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H&r Block At Home Free

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H&r Block At Home Free

H&r block at home free 4. H&r block at home free   Farm Business Expenses Table of Contents What's New for 2013 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Deductible ExpensesReasonable allocation. H&r block at home free Prepaid Farm Supplies Prepaid Livestock Feed Labor Hired Repairs and Maintenance Interest Breeding Fees Fertilizer and Lime Taxes Insurance Rent and Leasing Depreciation Business Use of Your Home Truck and Car Expenses Travel Expenses Marketing Quota Penalties Tenant House Expenses Items Purchased for Resale Other Expenses Domestic Production Activities Deduction Capital ExpensesForestation and reforestation costs. H&r block at home free Nondeductible ExpensesPersonal, Living, and Family Expenses Other Nondeductible Items Losses From Operating a FarmAt-Risk Limits Passive Activity Limits Excess Farm Loss Limit Not-for-Profit FarmingUsing the presumption later. H&r block at home free Category 1. H&r block at home free Category 2. H&r block at home free Category 3. H&r block at home free What's New for 2013 Standard mileage rate. H&r block at home free  For 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56. H&r block at home free 5 cents. H&r block at home free See Truck and Car Expenses , later. H&r block at home free Simplified method for business use of home deduction. H&r block at home free  The IRS now provides a simplified method to determine your expenses for business use of your home. H&r block at home free For more information, see Schedule C (Form 1040), Part II, and its instructions. H&r block at home free Introduction You can generally deduct the current costs of operating your farm. H&r block at home free Current costs are expenses you do not have to capitalize or include in inventory costs. H&r block at home free However, your deduction for the cost of livestock feed and certain other supplies may be limited. H&r block at home free If you have an operating loss, you may not be able to deduct all of it. H&r block at home free Topics - This chapter discusses: Deductible expenses Domestic production activities deduction Capital expenses Nondeductible expenses Losses from operating a farm Not-for-profit farming Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 587 Business Use of Your Home 925 Passive Activity and At-Risk Rules 936 Home Mortgage Interest Deduction Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch F (Form 1040) Profit or Loss From Farming 1045 Application for Tentative Refund 5213 Election To Postpone Determination as To Whether the Presumption Applies That an Activity Is Engaged in for Profit 8903 Domestic Production Activities Deduction See chapter 16 for information about getting publications and forms. H&r block at home free Deductible Expenses The ordinary and necessary costs of operating a farm for profit are deductible business expenses. H&r block at home free “Ordinary” means what most farmers do and “necessary” means what is useful and helpful in farming. H&r block at home free Schedule F, Part II, lists some common farm expenses that are typically deductible. H&r block at home free This chapter discusses many of these expenses, as well as others not listed on Schedule F. H&r block at home free Reimbursed expenses. H&r block at home free   If the reimbursement is received in the same year that the expense is claimed, reduce the expense by the amount of the reimbursement. H&r block at home free If the reimbursement is received in a year after the expense is claimed, include the reimbursement amount in income. H&r block at home free See Refund or reimbursement under Income From Other Sources in chapter 3. H&r block at home free Personal and business expenses. H&r block at home free   Some expenses you pay during the tax year may be part personal and part business. H&r block at home free These may include expenses for gasoline, oil, fuel, water, rent, electricity, telephone, automobile upkeep, repairs, insurance, interest, and taxes. H&r block at home free   You must allocate these mixed expenses between their business and personal parts. H&r block at home free Generally, the personal part of these expenses is not deductible. H&r block at home free The business portion of the expenses is deductible on Schedule F. H&r block at home free Example. H&r block at home free You paid $1,500 for electricity during the tax year. H&r block at home free You used 1/3 of the electricity for personal purposes and 2/3 for farming. H&r block at home free Under these circumstances, you can deduct $1,000 (2/3 of $1,500) of your electricity expense as a farm business expense. H&r block at home free Reasonable allocation. H&r block at home free   It is not always easy to determine the business and nonbusiness parts of an expense. H&r block at home free There is no method of allocation that applies to all mixed expenses. H&r block at home free Any reasonable allocation is acceptable. H&r block at home free What is reasonable depends on the circumstances in each case. H&r block at home free Prepaid Farm Supplies Prepaid farm supplies include the following items if paid for during the year. H&r block at home free Feed, seed, fertilizer, and similar farm supplies not used or consumed during the year, but not including farm supplies that you would have consumed during the year if not for a fire, storm, flood, other casualty, disease, or drought. H&r block at home free Poultry (including egg-laying hens and baby chicks) bought for use (or for both use and resale) in your farm business. H&r block at home free However, include only the amount that would be deductible in the following year if you had capitalized the cost and deducted it ratably over the lesser of 12 months or the useful life of the poultry. H&r block at home free Poultry bought for resale and not resold during the year. H&r block at home free Deduction limit. H&r block at home free   If you use the cash method of accounting to report your income and expenses, your deduction for prepaid farm supplies in the year you pay for them may be limited to 50% of your other deductible farm expenses for the year (all Schedule F deductions except prepaid farm supplies). H&r block at home free This limit does not apply if you meet one of the exceptions described later. H&r block at home free See Chapter 2 for a discussion of the cash method of accounting. H&r block at home free   If the limit applies, you can deduct the excess cost of farm supplies other than poultry in the year you use or consume the supplies. H&r block at home free The excess cost of poultry bought for use (or for both use and resale) in your farm business is deductible in the year following the year you pay for it. H&r block at home free The excess cost of poultry bought for resale is deductible in the year you sell or otherwise dispose of that poultry. H&r block at home free Example. H&r block at home free You may not qualify for the exception described next. H&r block at home free During 2013, you bought fertilizer ($4,000), feed ($1,000), and seed ($500) for use on your farm in the following year. H&r block at home free Your total prepaid farm supplies expense for 2013 is $5,500. H&r block at home free Your other deductible farm expenses totaled $10,000 for 2013. H&r block at home free Therefore, your deduction for prepaid farm supplies cannot be more than $5,000 (50% of $10,000) for 2013. H&r block at home free The excess prepaid farm supplies expense of $500 ($5,500 − $5,000) is deductible in a later tax year when you use or consume the supplies. H&r block at home free Exceptions. H&r block at home free   This limit on the deduction for prepaid farm supplies expense does not apply if you are a farm-related taxpayer and either of the following apply. H&r block at home free Your prepaid farm supplies expense is more than 50% of your other deductible farm expenses because of a change in business operations caused by unusual circumstances. H&r block at home free Your total prepaid farm supplies expense for the preceding 3 tax years is less than 50% of your total other deductible farm expenses for those 3 tax years. H&r block at home free   You are a farm-related taxpayer if any of the following tests apply. H&r block at home free Your main home is on a farm. H&r block at home free Your principal business is farming. H&r block at home free A member of your family meets (1) or (2). H&r block at home free For this purpose, your family includes your brothers and sisters, half-brothers and half-sisters, spouse, parents, grandparents, children, grandchildren, and aunts and uncles and their children. H&r block at home free    Whether or not the deduction limit for prepaid farm supplies applies, your expenses for prepaid livestock feed may be subject to the rules for advance payment of livestock feed, discussed next. H&r block at home free Prepaid Livestock Feed If you report your income and expenses under the cash method of accounting, you cannot deduct in the year paid the cost of feed your livestock will consume in a later year unless you meet all the following tests. H&r block at home free The payment is for the purchase of feed rather than a deposit. H&r block at home free The prepayment has a business purpose and is not merely for tax avoidance. H&r block at home free Deducting the prepayment does not result in a material distortion of your income. H&r block at home free If you meet all three tests, you can deduct the prepaid feed, subject to the limit on prepaid farm supplies discussed earlier. H&r block at home free If you fail any of these tests, you can deduct the prepaid feed only in the year it is consumed. H&r block at home free This rule does not apply to the purchase of commodity futures contracts. H&r block at home free Payment for the purchase of feed. H&r block at home free   Whether a payment is for the purchase of feed or a deposit depends on the facts and circumstances in each case. H&r block at home free It is for the purchase of feed if you can show you made it under a binding commitment to accept delivery of a specific quantity of feed at a fixed price and you are not entitled, by contract or business custom, to a refund or repurchase. H&r block at home free   The following are some factors that show a payment is a deposit rather than for the purchase of feed. H&r block at home free The absence of specific quantity terms. H&r block at home free The right to a refund of any unapplied payment credit at the end of the contract. H&r block at home free The seller's treatment of the payment as a deposit. H&r block at home free The right to substitute other goods or products for those specified in the contract. H&r block at home free   A provision permitting substitution of ingredients to vary the particular feed mix to meet your livestock's current diet requirements will not suggest a deposit. H&r block at home free Further, a price adjustment to reflect market value at the date of delivery is not, by itself, proof of a deposit. H&r block at home free Business purpose. H&r block at home free   The prepayment has a business purpose only if you have a reasonable expectation of receiving some business benefit from prepaying the cost of livestock feed. H&r block at home free The following are some examples of business benefits. H&r block at home free Fixing maximum prices and securing an assured feed supply. H&r block at home free Securing preferential treatment in anticipation of a feed shortage. H&r block at home free   Other factors considered in determining the existence of a business purpose are whether the prepayment was a condition imposed by the seller and whether that condition was meaningful. H&r block at home free No material distortion of income. H&r block at home free   The following are some factors considered in determining whether deducting prepaid livestock feed materially distorts income. H&r block at home free Your customary business practice in conducting your livestock operations. H&r block at home free The expense in relation to past purchases. H&r block at home free The time of year you made the purchase. H&r block at home free The expense in relation to your income for the year. H&r block at home free Labor Hired You can deduct reasonable wages paid for regular farm labor, piecework, contract labor, and other forms of labor hired to perform your farming operations. H&r block at home free You can pay wages in cash or in noncash items such as inventory, capital assets, or assets used in your business. H&r block at home free The cost of boarding farm labor is a deductible labor cost. H&r block at home free Other deductible costs you incur for farm labor include health insurance, workers' compensation insurance, and other benefits. H&r block at home free If you must withhold social security, Medicare, and income taxes from your employees' cash wages, you can still deduct the full amount of wages before withholding. H&r block at home free See chapter 13 for more information on employment taxes. H&r block at home free Also, deduct the employer's share of the social security and Medicare taxes you must pay on your employees' wages as a farm business expense on Schedule F, line 29. H&r block at home free See Taxes , later. H&r block at home free Property for services. H&r block at home free   If you transfer property to an employee in payment for services, you can deduct as wages paid the fair market value of the property on the date of transfer. H&r block at home free If the employee pays you anything for the property, deduct as wages the fair market value of the property minus the payment by the employee for the property. H&r block at home free   Treat the wages deducted as an amount received for the property. H&r block at home free You may have a gain or loss to report if the property's adjusted basis on the date of transfer is different from its fair market value. H&r block at home free Any gain or loss has the same character the exchanged property had in your hands. H&r block at home free For more information, see chapter 8. H&r block at home free Child as an employee. H&r block at home free   You can deduct reasonable wages or other compensation you pay to your child for doing farmwork if a true employer-employee relationship exists between you and your child. H&r block at home free Include these wages in the child's income. H&r block at home free The child may have to file an income tax return. H&r block at home free These wages may also be subject to social security and Medicare taxes if your child is age 18 or older. H&r block at home free For more information, see Family Employees in chapter 13. H&r block at home free    A Form W-2, Wage and Tax Statement, should be issued to the child employee. H&r block at home free   The fact that your child spends the wages to buy clothes or other necessities you normally furnish does not prevent you from deducting your child's wages as a farm expense. H&r block at home free The amount of wages paid to the child could cause a loss of the dependency exemption depending on how the child uses the money. H&r block at home free Spouse as an employee. H&r block at home free   You can deduct reasonable wages or other compensation you pay to your spouse if a true employer-employee relationship exists between you and your spouse. H&r block at home free Wages you pay to your spouse are subject to social security and Medicare taxes. H&r block at home free For more information, see Family Employees in chapter 13. H&r block at home free Nondeductible Pay You cannot deduct wages paid for certain household work, construction work, and maintenance of your home. H&r block at home free However, those wages may be subject to the employment taxes discussed in chapter 13. H&r block at home free Household workers. H&r block at home free   Do not deduct amounts paid to persons engaged in household work, except to the extent their services are used in boarding or otherwise caring for farm laborers. H&r block at home free Construction labor. H&r block at home free   Do not deduct wages paid to hired help for the construction of new buildings or other improvements. H&r block at home free These wages are part of the cost of the building or other improvement. H&r block at home free You must capitalize them. H&r block at home free Maintaining your home. H&r block at home free   If your farm employee spends time maintaining or repairing your home, the wages and employment taxes you pay for that work are nondeductible personal expenses. H&r block at home free For example, assume you have a farm employee for the entire tax year and the employee spends 5% of the time maintaining your home. H&r block at home free The employee devotes the remaining time to work on your farm. H&r block at home free You cannot deduct 5% of the wages and employment taxes you pay for that employee. H&r block at home free Employment Credits Reduce your deduction for wages by the amount of any employment credits you claim such as the work opportunity credit for qualified tax-exempt organizations hiring qualified veterans (Form 5884-C). H&r block at home free Repairs and Maintenance You can deduct most expenses for the repair and maintenance of your farm property. H&r block at home free Common items of repair and maintenance are repainting, replacing shingles and supports on farm buildings, and periodic or routine maintenance of trucks, tractors, and other farm machinery. H&r block at home free However, repairs to, or overhauls of, depreciable property that substantially prolong the life of the property, increase its value, or adapt it to a different use are capital expenses. H&r block at home free For example, if you repair the barn roof, the cost is deductible. H&r block at home free But if you replace the roof, it is a capital expense. H&r block at home free For more information, see Capital Expenses , later. H&r block at home free Interest You can deduct as a farm business expense interest paid on farm mortgages and other obligations you incur in your farm business. H&r block at home free Cash method. H&r block at home free   If you use the cash method of accounting, you can generally deduct interest paid during the tax year. H&r block at home free You cannot deduct interest paid with funds received from the original lender through another loan, advance, or other arrangement similar to a loan. H&r block at home free You can, however, deduct the interest when you start making payments on the new loan. H&r block at home free For more information, see Cash Method in chapter 2. H&r block at home free Prepaid interest. H&r block at home free   Under the cash method, you generally cannot deduct any interest paid before the year it is due. H&r block at home free Interest paid in advance may be deducted only in the tax year in which it is due. H&r block at home free Accrual method. H&r block at home free   If you use an accrual method of accounting, you can deduct only interest that has accrued during the tax year. H&r block at home free However, you cannot deduct interest owed to a related person who uses the cash method until payment is made and the interest is includible in the gross income of that person. H&r block at home free For more information, see Accrual Method in chapter 2. H&r block at home free Allocation of interest. H&r block at home free   If you use the proceeds of a loan for more than one purpose, you must allocate the interest on that loan to each use. H&r block at home free Allocate the interest to the following categories. H&r block at home free Trade or business interest. H&r block at home free Passive activity interest. H&r block at home free Investment interest. H&r block at home free Portfolio interest. H&r block at home free Personal interest. H&r block at home free   You generally allocate interest on a loan the same way you allocate the loan proceeds. H&r block at home free You allocate loan proceeds by tracing disbursements to specific uses. H&r block at home free The easiest way to trace disbursements to specific uses is to keep the proceeds of a particular loan separate from any other funds. H&r block at home free Secured loan. H&r block at home free   The allocation of loan proceeds and the related interest is generally not affected by the use of property that secures the loan. H&r block at home free Example. H&r block at home free You secure a loan with property used in your farming business. H&r block at home free You use the loan proceeds to buy a car for personal use. H&r block at home free You must allocate interest expense on the loan to personal use (purchase of the car) even though the loan is secured by farm business property. H&r block at home free If the property that secures the loan is your home, you generally do not allocate the loan proceeds or the related interest. H&r block at home free The interest is usually deductible as qualified home mortgage interest, regardless of how the loan proceeds are used. H&r block at home free However, you can choose to treat the loan as not secured by your home. H&r block at home free For more information, see Publication 936. H&r block at home free Allocation period. H&r block at home free   The period for which a loan is allocated to a particular use begins on the date the proceeds are used and ends on the earlier of the following dates. H&r block at home free The date the loan is repaid. H&r block at home free The date the loan is reallocated to another use. H&r block at home free More information. H&r block at home free   For more information on interest, see chapter 4 in Publication 535. H&r block at home free Breeding Fees You can deduct breeding fees as a farm business expense. H&r block at home free However, if you use an accrual method of accounting, you must capitalize breeding fees and allocate them to the cost basis of the calf, foal, etc. H&r block at home free For more information on who must use an accrual method of accounting, see Accrual Method Required under Accounting Methods in chapter 2. H&r block at home free Fertilizer and Lime You can deduct in the year paid or incurred the cost of fertilizer, lime, and other materials applied to farmland to enrich, neutralize, or condition it if the benefits last a year or less. H&r block at home free You can also deduct the cost of applying these materials in the year you pay or incur it. H&r block at home free However, see Prepaid Farm Supplies , earlier, for a rule that may limit your deduction for these materials. H&r block at home free If the benefits of the fertilizer, lime, or other materials last substantially more than one year, you generally capitalize their cost and deduct a part each year the benefits last. H&r block at home free However, you can choose to deduct these expenses in the year paid or incurred. H&r block at home free If you make this choice, you will need IRS approval if you later decide to capitalize the cost of previously deducted items. H&r block at home free If you sell farmland on which fertilizer or lime has been applied and if the selling price of the land includes part or all of the cost of the fertilizer or lime, you report the sale amount attributable to the fertilizer or lime as ordinary income. H&r block at home free Farmland, for these purposes, is land used for producing crops, fruits, or other agricultural products or for sustaining livestock. H&r block at home free It does not include land you have never used previously for producing crops or sustaining livestock. H&r block at home free You cannot deduct initial land preparation costs. H&r block at home free (See Capital Expenses , later. H&r block at home free ) Include government payments you receive for lime or fertilizer in income. H&r block at home free See Fertilizer and Lime under Agricultural Program Payments in chapter 3. H&r block at home free Taxes You can deduct as a farm business expense the real estate and personal property taxes on farm business assets, such as farm equipment, animals, farmland, and farm buildings. H&r block at home free You also can deduct the social security and Medicare taxes you pay to match the amount withheld from the wages of farm employees and any federal unemployment tax you pay. H&r block at home free For information on employment taxes, see chapter 13. H&r block at home free Allocation of taxes. H&r block at home free   The taxes on the part of your farm you use as your home (including the furnishings and surrounding land not used for farming) are nonbusiness taxes. H&r block at home free You may be able to deduct these nonbusiness taxes as itemized deductions on Schedule A (Form 1040). H&r block at home free To determine the nonbusiness part, allocate the taxes between the farm assets and nonbusiness assets. H&r block at home free The allocation can be done from the assessed valuations. H&r block at home free If your tax statement does not show the assessed valuations, you can usually get them from the tax assessor. H&r block at home free State and local general sales taxes. H&r block at home free   State and local general sales taxes on nondepreciable farm business expense items are deductible as part of the cost of those items. H&r block at home free Include state and local general sales taxes imposed on the purchase of assets for use in your farm business as part of the cost you depreciate. H&r block at home free Also treat the taxes as part of your cost if they are imposed on the seller and passed on to you. H&r block at home free State and federal income taxes. H&r block at home free   Individuals cannot deduct state and federal income taxes as farm business expenses. H&r block at home free Individuals can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). H&r block at home free However, you cannot deduct federal income tax. H&r block at home free Highway use tax. H&r block at home free   You can deduct the federal use tax on highway motor vehicles paid on a truck or truck tractor used in your farm business. H&r block at home free For information on the tax itself, including information on vehicles subject to the tax, see the Instructions for Form 2290, Heavy Highway Vehicle Use Tax Return. H&r block at home free Self-employment tax deduction. H&r block at home free   You can deduct as an adjustment to income on Form 1040 one-half of your self-employment tax in figuring your adjusted gross income. H&r block at home free For more information, see chapter 12. H&r block at home free Insurance You generally can deduct the ordinary and necessary cost of insurance for your farm business as a business expense. H&r block at home free This includes premiums you pay for the following types of insurance. H&r block at home free Fire, storm, crop, theft, liability, and other insurance on farm business assets. H&r block at home free Health and accident insurance on your farm employees. H&r block at home free Workers' compensation insurance set by state law that covers any claims for job-related bodily injuries or diseases suffered by employees on your farm, regardless of fault. H&r block at home free Business interruption insurance. H&r block at home free State unemployment insurance on your farm employees (deductible as taxes if they are considered taxes under state law). H&r block at home free Insurance to secure a loan. H&r block at home free   If you take out a policy on your life or on the life of another person with a financial interest in your farm business to get or protect a business loan, you cannot deduct the premiums as a business expense. H&r block at home free In the event of death, the proceeds of the policy are not taxed as income even if they are used to liquidate the debt. H&r block at home free Advance premiums. H&r block at home free   Deduct advance payments of insurance premiums only in the year to which they apply, regardless of your accounting method. H&r block at home free Example. H&r block at home free On June 28, 2013, you paid a premium of $3,000 for fire insurance on your barn. H&r block at home free The policy will cover a period of 3 years beginning on July 1, 2013. H&r block at home free Only the cost for the 6 months in 2013 is deductible as an insurance expense on your 2013 calendar year tax return. H&r block at home free Deduct $500, which is the premium for 6 months of the 36-month premium period, or 6/36 of $3,000. H&r block at home free In both 2014 and 2015, deduct $1,000 (12/36 of $3,000). H&r block at home free Deduct the remaining $500 in 2016. H&r block at home free Had the policy been effective on January 1, 2013, the deductible expense would have been $1,000 for each of the years 2013, 2014, and 2015, based on one-third of the premium used each year. H&r block at home free Business interruption insurance. H&r block at home free   Use and occupancy and business interruption insurance premiums are deductible as a business expense. H&r block at home free This insurance pays for lost profits if your business is shut down due to a fire or other cause. H&r block at home free Report any proceeds in full on Schedule F, Part I. H&r block at home free Self-employed health insurance deduction. H&r block at home free   If you are self-employed, you can deduct as an adjustment to income on Form 1040 your payments for medical, dental, and qualified long-term care insurance coverage for yourself, your spouse, and your dependents when figuring your adjusted gross income on your Form 1040. H&r block at home free Effective March 30, 2010, the insurance can also cover any child of yours under age 27 at the end of 2013, even if the child was not your dependent. H&r block at home free Generally, this deduction cannot be more than the net profit from the business under which the plan was established. H&r block at home free   If you or your spouse is also an employee of another person, you cannot take the deduction for any month in which you are eligible to participate in a subsidized health plan maintained by your employer or your spouse's employer. H&r block at home free   Generally, use the Self-Employed Health Insurance Deduction Worksheet in the Instructions for Form 1040 to figure your deduction. H&r block at home free Include the remaining part of the insurance payment in your medical expenses on Schedule A (Form 1040) if you itemize your deductions. H&r block at home free   For more information, see Deductible Premiums in Publication 535, chapter 6. H&r block at home free Rent and Leasing If you lease property for use in your farm business, you can generally deduct the rent you pay on Schedule F. H&r block at home free However, you cannot deduct rent you pay in crop shares if you deduct the cost of raising the crops as farm expenses. H&r block at home free Advance payments. H&r block at home free   Deduct advance payments of rent only in the year to which they apply, regardless of your accounting method. H&r block at home free Farm home. H&r block at home free   If you rent a farm, do not deduct the part of the rental expense that represents the fair rental value of the farm home in which you live. H&r block at home free Lease or Purchase If you lease a farm building or equipment, you must determine whether or not the agreement must be treated as a conditional sales contract rather than a lease. H&r block at home free If the agreement is treated as a conditional sales contract, the payments under the agreement (so far as they do not represent interest or other charges) are payments for the purchase of the property. H&r block at home free Do not deduct these payments as rent, but capitalize the cost of the property and recover this cost through depreciation. H&r block at home free Conditional sales contract. H&r block at home free   Whether an agreement is a conditional sales contract depends on the intent of the parties. H&r block at home free Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. H&r block at home free No single test, or special combination of tests, always applies. H&r block at home free However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. H&r block at home free The agreement applies part of each payment toward an equity interest you will receive. H&r block at home free You get title to the property after you make a stated amount of required payments. H&r block at home free The amount you must pay to use the property for a short time is a large part of the amount you would pay to get title to the property. H&r block at home free You pay much more than the current fair rental value of the property. H&r block at home free You have an option to buy the property at a nominal price compared to the value of the property when you may exercise the option. H&r block at home free Determine this value when you make the agreement. H&r block at home free You have an option to buy the property at a nominal price compared to the total amount you have to pay under the agreement. H&r block at home free The agreement designates part of the payments as interest, or part of the payments can be easily recognized as interest. H&r block at home free Example. H&r block at home free You lease new farm equipment from a dealer who both sells and leases. H&r block at home free The agreement includes an option to purchase the equipment for a specified price. H&r block at home free The lease payments and the specified option price equal the sales price of the equipment plus interest. H&r block at home free Under the agreement, you are responsible for maintenance, repairs, and the risk of loss. H&r block at home free For federal income tax purposes, the agreement is a conditional sales contract. H&r block at home free You cannot deduct any of the lease payments as rent. H&r block at home free You can deduct interest, repairs, insurance, depreciation, and other expenses related to the equipment. H&r block at home free Motor vehicle leases. H&r block at home free   Special rules apply to lease agreements that have a terminal rental adjustment clause. H&r block at home free In general, this is a clause that provides for a rental price adjustment based on the amount the lessor is able to sell the vehicle for at the end of the lease. H&r block at home free If your rental agreement contains a terminal rental adjustment clause, treat the agreement as a lease if the agreement otherwise qualifies as a lease. H&r block at home free For more information, see Internal Revenue Code (IRC) section 7701(h). H&r block at home free Leveraged leases. H&r block at home free   Special rules apply to leveraged leases of equipment (arrangements in which the equipment is financed by a nonrecourse loan from a third party). H&r block at home free For more information, see Publication 535, chapter 3, and Revenue Procedure 2001-28, which begins on page 1156 of Internal Revenue Bulletin 2001-19 at www. H&r block at home free irs. H&r block at home free gov/pub/irs-irbs/irb01-19. H&r block at home free pdf. H&r block at home free Depreciation If property you acquire to use in your farm business is expected to last more than one year, you generally cannot deduct the entire cost in the year you acquire it. H&r block at home free You must recover the cost over more than one year and deduct part of it each year on Schedule F as depreciation or amortization. H&r block at home free However, you can choose to deduct part or all of the cost of certain qualifying property, up to a limit, as a section 179 deduction in the year you place it in service. H&r block at home free Depreciation, amortization, and the section 179 deduction are discussed in chapter 7. H&r block at home free Business Use of Your Home You can deduct expenses for the business use of your home if you use part of your home exclusively and regularly: As the principal place of business for any trade or business in which you engage, As a place to meet or deal with patients, clients, or customers in the normal course of your trade or business, or In connection with your trade or business, if you are using a separate structure that is not attached to your home. H&r block at home free Your home office will qualify as your principal place of business for deducting expenses for its use if you meet both of the following requirements. H&r block at home free You use it exclusively and regularly for the administrative or management activities of your trade or business. H&r block at home free You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. H&r block at home free If you use part of your home for business, you must divide the expenses of operating your home between personal and business use. H&r block at home free The IRS now provides a simplified method to determine your expenses for business use of your home. H&r block at home free For more information, see Schedule C (Form 1040), Part II, and its instructions. H&r block at home free Deduction limit. H&r block at home free   If your gross income from farming equals or exceeds your total farm expenses (including expenses for the business use of your home), you can deduct all your farm expenses. H&r block at home free But if your gross income from farming is less than your total farm expenses, your deduction for certain expenses for the use of your home in your farming business is limited. H&r block at home free   Your deduction for otherwise nondeductible expenses, such as utilities, insurance, and depreciation (with depreciation taken last), cannot be more than the gross income from farming minus the following expenses. H&r block at home free The business part of expenses you could deduct even if you did not use your home for business (such as deductible mortgage interest, real estate taxes, and casualty and theft losses). H&r block at home free Farm expenses other than expenses that relate to the use of your home. H&r block at home free If you are self-employed, do not include your deduction for half of your self-employment tax. H&r block at home free   Deductions over the current year's limit can be carried over to your next tax year. H&r block at home free They are subject to the deduction limit for the next tax year. H&r block at home free More information. H&r block at home free   See Publication 587 for more information on deducting expenses for the business use of your home. H&r block at home free Telephone expense. H&r block at home free   You cannot deduct the cost of basic local telephone service (including any taxes) for the first telephone line you have in your home, even if you have an office in your home. H&r block at home free However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for your farm business, are deductible business expenses. H&r block at home free Cell phone charges for calls relating to your farm business are deductible. H&r block at home free If the cell phone you use for your farm business is part of a family cell phone plan, you must allocate and deduct only the portion of the charges attributable to farm business calls. H&r block at home free Truck and Car Expenses You can deduct the actual cost of operating a truck or car in your farm business. H&r block at home free Only expenses for business use are deductible. H&r block at home free These include such items as gasoline, oil, repairs, license tags, insurance, and depreciation (subject to certain limits). H&r block at home free Standard mileage rate. H&r block at home free   Instead of using actual costs, under certain conditions you can use the standard mileage rate. H&r block at home free The standard mileage rate for each mile of business use is 56. H&r block at home free 5 cents in 2013. H&r block at home free You can use the standard mileage rate for a car or a light truck, such as a van, pickup, or panel truck, you own or lease. H&r block at home free   You cannot use the standard mileage rate if you operate five or more cars or light trucks at the same time. H&r block at home free You are not using five or more vehicles at the same time if you alternate using the vehicles (you use them at different times) for business. H&r block at home free Example. H&r block at home free Maureen owns a car and four pickup trucks that are used in her farm business. H&r block at home free Her farm employees use the trucks and she uses the car for business. H&r block at home free Maureen cannot use the standard mileage rate for the car or the trucks. H&r block at home free This is because all five vehicles are used in Maureen's farm business at the same time. H&r block at home free She must use actual expenses for all vehicles. H&r block at home free Business use percentage. H&r block at home free   You can claim 75% of the use of a car or light truck as business use without any records if you used the vehicle during most of the normal business day directly in connection with the business of farming. H&r block at home free You choose this method of substantiating business use the first year the vehicle is placed in service. H&r block at home free Once you make this choice, you may not change to another method later. H&r block at home free The following are uses directly connected with the business of farming. H&r block at home free Cultivating land. H&r block at home free Raising or harvesting any agricultural or horticultural commodity. H&r block at home free Raising, shearing, feeding, caring for, training, and managing animals. H&r block at home free Driving to the feed or supply store. H&r block at home free   If you keep records and they show that your business use was more than 75%, you may be able to claim more. H&r block at home free See Recordkeeping requirements under Travel Expenses , below. H&r block at home free More information. H&r block at home free   For more information on deductible truck and car expenses, see Publication 463, chapter 4. H&r block at home free If you pay your employees for the use of their truck or car in your farm business, see Reimbursements to employees under Travel Expenses next. H&r block at home free Travel Expenses You can deduct ordinary and necessary expenses you incur while traveling away from home for your farm business. H&r block at home free You cannot deduct lavish or extravagant expenses. H&r block at home free Usually, the location of your farm business is considered your home for tax purposes. H&r block at home free You are traveling away from home if: Your duties require you to be absent from your farm substantially longer than an ordinary work day, and You need to get sleep or rest to meet the demands of your work while away from home. H&r block at home free If you meet these requirements and can prove the time, place, and business purpose of your travel, you can deduct your ordinary and necessary travel expenses. H&r block at home free The following are some types of deductible travel expenses. H&r block at home free Air, rail, bus, and car transportation; Meals and lodging; Dry cleaning and laundry; Telephone and fax; Transportation between your hotel and your temporary work or business meeting location; and Tips for any of the above expenses. H&r block at home free Meals. H&r block at home free   You ordinarily can deduct only 50% of your business-related meals expenses. H&r block at home free You can deduct the cost of your meals while traveling on business only if your business trip is overnight or long enough to require you to stop for sleep or rest to properly perform your duties. H&r block at home free You cannot deduct any of the cost of meals if it is not necessary for you to rest, unless you meet the rules for business entertainment. H&r block at home free For information on entertainment expenses, see Publication 463, chapter 2. H&r block at home free   The expense of a meal includes amounts you spend for your food, beverages, taxes, and tips relating to the meal. H&r block at home free You can deduct either 50% of the actual cost or 50% of a standard meal allowance that covers your daily meal and incidental expenses. H&r block at home free    Recordkeeping requirements. H&r block at home free You must be able to prove your deductions for travel by adequate records or other evidence that will support your own statement. H&r block at home free Estimates or approximations do not qualify as proof of an expense. H&r block at home free   You should keep an account book or similar record, supported by adequate documentary evidence, such as receipts, that together support each element of an expense. H&r block at home free Generally, it is best to record the expense and get documentation of it at the time you pay it. H&r block at home free   If you choose to deduct a standard meal allowance rather than the actual expense, you do not have to keep records to prove amounts spent for meals and incidental items. H&r block at home free However, you must still keep records to prove the actual amount of other travel expenses, and the time, place, and business purpose of your travel. H&r block at home free More information. H&r block at home free   For detailed information on travel, recordkeeping, and the standard meal allowance, see Publication 463. H&r block at home free Reimbursements to employees. H&r block at home free   You generally can deduct reimbursements you pay to your employees for travel and transportation expenses they incur in the conduct of your business. H&r block at home free Employees may be reimbursed under an accountable or nonaccountable plan. H&r block at home free Under an accountable plan, the employee must provide evidence of expenses. H&r block at home free Under a nonaccountable plan, no evidence of expenses is required. H&r block at home free If you reimburse expenses under an accountable plan, deduct them as travel and transportation expenses. H&r block at home free If you reimburse expenses under a nonaccountable plan, you must report the reimbursements as wages on Form W-2 and deduct them as wages. H&r block at home free For more information, see Publication 535, chapter 11. H&r block at home free Marketing Quota Penalties You can deduct as Other expenses on Schedule F penalties you pay for marketing crops in excess of farm marketing quotas. H&r block at home free However, if you do not pay the penalty, but instead the purchaser of your crop deducts it from the payment to you, include in gross income only the amount you received. H&r block at home free Do not take a separate deduction for the penalty. H&r block at home free Tenant House Expenses You can deduct the costs of maintaining houses and their furnishings for tenants or hired help as farm business expenses. H&r block at home free These costs include repairs, utilities, insurance, and depreciation. H&r block at home free The value of a dwelling you furnish to a tenant under the usual tenant-farmer arrangement is not taxable income to the tenant. H&r block at home free Items Purchased for Resale If you use the cash method of accounting, you ordinarily deduct the cost of livestock and other items purchased for resale only in the year of sale. H&r block at home free You deduct this cost, including freight charges for transporting the livestock to the farm, on Schedule F, Part I. H&r block at home free However, see Chickens, seeds, and young plants , below. H&r block at home free Example. H&r block at home free You use the cash method of accounting. H&r block at home free In 2013, you buy 50 steers you will sell in 2014. H&r block at home free You cannot deduct the cost of the steers on your 2013 tax return. H&r block at home free You deduct their cost on your 2014 Schedule F, Part I. H&r block at home free Chickens, seeds, and young plants. H&r block at home free   If you are a cash method farmer, you can deduct the cost of hens and baby chicks bought for commercial egg production, or for raising and resale, as an expense on Schedule F, Part I, in the year paid if you do it consistently and it does not distort income. H&r block at home free You also can deduct the cost of seeds and young plants bought for further development and cultivation before sale as an expense on Schedule F, Part I, when paid if you do this consistently and you do not figure your income on the crop method. H&r block at home free However, see Prepaid Farm Supplies , earlier, for a rule that may limit your deduction for these items. H&r block at home free   If you deduct the cost of chickens, seeds, and young plants as an expense, report their entire selling price as income. H&r block at home free You cannot also deduct the cost from the selling price. H&r block at home free   You cannot deduct the cost of seeds and young plants for Christmas trees and timber as an expense. H&r block at home free Deduct the cost of these seeds and plants through depletion allowances. H&r block at home free For more information, see Depletion in chapter 7. H&r block at home free   The cost of chickens and plants used as food for your family is never deductible. H&r block at home free   Capitalize the cost of plants with a preproductive period of more than 2 years, unless you can elect out of the uniform capitalization rules. H&r block at home free These rules are discussed in chapter 6. H&r block at home free Example. H&r block at home free You use the cash method of accounting. H&r block at home free In 2013, you buy 500 baby chicks to raise for resale in 2014. H&r block at home free You also buy 50 bushels of winter wheat seed in 2013 that you sow in the fall. H&r block at home free Unless you previously adopted the method of deducting these costs in the year you sell the chickens or the harvested crops, you can deduct the cost of both the baby chicks and the seed wheat in 2013. H&r block at home free Election to use crop method. H&r block at home free   If you use the crop method, you can delay deducting the cost of seeds and young plants until you sell them. H&r block at home free You must get IRS approval to use the crop method. H&r block at home free If you follow this method, deduct the cost from the selling price to determine your profit on Schedule F, Part I. H&r block at home free For more information, see Crop method under Special Methods of Accounting in chapter 2. H&r block at home free Choosing a method. H&r block at home free   You can adopt either the crop method or the cash method for deducting the cost in the first year you buy egg-laying hens, pullets, chicks, or seeds and young plants. H&r block at home free   Although you must use the same method for egg-laying hens, pullets, and chicks, you can use a different method for seeds and young plants. H&r block at home free Once you use a particular method for any of these items, use it for those items until you get IRS approval to change your method. H&r block at home free For more information, see Change in Accounting Method in chapter 2. H&r block at home free Other Expenses The following list, while not all-inclusive, shows some expenses you can deduct as other farm expenses on Schedule F, Part II. H&r block at home free These expenses must be for business purposes and  (1) paid, if you use the cash method of accounting, or (2) incurred, if you use an accrual method of accounting. H&r block at home free Accounting fees. H&r block at home free Advertising. H&r block at home free Business travel and meals. H&r block at home free Commissions. H&r block at home free Consultant fees. H&r block at home free Crop scouting expenses. H&r block at home free Dues to cooperatives. H&r block at home free Educational expenses (to maintain and improve farming skills). H&r block at home free Farm-related attorney fees. H&r block at home free Farm magazines. H&r block at home free Ginning. H&r block at home free Insect sprays and dusts. H&r block at home free Litter and bedding. H&r block at home free Livestock fees. H&r block at home free Marketing fees. H&r block at home free Milk assessment. H&r block at home free Recordkeeping expenses. H&r block at home free Service charges. H&r block at home free Small tools expected to last one year or less. H&r block at home free Stamps and stationery. H&r block at home free Subscriptions to professional, technical, and trade journals that deal with farming. H&r block at home free Tying material and containers. H&r block at home free Loan expenses. H&r block at home free   You prorate and deduct loan expenses, such as legal fees and commissions, you pay to get a farm loan over the term of the loan. H&r block at home free Tax preparation fees. H&r block at home free   You can deduct as a farm business expense on Schedule F the cost of preparing that part of your tax return relating to your farm business. H&r block at home free You may be able to deduct the remaining cost on Schedule A (Form 1040) if you itemize your deductions. H&r block at home free   You also can deduct on Schedule F the amount you pay or incur in resolving tax issues relating to your farm business. H&r block at home free Domestic Production Activities Deduction Generally, you are allowed a deduction for income attributable to domestic production activities. H&r block at home free You can deduct 9% of the lesser of your qualified production activities income or your taxable income (adjusted gross income for individuals) for the tax year. H&r block at home free Your deduction is limited to 50% of the Form W-2 wages you paid for the tax year that are properly allocable to domestic production gross receipts. H&r block at home free For this purpose, Form W-2 wages do not include noncash wages paid for agricultural labor, such as compensation paid as commodities. H&r block at home free Also, excluded from Form W-2 wages are wages paid to your children under age 18 and nontaxable fringe benefits. H&r block at home free Income from cooperatives. H&r block at home free   If you receive a patronage dividend or qualified per-unit retain allocation from a cooperative which is engaged in the manufacturing, production, growth, or extraction in whole or in significant part of any agricultural or horticultural product or in the marketing of agricultural or horticultural products, your income from the cooperative can give rise to a domestic production activities deduction. H&r block at home free This deduction amount is reported on Form 1099-PATR, box 6. H&r block at home free In order for you to qualify for the deduction, the cooperative is required to send you a written notice designating your portion of the domestic production activities deduction. H&r block at home free More information. H&r block at home free   For more information on the domestic production activities deduction, see the Instructions for Form 8903. H&r block at home free Capital Expenses A capital expense is a payment, or a debt incurred, for the acquisition, improvement, or restoration of an asset that is expected to last more than one year. H&r block at home free You include the expense in the basis of the asset. H&r block at home free Uniform capitalization rules also require you to capitalize or include in inventory certain other expenses. H&r block at home free See chapters 2  and 6. H&r block at home free Capital expenses are generally not deductible, but they may be depreciable. H&r block at home free However, you can elect to deduct certain capital expenses, such as the following. H&r block at home free The cost of fertilizer, lime, etc. H&r block at home free (See Fertilizer and Lime under Deductible Expenses , earlier. H&r block at home free ) Soil and water conservation expenses. H&r block at home free (See chapter 5. H&r block at home free ) The cost of property that qualifies for a deduction under section 179. H&r block at home free (See chapter 7. H&r block at home free ) Business start-up costs. H&r block at home free (See Business start-up and organizational costs , later. H&r block at home free ) Forestation and reforestation costs. H&r block at home free (See Forestation and reforestation costs , later. H&r block at home free ) Generally, the costs of the following items, including the costs of material, hired labor, and installation, are capital expenses. H&r block at home free Land and buildings. H&r block at home free Additions, alterations, and improvements to buildings, etc. H&r block at home free Cars and trucks. H&r block at home free Equipment and machinery. H&r block at home free Fences. H&r block at home free Draft, breeding, sport, and dairy livestock. H&r block at home free Repairs to machinery, equipment, trucks, and cars that prolong their useful life, increase their value, or adapt them to different use. H&r block at home free Water wells, including drilling and equipping costs. H&r block at home free Land preparation costs, such as: Clearing land for farming, Leveling and conditioning land, Purchasing and planting trees, Building irrigation canals and ditches, Laying irrigation pipes, Installing drain tile, Modifying channels or streams, Constructing earthen, masonry, or concrete tanks, reservoirs, or dams, and Building roads. H&r block at home free Business start-up and organizational costs. H&r block at home free   You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs paid or incurred after October 22, 2004. H&r block at home free The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. H&r block at home free Any remaining costs must be amortized. H&r block at home free See chapter 7. H&r block at home free   You elect to deduct start-up or organizational costs by claiming the deduction on the income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. H&r block at home free However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). H&r block at home free Clearly indicate the election on your amended return and write “Filed pursuant to section 301. H&r block at home free 9100-2” at the top of the amended return. H&r block at home free File the amended return at the same address you filed the original return. H&r block at home free The election applies when figuring taxable income for the current tax year and all subsequent years. H&r block at home free   You can choose to forgo the election by clearly electing to capitalize your start-up or organizational costs on an income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. H&r block at home free For more information about start-up and organizational costs, see chapter 7. H&r block at home free Crop production expenses. H&r block at home free   The uniform capitalization rules generally require you to capitalize expenses incurred in producing plants. H&r block at home free However, except for certain taxpayers required to use an accrual method of accounting, the capitalization rules do not apply to plants with a preproductive period of 2 years or less. H&r block at home free For more information, see Uniform Capitalization Rules in chapter 6. H&r block at home free Timber. H&r block at home free   Capitalize the cost of acquiring timber. H&r block at home free Do not include the cost of land in the cost of the timber. H&r block at home free You must generally capitalize direct costs incurred in reforestation. H&r block at home free However, you can elect to deduct some forestation and reforestation costs. H&r block at home free See Forestation and reforestation costs next. H&r block at home free Reforestation costs include the following. H&r block at home free Site preparation costs, such as: Girdling, Applying herbicide, Baiting rodents, and Clearing and controlling brush. H&r block at home free The cost of seed or seedlings. H&r block at home free Labor and tool expenses. H&r block at home free Depreciation on equipment used in planting or seeding. H&r block at home free Costs incurred in replanting to replace lost seedlings. H&r block at home free You can choose to capitalize certain indirect reforestation costs. H&r block at home free   These capitalized amounts are your basis for the timber. H&r block at home free Recover your basis when you sell the timber or take depletion allowances when you cut the timber. H&r block at home free See Depletion in chapter 7. H&r block at home free Forestation and reforestation costs. H&r block at home free   You can elect to deduct up to $10,000 ($5,000 if married filing separately; $0 for a trust) of qualifying reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. H&r block at home free Any remaining costs can be amortized over an 84-month period. H&r block at home free See chapter 7. H&r block at home free If you make an election to deduct or amortize qualifying reforestation costs, you should create and maintain separate timber accounts for each qualified timber property. H&r block at home free The accounts should include all reforestation treatments and the dates they were applied. H&r block at home free Any qualified timber property that is subject to the deduction or amortization election cannot be included in any other timber account for which depletion is allowed. H&r block at home free The timber account should be maintained until the timber is disposed of. H&r block at home free For more information, see Notice 2006-47, 2006-20 I. H&r block at home free R. H&r block at home free B. H&r block at home free 892, available at  www. H&r block at home free irs. H&r block at home free gov/irb/2006-20_IRB/ar11. H&r block at home free html. H&r block at home free   You elect to deduct forestation and reforestation costs by claiming the deduction on the income tax return filed by the due date (including extensions) for the tax year in which the expenses were paid or incurred. H&r block at home free If you are filing Form T (Timber), Forest Activities Schedule, also complete Form T (Timber), Part IV. H&r block at home free If you are not filing Form T (Timber), attach a statement to your return with the following information. H&r block at home free The unique stand identification numbers. H&r block at home free The total number of acres reforested during the tax year. H&r block at home free The nature of the reforestation treatments. H&r block at home free The total amounts of the qualified reforestation expenditures eligible to be amortized or deducted. H&r block at home free   However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). H&r block at home free Clearly indicate the election on your amended return and write “Filed pursuant to section 301. H&r block at home free 9100-2” at the top of the amended return. H&r block at home free File the amended return at the same address you filed the original return. H&r block at home free    For more information about forestation and reforestation costs, see chapter 7. H&r block at home free    For more information about timber, see Agriculture Handbook Number 731, Forest Landowners' Guide to the Federal Income Tax. H&r block at home free You can view this publication on the Internet at  www. H&r block at home free fs. H&r block at home free fed. H&r block at home free us/publications. H&r block at home free Christmas tree cultivation. H&r block at home free   If you are in the business of planting and cultivating Christmas trees to sell when they are more than 6 years old, capitalize expenses incurred for planting and stump culture and add them to the basis of the standing trees. H&r block at home free Recover these expenses as part of your adjusted basis when you sell the standing trees or as depletion allowances when you cut the trees. H&r block at home free For more information, see Timber Depletion under Depletion in chapter 7. H&r block at home free   You can deduct as business expenses the costs incurred for shearing and basal pruning of these trees. H&r block at home free Expenses incurred for silvicultural practices, such as weeding or cleaning, and noncommercial thinning are also deductible as business expenses. H&r block at home free   Capitalize the cost of land improvements, such as road grading, ditching, and fire breaks, that have a useful life beyond the tax year. H&r block at home free If the improvements do not have a determinable useful life, add their cost to the basis of the land. H&r block at home free The cost is recovered when you sell or otherwise dispose of it. H&r block at home free If the improvements have a determinable useful life, recover their cost through depreciation. H&r block at home free Capitalize the cost of equipment and other depreciable assets, such as culverts and fences, to the extent you do not use them in planting Christmas trees. H&r block at home free Recover these costs through depreciation. H&r block at home free Nondeductible Expenses You cannot deduct personal expenses and certain other items on your tax return even if they relate to your farm. H&r block at home free Personal, Living, and Family Expenses You cannot deduct certain personal, living, and family expenses as business expenses. H&r block at home free These include rent and insurance premiums paid on property used as your home, life insurance premiums on yourself or your family, the cost of maintaining cars, trucks, or horses for personal use, allowances to minor children, attorneys' fees and legal expenses incurred in personal matters, and household expenses. H&r block at home free Likewise, the cost of purchasing or raising produce or livestock consumed by you or your family is not deductible. H&r block at home free Other Nondeductible Items You cannot deduct the following items on your tax return. H&r block at home free Loss of growing plants, produce, and crops. H&r block at home free   Losses of plants, produce, and crops raised for sale are generally not deductible. H&r block at home free However, you may have a deductible loss on plants with a preproductive period of more than 2 years. H&r block at home free See chapter 11 for more information. H&r block at home free Repayment of loans. H&r block at home free   You cannot deduct the repayment of a loan. H&r block at home free However, if you use the proceeds of a loan for farm business expenses, you can deduct the interest on the loan. H&r block at home free See Interest , earlier. H&r block at home free Estate, inheritance, legacy, succession, and gift taxes. H&r block at home free   You cannot deduct estate, inheritance, legacy, succession, and gift taxes. H&r block at home free Loss of livestock. H&r block at home free   You cannot deduct as a loss the value of raised livestock that die if you deducted the cost of raising them as an expense. H&r block at home free Losses from sales or exchanges between related persons. H&r block at home free   You cannot deduct losses from sales or exchanges of property between you and certain related persons, including your spouse, brother, sister, ancestor, or lineal descendant. H&r block at home free For more information, see chapter 2 of Publication 544, Sales and Other Dispositions of Assets. H&r block at home free Cost of raising unharvested crops. H&r block at home free   You cannot deduct the cost of raising unharvested crops sold with land owned more than one year if you sell both at the same time and to the same person. H&r block at home free Add these costs to the basis of the land to determine the gain or loss on the sale. H&r block at home free For more information, see Section 1231 Gains and Losses in chapter 9. H&r block at home free Cost of unharvested crops bought with land. H&r block at home free   Capitalize the purchase price of land, including the cost allocable to unharvested crops. H&r block at home free You cannot deduct the cost of the crops at the time of purchase. H&r block at home free However, you can deduct this cost in figuring net profit or loss in the tax year you sell the crops. H&r block at home free Cost related to gifts. H&r block at home free   You cannot deduct costs related to your gifts of agricultural products or property held for sale in the ordinary course of your business. H&r block at home free The costs are not deductible in the year of the gift or any later year. H&r block at home free For example, you cannot deduct the cost of raising cattle or the cost of planting and raising unharvested wheat on parcels of land given as a gift to your children. H&r block at home free Club dues and membership fees. H&r block at home free   Generally, you cannot deduct amounts you pay or incur for membership in any club organized for business, pleasure, recreation, or any other social purpose. H&r block at home free This includes country clubs, golf and athletic clubs, hotel clubs, sporting clubs, airline clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. H&r block at home free Exception. H&r block at home free   The following organizations will not be treated as a club organized for business, pleasure, recreation, or other social purposes, unless one of its main purposes is to conduct entertainment activities for members or their guests or to provide members or their guests with access to entertainment facilities. H&r block at home free Boards of trade. H&r block at home free Business leagues. H&r block at home free Chambers of commerce. H&r block at home free Civic or public service organizations. H&r block at home free Professional associations. H&r block at home free Trade associations. H&r block at home free Real estate boards. H&r block at home free Fines and penalties. H&r block at home free   You cannot deduct fines and penalties, except penalties for exceeding marketing quotas, discussed earlier. H&r block at home free Losses From Operating a Farm If your deductible farm expenses are more than your farm income, you have a loss from the operation of your farm. H&r block at home free The amount of the loss you can deduct when figuring your taxable income may be limited. H&r block at home free To figure your deductible loss, you must apply the following limits. H&r block at home free The at-risk limits. H&r block at home free The passive activity limits. H&r block at home free The following discussions explain these limits. H&r block at home free If your deductible loss after applying these limits is more than your other income for the year, you may have a net operating loss. H&r block at home free See Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. H&r block at home free If you do not carry on your farming activity to make a profit, your loss deduction may be limited by the not-for-profit rules. H&r block at home free See Not-for-Profit Farming, later. H&r block at home free At-Risk Limits The at-risk rules limit your deduction for losses from most business or income-producing activities, including farming. H&r block at home free These rules limit the losses you can deduct when figuring your taxable income. H&r block at home free The deductible loss from an activity is limited to the amount you have at risk in the activity. H&r block at home free You are at risk in any activity for: The money and adjusted basis of property you contribute to the activity, and Amounts you borrow for use in the activity if: You are personally liable for repayment, or You pledge property (other than property used in the activity) as security for the loan. H&r block at home free You are not at risk, however, for amounts you borrow for use in a farming activity from a person who has an interest in the activity (other than as a creditor) or a person related to someone (other than you) having such an interest. H&r block at home free For more information, see Publication 925. H&r block at home free Passive Activity Limits A passive activity is generally any activity involving the conduct of any trade or business in which you do not materially participate. H&r block at home free Generally, a rental activity is a passive activity. H&r block at home free If you have a passive activity, special rules limit the loss you can deduct in the tax year. H&r block at home free You generally can deduct losses from passive activities only up to income from passive activities. H&r block at home free Credits are similarly limited. H&r block at home free For more information, see Publication 925. H&r block at home free Excess Farm Loss Limit For tax years beginning after 2009, excess farm losses (defined below) are not deductible if you received certain applicable subsidies. H&r block at home free This limit applies to any farming businesses, other than a C corporation, that received a direct or counter-cyclical payment (or any payment in lieu of such payments) under title I of the Food, Conservation, and Energy Act of 2008, or from a Commodity Credit Corporation loan. H&r block at home free Your farming losses are limited to the greater of: $300,000 ($150,000 for a married person filing a separate return), or The total net farm income for the prior five tax years. H&r block at home free Farming losses from casualty losses or losses by reason of disease or drought are disregarded for purposes of figuring this limitation. H&r block at home free Also, the limitation on farm losses should be applied before the passive activity loss rules are applied. H&r block at home free For more details, see IRC section 461(j). H&r block at home free Excess farm loss. H&r block at home free   Generally, an excess farm loss is the amount of your farming loss that exceeds the amount of the limitation (as described above). H&r block at home free This loss can be determined by taking the excess of: The total deductions for the tax year from your farming businesses, over The total gross income or gain for the tax year from your farming businesses, plus the greater of: $300,000 ($150,000 for a married person filing a separate return), or The excess (if any) of the total gross income or gain from your farming businesses for the prior five tax years over the total deductions from your farming businesses for the prior five tax years. H&r block at home free   Excess farm losses that are disallowed can be carried forward to the next tax year and treated as a deduction from that year. H&r block at home free Not-for-Profit Farming If you operate a farm for profit, you can deduct all the ordinary and necessary expenses of carrying on the business of farming on Schedule F. H&r block at home free However, if you do not carry on your farming activity, or other activity you engage or invest in, to make a profit, you report the income from the activity on Form 1040, line 21, and you can deduct expenses of carrying on the activity only if you itemize your deductions on Schedule A (Form 1040). H&r block at home free Also, there is a limit on the deductions you can take. H&r block at home free You cannot use a loss from that activity to offset income from other activities. H&r block at home free Activities you do as a hobby, or mainly for sport or recreation, come under this limit. H&r block at home free An investment activity intended only to produce tax losses for the investors also comes under this limit. H&r block at home free The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. H&r block at home free It does not apply to corporations other than S corporations. H&r block at home free In determining whether you are carrying on your farming activity for profit, all the facts are taken into account. H&r block at home free No one factor alone is decisive. H&r block at home free Among the factors to consider are whether: You operate your farm in a businesslike manner; The time and effort you spend on farming indicate you intend to make it profitable; You depend on income from farming for your livelihood; Your losses are due to circumstances beyond your control or are normal in the start-up phase of farming; You change your methods of operation in an attempt to improve profitability; You, or your advisors, have the knowledge needed to carry on the farming activity as a successful business; You were successful in making a profit in similar activities in the past; You make a profit from farming in some years and the amount of profit you make; and You can expect to make a future profit from the appreciation of the assets used in the farming activity. H&r block at home free Presumption of profit. H&r block at home free   Your farming or other activity is presumed carried on for profit if it produced a profit in at least 3 of the last 5 tax years, including the current year. H&r block at home free Activities that consist primarily of breeding, training, showing, or racing horses are presumed carried on for profit if they produced a profit in at least 2 of the last 7 tax years, including the current year. H&r block at home free The activity must be substantially the same for each year within this period. H&r block at home free You have a profit when the gross income from an activity is more than the deductions for it. H&r block at home free   If a taxpayer dies before the end of the 5-year (or 7-year) period, the period ends on the date of the taxpayer's death. H&r block at home free   If your business or investment activity passes this 3- (or 2-) years-of-profit test, presume it is carried on for profit. H&r block at home free This means the limits discussed here do not apply. H&r block at home free You can take all your business deductions from the activity on Schedule F, even for the years that you have a loss. H&r block at home free You can rely on this presumption in every case, unless the IRS shows it is not valid. H&r block at home free   If you fail the 3- (or 2-) years-of-profit test, you still may be considered to operate your farm for profit by considering the factors listed earlier. H&r block at home free Using the presumption later. H&r block at home free   If you are starting out in farming and do not have 3 (or 2) years showing a profit, you may want to take advantage of this presumption later, after you have had the 5 (or 7) years of experience allowed by the test. H&r block at home free   You can choose to do this by filing Form 5213. H&r block at home free Filing this form postpones any determination that your farming activity is not carried on for profit until 5 (or 7) years have passed since you first started farming. H&r block at home free You must file Form 5213 within 3 years after the due date of your return for the year in which you first carried on the activity, or, if earlier, within 60 days after receiving a written notice from the IRS proposing to disallow deductions attributable to the activity. H&r block at home free   The benefit gained by making this choice is that the IRS will not immediately question whether your farming activity is engaged in for profit. H&r block at home free Accordingly, it will not limit your deductions. H&r block at home free Rather, you will gain time to earn a profit in 3 (or 2) out of the first 5 (or 7) years you carry on the farming activity. H&r block at home free If you show 3 (or 2) years of profit at the end of this period, your deductions are not limited under these rules. H&r block at home free If you do not have 3 (or 2) years of profit (and cannot otherwise show that you operated your farm for profit), the limit applies retroactively to any year in the 5-year (or 7-year) period with a loss. H&r block at home free   Filing Form 5213 automatically extends the period of limitations on any year
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The H&r Block At Home Free

H&r block at home free 8. H&r block at home free   Distributions and Rollovers Table of Contents DistributionsMinimum Required Distributions No Special 10-Year Tax Option Transfer of Interest in 403(b) ContractAfter-tax contributions. H&r block at home free Permissive service credit. H&r block at home free Tax-Free RolloversHardship exception to rollover rules. H&r block at home free Eligible retirement plans. H&r block at home free Nonqualifying distributions. H&r block at home free Second rollover. H&r block at home free Gift Tax Distributions Permissible distributions. H&r block at home free   Generally, a distribution cannot be made from a 403(b) account until the employee: Reaches age 59½, Has a severance from employment, Dies, Becomes disabled, In the case of elective deferrals, encounters financial hardship, or Has a qualified reservist distribution. H&r block at home free In most cases, the payments you receive or that are made available to you under your 403(b) account are taxable in full as ordinary income. H&r block at home free In general, the same tax rules apply to distributions from 403(b) plans that apply to distributions from other retirement plans. H&r block at home free These rules are explained in Publication 575. H&r block at home free Publication 575 also discusses the additional tax on early distributions from retirement plans. H&r block at home free Retired public safety officers. H&r block at home free   If you are an eligible retired public safety officer, distributions of up to $3,000, made directly from your 403(b) plan to pay accident, health, or long-term care insurance, are not included in your taxable income. H&r block at home free The premiums can be for you, your spouse, or your dependents. H&r block at home free   A public safety officer is a law enforcement officer, fire fighter, chaplain, or member of a rescue squad or ambulance crew. H&r block at home free   For additional information, see Publication 575. H&r block at home free Distribution for active reservist. H&r block at home free   The 10% penalty for early withdrawals will not apply to a qualified reservist distribution attributable to elective deferrals from a 403(b) plan. H&r block at home free A qualified reservist distribution is a distribution that is made: To an individual who is a reservist or national guardsman and who was ordered or called to active duty for a period in excess of 179 days or for an indefinite period; and During the period beginning on the date of the order or call to duty and ending at the close of the active duty period. H&r block at home free Minimum Required Distributions You must receive all, or at least a certain minimum, of your interest accruing after 1986 in the 403(b) plan by April 1 of the calendar year following the later of the calendar year in which you become age 70½, or the calendar year in which you retire. H&r block at home free Check with your employer, plan administrator, or provider to find out whether this rule also applies to pre-1987 accruals. H&r block at home free If not, a minimum amount of these accruals must begin to be distributed by the later of the end of the calendar year in which you reach age 75 or April 1 of the calendar year following retirement. H&r block at home free For each year thereafter, the minimum distribution must be made by the last day of the year. H&r block at home free If you do not receive the required minimum distribution, you are subject to a nondeductible 50% excise tax on the difference between the required minimum distribution and the amount actually distributed. H&r block at home free No Special 10-Year Tax Option A distribution from a 403(b) plan does not qualify as a lump-sum distribution. H&r block at home free This means you cannot use the special 10-year tax option to calculate the taxable portion of a 403(b) distribution. H&r block at home free For more information, see Publication 575. H&r block at home free Transfer of Interest in 403(b) Contract Contract exchanges. H&r block at home free   If you transfer all or part of your interest from a 403(b) contract to another 403(b) contract (held in the same plan), the transfer is tax free, and is referred to as a contract exchange. H&r block at home free This was previously known as a 90-24 transfer. H&r block at home free A contract exchange is similar to a 90-24 transfer with one major difference. H&r block at home free Previously, you were able to accomplish the transfer without your employer’s involvement. H&r block at home free After September 24, 2007, all such transfers are accomplished through a contract exchange requiring your employer’s involvement. H&r block at home free In addition, the plan must provide for the exchange and the transferred interest must be subject to the same or stricter distribution restrictions. H&r block at home free Finally, your accumulated benefit after the exchange must be equal to what it was before the exchange. H&r block at home free   Transfers that do not satisfy this rule are plan distributions and are generally taxable as ordinary income. H&r block at home free Plan-to-plan transfers. H&r block at home free   You may also transfer part or all of your interest from a 403(b) plan to another 403(b) plan if you are an employee of (or were formerly employed by) the employer of the plan to which you would like to transfer. H&r block at home free Both the initial plan and the receiving plan must provide for transfers. H&r block at home free Your accumulated benefit after the transfer must be at least equal to what it was before the transfer. H&r block at home free The new plan’s restrictions on distributions must be the same or stricter than those of the original plan. H&r block at home free Tax-free transfers for certain cash distributions. H&r block at home free   A tax-free transfer may also apply to a cash distribution of your 403(b) account from an insurance company that is subject to a rehabilitation, conservatorship, insolvency, or similar state proceeding. H&r block at home free To receive tax-free treatment, you must do all of the following: Withdraw all the cash to which you are entitled in full settlement of your contract rights or, if less, the maximum permitted by the state. H&r block at home free Reinvest the cash distribution in a single policy or contract issued by another insurance company or in a single custodial account subject to the same or stricter distribution restrictions as the original contract not later than 60 days after you receive the cash distribution. H&r block at home free Assign all future distribution rights to the new contract or account for investment in that contract or account if you received an amount that is less than what you are entitled to because of state restrictions. H&r block at home free   In addition to the preceding requirements, you must provide the new insurer with a written statement containing all of the following information: The gross amount of cash distributed under the old contract. H&r block at home free The amount of cash reinvested in the new contract. H&r block at home free Your investment in the old contract on the date you receive your first cash distribution. H&r block at home free   Also, you must attach the following items to your timely filed income tax return in the year you receive the first distribution of cash. H&r block at home free A copy of the statement you gave the new insurer. H&r block at home free A statement that includes: The words ELECTION UNDER REV. H&r block at home free PROC. H&r block at home free 92-44, The name of the company that issued the new contract, and The new policy number. H&r block at home free Direct trustee-to-trustee transfer. H&r block at home free   If you make a direct trustee-to-trustee transfer, from your governmental 403(b) account to a defined benefit governmental plan, it may not be includible in gross income. H&r block at home free   The transfer amount is not includible in gross income if it is made to: Purchase permissive service credits, or Repay contributions and earnings that were previously refunded under a forfeiture of service credit under the plan, or under another plan maintained by a state or local government employer within the same state. H&r block at home free After-tax contributions. H&r block at home free   For distributions beginning after December 31, 2006, after-tax contributions can be rolled over between a 403(b) plan and a defined benefit plan, IRA, or a defined contribution plan. H&r block at home free If the rollover is to or from a 403(b) plan, it must occur through a direct trustee-to-trustee transfer. H&r block at home free Permissive service credit. H&r block at home free   A permissive service credit is credit for a period of service recognized by a defined benefit governmental plan only if you voluntarily contribute to the plan an amount that does not exceed the amount necessary to fund the benefit attributable to the period of service and the amount contributed is in addition to the regular employee contribution, if any, under the plan. H&r block at home free   A permissive service credit may also include service credit for up to 5 years where there is no performance of service, or service credited to provide an increased benefit for service credit which a participant is receiving under the plan. H&r block at home free   Check with your plan administrator as to the type and extent of service that may be purchased by this transfer. H&r block at home free Tax-Free Rollovers You can generally roll over tax free all or any part of a distribution from a 403(b) plan to a traditional IRA or a non-Roth eligible retirement plan, except for any nonqualifying distributions, described later. H&r block at home free You may also roll over any part of a distribution from a 403(b) plan by converting it through a direct rollover, described below, to a Roth IRA. H&r block at home free Conversion amounts are generally includible in your taxable income in the year of the distribution from your 403(b) account. H&r block at home free See Publication 590 for more information about conversion into a Roth IRA. H&r block at home free Note. H&r block at home free A participant is required to roll over distribution amounts received within 60 days in order for the amount to be treated as nontaxable. H&r block at home free Distribution amounts that are rolled over within the 60 days are not subject to the 10% early distribution penalty. H&r block at home free Rollovers to and from 403(b) plans. H&r block at home free   You can generally roll over tax free all or any part of a distribution from an eligible retirement plan to a 403(b) plan. H&r block at home free Beginning January 1, 2008, distributions from tax-qualified retirement plans and tax-sheltered annuities can be converted by making a direct rollover into a Roth IRA subject to the restrictions that currently apply to rollovers from a traditional IRA into a Roth IRA. H&r block at home free Converted amounts are generally includible in your taxable income in the year of the distribution from your 403(b) account. H&r block at home free See Publication 590 for more information on conversion into a Roth IRA. H&r block at home free   If a distribution includes both pre-tax contributions and after-tax contributions, the portion of the distribution that is rolled over is treated as consisting first of pre-tax amounts (contributions and earnings that would be includible in income if no rollover occurred). H&r block at home free This means that if you roll over an amount that is at least as much as the pre-tax portion of the distribution, you do not have to include any of the distribution in income. H&r block at home free   For more information on rollovers and eligible retirement plans, see Publication 575. H&r block at home free If you roll over money or other property from a 403(b) plan to an eligible retirement plan, see Publication 575 for information about possible effects on later distributions from the eligible retirement plan. H&r block at home free Hardship exception to rollover rules. H&r block at home free   The IRS may waive the 60-day rollover period if the failure to waive such requirement would be against equity or good conscience, including cases of casualty, disaster, or other events beyond the reasonable control of an individual. H&r block at home free   To obtain a hardship exception, you must apply to the IRS for a waiver of the 60-day rollover requirement. H&r block at home free You apply for the waiver by following the general instructions used in requesting a letter ruling. H&r block at home free These instructions are stated in Revenue Procedure 2013-4, 2013-1 I. H&r block at home free R. H&r block at home free B. H&r block at home free 126 available at www. H&r block at home free irs. H&r block at home free gov/irb/2013-01_IRB/ar09. H&r block at home free html, or see the latest annual update. H&r block at home free You must also pay a user fee with the application. H&r block at home free The user fee for a rollover that is less than $50,000 is $500. H&r block at home free For rollovers that are $50,000 or more, see Revenue Procedure 2013-8, 2013-1 I. H&r block at home free R. H&r block at home free B. H&r block at home free 237 available at www. H&r block at home free irs. H&r block at home free gov/irb/2013-01_IRB/ar13. H&r block at home free html, or see the latest annual update. H&r block at home free   In determining whether to grant a waiver, the IRS will consider all relevant facts and circumstances, including: Whether errors were made by the financial institution; Whether you were unable to complete the rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country, or postal error; Whether you used the amount distributed (for example, in the case of payment by check, whether you cashed the check); and How much time has passed since the date of distribution. H&r block at home free   For additional information on rollovers, see Publication 590. H&r block at home free Eligible retirement plans. H&r block at home free   The following are considered eligible retirement plans. H&r block at home free Individual retirement arrangements. H&r block at home free Roth IRA. H&r block at home free 403(b) plans. H&r block at home free Government eligible 457 plans. H&r block at home free Qualified retirement plans. H&r block at home free  If the distribution is from a designated Roth account, then the only eligible retirement plan is another designated Roth account or a Roth IRA. H&r block at home free Nonqualifying distributions. H&r block at home free   You cannot roll over tax free: Minimum required distributions (generally required to begin at age 70½), Substantially equal payments over your life or life expectancy, Substantially equal payments over the joint lives or life expectancies of your beneficiary and you, Substantially equal payments for a period of 10 years or more, Hardship distributions, or Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or excess annual additions and any allocable gains. H&r block at home free Rollover of nontaxable amounts. H&r block at home free    You may be able to roll over the nontaxable part of a distribution (such as your after-tax contributions) made to another eligible retirement plan, traditional IRA, or Roth IRA. H&r block at home free The transfer must be made either through a direct rollover to an eligible plan that separately accounts for the taxable and nontaxable parts of the rollover or through a rollover to a traditional IRA or Roth IRA. H&r block at home free   If you roll over only part of a distribution that includes both taxable and nontaxable amounts, the amount you roll over is treated as coming first from the taxable part of the distribution. H&r block at home free Direct rollovers of 403(b) plan distributions. H&r block at home free   You have the option of having your 403(b) plan make the rollover directly to a traditional IRA, Roth IRA, or new plan. H&r block at home free Before you receive a distribution, your plan will give you information on this. H&r block at home free It is generally to your advantage to choose this option because your plan will not withhold tax on the distribution if you choose it. H&r block at home free Distribution received by you. H&r block at home free   If you receive a distribution that qualifies to be rolled over, you can roll over all or any part of the distribution. H&r block at home free Generally, you will receive only 80% of the distribution because 20% must be withheld. H&r block at home free If you roll over only the 80% you receive, you must pay tax on the 20% you did not roll over. H&r block at home free You can replace the 20% that was withheld with other money within the 60-day period to make a 100% rollover. H&r block at home free Voluntary deductible contributions. H&r block at home free   For tax years 1982 through 1986, employees could make deductible contributions to a 403(b) plan under the individual retirement arrangement (IRA) rules instead of deducting contributions to a traditional IRA. H&r block at home free   If you made voluntary deductible contributions to a 403(b) plan under these traditional IRA rules, the distribution of all or part of the accumulated deductible contributions may be rolled over if it otherwise qualifies as a distribution you can roll over. H&r block at home free Accumulated deductible contributions are the deductible contributions: Plus Income allocable to the contributions, Gain allocable to the contributions, and Minus Expenses and losses allocable to the contributions, and Distributions from the contributions, income, or gain. H&r block at home free Excess employer contributions. H&r block at home free   The portion of a distribution from a 403(b) plan transferred to a traditional IRA that was previously included in income as excess employer contributions (discussed earlier) is not an eligible rollover distribution. H&r block at home free   Its transfer does not affect the rollover treatment of the eligible portion of the transferred amounts. H&r block at home free However, the ineligible portion is subject to the traditional IRA contribution limits and may create an excess IRA contribution subject to a 6% excise tax (see chapter 1 of Publication 590). H&r block at home free Qualified domestic relations order. H&r block at home free   You may be able to roll over tax free all or any part of an eligible rollover distribution from a 403(b) plan that you receive under a qualified domestic relations order (QDRO). H&r block at home free If you receive the interest in the 403(b) plan as an employee's spouse or former spouse under a QDRO, all of the rollover rules apply to you as if you were the employee. H&r block at home free You can roll over your interest in the plan to a traditional IRA or another 403(b) plan. H&r block at home free For more information on the treatment of an interest received under a QDRO, see Publication 575. H&r block at home free Spouses of deceased employees. H&r block at home free   If you are the spouse of a deceased employee, you can roll over the qualifying distribution attributable to the employee. H&r block at home free You can make the rollover to any eligible retirement plan. H&r block at home free   After you roll money and other property over from a 403(b) plan to an eligible retirement plan, and you take a distribution from that plan, you will not be eligible to receive the capital gain treatment or the special averaging treatment for the distribution. H&r block at home free Second rollover. H&r block at home free   If you roll over a qualifying distribution to a traditional IRA, you can, if certain conditions are satisfied, later roll the distribution into another 403(b) plan. H&r block at home free For more information, see IRA as a holding account (conduit IRA) for rollovers to other eligible plans in chapter 1 of Publication 590. H&r block at home free Nonspouse beneficiary. H&r block at home free   A nonspouse beneficiary may make a direct rollover of a distribution from a 403(b) plan of a deceased participant if the rollover is a direct transfer to an inherited IRA established to receive the distribution. H&r block at home free If the rollover is a direct trustee-to-trustee transfer to an IRA established to receive the distribution: The transfer will be treated as an eligible rollover distribution. H&r block at home free The IRA will be considered an inherited account. H&r block at home free The required minimum distribution rules that apply in instances where the participant dies before the entire interest is distributed will apply to the transferred IRA. H&r block at home free    For more information on IRAs, see Publication 590. H&r block at home free Frozen deposits. H&r block at home free   The 60-day period usually allowed for completing a rollover is extended for any time that the amount distributed is a frozen deposit in a financial institution. H&r block at home free The 60-day period cannot end earlier than 10 days after the deposit ceases to be a frozen deposit. H&r block at home free   A frozen deposit is any deposit that on any day during the 60-day period cannot be withdrawn because: The financial institution is bankrupt or insolvent, or The state where the institution is located has placed limits on withdrawals because one or more banks in the state are (or are about to be) bankrupt or insolvent. H&r block at home free Gift Tax If, by choosing or not choosing an election, or option, you provide an annuity for your beneficiary at or after your death, you may have made a taxable gift equal to the value of the annuity. H&r block at home free Joint and survivor annuity. H&r block at home free   If the gift is an interest in a joint and survivor annuity where only you and your spouse have the right to receive payments, the gift will generally be treated as qualifying for the unlimited marital deduction. H&r block at home free More information. H&r block at home free   For information on the gift tax, see Publication 559, Survivors, Executors, and Administrators. H&r block at home free Prev  Up  Next   Home   More Online Publications