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Free tax usa 2011 Publication 505 - Introductory Material Table of Contents IntroductionNonresident aliens. Free tax usa 2011 Ordering forms and publications. Free tax usa 2011 Tax questions. Free tax usa 2011 What's New for 2014 Reminders Introduction The federal income tax is a pay-as-you-go tax. Free tax usa 2011 You must pay the tax as you earn or receive income during the year. Free tax usa 2011 There are two ways to pay as you go. Free tax usa 2011 Withholding. Free tax usa 2011 If you are an employee, your employer probably withholds income tax from your pay. Free tax usa 2011 In addition, tax may be withheld from certain other income, such as pensions, bonuses, commissions, and gambling winnings. Free tax usa 2011 The amount withheld is paid to the Internal Revenue Service (IRS) in your name. Free tax usa 2011 Estimated tax. Free tax usa 2011 If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. Free tax usa 2011 People who are in business for themselves generally will have to pay their tax this way. Free tax usa 2011 You may have to pay estimated tax if you receive income such as dividends, interest, capital gains, rents, and royalties. Free tax usa 2011 Estimated tax is used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax. Free tax usa 2011 This publication explains both of these methods. Free tax usa 2011 It also explains how to take credit on your return for the tax that was withheld and for your estimated tax payments. Free tax usa 2011 If you did not pay enough tax during the year, either through withholding or by making estimated tax payments, you may have to pay a penalty. Free tax usa 2011 Generally, the IRS can figure this penalty for you. Free tax usa 2011 This underpayment penalty, and the exceptions to it, are discussed in chapter 4. Free tax usa 2011 Nonresident aliens. Free tax usa 2011    Before completing Form W-4, nonresident alien employees should see the Instructions for Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual. Free tax usa 2011 Also see chapter 8 of Publication 519, U. Free tax usa 2011 S. Free tax usa 2011 Tax Guide for Aliens, for important information on withholding. Free tax usa 2011 What's new for 2013 and 2014. Free tax usa 2011   See What's New for 2014 in this Introduction, and What's New for 2013 in chapter 4. Free tax usa 2011 Comments and suggestions. Free tax usa 2011   We welcome your comments about this publication and your suggestions for future editions. Free tax usa 2011   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free tax usa 2011 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free tax usa 2011 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free tax usa 2011   You can send your comments from www. Free tax usa 2011 irs. Free tax usa 2011 gov/formspubs/. Free tax usa 2011 Click on “More Information” and then on Give us feedback on forms and publications. Free tax usa 2011   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Free tax usa 2011 Ordering forms and publications. Free tax usa 2011   Visit www. Free tax usa 2011 irs. Free tax usa 2011 gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 business days after your request is received. Free tax usa 2011 Internal Revenue Service 1201 N. Free tax usa 2011 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free tax usa 2011   If you have a tax question, check the information available on IRS. Free tax usa 2011 gov or call 1-800-829-1040. Free tax usa 2011 We cannot answer tax questions sent to either of the above addresses. Free tax usa 2011 What's New for 2014 Use your 2013 tax return as a guide in figuring your 2014 estimated tax, but be sure to consider the following. Free tax usa 2011 Standard mileage rates. Free tax usa 2011  The 2014 rate for business use of your vehicle is 56 cents per mile. Free tax usa 2011 The rate for use of your vehicle to get medical care or move is 23½ cents per mile. Free tax usa 2011 The rate of 14 cents per mile for charitable use is unchanged. Free tax usa 2011 Personal exemption increased for certain taxpayers. Free tax usa 2011  For 2014, the personal exemption amount is increased to $3,950 for taxpayers with adjusted gross income at or below $305,050 if married filing jointly or qualifying widow(er), $279,650 if head of household, $254,200 if single, or $152,525 if married filing separately. Free tax usa 2011 The personal exemption amount for taxpayers with adjusted gross income above these thresholds may be reduced. Free tax usa 2011 Limitation on itemized deductions. Free tax usa 2011  For 2014, itemized deductions for taxpayers with adjusted gross income above $305,050 if married filing jointly or qualifying widow(er), $279,650 if head of household, $254,200 if single, and $152,525 if married filing separately may be reduced. Free tax usa 2011 Health care coverage. Free tax usa 2011  When you file your 2014 tax return in 2015, you will need to either (1) indicate on your return that you and your family had health care coverage throughout 2014, (2) claim an exemption from the health care coverage requirement for some or all of 2014, or (3) make a payment if you do not have coverage or an exemption(s) for all 12 months of 2014. Free tax usa 2011 For examples on how this payment works, go to www. Free tax usa 2011 IRS. Free tax usa 2011 gov/aca and click under the “Individuals & Families” section. Free tax usa 2011 You may want to consider this when figuring your “Other taxes” on Line 12 of the 2014 Estimated Tax Worksheet (Worksheet 2-1). Free tax usa 2011 For general information on these requirements, go to www. Free tax usa 2011 IRS. Free tax usa 2011 gov/aca. Free tax usa 2011 Advance payments of the Premium Tax Credit. Free tax usa 2011  If you buy health care insurance through the Health Insurance Marketplace, you may be eligible for advance payments of the Premium Tax Credit to help pay for your insurance coverage. Free tax usa 2011 Receiving too little or too much in advance will affect your refund or balance due. Free tax usa 2011 Promptly report changes in your income or family size to your Marketplace. Free tax usa 2011 You may want to consider this when figuring your estimated taxes for 2014. Free tax usa 2011 For more information, go to www. Free tax usa 2011 IRS. Free tax usa 2011 gov/aca and see Publication 5120 and Publication 5121. Free tax usa 2011 http://www. Free tax usa 2011 IRS. Free tax usa 2011 gov/pub5120 Alternative minimum tax (AMT) exemption amount increased. Free tax usa 2011  The AMT exemption amount is increased to $52,800 ($82,100 if married filing jointly or qualifying widow(er); $41,050 if married filing separately). Free tax usa 2011 Lifetime learning credit income limits. Free tax usa 2011  In order to claim a lifetime learning credit, your MAGI must be less than $54,000 ($108,000 if married filing jointly). Free tax usa 2011 Retirement savings contribution credit income limits increased. Free tax usa 2011  In order to claim this credit for 2014, your MAGI must be less than $30,000 ($60,000 if married filing jointly; $45,000 if head of household). Free tax usa 2011 Adoption credit or exclusion. Free tax usa 2011  The maximum adoption credit or exclusion for employer-provided adoption benefits has increased to $13,190. Free tax usa 2011 In order to claim either the credit or exclusion, your MAGI must be less than $237,880. Free tax usa 2011 Earned income credit (EIC). Free tax usa 2011  You may be able to take the EIC in 2014 if: Three or more children lived with you and you earned less than $46,997 ($52,427 if married filing jointly), Two children lived with you and you earned less than $43,756 ($49,186 if married filing jointly), One child lived with you and you earned less than $38,511 ($43,941 if married filing jointly), or A child did not live with you and you earned less than $14,590 ($20,020 if married filing jointly). Free tax usa 2011 Also, the maximum MAGI you can have and still get the credit has increased. Free tax usa 2011 You may be able to take the credit if your MAGI is less than the amount in the above list that applies to you. Free tax usa 2011 The maximum investment income you can have and get the credit has increased to $3,350. Free tax usa 2011 Reminders Future developments. Free tax usa 2011  The IRS has created a page on IRS. Free tax usa 2011 gov for information about Publication 505 at www. Free tax usa 2011 irs. Free tax usa 2011 gov/pub505. Free tax usa 2011 Information about any future developments affecting Publication 505 (such as legislation enacted after we release it) will be posted on that page. Free tax usa 2011 Social security tax. Free tax usa 2011   Generally, each employer for whom you work during the tax year must withhold social security tax up to the annual limit. Free tax usa 2011 The annual limit is $117,000 in 2014. Free tax usa 2011 Photographs of missing children. Free tax usa 2011  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free tax usa 2011 Photographs of missing children selected by the Center may appear in this publication on pages that otherwise would be blank. Free tax usa 2011 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Free tax usa 2011 Additional Medicare Tax. Free tax usa 2011  Beginning in 2013, a 0. Free tax usa 2011 9% Additional Medicare Tax applies to Medicare wages, Railroad Retirement Tax Act compensation, and self-employment income over a threshold amount based on your filing status. Free tax usa 2011 You may need to include this amount when figuring your estimated tax. Free tax usa 2011 See the instructions for line 12 of the 2014 Estimated Tax Worksheet. Free tax usa 2011 You may also request that your employer deduct and withhold an additional amount of income tax withholding from your wages on Form W-4, Employee's Withholding Allowance Certificate. Free tax usa 2011 For more information on Additional Medicare Tax, go to IRS. Free tax usa 2011 gov and enter “Additional Medicare Tax” in the search box. Free tax usa 2011 Net Investment Income Tax. Free tax usa 2011  Beginning in 2013, you may be subject to Net Investment Income Tax (NIIT). Free tax usa 2011 NIIT is a 3. Free tax usa 2011 8% tax on the lesser of net investment income or the excess of your modified adjusted gross income (MAGI) over the threshold amount. Free tax usa 2011 NIIT may need to be included when figuring estimated tax. Free tax usa 2011 See the instructions for line 12 of the 2014 Estimated Tax Worksheet. Free tax usa 2011 You may also request that your employer deduct and withhold an additional amount of income tax withholding from your wages on Form W-4. Free tax usa 2011 For more information on NIIT, go to IRS. Free tax usa 2011 gov and enter “Net Investment Income Tax” in the search box. Free tax usa 2011 Prev  Up  Next   Home   More Online Publications
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Free tax usa 2011 28. Free tax usa 2011   Miscellaneous Deductions Table of Contents What's New Introduction Useful Items - You may want to see: Deductions Subject to the 2% LimitUnreimbursed Employee Expenses (Line 21) Tax Preparation Fees (Line 22) Other Expenses (Line 23) Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses What's New Standard mileage rate. Free tax usa 2011  The 2013 rate for business use of a vehicle is 56½ cents per mile. Free tax usa 2011 Introduction This chapter explains which expenses you can claim as miscellaneous itemized deductions on Schedule A (Form 1040). Free tax usa 2011 You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. Free tax usa 2011 This chapter covers the following topics. Free tax usa 2011 Deductions subject to the 2% limit. Free tax usa 2011 Deductions not subject to the 2% limit. Free tax usa 2011 Expenses you cannot deduct. Free tax usa 2011 You must keep records to verify your deductions. Free tax usa 2011 You should keep receipts, canceled checks, substitute checks, financial account statements, and other documentary evidence. Free tax usa 2011 For more information on recordkeeping, get Publication 552, Record- keeping for Individuals. Free tax usa 2011 Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) 946 How To Depreciate Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040). Free tax usa 2011 You can claim the amount of expenses that is more than 2% of your adjusted gross income. Free tax usa 2011 You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Free tax usa 2011 Your adjusted gross income is the amount on Form 1040, line 38. Free tax usa 2011 Generally, you apply the 2% limit after you apply any other deduction limit. Free tax usa 2011 For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed in chapter 26) before you apply the 2% limit. Free tax usa 2011 Deductions subject to the 2% limit are discussed in the three categories in which you report them on Schedule A (Form 1040). Free tax usa 2011 Unreimbursed employee expenses (line 21). Free tax usa 2011 Tax preparation fees (line 22). Free tax usa 2011 Other expenses (line 23). Free tax usa 2011 Unreimbursed Employee Expenses (Line 21) Generally, you can deduct on Schedule A (Form 1040), line 21, 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 tax usa 2011 An expense is ordinary if it is common and accepted in your trade, business, or profession. Free tax usa 2011 An expense is necessary if it is appropriate and helpful to your business. Free tax usa 2011 An expense does not have to be required to be considered necessary. Free tax usa 2011 Examples of unreimbursed employee expenses are listed next. Free tax usa 2011 The list is followed by discussions of additional unreimbursed employee expenses. Free tax usa 2011 Business bad debt of an employee. Free tax usa 2011 Education that is work related. Free tax usa 2011 (See chapter 27. Free tax usa 2011 ) Legal fees related to your job. Free tax usa 2011 Licenses and regulatory fees. Free tax usa 2011 Malpractice insurance premiums. Free tax usa 2011 Medical examinations required by an employer. Free tax usa 2011 Occupational taxes. Free tax usa 2011 Passport for a business trip. Free tax usa 2011 Subscriptions to professional journals and trade magazines related to your work. Free tax usa 2011 Travel, transportation, entertainment, and gifts related to your work. Free tax usa 2011 (See chapter 26. Free tax usa 2011 ) Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. Free tax usa 2011 Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer that are attributable to the pay you received from that employer. Free tax usa 2011 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 tax usa 2011 For more information about the rules and exceptions to the rules affecting the allowable deductions for a home computer, see Publication 529. Free tax usa 2011 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 tax usa 2011 Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. Free tax usa 2011 Lobbying and political activities. Free tax usa 2011   You may not be able to deduct that part of your dues that is for certain lobbying and political activities. Free tax usa 2011 See Dues used for lobbying under Nondeductible Expenses, later. Free tax usa 2011 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 tax usa 2011 If you file Form 1040A, you can deduct these expenses on line 16. Free tax usa 2011 If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. Free tax usa 2011 However, neither spouse can deduct more than $250 of his or her qualified expenses. Free tax usa 2011 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 tax usa 2011 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 tax usa 2011 The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. Free tax usa 2011 See Publication 587 for more detailed information and a worksheet. Free tax usa 2011 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 tax usa 2011 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 tax usa 2011 Employment and outplacement agency fees. Free tax usa 2011   You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. Free tax usa 2011 Employer pays you back. Free tax usa 2011   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 tax usa 2011 (See Recoveries in chapter 12. Free tax usa 2011 ) Employer pays the employment agency. Free tax usa 2011   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 tax usa 2011 Résumé. Free tax usa 2011   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 tax usa 2011 Travel and transportation expenses. Free tax usa 2011   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 tax usa 2011 You can deduct the travel expenses if the trip is primarily to look for a new job. Free tax usa 2011 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 tax usa 2011   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 tax usa 2011   You can choose to use the standard mileage rate to figure your car expenses. Free tax usa 2011 The 2013 rate for business use of a vehicle is 56½ cents per mile. Free tax usa 2011 See chapter 26 for more information. Free tax usa 2011 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 tax usa 2011 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 tax usa 2011 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 tax usa 2011 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 tax usa 2011 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 tax usa 2011 Research Expenses of a College Professor If you are a college professor, you can deduct research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. Free tax usa 2011 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 tax usa 2011 However, you cannot deduct the cost of travel as a form of education. Free tax usa 2011 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 tax usa 2011 You can depreciate the cost of tools that have a useful life substantially beyond the tax year. Free tax usa 2011 For more information about depreciation, see Publication 946. Free tax usa 2011 Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. Free tax usa 2011 You can also deduct assessments for benefit payments to unemployed union members. Free tax usa 2011 However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Free tax usa 2011 Also, you cannot deduct contributions to a pension fund, even if the union requires you to make the contributions. Free tax usa 2011 You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. Free tax usa 2011 See Lobbying Expenses under Nondeductible Expenses, later. Free tax usa 2011 Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. Free tax usa 2011 You must wear them as a condition of your employment. Free tax usa 2011 The clothes are not suitable for everyday wear. Free tax usa 2011 It is not enough that you wear distinctive clothing. Free tax usa 2011 The clothing must be specifically required by your employer. Free tax usa 2011 Nor is it enough that you do not, in fact, wear your work clothes away from work. Free tax usa 2011 The clothing must not be suitable for taking the place of your regular clothing. Free tax usa 2011 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 tax usa 2011 ). Free tax usa 2011 Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. Free tax usa 2011 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 tax usa 2011 Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. Free tax usa 2011 Protective clothing. Free tax usa 2011   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 tax usa 2011   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 tax usa 2011 Military uniforms. Free tax usa 2011   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. Free tax usa 2011 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 tax usa 2011 In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. Free tax usa 2011   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 tax usa 2011   You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. Free tax usa 2011 Tax Preparation Fees (Line 22) You can usually deduct tax preparation fees in the year you pay them. Free tax usa 2011 Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. Free tax usa 2011 These fees include the cost of tax preparation software programs and tax publications. Free tax usa 2011 They also include any fee you paid for electronic filing of your return. Free tax usa 2011 Other Expenses (Line 23) You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2% limit. Free tax usa 2011 On Schedule A (Form 1040), line 23, you can deduct 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 tax usa 2011 You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonably and closely related to these purposes. Free tax usa 2011 Some of these other expenses are explained in the following discussions. Free tax usa 2011 If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses , later, under Nondeductible Expenses. Free tax usa 2011 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 tax usa 2011 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 tax usa 2011 First report the loss in Section B of Form 4684, Casualties and Thefts. Free tax usa 2011 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 tax usa 2011 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 tax usa 2011 For other casualty and theft losses, see chapter 25. Free tax usa 2011 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 tax usa 2011 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 tax usa 2011 The fees are deductible in the year paid. Free tax usa 2011 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 tax usa 2011 You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. Free tax usa 2011 But if you work as an employee and also use the computer in that work, see Publication 946. Free tax usa 2011 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 tax usa 2011 Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. Free tax usa 2011 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 tax usa 2011 For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. Free tax usa 2011 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 tax usa 2011 But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. Free tax usa 2011 You must add the fee to the cost of the property. Free tax usa 2011 You cannot deduct the fee you pay to a broker to sell securities. Free tax usa 2011 You can use the fee only to figure gain or loss from the sale. Free tax usa 2011 See the Instructions for Form 8949 for information on how to report the fee. Free tax usa 2011 Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. Free tax usa 2011 A hobby is not a business because it is not carried on to make a profit. Free tax usa 2011 See Activity not for profit in chapter 12 under Other Income. Free tax usa 2011 Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. Free tax usa 2011 Deductions of pass-through entities are passed through to the partners or shareholders. Free tax usa 2011 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 tax usa 2011 Example. Free tax usa 2011 You are a member of an investment club that is formed solely to invest in securities. Free tax usa 2011 The club is treated as a partnership. Free tax usa 2011 The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. Free tax usa 2011 In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. Free tax usa 2011 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 tax usa 2011 Publicly offered mutual funds. Free tax usa 2011   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. Free tax usa 2011 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 tax usa 2011   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 tax usa 2011 This net figure is the amount you report on your return as income. Free tax usa 2011 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 tax usa 2011 Information returns. Free tax usa 2011   You should receive information returns from pass-through entities. Free tax usa 2011 Partnerships and S corporations. Free tax usa 2011   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 tax usa 2011 Nonpublicly offered mutual funds. Free tax usa 2011   These funds will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing your share of gross income and investment expenses. Free tax usa 2011 You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. Free tax usa 2011 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 tax usa 2011 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 tax usa 2011 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 tax usa 2011 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 tax usa 2011 You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040). Free tax usa 2011 See Tax Preparation Fees , earlier. Free tax usa 2011 Loss on Deposits For information on whether, and if so, how, you may deduct a loss on your deposit in a qualified financial institution, see Loss on Deposits in chapter 25. Free tax usa 2011 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 tax usa 2011 If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. Free tax usa 2011 If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. Free tax usa 2011 Repayments of Social Security Benefits For information on how to deduct your repayments of certain social security benefits, see Repayments More Than Gross Benefits in chapter 11. Free tax usa 2011 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 tax usa 2011 You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. Free tax usa 2011 Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. Free tax usa 2011 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 tax usa 2011 Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your individual retirement arrangement (IRA) are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. Free tax usa 2011 For more information about IRAs, see chapter 17. Free tax usa 2011 Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. Free tax usa 2011 They are not subject to the 2% limit. Free tax usa 2011 Report these items on Schedule A (Form 1040), line 28. Free tax usa 2011 List of Deductions Each of the following items is discussed in detail after the list (except where indicated). Free tax usa 2011 Amortizable premium on taxable bonds. Free tax usa 2011 Casualty and theft losses from income- producing property. Free tax usa 2011 Federal estate tax on income in respect of a decedent. Free tax usa 2011 Gambling losses up to the amount of gambling winnings. Free tax usa 2011 Impairment-related work expenses of persons with disabilities. Free tax usa 2011 Loss from other activities from Schedule K-1 (Form 1065-B), box 2. Free tax usa 2011 Losses from Ponzi-type investment schemes. Free tax usa 2011 See Losses from Ponzi-type investment schemes under Theft in chapter 25. Free tax usa 2011 Repayments of more than $3,000 under a claim of right. Free tax usa 2011 Unrecovered investment in an annuity. Free tax usa 2011 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 tax usa 2011 You can elect to amortize the premium on taxable bonds. Free tax usa 2011 The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. Free tax usa 2011 Part of the premium on some bonds may be a miscellaneous deduction not subject to the 2% limit. Free tax usa 2011 For more information, see Amortizable Premium on Taxable Bonds in Publication 529, and Bond Premium Amortization in chapter 3 of Publication 550, Investment Income and Expenses. Free tax usa 2011 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 tax usa 2011 First, report the loss in Form 4684, Section B. Free tax usa 2011 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 tax usa 2011 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 tax usa 2011 For more information on casualty and theft losses, see chapter 25. Free tax usa 2011 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 tax usa 2011 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 tax usa 2011 See Publication 559 for more information. Free tax usa 2011 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 tax usa 2011 You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. Free tax usa 2011 You cannot deduct gambling losses that are more than your winnings. Free tax usa 2011 You cannot reduce your gambling winnings by your gambling losses and report the difference. Free tax usa 2011 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 tax usa 2011 Therefore, your records should show your winnings separately from your losses. Free tax usa 2011 Diary of winnings and losses. Free tax usa 2011 You must keep an accurate diary or similar record of your losses and winnings. Free tax usa 2011 Your diary should contain at least the following information. Free tax usa 2011 The date and type of your specific wager or wagering activity. Free tax usa 2011 The name and address or location of the gambling establishment. Free tax usa 2011 The names of other persons present with you at the gambling establishment. Free tax usa 2011 The amount(s) you won or lost. Free tax usa 2011 See Publication 529 for more information. Free tax usa 2011 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 tax usa 2011 Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and for other expenses in connection with your place of work that are necessary for you to be able to work. Free tax usa 2011 Self-employed. Free tax usa 2011   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 tax usa 2011 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. Free tax usa 2011 It is not subject to the passive activity limitations. Free tax usa 2011 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 tax usa 2011 See Repayments in chapter 12 for more information. Free tax usa 2011 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 tax usa 2011 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 tax usa 2011 See chapter 10 for more information about the tax treatment of pensions and annuities. Free tax usa 2011 Nondeductible Expenses Examples of nondeductible expenses are listed next. Free tax usa 2011 The list is followed by discussions of additional nondeductible expenses. Free tax usa 2011 List of Nondeductible Expenses Broker's commissions that you paid in connection with your IRA or other investment property. Free tax usa 2011 Burial or funeral expenses, including the cost of a cemetery lot. Free tax usa 2011 Capital expenses. Free tax usa 2011 Fees and licenses, such as car licenses, marriage licenses, and dog tags. Free tax usa 2011 Hobby losses, but see Hobby Expenses , earlier. Free tax usa 2011 Home repairs, insurance, and rent. Free tax usa 2011 Illegal bribes and kickbacks. Free tax usa 2011 See Bribes and kickbacks in chapter 11 of Publication 535. Free tax usa 2011 Losses from the sale of your home, furniture, personal car, etc. Free tax usa 2011 Personal disability insurance premiums. Free tax usa 2011 Personal, living, or family expenses. Free tax usa 2011 The value of wages never received or lost vacation time. Free tax usa 2011 Adoption Expenses You cannot deduct the expenses of adopting a child, but you may be able to take a credit for those expenses. Free tax usa 2011 See chapter 37. Free tax usa 2011 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 tax usa 2011 These include qualification and registration fees for primary elections. Free tax usa 2011 Legal fees. Free tax usa 2011   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. Free tax usa 2011 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 tax usa 2011 Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. Free tax usa 2011 This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. Free tax usa 2011 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 tax usa 2011 Dues paid to airline, hotel, and luncheon clubs are not deductible. Free tax usa 2011 Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). Free tax usa 2011 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 tax usa 2011 Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. Free tax usa 2011 This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Free tax usa 2011 Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. Free tax usa 2011 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 tax usa 2011 Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. Free tax usa 2011 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 tax usa 2011 See Home Office under Unreimbursed Employee Expenses, earlier, and Security System under Deducting Expenses in Publication 587. Free tax usa 2011 Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. Free tax usa 2011 Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. Free tax usa 2011 You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. Free tax usa 2011 See chapter 18 for information on alimony. Free tax usa 2011 Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. Free tax usa 2011 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 tax usa 2011 Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. Free tax usa 2011 Dues used for lobbying. Free tax usa 2011   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 tax usa 2011 See Lobbying Expenses in Publication 529 for information on exceptions. Free tax usa 2011 Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. Free tax usa 2011 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 tax usa 2011 See chapter 25. Free tax usa 2011 Example. Free tax usa 2011 A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Free tax usa 2011 The diamond falls from the ring and is never found. Free tax usa 2011 The loss of the diamond is a casualty. Free tax usa 2011 Lunches with Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. Free tax usa 2011 See chapter 26 for information on deductible expenses while traveling away from home. Free tax usa 2011 Meals While Working Late You cannot deduct the cost of meals while working late. Free tax usa 2011 However, you may be able to claim a deduction if the cost of meals is a deductible entertainment expense, or if you are traveling away from home. Free tax usa 2011 See chapter 26 for information on deductible entertainment expenses and expenses while traveling away from home. Free tax usa 2011 Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. Free tax usa 2011 Custody of children. Free tax usa 2011 Breach of promise to marry suit. Free tax usa 2011 Civil or criminal charges resulting from a personal relationship. Free tax usa 2011 Damages for personal injury, except for certain unlawful discrimination and whistleblower claims. Free tax usa 2011 Preparation of a title (or defense or perfection of a title). Free tax usa 2011 Preparation of a will. Free tax usa 2011 Property claims or property settlement in a divorce. Free tax usa 2011 You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. Free tax usa 2011 Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Free tax usa 2011 Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. Free tax usa 2011 Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. Free tax usa 2011 Accounting certificate fees paid for the initial right to practice accounting. Free tax usa 2011 Bar exam fees and incidental expenses in securing initial admission to the bar. Free tax usa 2011 Medical and dental license fees paid to get initial licensing. Free tax usa 2011 Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. Free tax usa 2011 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 tax usa 2011 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 tax usa 2011 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 tax usa 2011 You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. Free tax usa 2011 Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. Free tax usa 2011 You cannot deduct interest on a debt incurred or continued to buy or carry  tax-exempt securities. Free tax usa 2011 If you have expenses to produce both taxable and tax-exempt income, but you cannot identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct. Free tax usa 2011 Example. Free tax usa 2011 During the year, you received taxable interest of $4,800 and tax-exempt interest of $1,200. Free tax usa 2011 In earning this income, you had total expenses of $500 during the year. Free tax usa 2011 You cannot identify the amount of each expense item that is for each income item. Free tax usa 2011 Therefore, 80% ($4,800/$6,000) of the expense is for the taxable interest and 20% ($1,200/$6,000) is for the tax-exempt interest. Free tax usa 2011 You can deduct, subject to the 2% limit, expenses of $400 (80% of $500). Free tax usa 2011 Travel Expenses for Another Individual You generally cannot deduct travel expenses you pay or incur for a spouse, dependent, or other individual who accompanies you (or your employee) on business or personal travel unless the spouse, dependent, or other individual is an employee of the taxpayer, the travel is for a bona fide business purpose, and such expenses would otherwise be deductible by the spouse, dependent, or other individual. Free tax usa 2011 See chapter 26 for more information on deductible travel expenses. Free tax usa 2011 Voluntary Unemployment Benefit Fund Contributions You cannot deduct voluntary unemployment benefit fund contributions you make to a union fund or a private fund. Free tax usa 2011 However, you can deduct contributions as taxes if state law requires you to make them to a state unemployment fund that covers you for the loss of wages from unemployment caused by business conditions. Free tax usa 2011 Wristwatches You cannot deduct the cost of a wristwatch, even if there is a job requirement that you know the correct time to properly perform your duties. Free tax usa 2011 Prev  Up  Next   Home   More Online Publications