samoa or Puerto Rico, How to make estimated tax payments and pay self-employment tax, and How to request assistance in resolving instances of double taxation. Free income tax filing for seniors Who Must File If you are not required to file a possession tax return that includes your worldwide income, you must generally file a U. Free income tax filing for seniors S. Free income tax filing for seniors income tax return if your gross income is at least the amount shown in Table 4-1, later, for your filing status and age. Free income tax filing for seniors If you were a bona fide resident of American Samoa or Puerto Rico and are able to exclude your possession income from your U. Free income tax filing for seniors S. Free income tax filing for seniors tax return, your filing requirement may be less than the amount in Table 4-1. Free income tax filing for seniors For details, see the information under Filing Requirement if Possession Income Is Excluded , later. Free income tax filing for seniors Some individuals (such as those who can be claimed as a dependent on another person's return or who owe certain taxes, such as self-employment tax) must file a tax return even though the gross income is less than the amount shown in Table 4-1 for their filing status and age. Free income tax filing for seniors For more information, see the Form 1040 instructions. Free income tax filing for seniors Filing Requirement if Possession Income Is Excluded If you were a bona fide resident of American Samoa or Puerto Rico and qualify to exclude possession income on your U. Free income tax filing for seniors S. Free income tax filing for seniors tax return, you must determine your adjusted filing requirement. Free income tax filing for seniors Generally, your filing requirement is based on the total of your (and your spouse's if filing a joint return) personal exemption(s) plus your standard deduction. Free income tax filing for seniors Personal exemption. Free income tax filing for seniors   When figuring your filing requirement, your personal exemption is allowed in full. Free income tax filing for seniors Do not reduce it for this purpose. Free income tax filing for seniors Do not include exemptions for your dependents. Free income tax filing for seniors Allowable standard deduction. Free income tax filing for seniors   Unless your filing status is married filing separately, the minimum income level at which you must file a return is based, in part, on the standard deduction for your filing status and age. Free income tax filing for seniors Because the standard deduction applies to all types of income, it must be divided between your excluded income and income from other sources. Free income tax filing for seniors Multiply the regular standard deduction for your filing status and age (this is zero if you are married filing a separate return; all others, see Form 1040 instructions) by the following fraction:      Gross income subject to U. Free income tax filing for seniors S. Free income tax filing for seniors income tax     Gross income from all sources (including excluded possession income)   Example. Free income tax filing for seniors Barbara Spruce, a U. Free income tax filing for seniors S. Free income tax filing for seniors citizen, is single, under 65, and a bona fide resident of American Samoa. Free income tax filing for seniors During 2013, she received $20,000 of income from American Samoa sources (qualifies for exclusion) and $8,000 of income from sources outside the possession (subject to U. Free income tax filing for seniors S. Free income tax filing for seniors income tax). Free income tax filing for seniors Her allowable standard deduction for 2013 is figured as follows:   $8,000 $28,000 × $6,100 (regular standard deduction) = $1,743   Adjusted filing requirement. Free income tax filing for seniors   Figure your adjusted filing requirement by adding the amount of your allowable standard deduction to the amount of your personal exemption. Free income tax filing for seniors You must file a U. Free income tax filing for seniors S. Free income tax filing for seniors income tax return if your gross income is at least the amount shown on line 3 of the following worksheet. Free income tax filing for seniors    1. Free income tax filing for seniors Enter the allowable standard deduction you figured earlier under Allowable standard deduction . Free income tax filing for seniors If your filing status is married filing separately, enter -0-   2. Free income tax filing for seniors Personal exemption. Free income tax filing for seniors If your filing status is married filing jointly, enter $7,800; if someone can claim you as a dependent, enter -0-; otherwise, enter $3,900   3. Free income tax filing for seniors Add lines 1 and 2. Free income tax filing for seniors You must file a U. Free income tax filing for seniors S. Free income tax filing for seniors income tax return if your gross income from sources outside the relevant possession is at least this amount   Table 4-1. Free income tax filing for seniors 2013 Filing Requirements Chart for Most Taxpayers IF your filing status is. Free income tax filing for seniors . Free income tax filing for seniors . Free income tax filing for seniors AND at the end of 2013 you were*. Free income tax filing for seniors . Free income tax filing for seniors . Free income tax filing for seniors THEN file a return if your gross income** was at least. Free income tax filing for seniors . Free income tax filing for seniors . Free income tax filing for seniors single under 65 $10,000 65 or older $11,500 married filing jointly*** under 65 (both spouses) $20,000 65 or older (one spouse) $21,200 65 or older (both spouses) $22,400 married filing separately any age $3,900 head of household under 65 $12,850 65 or older $14,350 qualifying widow(er)  with dependent child under 65 $16,100 65 or older $17,300 * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Free income tax filing for seniors ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States (even if you can exclude part or all of it). Free income tax filing for seniors Do not include social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time during 2013, or (b) one-half of your social security benefits plus your other gross income is more than $25,000 ($32,000 if married filing jointly). Free income tax filing for seniors If (a) or (b) applies, see the instructions for Form 1040 or Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure the taxable part of social security benefits you must include in gross income. Free income tax filing for seniors *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900 you must file a return regardless of your age. Free income tax filing for seniors Example 1. Free income tax filing for seniors James and Joan Thompson, one over 65, are U. Free income tax filing for seniors S. Free income tax filing for seniors citizens and bona fide residents of Puerto Rico during the entire tax year. Free income tax filing for seniors They file a joint income tax return. Free income tax filing for seniors During 2013, they received $35,000 of income from Puerto Rico sources (qualifies for exclusion) and $6,000 of income from sources outside Puerto Rico (subject to U. Free income tax filing for seniors S. Free income tax filing for seniors income tax). Free income tax filing for seniors Their allowable standard deduction for 2013 is figured as follows:   $6,000 $41,000 × $13,400 ( standard deduction for 65 or older (one spouse) ) = $1,961   The Thompsons do not have to file a U. Free income tax filing for seniors S. Free income tax filing for seniors income tax return because their gross income subject to U. Free income tax filing for seniors S. Free income tax filing for seniors tax ($6,000) is less than their allowable standard deduction plus their personal exemptions ($1,961+ $7,800= $9,761). Free income tax filing for seniors Example 2. Free income tax filing for seniors Barbara Spruce (see Example under Allowable standard deduction, earlier), however, must file a U. Free income tax filing for seniors S. Free income tax filing for seniors income tax return because her gross income subject to U. Free income tax filing for seniors S. Free income tax filing for seniors tax ($8,000) is more than her allowable standard deduction plus her personal exemption ($1,743 + $3,900 = $5,643). Free income tax filing for seniors If you must file a U. Free income tax filing for seniors S. Free income tax filing for seniors income tax return, you may be able to file a paperless return using IRS e-file. Free income tax filing for seniors See your form instructions or visit our website at IRS. Free income tax filing for seniors gov. Free income tax filing for seniors When To File If you file on a calendar year basis, the due date for filing your U. Free income tax filing for seniors S. Free income tax filing for seniors income tax return is April 15 following the end of your tax year. Free income tax filing for seniors If you use a fiscal year (a year ending on the last day of a month other than December), the due date is the 15th day of the 4th month after the end of your fiscal year. Free income tax filing for seniors If any due date falls on a Saturday, Sunday, or legal holiday, your tax return is due on the next business day. Free income tax filing for seniors For your 2013 tax return, the due date is April 15, 2014. Free income tax filing for seniors If you mail your federal tax return, it is considered timely if it bears an official postmark dated on or before the due date, including any extensions. Free income tax filing for seniors If you use a private delivery service designated by the IRS, generally the postmark date is the date the private delivery service records in its database or marks on the mailing label. Free income tax filing for seniors See your form instructions for a list of designated private delivery services. Free income tax filing for seniors Extension of Time To File You can get an extension of time to file your U. Free income tax filing for seniors S. Free income tax filing for seniors income tax return. Free income tax filing for seniors Special rules apply for those living outside the United States. Free income tax filing for seniors Automatic 6-Month Extension If you cannot file your 2013 return by the due date, you can get an automatic 6-month extension of time to file. Free income tax filing for seniors Example. Free income tax filing for seniors If your return must be filed by April 15, 2014, you will have until October 15, 2014, to file. Free income tax filing for seniors Although you are not required to make a payment of the tax you estimate as due, Form 4868 does not extend the time to pay taxes. Free income tax filing for seniors If you do not pay the amount due by the regular due date (generally April 15), you will owe interest on any unpaid tax from the original due date to the date you pay the tax. Free income tax filing for seniors You may also be charged penalties (see the Instructions for Form 4868). Free income tax filing for seniors How to get the automatic extension. Free income tax filing for seniors   You can get the automatic 6-month extension if you do one of the following by the due date for filing your return. Free income tax filing for seniors E-file Form 4868 using your personal computer or a tax professional. Free income tax filing for seniors E-file and pay by credit or debit card. Free income tax filing for seniors Your payment must be at least $1. Free income tax filing for seniors You may pay by phone or over the Internet. Free income tax filing for seniors Do not file Form 4868. Free income tax filing for seniors File a paper Form 4868. Free income tax filing for seniors If you are a fiscal year taxpayer, you must file a paper Form 4868. Free income tax filing for seniors See Form 4868 for information on getting an extension using these options. Free income tax filing for seniors When to file. Free income tax filing for seniors   You must request the automatic extension by the due date for your return. Free income tax filing for seniors You can file your return any time before the 6-month extension period ends. Free income tax filing for seniors When you file your return. Free income tax filing for seniors   Enter any payment you made related to the extension of time to file on Form 1040, line 68. Free income tax filing for seniors If you file Form 1040A, U. Free income tax filing for seniors S. Free income tax filing for seniors Individual Income Tax Return, or Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, include that payment in your total payments on Form 1040A, line 41, or Form 1040EZ, line 9. Free income tax filing for seniors Also enter “Form 4868” and the amount paid in the space to the left of the entry space for line 41 or line 9. Free income tax filing for seniors You cannot ask the Internal Revenue Service to figure your tax if you use the extension of time to file. Free income tax filing for seniors Individuals Outside the United States and Puerto Rico You are allowed an automatic 2-month extension (until June 16, 2014, if you use the calendar year) to file your 2013 return and pay any federal income tax due if: You are a U. Free income tax filing for seniors S. Free income tax filing for seniors citizen or resident, and On the due date of your return: You are living outside of the United States and Puerto Rico, and your main place of business or post of duty is outside the United States and Puerto Rico, or You are in military or naval service on duty outside the United States and Puerto Rico. Free income tax filing for seniors However, if you pay the tax due after the regular due date (generally April 15), interest will be charged from April 15 until the date the tax is paid. Free income tax filing for seniors If you serve in a combat zone or qualified hazardous duty area, you may be eligible for a longer extension of time to file. Free income tax filing for seniors For more information, see Publication 3, Armed Forces' Tax Guide. Free income tax filing for seniors Married taxpayers. Free income tax filing for seniors   If you file a joint return, only one spouse has to qualify for this automatic extension. Free income tax filing for seniors However, if you and your spouse file separate returns, this automatic extension applies only to the spouse who qualifies. Free income tax filing for seniors How to get the extension. Free income tax filing for seniors   To use this special automatic extension, you must attach a statement to your return explaining what situation qualified you for the extension. Free income tax filing for seniors (See the situations listed under (2), earlier. Free income tax filing for seniors ) Extension beyond 2 months. Free income tax filing for seniors   If you cannot file your 2013 return within the automatic 2-month extension period, you can get an additional 4-month extension, for a total of 6 months. Free income tax filing for seniors File Form 4868 by the end of the automatic extension period (June 16, 2014 for calendar year taxpayers). Free income tax filing for seniors Be sure to check the box on Form 4868, line 8, if appropriate. Free income tax filing for seniors   In addition to this 6-month extension, taxpayers who are out of the country (as defined under (2) earlier) can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). Free income tax filing for seniors   To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. Free income tax filing for seniors Send the letter by the extended due date (October 15 for calendar year taxpayers) to:  Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA   You will not receive any notification from the IRS unless your request is denied for being untimely. Free income tax filing for seniors Where To File Use the addresses listed below if you have to file Form 1040 with the United States and you are excluding possession income from American Samoa or Puerto Rico. Free income tax filing for seniors If you are not including a check or a money order, send your U. Free income tax filing for seniors S. Free income tax filing for seniors tax return and all attachments to:   Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA If you are including a check or a money order, send your U. Free income tax filing for seniors S. Free income tax filing for seniors tax return and all attachments to:  Internal Revenue Service P. Free income tax filing for seniors O. Free income tax filing for seniors Box 1303 Charlotte, NC 28201-1303 USA Also send your U. Free income tax filing for seniors S. Free income tax filing for seniors return to these addresses if you are attaching Form 5074 or Form 8689. Free income tax filing for seniors If you are not in either of the above categories, send your return to the address shown in the Form 1040 instructions for the possession or state in which you reside. Free income tax filing for seniors Special Rules for Completing Your U. Free income tax filing for seniors S. Free income tax filing for seniors Tax Return If you are not excluding possession income from your U. Free income tax filing for seniors S. Free income tax filing for seniors tax return, follow the instructions for the specific forms you file. Free income tax filing for seniors However, you may not qualify to claim the earned income credit (EIC). Free income tax filing for seniors Earned income credit. Free income tax filing for seniors   Even if you maintain a household in one of the possessions discussed in this publication that is your main home and the home of your qualifying child, you cannot claim the earned income credit on your U. Free income tax filing for seniors S. Free income tax filing for seniors tax return. Free income tax filing for seniors This credit is available only if you maintain the household in the United States or you are serving on extended active duty in the U. Free income tax filing for seniors S. Free income tax filing for seniors Armed Forces. Free income tax filing for seniors U. Free income tax filing for seniors S. Free income tax filing for seniors Armed Forces. Free income tax filing for seniors   U. Free income tax filing for seniors S. Free income tax filing for seniors military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. Free income tax filing for seniors Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. Free income tax filing for seniors Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. Free income tax filing for seniors Income from American Samoa or Puerto Rico excluded. Free income tax filing for seniors   You will not be allowed to take deductions and credits that apply to the excluded income. Free income tax filing for seniors The additional information you need follows. Free income tax filing for seniors Deductions if Possession Income Is Excluded Deductions that specifically apply to your excluded possession income, such as employee business expenses, are not allowable on your U. Free income tax filing for seniors S. Free income tax filing for seniors income tax return. Free income tax filing for seniors Deductions that do not specifically apply to any particular type of income must be divided between your excluded income from sources in the relevant possession and income from all other sources to find the part that you can deduct on your U. Free income tax filing for seniors S. Free income tax filing for seniors tax return. Free income tax filing for seniors Examples of such deductions are alimony payments, the standard deduction, and certain itemized deductions (such as medical expenses, charitable contributions, real estate taxes, and mortgage interest on your home). Free income tax filing for seniors Figuring the deduction. Free income tax filing for seniors   To find the part of a deduction that is allowable, multiply the deduction by the following fraction. Free income tax filing for seniors   Gross income subject to U. Free income tax filing for seniors S. Free income tax filing for seniors income tax     Gross income from all sources (including excluded possession income)   Adjustments to Income Your adjusted gross income equals your gross income minus certain deductions (adjustments). Free income tax filing for seniors Moving expense deduction. Free income tax filing for seniors   Generally, expenses of a move to a possession are directly attributable to wages, salaries, and other earned income from that possession. Free income tax filing for seniors Likewise, the expenses of a move back to the United States are generally attributable to U. Free income tax filing for seniors S. Free income tax filing for seniors earned income. Free income tax filing for seniors   If you are claiming expenses for a move to a relevant possession, how and where you will deduct the expenses depends on your status as a bona fide resident and if any of your possession income is excluded on your U. Free income tax filing for seniors S. Free income tax filing for seniors tax return. Free income tax filing for seniors For more information, see Moving expense deduction in chapter 3 under the name of the relevant possession. Free income tax filing for seniors   If you are claiming expenses for a move from a U. Free income tax filing for seniors S. Free income tax filing for seniors possession to the United States, use Form 3903 to figure your deductible expenses and enter the amount on Form 1040, line 26. Free income tax filing for seniors For purposes of deducting moving expenses, the possessions are considered part of the United States. Free income tax filing for seniors See Publication 521, Moving Expenses, for information about what expenses are deductible. Free income tax filing for seniors Self-employment tax deduction. Free income tax filing for seniors   Generally, if you are reporting self-employment income on your U. Free income tax filing for seniors S. Free income tax filing for seniors return, you can include the deductible part of your self-employment tax on Form 1040, line 27. Free income tax filing for seniors This is an income tax deduction only; it is not a deduction in figuring net earnings from self-employment (for self-employment tax). Free income tax filing for seniors   However, if you are a bona fide resident of American Samoa or Puerto Rico and you exclude all of your self-employment income from gross income, you cannot take the deduction on Form 1040, line 27, because the deduction is related to excluded income. Free income tax filing for seniors   If only part of your self-employment income is excluded, the part of the deduction that is based on the nonexcluded income is allowed. Free income tax filing for seniors This would happen if, for instance, you have two businesses and only the income from one of them is excludable. Free income tax filing for seniors   For purposes of the deduction only, figure the self-employment tax on the nonexcluded income by multiplying your total self-employment tax (from Schedule SE (Form 1040)), Self-Employment Tax) by the following fraction. Free income tax filing for seniors   Self-employment income subject to U. Free income tax filing for seniors S. Free income tax filing for seniors income tax     Total self-employment income (including excluded possession income)   The result is your self-employment tax on nonexcluded income. Free income tax filing for seniors Include the deductible part of this amount on Form 1040, line 27. Free income tax filing for seniors Individual retirement arrangement (IRA) deduction. Free income tax filing for seniors   Do not take excluded income into account when figuring your deductible IRA contribution. Free income tax filing for seniors Standard Deduction The standard deduction is composed of the regular standard deduction amount and the additional standard deduction for taxpayers who are blind or age 65 or over. Free income tax filing for seniors To find the amount you can claim on Form 1040, line 40, first figure your full standard deduction according to the Instructions for Form 1040. Free income tax filing for seniors Then multiply your full standard deduction by the following fraction. Free income tax filing for seniors   Gross income subject to U. Free income tax filing for seniors S. Free income tax filing for seniors income tax     Gross income from all sources (including excluded possession income)   In the space above line 40, enter “Standard deduction modified due to income excluded under section 931 (if American Samoa) or section 933 (if Puerto Rico). Free income tax filing for seniors ” This calculation may not be the same as the one you used to determine if you need to file a U. Free income tax filing for seniors S. Free income tax filing for seniors tax return. Free income tax filing for seniors Itemized Deductions Most itemized deductions do not apply to a particular type of income. Free income tax filing for seniors However, itemized deductions can be divided into three categories. Free income tax filing for seniors Those that apply specifically to excluded income, such as employee business expenses, are not deductible. Free income tax filing for seniors Those that apply specifically to income subject to U. Free income tax filing for seniors S. Free income tax filing for seniors income tax, which might also be employee business expenses, are fully allowable under the Instructions for Schedule A (Form 1040), Itemized Deductions. Free income tax filing for seniors Those that do not apply to specific income must be allocated between your gross income subject to U. Free income tax filing for seniors S. Free income tax filing for seniors income tax and your total gross income from all sources. Free income tax filing for seniors The example given later shows how to figure the deductible part of each type of expense that is not related to specific income. Free income tax filing for seniors Example. Free income tax filing for seniors In 2013, you and your spouse are both under 65 and U. Free income tax filing for seniors S. Free income tax filing for seniors citizens who are bona fide residents of Puerto Rico during the entire tax year. Free income tax filing for seniors You file a joint income tax return. Free income tax filing for seniors During 2013, you earned $20,000 from Puerto Rican sources (excluded from U. Free income tax filing for seniors S. Free income tax filing for seniors gross income) and your spouse earned $60,000 from the U. Free income tax filing for seniors S. Free income tax filing for seniors Government. Free income tax filing for seniors You have $16,000 of itemized deductions that do not apply to any specific type of income. Free income tax filing for seniors These are medical expenses of $4,000, real estate taxes of $5,000, home mortgage interest of $6,000, and charitable contributions of $1,000 (cash contributions). Free income tax filing for seniors You determine the amount of each deduction that you can claim on your Schedule A (Form 1040), Itemized Deductions, by multiplying the deduction by the fraction shown under Figuring the deduction , earlier under Deductions if Possession Income is Excluded. Free income tax filing for seniors   Medical Expenses   $60,000$80,000 × $4,000 = $3,000  (enter on line 1  of Schedule A)     Real Estate Taxes   $60,000$80,000 × $5,000 = $3,750  (enter on line 6  of Schedule A)     Home Mortgage Interest   $60,000$80,000 × $6,000 = $4,500  (enter on line 10 or 11 of  Schedule A)     Charitable Contributions (cash contributions)   $60,000$80,000 × $1,000 = $750  (enter on line 16 of Schedule A)   Enter on Schedule A (Form 1040) only the allowable portion of each deduction. Free income tax filing for seniors Overall limitation on itemized deductions. Free income tax filing for seniors   If your adjusted gross income (discussed earlier) is over $300,000 if married filing jointly or qualifying widow(er); $275,000 if head of household; $250,000 if single; or $150,000 if married filing separately; see the Itemized Deductions Worksheet in the Instructions for Schedule A (Form 1040), to figure your itemized deductions. Free income tax filing for seniors Personal Exemptions Personal exemptions are allowed in full even if excluding possession income. Free income tax filing for seniors However, depending upon your adjusted gross income and filing status, the amount you can deduct may be reduced. Free income tax filing for seniors See the Deduction for Exemptions Worksheet—Line 42 in the instructions for Form 1040. Free income tax filing for seniors Foreign Tax Credit if Possession Income Is Excluded If you must report American Samoa or Puerto Rico source income on your U. Free income tax filing for seniors S. Free income tax filing for seniors tax return, you can claim a foreign tax credit for income taxes paid to the possession on that income. Free income tax filing for seniors However, you cannot claim a foreign tax credit for taxes paid on possession income that is excluded on your U. Free income tax filing for seniors S. Free income tax filing for seniors tax return. Free income tax filing for seniors The foreign tax credit is generally figured on Form 1116. Free income tax filing for seniors If you have income, such as U. Free income tax filing for seniors S. Free income tax filing for seniors Government wages, that is not excludable, and you also have possession source income that is excludable, you must figure the credit by reducing your foreign taxes paid or accrued by the taxes based on the excluded income. Free income tax filing for seniors You make this reduction for each separate income category. Free income tax filing for seniors To find the amount of this reduction, use the following formula for each income category. Free income tax filing for seniors Excluded income from possession sources less deductible expenses based on that income x Tax paid or accrued to the possession = Reduction in foreign taxes Total income subject to possession tax less deductible expenses based on that income Enter the amount of the reduction on Form 1116, line 12. Free income tax filing for seniors For more information on the foreign tax credit, see Publication 514. Free income tax filing for seniors Example. Free income tax filing for seniors Jason and Lynn Reddy are U. Free income tax filing for seniors S. Free income tax filing for seniors citizens who were bona fide residents of Puerto Rico during all of 2013. Free income tax filing for seniors They file a joint tax return. Free income tax filing for seniors The following table shows their excludable and taxable income for U. Free income tax filing for seniors S. Free income tax filing for seniors federal income tax purposes. Free income tax filing for seniors   Taxable   Excludable Jason's wages from  U. Free income tax filing for seniors S. Free income tax filing for seniors Government $25,000     Lynn's wages from Puerto Rico  corp. Free income tax filing for seniors     $15,000 Dividend from Puerto Rico corp. Free income tax filing for seniors doing business in Puerto Rico     200 Dividend from U. Free income tax filing for seniors S. Free income tax filing for seniors  corp. Free income tax filing for seniors doing business  in U. Free income tax filing for seniors S. Free income tax filing for seniors * 1,000     Totals $26,000   $15,200 * Income from sources outside Puerto Rico is taxable. Free income tax filing for seniors   Jason and Lynn must file 2013 income tax returns with both Puerto Rico and the United States. Free income tax filing for seniors They have gross income of $26,000 for U. Free income tax filing for seniors S. Free income tax filing for seniors tax purposes. Free income tax filing for seniors They paid taxes to Puerto Rico of $4,000 ($3,980 on their wages and $20 on the dividend from the Puerto Rico corporation). Free income tax filing for seniors They figure their foreign tax credit on two Forms 1116, which they must attach to their U. Free income tax filing for seniors S. Free income tax filing for seniors return. Free income tax filing for seniors They fill out one Form 1116 for wages and one Form 1116 for the dividend. Free income tax filing for seniors Jason and Lynn figure the Puerto Rico taxes on excluded income as follows. Free income tax filing for seniors   Wages: ($15,000 ÷ $40,000) × $3,980 = $1,493   Dividend: ($200 ÷ $200) × $20 = $20 They enter $1,493 on Form 1116, line 12, for wages and $20 on the second Form 1116, line 12, for the dividend. Free income tax filing for seniors Self-Employment Tax Self-employment tax includes both social security and Medicare taxes for individuals who are self-employed. Free income tax filing for seniors A U. Free income tax filing for seniors S. Free income tax filing for seniors citizen or resident alien who is self-employed must pay self-employment tax on net self-employment earnings of $400 or more. Free income tax filing for seniors This rule applies whether or not the earnings are excludable from gross income (or whether or not a U. Free income tax filing for seniors S. Free income tax filing for seniors income tax return must otherwise be filed). Free income tax filing for seniors Bona fide residents of the possessions discussed in this publication are considered U. Free income tax filing for seniors S. Free income tax filing for seniors residents for this purpose and are subject to the self-employment tax. Free income tax filing for seniors Forms to file. Free income tax filing for seniors   If you have net self-employment income and are subject to self-employment tax, file one of the following with the United States. Free income tax filing for seniors If you are required to file Form 1040 with the United States, complete Schedule SE (Form 1040) and attach it to your Form 1040. Free income tax filing for seniors If you are not required to file Form 1040 with the United States and you are a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI, file Form 1040-SS. Free income tax filing for seniors If you are a resident of Puerto Rico, you can file the Spanish-language Form 1040-PR instead. Free income tax filing for seniors Do not file forms 1040-SS or 1040-PR with Form 1040. Free income tax filing for seniors If you are required to pay Additional Medicare Tax (discussed later) on your self-employment income, attach Form 8959, Additional Medicare Tax to Form 1040, Form 1040-SS, or Form 1040-PR, as applicable. Free income tax filing for seniors Chapter 11 Bankruptcy cases. Free income tax filing for seniors   While you are a debtor in a chapter 11 bankruptcy case, your net profit or loss from self-employment will be included on the income tax return (Form 1041, U. Free income tax filing for seniors S. Free income tax filing for seniors Income Tax Return for Estates and Trusts) of the bankruptcy estate. Free income tax filing for seniors However, you—not the bankruptcy estate—are responsible for paying self-employment tax on your net earnings from self-employment. Free income tax filing for seniors   Use Schedule SE (Form 1040), Form 1040-SS, or Form 1040-PR, as determined above, to figure your correct amount of self-employment tax. Free income tax filing for seniors   For other reporting requirements, see Chapter 11 Bankruptcy Cases in the Instructions for Form 1040. Free income tax filing for seniors Additional Medicare Tax Beginning in 2013, a 0. Free income tax filing for seniors 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 if single, head of household, or qualifying widow(er). Free income tax filing for seniors Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Free income tax filing for seniors A self-employment loss should not be considered for purposes of this tax. Free income tax filing for seniors RRTA compensation should be separately compared to the threshold. Free income tax filing for seniors Your employer is responsible for withholding the 0. Free income tax filing for seniors 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000. Free income tax filing for seniors You should consider this withholding, if applicable, in determining whether you need to make estimated tax payments. Free income tax filing for seniors There are no special rules for U. Free income tax filing for seniors S. Free income tax filing for seniors citizens and nonresident aliens living abroad for purposes of this provision. Free income tax filing for seniors Wages, RRTA compensation, and self-employment income that are subject to Medicare tax will also be subject to Additional Medicare Tax if in excess of the applicable threshold. Free income tax filing for seniors For more information, see Form 8959, Additional Medicare Tax, and its instructions or visit www. Free income tax filing for seniors irs. Free income tax filing for seniors gov and enter the following words in the search box: Additional Medicare Tax. Free income tax filing for seniors You cannot include the Additional Medicare Tax as a deductible part of your self-employment tax. Free income tax filing for seniors Net Investment Income Tax Beginning in 2013, the Net Investment Income Tax (NIIT) imposes a 3. Free income tax filing for seniors 8% tax on the lesser of an individual’s net investment income or the excess of the individual’s modified adjusted gross income over a specified threshold amount. Free income tax filing for seniors Bona fide residents of Puerto Rico and American Samoa who may have a federal income tax return filing obligation may be liable for the NIIT if the taxpayer’s modified adjusted gross income from non-territory sources exceeds a specified threshold amount. Free income tax filing for seniors The NIIT does not apply to any individual who is a nonresident alien with respect to the United States. Free income tax filing for seniors Bona fide residents must take into account any additional tax liability associated with the NIIT when calculating your estimated tax payments. Free income tax filing for seniors Forms to file. Free income tax filing for seniors   If you are a bona fide resident of American Samoa and Puerto Rico and you are required to pay the NIIT, you must file Form 1040 with the United States and attach Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts. Free income tax filing for seniors For more information, see Form 8960 and its instructions. Free income tax filing for seniors Paying Your Taxes You may find that not all of your income tax has been paid through withholding by either the United States or the possession. Free income tax filing for seniors This is often true if you have income that is not subject to withholding, such as self-employment, interest, or rental income. Free income tax filing for seniors In this situation, you may need to make estimated tax payments. Free income tax filing for seniors Estimated Tax If your estimated income tax obligation is to the United States, use the worksheet in the Form 1040-ES package to figure your estimated tax, including self-employment tax. Free income tax filing for seniors Include the Additional Medicare Tax and Net Investment Income Tax if applicable. Free income tax filing for seniors If you are paying by check or money order, use the payment vouchers in the Form 1040-ES package. Free income tax filing for seniors Or, you can make your payments electronically and not have to file any paper forms. Free income tax filing for seniors See the Form 1040-ES instructions for information on making payments. Free income tax filing for seniors Double Taxation Mutual agreement procedures exist to settle issues where there is inconsistent tax treatment between the IRS and the taxing authorities of the following possessions. Free income tax filing for seniors American Samoa. Free income tax filing for seniors The Commonwealth of Puerto Rico. Free income tax filing for seniors The Commonwealth of the Northern Mariana Islands. Free income tax filing for seniors Guam. Free income tax filing for seniors The U. Free income tax filing for seniors S. Free income tax filing for seniors Virgin Islands. Free income tax filing for seniors These issues usually involve allocations of income, deductions, credits, or allowances between related persons; determinations of residency; and determinations of the source of income and related expenses. Free income tax filing for seniors Competent Authority Assistance The tax coordination agreements between the United States and the possession tax departments contain provisions allowing the competent authorities of the United States and the relevant possession to resolve, by mutual agreement, inconsistent tax treatment by the two jurisdictions. Free income tax filing for seniors How to make your request. Free income tax filing for seniors   Your request for competent authority assistance must include all the information listed in Revenue Procedure 2006-23, 2006-20 I. Free income tax filing for seniors R. Free income tax filing for seniors B. Free income tax filing for seniors 900 available at www. Free income tax filing for seniors irs. Free income tax filing for seniors gov/pub/irs-irbs/irb06-49. Free income tax filing for seniors pdf. Free income tax filing for seniors    Also, see Notice 2013-78, which provides proposed updates to the procedures for requesting U. Free income tax filing for seniors S. Free income tax filing for seniors competent authority assistance under tax treaties. Free income tax filing for seniors As noted, an update to Revenue Procedure 2006-23 will be published in the future. Free income tax filing for seniors   Your request must be in the form of a letter addressed to the Deputy Commissioner (International) LB&I. Free income tax filing for seniors It must contain a statement that competent authority assistance is requested under the mutual agreement procedure with the possession. Free income tax filing for seniors You (or a person having authority to sign your federal return) must sign and date the request. Free income tax filing for seniors    Send your written request for U. Free income tax filing for seniors S. Free income tax filing for seniors assistance under this procedure to:   Deputy Commissioner (International) Large Business and International Division Internal Revenue Service 1111 Constitution Avenue, N. Free income tax filing for seniors W. Free income tax filing for seniors  Routing: M4-365 Washington, DC 20224 (Attention: TAIT) Nonresident aliens generally must present their initial request for assistance to the relevant possession tax agency. Free income tax filing for seniors Credit or Refund In addition to the tax assistance request, if you seek a credit or refund of any overpayment of U. Free income tax filing for seniors S. Free income tax filing for seniors tax paid on the income in question, you should file a claim on Form 1040X, Amended U. Free income tax filing for seniors S. Free income tax filing for seniors Individual Income Tax Return. Free income tax filing for seniors Indicate on the form that a request for assistance under the mutual agreement procedure with the possession has been filed. Free income tax filing for seniors Attach a copy of the request to the form. Free income tax filing for seniors Also, you should take whatever steps must be taken under the possession tax code to prevent the expiration of the statutory period for filing a claim for credit or refund of a possession tax. Free income tax filing for seniors See Revenue Procedure 2006-54 (or its successor), section 9, for complete information. 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The Free Income Tax Filing For Seniors

Free income tax filing for seniors Publication 547 - Main Content Table of Contents CasualtyFamily pet. Free income tax filing for seniors Progressive deterioration. Free income tax filing for seniors Special Procedure for Damage From Corrosive Drywall Theft Loss on Deposits Proof of Loss Figuring a LossGain from reimbursement. Free income tax filing for seniors Business or income-producing property. Free income tax filing for seniors Loss of inventory. Free income tax filing for seniors Leased property. Free income tax filing for seniors Exception for personal-use real property. Free income tax filing for seniors Decrease in Fair Market Value Adjusted Basis Insurance and Other Reimbursements Deduction Limits2% Rule $100 Rule 10% Rule Figuring the Deduction Figuring a GainPostponement of Gain When To Report Gains and LossesLoss on deposits. Free income tax filing for seniors Lessee's loss. Free income tax filing for seniors Disaster Area LossesDisaster loss to inventory. Free income tax filing for seniors Main home in disaster area. Free income tax filing for seniors Unsafe home. Free income tax filing for seniors Time limit for making choice. Free income tax filing for seniors Revoking your choice. Free income tax filing for seniors Figuring the loss deduction. Free income tax filing for seniors How to report the loss on Form 1040X. Free income tax filing for seniors Records. Free income tax filing for seniors Need a copy of your tax return for the preceding year? Postponed Tax Deadlines Contacting the Federal Emergency Management Agency (FEMA) How To Report Gains and LossesProperty held 1 year or less. Free income tax filing for seniors Property held more than 1 year. Free income tax filing for seniors Depreciable property. Free income tax filing for seniors Adjustments to Basis If Deductions Are More Than Income How To Get Tax HelpLow Income Taxpayer Clinics Casualty A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Free income tax filing for seniors A sudden event is one that is swift, not gradual or progressive. Free income tax filing for seniors An unexpected event is one that is ordinarily unanticipated and unintended. Free income tax filing for seniors An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. Free income tax filing for seniors Generally, casualty losses are deductible during the taxable year that the loss occurred. Free income tax filing for seniors See Table 3, later. Free income tax filing for seniors Deductible losses. Free income tax filing for seniors   Deductible casualty losses can result from a number of different causes, including the following. Free income tax filing for seniors Car accidents (but see Nondeductible losses , next, for exceptions). Free income tax filing for seniors Earthquakes. Free income tax filing for seniors Fires (but see Nondeductible losses , next, for exceptions). Free income tax filing for seniors Floods. Free income tax filing for seniors Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses , later. Free income tax filing for seniors Mine cave-ins. Free income tax filing for seniors Shipwrecks. Free income tax filing for seniors Sonic booms. Free income tax filing for seniors Storms, including hurricanes and tornadoes. Free income tax filing for seniors Terrorist attacks. Free income tax filing for seniors Vandalism. Free income tax filing for seniors Volcanic eruptions. Free income tax filing for seniors Nondeductible losses. Free income tax filing for seniors   A casualty loss is not deductible if the damage or destruction is caused by the following. Free income tax filing for seniors Accidentally breaking articles such as glassware or china under normal conditions. Free income tax filing for seniors A family pet (explained below). Free income tax filing for seniors A fire if you willfully set it, or pay someone else to set it. Free income tax filing for seniors A car accident if your willful negligence or willful act caused it. Free income tax filing for seniors The same is true if the willful act or willful negligence of someone acting for you caused the accident. Free income tax filing for seniors Progressive deterioration (explained below). Free income tax filing for seniors However, see Special Procedure for Damage From Corrosive Drywall , later. Free income tax filing for seniors Family pet. Free income tax filing for seniors   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed earlier under Casualty are met. Free income tax filing for seniors Example. Free income tax filing for seniors Your antique oriental rug was damaged by your new puppy before it was housebroken. Free income tax filing for seniors Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. Free income tax filing for seniors Progressive deterioration. Free income tax filing for seniors   Loss of property due to progressive deterioration is not deductible as a casualty loss. Free income tax filing for seniors This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. Free income tax filing for seniors The following are examples of damage due to progressive deterioration. Free income tax filing for seniors The steady weakening of a building due to normal wind and weather conditions. Free income tax filing for seniors The deterioration and damage to a water heater that bursts. Free income tax filing for seniors However, the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty. Free income tax filing for seniors Most losses of property caused by droughts. Free income tax filing for seniors To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit. Free income tax filing for seniors Termite or moth damage. Free income tax filing for seniors The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. Free income tax filing for seniors However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. Free income tax filing for seniors Special Procedure for Damage From Corrosive Drywall Under a special procedure, you can deduct the amounts you paid to repair damage to your home and household appliances due to corrosive drywall. Free income tax filing for seniors Under this procedure, you treat the amounts paid for repairs as a casualty loss in the year of payment. Free income tax filing for seniors For example, amounts you paid for repairs in 2013 are deductible on your 2013 tax return and amounts you paid for repairs in 2012 are deductible on your 2012 tax return. Free income tax filing for seniors Note. Free income tax filing for seniors If you paid for any repairs before 2013 and you choose to follow this special procedure, you can amend your return for the earlier year by filing Form 1040X, Amended U. Free income tax filing for seniors S. Free income tax filing for seniors Individual Income Tax Return, and attaching a completed Form 4684 for the appropriate year. Free income tax filing for seniors Form 4684 for the appropriate year can be found at IRS. Free income tax filing for seniors gov. Free income tax filing for seniors Generally, Form 1040X must be filed within 3 years after the date the original return was filed or within 2 years after the date the tax was paid, whichever is later. Free income tax filing for seniors Corrosive drywall. Free income tax filing for seniors   For purposes of this special procedure, “corrosive drywall” means drywall that is identified as problem drywall under the two-step identification method published by the Consumer Product Safety Commission (CPSC) and the Department of Housing and Urban Development (HUD) in their interim guidance dated January 28, 2010, as revised by the CPSC and HUD. Free income tax filing for seniors The revised identification guidance and remediation guidelines are available at www. Free income tax filing for seniors cpsc. Free income tax filing for seniors gov/Safety-Education/Safety-Education-Centers/Drywall. Free income tax filing for seniors Special instructions for completing Form 4684. Free income tax filing for seniors   If you choose to follow this special procedure, complete Form 4684, Section A, according to the instructions below. Free income tax filing for seniors The IRS will not challenge your treatment of damage resulting from corrosive drywall as a casualty loss if you determine and report the loss as explained below. Free income tax filing for seniors Top margin of Form 4684. Free income tax filing for seniors   Enter “Revenue Procedure 2010-36”. Free income tax filing for seniors Line 1. Free income tax filing for seniors   Enter the information required by the line 1 instructions. Free income tax filing for seniors Line 2. Free income tax filing for seniors   Skip this line. Free income tax filing for seniors Line 3. Free income tax filing for seniors   Enter the amount of insurance or other reimbursements you received (including through litigation). Free income tax filing for seniors If none, enter -0-. Free income tax filing for seniors Lines 4–7. Free income tax filing for seniors   Skip these lines. Free income tax filing for seniors Line 8. Free income tax filing for seniors   Enter the amount you paid to repair the damage to your home and household appliances due to corrosive drywall. Free income tax filing for seniors Enter only the amounts you paid to restore your home to the condition existing immediately before the damage. Free income tax filing for seniors Do not enter any amounts you paid for improvements or additions that increased the value of your home above its pre-loss value. Free income tax filing for seniors If you replaced a household appliance instead of repairing it, enter the lesser of: The current cost to replace the original appliance, or The basis of the original appliance (generally its cost). Free income tax filing for seniors Line 9. Free income tax filing for seniors   If line 8 is more than line 3, do one of the following. Free income tax filing for seniors If you have a pending claim for reimbursement (or you intend to pursue reimbursement), enter 75% of the difference between lines 3 and 8. Free income tax filing for seniors If item (1) does not apply to you, enter the full amount of the difference between lines 3 and 8. Free income tax filing for seniors If line 8 is less than or equal to line 3, you cannot claim a casualty loss deduction using this special procedure. Free income tax filing for seniors    If you have a pending claim for reimbursement (or you intend to pursue reimbursement), you may have income or an additional deduction in a later tax year depending on the actual amount of reimbursement received. Free income tax filing for seniors See Reimbursement Received After Deducting Loss, later. Free income tax filing for seniors Lines 10–18. Free income tax filing for seniors   Complete these lines according to the Instructions for Form 4684. Free income tax filing for seniors Choosing not to follow this special procedure. Free income tax filing for seniors   If you choose not to follow this special procedure, you are subject to all of the provisions that apply to the deductibility of casualty losses, and you must complete lines 1–9 according to the Instructions for Form 4684. Free income tax filing for seniors This means, for example, that you must establish that the damage, destruction, or loss of property resulted from an identifiable event as defined earlier under Casualty . Free income tax filing for seniors Furthermore, you must have proof that shows the following. Free income tax filing for seniors The loss is properly deductible in the tax year you claimed it and not in some other year. Free income tax filing for seniors See When To Report Gains and Losses , later. Free income tax filing for seniors The amount of the claimed loss. Free income tax filing for seniors See Proof of Loss , later. Free income tax filing for seniors No claim for reimbursement of any portion of the loss exists for which there is a reasonable prospect of recovery. Free income tax filing for seniors See When To Report Gains and Losses , later. Free income tax filing for seniors Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. Free income tax filing for seniors The taking of property must be illegal under the law of the state where it occurred and it must have been done with criminal intent. Free income tax filing for seniors You do not need to show a conviction for theft. Free income tax filing for seniors Theft includes the taking of money or property by the following means. Free income tax filing for seniors Blackmail. Free income tax filing for seniors Burglary. Free income tax filing for seniors Embezzlement. Free income tax filing for seniors Extortion. Free income tax filing for seniors Kidnapping for ransom. Free income tax filing for seniors Larceny. Free income tax filing for seniors Robbery. Free income tax filing for seniors The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. Free income tax filing for seniors Decline in market value of stock. Free income tax filing for seniors   You cannot deduct as a theft loss the decline in market value of stock acquired on the open market for investment if the decline is caused by disclosure of accounting fraud or other illegal misconduct by the officers or directors of the corporation that issued the stock. Free income tax filing for seniors However, you can deduct as a capital loss the loss you sustain when you sell or exchange the stock or the stock becomes completely worthless. Free income tax filing for seniors You report a capital loss on Schedule D (Form 1040). Free income tax filing for seniors For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. Free income tax filing for seniors Mislaid or lost property. Free income tax filing for seniors    The simple disappearance of money or property is not a theft. Free income tax filing for seniors However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Free income tax filing for seniors Sudden, unexpected, and unusual events were defined earlier under Casualty . Free income tax filing for seniors Example. Free income tax filing for seniors A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Free income tax filing for seniors The diamond falls from the ring and is never found. Free income tax filing for seniors The loss of the diamond is a casualty. Free income tax filing for seniors Losses from Ponzi-type investment schemes. Free income tax filing for seniors   The IRS has issued the following guidance to assist taxpayers who are victims of losses from Ponzi-type investment schemes: Revenue Ruling 2009-9, 2009-14 I. Free income tax filing for seniors R. Free income tax filing for seniors B. Free income tax filing for seniors 735 (available at www. Free income tax filing for seniors irs. Free income tax filing for seniors gov/irb/2009-14_IRB/ar07. Free income tax filing for seniors html). Free income tax filing for seniors Revenue Procedure 2009-20, 2009-14 I. Free income tax filing for seniors R. Free income tax filing for seniors B. Free income tax filing for seniors 749 (available at www. Free income tax filing for seniors irs. Free income tax filing for seniors gov/irb/2009-14_IRB/ar11. Free income tax filing for seniors html). Free income tax filing for seniors Revenue Procedure 2011-58, 2011-50 I. Free income tax filing for seniors R. Free income tax filing for seniors B. Free income tax filing for seniors 847 (available at www. Free income tax filing for seniors irs. Free income tax filing for seniors gov/irb/2011-50_IRB/ar11. Free income tax filing for seniors html). Free income tax filing for seniors If you qualify to use Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, and you choose to follow the procedures in the guidance, first fill out Section C of Form 4684 to determine the amount to enter on Section B, line 28. Free income tax filing for seniors Skip lines 19 to 27, but you must fill out Section B, lines 29 to 39, as appropriate. Free income tax filing for seniors Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Free income tax filing for seniors You do not need to complete Appendix A. Free income tax filing for seniors For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. Free income tax filing for seniors   If you choose not to use the procedures in Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate. Free income tax filing for seniors Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. Free income tax filing for seniors If you incurred this type of loss, you can choose one of the following ways to deduct the loss. Free income tax filing for seniors As a casualty loss. Free income tax filing for seniors As an ordinary loss. Free income tax filing for seniors As a nonbusiness bad debt. Free income tax filing for seniors Casualty loss or ordinary loss. Free income tax filing for seniors   You can choose to deduct a loss on deposits as a casualty loss or as an ordinary loss for any year in which you can reasonably estimate how much of your deposits you have lost in an insolvent or bankrupt financial institution. Free income tax filing for seniors The choice generally is made on the return you file for that year and applies to all your losses on deposits for the year in that particular financial institution. Free income tax filing for seniors If you treat the loss as a casualty or ordinary loss, you cannot treat the same amount of the loss as a nonbusiness bad debt when it actually becomes worthless. Free income tax filing for seniors However, you can take a nonbusiness bad debt deduction for any amount of loss that is more than the estimated amount you deducted as a casualty or ordinary loss. Free income tax filing for seniors Once you make the choice, you cannot change it without permission from the Internal Revenue Service. Free income tax filing for seniors   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Free income tax filing for seniors The maximum amount you can claim is $20,000 ($10,000 if you are married filing separately) reduced by any expected state insurance proceeds. Free income tax filing for seniors Your loss is subject to the 2%-of-adjusted-gross-income limit. Free income tax filing for seniors You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. Free income tax filing for seniors Nonbusiness bad debt. Free income tax filing for seniors   If you do not choose to deduct the loss as a casualty loss or as an ordinary loss, you must wait until the year the actual loss is determined and deduct the loss as a nonbusiness bad debt in that year. Free income tax filing for seniors How to report. Free income tax filing for seniors   The kind of deduction you choose for your loss on deposits determines how you report your loss. Free income tax filing for seniors See Table 1. Free income tax filing for seniors More information. Free income tax filing for seniors   For more information, see Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the Instructions for Form 4684. Free income tax filing for seniors Deducted loss recovered. Free income tax filing for seniors   If you recover an amount you deducted as a loss in an earlier year, you may have to include the amount recovered in your income for the year of recovery. Free income tax filing for seniors If any part of the original deduction did not reduce your tax in the earlier year, you do not have to include that part of the recovery in your income. Free income tax filing for seniors For more information, see Recoveries in Publication 525. Free income tax filing for seniors Proof of Loss To deduct a casualty or theft loss, you must be able to show that there was a casualty or theft. Free income tax filing for seniors You also must be able to support the amount you take as a deduction. Free income tax filing for seniors Casualty loss proof. Free income tax filing for seniors   For a casualty loss, you should be able to show all of the following. Free income tax filing for seniors The type of casualty (car accident, fire, storm, etc. Free income tax filing for seniors ) and when it occurred. Free income tax filing for seniors That the loss was a direct result of the casualty. Free income tax filing for seniors That you were the owner of the property, or if you leased the property from someone else, that you were contractually liable to the owner for the damage. Free income tax filing for seniors Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Free income tax filing for seniors Theft loss proof. Free income tax filing for seniors   For a theft loss, you should be able to show all of the following. Free income tax filing for seniors When you discovered that your property was missing. Free income tax filing for seniors That your property was stolen. Free income tax filing for seniors That you were the owner of the property. Free income tax filing for seniors Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Free income tax filing for seniors    It is important that you have records that will prove your deduction. Free income tax filing for seniors If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. Free income tax filing for seniors Figuring a Loss To determine your deduction for a casualty or theft loss, you must first figure your loss. Free income tax filing for seniors Table 1. Free income tax filing for seniors Reporting Loss on Deposits IF you choose to report the loss as a(n). Free income tax filing for seniors . Free income tax filing for seniors . Free income tax filing for seniors   THEN report it on. Free income tax filing for seniors . Free income tax filing for seniors . Free income tax filing for seniors casualty loss   Form 4684 and Schedule A  (Form 1040). Free income tax filing for seniors ordinary loss   Schedule A (Form 1040). Free income tax filing for seniors nonbusiness bad debt   Form 8949 and Schedule D (Form 1040). Free income tax filing for seniors Amount of loss. Free income tax filing for seniors   Figure the amount of your loss using the following steps. Free income tax filing for seniors Determine your adjusted basis in the property before the casualty or theft. Free income tax filing for seniors Determine the decrease in fair market value (FMV) of the property as a result of the casualty or theft. Free income tax filing for seniors From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. Free income tax filing for seniors For personal-use property and property used in performing services as an employee, apply the deduction limits, discussed later, to determine the amount of your deductible loss. Free income tax filing for seniors Gain from reimbursement. Free income tax filing for seniors   If your reimbursement is more than your adjusted basis in the property, you have a gain. Free income tax filing for seniors This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. Free income tax filing for seniors If you have a gain, you may have to pay tax on it, or you may be able to postpone reporting the gain. Free income tax filing for seniors See Figuring a Gain , later. Free income tax filing for seniors Business or income-producing property. Free income tax filing for seniors   If you have business or income-producing property, such as rental property, and it is stolen or completely destroyed, the decrease in FMV is not considered. Free income tax filing for seniors Your loss is figured as follows:   Your adjusted basis in the property     MINUS     Any salvage value     MINUS     Any insurance or other reimbursement you  receive or expect to receive   Loss of inventory. Free income tax filing for seniors   There are two ways you can deduct a casualty or theft loss of inventory, including items you hold for sale to customers. Free income tax filing for seniors   One way is to deduct the loss through the increase in the cost of goods sold by properly reporting your opening and closing inventories. Free income tax filing for seniors Do not claim this loss again as a casualty or theft loss. Free income tax filing for seniors If you take the loss through the increase in the cost of goods sold, include any insurance or other reimbursement you receive for the loss in gross income. Free income tax filing for seniors   The other way is to deduct the loss separately. Free income tax filing for seniors If you deduct it separately, eliminate the affected inventory items from the cost of goods sold by making a downward adjustment to opening inventory or purchases. Free income tax filing for seniors Reduce the loss by the reimbursement you received. Free income tax filing for seniors Do not include the reimbursement in gross income. Free income tax filing for seniors If you do not receive the reimbursement by the end of the year, you may not claim a loss to the extent you have a reasonable prospect of recovery. Free income tax filing for seniors Leased property. Free income tax filing for seniors   If you are liable for casualty damage to property you lease, your loss is the amount you must pay to repair the property minus any insurance or other reimbursement you receive or expect to receive. Free income tax filing for seniors Separate computations. Free income tax filing for seniors   Generally, if a single casualty or theft involves more than one item of property, you must figure the loss on each item separately. Free income tax filing for seniors Then combine the losses to determine the total loss from that casualty or theft. Free income tax filing for seniors Exception for personal-use real property. Free income tax filing for seniors   In figuring a casualty loss on personal-use real property, the entire property (including any improvements, such as buildings, trees, and shrubs) is treated as one item. Free income tax filing for seniors Figure the loss using the smaller of the following. Free income tax filing for seniors The decrease in FMV of the entire property. Free income tax filing for seniors The adjusted basis of the entire property. Free income tax filing for seniors   See Real property under Figuring the Deduction, later. Free income tax filing for seniors Decrease in Fair Market Value Fair market value (FMV) is the price for which you could sell your property to a willing buyer when neither of you has to sell or buy and both of you know all the relevant facts. Free income tax filing for seniors The decrease in FMV used to figure the amount of a casualty or theft loss is the difference between the property's fair market value immediately before and immediately after the casualty or theft. Free income tax filing for seniors FMV of stolen property. Free income tax filing for seniors   The FMV of property immediately after a theft is considered to be zero because you no longer have the property. Free income tax filing for seniors Example. Free income tax filing for seniors Several years ago, you purchased silver dollars at face value for $150. Free income tax filing for seniors This is your adjusted basis in the property. Free income tax filing for seniors Your silver dollars were stolen this year. Free income tax filing for seniors The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. Free income tax filing for seniors Your theft loss is $150. Free income tax filing for seniors Recovered stolen property. Free income tax filing for seniors   Recovered stolen property is your property that was stolen and later returned to you. Free income tax filing for seniors If you recovered property after you had already taken a theft loss deduction, you must refigure your loss using the smaller of the property's adjusted basis (explained later) or the decrease in FMV from the time just before it was stolen until the time it was recovered. Free income tax filing for seniors Use this amount to refigure your total loss for the year in which the loss was deducted. Free income tax filing for seniors   If your refigured loss is less than the loss you deducted, you generally have to report the difference as income in the recovery year. Free income tax filing for seniors But report the difference only up to the amount of the loss that reduced your tax. Free income tax filing for seniors For more information on the amount to report, see Recoveries in Publication 525. Free income tax filing for seniors Figuring Decrease in FMV — Items To Consider To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. Free income tax filing for seniors However, other measures also can be used to establish certain decreases. Free income tax filing for seniors See Appraisal and Cost of cleaning up or making repairs , next. Free income tax filing for seniors Appraisal. Free income tax filing for seniors   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterwards should be made by a competent appraiser. Free income tax filing for seniors The appraiser must recognize the effects of any general market decline that may occur along with the casualty. Free income tax filing for seniors This information is needed to limit any deduction to the actual loss resulting from damage to the property. Free income tax filing for seniors   Several factors are important in evaluating the accuracy of an appraisal, including the following. Free income tax filing for seniors The appraiser's familiarity with your property before and after the casualty or theft. Free income tax filing for seniors The appraiser's knowledge of sales of comparable property in the area. Free income tax filing for seniors The appraiser's knowledge of conditions in the area of the casualty. Free income tax filing for seniors The appraiser's method of appraisal. Free income tax filing for seniors You may be able to use an appraisal that you used to get a federal loan (or a federal loan guarantee) as the result of a federally declared disaster to establish the amount of your disaster loss. Free income tax filing for seniors For more information on disasters, see Disaster Area Losses, later. Free income tax filing for seniors Cost of cleaning up or making repairs. Free income tax filing for seniors   The cost of repairing damaged property is not part of a casualty loss. Free income tax filing for seniors Neither is the cost of cleaning up after a casualty. Free income tax filing for seniors But you can use the cost of cleaning up or of making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. Free income tax filing for seniors The repairs are actually made. Free income tax filing for seniors The repairs are necessary to bring the property back to its condition before the casualty. Free income tax filing for seniors The amount spent for repairs is not excessive. Free income tax filing for seniors The repairs take care of the damage only. Free income tax filing for seniors The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. Free income tax filing for seniors Landscaping. Free income tax filing for seniors   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. Free income tax filing for seniors You may be able to measure your loss by what you spend on the following. Free income tax filing for seniors Removing destroyed or damaged trees and shrubs, minus any salvage you receive. Free income tax filing for seniors Pruning and other measures taken to preserve damaged trees and shrubs. Free income tax filing for seniors Replanting necessary to restore the property to its approximate value before the casualty. Free income tax filing for seniors Car value. Free income tax filing for seniors   Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. Free income tax filing for seniors You can use the books' retail values and modify them by factors such as the mileage and condition of your car to figure its value. Free income tax filing for seniors The prices are not official, but they may be useful in determining value and suggesting relative prices for comparison with current sales and offerings in your area. Free income tax filing for seniors If your car is not listed in the books, determine its value from other sources. Free income tax filing for seniors A dealer's offer for your car as a trade-in on a new car is not usually a measure of its true value. Free income tax filing for seniors Figuring Decrease in FMV — Items Not To Consider You generally should not consider the following items when attempting to establish the decrease in FMV of your property. Free income tax filing for seniors Cost of protection. Free income tax filing for seniors   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. Free income tax filing for seniors The amount you spend on insurance or to board up your house against a storm is not part of your loss. Free income tax filing for seniors If the property is business property, these expenses are deductible as business expenses. Free income tax filing for seniors   If you make permanent improvements to your property to protect it against a casualty or theft, add the cost of these improvements to your basis in the property. Free income tax filing for seniors An example would be the cost of a dike to prevent flooding. Free income tax filing for seniors Exception. Free income tax filing for seniors   You cannot increase your basis in the property by, or deduct as a business expense, any expenditures you made with respect to qualified disaster mitigation payments (discussed later under Disaster Area Losses ). Free income tax filing for seniors Related expenses. Free income tax filing for seniors   The incidental expenses due to a casualty or theft, such as expenses for the treatment of personal injuries, for temporary housing, or for a rental car, are not part of your casualty or theft loss. Free income tax filing for seniors However, they may be deductible as business expenses if the damaged or stolen property is business property. Free income tax filing for seniors Replacement cost. Free income tax filing for seniors   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. Free income tax filing for seniors Example. Free income tax filing for seniors You bought a new chair 4 years ago for $300. Free income tax filing for seniors In April, a fire destroyed the chair. Free income tax filing for seniors You estimate that it would cost $500 to replace it. Free income tax filing for seniors If you had sold the chair before the fire, you estimate that you could have received only $100 for it because it was 4 years old. Free income tax filing for seniors The chair was not insured. Free income tax filing for seniors Your loss is $100, the FMV of the chair before the fire. Free income tax filing for seniors It is not $500, the replacement cost. Free income tax filing for seniors Sentimental value. Free income tax filing for seniors   Do not consider sentimental value when determining your loss. Free income tax filing for seniors If a family portrait, heirloom, or keepsake is damaged, destroyed, or stolen, you must base your loss on its FMV, as limited by your adjusted basis in the property. Free income tax filing for seniors Decline in market value of property in or near casualty area. Free income tax filing for seniors   A decrease in the value of your property because it is in or near an area that suffered a casualty, or that might again suffer a casualty, is not to be taken into consideration. Free income tax filing for seniors You have a loss only for actual casualty damage to your property. Free income tax filing for seniors However, if your home is in a federally declared disaster area, see Disaster Area Losses , later. Free income tax filing for seniors Costs of photographs and appraisals. Free income tax filing for seniors   Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. Free income tax filing for seniors Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. Free income tax filing for seniors   Appraisals are used to figure the decrease in FMV because of a casualty or theft. Free income tax filing for seniors See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. Free income tax filing for seniors   The costs of photographs and appraisals used as evidence of the value and condition of property damaged as a result of a casualty are not a part of the loss. Free income tax filing for seniors They are expenses in determining your tax liability. Free income tax filing for seniors You can claim these costs as a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit on Schedule A (Form 1040). Free income tax filing for seniors Adjusted Basis The measure of your investment in the property you own is its basis. Free income tax filing for seniors For property you buy, your basis is usually its cost to you. Free income tax filing for seniors For property you acquire in some other way, such as inheriting it, receiving it as a gift, or getting it in a nontaxable exchange, you must figure your basis in another way, as explained in Publication 551. Free income tax filing for seniors If you inherited the property from someone who died in 2010 and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Free income tax filing for seniors Adjustments to basis. Free income tax filing for seniors    While you own the property, various events may take place that change your basis. Free income tax filing for seniors Some events, such as additions or permanent improvements to the property, increase basis. Free income tax filing for seniors Others, such as earlier casualty losses and depreciation deductions, decrease basis. Free income tax filing for seniors When you add the increases to the basis and subtract the decreases from the basis, the result is your adjusted basis. Free income tax filing for seniors See Publication 551 for more information on figuring the basis of your property. Free income tax filing for seniors Insurance and Other Reimbursements If you receive an insurance or other type of reimbursement, you must subtract the reimbursement when you figure your loss. Free income tax filing for seniors You do not have a casualty or theft loss to the extent you are reimbursed. Free income tax filing for seniors If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. Free income tax filing for seniors You must reduce your loss even if you do not receive payment until a later tax year. Free income tax filing for seniors See Reimbursement Received After Deducting Loss , later. Free income tax filing for seniors Failure to file a claim for reimbursement. Free income tax filing for seniors   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. Free income tax filing for seniors Otherwise, you cannot deduct this loss as a casualty or theft. Free income tax filing for seniors The portion of the loss usually not covered by insurance (for example, a deductible) is not subject to this rule. Free income tax filing for seniors Example. Free income tax filing for seniors You have a car insurance policy with a $1,000 deductible. Free income tax filing for seniors Because your insurance did not cover the first $1,000 of an auto collision, the $1,000 would be deductible (subject to the $100 and 10% rules, discussed later). Free income tax filing for seniors This is true, even if you do not file an insurance claim, because your insurance policy would never have reimbursed you for the deductible. Free income tax filing for seniors Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. Free income tax filing for seniors Other types of reimbursements are discussed next. Free income tax filing for seniors Also see the Instructions for Form 4684. Free income tax filing for seniors Employer's emergency disaster fund. Free income tax filing for seniors   If you receive money from your employer's emergency disaster fund and you must use that money to rehabilitate or replace property on which you are claiming a casualty loss deduction, you must take that money into consideration in computing the casualty loss deduction. Free income tax filing for seniors Take into consideration only the amount you used to replace your destroyed or damaged property. Free income tax filing for seniors Example. Free income tax filing for seniors Your home was extensively damaged by a tornado. Free income tax filing for seniors Your loss after reimbursement from your insurance company was $10,000. Free income tax filing for seniors Your employer set up a disaster relief fund for its employees. Free income tax filing for seniors Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. Free income tax filing for seniors You received $4,000 from the fund and spent the entire amount on repairs to your home. Free income tax filing for seniors In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer's fund. Free income tax filing for seniors Your casualty loss before applying the deduction limits (discussed later) is $6,000. Free income tax filing for seniors Cash gifts. Free income tax filing for seniors   If you receive excludable cash gifts as a disaster victim and there are no limits on how you can use the money, you do not reduce your casualty loss by these excludable cash gifts. Free income tax filing for seniors This applies even if you use the money to pay for repairs to property damaged in the disaster. Free income tax filing for seniors Example. Free income tax filing for seniors Your home was damaged by a hurricane. Free income tax filing for seniors Relatives and neighbors made cash gifts to you that were excludable from your income. Free income tax filing for seniors You used part of the cash gifts to pay for repairs to your home. Free income tax filing for seniors There were no limits or restrictions on how you could use the cash gifts. Free income tax filing for seniors It was an excludable gift, so the money you received and used to pay for repairs to your home does not reduce your casualty loss on the damaged home. Free income tax filing for seniors Insurance payments for living expenses. Free income tax filing for seniors   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. Free income tax filing for seniors You lose the use of your main home because of a casualty. Free income tax filing for seniors Government authorities do not allow you access to your main home because of a casualty or threat of one. Free income tax filing for seniors Inclusion in income. Free income tax filing for seniors   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. Free income tax filing for seniors Report this amount on Form 1040, line 21. Free income tax filing for seniors However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. Free income tax filing for seniors See Qualified disaster relief payments , later, under Disaster Area Losses. Free income tax filing for seniors   A temporary increase in your living expenses is the difference between the actual living expenses you and your family incurred during the period you could not use your home and your normal living expenses for that period. Free income tax filing for seniors Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. Free income tax filing for seniors Generally, these expenses include the amounts you pay for the following. Free income tax filing for seniors Renting suitable housing. Free income tax filing for seniors Transportation. Free income tax filing for seniors Food. Free income tax filing for seniors Utilities. Free income tax filing for seniors Miscellaneous services. Free income tax filing for seniors Normal living expenses consist of these same expenses that you would have incurred but did not because of the casualty or the threat of one. Free income tax filing for seniors Example. Free income tax filing for seniors As a result of a fire, you vacated your apartment for a month and moved to a motel. Free income tax filing for seniors You normally pay $525 a month for rent. Free income tax filing for seniors None was charged for the month the apartment was vacated. Free income tax filing for seniors Your motel rent for this month was $1,200. Free income tax filing for seniors You normally pay $200 a month for food. Free income tax filing for seniors Your food expenses for the month you lived in the motel were $400. Free income tax filing for seniors You received $1,100 from your insurance company to cover your living expenses. Free income tax filing for seniors You determine the payment you must include in income as follows. Free income tax filing for seniors 1. Free income tax filing for seniors Insurance payment for living expenses $1,100 2. Free income tax filing for seniors Actual expenses during the month you are unable to use your home because of the fire $1,600   3. Free income tax filing for seniors Normal living expenses 725   4. Free income tax filing for seniors Temporary increase in living expenses: Subtract line 3  from line 2 875 5. Free income tax filing for seniors Amount of payment includible in income: Subtract line 4 from line 1 $ 225 Tax year of inclusion. Free income tax filing for seniors   You include the taxable part of the insurance payment in income for the year you regain the use of your main home or, if later, for the year you receive the taxable part of the insurance payment. Free income tax filing for seniors Example. Free income tax filing for seniors Your main home was destroyed by a tornado in August 2011. Free income tax filing for seniors You regained use of your home in November 2012. Free income tax filing for seniors The insurance payments you received in 2011 and 2012 were $1,500 more than the temporary increase in your living expenses during those years. Free income tax filing for seniors You include this amount in income on your 2012 Form 1040. Free income tax filing for seniors If, in 2013, you receive further payments to cover the living expenses you had in 2011 and 2012, you must include those payments in income on your 2013 Form 1040. Free income tax filing for seniors Disaster relief. Free income tax filing for seniors   Food, medical supplies, and other forms of assistance you receive do not reduce your casualty loss, unless they are replacements for lost or destroyed property. Free income tax filing for seniors Table 2. Free income tax filing for seniors Deduction Limit Rules for Personal-Use and Employee Property       $100 Rule 10% Rule 2% Rule General Application You must reduce each casualty or theft loss by $100 when figuring your deduction. Free income tax filing for seniors Apply this rule to personal-use property after you have figured the amount of your loss. Free income tax filing for seniors You must reduce your total casualty or theft loss by 10% of your adjusted gross income. Free income tax filing for seniors Apply this rule to personal-use property after you reduce each loss by $100 (the $100 rule). Free income tax filing for seniors You must reduce your total casualty or theft loss by 2% of your adjusted gross income. Free income tax filing for seniors Apply this rule to property you used in performing services as an employee after you have figured the amount of your loss and added it to your job expenses and most other miscellaneous itemized deductions. Free income tax filing for seniors Single Event Apply this rule only once, even if many pieces of property are affected. Free income tax filing for seniors Apply this rule only once, even if many pieces of property are affected. Free income tax filing for seniors Apply this rule only once, even if many pieces of property are affected. Free income tax filing for seniors More Than One Event Apply to the loss from each event. Free income tax filing for seniors Apply to the total of all your losses from all events. Free income tax filing for seniors Apply to the total of all your losses from all events. Free income tax filing for seniors More Than One Person— With Loss From the   Same Event  (other than a married couple  filing jointly) Apply separately to each person. Free income tax filing for seniors Apply separately to each person. Free income tax filing for seniors Apply separately to each person. Free income tax filing for seniors Married Couple—  With Loss From the  Same Event Filing Joint Return Apply as if you were one person. Free income tax filing for seniors Apply as if you were one person. Free income tax filing for seniors Apply as if you were one person. Free income tax filing for seniors Filing Separate Return Apply separately to each spouse. Free income tax filing for seniors Apply separately to each spouse. Free income tax filing for seniors Apply separately to each spouse. Free income tax filing for seniors More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. Free income tax filing for seniors Apply separately to each owner of jointly owned property. Free income tax filing for seniors Apply separately to each owner of jointly owned property. Free income tax filing for seniors    Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster, are not taxable income to you. Free income tax filing for seniors For more information, see Qualified disaster relief payments under Disaster Area Losses, later. Free income tax filing for seniors   Disaster unemployment assistance payments are unemployment benefits that are taxable. Free income tax filing for seniors   Generally, disaster relief grants received under the Robert T. Free income tax filing for seniors Stafford Disaster Relief and Emergency Assistance Act are not included in your income. Free income tax filing for seniors See Federal disaster relief grants , later, under Disaster Area Losses. Free income tax filing for seniors Loan proceeds. Free income tax filing for seniors   Do not reduce your casualty loss by loan proceeds you use to rehabilitate or replace property on which you are claiming a casualty loss deduction. Free income tax filing for seniors If you have a federal loan that is canceled (forgiven), see Federal loan canceled , later, under Disaster Area Losses. Free income tax filing for seniors Reimbursement Received After Deducting Loss If you figured your casualty or theft loss using the amount of your expected reimbursement, you may have to adjust your tax return for the tax year in which you get your actual reimbursement. Free income tax filing for seniors This section explains the adjustment you may have to make. Free income tax filing for seniors Actual reimbursement less than expected. Free income tax filing for seniors   If you later receive less reimbursement than you expected, include that difference as a loss with your other losses (if any) on your return for the year in which you can reasonably expect no more reimbursement. Free income tax filing for seniors Example. Free income tax filing for seniors Your personal car had a FMV of $2,000 when it was destroyed in a collision with another car in 2012. Free income tax filing for seniors The accident was due to the negligence of the other driver. Free income tax filing for seniors At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. Free income tax filing for seniors You did not have a deductible loss in 2012. Free income tax filing for seniors In January 2013, the court awards you a judgment of $2,000. Free income tax filing for seniors However, in July it becomes apparent that you will be unable to collect any amount from the other driver. Free income tax filing for seniors Since this is your only casualty or theft loss, you can deduct the loss in 2013 that is figured by applying the Deduction Limits (discussed later). Free income tax filing for seniors Actual reimbursement more than expected. Free income tax filing for seniors   If you later receive more reimbursement than you expected, after you have claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. Free income tax filing for seniors However, if any part of the original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. Free income tax filing for seniors You do not refigure your tax for the year you claimed the deduction. Free income tax filing for seniors See Recoveries in Publication 525 to find out how much extra reimbursement to include in income. Free income tax filing for seniors Example. Free income tax filing for seniors In 2012, a hurricane destroyed your motorboat. Free income tax filing for seniors Your loss was $3,000, and you estimated that your insurance would cover $2,500 of it. Free income tax filing for seniors You did not itemize deductions on your 2012 return, so you could not deduct the loss. Free income tax filing for seniors When the insurance company reimburses you for the loss, you do not report any of the reimbursement as income. Free income tax filing for seniors This is true even if it is for the full $3,000 because you did not deduct the loss on your 2012 return. Free income tax filing for seniors The loss did not reduce your tax. Free income tax filing for seniors    If the total of all the reimbursements you receive is more than your adjusted basis in the destroyed or stolen property, you will have a gain on the casualty or theft. Free income tax filing for seniors If you have already taken a deduction for a loss and you receive the reimbursement in a later year, you may have to include the gain in your income for the later year. Free income tax filing for seniors Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. Free income tax filing for seniors You may be able to postpone reporting any remaining gain as explained under Postponement of Gain, later. Free income tax filing for seniors Actual reimbursement same as expected. Free income tax filing for seniors   If you receive exactly the reimbursement you expected to receive, you do not have to include any of the reimbursement in your income and you cannot deduct any additional loss. Free income tax filing for seniors Example. Free income tax filing for seniors In December 2013, you had a collision while driving your personal car. Free income tax filing for seniors Repairs to the car cost $950. Free income tax filing for seniors You had $100 deductible collision insurance. Free income tax filing for seniors Your insurance company agreed to reimburse you for the rest of the damage. Free income tax filing for seniors Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. Free income tax filing for seniors Due to the $100 rule, you cannot deduct the $100 you paid as the deductible. Free income tax filing for seniors When you receive the $850 from the insurance company in 2014, do not report it as income. Free income tax filing for seniors Deduction Limits After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. Free income tax filing for seniors The deduction for casualty and theft losses of employee property and personal-use property is limited. Free income tax filing for seniors A loss on employee property is subject to the 2% rule, discussed next. Free income tax filing for seniors With certain exceptions, a loss on property you own for your personal use is subject to the $100 and 10% rules, discussed later. Free income tax filing for seniors The 2%, $100, and 10% rules are also summarized in Table 2 . Free income tax filing for seniors Losses on business property (other than employee property) and income-producing property are not subject to these rules. Free income tax filing for seniors However, if your casualty or theft loss involved a home you used for business or rented out, your deductible loss may be limited. Free income tax filing for seniors See the Instructions for Form 4684, Section B. Free income tax filing for seniors If the casualty or theft loss involved property used in a passive activity, see Form 8582, Passive Activity Loss Limitations, and its instructions. Free income tax filing for seniors 2% Rule The casualty and theft loss deduction for employee property, when added to your job expenses and most other miscellaneous itemized deductions on Schedule A (Form 1040) or Form 1040NR, Schedule A, must be reduced by 2% of your adjusted gross income. Free income tax filing for seniors Employee property is property used in performing services as an employee. Free income tax filing for seniors $100 Rule After you have figured your casualty or theft loss on personal-use property, as discussed earlier, you must reduce that loss by $100. Free income tax filing for seniors This reduction applies to each total casualty or theft loss. Free income tax filing for seniors It does not matter how many pieces of property are involved in an event. Free income tax filing for seniors Only a single $100 reduction applies. Free income tax filing for seniors Example. Free income tax filing for seniors You have $750 deductible collision insurance on your car. Free income tax filing for seniors The car is damaged in a collision. Free income tax filing for seniors The insurance company pays you for the damage minus the $750 deductible. Free income tax filing for seniors The amount of the casualty loss is based solely on the deductible. Free income tax filing for seniors The casualty loss is $650 ($750 − $100) because the first $100 of a casualty loss on personal-use property is not deductible. Free income tax filing for seniors Single event. Free income tax filing for seniors   Generally, events closely related in origin cause a single casualty. Free income tax filing for seniors It is a single casualty when the damage is from two or more closely related causes, such as wind and flood damage caused by the same storm. Free income tax filing for seniors A single casualty may also damage two or more pieces of property, such as a hailstorm that damages both your home and your car parked in your driveway. Free income tax filing for seniors Example 1. Free income tax filing for seniors A thunderstorm destroyed your pleasure boat. Free income tax filing for seniors You also lost some boating equipment in the storm. Free income tax filing for seniors Your loss was $5,000 on the boat and $1,200 on the equipment. Free income tax filing for seniors Your insurance company reimbursed you $4,500 for the damage to your boat. Free income tax filing for seniors You had no insurance coverage on the equipment. Free income tax filing for seniors Your casualty loss is from a single event and the $100 rule applies once. Free income tax filing for seniors Figure your loss before applying the 10% rule (discussed later) as follows. Free income tax filing for seniors     Boat Equipment 1. Free income tax filing for seniors Loss $5,000 $1,200 2. Free income tax filing for seniors Subtract insurance 4,500 -0- 3. Free income tax filing for seniors Loss after reimbursement $ 500 $1,200 4. Free income tax filing for seniors Total loss $1,700 5. Free income tax filing for seniors Subtract $100 100 6. Free income tax filing for seniors Loss before 10% rule $1,600 Example 2. Free income tax filing for seniors Thieves broke into your home in January and stole a ring and a fur coat. Free income tax filing for seniors You had a loss of $200 on the ring and $700 on the coat. Free income tax filing for seniors This is a single theft. Free income tax filing for seniors The $100 rule applies to the total $900 loss. Free income tax filing for seniors Example 3. Free income tax filing for seniors In September, hurricane winds blew the roof off your home. Free income tax filing for seniors Flood waters caused by the hurricane further damaged your home and destroyed your furniture and personal car. Free income tax filing for seniors This is considered a single casualty. Free income tax filing for seniors The $100 rule is applied to your total loss from the flood waters and the wind. Free income tax filing for seniors More than one loss. Free income tax filing for seniors   If you have more than one casualty or theft loss during your tax year, you must reduce each loss by $100. Free income tax filing for seniors Example. Free income tax filing for seniors Your family car was damaged in an accident in January. Free income tax filing for seniors Your loss after the insurance reimbursement was $75. Free income tax filing for seniors In February, your car was damaged in another accident. Free income tax filing for seniors This time your loss after the insurance reimbursement was $90. Free income tax filing for seniors Apply the $100 rule to each separate casualty loss. Free income tax filing for seniors Since neither accident resulted in a loss of over $100, you are not entitled to any deduction for these accidents. Free income tax filing for seniors More than one person. Free income tax filing for seniors   If two or more individuals (other than a husband and wife filing a joint return) have losses from the same casualty or theft, the $100 rule applies separately to each individual. Free income tax filing for seniors Example. Free income tax filing for seniors A fire damaged your house and also damaged the personal property of your house guest. Free income tax filing for seniors You must reduce your loss by $100. Free income tax filing for seniors Your house guest must reduce his or her loss by $100. Free income tax filing for seniors Married taxpayers. Free income tax filing for seniors   If you and your spouse file a joint return, you are treated as one individual in applying the $100 rule. Free income tax filing for seniors It does not matter whether you own the property jointly or separately. Free income tax filing for seniors   If you and your spouse have a casualty or theft loss and you file separate returns, each of you must reduce your loss by $100. Free income tax filing for seniors This is true even if you own the property jointly. Free income tax filing for seniors If one spouse owns the property, only that spouse can figure a loss deduction on a separate return. Free income tax filing for seniors   If the casualty or theft loss is on property you own as tenants by the entirety, each of you can figure your deduction on only one-half of the loss on separate returns. Free income tax filing for seniors Neither of you can figure your deduction on the entire loss on a separate return. Free income tax filing for seniors Each of you must reduce the loss by $100. Free income tax filing for seniors More than one owner. Free income tax filing for seniors   If two or more individuals (other than a husband and wife filing a joint return) have a loss on property jointly owned, the $100 rule applies separately to each. Free income tax filing for seniors For example, if two sisters live together in a home they own jointly and they have a casualty loss on the home, the $100 rule applies separately to each sister. Free income tax filing for seniors 10% Rule You must reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. Free income tax filing for seniors Apply this rule after you reduce each loss by $100. Free income tax filing for seniors For more information, see the Form 4684 instructions. Free income tax filing for seniors If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. Free income tax filing for seniors Example. Free income tax filing for seniors In June, you discovered that your house had been burglarized. Free income tax filing for seniors Your loss after insurance reimbursement was $2,000. Free income tax filing for seniors Your adjusted gross income for the year you discovered the theft is $29,500. Free income tax filing for seniors Figure your theft loss as follows. Free income tax filing for seniors 1. Free income tax filing for seniors Loss after insurance $2,000 2. Free income tax filing for seniors Subtract $100 100 3. Free income tax filing for seniors Loss after $100 rule $1,900 4. Free income tax filing for seniors Subtract 10% of $29,500 AGI $2,950 5. Free income tax filing for seniors Theft loss deduction $-0- You do not have a theft loss deduction because your loss ($1,900) is less than 10% of your adjusted gross income ($2,950). Free income tax filing for seniors More than one loss. Free income tax filing for seniors   If you have more than one casualty or theft loss during your tax year, reduce each loss by any reimbursement and by $100. Free income tax filing for seniors Then you must reduce the total of all your losses by 10% of your adjusted gross income. Free income tax filing for seniors Example. Free income tax filing for seniors In March, you had a car accident that totally destroyed your car. Free income tax filing for seniors You did not have collision insurance on your car, so you did not receive any insurance reimbursement. Free income tax filing for seniors Your loss on the car was $1,800. Free income tax filing for seniors In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items you had stored there. Free income tax filing for seniors Your loss on the basement items after reimbursement was $2,100. Free income tax filing for seniors Your adjusted gross income for the year that the accident and fire occurred is $25,000. Free income tax filing for seniors You figure your casualty loss deduction as follows. Free income tax filing for seniors     Car Basement 1. Free income tax filing for seniors Loss $1,800 $2,100 2. Free income tax filing for seniors Subtract $100 per incident 100 100 3. Free income tax filing for seniors Loss after $100 rule $1,700 $2,000 4. Free income tax filing for seniors Total loss $3,700 5. Free income tax filing for seniors Subtract 10% of $25,000 AGI 2,500 6. Free income tax filing for seniors Casualty loss deduction $1,200 Married taxpayers. Free income tax filing for seniors   If you and your spouse file a joint return, you are treated as one individual in applying the 10% rule. Free income tax filing for seniors It does not matter if you own the property jointly or separately. Free income tax filing for seniors   If you file separate returns, the 10% rule applies to each return on which a loss is claimed. Free income tax filing for seniors More than one owner. Free income tax filing for seniors   If two or more individuals (other than husband and wife filing a joint return) have a loss on property that is owned jointly, the 10% rule applies separately to each. Free income tax filing for seniors Gains and losses. Free income tax filing for seniors   If you have casualty or theft gains as well as losses to personal-use property, you must compare your total gains to your total losses. Free income tax filing for seniors Do this after you have reduced each loss by any reimbursements and by $100 but before you have reduced the losses by 10% of your adjusted gross income. Free income tax filing for seniors Casualty or theft gains do not include gains you choose to postpone. Free income tax filing for seniors See Postponement of Gain, later. Free income tax filing for seniors Losses more than gains. Free income tax filing for seniors   If your losses are more than your recognized gains, subtract your gains from your losses and reduce the result by 10% of your adjusted gross income. Free income tax filing for seniors The rest, if any, is your deductible loss from personal-use property. Free income tax filing for seniors Example. Free income tax filing for seniors Your theft loss after reducing it by reimbursements and by $100 is $2,700. Free income tax filing for seniors Your casualty gain is $700. Free income tax filing for seniors Your loss is more than your gain, so you must reduce your $2,000 net loss ($2,700 − $700) by 10% of your adjusted gross income. Free income tax filing for seniors Gains more than losses. Free income tax filing for seniors   If your recognized gains are more than your losses, subtract your losses from your gains. Free income tax filing for seniors The difference is treated as a capital gain and must be reported on Schedule D (Form 1040). Free income tax filing for seniors The 10% rule does not apply to your gains. Free income tax filing for seniors Example. Free income tax filing for seniors Your theft loss is $600 after reducing it by reimbursements and by $100. Free income tax filing for seniors Your casualty gain is $1,600. Free income tax filing for seniors Because your gain is more than your loss, you must report the $1,000 net gain ($1,600 − $600) on Schedule D (Form 1040). Free income tax filing for seniors More information. Free income tax filing for seniors   For information on how to figure recognized gains, see Figuring a Gain , later. Free income tax filing for seniors Figuring the Deduction Generally, you must figure your loss separately for each item stolen, damaged, or destroyed. Free income tax filing for seniors However, a special rule applies to real property you own for personal use. Free income tax filing for seniors Real property. Free income tax filing for seniors   In figuring a loss to real estate you own for personal use, all improvements (such as buildings and ornamental trees and the land containing the improvements) are considered together. Free income tax filing for seniors Example 1. Free income tax filing for seniors In June, a fire destroyed your lakeside cottage, which cost $144,800 (including $14,500 for the land) several years ago. Free income tax filing for seniors (Your land was not damaged. Free income tax filing for seniors ) This was your only casualty or theft loss for the year. Free income tax filing for seniors The FMV of the property immediately before the fire was $180,000 ($145,000 for the cottage and $35,000 for the land). Free income tax filing for seniors The FMV immediately after the fire was $35,000 (value of the land). Free income tax filing for seniors You collected $130,000 from the insurance company. Free income tax filing for seniors Your adjusted gross income for the year the fire occurred is $80,000. Free income tax filing for seniors Your deduction for the casualty loss is $6,700, figured in the following manner. Free income tax filing for seniors 1. Free income tax filing for seniors Adjusted basis of the entire property (cost in this example) $144,800 2. Free income tax filing for seniors FMV of entire property  before fire $180,000 3. Free income tax filing for seniors FMV of entire property after fire 35,000 4. Free income tax filing for seniors Decrease in FMV of entire property (line 2 − line 3) $145,000 5. Free income tax filing for seniors Loss (smaller of line 1 or line 4) $144,800 6. Free income tax filing for seniors Subtract insurance 130,000 7. Free income tax filing for seniors Loss after reimbursement $14,800 8. Free income tax filing for seniors Subtract $100 100 9. Free income tax filing for seniors Loss after $100 rule $14,700 10. Free income tax filing for seniors Subtract 10% of $80,000 AGI 8,000 11. Free income tax filing for seniors Casualty loss deduction $ 6,700 Example 2. Free income tax filing for seniors You bought your home a few years ago. Free income tax filing for seniors You paid $150,000 ($10,000 for the land and $140,000 for the house). Free income tax filing for seniors You also spent an additional $2,000 for landscaping. Free income tax filing for seniors This year a fire destroyed your home. Free income tax filing for seniors The fire also damaged the shrubbery and trees in your yard. Free income tax filing for seniors The fire was your only casualty or theft loss this year. Free income tax filing for seniors Competent appraisers valued the property as a whole at $175,000 before the fire, but only $50,000 after the fire. Free income tax filing for seniors Shortly after the fire, the insurance company paid you $95,000 for the loss. Free income tax filing for seniors Your adjusted gross income for this year is $70,000. Free income tax filing for seniors You figure your casualty loss deduction as follows. Free income tax filing for seniors 1. Free income tax filing for seniors Adjusted basis of the entire property (cost of land, building, and landscaping) $152,000 2. Free income tax filing for seniors FMV of entire property  before fire $175,000 3. Free income tax filing for seniors FMV of entire property after fire 50,000 4. Free income tax filing for seniors Decrease in FMV of entire property (line 2 − line 3) $125,000 5. Free income tax filing for seniors Loss (smaller of line 1 or line 4) $125,000 6. Free income tax filing for seniors Subtract insurance 95,000 7. Free income tax filing for seniors Loss after reimbursement $30,000 8. Free income tax filing for seniors Subtract $100 100 9. Free income tax filing for seniors Loss after $100 rule $29,900 10. Free income tax filing for seniors Subtract 10% of $70,000 AGI 7,000 11. Free income tax filing for seniors Casualty loss deduction $ 22,900 Personal property. Free income tax filing for seniors   Personal property is any property that is not real property. Free income tax filing for seniors If your personal property is stolen or is damaged or destroyed by a casualty, you must figure your loss separately for each item of property. Free income tax filing for seniors Then combine these separate losses to figure the total loss. Free income tax filing for seniors Reduce the total loss by $100 and 10% of your adjusted gross income to figure the loss deduction. Free income tax filing for seniors Example 1. Free income tax filing for seniors In August, a storm destroyed your pleasure boat, which cost $18,500. Free income tax filing for seniors This was your only casualty or theft loss for the year. Free income tax filing for seniors Its FMV immediately before the storm was $17,000. Free income tax filing for seniors You had no insurance, but were able to salvage the motor of the boat and sell it for $200. Free income tax filing for seniors Your adjusted gross income for the year the casualty occurred is $70,000. Free income tax filing for seniors Although the motor was sold separately, it is part of the boat and not a separate item of property. Free income tax filing for seniors You figure your casualty loss deduction as follows. Free income tax filing for seniors 1. Free income tax filing for seniors Adjusted basis (cost in this example) $18,500 2. Free income tax filing for seniors FMV before storm $17,000 3. Free income tax filing for seniors FMV after storm 200 4. Free income tax filing for seniors Decrease in FMV  (line 2 − line 3) $16,800 5. Free income tax filing for seniors Loss (smaller of line 1 or line 4) $16,800 6. Free income tax filing for seniors Subtract insurance -0- 7. Free income tax filing for seniors Loss after reimbursement $16,800 8. Free income tax filing for seniors Subtract $100 100 9. Free income tax filing for seniors Loss after $100 rule $16,700 10. Free income tax filing for seniors Subtract 10% of $70,000 AGI 7,000 11. Free income tax filing for seniors Casualty loss deduction $ 9,700 Example 2. Free income tax filing for seniors In June, you were involved in an auto accident that totally destroyed your personal car and your antique pocket watch. Free income tax filing for seniors You had bought the car for $30,000. Free income tax filing for seniors The FMV of the car just before the accident was $17,500. Free income tax filing for seniors Its FMV just after the accident was $180 (scrap value). Free income tax filing for seniors Your insurance company reimbursed you $16,000. Free income tax filing for seniors Your watch was not insured. Free income tax filing for seniors You had purchased it for $250. Free income tax filing for seniors Its FMV just before the accident was $500. Free income tax filing for seniors Your adjusted gross income for the year the accident occurred is $97,000. Free income tax filing for seniors Your casualty loss deduction is zero, figured as follows. Free income tax filing for seniors     Car Watch 1. Free income tax filing for seniors Adjusted basis (cost) $30,000 $250 2. Free income tax filing for seniors FMV before accident $17,500 $500 3. Free income tax filing for seniors FMV after accident 180 -0- 4. Free income tax filing for seniors Decrease in FMV (line 2 − line 3) $17,320 $500 5. Free income tax filing for seniors Loss (smaller of line 1 or line 4) $17,320 $250 6. Free income tax filing for seniors Subtract insurance 16,000 -0- 7. Free income tax filing for seniors Loss after reimbursement $1,320 $250 8. Free income tax filing for seniors Total loss $1,570 9. Free income tax filing for seniors Subtract $100 100 10. Free income tax filing for seniors Loss after $100 rule $1,470 11. Free income tax filing for seniors Subtract 10% of $97,000 AGI 9,700 12. Free income tax filing for seniors Casualty loss deduction $ -0- Both real and personal properties. Free income tax filing for seniors   When a casualty involves both real and personal properties, you must figure the loss separately for each type of property. Free income tax filing for seniors However, you apply a single $100 reduction to the total loss. Free income tax filing for seniors Then, you apply the 10% rule to figure the casualty loss deduction. Free income tax filing for seniors Example. Free income tax filing for seniors In July, a hurricane damaged your home, which cost you $164,000 including land. Free income tax filing for seniors The FMV of the property (both building and land) immediately before the storm was $170,000 and its FMV immediately after the storm was $100,000. Free income tax filing for seniors Your household furnishings were also damaged. Free income tax filing for seniors You separately figured the loss on each damaged household item and arrived at a total loss of $600. Free income tax filing for seniors You collected $50,000 from the insurance company for the damage to your home, but your household furnishings were not insured. Free income tax filing for seniors Your adjusted gross income for the year the hurricane occurred is $65,000. Free income tax filing for seniors You figure your casualty loss deduction from the hurricane in the following manner. Free income tax filing for seniors 1. Free income tax filing for seniors Adjusted basis of real property (cost in this example) $164,000 2. Free income tax filing for seniors FMV of real property before hurricane $170,000 3. Free income tax filing for seniors FMV of real property after hurricane 100,000 4. Free income tax filing for seniors Decrease in FMV of real property (line 2 − line 3) $70,000 5. Free income tax filing for seniors Loss on real property (smaller of line 1 or line 4) $70,000 6. Free income tax filing for seniors Subtract insurance 50,000 7. Free income tax filing for seniors Loss on real property after reimbursement $20,000 8. Free income tax filing for seniors Loss on furnishings $600 9. Free income tax filing for seniors Subtract insurance -0- 10. Free income tax filing for seniors Loss on furnishings after reimbursement $600 11. Free income tax filing for seniors Total loss (line 7 plus line 10) $20,600 12. Free income tax filing for seniors Subtract $100 100 13. Free income tax filing for seniors Loss after $100 rule $20,500 14. Free income tax filing for seniors Subtract 10% of $65,000 AGI 6,500 15. Free income tax filing for seniors Casualty loss deduction $14,000 Property used partly for business and partly for personal purposes. Free income tax filing for seniors   When property is used partly for personal purposes and partly for business or income-producing purposes, the casualty or theft loss deduction must be figured separately for the personal-use portion and for the business or income-producing portion. Free income tax filing for seniors You must figure each loss separately because the losses attributed to these two uses are figured in two different ways. Free income tax filing for seniors When figuring each loss, allocate the total cost or basis, the FMV before and after the casualty or theft loss, and the insurance or other reimbursement between the business and personal use of the property. Free income tax filing for seniors The $100 rule and the 10% rule apply only to the casualty or theft loss on the personal-use portion of the property. Free income tax filing for seniors Example. Free income tax filing for seniors You own a building that you constructed on leased land. Free income tax filing for seniors You use half of the building for your business and you live in the other half. Free income tax filing for seniors The cost of the building was $400,000. Free income tax filing for seniors You made no further improvements or additions to it. Free income tax filing for seniors A flood in March damaged the entire building. Free income tax filing for seniors The FMV of the building was $380,000 immediately before the flood and $320,000 afterwards. Free income tax filing for seniors Your insurance company reimbursed you $40,000 for the flood damage. Free income tax filing for seniors Depreciation on the business part of the building before the flood totaled $24,000. Free income tax filing for seniors Your adjusted gross income for the year the flood occurred is $125,000. Free income tax filing for seniors You have a deductible business casualty loss of $10,000. Free income tax filing for seniors You do not have a deductible personal casualty loss because of the 10% rule. Free income tax filing for seniors You figure your loss as follows. Free income tax filing for seniors     Business   Personal     Part   Part 1. Free income tax filing for seniors Cost (total $400,000) $200,000   $200,000 2. Free income tax filing for seniors Subtract depreciation 24,000   -0- 3. Free income tax filing for seniors Adjusted basis $176,000   $200,000 4. Free income tax filing for seniors FMV before flood (total $380,000) $190,000   $190,000 5. Free income tax filing for seniors FMV after flood (total $320,000) 160,000   160,000 6. Free income tax filing for seniors Decrease in FMV  (line 4 − line 5) $30,000   $30,000 7. Free income tax filing for seniors Loss (smaller of line 3 or line 6) $30,000   $30,000 8. Free income tax filing for seniors Subtract insurance 20,000   20,000 9. Free income tax filing for seniors Loss after reimbursement $10,000   $10,000 10. Free income tax filing for seniors Subtract $100 on personal-use property -0-   100 11. Free income tax filing for seniors Loss after $100 rule $10,000   $9,900 12. Free income tax filing for seniors Subtract 10% of $125,000 AGI on personal-use property -0-   12,500 13. Free income tax filing for seniors Deductible business loss $10,000     14. Free income tax filing for seniors Deductible personal loss $-0- Figuring a Gain If you receive an insurance payment or other reimbursement that is more than your adjusted basis in the destroyed, damaged, or stolen property, you have a gain from the casualty or theft. Free income tax filing for seniors Your gain is figured as follows. Free income tax filing for seniors The amount you receive (discussed next), minus Your adjusted basis in the property at the time of the casualty or theft. Free income tax filing for seniors See Adjusted Basis , earlier, for information on adjusted basis. Free income tax filing for seniors Even if the decrease in FMV of your property is smaller than the adjusted basis of your property, use your adjusted basis to figure the gain. Free income tax filing for seniors Amount you receive. Free income tax filing for seniors   The amount you receive includes any money plus the value of any property you receive minus any expenses you have in obtaining reimbursement. Free income tax filing for seniors It also includes any reimbursement used to pay off a mortgage or other lien on the damaged, destroyed, or stolen property. Free income tax filing for seniors Example. Free income tax filing for seniors A hurricane destroyed your personal residence and the insurance company awarded you $145,000. Free income tax filing for seniors You received $140,000 in cash. Free income tax filing for seniors The remaining $5,000 was paid directly to the holder of a mortgage on the property. Free income tax filing for seniors The amount you received includes the $5,000 reimbursement paid on the mortgage. Free income tax filing for seniors Main home destroyed. Free income tax filing for seniors   If you have a gain because your main home was destroyed, you generally can exclude the gain from your income as if you had sold or exchanged your home. Free income tax filing for seniors You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). Free income tax filing for seniors To exclude a gain, you generally must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date it was destroyed. Free income tax filing for seniors For information on this exclusion, see Publication 523. Free income tax filing for seniors If your gain is more than the amount you can exclude, but you buy replacement property, you may be able to postpone reporting the excess gain. Free income tax filing for seniors See Postponement of Gain , later. Free income tax filing for seniors Reporting a gain. Free income tax filing for seniors   You generally must report your gain as income in the year you receive the reimbursement. Free income tax filing for seniors However, you do not have to report your gain if you meet certain requirements and choose to postpone reporting the gain according to the rules explained under Postponement of Gain, next. Free income tax filing for seniors   For information on how to report a gain, see How To Report Gains and Losses , later. Free income tax filing for seniors    If you have a casualty or theft gain on personal-use property that you choose to postpone reporting (as explained next) and you also have another casualty or theft loss on personal-use property, do not consider the gain you are postponing when figuring your casualty or theft loss deduction. Free income tax filing for seniors See 10% Rule under Deduction Limits, earlier. Free income tax filing for seniors Postponement of Gain Do not report a gain if you receive reimbursement in the form of property similar or related in service or use to the destroyed or stolen property. Free income tax filing for seniors Your basis in the new property is generally the same as your adjusted basis in the property it replaces. Free income tax filing for seniors You must ordinarily report the gain on your stolen or destroyed property if you receive money or unlike property as reimbursement. Free income tax filing for seniors However, you can choose to postpone reporting the gain if you purchase property that is similar or related in service or use to the stolen or destroyed property within a specified replacement period, discussed later. Free income tax filing for seniors You also can choose to postpone reporting the gain if you purchase a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the property. Free income tax filing for seniors See Controlling interest in a corporation , later. Free income tax filing for seniors If you have a gain on damaged property, you can postpone reporting the gain if you spend the reimbursement to restore the property. Free income tax filing for seniors To postpone reporting all the gain, the cost of your replacement property must be at least as much as the reimbursement you receive. Free income tax filing for seniors If the cost of the replacement property is less than the reimbursement, you must include the gain in your income up to the amount of the unspent reimbursement. Free income tax filing for seniors Example. Free income tax filing for seniors In 1970, you bought an oceanfront cottage for your personal use at a cost of $18,000. Free income tax filing for seniors You made no further improvements or additions to it. Free income tax filing for seniors When a storm destroyed the cottage this January, the cottage was worth $250,000. Free income tax filing for seniors You received $146,000 from the insurance company in March. Free income tax filing for seniors You had a gain of $128,000 ($146,000 − $18,000). Free income tax filing for seniors You spent $144,000 to rebuild the cottage. Free income tax filing for seniors Since this is less than the insurance proceeds received, you must include $2,000 ($146,000 − $144,000) in your income. Free income tax filing for seniors Buying replacement property from a related person. Free income tax filing for seniors   You cannot postpone reporting a gain from a casualty or theft if you buy the replacement property from a related person (discussed later). Free income tax filing for seniors This rule applies to the following taxpayers. Free income tax filing for seniors C corporations. Free income tax filing for seniors Partnerships in which more than 50% of the capital or profits interests is owned by C corporations. Free income tax filing for seniors All others (including individuals, partnerships — other than those in (2) — and S corporations) if the total realized gain for the tax year on all destroyed or stolen properties on which there are realized gains is more than $100,000. Free income tax filing for seniors For casualties and thefts described in (3) above, gains cannot be offset by any losses when determining whether the total gain is more than $100,000. Free income tax filing for seniors If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. Free income tax filing for seniors If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. Free income tax filing for seniors Exception. Free income tax filing for seniors   This rule does not apply if the related person acquired the property from an unrelated person within the period of time allowed for replacing the destroyed or stolen property. Free income tax filing for seniors Related persons. Free income tax filing for seniors   Under this rule, related persons include, for example, a parent and child, a brother and sister, a corporation and an individual who owns more than 50% of its outstanding stock, and two partnerships in which the same C corporations own more than 50% of the capital or profits interests. Free income tax filing for seniors For more information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. Free income tax filing for seniors Death of a taxpayer. Free income tax filing for seniors   If a taxpayer dies after having a gain but before buying replacement property, the gain must be reported for the year in which the decedent realized the gain. Free income tax filing for seniors The executor of the estate or the person succeeding to the funds from the casualty or theft cannot postpone reporting the gain by buying replacement property. Free income tax filing for seniors Replacement Property You must buy replacement property for the specific purpose of replacing your destroyed or stolen property. Free income tax filing for seniors Property you acquire as a gift or inheritance does not qualify. Free income tax filing for seniors You do not have to use the same funds you receive as