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Free State Filing Turbotax

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Free State Filing Turbotax

Free state filing turbotax Publication 516 - Main Content Table of Contents U. Free state filing turbotax S. Free state filing turbotax Tax ReturnFiling Information Foreign Bank Accounts U. Free state filing turbotax S. Free state filing turbotax Government Payments Foreign Earned Income Exclusion Tax Treaty Benefits Allowances, Differentials, and Special Pay Other Income Deductions and Credits — Business Expenses Deductions and Credits — Nonbusiness Expenses Foreign Taxes Local (Foreign) Tax ReturnTax Treaty Benefits Other Agreements Double Withholding How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Free state filing turbotax U. Free state filing turbotax S. Free state filing turbotax Tax Return Filing Information If you are a U. Free state filing turbotax S. Free state filing turbotax citizen or green card holder living or traveling outside the United States, you are generally required to file income tax returns in the same way as those residing in the United States. Free state filing turbotax However, the special rules explained in the following discussions may apply to you. Free state filing turbotax See also Tax Treaty Benefits, later. Free state filing turbotax When To File and Pay Most individual tax returns cover a calendar year, January through December. Free state filing turbotax The regular due date for these tax returns is April 15 of the following year. Free state filing turbotax If April 15 falls on a Saturday, Sunday, or legal holiday, your tax return is considered timely filed if it is filed by the next business day that is not a Saturday, Sunday, or legal holiday. Free state filing turbotax If you get an extension, you are allowed additional time to file and, in some circumstances, pay your tax. Free state filing turbotax You must pay interest on any tax not paid by the regular due date. Free state filing turbotax Your return is considered filed on time if it is mailed from and officially postmarked in a foreign country on or before the due date (including extensions), or given to a designated international private delivery service before midnight of the last date prescribed for filing. Free state filing turbotax See your tax form instructions for a list of private delivery services that have been designated by the IRS to meet this “timely mailing as timely filing/paying” rule for tax returns and payments. Free state filing turbotax If your return is filed late, the postmark or delivery service date does not determine the date of filing. Free state filing turbotax In that case, your return is considered filed when it is received by the IRS. Free state filing turbotax Extensions You may be able to get an extension of time to file your return and pay your tax. Free state filing turbotax Automatic 2-month extension. Free state filing turbotax   You can get an automatic 2-month extension (to June 15, for a calendar year return) to file your return and pay your tax if you are a U. Free state filing turbotax S. Free state filing turbotax citizen or resident and, on the regular due date of your return, you are living outside the United States and Puerto Rico and your main place of business or post of duty is outside the United States and Puerto Rico. Free state filing turbotax To get this extension, you must attach a statement to your return explaining how you qualified. Free state filing turbotax You will owe interest on any tax not paid by the regular due date of your return. Free state filing turbotax Married taxpayers. Free state filing turbotax   If you file a joint return, either you or your spouse can qualify for the automatic extension. Free state filing turbotax If you and your spouse file separate returns, the extension applies only to the spouse who qualifies. Free state filing turbotax Additional extension. Free state filing turbotax   You can apply for an additional extension of time to file your return by filing Form 4868. Free state filing turbotax You must file Form 4868 by the due date for your income tax return. Free state filing turbotax   Generally, you must file it by April 15. Free state filing turbotax However, if you qualify for the automatic 2-month extension, you generally must file Form 4868 by June 15. Free state filing turbotax Check the box on line 8 of Form 4868. Free state filing turbotax Payment of tax. Free state filing turbotax   You should estimate and pay any additional tax you owe when you file Form 4868 to avoid being charged a late-payment penalty. Free state filing turbotax The late-payment penalty applies if, through withholding, etc. Free state filing turbotax , you paid less than 90% of your actual tax liability by the original due date of your income tax return. Free state filing turbotax Even if the late-payment penalty does not apply, you will be charged interest on any unpaid tax liability from the original due date of the return until the tax is paid. Free state filing turbotax Electronic filing. Free state filing turbotax   You can file for the additional extension by phone, using your home computer, or through a tax professional. Free state filing turbotax See Form 4868 for more information. Free state filing turbotax Limit on additional extensions. Free state filing turbotax   You generally cannot get a total extension of more than 6 months. Free state filing turbotax However, if you are outside the United States and meet certain tests, you may be able to get a longer extension. Free state filing turbotax   For more information, see Publication 54. Free state filing turbotax Foreign Bank Accounts You must file Form TD F 90-22. Free state filing turbotax 1 if at any time during the year you had an interest in, or signature or other authority over, a bank account, securities account, or other financial account in a foreign country. Free state filing turbotax This applies if the combined assets in the account(s) were more than $10,000. Free state filing turbotax Do not include accounts in a U. Free state filing turbotax S. Free state filing turbotax military banking facility operated by a U. Free state filing turbotax S. Free state filing turbotax financial institution. Free state filing turbotax File the completed form by June 30 of the following year with the Department of the Treasury at the address shown on that form. Free state filing turbotax Do not attach it to Form 1040. Free state filing turbotax If you are required to file Form TD F 90-22. Free state filing turbotax 1 but do not do so, you may have to pay a penalty of up to $10,000 (more if the failure to file is willful). Free state filing turbotax You also may be required to file Form 8938 with your U. Free state filing turbotax S. Free state filing turbotax income tax return to report your interest in foreign bank accounts and other specified foreign financial assets. Free state filing turbotax For taxpayers living abroad, you generally do not have to file Form 8938 unless the total value of your specified foreign financial assets is more than $200,000 ($400,000 if married filing jointly) on the last day of the tax year or more than $300,000 ($600,000 if married filing jointly) at any time during the tax year. Free state filing turbotax For more information, see Form 8938 and its instructions. Free state filing turbotax U. Free state filing turbotax S. Free state filing turbotax Government Payments Wages earned for performing services outside the United States is foreign income, regardless of your employer. Free state filing turbotax If you are a U. Free state filing turbotax S. Free state filing turbotax citizen or resident alien, you must report all income from worldwide sources on your tax return unless it is exempt by U. Free state filing turbotax S. Free state filing turbotax law. Free state filing turbotax This applies to earned income (such as wages) as well as unearned income (such as interest, dividends, and capital gains). Free state filing turbotax If you are a nonresident alien, your income from sources outside the United States is not subject to U. Free state filing turbotax S. Free state filing turbotax tax. Free state filing turbotax Foreign Earned Income Exclusion Employees of the U. Free state filing turbotax S. Free state filing turbotax Government are not entitled to the foreign earned income exclusion or the foreign housing exclusion/deduction under section 911 because “foreign earned income ”does not include amounts paid by the U. Free state filing turbotax S. Free state filing turbotax Government as an employee. Free state filing turbotax But see Other Employment, later. Free state filing turbotax Special Situations In the following two situations, your pay is from the U. Free state filing turbotax S. Free state filing turbotax Government and does not qualify for the foreign earned income exclusion. Free state filing turbotax U. Free state filing turbotax S. Free state filing turbotax agency reimbursed by foreign country. Free state filing turbotax   If you are a U. Free state filing turbotax S. Free state filing turbotax Government employee paid by a U. Free state filing turbotax S. Free state filing turbotax agency to perform services in a foreign country, your pay is from the U. Free state filing turbotax S. Free state filing turbotax Government and does not qualify the foreign earned income exclusion or the foreign housing exclusion/deduction. Free state filing turbotax This is true even if the U. Free state filing turbotax S. Free state filing turbotax agency is reimbursed by the foreign government. Free state filing turbotax Employees of post exchanges, etc. Free state filing turbotax   If you are an employee of an Armed Forces post exchange, officers' and enlisted personnel club, Embassy commissary, or similar instrumentality of the U. Free state filing turbotax S. Free state filing turbotax Government, the earnings you receive are paid by the U. Free state filing turbotax S. Free state filing turbotax Government. Free state filing turbotax This is true whether they are paid from appropriated or nonappropriated funds. Free state filing turbotax These earnings are not eligible for the foreign earned income exclusion or the foreign housing exclusion/deduction. Free state filing turbotax Tax Treaty Benefits Most income tax treaties contain an article relating to remuneration from government services. Free state filing turbotax Even if you are working in a foreign country with which the United States has an income tax treaty in force and the treaty article that applies to government services says that your government pay is taxable only in the foreign country, the treaty will likely contain a “saving clause”, which provides that the United States may tax its citizens and its residents as if the treaty had not come into effect. Free state filing turbotax In some treaties, the government service article is an exception to the saving clause, but often only for individuals who are not U. Free state filing turbotax S. Free state filing turbotax citizens or green card holders. Free state filing turbotax Consequently, if you are a U. Free state filing turbotax S. Free state filing turbotax citizen or green card holder, you will generally not be entitled to reduce your U. Free state filing turbotax S. Free state filing turbotax tax on your government pay. Free state filing turbotax If you are neither a U. Free state filing turbotax S. Free state filing turbotax citizen nor green card holder, and you are treated as a resident of the treaty country under the treaty residence article (after application of the so-called “tie-breaker” rule), then you may be entitled to benefits under the government service article. Free state filing turbotax Review the treaty text carefully. Free state filing turbotax U. Free state filing turbotax S. Free state filing turbotax citizens must always file Form 1040. Free state filing turbotax Non-U. Free state filing turbotax S. Free state filing turbotax citizens who are treated as a resident of a treaty country under the treaty residence article (after application of the so-called “tie-breaker” rule) may file Form 1040NR and attach Form 8833. Free state filing turbotax If you pay or accrue taxes to the foreign country on your pay, you may be able to relieve double taxation with a foreign tax credit. Free state filing turbotax Most income tax treaties contain an article providing relief from double taxation. Free state filing turbotax Many treaties contain special foreign tax credit rules for U. Free state filing turbotax S. Free state filing turbotax citizens who are residents of a treaty country. Free state filing turbotax For more information on the mechanics of the foreign tax credit, see Foreign Taxes, later. Free state filing turbotax Allowances, Differentials, and Special Pay Most payments received by U. Free state filing turbotax S. Free state filing turbotax Government civilian employees for working abroad, including pay differentials, are taxable. Free state filing turbotax However, certain foreign areas allowances, cost of living allowances, and travel allowances are tax free. Free state filing turbotax The following discussions explain the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. Free state filing turbotax Pay differentials. Free state filing turbotax   Pay differentials you receive as financial incentives for employment abroad are taxable. Free state filing turbotax Your employer should have included these differentials as wages on your Form W-2, Wage and Tax Statement. Free state filing turbotax   Generally, pay differentials are given for employment under adverse conditions (such as severe climate) or because the post of duty is located in a hazardous or isolated area that may be outside the United States. Free state filing turbotax The area does not have to be a qualified hazardous duty area as discussed in Publication 3. Free state filing turbotax Pay differentials include: Post differentials, Special incentive differentials, and Danger pay. Free state filing turbotax Foreign areas allowances. Free state filing turbotax   Certain foreign areas allowances are tax free. Free state filing turbotax Your employer should not have included these allowances as wages on your Form W-2. Free state filing turbotax   Tax-free foreign areas allowances are allowances (other than post differentials) received under the following laws. Free state filing turbotax Title I, chapter 9, of the Foreign Service Act of 1980. Free state filing turbotax Section 4 of the Central Intelligence Agency Act of 1949, as amended. Free state filing turbotax Title II of the Overseas Differentials and Allowances Act. Free state filing turbotax Subsection (e) or (f) of the first section of the Administrative Expenses Act of 1946, as amended, or section 22 of that Act. Free state filing turbotax These allowances cover such expenses as: Certain repairs to a leased home, Education of dependents in special situations, Motor vehicle shipment, Separate maintenance for dependents, Temporary quarters, Transportation for medical treatment, and Travel, moving, and storage. Free state filing turbotax Allowances received by foreign service employees for representation expenses are also tax free under the above provisions. Free state filing turbotax Cost-of-living allowances. Free state filing turbotax   If you are stationed outside the continental United States or in Alaska, your gross income does not include cost-of-living allowances (other than amounts received under Title II of the Overseas Differentials and Allowances Act) granted by regulations approved by the President of the United States. Free state filing turbotax The cost-of-living portion of any other allowance (for example, a living and quarters allowance) is not included even if the underlying allowance is included in gross income. Free state filing turbotax Cost-of-living allowances are not included on your Form W-2. Free state filing turbotax Federal court employees. Free state filing turbotax   If you are a federal court employee, the preceding paragraph also applies to you. Free state filing turbotax The cost-of-living allowance must be granted by rules similar to regulations approved by the President. Free state filing turbotax American Institute in Taiwan. Free state filing turbotax   If you are an employee of the American Institute in Taiwan, allowances you receive are exempt from U. Free state filing turbotax S. Free state filing turbotax tax if they are equivalent to tax-exempt allowances received by civilian employees of the U. Free state filing turbotax S. Free state filing turbotax Government. Free state filing turbotax Federal reemployment payments after serving with an international organization. Free state filing turbotax   If you are a federal employee who is reemployed by a federal agency after serving with an international organization, you must include in income any reemployment payments you receive. Free state filing turbotax These payments are equal to the difference between the pay, allowances, post differential, and other monetary benefits paid by the international organization and the pay and other benefits that would have been paid by the federal agency had you been detailed to the international agency. Free state filing turbotax Allowances or reimbursements for travel and transportation expenses. Free state filing turbotax   See How To Report Business Expenses, later, for a discussion on whether a reimbursement or allowance for travel or transportation is included in your income. Free state filing turbotax Lodging furnished to a principal representative of the United States. Free state filing turbotax   If you are a principal representative of the United States stationed in a foreign country, you do not have to include in income the value of lodging (including utilities) provided to you as an official residence. Free state filing turbotax However, amounts paid by the U. Free state filing turbotax S. Free state filing turbotax government for your usual costs of operating and maintaining your household are taxable. Free state filing turbotax If amounts are withheld from your pay to cover these expenses, you cannot exclude or deduct those amounts from your income. Free state filing turbotax Peace Corps. Free state filing turbotax   If you are a Peace Corps volunteer or volunteer leader, some allowances you receive are taxable and others are not. Free state filing turbotax Taxable allowances. Free state filing turbotax   The following allowances must be included on your Form W-2 and reported on your return as wages. Free state filing turbotax If you are a volunteer leader, allowances paid to your spouse and minor children while you are training in the United States. Free state filing turbotax The part of living allowances designated by the Director of the Peace Corps as basic compensation. Free state filing turbotax This is the part for personal items such as domestic help, laundry and clothing maintenance, entertainment and recreation, transportation, and other miscellaneous expenses. Free state filing turbotax Leave allowances. Free state filing turbotax Readjustment allowances or “termination payments. Free state filing turbotax ” Taxable allowances are considered received by you when credited to your account. Free state filing turbotax Example. Free state filing turbotax Gary Carpenter, a Peace Corps volunteer, gets $175 a month during his period of service, to be paid to him in a lump sum at the end of his tour of duty. Free state filing turbotax Although the allowance is not available to him until the end of his service, Gary must include it in his income on a monthly basis as it is credited to his account. Free state filing turbotax Nontaxable allowances. Free state filing turbotax   These generally include travel allowances and the part of living allowances for housing, utilities, food, clothing, and household supplies. Free state filing turbotax These allowances should not be included on your Form W-2. Free state filing turbotax These allowances are tax free whether paid by the U. Free state filing turbotax S. Free state filing turbotax Government or the foreign country in which you are stationed. Free state filing turbotax Other Income Other employment. Free state filing turbotax   If, in addition to your U. Free state filing turbotax S. Free state filing turbotax government pay, you receive income from a private employer or self-employment, you may qualify to claim the foreign earned income exclusion and the foreign housing exclusion and deduction under section 911 based on this other income provided you meet either the bona fide residence test or the physical presence test. Free state filing turbotax In addition, if your spouse is a U. Free state filing turbotax S. Free state filing turbotax citizen or resident alien who earns income in a foreign country that is paid by a private employer or is from self-employment, he or she may also qualify for the exclusion or the deduction. Free state filing turbotax For more information, see Publication 54. Free state filing turbotax The tax treaty rules relating to income from personal services generally apply to income from private employment. Free state filing turbotax As discussed above, the saving clause applies to you if you are a U. Free state filing turbotax S. Free state filing turbotax citizen or if you are a resident of the United States under the treaty residence article (after application of the so-called “tie-breaker” rule). Free state filing turbotax Sale of personal property. Free state filing turbotax   If you have a gain from the sale of your personal property (such as an automobile or a home appliance), whether directly or through a favorable exchange rate in converting the proceeds to U. Free state filing turbotax S. Free state filing turbotax dollars, the excess of the amount received in U. Free state filing turbotax S. Free state filing turbotax dollars over the cost or other basis of the property is a capital gain. Free state filing turbotax Capital gains are reported on Schedule D (Form 1040), Capital Gains and Losses. Free state filing turbotax However, losses from sales of your personal property, whether directly or through an unfavorable exchange rate, are not deductible. Free state filing turbotax Sale of your home. Free state filing turbotax   All or part of the gain on the sale of your main home, within or outside the United States, may be taxable. Free state filing turbotax Losses are not deductible. Free state filing turbotax   You may be able to exclude from income any gain up to $250,000 ($500,000 on a joint return). Free state filing turbotax Generally, you must have owned and used the home as your main residence for two of the five years preceding the date of sale. Free state filing turbotax   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse is serving on qualified official extended duty as a member of the Foreign Service of the United States, as an employee of the intelligence community, or as an employee or volunteer of the Peace Corps. Free state filing turbotax   For detailed information on selling your home, see Publication 523. Free state filing turbotax Deductions and Credits — Business Expenses You may deduct certain expenses such as travel expenses, transportation expenses, and other expenses connected to your employment. Free state filing turbotax Travel Expenses Subject to certain limits, you can deduct your unreimbursed ordinary and necessary expenses of traveling away from home in connection with the performance of your official duties. Free state filing turbotax These expenses include such items as travel costs, meals, lodging, baggage charges, local transportation costs (such as taxi fares), tips, and dry cleaning and laundry fees. Free state filing turbotax Your home for tax purposes (tax home) is your regular post of duty regardless of where you maintain your family home. Free state filing turbotax Your tax home is not limited to the Embassy, consulate, or duty station. Free state filing turbotax It includes the entire city or general area in which your principal place of employment is located. Free state filing turbotax Traveling away from home. Free state filing turbotax   You are traveling away from home if you meet both of the following requirements. Free state filing turbotax Your duties require you to be away from the general area of your tax home substantially longer than an ordinary day's work. Free state filing turbotax You need to get sleep or rest to meet the demands of your work while away from home. Free state filing turbotax This requirement is not satisfied by merely napping in your car. Free state filing turbotax You do not have to be away from your tax home for a whole day or from dusk to dawn as long as your relief from duty is long enough to get necessary sleep or rest. Free state filing turbotax Temporary assignment. Free state filing turbotax   If your assignment or job away from your tax home is temporary, your tax home does not change. Free state filing turbotax You are considered to be away from home for the whole period, and your travel expenses are deductible. Free state filing turbotax Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for one year or less. Free state filing turbotax   However, if your assignment or job is indefinite, the location of the assignment or job becomes your new tax home and you cannot deduct your travel expenses while there. Free state filing turbotax An assignment or job in a single location is considered indefinite if it is realistically expected to last for more than one year, whether or not it actually lasts for more than one year. Free state filing turbotax   You must determine whether your assignment is temporary or indefinite when you start work. Free state filing turbotax If you expect employment to last for one year or less, it is temporary unless there are facts and circumstances that indicate otherwise. Free state filing turbotax Employment that is initially temporary may become indefinite due to changed circumstances. Free state filing turbotax A series of assignments to the same location, all for short periods but that together cover a long period, may be considered an indefinite assignment. Free state filing turbotax Exception for federal crime investigations or prosecutions. Free state filing turbotax   If you are a federal employee participating in a federal crime investigation or prosecution, you may be able to deduct travel expenses even if you are away from your tax home for more than one year. Free state filing turbotax This exception to the one-year rule applies if the Attorney General certifies that you are traveling for the federal government in a temporary duty status to prosecute, or provide support services for the investigation or prosecution of, a federal crime. Free state filing turbotax Limit on meals and entertainment. Free state filing turbotax   You can generally deduct only 50% of the cost of your unreimbursed business-related meals and entertainment. Free state filing turbotax However, the limit does not apply to expenses reimbursed under a U. Free state filing turbotax S. Free state filing turbotax Government expense allowance arrangement. Free state filing turbotax Individuals subject to hours of service limits. Free state filing turbotax   You can deduct 80% of your unreimbursed business-related meal expenses if the meals take place during or incident to any period subject to the Department of Transportation's hours of service limits. Free state filing turbotax   Individuals subject to the Department of Transportation's “hours of service” limits include the following. Free state filing turbotax Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations. Free state filing turbotax Interstate truck operators and bus drivers who are under Department of Transportation regulations. Free state filing turbotax Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations. Free state filing turbotax Certain merchant mariners who are under Coast Guard regulations. Free state filing turbotax Primary purpose of trip must be for business. Free state filing turbotax   If your trip was entirely for business, your unreimbursed travel expenses are generally deductible. Free state filing turbotax However, if you spend some of your time on nonbusiness activities, part of your expenses may not be deductible. Free state filing turbotax   If your trip was mainly personal, you cannot deduct your travel expenses to and from your destination. Free state filing turbotax This applies even if you engage in business activities while there. Free state filing turbotax However, you can deduct any expenses while at your destination that are directly related to your business. Free state filing turbotax Expenses paid for others. Free state filing turbotax   You generally cannot deduct travel expenses of your spouse, dependents, or other individuals who go with you on a trip. Free state filing turbotax Home leave. Free state filing turbotax   The Foreign Service Act requires U. Free state filing turbotax S. Free state filing turbotax citizens who are members of the foreign service to take a leave of absence after completing 3 years of continuous service abroad. Free state filing turbotax This period is called “home leave” and can be used to take care of certain personal matters such as medical and dental checkups, buying a new wardrobe, and visiting relatives. Free state filing turbotax   The amounts paid for your travel, meals, and lodging while on home leave are deductible as travel or business expenses subject to the rules and limits discussed earlier. Free state filing turbotax You must be able to verify these amounts in order to claim them. Free state filing turbotax Amounts paid on behalf of your family while on home leave are personal living expenses and are not deductible. Free state filing turbotax More information. Free state filing turbotax   See chapter 1 of Publication 463 for more information on travel expenses. Free state filing turbotax Transportation Expenses You can deduct allowable transportation expenses that are directly related to your official duties. Free state filing turbotax Transportation expenses include the cost of transportation by air, rail, bus, or taxi, and the cost of driving and maintaining your car. Free state filing turbotax They do not include expenses you have when traveling away from home overnight. Free state filing turbotax Those expenses are deductible as travel expenses and are discussed earlier. Free state filing turbotax Commuting. Free state filing turbotax   You cannot deduct your transportation costs of going between your home and your regular business location. Free state filing turbotax These costs are personal commuting expenses. Free state filing turbotax   If you have one or more regular business locations but must work at a temporary location, you can deduct the costs of commuting to that temporary place of work. Free state filing turbotax   If you work at two or more places in the same day, you can deduct your expenses of getting from one place of work to the other. Free state filing turbotax More information. Free state filing turbotax   For more information on transportation expenses, see chapter 4 of Publication 463. Free state filing turbotax Other Employee Business Expenses You may be able to deduct other unreimbursed expenses that are connected with your employment. Free state filing turbotax Membership dues. Free state filing turbotax   You can deduct membership dues you pay to professional societies that relate to your business or profession. Free state filing turbotax Subscriptions. Free state filing turbotax   You can deduct subscriptions to professional publications that relate to your business or profession. Free state filing turbotax Educational expenses. Free state filing turbotax   Generally, educational expenses are considered to be personal expenses and are not deductible. Free state filing turbotax However, under some circumstances, educational expenses are deductible as business expenses. Free state filing turbotax   You can deduct educational expenses as business expenses if the education: Maintains or improves skills needed in your present position, or Meets the express requirements of your agency to keep your present position, salary, or status. Free state filing turbotax   You cannot deduct educational expenses as business expenses if the education: Is needed to enable you to meet minimum educational requirements for qualification in your present position, Is a part of a program of study that can qualify you for a new position, or Is for travel as a form of education. Free state filing turbotax These rules apply even if the education is required by your agency or it maintains or improves skills required in your work. Free state filing turbotax   See Publication 970, Tax Benefits for Education, for more information on educational expenses. Free state filing turbotax    Educational expenses that are not work related, such as costs of sending children to college, are personal expenses that you cannot deduct. Free state filing turbotax However, you may be eligible for other tax benefits such as the American opportunity and lifetime learning credits; contributions to a Coverdell education savings account or qualified tuition program; deduction for student loan interest; and exclusion from income of certain savings bond interest. Free state filing turbotax These benefits are explained in Publication 970. Free state filing turbotax Foreign service representation expenses. Free state filing turbotax   If you are an employee of the U. Free state filing turbotax S. Free state filing turbotax Foreign Service and your position requires you to establish and maintain favorable relations in foreign countries, you may receive a nontaxable allowance for representation expenses. Free state filing turbotax If your expenses are more than the allowance you receive, you can deduct the excess expenses as an itemized deduction on Schedule A (Form 1040) if you meet one of the following conditions. Free state filing turbotax You have a certificate from the Secretary of State attesting that the expenses were incurred for the benefit of the United States, and would be reimbursable under appropriate legislation if the agency had sufficient funds for these reimbursements. Free state filing turbotax The expenses, while specifically not reimbursable under State Department regulations, were ordinary and necessary business expenses incurred in the performance of your official duties. Free state filing turbotax    To deduct any expenses for travel, entertainment, and gifts, including those certified by the Secretary of State, you must meet the rules for recordkeeping and accounting to your employer. Free state filing turbotax These rules are explained in Publication 463. Free state filing turbotax Representation expenses. Free state filing turbotax   These are expenses that further the interest of the United States abroad. Free state filing turbotax They include certain entertainment, gifts, costs of official functions, and rental of ceremonial dress. Free state filing turbotax They generally do not include costs of passenger vehicles (such as cars or aircraft), printing or engraving, membership fees, or amounts a principal representative must pay personally to cover the usual costs of operating and maintaining an official residence. Free state filing turbotax   Chapters 300 and 400 of the Standardized Regulations (Government Civilians, Foreign Area) provide more detail on what expenses are allowable as representation expenses. Free state filing turbotax These regulations are available on the Internet at www. Free state filing turbotax state. Free state filing turbotax gov/m/a/als. Free state filing turbotax Look under “Standardized Regulations (DSSR)” and click on “DSSR Table of Contents. Free state filing turbotax ” Publication 463 and Publication 529, Miscellaneous Deductions, provide more detail on what expenses are allowable as ordinary and necessary business expenses. Free state filing turbotax Impairment-related work expenses. Free state filing turbotax   If you are an employee with a physical or mental disability, you can deduct attendant-care services at your place of work and other expenses in connection with work that are necessary for you to be able to work. Free state filing turbotax Attendant care includes a reader for a blind person and a helper for a person with a physical disability. Free state filing turbotax These expenses are reported on Form 2106 or 2106-EZ and carried to Schedule A (Form 1040). Free state filing turbotax They are not subject to the 2%-of-adjusted- gross-income limit on miscellaneous itemized deductions. Free state filing turbotax Loss on conversion of U. Free state filing turbotax S. Free state filing turbotax dollars into foreign currency. Free state filing turbotax   The conversion of U. Free state filing turbotax S. Free state filing turbotax dollars into foreign currency at an official rate of exchange that is not as favorable as the free market rate does not result in a deductible loss. Free state filing turbotax Recordkeeping Rules If you claim a deduction for unreimbursed business expenses, you must keep timely and adequate records of all your business expenses. Free state filing turbotax For example, you must keep records and supporting evidence to prove the following elements about deductions for travel expenses (including meals and lodging while away from home). Free state filing turbotax The amount of each separate expense for travel away from home, such as the cost of your transportation, lodging, or meals. Free state filing turbotax You may total your incidental expenses if you list them in reasonable categories such as daily meals, gasoline and oil, and taxi fares. Free state filing turbotax For each trip away from home, the dates you left and returned and the number of days spent on business. Free state filing turbotax The destination or area of your travel, described by the name of the city, town, or similar designation. Free state filing turbotax The business reason for your travel or the business benefit gained or expected to be gained from your travel. Free state filing turbotax How to record your expenses. Free state filing turbotax   Records for proof of your expenses should be kept in an account book, diary, statement of expense, or similar record. Free state filing turbotax They should be supported by other records, such as receipts or canceled checks, in sufficient detail to establish the elements for these expenses. Free state filing turbotax You do not need to duplicate information in an account book or diary that is shown on a receipt as long as your records and receipts complement each other in an orderly manner. Free state filing turbotax   Each expense should be recorded separately in your records. Free state filing turbotax However, some items can be totaled in reasonable categories. Free state filing turbotax You can make one daily entry for categories such as taxi fares, telephone calls, meals while away from home, gas and oil, and other incidental costs of travel. Free state filing turbotax You may record tips separately or with the cost of the service. Free state filing turbotax    Documentary evidence generally is required to support all lodging expenses while traveling away from home. Free state filing turbotax It is also required for any other expense of $75 or more, except transportation charges if the evidence is not readily available. Free state filing turbotax Documentary evidence is a receipt, paid bill, or similar proof sufficient to support an expense. Free state filing turbotax It ordinarily will be considered adequate if it shows the amount, date, place, and essential business character of the expense. Free state filing turbotax    A canceled check by itself does not prove a business cost. Free state filing turbotax You must have other evidence to show that the check was used for a business purpose. Free state filing turbotax Your records must be timely. Free state filing turbotax   Record the elements for the expense in your account book or other record at or near the time of the expense. Free state filing turbotax A timely-kept record has more value than statements prepared later when, generally, there is a lack of accurate recall. Free state filing turbotax Confidential information. Free state filing turbotax   You do not need to put confidential information relating to an element of a deductible expense (such as the place, business purpose, or business relationship) in your account book, diary, or other record. Free state filing turbotax However, you do have to record the information elsewhere at or near the time of the expense and have it available to fully prove that element of the expense. Free state filing turbotax How To Report Business Expenses As a U. Free state filing turbotax S. Free state filing turbotax Government employee, your business expense reimbursements are generally paid under an accountable plan and are not included in your wages on your Form W-2. Free state filing turbotax If your expenses are not more than the reimbursements, you do not need to show your expenses or reimbursements on your return. Free state filing turbotax However, if you do not account to your employer for a travel advance or if you do not return any excess advance within a reasonable period of time, the advance (or excess) will be included in your wages on your Form W-2. Free state filing turbotax If you are entitled to a reimbursement from your employer but you do not claim it, you cannot deduct the expenses to which that unclaimed reimbursement applies. Free state filing turbotax Form 2106 or Form 2106-EZ. Free state filing turbotax   You must complete Form 2106 or 2106-EZ to deduct your expenses. Free state filing turbotax Also, if your actual expenses are more than your reimbursements, you can complete Form 2106 or 2106-EZ to deduct your excess expenses. Free state filing turbotax Generally, you must include all of your expenses and reimbursements on Form 2106 or 2106-EZ and carry your allowable expense to Schedule A (Form 1040). Free state filing turbotax Your allowable expense is then generally subject to the 2%-of-adjusted-gross-income limit. Free state filing turbotax Form 2106-EZ. Free state filing turbotax   You may be able to use Form 2106-EZ instead of the more complex Form 2106 for reporting unreimbursed employee business expenses. Free state filing turbotax You can use Form 2106-EZ if you meet both of the following conditions. Free state filing turbotax You are not reimbursed by your employer for any expenses. Free state filing turbotax (Amounts your employer included in your wages on your Form W-2 are not considered reimbursements. Free state filing turbotax ) If you claim car expenses, you use the standard mileage rate. Free state filing turbotax Deductions and Credits — Nonbusiness Expenses In addition to deductible business expenses, you may be entitled to deduct certain other expenses. Free state filing turbotax Moving Expenses If you changed job locations or started a new job, you may be able to deduct the reasonable expenses of moving yourself, your family, and your household goods and personal effects to your new home. Free state filing turbotax However, you cannot deduct any expenses for which you received a tax-free allowance as a U. Free state filing turbotax S. Free state filing turbotax Government employee. Free state filing turbotax To deduct moving expenses, your move must be closely related to the start of work and you must meet the distance test and the time test. Free state filing turbotax Closely related to the start of work. Free state filing turbotax   The move must be closely related, both in time and in place, to the start of work at the new location. Free state filing turbotax In general, you must have incurred your moving expenses within one year from the time you first report to your new job or business. Free state filing turbotax   A move generally is not considered closely related in place to the start of work if the distance from your new home to the new job location is more than the distance from your former home to the new job location. Free state filing turbotax A move that does not meet this requirement may qualify if you can show that you must live at the new home as a condition of employment, or you will spend less time or money commuting from the new home to the new job. Free state filing turbotax Distance test. Free state filing turbotax   Your new main job location must be at least 50 miles farther from your former home than your old main job location was. Free state filing turbotax If you did not have an old job location, your new job location must be at least 50 miles from your former home. Free state filing turbotax Time test. Free state filing turbotax   If you are an employee, you must work full time for at least 39 weeks during the first 12 months after you arrive in the general area of your new job location. Free state filing turbotax Deductible moving expenses. Free state filing turbotax   Moving expenses that can be deducted include the reasonable costs of: Moving household goods and personal effects (including packing, crating, in-transit storage, and insurance) of both you and members of your household, and Transportation and lodging for yourself and members of your household for one trip from your former home to your new home (including costs of getting passports). Free state filing turbotax    The cost of your meals is not a deductible moving expense. Free state filing turbotax   The costs of moving household goods include the reasonable expenses of moving household goods and personal effects to and from storage. Free state filing turbotax For a foreign move, the costs also include expenses of storing the goods and effects for part or all of the period that your new job location abroad continues to be your main job location. Free state filing turbotax Expenses must be reasonable. Free state filing turbotax   You can deduct only those expenses that are reasonable for the circumstances of your move. Free state filing turbotax For example, the costs of traveling from your former home to your new one should be by the shortest, most direct route available by conventional transportation. Free state filing turbotax Members of your household. Free state filing turbotax   A member of your household includes anyone who has both your former home and new home as his or her home. Free state filing turbotax It does not include a tenant or employee unless you can claim that person as a dependent. Free state filing turbotax Retirees. Free state filing turbotax   You can deduct the costs of moving to the United States when you permanently retire if both your former main job location and former home were outside the United States and its possessions. Free state filing turbotax You do not have to meet the time test described earlier. Free state filing turbotax Survivors. Free state filing turbotax   You can deduct moving expenses for a move to the United States if you are the spouse or dependent of a person whose main job location at the time of death was outside the United States and its possessions. Free state filing turbotax The move must begin within 6 months after the decedent's death. Free state filing turbotax It must be from the decedent's former home outside the United States, and that home must also have been your home. Free state filing turbotax You do not have to meet the time test described earlier. Free state filing turbotax How to report moving expenses. Free state filing turbotax   Use Form 3903 to report your moving expenses and figure your allowable deduction. Free state filing turbotax Claim the deduction as an adjustment to income on Form 1040. Free state filing turbotax (You cannot deduct moving expenses on Form 1040A or Form 1040EZ. Free state filing turbotax ) Reimbursements. Free state filing turbotax   Generally, you must include reimbursements of, or payments for, nondeductible moving expenses in gross income for the year paid. Free state filing turbotax You also must include in gross income reimbursements paid to you under a nonaccountable plan. Free state filing turbotax However, there is an exception for the tax-free foreign areas allowances described earlier under Allowances, Differentials, and Special Pay. Free state filing turbotax Additional information. Free state filing turbotax   For additional information about moving expenses, see Publication 521. Free state filing turbotax Other Itemized Deductions You may be able to claim other itemized deductions not connected to your employment. Free state filing turbotax Contributions. Free state filing turbotax   You can deduct contributions to qualified organizations created or organized in or under the laws of the United States or its possessions. Free state filing turbotax You cannot deduct contributions you make directly to foreign organizations (except for certain Canadian, Israeli, and Mexican charities), churches, and governments. Free state filing turbotax For more information, see Publication 526, Charitable Contributions. Free state filing turbotax Real estate tax and home mortgage interest. Free state filing turbotax   If you receive a tax-free housing allowance, your itemized deductions for real estate taxes and home mortgage interest are limited. Free state filing turbotax You must reduce the amount of each deduction that would otherwise be allowable by the amount of each expense that is related to the tax-free allowance. Free state filing turbotax Example. Free state filing turbotax Adam is an IRS employee working overseas who receives a $6,300 tax-free housing and utility allowance. Free state filing turbotax During the year, Adam used the allowance, with other funds, to provide a home for himself. Free state filing turbotax His expenses for this home totaled $8,400 and consisted of mortgage principal ($500), insurance ($400), real estate taxes ($1,400), mortgage interest ($4,000), and utility costs ($2,100). Free state filing turbotax Adam did not have any other expenses related to providing a home for himself. Free state filing turbotax Adam must reduce his deductions for home mortgage interest and real estate taxes. Free state filing turbotax He figures a reasonable way to reduce them is to multiply them by a fraction: its numerator is $6,300 (the total housing and utility allowance) and its denominator is $8,400 (the total of all payments to which the housing and utility allowance applies). Free state filing turbotax The result is 3/4. Free state filing turbotax Adam reduces his otherwise allowable home mortgage interest deduction by $3,000 (the $4,000 he paid ×3/4) and his otherwise allowable real estate tax deduction by $1,050 (the $1,400 he paid × 3/4). Free state filing turbotax He can deduct $1,000 of his mortgage interest ($4,000 − $3,000) and $350 of his real estate taxes ($1,400 − $1,050) when he itemizes his deductions. Free state filing turbotax Exception to the reduction. Free state filing turbotax   If you receive a tax-free housing allowance as a member of the military or the clergy, you do not have to reduce your deductions for real estate tax and home mortgage interest expenses you are otherwise entitled to deduct. Free state filing turbotax Required statement. Free state filing turbotax   If you receive a tax-free housing allowance and have real estate tax or home mortgage interest expenses, attach a statement to your tax return. Free state filing turbotax The statement must contain all of the following information. Free state filing turbotax The amount of each type of tax-free income you received, such as a tax-free housing allowance or tax-free representation allowance. Free state filing turbotax The amount of otherwise deductible expenses attributable to each type of tax-free income. Free state filing turbotax The amount attributable to each type of tax-free income that was not directly attributable to that type of tax-free income. Free state filing turbotax An explanation of how you determined the amounts not directly attributable to each type of tax-free income. Free state filing turbotax   The statement must also indicate that none of the amounts deducted on your return are in any way attributable to tax-free income. Free state filing turbotax Foreign Taxes If you pay or accrue taxes to a foreign government, you generally can choose to either claim them as a credit against your U. Free state filing turbotax S. Free state filing turbotax income tax liability or deduct them as an itemized deduction when figuring your taxable income. Free state filing turbotax Do not include the foreign taxes paid or accrued as withheld income taxes in the Payments section of Form 1040. Free state filing turbotax Foreign tax credit. Free state filing turbotax   Your foreign tax credit is subject to a limit based on your taxable income from foreign sources. Free state filing turbotax If you choose to figure a credit against your U. Free state filing turbotax S. Free state filing turbotax tax liability for the foreign taxes, you generally must complete Form 1116 and attach it to your U. Free state filing turbotax S. Free state filing turbotax income tax return. Free state filing turbotax    You cannot claim a credit for foreign taxes paid on amounts excluded from gross income under the foreign earned income or housing exclusions. Free state filing turbotax If all your foreign income is exempt from U. Free state filing turbotax S. Free state filing turbotax tax, you will not be able to claim a foreign tax credit. Free state filing turbotax   If, because of the limit on the credit, you cannot use the full amount of qualified foreign taxes paid or accrued in the tax year, you are allowed to carry the excess back 1 year and then forward 10 years. Free state filing turbotax Exemption from limit. Free state filing turbotax   You can elect to not be subject to the foreign tax limit if you meet all the following conditions. Free state filing turbotax Your only foreign income is passive income, such as interest, dividends, and royalties. Free state filing turbotax The total of all your foreign taxes is not more than $300 ($600 for joint tax returns). Free state filing turbotax The foreign income and taxes are reported to you on a payee statement, such as Form 1099-DIV, Dividends and Distributions, or 1099-INT, Interest Income. Free state filing turbotax If you make the election, you can claim a foreign tax credit without filing Form 1116. Free state filing turbotax However, you cannot carry back or carry over any unused foreign tax to or from this year. Free state filing turbotax See the instructions for the appropriate line in the Tax and Credits section of Form 1040. Free state filing turbotax Foreign tax deduction. Free state filing turbotax   If you choose to deduct all foreign income taxes on your U. Free state filing turbotax S. Free state filing turbotax income tax return, itemize the deduction on Schedule A (Form 1040). Free state filing turbotax You cannot deduct foreign taxes paid on income you exclude under the foreign earned income or housing exclusions. Free state filing turbotax Example. Free state filing turbotax Dennis and Christina are married and live and work in Country X. Free state filing turbotax Dennis works for the U. Free state filing turbotax S. Free state filing turbotax Government and Christina is employed by a private company. Free state filing turbotax They pay income tax to Country X on Christina's income only. Free state filing turbotax Dennis and Christina file a joint tax return and exclude all of Christina's income. Free state filing turbotax They cannot claim a foreign tax credit or take a deduction for the taxes paid to Country X. Free state filing turbotax Deduction for other foreign taxes. Free state filing turbotax   The deduction for foreign taxes other than foreign income taxes is not related to the foreign tax credit. Free state filing turbotax You can take deductions for these miscellaneous foreign taxes and also claim the foreign tax credit for income taxes paid to a foreign country. Free state filing turbotax   You can deduct real property taxes you pay that are imposed on you by a foreign country. Free state filing turbotax You take this deduction on Schedule A (Form 1040). Free state filing turbotax You cannot deduct other foreign taxes, such as personal property taxes, unless you incurred the expenses in a trade or business or in the production of income. Free state filing turbotax More information. Free state filing turbotax   The foreign tax credit and deduction, their limits, and carryback and carryover provisions are discussed in detail in Publication 514. Free state filing turbotax Local (Foreign) Tax Return As a U. Free state filing turbotax S. Free state filing turbotax Government employee, you are expected to observe and fulfill all tax obligations imposed by the host country government. Free state filing turbotax Check with local tax authorities to determine whether you are considered a tax resident of your host country, whether you are required to file a host country tax return and whether you owe taxes to the host country. Free state filing turbotax Tax Treaty Benefits As discussed earlier, most income tax treaties contain an article relating to remuneration from government services. Free state filing turbotax Review the treaty text carefully to determine whether your U. Free state filing turbotax S. Free state filing turbotax Government remuneration is taxable in the host country. Free state filing turbotax You will first have to determine whether you are a resident of your host country under the treaty residence article (after application of the so-called “tie-breaker” rule). Free state filing turbotax If you or your spouse receives income from a private employer or self-employment, review the tax treaty rules relating to income from personal services to determine whether that income is taxable in the host country. Free state filing turbotax If you pay or accrue taxes to both the host country and the United States, you may be able to relieve double taxation with a foreign tax credit. Free state filing turbotax Most income tax treaties contain an article providing relief from double taxation. Free state filing turbotax Many treaties contain special foreign tax credit rules for U. Free state filing turbotax S. Free state filing turbotax citizens who are residents of a treaty country. Free state filing turbotax For more information about the foreign tax credit, see Foreign Taxes, earlier. Free state filing turbotax Other Agreements The United States may be a party to agreements other than income tax treaties that may affect your tax obligations to the host country. Free state filing turbotax For example, consular employees may be exempt from host country tax under the Vienna Convention on Consular Relations or bilateral consular agreements. Free state filing turbotax Similarly, certain diplomatic staff may be exempt from host country tax under the Vienna Convention on Diplomatic Relations. Free state filing turbotax Check with the appropriate U. Free state filing turbotax S. Free state filing turbotax Embassy for more information. Free state filing turbotax Double Withholding If your U. Free state filing turbotax S. Free state filing turbotax government pay is subject to withholding in both the United States and the foreign country, you may reduce the amount of U. Free state filing turbotax S. Free state filing turbotax tax that is withheld from your pay if you expect to be entitled to a foreign tax credit on your U. Free state filing turbotax S. Free state filing turbotax income tax return on this income. Free state filing turbotax Complete Worksheet 1-6 in Publication 505, Tax Withholding and Estimated Tax, to determine how to revise Form W-4, Employee’s Withholding Allowance Certificate. Free state filing turbotax How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. Free state filing turbotax By selecting the method that is best for you, you will have quick and easy access to tax help. Free state filing turbotax Free help with your tax return. Free state filing turbotax   Free help in preparing your return is available nationwide from IRS-certified volunteers. Free state filing turbotax The Volunteer Income Tax Assistance (VITA) program is designed to help low-moderate income, elderly, disabled, and limited English proficient taxpayers. Free state filing turbotax The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Free state filing turbotax Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Free state filing turbotax Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. Free state filing turbotax To find the nearest VITA or TCE site, visit IRS. Free state filing turbotax gov or call 1-800-906-9887 or 1-800-829-1040. Free state filing turbotax   As part of the TCE program, AARP offers the Tax-Aide counseling program. Free state filing turbotax To find the nearest AARP Tax-Aide site, visit AARP's website at www. Free state filing turbotax aarp. Free state filing turbotax org/money/taxaide or call 1-888-227-7669. Free state filing turbotax   For more information on these programs, go to IRS. Free state filing turbotax gov and enter “VITA” in the search box. Free state filing turbotax Internet. Free state filing turbotax You can access the IRS website at IRS. Free state filing turbotax gov 24 hours a day, 7 days a week to: E-file your return. Free state filing turbotax Find out about commercial tax preparation and e-file services available free to eligible taxpayers. Free state filing turbotax Check the status of your 2012 refund. Free state filing turbotax Go to IRS. Free state filing turbotax gov and click on Where’s My Refund. Free state filing turbotax Information about your return will generally be available within 24 hours after the IRS receives your e-filed return, or 4 weeks after you mail your paper return. Free state filing turbotax If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Free state filing turbotax Have your 2012 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Free state filing turbotax Where's My Refund? has a new look this year! The tool will include a tracker that displays progress through three stages: (1) return received, (2) refund approved, and (3) refund sent. Free state filing turbotax Where's My Refund? will provide an actual personalized refund date as soon as the IRS processes your tax return and approves your refund. Free state filing turbotax So in a change from previous filing seasons, you won't get an estimated refund date right away. Free state filing turbotax Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. Free state filing turbotax You can obtain a free transcript online at IRS. Free state filing turbotax gov by clicking on Order a Return or Account Transcript under “Tools. Free state filing turbotax ” For a transcript by phone, call 1-800-908-9946 and follow the prompts in the recorded message. Free state filing turbotax You will be prompted to provide your SSN or Individual Taxpayer Identification Number (ITIN), date of birth, street address and ZIP code. Free state filing turbotax Download forms, including talking tax forms, instructions, and publications. Free state filing turbotax Order IRS products. Free state filing turbotax Research your tax questions. Free state filing turbotax Search publications by topic or keyword. Free state filing turbotax Use the Internal Revenue Code, regulations, or other official guidance. Free state filing turbotax View Internal Revenue Bulletins (IRBs) published in the last few years. Free state filing turbotax Figure your withholding allowances using the IRS Withholding Calculator at www. Free state filing turbotax irs. Free state filing turbotax gov/individuals. Free state filing turbotax Determine if Form 6251 (Alternative Minimum Tax— Individuals), must be filed by using our Alternative Minimum Tax (AMT) Assistant available at IRS. Free state filing turbotax gov by typing Alternative Minimum Tax Assistant in the search box. Free state filing turbotax Sign up to receive local and national tax news by email. Free state filing turbotax Get information on starting and operating a small business. Free state filing turbotax Phone. Free state filing turbotax Many services are available by phone. Free state filing turbotax   Ordering forms, instructions, and publications. Free state filing turbotax Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions (limited to 5 years). Free state filing turbotax You should receive your order within 10 days. Free state filing turbotax Asking tax questions. Free state filing turbotax Call the IRS with your tax questions at 1-800-829-1040. Free state filing turbotax Solving problems. Free state filing turbotax You can get face-to-face help solving tax problems most business days in IRS Taxpayer Assistance Centers (TAC). Free state filing turbotax An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Free state filing turbotax Call your local Taxpayer Assistance Center for an appointment. Free state filing turbotax To find the number, go to www. Free state filing turbotax irs. Free state filing turbotax gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Free state filing turbotax TTY/TDD equipment. Free state filing turbotax If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. Free state filing turbotax The TTY/TDD telephone number is for individuals who are deaf, hard of hearing, or have a speech disability. Free state filing turbotax These individuals can also access the IRS through relay services such as the Federal Relay Service at www. Free state filing turbotax gsa. Free state filing turbotax gov/fedrelay. Free state filing turbotax TeleTax topics. Free state filing turbotax Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. Free state filing turbotax Checking the status of your 2012 refund. Free state filing turbotax To check the status of your 2012 refund, call 1-800-829-1954 or 1-800-829-4477 (automated Where's My Refund? information 24 hours a day, 7 days a week). Free state filing turbotax Information about your return will generally be available within 24 hours after the IRS receives your e-filed return, or 4 weeks after you mail your paper return. Free state filing turbotax If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Free state filing turbotax Have your 2012 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Free state filing turbotax Where's My Refund? will provide an actual personalized refund date as soon as the IRS processes your tax return and approves your refund. Free state filing turbotax Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. Free state filing turbotax Outside the U. Free state filing turbotax S. Free state filing turbotax If you are outside the United States, taxpayer assistance is available at the following U. Free state filing turbotax S Embassies or consulate. Free state filing turbotax Beijing, China (86) (10) 8531-3983 Frankfurt, Germany (49) (69) 7535-3834 London, England (44) (20) 7894-0476 Paris, France (33) (1) 4312-2555 Please contact the office for times when assistance will be available. Free state filing turbotax If you cannot get to one of these offices, taxpayer assistance is available at (267) 941-1000 (not a toll free call). Free state filing turbotax If you are in a U. Free state filing turbotax S. Free state filing turbotax territory (American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and U. Free state filing turbotax S. Free state filing turbotax Virgin Islands) and have a tax question, you can call 1-800-829-1040. Free state filing turbotax Evaluating the quality of our telephone services. Free state filing turbotax To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. Free state filing turbotax One method is for a second IRS representative to listen in on or record random telephone calls. Free state filing turbotax Another is to ask some callers to complete a short survey at the end of the call. Free state filing turbotax Walk-in. Free state filing turbotax Some products and services are available on a walk-in basis. Free state filing turbotax   Products. Free state filing turbotax You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Free state filing turbotax Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Free state filing turbotax Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. Free state filing turbotax Services. Free state filing turbotax You can walk in to your local TAC most business days for personal, face-to-face tax help. Free state filing turbotax An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Free state filing turbotax If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local TAC where you can talk with an IRS representative face-to-face. Free state filing turbotax No appointment is necessary—just walk in. Free state filing turbotax Before visiting, check www. Free state filing turbotax irs. Free state filing turbotax gov/localcontacts for hours of operation and services provided. Free state filing turbotax If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested by calling your local TAC. Free state filing turbotax You can leave a message and a representative will call you back within 2 business days. Free state filing turbotax All other issues will be handled without an appointment. Free state filing turbotax To call your local TAC, go to  www. Free state filing turbotax irs. Free state filing turbotax gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Free state filing turbotax Outside the U. Free state filing turbotax S. Free state filing turbotax If you are outside the United States during the filing period (January to mid-June), you can get the necessary federal tax forms and publications from most U. Free state filing turbotax S. Free state filing turbotax Embassies and consulates. Free state filing turbotax Mail. Free state filing turbotax You can send your order for forms, instructions, and publications to the address below. Free state filing turbotax You should receive a response within 10 days after your request is received. Free state filing turbotax  Internal Revenue Service 1201 N. Free state filing turbotax Mitsubishi Motorway Bloomington, IL 61705-6613 Outside the U. Free state filing turbotax S. Free state filing turbotax If you are outside the United States, you can get tax assistance by writing to the address below. Free state filing turbotax  Internal Revenue Service International Accounts Philadelphia, PA 19255-0725 Taxpayer Advocate Service. Free state filing turbotax   The Taxpayer Advocate Service (TAS) is your voice at the IRS. Free state filing turbotax Its job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights. Free state filing turbotax TAS offers free help to guide you through the often-confusing process of resolving tax problems that you haven’t been able to solve on your own. Free state filing turbotax Remember, the worst thing you can do is nothing at all. Free state filing turbotax   TAS can help if you can’t resolve your problem with the IRS and: Your problem is causing financial difficulties for you, your family, or your business. Free state filing turbotax You face (or your business is facing) an immediate threat of adverse action. Free state filing turbotax You have tried repeatedly to contact the IRS but no one has responded, or the IRS has not responded to you by the date promised. Free state filing turbotax   If you qualify for help, they will do everything they can to get your problem resolved. Free state filing turbotax You will be assigned to one advocate who will be with you at every turn. Free state filing turbotax TAS has offices in every state, the District of Columbia, and Puerto Rico. Free state filing turbotax Although TAS is independent within the IRS, their advocates know how to work with the IRS to get your problems resolved. Free state filing turbotax And its services are always free. Free state filing turbotax   As a taxpayer, you have rights that the IRS must abide by in its dealings with you. Free state filing turbotax The TAS tax toolkit at www. Free state filing turbotax TaxpayerAdvocate. Free state filing turbotax irs. Free state filing turbotax gov can help you understand these rights. Free state filing turbotax   If you think TAS might be able to help you, call your local advocate, whose number is in your phone book and on our website at www. Free state filing turbotax irs. Free state filing turbotax gov/advocate. Free state filing turbotax You can also call the toll-free number at 1-877-777-4778. Free state filing turbotax Deaf and hard of hearing individuals who have access to TTY/TDD equipment can call 1-800-829-4059. Free state filing turbotax These individuals can also access the IRS through relay services such as the Federal Relay Service at www. Free state filing turbotax gsa. Free state filing turbotax gov/fedrelay. Free state filing turbotax   TAS also handles large-scale or systemic problems that affect many taxpayers. Free state filing turbotax If you know of one of these broad issues, please report it through the Systemic Advocacy Management System at www. Free state filing turbotax irs. Free state filing turbotax gov/advocate. Free state filing turbotax    Outside the U. Free state filing turbotax S. Free state filing turbotax If you live outside of the United States, you can call the Taxpayer Advocate at (787) 522-8601 in English or (787) 522-8600 in Spanish. Free state filing turbotax You can contact the Taxpayer Advocate at: Internal Revenue Service Taxpayer Advocate Service City View Plaza, 48 Carr 165, Suite 2000 Guaynabo, P. Free state filing turbotax R. Free state filing turbotax 00968-8000 Low Income Taxpayer Clinics (LITCs). Free state filing turbotax   Low Income Taxpayer Clinics (LITCs) are independent from the IRS. Free state filing turbotax Some clinics serve individuals whose income is below a certain level and who need to resolve a tax problem. Free state filing turbotax These clinics provide professional representation before the IRS or in court on audits, appeals, tax collection disputes, and other issues for free or for a small fee. Free state filing turbotax Some clinics can provide information about taxpayer rights and responsibilities in many different languages for individuals who speak English as a second language. Free state filing turbotax For more information and to find a clinic near you, see the LITC page on www. Free state filing turbotax irs. Free state filing turbotax gov/advocate or IRS Publication 4134, Low Income Taxpayer Clinic List. Free state filing turbotax This publication is also available by calling 1-800-TAX-FORM (1-800-829-3676) or at your local IRS office. Free state filing turbotax Free tax services. Free state filing turbotax   Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. Free state filing turbotax Learn about free tax information from the IRS, including publications, services, and education and assistance programs. Free state filing turbotax The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. Free state filing turbotax The majority of the information and services listed in this publication are available to you free of charge. Free state filing turbotax If there is a fee associated with a resource or service, it is listed in the publication. Free state filing turbotax   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. Free state filing turbotax DVD for tax products. Free state filing turbotax You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. Free state filing turbotax Prior-year forms, instructions, and publications. Free state filing turbotax Tax Map: an electronic research tool and finding aid. Free state filing turbotax Tax law frequently asked questions. Free state filing turbotax Tax Topics from the IRS telephone response system. Free state filing turbotax Internal Revenue Code—Title 26 of the U. Free state filing turbotax S. Free state filing turbotax Code. Free state filing turbotax Links to other Internet-based tax research materials. Free state filing turbotax Fill-in, print, and save features for most tax forms. Free state filing turbotax Internal Revenue Bulletins. Free state filing turbotax Toll-free and email technical support. Free state filing turbotax Two releases during the year. Free state filing turbotax  – The first release will ship the beginning of January 2013. Free state filing turbotax  – The final release will ship the beginning of March 2013. Free state filing turbotax Purchase the DVD from National Technical Information Service (NTIS) at www. Free state filing turbotax irs. Free state filing turbotax gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee). Free state filing turbotax Prev  Up  Next   Home   More Online Publications

Topic 506 - Charitable Contributions

Charitable contributions are deductible only if you itemize deductions on Form 1040, Schedule A (PDF).

To be deductible, charitable contributions must be made to qualified organizations. Payments to individuals are never deductible. See Publication 526, Charitable Contributions. To determine if the organization that you have contributed to qualifies as a charitable organization for income tax deductions, review Exempt Organizations Select Check on the IRS.gov website.

If your contribution entitles you to merchandise, goods, or services, including admission to a charity ball, banquet, theatrical performance, or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received.

For a contribution of cash, check, or other monetary gift (regardless of amount), you must maintain as a record of the contribution a bank record or a written communication from the qualified organization containing the name of the organization, the date of the contribution, and the amount of the contribution. In addition to deducting your cash contributions, you generally can deduct the fair market value of any other property you donate to qualified organizations. See Publication 561, Determining the Value of Donated Property. For any contribution of $250 or more (including contributions of cash or property), you must obtain and keep in your records a contemporaneous written acknowledgment from the qualified organization indicating the amount of the cash and a description of any property contributed. The acknowledgment must say whether the organization provided any goods or services in exchange for the gift and, if so, must provide a description and a good faith estimate of the value of those goods or services. One document from the qualified organization may satisfy both the written communication requirement for monetary gifts and the contemporaneous written acknowledgment requirement for all contributions of $250 or more.

You must fill out Form 8283 (PDF), and attach it to your return, if your deduction for a noncash contribution is more than $500. If you claim a deduction for a contribution of noncash property worth $5,000 or less, you must fill out Form 8283, Section A. If you claim a deduction for a contribution of noncash property worth more than $5,000, you will need a qualified appraisal of the noncash property and must fill out Form 8283, Section B. If you claim a deduction for a contribution of noncash property worth more than $500,000, you also will need to attach the qualified appraisal to your return.

Special rules apply to donations of certain types of property such as automobiles, inventory and investments that have appreciated in value. For more information, refer to Publication 526, Charitable Contributions. For information on determining the value of your noncash contributions, refer to Publication 561, Determining the Value of Donated Property.

Page Last Reviewed or Updated: December 12, 2013

The Free State Filing Turbotax

Free state filing turbotax Publication 551 - Main Content Table of Contents Cost BasisStocks and Bonds Real Property Business Assets Allocating the Basis Adjusted BasisIncreases to Basis Decreases to Basis Adjustments to Basis Example Basis Other Than CostProperty Received for Services Taxable Exchanges Nontaxable Exchanges Property Transferred From a Spouse Property Received as a Gift Inherited Property Property Changed to Business or Rental Use How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Free state filing turbotax Cost Basis The basis of property you buy is usually its cost. Free state filing turbotax The cost is the amount you pay in cash, debt obligations, other property, or services. Free state filing turbotax Your cost also includes amounts you pay for the following items. Free state filing turbotax Sales tax, Freight, Installation and testing, Excise taxes, Legal and accounting fees (when they must be capitalized), Revenue stamps, Recording fees, and Real estate taxes (if assumed for the seller). Free state filing turbotax  You may also have to capitalize (add to basis) certain other costs related to buying or producing property. Free state filing turbotax Loans with low or no interest. Free state filing turbotax   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, minus the amount considered to be unstated interest. Free state filing turbotax You generally have unstated interest if your interest rate is less than the applicable federal rate. Free state filing turbotax For more information, see Unstated Interest and Original Issue Discount in Publication 537. Free state filing turbotax Purchase of a business. Free state filing turbotax   When you purchase a trade or business, you generally purchase all assets used in the business operations, such as land, buildings, and machinery. Free state filing turbotax Allocate the price among the various assets, including any section 197 intangibles. Free state filing turbotax See Allocating the Basis, later. Free state filing turbotax Stocks and Bonds The basis of stocks or bonds you buy is generally the purchase price plus any costs of purchase, such as commissions and recording or transfer fees. Free state filing turbotax If you get stocks or bonds other than by purchase, your basis is usually determined by the fair market value (FMV) or the previous owner's adjusted basis of the stock. Free state filing turbotax You must adjust the basis of stocks for certain events that occur after purchase. Free state filing turbotax See Stocks and Bonds in chapter 4 of Publication 550 for more information on the basis of stock. Free state filing turbotax Identifying stock or bonds sold. Free state filing turbotax   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. Free state filing turbotax If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. Free state filing turbotax For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Free state filing turbotax Mutual fund shares. Free state filing turbotax   If you sell mutual fund shares acquired at different times and prices, you can choose to use an average basis. Free state filing turbotax For more information, see Publication 550. Free state filing turbotax Real Property Real property, also called real estate, is land and generally anything built on or attached to it. Free state filing turbotax If you buy real property, certain fees and other expenses become part of your cost basis in the property. Free state filing turbotax Real estate taxes. Free state filing turbotax   If you pay real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. Free state filing turbotax You cannot deduct them as taxes. Free state filing turbotax   If you reimburse the seller for taxes the seller paid for you, you can usually deduct that amount as an expense in the year of purchase. Free state filing turbotax Do not include that amount in the basis of the property. Free state filing turbotax If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Free state filing turbotax Settlement costs. Free state filing turbotax   Your basis includes the settlement fees and closing costs for buying property. Free state filing turbotax You cannot include in your basis the fees and costs for getting a loan on property. Free state filing turbotax A fee for buying property is a cost that must be paid even if you bought the property for cash. Free state filing turbotax   The following items are some of the settlement fees or closing costs you can include in the basis of your property. Free state filing turbotax Abstract fees (abstract of title fees); Charges for installing utility services; Legal fees (including title search and preparation of the sales contract and deed); Recording fees; Surveys; Transfer taxes; Owner's title insurance; and Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Free state filing turbotax   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Free state filing turbotax   The following items are some settlement fees and closing costs you cannot include in the basis of the property. Free state filing turbotax Casualty insurance premiums. Free state filing turbotax Rent for occupancy of the property before closing. Free state filing turbotax Charges for utilities or other services related to occupancy of the property before closing. Free state filing turbotax Charges connected with getting a loan. Free state filing turbotax The following are examples of these charges. Free state filing turbotax Points (discount points, loan origination fees). Free state filing turbotax Mortgage insurance premiums. Free state filing turbotax Loan assumption fees. Free state filing turbotax Cost of a credit report. Free state filing turbotax Fees for an appraisal required by a lender. Free state filing turbotax Fees for refinancing a mortgage. Free state filing turbotax If these costs relate to business property, items (1) through (3) are deductible as business expenses. Free state filing turbotax Items (4) and (5) must be capitalized as costs of getting a loan and can be deducted over the period of the loan. Free state filing turbotax Points. Free state filing turbotax   If you pay points to obtain a loan (including a mortgage, second mortgage, line of credit, or a home equity loan), do not add the points to the basis of the related property. Free state filing turbotax Generally, you deduct the points over the term of the loan. Free state filing turbotax For more information on how to deduct points, see Points in chapter 4 of Publication 535. Free state filing turbotax Points on home mortgage. Free state filing turbotax   Special rules may apply to points you and the seller pay when you obtain a mortgage to purchase your main home. Free state filing turbotax If certain requirements are met, you can deduct the points in full for the year in which they are paid. Free state filing turbotax Reduce the basis of your home by any seller-paid points. Free state filing turbotax For more information, see Points in Publication 936, Home Mortgage Interest Deduction. Free state filing turbotax Assumption of mortgage. Free state filing turbotax   If you buy property and assume (or buy subject to) an existing mortgage on the property, your basis includes the amount you pay for the property plus the amount to be paid on the mortgage. Free state filing turbotax Example. Free state filing turbotax If you buy a building for $20,000 cash and assume a mortgage of $80,000 on it, your basis is $100,000. Free state filing turbotax Constructing assets. Free state filing turbotax   If you build property or have assets built for you, your expenses for this construction are part of your basis. Free state filing turbotax Some of these expenses include the following costs. Free state filing turbotax Land, Labor and materials, Architect's fees, Building permit charges, Payments to contractors, Payments for rental equipment, and Inspection fees. Free state filing turbotax In addition, if you own a business and use your employees, material, and equipment to build an asset, do not deduct the following expenses. Free state filing turbotax You must include them in the asset's basis. Free state filing turbotax Employee wages paid for the construction work, reduced by any employment credits allowed; Depreciation on equipment you own while it is used in the construction; Operating and maintenance costs for equipment used in the construction; and The cost of business supplies and materials used in the construction. Free state filing turbotax    Do not include the value of your own labor, or any other labor you did not pay for, in the basis of any property you construct. Free state filing turbotax Business Assets If you purchase property to use in your business, your basis is usually its actual cost to you. Free state filing turbotax If you construct, create, or otherwise produce property, you must capitalize the costs as your basis. Free state filing turbotax In certain circumstances, you may be subject to the uniform capitalization rules, next. Free state filing turbotax Uniform Capitalization Rules The uniform capitalization rules specify the costs you add to basis in certain circumstances. Free state filing turbotax Activities subject to the rules. Free state filing turbotax   You must use the uniform capitalization rules if you do any of the following in your trade or business or activity carried on for profit. Free state filing turbotax Produce real or tangible personal property for use in the business or activity, Produce real or tangible personal property for sale to customers, or Acquire property for resale. Free state filing turbotax However, this rule does not apply to personal property if your average annual gross receipts for the 3 previous tax years are $10 million or less. Free state filing turbotax   You produce property if you construct, build, install, manufacture, develop, improve, create, raise, or grow the property. Free state filing turbotax Treat property produced for you under a contract as produced by you up to the amount you pay or costs you otherwise incur for the property. Free state filing turbotax Tangible personal property includes films, sound recordings, video tapes, books, or similar property. Free state filing turbotax    Under the uniform capitalization rules, you must capitalize all direct costs and an allocable part of most indirect costs you incur due to your production or resale activities. Free state filing turbotax To capitalize means to include certain expenses in the basis of property you produce or in your inventory costs rather than deduct them as a current expense. Free state filing turbotax You recover these costs through deductions for depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Free state filing turbotax   Any cost you cannot use to figure your taxable income for any tax year is not subject to the uniform capitalization rules. Free state filing turbotax Example. Free state filing turbotax If you incur a business meal expense for which your deduction would be limited to 50% of the cost of the meal, that amount is subject to the uniform capitalization rules. Free state filing turbotax The nondeductible part of the cost is not subject to the uniform capitalization rules. Free state filing turbotax More information. Free state filing turbotax   For more information about these rules, see the regulations under section 263A of the Internal Revenue Code and Publication 538, Accounting Periods and Methods. Free state filing turbotax Exceptions. Free state filing turbotax   The following are not subject to the uniform capitalization rules. Free state filing turbotax Property you produce that you do not use in your trade, business, or activity conducted for profit; Qualified creative expenses you pay or incur as a free-lance (self-employed) writer, photographer, or artist that are otherwise deductible on your tax return; Property you produce under a long-term contract, except for certain home construction contracts; Research and experimental expenses deductible under section 174 of the Internal Revenue Code; and Costs for personal property acquired for resale if your (or your predecessor's) average annual gross receipts for the 3 previous tax years do not exceed $10 million. Free state filing turbotax For other exceptions to the uniform capitalization rules, see section 1. Free state filing turbotax 263A-1(b) of the regulations. Free state filing turbotax   For information on the special rules that apply to costs incurred in the business of farming, see chapter 6 of Publication 225, Farmer's Tax Guide. Free state filing turbotax Intangible Assets Intangible assets include goodwill, patents, copyrights, trademarks, trade names, and franchises. Free state filing turbotax The basis of an intangible asset is usually the cost to buy or create it. Free state filing turbotax If you acquire multiple assets, for example a going business for a lump sum, see Allocating the Basis below to figure the basis of the individual assets. Free state filing turbotax The basis of certain intangibles can be amortized. Free state filing turbotax See chapter 8 of Publication 535 for information on the amortization of these costs. Free state filing turbotax Patents. Free state filing turbotax   The basis of a patent you get for an invention is the cost of development, such as research and experimental expenditures, drawings, working models, and attorneys' and governmental fees. Free state filing turbotax If you deduct the research and experimental expenditures as current business expenses, you cannot include them in the basis of the patent. Free state filing turbotax The value of the inventor's time spent on an invention is not part of the basis. Free state filing turbotax Copyrights. Free state filing turbotax   If you are an author, the basis of a copyright will usually be the cost of getting the copyright plus copyright fees, attorneys' fees, clerical assistance, and the cost of plates that remain in your possession. Free state filing turbotax Do not include the value of your time as the author, or any other person's time you did not pay for. Free state filing turbotax Franchises, trademarks, and trade names. Free state filing turbotax   If you buy a franchise, trademark, or trade name, the basis is its cost, unless you can deduct your payments as a business expense. Free state filing turbotax Allocating the Basis If you buy multiple assets for a lump sum, allocate the amount you pay among the assets you receive. Free state filing turbotax You must make this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. Free state filing turbotax See Trade or Business Acquired below. Free state filing turbotax Group of Assets Acquired If you buy multiple assets for a lump sum, you and the seller may agree to a specific allocation of the purchase price among the assets in the sales contract. Free state filing turbotax If this allocation is based on the value of each asset and you and the seller have adverse tax interests, the allocation generally will be accepted. Free state filing turbotax However, see Trade or Business Acquired, next. Free state filing turbotax Trade or Business Acquired If you acquire a trade or business, allocate the consideration paid to the various assets acquired. Free state filing turbotax Generally, reduce the consideration paid by any cash and general deposit accounts (including checking and savings accounts) received. Free state filing turbotax Allocate the remaining consideration to the other business assets received in proportion to (but not more than) their fair market value in the following order. Free state filing turbotax Certificates of deposit, U. Free state filing turbotax S. Free state filing turbotax Government securities, foreign currency, and actively traded personal property, including stock and securities. Free state filing turbotax Accounts receivable, other debt instruments, and assets you mark to market at least annually for federal income tax purposes. Free state filing turbotax Property of a kind that would properly be included in inventory if on hand at the end of the tax year or property held primarily for sale to customers in the ordinary course of business. Free state filing turbotax All other assets except section 197 intangibles, goodwill, and going concern value. Free state filing turbotax Section 197 intangibles except goodwill and going concern value. Free state filing turbotax Goodwill and going concern value (whether or not they qualify as section 197 intangibles). Free state filing turbotax Agreement. Free state filing turbotax   The buyer and seller may enter into a written agreement as to the allocation of any consideration or the fair market value (FMV) of any of the assets. Free state filing turbotax This agreement is binding on both parties unless the IRS determines the amounts are not appropriate. Free state filing turbotax Reporting requirement. Free state filing turbotax   Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. Free state filing turbotax Use Form 8594 to provide this information. Free state filing turbotax The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred. Free state filing turbotax More information. Free state filing turbotax   See Sale of a Business in chapter 2 of Publication 544 for more information. Free state filing turbotax Land and Buildings If you buy buildings and the land on which they stand for a lump sum, allocate the basis of the property among the land and the buildings so you can figure the depreciation allowable on the buildings. Free state filing turbotax Figure the basis of each asset by multiplying the lump sum by a fraction. Free state filing turbotax The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Free state filing turbotax If you are not certain of the FMV of the land and buildings, you can allocate the basis based on their assessed values for real estate tax purposes. Free state filing turbotax Demolition of building. Free state filing turbotax   Add demolition costs and other losses incurred for the demolition of any building to the basis of the land on which the demolished building was located. Free state filing turbotax Do not claim the costs as a current deduction. Free state filing turbotax Modification of building. Free state filing turbotax   A modification of a building will not be treated as a demolition if the following conditions are satisfied. Free state filing turbotax 75 percent or more of the existing external walls of the building are retained in place as internal or external walls, and 75 percent or more of the existing internal structural framework of the building is retained in place. Free state filing turbotax   If the building is a certified historic structure, the modification must also be part of a certified rehabilitation. Free state filing turbotax   If these conditions are met, add the costs of the modifications to the basis of the building. Free state filing turbotax Subdivided lots. Free state filing turbotax   If you buy a tract of land and subdivide it, you must determine the basis of each lot. Free state filing turbotax This is necessary because you must figure the gain or loss on the sale of each individual lot. Free state filing turbotax As a result, you do not recover your entire cost in the tract until you have sold all of the lots. Free state filing turbotax   To determine the basis of an individual lot, multiply the total cost of the tract by a fraction. Free state filing turbotax The numerator is the FMV of the lot and the denominator is the FMV of the entire tract. Free state filing turbotax Future improvement costs. Free state filing turbotax   If you are a developer and sell subdivided lots before the development work is completed, you can (with IRS consent) include in the basis of the properties sold an allocation of the estimated future cost for common improvements. Free state filing turbotax See Revenue Procedure 92–29 for more information, including an explanation of the procedures for getting consent from the IRS. Free state filing turbotax Use of erroneous cost basis. Free state filing turbotax   If you made a mistake in figuring the cost basis of subdivided lots sold in previous years, you cannot correct the mistake for years for which the statute of limitations (generally 3 tax years) has expired. Free state filing turbotax Figure the basis of any remaining lots by allocating the correct original cost basis of the entire tract among the original lots. Free state filing turbotax Example. Free state filing turbotax You bought a tract of land to which you assigned a cost of $15,000. Free state filing turbotax You subdivided the land into 15 building lots of equal size and equitably divided your basis so that each lot had a basis of $1,000. Free state filing turbotax You treated the sale of each lot as a separate transaction and figured gain or loss separately on each sale. Free state filing turbotax Several years later you determine that your original basis in the tract was $22,500 and not $15,000. Free state filing turbotax You sold eight lots using $8,000 of basis in years for which the statute of limitations has expired. Free state filing turbotax You now can take $1,500 of basis into account for figuring gain or loss only on the sale of each of the remaining seven lots ($22,500 basis divided among all 15 lots). Free state filing turbotax You cannot refigure the basis of the eight lots sold in tax years barred by the statute of limitations. Free state filing turbotax Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments to the basis of the property. Free state filing turbotax The result of these adjustments to the basis is the adjusted basis. Free state filing turbotax Increases to Basis Increase the basis of any property by all items properly added to a capital account. Free state filing turbotax These include the cost of any improvements having a useful life of more than 1 year. Free state filing turbotax Rehabilitation expenses also increase basis. Free state filing turbotax However, you must subtract any rehabilitation credit allowed for these expenses before you add them to your basis. Free state filing turbotax If you have to recapture any of the credit, increase your basis by the recaptured amount. Free state filing turbotax If you make additions or improvements to business property, keep separate accounts for them. Free state filing turbotax Also, you must depreciate the basis of each according to the depreciation rules that would apply to the underlying property if you had placed it in service at the same time you placed the addition or improvement in service. Free state filing turbotax For more information, see Publication 946. Free state filing turbotax The following items increase the basis of property. Free state filing turbotax The cost of extending utility service lines to the property; Impact fees; Legal fees, such as the cost of defending and perfecting title; Legal fees for obtaining a decrease in an assessment levied against property to pay for local improvements; Zoning costs; and The capitalized value of a redeemable ground rent. Free state filing turbotax Assessments for Local Improvements Increase the basis of property by assessments for items such as paving roads and building ditches that increase the value of the property assessed. Free state filing turbotax Do not deduct them as taxes. Free state filing turbotax However, you can deduct as taxes charges for maintenance, repairs, or interest charges related to the improvements. Free state filing turbotax Example. Free state filing turbotax Your city changes the street in front of your store into an enclosed pedestrian mall and assesses you and other affected landowners for the cost of the conversion. Free state filing turbotax Add the assessment to your property's basis. Free state filing turbotax In this example, the assessment is a depreciable asset. Free state filing turbotax Deducting vs. Free state filing turbotax Capitalizing Costs Do not add to your basis costs you can deduct as current expenses. Free state filing turbotax For example, amounts paid for incidental repairs or maintenance that are deductible as business expenses cannot be added to basis. Free state filing turbotax However, you can choose either to deduct or to capitalize certain other costs. Free state filing turbotax If you capitalize these costs, include them in your basis. Free state filing turbotax If you deduct them, do not include them in your basis. Free state filing turbotax See Uniform Capitalization Rules earlier. Free state filing turbotax The costs you can choose to deduct or to capitalize include the following. Free state filing turbotax Carrying charges, such as interest and taxes, that you pay to own property, except carrying charges that must be capitalized under the uniform capitalization rules; Research and experimentation costs; Intangible drilling and development costs for oil, gas, and geothermal wells; Exploration costs for new mineral deposits; Mining development costs for a new mineral deposit; Costs of establishing, maintaining, or increasing the circulation of a newspaper or other periodical; and Costs of removing architectural and transportation barriers to people with disabilities and the elderly. Free state filing turbotax If you claim the disabled access credit, you must reduce the amount you deduct or capitalize by the amount of the credit. Free state filing turbotax For more information about deducting or capitalizing costs, see chapter 7 in Publication 535. Free state filing turbotax Table 1. Free state filing turbotax Examples of Increases and Decreases to Basis Increases to Basis Decreases to Basis Capital improvements:   Putting an addition on your home   Replacing an entire roof  Paving your driveway  Installing central air conditioning Rewiring your home Exclusion from income of subsidies for energy conservation measures  Casualty or theft loss deductions and insurance reimbursements  Vehicle credits Assessments for local improvements: Water connections Sidewalks Roads Section 179 deduction  Casualty losses: Restoring damaged property Depreciation  Nontaxable corporate distributions Legal fees:  Cost of defending and perfecting a title   Zoning costs   Decreases to Basis The following are some items that reduce the basis of property. Free state filing turbotax Section 179 deduction; Nontaxable corporate distributions; Deductions previously allowed (or allowable) for amortization, depreciation, and depletion; Exclusion of subsidies for energy conservation measures; Vehicle credits; Residential energy credits; Postponed gain from sale of home; Investment credit (part or all) taken; Casualty and theft losses and insurance reimbursement; Certain canceled debt excluded from income; Rebates from a manufacturer or seller; Easements; Gas-guzzler tax; Adoption tax benefits; and Credit for employer-provided child care. Free state filing turbotax Some of these items are discussed next. Free state filing turbotax Casualties and Thefts If you have a casualty or theft loss, decrease the basis in your property by any insurance or other reimbursement and by any deductible loss not covered by insurance. Free state filing turbotax You must increase your basis in the property by the amount you spend on repairs that substantially prolong the life of the property, increase its value, or adapt it to a different use. Free state filing turbotax To make this determination, compare the repaired property to the property before the casualty. Free state filing turbotax For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts. Free state filing turbotax Easements The amount you receive for granting an easement is generally considered to be a sale of an interest in real property. Free state filing turbotax It reduces the basis of the affected part of the property. Free state filing turbotax If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. Free state filing turbotax Vehicle Credits Unless you elect not to claim the qualified plug-in electric vehicle credit, the alternative motor vehicle credit, or the qualified plug-in electric drive motor vehicle credit, you may have to reduce the basis of each qualified vehicle by certain amounts reported. Free state filing turbotax For more information, see Form 8834, Qualified Plug-in Electric and Electric Vehicle Credit; Form 8910, Alternative Motor Vehicle Credit; Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit;and the related instructions. Free state filing turbotax Gas-Guzzler Tax Decrease the basis in your car by the gas-guzzler (fuel economy) tax if you begin using the car within 1 year of the date of its first sale for ultimate use. Free state filing turbotax This rule also applies to someone who later buys the car and begins using it not more than 1 year after the original sale for ultimate use. Free state filing turbotax If the car is imported, the one-year period begins on the date of entry or withdrawal of the car from the warehouse if that date is later than the date of the first sale for ultimate use. Free state filing turbotax Section 179 Deduction If you take the section 179 deduction for all or part of the cost of qualifying business property, decrease the basis of the property by the deduction. Free state filing turbotax For more information about the section 179 deduction, see Publication 946. Free state filing turbotax Exclusion of Subsidies for Energy Conservation Measures You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of any energy conservation measure for a dwelling unit. Free state filing turbotax Reduce the basis of the property for which you received the subsidy by the excluded amount. Free state filing turbotax For more information on this subsidy, see Publication 525. Free state filing turbotax Depreciation Decrease the basis of property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you chose. Free state filing turbotax If you took less depreciation than you could have under the method chosen, decrease the basis by the amount you could have taken under that method. Free state filing turbotax If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. Free state filing turbotax Unless a timely election is made not to deduct the special depreciation allowance for property placed in service after September 10, 2001, decrease the property's basis by the special depreciation allowance you deducted or could have deducted. Free state filing turbotax If you deducted more depreciation than you should have, decrease your basis by the amount equal to the depreciation you should have deducted plus the part of the excess depreciation you deducted that actually reduced your tax liability for the year. Free state filing turbotax In decreasing your basis for depreciation, take into account the amount deducted on your tax returns as depreciation and any depreciation capitalized under the uniform capitalization rules. Free state filing turbotax For information on figuring depreciation, see Publication 946. Free state filing turbotax If you are claiming depreciation on a business vehicle, see Publication 463. Free state filing turbotax If the car is not used more than 50% for business during the tax year, you may have to recapture excess depreciation. Free state filing turbotax Include the excess depreciation in your gross income and add it to your basis in the property. Free state filing turbotax For information on the computation of excess depreciation, see chapter 4 in Publication 463. Free state filing turbotax Canceled Debt Excluded From Income If a debt you owe is canceled or forgiven, other than as a gift or bequest, you generally must include the canceled amount in your gross income for tax purposes. Free state filing turbotax A debt includes any indebtedness for which you are liable or which attaches to property you hold. Free state filing turbotax You can exclude canceled debt from income in the following situations. Free state filing turbotax Debt canceled in a bankruptcy case or when you are insolvent, Qualified farm debt, and Qualified real property business debt (provided you are not a C corporation). Free state filing turbotax If you exclude from income canceled debt under situation (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. Free state filing turbotax However, in situation (3), you must reduce the basis of your depreciable property by the excluded amount. Free state filing turbotax For more information about canceled debt in a bankruptcy case or during insolvency, see Publication 908, Bankruptcy Tax Guide. Free state filing turbotax For more information about canceled debt that is qualified farm debt, see chapter 3 in Publication 225. Free state filing turbotax For more information about qualified real property business debt, see chapter 5 in Publication 334, Tax Guide for Small Business. Free state filing turbotax Postponed Gain From Sale of Home If you postponed gain from the sale of your main home before May 7, 1997, you must reduce the basis of your new home by the postponed gain. Free state filing turbotax For more information on the rules for the sale of a home, see Publication 523. Free state filing turbotax Adoption Tax Benefits If you claim an adoption credit for the cost of improvements you added to the basis of your home, decrease the basis of your home by the credit allowed. Free state filing turbotax This also applies to amounts you received under an employer's adoption assistance program and excluded from income. Free state filing turbotax For more information Form 8839, Qualified Adoption Expenses. Free state filing turbotax Employer-Provided Child Care If you are an employer, you can claim the employer-provided child care credit on amounts you paid or incurred to acquire, construct, rehabilitate, or expand property used as part of your qualified child care facility. Free state filing turbotax You must reduce your basis in that property by the credit claimed. Free state filing turbotax For more information, see Form 8882, Credit for Employer-Provided Child Care Facilities and Services. Free state filing turbotax Adjustments to Basis Example In January 2005, you paid $80,000 for real property to be used as a factory. Free state filing turbotax You also paid commissions of $2,000 and title search and legal fees of $600. Free state filing turbotax You allocated the total cost of $82,600 between the land and the building—$10,325 for the land and $72,275 for the building. Free state filing turbotax Immediately you spent $20,000 in remodeling the building before you placed it in service. Free state filing turbotax You were allowed depreciation of $14,526 for the years 2005 through 2009. Free state filing turbotax In 2008 you had a $5,000 casualty loss from a that was not covered by insurance on the building. Free state filing turbotax You claimed a deduction for this loss. Free state filing turbotax You spent $5,500 to repair the damages and extend the useful life of the building. Free state filing turbotax The adjusted basis of the building on January 1, 2010, is figured as follows: Original cost of building including fees and commissions $72,275 Adjustments to basis:     Add:         Improvements 20,000   Repair of damages 5,500       $97,775 Subtract:       Depreciation $14,526     Deducted casualty loss 5,000 19,526 Adjusted basis on January 1, 2010 $78,249 The basis of the land, $10,325, remains unchanged. Free state filing turbotax It is not affected by any of the above adjustments. Free state filing turbotax Basis Other Than Cost There are many times when you cannot use cost as basis. Free state filing turbotax In these cases, the fair market value or the adjusted basis of property may be used. Free state filing turbotax Adjusted basis is discussed earlier. Free state filing turbotax Fair market value (FMV). Free state filing turbotax   FMV is the price at which property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Free state filing turbotax Sales of similar property on or about the same date may be helpful in figuring the property's FMV. Free state filing turbotax Property Received for Services If you receive property for services, include the property's FMV in income. Free state filing turbotax The amount you include in income becomes your basis. Free state filing turbotax If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. Free state filing turbotax Bargain Purchases A bargain purchase is a purchase of an item for less than its FMV. Free state filing turbotax If, as compensation for services, you purchase goods or other property at less than FMV, include the difference between the purchase price and the property's FMV in your income. Free state filing turbotax Your basis in the property is its FMV (your purchase price plus the amount you include in income). Free state filing turbotax If the difference between your purchase price and the FMV represents a qualified employee discount, do not include the difference in income. Free state filing turbotax However, your basis in the property is still its FMV. Free state filing turbotax See Employee Discounts in Publication 15-B. Free state filing turbotax Restricted Property If you receive property for your services and the property is subject to certain restrictions, your basis in the property is its FMV when it becomes substantially vested unless you make the election discussed later. Free state filing turbotax Property becomes substantially vested when your rights in the property or the rights of any person to whom you transfer the property are not subject to a substantial risk of forfeiture. Free state filing turbotax There is substantial risk of forfeiture when the rights to full enjoyment of the property depend on the future performance of substantial services by any person. Free state filing turbotax When the property becomes substantially vested, include the FMV, less any amount you paid for the property, in income. Free state filing turbotax Example. Free state filing turbotax Your employer gives you stock for services performed under the condition that you will have to return the stock unless you complete 5 years of service. Free state filing turbotax The stock is under a substantial risk of forfeiture and is not substantially vested when you receive it. Free state filing turbotax You do not report any income until you have completed the 5 years of service that satisfy the condition. Free state filing turbotax Fair market value. Free state filing turbotax   Figure the FMV of property you received without considering any restriction except one that by its terms will never end. Free state filing turbotax Example. Free state filing turbotax You received stock from your employer for services you performed. Free state filing turbotax If you want to sell the stock while you are still employed, you must sell the stock to your employer at book value. Free state filing turbotax At your retirement or death, you or your estate must offer to sell the stock to your employer at its book value. Free state filing turbotax This is a restriction that by its terms will never end and you must consider it when you figure the FMV. Free state filing turbotax Election. Free state filing turbotax   You can choose to include in your gross income the FMV of the property at the time of transfer, less any amount you paid for it. Free state filing turbotax If you make this choice, the substantially vested rules do not apply. Free state filing turbotax Your basis is the amount you paid plus the amount you included in income. Free state filing turbotax   See the discussion of Restricted Property in Publication 525 for more information. Free state filing turbotax Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. Free state filing turbotax A taxable gain or deductible loss is also known as a recognized gain or loss. Free state filing turbotax If you receive property in exchange for other property in a taxable exchange, the basis of property you receive is usually its FMV at the time of the exchange. Free state filing turbotax A taxable exchange occurs when you receive cash or property not similar or related in use to the property exchanged. Free state filing turbotax Example. Free state filing turbotax You trade a tract of farm land with an adjusted basis of $3,000 for a tractor that has an FMV of $6,000. Free state filing turbotax You must report a taxable gain of $3,000 for the land. Free state filing turbotax The tractor has a basis of $6,000. Free state filing turbotax Involuntary Conversions If you receive property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, you can figure the basis of the replacement property you receive using the basis of the converted property. Free state filing turbotax Similar or related property. Free state filing turbotax   If you receive replacement property similar or related in service or use to the converted property, the replacement property's basis is the old property's basis on the date of the conversion. Free state filing turbotax However, make the following adjustments. Free state filing turbotax Decrease the basis by the following. Free state filing turbotax Any loss you recognize on the conversion, and Any money you receive that you do not spend on similar property. Free state filing turbotax Increase the basis by the following. Free state filing turbotax Any gain you recognize on the conversion, and Any cost of acquiring the replacement property. Free state filing turbotax Money or property not similar or related. Free state filing turbotax   If you receive money or property not similar or related in service or use to the converted property, and you buy replacement property similar or related in service or use to the converted property, the basis of the new property is its cost decreased by the gain not recognized on the conversion. Free state filing turbotax Example. Free state filing turbotax The state condemned your property. Free state filing turbotax The property had an adjusted basis of $26,000 and the state paid you $31,000 for it. Free state filing turbotax You realized a gain of $5,000 ($31,000 − $26,000). Free state filing turbotax You bought replacement property similar in use to the converted property for $29,000. Free state filing turbotax You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. Free state filing turbotax Your gain not recognized is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. Free state filing turbotax The basis of the new property is figured as follows: Cost of replacement property $29,000 Minus: Gain not recognized 3,000 Basis of the replacement property $26,000 Allocating the basis. Free state filing turbotax   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Free state filing turbotax Example. Free state filing turbotax The state in the previous example condemned your unimproved real property and the replacement property you bought was improved real property with both land and buildings. Free state filing turbotax Allocate the replacement property's $26,000 basis between land and buildings based on their respective costs. Free state filing turbotax More information. Free state filing turbotax   For more information about condemnations, see Involuntary Conversions in Publication 544. Free state filing turbotax For more information about casualty and theft losses, see Publication 547. Free state filing turbotax Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Free state filing turbotax If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. Free state filing turbotax A nontaxable gain or loss is also known as an unrecognized gain or loss. Free state filing turbotax Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Free state filing turbotax To qualify as a like-kind exchange, you must hold for business or investment purposes both the property you transfer and the property you receive. Free state filing turbotax There must also be an exchange of like-kind property. Free state filing turbotax For more information, see Like-Kind Exchanges in Publication 544. Free state filing turbotax The basis of the property you receive is the same as the basis of the property you gave up. Free state filing turbotax Example. Free state filing turbotax You exchange real estate (adjusted basis $50,000, FMV $80,000) held for investment for other real estate (FMV $80,000) held for investment. Free state filing turbotax Your basis in the new property is the same as the basis of the old ($50,000). Free state filing turbotax Exchange expenses. Free state filing turbotax   Exchange expenses are generally the closing costs you pay. Free state filing turbotax They include such items as brokerage commissions, attorney fees, deed preparation fees, etc. Free state filing turbotax Add them to the basis of the like-kind property received. Free state filing turbotax Property plus cash. Free state filing turbotax   If you trade property in a like-kind exchange and also pay money, the basis of the property received is the basis of the property you gave up increased by the money you paid. Free state filing turbotax Example. Free state filing turbotax You trade in a truck (adjusted basis $3,000) for another truck (FMV $7,500) and pay $4,000. Free state filing turbotax Your basis in the new truck is $7,000 (the $3,000 basis of the old truck plus the $4,000 paid). Free state filing turbotax Special rules for related persons. Free state filing turbotax   If a like-kind exchange takes place directly or indirectly between related persons and either party disposes of the property within 2 years after the exchange, the exchange no longer qualifies for like-kind exchange treatment. Free state filing turbotax Each person must report any gain or loss not recognized on the original exchange. Free state filing turbotax Each person reports it on the tax return filed for the year in which the later disposition occurs. Free state filing turbotax If this rule applies, the basis of the property received in the original exchange will be its fair market value. Free state filing turbotax   These rules generally do not apply to the following kinds of property dispositions. Free state filing turbotax Dispositions due to the death of either related person, Involuntary conversions, and Dispositions in which neither the original exchange nor the subsequent disposition had as a main purpose the avoidance of federal income tax. Free state filing turbotax Related persons. Free state filing turbotax   Generally, related persons are ancestors, lineal descendants, brothers and sisters (whole or half), and a spouse. Free state filing turbotax   For other related persons (for example, two corporations, an individual and a corporation, a grantor and fiduciary, etc. Free state filing turbotax ), see Nondeductible Loss in chapter 2 of Publication 544. Free state filing turbotax Exchange of business property. Free state filing turbotax   Exchanging the assets of one business for the assets of another business is a multiple property exchange. Free state filing turbotax For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. Free state filing turbotax Partially Nontaxable Exchange A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like property. Free state filing turbotax The basis of the property you receive is the same as the basis of the property you gave up, with the following adjustments. Free state filing turbotax Decrease the basis by the following amounts. Free state filing turbotax Any money you receive, and Any loss you recognize on the exchange. Free state filing turbotax Increase the basis by the following amounts. Free state filing turbotax Any additional costs you incur, and Any gain you recognize on the exchange. Free state filing turbotax If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Free state filing turbotax Example. Free state filing turbotax You traded a truck (adjusted basis $6,000) for a new truck (FMV $5,200) and $1,000 cash. Free state filing turbotax You realized a gain of $200 ($6,200 − $6,000). Free state filing turbotax This is the FMV of the truck received plus the cash minus the adjusted basis of the truck you traded ($5,200 + $1,000 – $6,000). Free state filing turbotax You include all the gain in income (recognized gain) because the gain is less than the cash received. Free state filing turbotax Your basis in the new truck is: Adjusted basis of old truck $6,000 Minus: Cash received (adjustment 1(a)) 1,000   $5,000 Plus: Gain recognized (adjustment 2(b)) 200 Basis of new truck $5,200 Allocation of basis. Free state filing turbotax   Allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. Free state filing turbotax The rest is the basis of the like property. Free state filing turbotax Example. Free state filing turbotax You had an adjusted basis of $15,000 in real estate you held for investment. Free state filing turbotax You exchanged it for other real estate to be held for investment with an FMV of $12,500, a truck with an FMV of $3,000, and $1,000 cash. Free state filing turbotax The truck is unlike property. Free state filing turbotax You realized a gain of $1,500 ($16,500 − $15,000). Free state filing turbotax This is the FMV of the real estate received plus the FMV of the truck received plus the cash minus the adjusted basis of the real estate you traded ($12,500 + $3,000 + $1,000 – $15,000). Free state filing turbotax You include in income (recognize) all $1,500 of the gain because it is less than the FMV of the unlike property plus the cash received. Free state filing turbotax Your basis in the properties you received is figured as follows. Free state filing turbotax Adjusted basis of real estate transferred $15,000 Minus: Cash received (adjustment 1(a)) 1,000   $14,000 Plus: Gain recognized (adjustment 2(b)) 1,500 Total basis of properties received $15,500 Allocate the total basis of $15,500 first to the unlike property — the truck ($3,000). Free state filing turbotax This is the truck's FMV. Free state filing turbotax The rest ($12,500) is the basis of the real estate. Free state filing turbotax Sale and Purchase If you sell property and buy similar property in two mutually dependent transactions, you may have to treat the sale and purchase as a single nontaxable exchange. Free state filing turbotax Example. Free state filing turbotax You are a salesperson and you use one of your cars 100% for business. Free state filing turbotax You have used this car in your sales activities for 2 years and have depreciated it. Free state filing turbotax Your adjusted basis in the car is $22,600 and its FMV is $23,100. Free state filing turbotax You are interested in a new car, which sells for $28,000. Free state filing turbotax If you trade your old car and pay $4,900 for the new one, your basis for depreciation for the new car would be $27,500 ($4,900 plus the $22,600 basis of your old car). Free state filing turbotax However, you want a higher basis for depreciating the new car, so you agree to pay the dealer $28,000 for the new car if he will pay you $23,100 for your old car. Free state filing turbotax Because the two transactions are dependent on each other, you are treated as having exchanged your old car for the new one and paid $4,900 ($28,000 − $23,100). Free state filing turbotax Your basis for depreciating the new car is $27,500, the same as if you traded the old car. Free state filing turbotax Partial Business Use of Property If you have property used partly for business and partly for personal use, and you exchange it in a nontaxable exchange for property to be used wholly or partly in your business, the basis of the property you receive is figured as if you had exchanged two properties. Free state filing turbotax The first is an exchange of like-kind property. Free state filing turbotax The second is personal-use property on which gain is recognized and loss is not recognized. Free state filing turbotax First, figure your adjusted basis in the property as if you transferred two separate properties. Free state filing turbotax Figure the adjusted basis of each part of the property by taking into account any adjustments to basis. Free state filing turbotax Deduct the depreciation you took or could have taken from the adjusted basis of the business part. Free state filing turbotax Then figure the amount realized for your property and allocate it to the business and nonbusiness parts of the property. Free state filing turbotax The business part of the property is permitted to be exchanged tax free. Free state filing turbotax However, you must recognize any gain from the exchange of the nonbusiness part. Free state filing turbotax You are deemed to have received, in exchange for the nonbusiness part, an amount equal to its FMV on the date of the exchange. Free state filing turbotax The basis of the property you acquired is the total basis of the property transferred (adjusted to the date of the exchange), increased by any gain recognized on the nonbusiness part. Free state filing turbotax If the nonbusiness part of the property transferred is your main home, you may qualify to exclude from income all or part of the gain on that part. Free state filing turbotax For more information, see Publication 523. Free state filing turbotax Trade of car used partly in business. Free state filing turbotax   If you trade in a car you used partly in your business for another car you will use in your business, your basis for depreciation of the new car is not the same as your basis for figuring a gain or loss on its sale. Free state filing turbotax   For information on figuring your basis for depreciation, see Publication 463. Free state filing turbotax Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse (or former spouse if the transfer is incident to divorce), is the same as your spouse's adjusted basis. Free state filing turbotax However, adjust your basis for any gain recognized by your spouse or former spouse on property transferred in trust. Free state filing turbotax This rule applies only to a transfer of property in trust in which the liabilities assumed, plus the liabilities to which the property is subject, are more than the adjusted basis of the property transferred. Free state filing turbotax If the property transferred to you is a series E, series EE, or series I United States savings bond, the transferor must include in income the interest accrued to the date of transfer. Free state filing turbotax Your basis in the bond immediately after the transfer is equal to the transferor's basis increased by the interest income includible in the transferor's income. Free state filing turbotax For more information on these bonds, see Publication 550. Free state filing turbotax At the time of the transfer, the transferor must give you the records necessary to determine the adjusted basis and holding period of the property as of the date of transfer. Free state filing turbotax For more information, see Publication 504, Divorced or Separated Individuals. Free state filing turbotax Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined earlier) to the donor just before it was given to you, its FMV at the time it was given to you, and any gift tax paid on it. Free state filing turbotax FMV Less Than Donor's Adjusted Basis If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Free state filing turbotax Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustment to basis while you held the property. Free state filing turbotax Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustment to basis while you held the property (see Adjusted Basis earlier). Free state filing turbotax If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and have a gain, you have neither gain nor loss on the sale or disposition of the property. Free state filing turbotax Example. Free state filing turbotax You received an acre of land as a gift. Free state filing turbotax At the time of the gift, the land had an FMV of $8,000. Free state filing turbotax The donor's adjusted basis was $10,000. Free state filing turbotax After you received the land, no events occurred to increase or decrease your basis. Free state filing turbotax If you sell the land for $12,000, you will have a $2,000 gain because you must use the donor's adjusted basis ($10,000) at the time of the gift as your basis to figure gain. Free state filing turbotax If you sell the land for $7,000, you will have a $1,000 loss because you must use the FMV ($8,000) at the time of the gift as your basis to figure a loss. Free state filing turbotax If the sales price is between $8,000 and $10,000, you have neither gain nor loss. Free state filing turbotax For instance, if the sales price was $9,000 and you tried to figure a gain using the donor's adjusted basis ($10,000), you would get a $1,000 loss. Free state filing turbotax If you then tried to figure a loss using the FMV ($8,000), you would get a $1,000 gain. Free state filing turbotax Business property. Free state filing turbotax   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deduction is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. Free state filing turbotax FMV Equal to or More Than Donor's Adjusted Basis If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. Free state filing turbotax Increase your basis by all or part of any gift tax paid, depending on the date of the gift. Free state filing turbotax Also, for figuring gain or loss from a sale or other disposition of the property, or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis by any required adjustments to basis while you held the property. Free state filing turbotax See Adjusted Basis earlier. Free state filing turbotax Gift received before 1977. Free state filing turbotax   If you received a gift before 1977, increase your basis in the gift (the donor's adjusted basis) by any gift tax paid on it. Free state filing turbotax However, do not increase your basis above the FMV of the gift at the time it was given to you. Free state filing turbotax Example 1. Free state filing turbotax You were given a house in 1976 with an FMV of $21,000. Free state filing turbotax The donor's adjusted basis was $20,000. Free state filing turbotax The donor paid a gift tax of $500. Free state filing turbotax Your basis is $20,500, the donor's adjusted basis plus the gift tax paid. Free state filing turbotax Example 2. Free state filing turbotax If, in Example 1, the gift tax paid had been $1,500, your basis would be $21,000. Free state filing turbotax This is the donor's adjusted basis plus the gift tax paid, limited to the FMV of the house at the time you received the gift. Free state filing turbotax Gift received after 1976. Free state filing turbotax   If you received a gift after 1976, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it that is due to the net increase in value of the gift. Free state filing turbotax Figure the increase by multiplying the gift tax paid by a fraction. Free state filing turbotax The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. Free state filing turbotax   The net increase in value of the gift is the FMV of the gift less the donor's adjusted basis. Free state filing turbotax The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Free state filing turbotax For information on the gift tax, see Publication 950, Introduction to Estate and Gift Taxes. Free state filing turbotax Example. Free state filing turbotax In 2010, you received a gift of property from your mother that had an FMV of $50,000. Free state filing turbotax Her adjusted basis was $20,000. Free state filing turbotax The amount of the gift for gift tax purposes was $37,000 ($50,000 minus the $13,000 annual exclusion). Free state filing turbotax She paid a gift tax of $9,000. Free state filing turbotax Your basis, $27,290, is figured as follows: Fair market value $50,000 Minus: Adjusted basis 20,000 Net increase in value $30,000 Gift tax paid $9,000 Multiplied by ($30,000 ÷ $37,000) . Free state filing turbotax 81 Gift tax due to net increase in value $7,290 Adjusted basis of property to your mother 20,000 Your basis in the property $27,290 Inherited Property Special rules apply to property acquired from a decedent who died in 2010. Free state filing turbotax See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. Free state filing turbotax If you inherited property from a decedent who died before 2010, your basis in property you inherit from a decedent is generally one of the following. Free state filing turbotax The FMV of the property at the date of the individual's death. Free state filing turbotax The FMV on the alternate valuation date if the personal representative for the estate chooses to use alternate valuation. Free state filing turbotax For information on the alternate valuation date, see the Instructions for Form 706. Free state filing turbotax The value under the special-use valuation method for real property used in farming or a closely held business if chosen for estate tax purposes. Free state filing turbotax This method is discussed later. Free state filing turbotax The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement. Free state filing turbotax For information on a qualified conservation easement, see the Instructions for Form 706. Free state filing turbotax If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. Free state filing turbotax For more information, see the Instructions for Form 706. Free state filing turbotax Appreciated property. Free state filing turbotax   The above rule does not apply to appreciated property you receive from a decedent if you or your spouse originally gave the property to the decedent within 1 year before the decedent's death. Free state filing turbotax Your basis in this property is the same as the decedent's adjusted basis in the property immediately before his or her death, rather than its FMV. Free state filing turbotax Appreciated property is any property whose FMV on the day it was given to the decedent is more than its adjusted basis. Free state filing turbotax Community Property In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), husband and wife are each usually considered to own half the community property. Free state filing turbotax When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. Free state filing turbotax For this rule to apply, at least half the value of the community property interest must be includable in the decedent's gross estate, whether or not the estate must file a return. Free state filing turbotax For example, you and your spouse owned community property that had a basis of $80,000. Free state filing turbotax When your spouse died, half the FMV of the community interest was includible in your spouse's estate. Free state filing turbotax The FMV of the community interest was $100,000. Free state filing turbotax The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). Free state filing turbotax The basis of the other half to your spouse's heirs is also $50,000. Free state filing turbotax For more information on community property, see Publication 555, Community Property. Free state filing turbotax Property Held by Surviving Tenant The following example explains the rule for the basis of property held by a surviving tenant in joint tenancy or tenancy by the entirety. Free state filing turbotax Example. Free state filing turbotax John and Jim owned, as joint tenants with right of survivorship, business property they purchased for $30,000. Free state filing turbotax John furnished two-thirds of the purchase price and Jim furnished one-third. Free state filing turbotax Depreciation deductions allowed before John's death were $12,000. Free state filing turbotax Under local law, each had a half interest in the income from the property. Free state filing turbotax At the date of John's death, the property had an FMV of $60,000, two-thirds of which is includable in John's estate. Free state filing turbotax Jim figures his basis in the property at the date of John's death as follows: Interest Jim bought with his own funds—1/3 of $30,000 cost $10,000   Interest Jim received on John's death—2/3 of $60,000 FMV 40,000 $50,000 Minus: ½ of $12,000 depreciation before John's death 6,000 Jim's basis at the date of John's death $44,000 If Jim had not contributed any part of the purchase price, his basis at the date of John's death would be $54,000. Free state filing turbotax This is figured by subtracting from the $60,000 FMV, the $6,000 depreciation allocated to Jim's half interest before the date of death. Free state filing turbotax If under local law Jim had no interest in the income from the property and he contributed no part of the purchase price, his basis at John's death would be $60,000, the FMV of the property. Free state filing turbotax Qualified Joint Interest Include one-half of the value of a qualified joint interest in the decedent's gross estate. Free state filing turbotax It does not matter how much each spouse contributed to the purchase price. Free state filing turbotax Also, it does not matter which spouse dies first. Free state filing turbotax A qualified joint interest is any interest in property held by husband and wife as either of the following. Free state filing turbotax Tenants by the entirety, or Joint tenants with right of survivorship if husband and wife are the only joint tenants. Free state filing turbotax Basis. Free state filing turbotax   As the surviving spouse, your basis in property you owned with your spouse as a qualified joint interest is the cost of your half of the property with certain adjustments. Free state filing turbotax Decrease the cost by any deductions allowed to you for depreciation and depletion. Free state filing turbotax Increase the reduced cost by your basis in the half you inherited. Free state filing turbotax Farm or Closely Held Business Under certain conditions, when a person dies the executor or personal representative of that person's estate can choose to value the qualified real property on other than its FMV. Free state filing turbotax If so, the executor or personal representative values the qualified real property based on its use as a farm or its use in a closely held business. Free state filing turbotax If the executor or personal representative chooses this method of valuation for estate tax purposes, that value is the basis of the property for the heirs. Free state filing turbotax Qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. Free state filing turbotax Special-use valuation. Free state filing turbotax   If you are a qualified heir who received special-use valuation property, your basis in the property is the estate's or trust's basis in that property immediately before the distribution. Free state filing turbotax Increase your basis by any gain recognized by the estate or trust because of post-death appreciation. Free state filing turbotax Post-death appreciation is the property's FMV on the date of distribution minus the property's FMV either on the date of the individual's death or the alternate valuation date. Free state filing turbotax Figure all FMVs without regard to the special-use valuation. Free state filing turbotax   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. Free state filing turbotax This tax is assessed if, within 10 years after the death of the decedent, you transfer the property to a person who is not a member of your family or the property stops being used as a farm or in a closely held business. Free state filing turbotax   To increase your basis in the property, you must make an irrevocable election and pay interest on the additional estate tax figured from the date 9 months after the decedent's death until the date of the payment of the additional estate tax. Free state filing turbotax If you meet these requirements, increase your basis in the property to its FMV on the date of the decedent's death or the alternate valuation date. Free state filing turbotax The increase in your basis is considered to have occurred immediately before the event that results in the additional estate tax. Free state filing turbotax   You make the election by filing with Form 706-A a statement that does all of the following. Free state filing turbotax Contains your name, address, and taxpayer identification number and those of the estate; Identifies the election as an election under section 1016(c) of the Internal Revenue Code; Specifies the property for which the election is made; and Provides any additional information required by the Instructions for Form 706-A. Free state filing turbotax   For more information, see the Instructions for Form 706 and the Instructions for Form 706-A. Free state filing turbotax Property Changed to Business or Rental Use If you hold property for personal use and then change it to business use or use it to produce rent, you must figure its basis for depreciation. Free state filing turbotax An example of changing property held for personal use to business use would be renting out your former main home. Free state filing turbotax Basis for depreciation. Free state filing turbotax   The basis for depreciation is the lesser of the following amounts. Free state filing turbotax The FMV of the property on the date of the change, or Your adjusted basis on the date of the change. Free state filing turbotax Example. Free state filing turbotax Several years ago you paid $160,000 to have your home built on a lot that cost $25,000. Free state filing turbotax You paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house before changing the property to rental use last year. Free state filing turbotax Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. Free state filing turbotax Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). Free state filing turbotax On the same date, your property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. Free state filing turbotax The basis for figuring depreciation on the house is its FMV on the date of change ($165,000) because it is less than your adjusted basis ($178,000). Free state filing turbotax Sale of property. Free state filing turbotax   If you later sell or dispose of property changed to business or rental use, the basis of the property you use will depend on whether you are figuring gain or loss. Free state filing turbotax Gain. Free state filing turbotax   The basis for figuring a gain is your adjusted basis when you sell the property. Free state filing turbotax Example. Free state filing turbotax Assume the same facts as in the previous example except that you sell the property at a gain after being allowed depreciation deductions of $37,500. Free state filing turbotax Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). Free state filing turbotax Loss. Free state filing turbotax   Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. Free state filing turbotax Then adjust this amount for the period after the change in the property's use, as discussed earlier under Adjusted Basis, to arrive at a basis for loss. Free state filing turbotax Example. Free state filing turbotax Assume the same facts as in the previous example, except that you sell the property at a loss after being allowed depreciation deductions of $37,500. Free state filing turbotax In this case, you would start with the FMV on the date of the change to rental use ($180,000) because it is less than the adjusted basis of $203,000 ($178,000 + $25,000) on that date. Free state filing turbotax Reduce that amount ($180,000) by the depreciation deductions to arrive at a basis for loss of $142,500 ($180,000 − $37,500). Free state filing turbotax How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. Free state filing turbotax By selecting the method that is best for you, you will have quick and easy access to tax help. Free state filing turbotax Contacting your Taxpayer Advocate. Free state filing turbotax   The Taxpayer Advocate Service (TAS) is an independent organization within the IRS. Free state filing turbotax We help taxpayers who are experiencing economic harm, such as not being able to provide necessities like housing, transportation, or food; taxpayers who are seeking help in resolving tax problems with the IRS; and those who believe that an IRS system or procedure is not working as it should. Free state filing turbotax Here are seven things every taxpayer should know about TAS. Free state filing turbotax TAS is your voice at the IRS. Free state filing turbotax Our service is free, confidential, and tailored to meet your needs. Free state filing turbotax You may be eligible for our help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should. Free state filing turbotax We help taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. Free state filing turbotax This includes businesses as well as individuals. Free state filing turbotax Our employees know the IRS and how to navigate it. Free state filing turbotax If you qualify for our help, we'll assign your case to an advocate who will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved. Free state filing turbotax We have at least one local taxpayer advocate in every state, the District of Columbia, and Puerto Rico. Free state filing turbotax You can call your local advocate, whose number is in your phone book, in Publication 1546, Taxpayer Advocate Service—Your Voice at the IRS, and on our website at www. Free state filing turbotax irs. Free state filing turbotax gov/advocate. Free state filing turbotax You can also call our toll-free line at 1-877-777-4778 or TTY/TDD 1-800-829-4059. Free state filing turbotax You can learn about your rights and responsibilities as a taxpayer by visiting our online tax toolkit at www. Free state filing turbotax taxtoolkit. Free state filing turbotax irs. Free state filing turbotax gov. Free state filing turbotax You can get updates on hot tax topics by visiting our YouTube channel at www. Free state filing turbotax youtube. Free state filing turbotax com/tasnta and our Facebook page at www. Free state filing turbotax facebook. Free state filing turbotax com/YourVoiceAtIRS, or by following our tweets at www. Free state filing turbotax twitter. Free state filing turbotax com/YourVoiceAtIRS. Free state filing turbotax Low Income Taxpayer Clinics (LITCs). Free state filing turbotax   The Low Income Taxpayer Clinic program serves individuals who have a problem with the IRS and whose income is below a certain level. Free state filing turbotax LITCs are independent from the IRS. Free state filing turbotax Most LITCs can provide representation before the IRS or in court on audits, tax collection disputes, and other issues for free or a small fee. Free state filing turbotax If an individual's native language is not English, some clinics can provide multilingual information about taxpayer rights and responsibilities. Free state filing turbotax For more information, see Publication 4134, Low Income Taxpayer Clinic List. Free state filing turbotax This publication is available at IRS. Free state filing turbotax gov, by calling 1-800-TAX-FORM (1-800-829-3676), or at your local IRS office. Free state filing turbotax Free tax services. Free state filing turbotax   Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. Free state filing turbotax Learn about free tax information from the IRS, including publications, services, and education and assistance programs. Free state filing turbotax The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. Free state filing turbotax The majority of the information and services listed in this publication are available to you free of charge. Free state filing turbotax If there is a fee associated with a resource or service, it is listed in the publication. Free state filing turbotax   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with d