Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Free State Taxes Filing

1040ezHr BlockFiling 2012 Tax ReturnsIrs Efile Form 4868Taxes Online 1040ezIrs AmendmentsDeadline For Filing TaxesIrs Form 1040ezHow Do You Fill Out A 1040x FormOnline 1040ez FormFiling Late Taxes OnlineWhere Mail 1040x Amended ReturnIrs Amended FormIrs Form1040xHrblock FreeIrs Ez Form OnlineFile My State Taxes For Free OnlineFree Tax 2007State Income Tax Forms 2011Irs Forms 20121040ez 2011 OnlineIrs 1040ez FormIrs 1040 Ez Form 2012How To Refile Your TaxesFile An Amended Tax Return For 2011Amended FormsHow To Amend Tax Return Turbotax1040 Ez Tax Table2012 Federal Tax Forms 1040aFile Taxes For 20111040ez 2012 Form1040 Tax FormHow To Amend TaxesFree Online State Tax Filing2012 Tax Form 1040Free 1040Freetaxusa 2010How To File Amended ReturnAmended 2009 Tax Return InstructionsFree Tax Calculator 2011

Free State Taxes Filing

Free state taxes filing Publication 529 - Main Content Table of Contents Deductions Subject to the 2% LimitUnreimbursed Employee Expenses Tax Preparation Fees Other Expenses Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses How To ReportWho can use Form 2106-EZ. Free state taxes filing Computer used in a home office. Free state taxes filing Example How To Get Tax HelpLow Income Taxpayer Clinics Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR). Free state taxes filing You can claim the amount of expenses that is more than 2% of your adjusted gross income. Free state taxes filing You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Free state taxes filing Your adjusted gross income is the amount on Form 1040, line 38, or Form 1040NR, line 37. Free state taxes filing Generally, you apply the 2% limit after you apply any other deduction limit. Free state taxes filing For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed later under Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging ) before you apply the 2% limit. Free state taxes filing Deductions subject to the 2% limit are discussed in the following three categories. Free state taxes filing Unreimbursed employee expenses (Schedule A (Form 1040), line 21 or Schedule A (Form 1040NR), line 7). Free state taxes filing Tax preparation fees (Schedule A (Form 1040), line 22 or Schedule A (Form 1040NR), line 8). Free state taxes filing Other expenses (Schedule A (Form 1040), line 23 or Schedule A (Form 1040NR), line 9). Free state taxes filing Unreimbursed Employee Expenses Generally, the following expenses are deducted on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. Free state taxes filing You can deduct only unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. Free state taxes filing An expense is ordinary if it is common and accepted in your trade, business, or profession. Free state taxes filing An expense is necessary if it is appropriate and helpful to your business. Free state taxes filing An expense does not have to be required to be considered necessary. Free state taxes filing You may be able to deduct the following items as unreimbursed employee expenses. Free state taxes filing Business bad debt of an employee. Free state taxes filing Business liability insurance premiums. Free state taxes filing Damages paid to a former employer for breach of an employment contract. Free state taxes filing Depreciation on a computer your employer requires you to use in your work. Free state taxes filing Dues to a chamber of commerce if membership helps you do your job. Free state taxes filing Dues to professional societies. Free state taxes filing Educator expenses. Free state taxes filing Home office or part of your home used regularly and exclusively in your work. Free state taxes filing Job search expenses in your present occupation. Free state taxes filing Laboratory breakage fees. Free state taxes filing Legal fees related to your job. Free state taxes filing Licenses and regulatory fees. Free state taxes filing Malpractice insurance premiums. Free state taxes filing Medical examinations required by an employer. Free state taxes filing Occupational taxes. Free state taxes filing Passport for a business trip. Free state taxes filing Repayment of an income aid payment received under an employer's plan. Free state taxes filing Research expenses of a college professor. Free state taxes filing Rural mail carriers' vehicle expenses. Free state taxes filing Subscriptions to professional journals and trade magazines related to your work. Free state taxes filing Tools and supplies used in your work. Free state taxes filing Travel, transportation, meals, entertainment, gifts, and local lodging related to your work. Free state taxes filing Union dues and expenses. Free state taxes filing Work clothes and uniforms if required and not suitable for everyday use. Free state taxes filing Work-related education. Free state taxes filing Business Bad Debt A business bad debt is a loss from a debt created or acquired in your trade or business. Free state taxes filing Any other worthless debt is a business bad debt only if there is a very close relationship between the debt and your trade or business when the debt becomes worthless. Free state taxes filing A debt has a very close relationship to your trade or business of being an employee if your main motive for incurring the debt is a business reason. Free state taxes filing Example. Free state taxes filing You make a bona fide loan to the corporation you work for. Free state taxes filing It fails to pay you back. Free state taxes filing You had to make the loan in order to keep your job. Free state taxes filing You have a business bad debt as an employee. Free state taxes filing More information. Free state taxes filing   For more information on business bad debts, see chapter 10 in Publication 535. Free state taxes filing For information on nonbusiness bad debts, see chapter 4 in Publication 550, Investment Income and Expenses. Free state taxes filing Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. Free state taxes filing Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer if the damages are attributable to the pay you received from that employer. Free state taxes filing Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. Free state taxes filing For the convenience of your employer. Free state taxes filing   This means that your use of the computer is for a substantial business reason of your employer. Free state taxes filing You must consider all facts in making this determination. Free state taxes filing Use of your computer during your regular working hours to carry on your employer's business is generally for the convenience of your employer. Free state taxes filing Required as a condition of your employment. Free state taxes filing   This means that you cannot properly perform your duties without the computer. Free state taxes filing Whether you can properly perform your duties without it depends on all the facts and circumstances. Free state taxes filing It is not necessary that your employer explicitly requires you to use your computer. Free state taxes filing But neither is it enough that your employer merely states that your use of the item is a condition of your employment. Free state taxes filing Example. Free state taxes filing You are an engineer with an engineering firm. Free state taxes filing You occasionally take work home at night rather than work late at the office. Free state taxes filing You own and use a computer that is similar to the one you use at the office to complete your work at home. Free state taxes filing Since your use of the computer is not for the convenience of your employer and is not required as a condition of your employment, you cannot claim a depreciation deduction for it. Free state taxes filing Which depreciation method to use. Free state taxes filing   The depreciation method you use depends on whether you meet the more-than-50%-use test. Free state taxes filing More-than-50%-use test met. Free state taxes filing   You meet this test if you use the computer more than 50% in your work. Free state taxes filing If you meet this test, you can claim accelerated depreciation under the General Depreciation System (GDS). Free state taxes filing In addition, you may be able to take the section 179 deduction for the year you place the item in service. Free state taxes filing More-than-50%-use test not met. Free state taxes filing   If you do not meet the more-than-50%-use test, you are limited to the straight line method of depreciation under the Alternative Depreciation System (ADS). Free state taxes filing You also cannot claim the section 179 deduction. Free state taxes filing (But if you use your computer in a home office, see the exception below. Free state taxes filing ) Investment use. Free state taxes filing   Your use of a computer in connection with investments (described later under Other Expenses ) does not count as use in your work. Free state taxes filing However, you can combine your investment use with your work use in figuring your depreciation deduction. Free state taxes filing Exception for computer used in a home office. Free state taxes filing   The more-than-50%-use test does not apply to a computer used only in a part of your home that meets the requirements described later under Home Office . Free state taxes filing You can claim accelerated depreciation using GDS for a computer used in a qualifying home office, even if you do not use it more than 50% in your work. Free state taxes filing You also may be able to take a section 179 deduction for the year you place the computer in service. Free state taxes filing See Computer used in a home office under How To Report, later. Free state taxes filing More information. Free state taxes filing   For more information on depreciation and the section 179 deduction for computers and other items used in a home office, see Business Furniture and Equipment in Publication 587. Free state taxes filing Publication 946 has detailed information about the section 179 deduction and depreciation deductions using GDS and ADS. Free state taxes filing Reporting your depreciation deduction. Free state taxes filing    See How To Report, later, for information about reporting a deduction for depreciation. Free state taxes filing You must keep records to prove your percentage of business and investment use. Free state taxes filing Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. Free state taxes filing Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. Free state taxes filing Lobbying and political activities. Free state taxes filing    You may not be able to deduct that part of your dues that is for certain lobbying and political activities. Free state taxes filing See Lobbying Expenses under Nondeductible Expenses, later. Free state taxes filing Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. Free state taxes filing If you file Form 1040A, you can deduct these expenses on line 16. Free state taxes filing If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. Free state taxes filing However, neither spouse can deduct more than $250 of his or her qualified expenses. Free state taxes filing Eligible educator. Free state taxes filing   An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in school for at least 900 hours during a school year. Free state taxes filing Qualified expenses. Free state taxes filing   Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. Free state taxes filing An ordinary expense is one that is common and accepted in your educational field. Free state taxes filing A necessary expense is one that is helpful and appropriate for your profession as an educator. Free state taxes filing An expense does not have to be required to be considered necessary. Free state taxes filing   Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. Free state taxes filing You must reduce your qualified expenses by the following amounts. Free state taxes filing Excludable U. Free state taxes filing S. Free state taxes filing series EE and I savings bond interest from Form 8815. Free state taxes filing Nontaxable qualified state tuition program earnings. Free state taxes filing Nontaxable earnings from Coverdell education savings accounts. Free state taxes filing Any reimbursements you received for those expenses that were not reported to you on your Form W-2, box 1. Free state taxes filing Educator expenses over limit. Free state taxes filing   If you were an educator in 2013 and you had qualified expenses that you cannot take as an adjustment to gross income, you can deduct the rest as an itemized deduction subject to the 2% limit. Free state taxes filing Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. Free state taxes filing You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. Free state taxes filing The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. Free state taxes filing Principal place of business. Free state taxes filing   If you have more than one place of business, the business part of your home is your principal place of business if: You use it regularly and exclusively for administrative or management activities of your trade or business, and You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Free state taxes filing   Otherwise, the location of your principal place of business generally depends on the relative importance of the activities performed at each location and the time spent at each location. Free state taxes filing You should keep records that will give the information needed to figure the deduction according to these rules. Free state taxes filing Also keep canceled checks, substitute checks, or account statements and receipts of the expenses paid to prove the deductions you claim. Free state taxes filing More information. Free state taxes filing   See Publication 587 for more detailed information and a worksheet for figuring the deduction. Free state taxes filing Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. Free state taxes filing You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. Free state taxes filing Employment and outplacement agency fees. Free state taxes filing    You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. Free state taxes filing Employer pays you back. Free state taxes filing   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. Free state taxes filing See Recoveries in Publication 525. Free state taxes filing Employer pays the employment agency. Free state taxes filing   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. Free state taxes filing Résumé. Free state taxes filing   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. Free state taxes filing Travel and transportation expenses. Free state taxes filing   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. Free state taxes filing You can deduct the travel expenses if the trip is primarily to look for a new job. Free state taxes filing The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. Free state taxes filing   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. Free state taxes filing    You can choose to use the standard mileage rate to figure your car expenses. Free state taxes filing The 2013 rate for business use of a vehicle is 56½ cents per mile. Free state taxes filing See Publication 463 for more information on travel and car expenses. Free state taxes filing Legal Fees You can deduct legal fees related to doing or keeping your job. Free state taxes filing Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. Free state taxes filing Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Free state taxes filing If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. Free state taxes filing Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. Free state taxes filing If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. Free state taxes filing Research Expenses of a College Professor If you are a college professor, you can deduct your research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. Free state taxes filing You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. Free state taxes filing However, you cannot deduct the cost of travel as a form of education. Free state taxes filing Rural Mail Carriers' Vehicle Expenses If your expenses to use a vehicle in performing services as a rural mail carrier are more than the amount of your reimbursements, you can deduct the unreimbursed expenses. Free state taxes filing See chapter 4 of Publication 463 for more information. Free state taxes filing Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. Free state taxes filing You can depreciate the cost of tools that have a useful life substantially beyond the tax year. Free state taxes filing For more information about depreciation, see Publication 946. Free state taxes filing Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging If you are an employee and have ordinary and necessary business-related expenses for travel away from home, local transportation, entertainment, and gifts, you may be able to deduct these expenses. Free state taxes filing Generally, you must file Form 2106 or Form 2106-EZ to claim these expenses. Free state taxes filing Travel expenses. Free state taxes filing   Travel expenses are those incurred while traveling away from home for your employer. Free state taxes filing You can deduct travel expenses paid or incurred in connection with a temporary work assignment. Free state taxes filing Generally, you cannot deduct travel expenses paid or incurred in connection with an indefinite work assignment. Free state taxes filing   Travel expenses may include: The cost of getting to and from your business destination (air, rail, bus, car, etc. Free state taxes filing ), Meals and lodging while away from home, Taxi fares, Baggage charges, and Cleaning and laundry expenses. Free state taxes filing   Travel expenses are discussed more fully in chapter 1 of Publication 463. Free state taxes filing Temporary work assignment. Free state taxes filing    If your assignment or job away from home in a single location is realistically expected to last (and does in fact last) for 1 year or less, it is temporary, unless there are facts and circumstances that indicate it is not. Free state taxes filing Indefinite work assignment. Free state taxes filing   If your assignment or job away from home in a single location is realistically expected to last for more than 1 year, it is indefinite, whether or not it actually lasts for more than 1 year. Free state taxes filing If your assignment or job away from home in a single location is realistically expected to last for 1 year or less, but at some later date it is realistically expected to exceed 1 year, it will be treated as temporary (in the absence of facts and circumstances indicating otherwise) until the date that your realistic expectation changes, and it will be treated as indefinite after that date. Free state taxes filing Federal crime investigation and prosecution. Free state taxes filing   If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule for deducting temporary travel expenses. Free state taxes filing This means that you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year. Free state taxes filing   To qualify, the Attorney General must certify that you are traveling: For the Federal Government, In a temporary duty status, and To investigate, prosecute, or provide support services for the investigation or prosecution of a federal crime. Free state taxes filing Armed Forces reservists traveling more than 100 miles from home. Free state taxes filing   If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct some of your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. Free state taxes filing The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. Free state taxes filing The balance, if any, is reported on Schedule A. Free state taxes filing   You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Naval, Marine Corps, Air Force, Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service. Free state taxes filing   For more information on travel expenses, see Publication 463. Free state taxes filing Local transportation expenses. Free state taxes filing   Local transportation expenses are the expenses of getting from one workplace to another when you are not traveling away from home. Free state taxes filing They include the cost of transportation by air, rail, bus, taxi, and the cost of using your car. Free state taxes filing   You can choose to use the standard mileage rate to figure your car expenses. Free state taxes filing The 2013 rate for business use of a vehicle is 56½ cents per mile. Free state taxes filing    In general, the costs of commuting between your residence and your place of business are nondeductible. Free state taxes filing Work at two places in a day. Free state taxes filing   If you work at two places in a day, whether or not for the same employer, you can generally deduct the expenses of getting from one workplace to the other. Free state taxes filing Temporary work location. Free state taxes filing   You can deduct expenses incurred in going between your home and a temporary work location if at least one of the following applies. Free state taxes filing The work location is outside the metropolitan area where you live and normally work. Free state taxes filing You have at least one regular work location (other than your home) for the same trade or business. Free state taxes filing (If this applies, the distance between your home and the temporary work location does not matter. Free state taxes filing )   For this purpose, a work location is generally considered temporary if your work there is realistically expected to last (and does in fact last) for 1 year or less. Free state taxes filing It is not temporary if your work there is realistically expected to last for more than 1 year, even if it actually lasts for 1 year or less. Free state taxes filing If your work there initially is realistically expected to last for 1 year or less, but later is realistically expected to last for more than 1 year, the work location is generally considered temporary until the date your realistic expectation changes and not temporary after that date. Free state taxes filing For more information, see chapter 1 of Publication 463. Free state taxes filing Home office. Free state taxes filing   You can deduct expenses incurred in going between your home and a workplace if your home is your principal place of business for the same trade or business. Free state taxes filing (In this situation, whether the other workplace is temporary or regular and its distance from your home do not matter. Free state taxes filing ) See Home Office , earlier, for a discussion on the use of your home as your principal place of business. Free state taxes filing Meals and entertainment. Free state taxes filing   Generally, you can deduct entertainment expenses (including entertainment-related meals) only if they are directly related to the active conduct of your trade or business. Free state taxes filing However, the expense only needs to be associated with the active conduct of your trade or business if it directly precedes or follows a substantial and bona fide business-related discussion. Free state taxes filing   You can deduct only 50% of your business-related meal and entertainment expenses unless the expenses meet certain exceptions. Free state taxes filing You apply this 50% limit before you apply the 2%-of-adjusted-gross-income limit. Free state taxes filing Meals when subject to “hours of service” limits. Free state taxes filing   You can deduct 80% of your business-related meal expenses if you consume the meals during or incident to any period subject to the Department of Transportation's “hours of service” limits. Free state taxes filing You apply this 80% limit before you apply the 2%-of-adjusted-gross-income limit. Free state taxes filing Gift expenses. Free state taxes filing   You can generally deduct up to $25 of business gifts you give to any one individual during the year. Free state taxes filing The following items do not count toward the $25 limit. Free state taxes filing Identical, widely distributed items costing $4 or less that have your name clearly and permanently imprinted. Free state taxes filing Signs, racks, and promotional materials to be displayed on the business premises of the recipient. Free state taxes filing Local lodging. Free state taxes filing   If your employer provides or requires you to obtain lodging while you are not traveling away from home, you can deduct the cost of the lodging if it is: on a temporary basis, necessary for you to participate in or be available for a business meeting or employer function, and the costs are ordinary and necessary, but not lavish or extravagant. Free state taxes filing   If your employer provides the lodging or reimburses you for the cost of the lodging, you can deduct the cost only if the value or the reimbursement is included in your gross income because it is reported as wages on your Form W-2. Free state taxes filing Additional information. Free state taxes filing    See Publication 463 for more information on travel, transportation, meal, entertainment, and gift expenses, and reimbursements for these expenses. Free state taxes filing Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. Free state taxes filing You can also deduct assessments for benefit payments to unemployed union members. Free state taxes filing However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Free state taxes filing Also, you cannot deduct contributions to a pension fund even if the union requires you to make the contributions. Free state taxes filing You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. Free state taxes filing See Lobbying Expenses under Nondeductible Expenses, later. Free state taxes filing Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. Free state taxes filing You must wear them as a condition of your employment. Free state taxes filing The clothes are not suitable for everyday wear. Free state taxes filing It is not enough that you wear distinctive clothing. Free state taxes filing The clothing must be specifically required by your employer. Free state taxes filing Nor is it enough that you do not, in fact, wear your work clothes away from work. Free state taxes filing The clothing must not be suitable for taking the place of your regular clothing. Free state taxes filing Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. Free state taxes filing ). Free state taxes filing Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. Free state taxes filing However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. Free state taxes filing Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. Free state taxes filing Protective clothing. Free state taxes filing   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. Free state taxes filing   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. Free state taxes filing Military uniforms. Free state taxes filing   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. Free state taxes filing However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. Free state taxes filing In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. Free state taxes filing   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. Free state taxes filing   If you are a student at an armed forces academy, you cannot deduct the cost of your uniforms if they replace regular clothing. Free state taxes filing However, you can deduct the cost of insignia, shoulder boards, and related items. Free state taxes filing    You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. Free state taxes filing Work-Related Education You can deduct expenses you have for education, even if the education may lead to a degree, if the education meets at least one of the following two tests. Free state taxes filing It maintains or improves skills required in your present work. Free state taxes filing It is required by your employer or the law to keep your salary, status, or job, and the requirement serves a business purpose of your employer. Free state taxes filing You cannot deduct expenses you have for education, even though one or both of the preceding tests are met, if the education: Is needed to meet the minimum educational requirements to qualify you in your trade or business, or Is part of a program of study that will lead to qualifying you in a new trade or business. Free state taxes filing If your education qualifies, you can deduct expenses for tuition, books, supplies, laboratory fees, and similar items, and certain transportation costs. Free state taxes filing If the education qualifies you for a new trade or business, you cannot deduct the educational expenses even if you do not intend to enter that trade or business. Free state taxes filing Travel as education. Free state taxes filing   You cannot deduct the cost of travel that in itself constitutes a form of education. Free state taxes filing For example, a French teacher who travels to France to maintain general familiarity with the French language and culture cannot deduct the cost of the trip as an educational expense. Free state taxes filing More information. Free state taxes filing    See Publication 970, Tax Benefits for Education, for a complete discussion of the deduction for work-related education expenses. Free state taxes filing Education Expenses During Unemployment If you stop working for a year or less in order to get education in order to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. Free state taxes filing Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. Free state taxes filing Tax Preparation Fees You can usually deduct tax preparation fees on the return for the year in which you pay them. Free state taxes filing Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. Free state taxes filing These fees include the cost of tax preparation software programs and tax publications. Free state taxes filing They also include any fee you paid for electronic filing of your return. Free state taxes filing See Tax preparation fees under How To Report, later. Free state taxes filing Other Expenses You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2%-of-adjusted-gross-income limit. Free state taxes filing On Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9, you can deduct the ordinary and necessary expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. Free state taxes filing You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonable and closely related to these purposes. Free state taxes filing These other expenses include the following items. Free state taxes filing Appraisal fees for a casualty loss or charitable contribution. Free state taxes filing Casualty and theft losses from property used in performing services as an employee. Free state taxes filing Clerical help and office rent in caring for investments. Free state taxes filing Depreciation on home computers used for investments. Free state taxes filing Excess deductions (including administrative expenses) allowed a beneficiary on termination of an estate or trust. Free state taxes filing Fees to collect interest and dividends. Free state taxes filing Hobby expenses, but generally not more than hobby income. Free state taxes filing Indirect miscellaneous deductions from pass-through entities. Free state taxes filing Investment fees and expenses. Free state taxes filing Legal fees related to producing or collecting taxable income or getting tax advice. Free state taxes filing Loss on deposits in an insolvent or bankrupt financial institution. Free state taxes filing Loss on traditional IRAs or Roth IRAs, when all amounts have been distributed to you. Free state taxes filing Repayments of income. Free state taxes filing Repayments of social security benefits. Free state taxes filing Safe deposit box rental, except for storing jewelry and other personal effects. Free state taxes filing Service charges on dividend reinvestment plans. Free state taxes filing Tax advice fees. Free state taxes filing Trustee's fees for your IRA, if separately billed and paid. Free state taxes filing If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses, later, under Nondeductible Expenses. Free state taxes filing Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. Free state taxes filing Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. Free state taxes filing First report the loss in Section B of Form 4684, Casualties and Thefts. Free state taxes filing You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Free state taxes filing To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Free state taxes filing For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts. Free state taxes filing Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. Free state taxes filing Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. Free state taxes filing The fees are deductible on the return for the year in which you paid them. Free state taxes filing For example, fees charged to payments made in 2013 can be claimed on the 2013 tax return. Free state taxes filing Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). Free state taxes filing You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. Free state taxes filing But if you work as an employee and also use the computer in that work, see Depreciation on Computers under Unreimbursed Employee Expenses, earlier. Free state taxes filing For more information on depreciation, see Publication 946. Free state taxes filing Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. Free state taxes filing Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. Free state taxes filing The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. Free state taxes filing For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. Free state taxes filing Fees To Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. Free state taxes filing But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. Free state taxes filing You must add the fee to the cost of the property. Free state taxes filing You cannot deduct the fee you pay to a broker to sell securities. Free state taxes filing You can use the fee only to figure gain or loss from the sale. Free state taxes filing See the instructions for Schedule D (Form 1040) for information on how to report the fee. Free state taxes filing Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. Free state taxes filing A hobby is not a business because it is not carried on to make a profit. Free state taxes filing See Not-for-Profit Activities in chapter 1 of Publication 535. Free state taxes filing Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. Free state taxes filing Deductions of pass-through entities are passed through to the partners or shareholders. Free state taxes filing The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. Free state taxes filing Example. Free state taxes filing You are a member of an investment club that is formed solely to invest in securities. Free state taxes filing The club is treated as a partnership. Free state taxes filing The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. Free state taxes filing In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. Free state taxes filing However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. Free state taxes filing Publicly offered mutual funds. Free state taxes filing   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. Free state taxes filing A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. Free state taxes filing   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). Free state taxes filing This net figure is the amount you report on your return as income. Free state taxes filing You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. Free state taxes filing Information returns. Free state taxes filing   You should receive information returns from pass-through entities. Free state taxes filing Partnerships and S corporations. Free state taxes filing   These entities issue Schedule K-1, which lists the items and amounts you must report, and identifies the tax return schedules and lines to use. Free state taxes filing Nonpublicly offered mutual funds. Free state taxes filing   These funds will send you a Form 1099-DIV, or a substitute form, showing your share of gross income and investment expenses. Free state taxes filing You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. Free state taxes filing Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. Free state taxes filing Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. Free state taxes filing You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. Free state taxes filing You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F) on the appropriate schedule. Free state taxes filing You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040 or Form 1040NR). Free state taxes filing See Tax Preparation Fees, earlier. Free state taxes filing Unlawful discrimination claims. Free state taxes filing   You may be able to deduct, as an adjustment to income on Form 1040, line 36, or Form 1040NR, line 35, rather than as a miscellaneous itemized deduction, attorney fees and court costs for actions settled or decided after October 22, 2004, involving a claim of unlawful discrimination, a claim against the U. Free state taxes filing S. Free state taxes filing Government, or a claim made under section 1862(b)(3)(A) of the Social Security Act. Free state taxes filing However, the amount you can deduct on Form 1040, line 36, or Form 1040NR, line 35, is limited to the amount of the judgment or settlement you are including in income for the tax year. Free state taxes filing See Publication 525 for more information. Free state taxes filing Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. Free state taxes filing If you can reasonably estimate the amount of your loss on money you have on deposit in a financial institution that becomes insolvent or bankrupt, you can generally choose to deduct it in the current year even though its exact amount has not been finally determined. Free state taxes filing If elected, the casualty loss is subject to certain deduction limitations. Free state taxes filing The election is made on Form 4684. Free state taxes filing Once you make this choice, you cannot change it without IRS approval. Free state taxes filing If none of the deposit is federally insured, you can deduct the loss in either of the following ways. Free state taxes filing As an ordinary loss (as a miscellaneous itemized deduction subject to the 2% limit). Free state taxes filing Write the name of the financial institution and “Insolvent Financial Institution” beside the amount on Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9. Free state taxes filing This deduction is limited to $20,000 ($10,000 if you are married filing separately) for each financial institution, reduced by any expected state insurance proceeds. Free state taxes filing As a casualty loss. Free state taxes filing Report it on Form 4684 first and then on Schedule A (Form 1040). Free state taxes filing See Publication 547 for details. Free state taxes filing As a nonbusiness bad debt. Free state taxes filing Report it on Schedule D (Form 1040). Free state taxes filing If any part of the deposit is federally insured, you can deduct the loss only as a casualty loss. Free state taxes filing Exception. Free state taxes filing   You cannot make this choice if you are a 1%-or-more-owner or an officer of the financial institution, or are related to such owner or officer. Free state taxes filing For a definition of “related,” see Deposit in Insolvent or Bankrupt Financial Institution in chapter 4 of Publication 550. Free state taxes filing Actual loss different from estimated loss. Free state taxes filing   If you make this choice and your actual loss is less than your estimated loss, you must include the excess in income. Free state taxes filing See Recoveries in Publication 525. Free state taxes filing If your actual loss is more than your estimated loss, treat the excess loss as explained under Choice not made, next. Free state taxes filing Choice not made. Free state taxes filing   If you do not make this choice (or if you have an excess actual loss after choosing to deduct your estimated loss), treat your loss (or excess loss) as a nonbusiness bad debt (deductible as a short-term capital loss) in the year its amount is finally determined. Free state taxes filing See Nonbusiness Bad Debts in chapter 4 of Publication 550. Free state taxes filing Loss on IRA If you have a loss on your traditional IRA (or Roth IRA) investment, you can deduct the loss as a miscellaneous itemized deduction subject to the 2% limit, but only when all the amounts in all your traditional IRA (or Roth IRA) accounts have been distributed to you and the total distributions are less than your unrecovered basis. Free state taxes filing For more information, see Publication 590, Individual Retirement Arrangements (IRAs). Free state taxes filing Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. Free state taxes filing If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. Free state taxes filing If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. Free state taxes filing Repayments of Social Security Benefits If the total of the amounts in box 5 (net benefits for 2013) of all your Forms SSA-1099, Social Security Benefit Statement, and Forms RRB-1099, Payments By the Railroad Retirement Board, is a negative figure (a figure in parentheses), you may be able to take a miscellaneous itemized deduction subject to the 2% limit. Free state taxes filing The amount you can deduct is the part of the negative figure that represents an amount you included in gross income in an earlier year. Free state taxes filing The amount in box 5 of Form SSA-1099 or RRB-1099 is the net amount of your benefits for the year. Free state taxes filing It will be a negative figure if the amount of benefits you repaid in 2013 (box 4) is more than the gross amount of benefits paid to you in 2013 (box 3). Free state taxes filing If the deduction is more than $3,000, you will have to use a special computation to figure your tax. Free state taxes filing See Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for additional information. Free state taxes filing Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. Free state taxes filing You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. Free state taxes filing Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. Free state taxes filing These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. Free state taxes filing Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your IRA are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. Free state taxes filing Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. Free state taxes filing They are not subject to the 2% limit. Free state taxes filing Report these items on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14. Free state taxes filing List of Deductions Amortizable premium on taxable bonds. Free state taxes filing Casualty and theft losses from income-producing property. Free state taxes filing Federal estate tax on income in respect of a decedent. Free state taxes filing Gambling losses up to the amount of gambling winnings. Free state taxes filing Impairment-related work expenses of persons with disabilities. Free state taxes filing Loss from other activities from Schedule K-1 (Form 1065-B), box 2. Free state taxes filing Losses from Ponzi-type investment schemes. Free state taxes filing Repayments of more than $3,000 under a claim of right. Free state taxes filing Unrecovered investment in an annuity. Free state taxes filing Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. Free state taxes filing You can elect to amortize the premium on taxable bonds. Free state taxes filing The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. Free state taxes filing Pre-1998 election to amortize bond premium. Free state taxes filing   Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988. Free state taxes filing Bonds acquired after October 22, 1986, and before 1988. Free state taxes filing   The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you chose to treat it as an offset to interest income on the bond. Free state taxes filing Bonds acquired before October 23, 1986. Free state taxes filing   The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2% limit. Free state taxes filing Deduction for excess premium. Free state taxes filing   On certain bonds (such as bonds that pay a variable rate of interest or that provide for an interest-free period), the amount of bond premium allocable to a period may exceed the amount of stated interest allocable to the period. Free state taxes filing If this occurs, treat the excess as a miscellaneous itemized deduction that is not subject to the 2% limit. Free state taxes filing However, the amount deductible is limited to the amount by which your total interest inclusions on the bond in prior periods exceed the total amount you treated as a bond premium deduction on the bond in prior periods. Free state taxes filing If any of the excess bond premium cannot be deducted because of the limit, this amount is carried forward to the next period and is treated as bond premium allocable to that period. Free state taxes filing    Pre-1998 choice to amortize bond premium. Free state taxes filing If you made the choice to amortize the premium on taxable bonds before 1998, you can deduct the bond premium amortization that is more than your interest income only for bonds acquired during 1998 and later years. Free state taxes filing More information. Free state taxes filing    For more information on bond premium, see Bond Premium Amortization in chapter 3 of Publication 550. Free state taxes filing Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). Free state taxes filing First report the loss in Section B of Form 4684. Free state taxes filing You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Free state taxes filing To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Free state taxes filing For more information on casualty and theft losses, see Publication 547. Free state taxes filing Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. Free state taxes filing Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. Free state taxes filing See Publication 559 for information about figuring the amount of this deduction. Free state taxes filing Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. Free state taxes filing You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. Free state taxes filing You cannot deduct gambling losses that are more than your winnings. Free state taxes filing Generally, nonresident aliens cannot deduct gambling losses on Schedule A (Form 1040NR). Free state taxes filing You cannot reduce your gambling winnings by your gambling losses and report the difference. Free state taxes filing You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Free state taxes filing Therefore, your records should show your winnings separately from your losses. Free state taxes filing Diary of winnings and losses. Free state taxes filing You must keep an accurate diary or similar record of your losses and winnings. Free state taxes filing Your diary should contain at least the following information. Free state taxes filing The date and type of your specific wager or wagering activity. Free state taxes filing The name and address or location of the gambling establishment. Free state taxes filing The names of other persons present with you at the gambling establishment. Free state taxes filing The amount(s) you won or lost. Free state taxes filing Proof of winnings and losses. Free state taxes filing   In addition to your diary, you should also have other documentation. Free state taxes filing You can generally prove your winnings and losses through Form W-2G, Certain Gambling Winnings, Form 5754, Statement by Person(s) Receiving Gambling Winnings, wagering tickets, canceled checks, substitute checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment. Free state taxes filing   For specific wagering transactions, you can use the following items to support your winnings and losses. Free state taxes filing    These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. Free state taxes filing They are not all-inclusive. Free state taxes filing Your tax liability depends on your particular facts and circumstances. Free state taxes filing Keno. Free state taxes filing   Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records. Free state taxes filing Slot machines. Free state taxes filing   A record of the machine number and all winnings by date and time the machine was played. Free state taxes filing Table games (twenty-one (blackjack), craps, poker, baccarat, roulette, wheel of fortune, etc. Free state taxes filing ). Free state taxes filing   The number of the table at which you were playing. Free state taxes filing Casino credit card data indicating whether the credit was issued in the pit or at the cashier's cage. Free state taxes filing Bingo. Free state taxes filing   A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Free state taxes filing Supplemental records include any receipts from the casino, parlor, etc. Free state taxes filing Racing (horse, harness, dog, etc. Free state taxes filing ). Free state taxes filing   A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Free state taxes filing Supplemental records include unredeemed tickets and payment records from the racetrack. Free state taxes filing Lotteries. Free state taxes filing   A record of ticket purchases, dates, winnings, and losses. Free state taxes filing Supplemental records include unredeemed tickets, payment slips, and winnings statements. Free state taxes filing Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. Free state taxes filing Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and other expenses in connection with your place of work that are necessary for you to be able to work. Free state taxes filing Example. Free state taxes filing You are blind. Free state taxes filing You must use a reader to do your work. Free state taxes filing You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. Free state taxes filing The reader's services are only for your work. Free state taxes filing You can deduct your expenses for the reader as impairment-related work expenses. Free state taxes filing Self-employed. Free state taxes filing   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. Free state taxes filing See Impairment-related work expenses. Free state taxes filing , later under How To Report. Free state taxes filing Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14 (only if effectively connected with a U. Free state taxes filing S. Free state taxes filing trade or business). Free state taxes filing It is not subject to the passive activity limitations. Free state taxes filing Officials Paid on a Fee Basis If you are a fee-basis official, you can claim your expenses in performing services in that job as an adjustment to income rather than as a miscellaneous itemized deduction. Free state taxes filing See Publication 463 for more information. Free state taxes filing Performing Artists If you are a qualified performing artist, you can deduct your employee business expenses as an adjustment to income rather than as a miscellaneous itemized deduction. Free state taxes filing If you are an employee, complete Form 2106 or Form 2106-EZ. Free state taxes filing See Publication 463 for more information. Free state taxes filing Losses From Ponzi-type Investment Schemes These losses are deductible as theft losses of income-producing property on your tax return for the year the loss was discovered. Free state taxes filing You figure the deductible loss in Section B of Form 4684. Free state taxes filing However, if you qualify to use Revenue Procedure 2009-20 (as modified by Revenue Procedure 2011-58) and you choose to follow the procedures in the guidance, complete Section C of Form 4684 before completing Section B. Free state taxes filing Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Free state taxes filing You do not need to complete Appendix A. Free state taxes filing See the Form 4684 instructions and Publication 547, Casualties, Disasters, and Thefts, for more information. Free state taxes filing Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid, or take a credit against your tax. Free state taxes filing See Repayments in Publication 525 for more information. Free state taxes filing Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. Free state taxes filing If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. Free state taxes filing See Publication 575, Pension and Annuity Income, for more information about the tax treatment of pensions and annuities. Free state taxes filing Nondeductible Expenses You cannot deduct the following expenses. Free state taxes filing List of Nondeductible Expenses Adoption expenses. Free state taxes filing Broker's commissions. Free state taxes filing Burial or funeral expenses, including the cost of a cemetery lot. Free state taxes filing Campaign expenses. Free state taxes filing Capital expenses. Free state taxes filing Check-writing fees. Free state taxes filing Club dues. Free state taxes filing Commuting expenses. Free state taxes filing Fees and licenses, such as car licenses, marriage licenses, and dog tags. Free state taxes filing Fines and penalties, such as parking tickets. Free state taxes filing Health spa expenses. Free state taxes filing Hobby losses—but see Hobby Expenses, earlier. Free state taxes filing Home repairs, insurance, and rent. Free state taxes filing Home security system. Free state taxes filing Illegal bribes and kickbacks—see Bribes and kickbacks in chapter 11 of Publication 535. Free state taxes filing Investment-related seminars. Free state taxes filing Life insurance premiums paid by the insured. Free state taxes filing Lobbying expenses. Free state taxes filing Losses from the sale of your home, furniture, personal car, etc. Free state taxes filing Lost or misplaced cash or property. Free state taxes filing Lunches with co-workers. Free state taxes filing Meals while working late. Free state taxes filing Medical expenses as business expenses other than medical examinations required by your employer. Free state taxes filing Personal disability insurance premiums. Free state taxes filing Personal legal expenses. Free state taxes filing Personal, living, or family expenses. Free state taxes filing Political contributions. Free state taxes filing Professional accreditation fees. Free state taxes filing Professional reputation, expenses to improve. Free state taxes filing Relief fund contributions. Free state taxes filing Residential telephone line. Free state taxes filing Stockholders' meeting, expenses of attending. Free state taxes filing Tax-exempt income, expenses of earning or collecting. Free state taxes filing The value of wages never received or lost vacation time. Free state taxes filing Travel expenses for another individual. Free state taxes filing Voluntary unemployment benefit fund contributions. Free state taxes filing Wristwatches. Free state taxes filing Adoption Expenses You cannot deduct the expenses of adopting a child but you may be able to take a credit for those expenses. Free state taxes filing For details, see Form 8839, Qualified Adoption Expenses. Free state taxes filing Commissions Commissions paid on the purchase of securities are not deductible, either as business or nonbusiness expenses. Free state taxes filing Instead, these fees must be added to the taxpayer's cost of the securities. Free state taxes filing Commissions paid on the sale are deductible as business expenses only by dealers. Free state taxes filing Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. Free state taxes filing These include qualification and registration fees for primary elections. Free state taxes filing Legal fees. Free state taxes filing   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. Free state taxes filing Capital Expenses You cannot currently deduct amounts paid to buy property that has a useful life substantially beyond the tax year or amounts paid to increase the value or prolong the life of property. Free state taxes filing If you use such property in your work, you may be able to take a depreciation deduction. Free state taxes filing See Publication 946. Free state taxes filing If the property is a car used in your work, also see Publication 463. Free state taxes filing Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. Free state taxes filing Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. Free state taxes filing This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. Free state taxes filing You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. Free state taxes filing Dues paid to airline, hotel, and luncheon clubs are not deductible. Free state taxes filing Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). Free state taxes filing If you haul tools, instruments, or other items in your car to and from work, you can deduct only the additional cost of hauling the items, such as the rent on a trailer to carry the items. Free state taxes filing Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. Free state taxes filing This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Free state taxes filing Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. Free state taxes filing Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. Free state taxes filing Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. Free state taxes filing However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. Free state taxes filing See Home Office under Unreimbursed Employee Expenses, earlier, and Publication 587. Free state taxes filing Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. Free state taxes filing Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. Free state taxes filing You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. Free state taxes filing See Publication 504, Divorced or Separated Individuals, for information on alimony. Free state taxes filing Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. Free state taxes filing These include expenses to: Influence legislation, Participate, or intervene, in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. Free state taxes filing Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. Free state taxes filing Covered executive branch official. Free state taxes filing   A covered executive branch official, for the purpose of (4) above, is any of the following officials. Free state taxes filing The President. Free state taxes filing The Vice President. Free state taxes filing Any officer or employee of the White House Office of the Executive Office of the President, and the two most senior level officers of each of the other agencies in the Executive Office. Free state taxes filing Any individual serving in a position in Level I of the Executive Schedule under section 5312 of Title 5, United States Code, any other individual designated by the President as having Cabinet-level status, and any immediate deputy of one of these individuals. Free state taxes filing Dues used for lobbying. Free state taxes filing   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. Free state taxes filing Exceptions. Free state taxes filing   You can deduct certain lobbying expenses if they are ordinary and necessary expenses of carrying on your trade or business. Free state taxes filing You can deduct expenses for attempting to influence the legislation of any local council or similar governing body (local legislation). Free state taxes filing An Indian tribal government is considered a local council or similar governing body. Free state taxes filing You can deduct in-house expenses for influencing legislation or communicating directly with a covered executive branch official if the expenses for the tax year are not more than $2,000 (not counting overhead expenses). Free state taxes filing If you are a professional lobbyist, you can deduct the expenses you incur in the trade or business of lobbying on behalf of another person. Free state taxes filing Payments by the other person to you for lobbying activities cannot be deducted. Free state taxes filing Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. Free state taxes filing However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Free state taxes filing See Publication 547. Free state taxes filing Example. Free state taxes filing A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Free state taxes filing The diamond falls from the ring and is never found. Free state taxes filing The loss of the diamond is a casualty. Free state taxes filing Lunches With Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. Free state taxes filing See Publication 463 for information on deductible expenses while traveling away from home. Free state taxes filing Meals While Working Late You cannot deduct the cost of meals while working late. Free state taxes filing However, you may be able to claim a deduction if the cost of the meals is a deductible entertainment expense, or if you are traveling away from home. Free state taxes filing See Publication 463 for information on deductible entertainment expenses and expenses while traveling away from home. Free state taxes filing Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. Free state taxes filing Custody of children. Free state taxes filing Breach of promise to marry suit. Free state taxes filing Civil or criminal charges resulting from a personal relationship. Free state taxes filing Damages for personal injury (except certain whistleblower claims and unlawful discrimination claims). Free state taxes filing For more information about unlawful discrimination claims, see Deductions Subject to the 2% Limit, earlier. Free state taxes filing Preparation of a title (or defense or perfection of a title). Free state taxes filing Preparation of a will. Free state taxes filing Property claims or property settlement in a divorce. Free state taxes filing You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. Free state taxes filing Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Free state taxes filing Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. Free state taxes filing Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. Free state taxes filing Accounting certificate fees paid for the initial right to practice accounting. Free state taxes filing Bar exam fees and incidental expenses in securing initial admission to the bar. Free state taxes filing Medical and dental license fees paid to get initial licensing. Free state taxes filing Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. Free state taxes filing Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. Free state taxes filing Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. Free state taxes filing Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. Free state taxes filing You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. Free state taxes filing Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. Free state taxes filing You cannot deduct interest on a debt incurred or continued to buy or carry tax-exempt securities. Free state taxes filing If you have expenses to p
Español

The Free State Taxes Filing

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