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H&r block free 1040ez 4. H&r block free 1040ez   Foreign Earned Income and Housing: Exclusion – Deduction Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Who Qualifies for the Exclusions and the Deduction? RequirementsTax Home in Foreign Country Bona Fide Residence Test Physical Presence Test Waiver of Time Requirements U. H&r block free 1040ez S. H&r block free 1040ez Travel Restrictions Foreign Earned Income Foreign Earned Income ExclusionLimit on Excludable Amount Choosing the Exclusion Foreign Housing Exclusion and DeductionHousing Amount Foreign Housing Exclusion Foreign Housing Deduction Married Couples Form 2555 and Form 2555-EZForm 2555-EZ Form 2555 Topics - This chapter discusses: Who qualifies for the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, The requirements that must be met to claim either exclusion or the deduction, How to figure the foreign earned income exclusion, and How to figure the foreign housing exclusion and the foreign housing deduction. H&r block free 1040ez Useful Items - You may want to see: Publication 519 U. H&r block free 1040ez S. H&r block free 1040ez Tax Guide for Aliens 570 Tax Guide for Individuals With Income from U. H&r block free 1040ez S. H&r block free 1040ez Possessions 596 Earned Income Credit (EIC) Form (and Instructions) 1040X Amended U. H&r block free 1040ez S. H&r block free 1040ez Individual Income Tax Return 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion See chapter 7 for information about getting these publications and forms. H&r block free 1040ez Who Qualifies for the Exclusions and the Deduction? If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction. H&r block free 1040ez If you are a U. H&r block free 1040ez S. H&r block free 1040ez citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. H&r block free 1040ez However, you may qualify to exclude from income up to $97,600 of your foreign earnings. H&r block free 1040ez In addition, you can exclude or deduct certain foreign housing amounts. H&r block free 1040ez See Foreign Earned Income Exclusion and Foreign Housing Exclusion and Deduction, later. H&r block free 1040ez You also may be entitled to exclude from income the value of meals and lodging provided to you by your employer. H&r block free 1040ez See Exclusion of Meals and Lodging, later. H&r block free 1040ez Requirements To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must meet all three of the following requirements. H&r block free 1040ez Your tax home must be in a foreign country. H&r block free 1040ez You must have foreign earned income. H&r block free 1040ez You must be one of the following. H&r block free 1040ez A U. H&r block free 1040ez S. H&r block free 1040ez citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. H&r block free 1040ez A U. H&r block free 1040ez S. H&r block free 1040ez resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. H&r block free 1040ez A U. H&r block free 1040ez S. H&r block free 1040ez citizen or a U. H&r block free 1040ez S. H&r block free 1040ez resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. H&r block free 1040ez See Publication 519 to find out if you are a U. H&r block free 1040ez S. H&r block free 1040ez resident alien for tax purposes and whether you keep that alien status when you temporarily work abroad. H&r block free 1040ez If you are a nonresident alien married to a U. H&r block free 1040ez S. H&r block free 1040ez citizen or resident alien, and both you and your spouse choose to treat you as a resident alien, you are a resident alien for tax purposes. H&r block free 1040ez For information on making the choice, see the discussion in chapter 1 under Nonresident Alien Spouse Treated as a Resident . H&r block free 1040ez Waiver of minimum time requirements. H&r block free 1040ez   The minimum time requirements for bona fide residence and physical presence can be waived if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. H&r block free 1040ez This is fully explained under Waiver of Time Requirements , later. H&r block free 1040ez   See Figure 4-A and information in this chapter to determine if you are eligible to claim either exclusion or the deduction. H&r block free 1040ez Tax Home in Foreign Country To qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, your tax home must be in a foreign country throughout your period of bona fide residence or physical presence abroad. H&r block free 1040ez Bona fide residence and physical presence are explained later. H&r block free 1040ez Tax Home Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. H&r block free 1040ez Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. H&r block free 1040ez Having a “tax home” in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes. H&r block free 1040ez If you do not have a regular or main place of business because of the nature of your work, your tax home may be the place where you regularly live. H&r block free 1040ez If you have neither a regular or main place of business nor a place where you regularly live, you are considered an itinerant and your tax home is wherever you work. H&r block free 1040ez You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States. H&r block free 1040ez However, your abode is not necessarily in the United States while you are temporarily in the United States. H&r block free 1040ez Your abode is also not necessarily in the United States merely because you maintain a dwelling in the United States, whether or not your spouse or dependents use the dwelling. H&r block free 1040ez “Abode” has been variously defined as one's home, habitation, residence, domicile, or place of dwelling. H&r block free 1040ez It does not mean your principal place of business. H&r block free 1040ez “Abode” has a domestic rather than a vocational meaning and does not mean the same as “tax home. H&r block free 1040ez ” The location of your abode often will depend on where you maintain your economic, family, and personal ties. H&r block free 1040ez Example 1. H&r block free 1040ez You are employed on an offshore oil rig in the territorial waters of a foreign country and work a 28-day on/28-day off schedule. H&r block free 1040ez You return to your family residence in the United States during your off periods. H&r block free 1040ez You are considered to have an abode in the United States and do not satisfy the tax home test in the foreign country. H&r block free 1040ez You cannot claim either of the exclusions or the housing deduction. H&r block free 1040ez Example 2. H&r block free 1040ez For several years, you were a marketing executive with a producer of machine tools in Toledo, Ohio. H&r block free 1040ez In November of last year, your employer transferred you to London, England, for a minimum of 18 months to set up a sales operation for Europe. H&r block free 1040ez Before you left, you distributed business cards showing your business and home addresses in London. H&r block free 1040ez You kept ownership of your home in Toledo but rented it to another family. H&r block free 1040ez You placed your car in storage. H&r block free 1040ez In November of last year, you moved your spouse, children, furniture, and family pets to a home your employer rented for you in London. H&r block free 1040ez Shortly after moving, you leased a car and you and your spouse got British driving licenses. H&r block free 1040ez Your entire family got library cards for the local public library. H&r block free 1040ez You and your spouse opened bank accounts with a London bank and secured consumer credit. H&r block free 1040ez You joined a local business league and both you and your spouse became active in the neighborhood civic association and worked with a local charity. H&r block free 1040ez Your abode is in London for the time you live there. H&r block free 1040ez You satisfy the tax home test in the foreign country. H&r block free 1040ez Please click here for the text description of the image. H&r block free 1040ez Figure 4–A Can I Claim the Exclusion or Deduction? Temporary or Indefinite Assignment The location of your tax home often depends on whether your assignment is temporary or indefinite. H&r block free 1040ez If you are temporarily absent from your tax home in the United States on business, you may be able to deduct your away-from-home expenses (for travel, meals, and lodging), but you would not qualify for the foreign earned income exclusion. H&r block free 1040ez If your new work assignment is for an indefinite period, your new place of employment becomes your tax home and you would not be able to deduct any of the related expenses that you have in the general area of this new work assignment. H&r block free 1040ez If your new tax home is in a foreign country and you meet the other requirements, your earnings may qualify for the foreign earned income exclusion. H&r block free 1040ez If you expect your employment away from home in a single location to last, and it does last, for 1 year or less, it is temporary unless facts and circumstances indicate otherwise. H&r block free 1040ez If you expect it to last for more than 1 year, it is indefinite. H&r block free 1040ez If you expect it to last for 1 year or less, but at some later date you expect it to last longer than 1 year, it is temporary (in the absence of facts and circumstances indicating otherwise) until your expectation changes. H&r block free 1040ez Once your expectation changes, it is indefinite. H&r block free 1040ez Foreign Country To meet the bona fide residence test or the physical presence test, you must live in or be present in a foreign country. H&r block free 1040ez A foreign country includes any territory under the sovereignty of a government other than that of the United States. H&r block free 1040ez The term “foreign country” includes the country's airspace and territorial waters, but not international waters and the airspace above them. H&r block free 1040ez It also includes the seabed and subsoil of those submarine areas adjacent to the country's territorial waters over which it has exclusive rights under international law to explore and exploit the natural resources. H&r block free 1040ez The term “foreign country” does not include Antarctica or U. H&r block free 1040ez S. H&r block free 1040ez possessions such as Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U. H&r block free 1040ez S. H&r block free 1040ez Virgin Islands, and Johnston Island. H&r block free 1040ez For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, the terms “foreign,” “abroad,” and “overseas” refer to areas outside the United States and those areas listed or described in the previous sentence. H&r block free 1040ez American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands Residence or presence in a U. H&r block free 1040ez S. H&r block free 1040ez possession does not qualify you for the foreign earned income exclusion. H&r block free 1040ez You may, however, qualify for an exclusion of your possession income on your U. H&r block free 1040ez S. H&r block free 1040ez return. H&r block free 1040ez American Samoa. H&r block free 1040ez   There is a possession exclusion available to individuals who are bona fide residents of American Samoa for the entire tax year. H&r block free 1040ez Gross income from sources within American Samoa may be eligible for this exclusion. H&r block free 1040ez Income that is effectively connected with the conduct of a trade or business within American Samoa also may be eligible for this exclusion. H&r block free 1040ez Use Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, to figure the exclusion. H&r block free 1040ez Guam and the Commonwealth of the Northern Mariana Islands. H&r block free 1040ez   An exclusion will be available to residents of Guam and the Commonwealth of the Northern Mariana Islands if, and when, new implementation agreements take effect between the United States and those possessions. H&r block free 1040ez   For more information, see Publication 570. H&r block free 1040ez Puerto Rico and U. H&r block free 1040ez S. H&r block free 1040ez Virgin Islands Residents of Puerto Rico and the U. H&r block free 1040ez S. H&r block free 1040ez Virgin Islands cannot claim the foreign earned income exclusion or the foreign housing exclusion. H&r block free 1040ez Puerto Rico. H&r block free 1040ez   Generally, if you are a U. H&r block free 1040ez S. H&r block free 1040ez citizen who is a bona fide resident of Puerto Rico for the entire tax year, you are not subject to U. H&r block free 1040ez S. H&r block free 1040ez tax on income from Puerto Rican sources. H&r block free 1040ez This does not include amounts paid for services performed as an employee of the United States. H&r block free 1040ez However, you are subject to U. H&r block free 1040ez S. H&r block free 1040ez tax on your income from sources outside Puerto Rico. H&r block free 1040ez In figuring your U. H&r block free 1040ez S. H&r block free 1040ez tax, you cannot deduct expenses allocable to income not subject to tax. H&r block free 1040ez Bona Fide Residence Test You meet the bona fide residence test if you are a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. H&r block free 1040ez You can use the bona fide residence test to qualify for the exclusions and the deduction only if you are either: A U. H&r block free 1040ez S. H&r block free 1040ez citizen, or A U. H&r block free 1040ez S. H&r block free 1040ez resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect. H&r block free 1040ez You do not automatically acquire bona fide resident status merely by living in a foreign country or countries for 1 year. H&r block free 1040ez If you go to a foreign country to work on a particular job for a specified period of time, you ordinarily will not be regarded as a bona fide resident of that country even though you work there for 1 tax year or longer. H&r block free 1040ez The length of your stay and the nature of your job are only two of the factors to be considered in determining whether you meet the bona fide residence test. H&r block free 1040ez Bona fide residence. H&r block free 1040ez   To meet the bona fide residence test, you must have established a bona fide residence in a foreign country. H&r block free 1040ez   Your bona fide residence is not necessarily the same as your domicile. H&r block free 1040ez Your domicile is your permanent home, the place to which you always return or intend to return. H&r block free 1040ez Example. H&r block free 1040ez You could have your domicile in Cleveland, Ohio, and a bona fide residence in Edinburgh, Scotland, if you intend to return eventually to Cleveland. H&r block free 1040ez The fact that you go to Scotland does not automatically make Scotland your bona fide residence. H&r block free 1040ez If you go there as a tourist, or on a short business trip, and return to the United States, you have not established bona fide residence in Scotland. H&r block free 1040ez But if you go to Scotland to work for an indefinite or extended period and you set up permanent quarters there for yourself and your family, you probably have established a bona fide residence in a foreign country, even though you intend to return eventually to the United States. H&r block free 1040ez You are clearly not a resident of Scotland in the first instance. H&r block free 1040ez However, in the second, you are a resident because your stay in Scotland appears to be permanent. H&r block free 1040ez If your residency is not as clearly defined as either of these illustrations, it may be more difficult to decide whether you have established a bona fide residence. H&r block free 1040ez Determination. H&r block free 1040ez   Questions of bona fide residence are determined according to each individual case, taking into account factors such as your intention, the purpose of your trip, and the nature and length of your stay abroad. H&r block free 1040ez   To meet the bona fide residence test, you must show the Internal Revenue Service (IRS) that you have been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. H&r block free 1040ez The IRS decides whether you are a bona fide resident of a foreign country largely on the basis of facts you report on Form 2555. H&r block free 1040ez IRS cannot make this determination until you file Form 2555. H&r block free 1040ez Statement to foreign authorities. H&r block free 1040ez   You are not considered a bona fide resident of a foreign country if you make a statement to the authorities of that country that you are not a resident of that country, and the authorities: Hold that you are not subject to their income tax laws as a resident, or Have not made a final decision on your status. H&r block free 1040ez Special agreements and treaties. H&r block free 1040ez   An income tax exemption provided in a treaty or other international agreement will not in itself prevent you from being a bona fide resident of a foreign country. H&r block free 1040ez Whether a treaty prevents you from becoming a bona fide resident of a foreign country is determined under all provisions of the treaty, including specific provisions relating to residence or privileges and immunities. H&r block free 1040ez Example 1. H&r block free 1040ez You are a U. H&r block free 1040ez S. H&r block free 1040ez citizen employed in the United Kingdom by a U. H&r block free 1040ez S. H&r block free 1040ez employer under contract with the U. H&r block free 1040ez S. H&r block free 1040ez Armed Forces. H&r block free 1040ez You are not subject to the North Atlantic Treaty Status of Forces Agreement. H&r block free 1040ez You may be a bona fide resident of the United Kingdom. H&r block free 1040ez Example 2. H&r block free 1040ez You are a U. H&r block free 1040ez S. H&r block free 1040ez citizen in the United Kingdom who qualifies as an “employee” of an armed service or as a member of a “civilian component” under the North Atlantic Treaty Status of Forces Agreement. H&r block free 1040ez You are not a bona fide resident of the United Kingdom. H&r block free 1040ez Example 3. H&r block free 1040ez You are a U. H&r block free 1040ez S. H&r block free 1040ez citizen employed in Japan by a U. H&r block free 1040ez S. H&r block free 1040ez employer under contract with the U. H&r block free 1040ez S. H&r block free 1040ez Armed Forces. H&r block free 1040ez You are subject to the agreement of the Treaty of Mutual Cooperation and Security between the United States and Japan. H&r block free 1040ez Being subject to the agreement does not make you a bona fide resident of Japan. H&r block free 1040ez Example 4. H&r block free 1040ez You are a U. H&r block free 1040ez S. H&r block free 1040ez citizen employed as an “official” by the United Nations in Switzerland. H&r block free 1040ez You are exempt from Swiss taxation on the salary or wages paid to you by the United Nations. H&r block free 1040ez This does not prevent you from being a bona fide resident of Switzerland. H&r block free 1040ez Effect of voting by absentee ballot. H&r block free 1040ez   If you are a U. H&r block free 1040ez S. H&r block free 1040ez citizen living abroad, you can vote by absentee ballot in any election held in the United States without risking your status as a bona fide resident of a foreign country. H&r block free 1040ez   However, if you give information to the local election officials about the nature and length of your stay abroad that does not match the information you give for the bona fide residence test, the information given in connection with absentee voting will be considered in determining your status, but will not necessarily be conclusive. H&r block free 1040ez Uninterrupted period including entire tax year. H&r block free 1040ez   To meet the bona fide residence test, you must reside in a foreign country or countries for an uninterrupted period that includes an entire tax year. H&r block free 1040ez An entire tax year is from January 1 through December 31 for taxpayers who file their income tax returns on a calendar year basis. H&r block free 1040ez   During the period of bona fide residence in a foreign country, you can leave the country for brief or temporary trips back to the United States or elsewhere for vacation or business. H&r block free 1040ez To keep your status as a bona fide resident of a foreign country, you must have a clear intention of returning from such trips, without unreasonable delay, to your foreign residence or to a new bona fide residence in another foreign country. H&r block free 1040ez Example 1. H&r block free 1040ez You arrived with your family in Lisbon, Portugal, on November 1, 2011. H&r block free 1040ez Your assignment is indefinite, and you intend to live there with your family until your company sends you to a new post. H&r block free 1040ez You immediately established residence there. H&r block free 1040ez You spent April of 2012 at a business conference in the United States. H&r block free 1040ez Your family stayed in Lisbon. H&r block free 1040ez Immediately following the conference, you returned to Lisbon and continued living there. H&r block free 1040ez On January 1, 2013, you completed an uninterrupted period of residence for a full tax year (2012), and you meet the bona fide residence test. H&r block free 1040ez Example 2. H&r block free 1040ez Assume the same facts as in Example 1, except that you transferred back to the United States on December 13, 2012. H&r block free 1040ez You would not meet the bona fide residence test because your bona fide residence in the foreign country, although it lasted more than a year, did not include a full tax year. H&r block free 1040ez You may, however, qualify for the foreign earned income exclusion or the housing exclusion or deduction under the physical presence test (discussed later). H&r block free 1040ez Bona fide resident for part of a year. H&r block free 1040ez   Once you have established bona fide residence in a foreign country for an uninterrupted period that includes an entire tax year, you are a bona fide resident of that country for the period starting with the date you actually began the residence and ending with the date you abandon the foreign residence. H&r block free 1040ez Your period of bona fide residence can include an entire tax year plus parts of 2 other tax years. H&r block free 1040ez Example. H&r block free 1040ez You were a bona fide resident of Singapore from March 1, 2011, through September 14, 2013. H&r block free 1040ez On September 15, 2013, you returned to the United States. H&r block free 1040ez Since you were a bona fide resident of a foreign country for all of 2012, you were also a bona fide resident of a foreign country from March 1, 2011, through the end of 2011 and from January 1, 2013, through September 14, 2013. H&r block free 1040ez Reassignment. H&r block free 1040ez   If you are assigned from one foreign post to another, you may or may not have a break in foreign residence between your assignments, depending on the circumstances. H&r block free 1040ez Example 1. H&r block free 1040ez You were a resident of Pakistan from October 1, 2012, through November 30, 2013. H&r block free 1040ez On December 1, 2013, you and your family returned to the United States to wait for an assignment to another foreign country. H&r block free 1040ez Your household goods also were returned to the United States. H&r block free 1040ez Your foreign residence ended on November 30, 2013, and did not begin again until after you were assigned to another foreign country and physically entered that country. H&r block free 1040ez Since you were not a bona fide resident of a foreign country for the entire tax year of 2012 or 2013 you do not meet the bona fide residence test in either year. H&r block free 1040ez You may, however, qualify for the foreign earned income exclusion or the housing exclusion or deduction under the physical presence test, discussed later. H&r block free 1040ez Example 2. H&r block free 1040ez Assume the same facts as in Example 1, except that upon completion of your assignment in Pakistan you were given a new assignment to Turkey. H&r block free 1040ez On December 1, 2013, you and your family returned to the United States for a month's vacation. H&r block free 1040ez On January 2, 2014, you arrived in Turkey for your new assignment. H&r block free 1040ez Because you did not interrupt your bona fide residence abroad, you meet the bona fide residence test. H&r block free 1040ez Physical Presence Test You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. H&r block free 1040ez The 330 days do not have to be consecutive. H&r block free 1040ez Any U. H&r block free 1040ez S. H&r block free 1040ez citizen or resident alien can use the physical presence test to qualify for the exclusions and the deduction. H&r block free 1040ez The physical presence test is based only on how long you stay in a foreign country or countries. H&r block free 1040ez This test does not depend on the kind of residence you establish, your intentions about returning, or the nature and purpose of your stay abroad. H&r block free 1040ez 330 full days. H&r block free 1040ez   Generally, to meet the physical presence test, you must be physically present in a foreign country or countries for at least 330 full days during a 12-month period. H&r block free 1040ez You can count days you spent abroad for any reason. H&r block free 1040ez You do not have to be in a foreign country only for employment purposes. H&r block free 1040ez You can be on vacation. H&r block free 1040ez   You do not meet the physical presence test if illness, family problems, a vacation, or your employer's orders cause you to be present for less than the required amount of time. H&r block free 1040ez Exception. H&r block free 1040ez   You can be physically present in a foreign country or countries for less than 330 full days and still meet the physical presence test if you are required to leave a country because of war or civil unrest. H&r block free 1040ez See Waiver of Time Requirements, later. H&r block free 1040ez Full day. H&r block free 1040ez   A full day is a period of 24 consecutive hours, beginning at midnight. H&r block free 1040ez Travel. H&r block free 1040ez    When you leave the United States to go directly to a foreign country or when you return directly to the United States from a foreign country, the time you spend on or over international waters does not count toward the 330-day total. H&r block free 1040ez Example. H&r block free 1040ez You leave the United States for France by air on June 10. H&r block free 1040ez You arrive in France at 9:00 a. H&r block free 1040ez m. H&r block free 1040ez on June 11. H&r block free 1040ez Your first full day of physical presence in France is June 12. H&r block free 1040ez Passing over foreign country. H&r block free 1040ez   If, in traveling from the United States to a foreign country, you pass over a foreign country before midnight of the day you leave, the first day you can count toward the 330-day total is the day following the day you leave the United States. H&r block free 1040ez Example. H&r block free 1040ez You leave the United States by air at 9:30 a. H&r block free 1040ez m. H&r block free 1040ez on June 10 to travel to Kenya. H&r block free 1040ez You pass over western Africa at 11:00 p. H&r block free 1040ez m. H&r block free 1040ez on June 10 and arrive in Kenya at 12:30 a. H&r block free 1040ez m. H&r block free 1040ez on June 11. H&r block free 1040ez Your first full day in a foreign country is June 11. H&r block free 1040ez Change of location. H&r block free 1040ez   You can move about from one place to another in a foreign country or to another foreign country without losing full days. H&r block free 1040ez If any part of your travel is not within any foreign country and takes less than 24 hours, you are considered to be in a foreign country during that part of travel. H&r block free 1040ez Example 1. H&r block free 1040ez You leave Ireland by air at 11:00 p. H&r block free 1040ez m. H&r block free 1040ez on July 6 and arrive in Sweden at 5:00 a. H&r block free 1040ez m. H&r block free 1040ez on July 7. H&r block free 1040ez Your trip takes less than 24 hours and you lose no full days. H&r block free 1040ez Example 2. H&r block free 1040ez You leave Norway by ship at 10:00 p. H&r block free 1040ez m. H&r block free 1040ez on July 6 and arrive in Portugal at 6:00 a. H&r block free 1040ez m. H&r block free 1040ez on July 8. H&r block free 1040ez Since your travel is not within a foreign country or countries and the trip takes more than 24 hours, you lose as full days July 6, 7, and 8. H&r block free 1040ez If you remain in Portugal, your next full day in a foreign country is July 9. H&r block free 1040ez In United States while in transit. H&r block free 1040ez   If you are in transit between two points outside the United States and are physically present in the United States for less than 24 hours, you are not treated as present in the United States during the transit. H&r block free 1040ez You are treated as traveling over areas not within any foreign country. H&r block free 1040ez    Please click here for the text description of the image. H&r block free 1040ez Figure 4-B How to figure the 12-month period. H&r block free 1040ez   There are four rules you should know when figuring the 12-month period. H&r block free 1040ez Your 12-month period can begin with any day of the month. H&r block free 1040ez It ends the day before the same calendar day, 12 months later. H&r block free 1040ez Your 12-month period must be made up of consecutive months. H&r block free 1040ez Any 12-month period can be used if the 330 days in a foreign country fall within that period. H&r block free 1040ez You do not have to begin your 12-month period with your first full day in a foreign country or end it with the day you leave. H&r block free 1040ez You can choose the 12-month period that gives you the greatest exclusion. H&r block free 1040ez In determining whether the 12-month period falls within a longer stay in the foreign country, 12-month periods can overlap one another. H&r block free 1040ez Example 1. H&r block free 1040ez You are a construction worker who works on and off in a foreign country over a 20-month period. H&r block free 1040ez You might pick up the 330 full days in a 12-month period only during the middle months of the time you work in the foreign country because the first few and last few months of the 20-month period are broken up by long visits to the United States. H&r block free 1040ez Example 2. H&r block free 1040ez You work in New Zealand for a 20-month period from January 1, 2012, through August 31, 2013, except that you spend 28 days in February 2012 and 28 days in February 2013 on vacation in the United States. H&r block free 1040ez You are present in New Zealand for at least 330 full days during each of the following two 12-month periods: January 1, 2012 – December 31, 2012 and September 1, 2012 – August 31, 2013. H&r block free 1040ez By overlapping the 12-month periods in this way, you meet the physical presence test for the whole 20-month period. H&r block free 1040ez See Figure 4-B, on the previous page. H&r block free 1040ez Waiver of Time Requirements Both the bona fide residence test and the physical presence test contain minimum time requirements. H&r block free 1040ez The minimum time requirements can be waived, however, if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. H&r block free 1040ez You must be able to show that you reasonably could have expected to meet the minimum time requirements if not for the adverse conditions. H&r block free 1040ez To qualify for the waiver, you must actually have your tax home in the foreign country and be a bona fide resident of, or be physically present in, the foreign country on or before the beginning date of the waiver. H&r block free 1040ez Early in 2014, the IRS will publish in the Internal Revenue Bulletin a list of the only countries that qualify for the waiver for 2013 and the effective dates. H&r block free 1040ez If you left one of the countries on or after the date listed for each country, you can meet the bona fide residence test or physical presence test for 2013 without meeting the minimum time requirement. H&r block free 1040ez However, in figuring your exclusion, the number of your qualifying days of bona fide residence or physical presence includes only days of actual residence or presence within the country. H&r block free 1040ez U. H&r block free 1040ez S. H&r block free 1040ez Travel Restrictions If you are present in a foreign country in violation of U. H&r block free 1040ez S. H&r block free 1040ez law, you will not be treated as a bona fide resident of a foreign country or as physically present in a foreign country while you are in violation of the law. H&r block free 1040ez Income that you earn from sources within such a country for services performed during a period of violation does not qualify as foreign earned income. H&r block free 1040ez Your housing expenses within that country (or outside that country for housing your spouse or dependents) while you are in violation of the law cannot be included in figuring your foreign housing amount. H&r block free 1040ez For 2013, the only country to which travel restrictions applied was Cuba. H&r block free 1040ez The restrictions applied for the entire year. H&r block free 1040ez However, individuals working at the U. H&r block free 1040ez S. H&r block free 1040ez Naval Base at Guantanamo Bay in Cuba are not in violation of U. H&r block free 1040ez S. H&r block free 1040ez law. H&r block free 1040ez Personal service income earned by individuals at the base is eligible for the foreign earned income exclusion provided the other requirements are met. H&r block free 1040ez Foreign Earned Income To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income. H&r block free 1040ez Foreign earned income generally is income you receive for services you perform during a period in which you meet both of the following requirements. H&r block free 1040ez Your tax home is in a foreign country. H&r block free 1040ez You meet either the bona fide residence test or the physical presence test. H&r block free 1040ez To determine whether your tax home is in a foreign country, see Tax Home in Foreign Country, earlier. H&r block free 1040ez To determine whether you meet either the bona fide residence test or the physical presence test, see Bona Fide Residence Test and Physical Presence Test, earlier. H&r block free 1040ez Foreign earned income does not include the following amounts. H&r block free 1040ez The value of meals and lodging that you exclude from your income because the meals and lodging were furnished for the convenience of your employer. H&r block free 1040ez Pension or annuity payments you receive, including social security benefits (see Pensions and annuities, later). H&r block free 1040ez Pay you receive as an employee of the U. H&r block free 1040ez S. H&r block free 1040ez Government. H&r block free 1040ez (See U. H&r block free 1040ez S. H&r block free 1040ez Government Employees, later. H&r block free 1040ez ) Amounts you include in your income because of your employer's contributions to a nonexempt employee trust or to a nonqualified annuity contract. H&r block free 1040ez Any unallowable moving expense deduction that you choose to recapture as explained under Moving Expense Attributable to Foreign Earnings in 2 Years in chapter 5. H&r block free 1040ez Payments you receive after the end of the tax year following the tax year in which you performed the services that earned the income. H&r block free 1040ez Earned income. H&r block free 1040ez   This is pay for personal services performed, such as wages, salaries, or professional fees. H&r block free 1040ez The list that follows classifies many types of income into three categories. H&r block free 1040ez The column headed Variable Income lists income that may fall into either the earned income category, the unearned income category, or partly into both. H&r block free 1040ez For more information on earned and unearned income, see Earned and Unearned Income, later. H&r block free 1040ez Earned Income Unearned Income Variable Income Salaries and wages Dividends Business profits Commissions Interest Royalties Bonuses Capital gains Rents Professional fees Gambling winnings Scholarships and fellowships Tips Alimony     Social security benefits     Pensions     Annuities     In addition to the types of earned income listed, certain noncash income and allowances or reimbursements are considered earned income. H&r block free 1040ez Noncash income. H&r block free 1040ez   The fair market value of property or facilities provided to you by your employer in the form of lodging, meals, or use of a car is earned income. H&r block free 1040ez Allowances or reimbursements. H&r block free 1040ez   Earned income includes allowances or reimbursements you receive, such as the following amounts. H&r block free 1040ez    Cost-of-living allowances. H&r block free 1040ez Overseas differential. H&r block free 1040ez Family allowance. H&r block free 1040ez Reimbursement for education or education allowance. H&r block free 1040ez Home leave allowance. H&r block free 1040ez Quarters allowance. H&r block free 1040ez Reimbursement for moving or moving allowance (unless excluded from income as discussed later in Reimbursement of employee expenses under Earned and Unearned Income). H&r block free 1040ez Source of Earned Income The source of your earned income is the place where you perform the services for which you received the income. H&r block free 1040ez Foreign earned income is income you receive for working in a foreign country. H&r block free 1040ez Where or how you are paid has no effect on the source of the income. H&r block free 1040ez For example, income you receive for work done in Austria is income from a foreign source even if the income is paid directly to your bank account in the United States and your employer is located in New York City. H&r block free 1040ez Example. H&r block free 1040ez You are a U. H&r block free 1040ez S. H&r block free 1040ez citizen, a bona fide resident of Canada, and working as a mining engineer. H&r block free 1040ez Your salary is $76,800 per year. H&r block free 1040ez You also receive a $6,000 cost-of-living allowance, and a $6,000 education allowance. H&r block free 1040ez Your employment contract did not indicate that you were entitled to these allowances only while outside the United States. H&r block free 1040ez Your total income is $88,800. H&r block free 1040ez You work a 5-day week, Monday through Friday. H&r block free 1040ez After subtracting your vacation, you have a total of 240 workdays in the year. H&r block free 1040ez You worked in the United States during the year for 6 weeks (30 workdays). H&r block free 1040ez The following shows how to figure the part of your income that is for work done in Canada during the year. H&r block free 1040ez   Number of days worked in Canada during the year (210) × Total income ($88,800) = $77,700     Number of days of work during the year for which payment was made (240)   Your foreign source earned income is $77,700. H&r block free 1040ez Earned and Unearned Income Earned income was defined earlier as pay for personal services performed. H&r block free 1040ez Some types of income are not easily identified as earned or unearned income. H&r block free 1040ez Some of these types of income are further explained here. H&r block free 1040ez Income from a sole proprietorship or partnership. H&r block free 1040ez   Income from a business in which capital investment is an important part of producing the income may be unearned income. H&r block free 1040ez If you are a sole proprietor or partner and your personal services are also an important part of producing the income, the part of the income that represents the value of your personal services will be treated as earned income. H&r block free 1040ez Capital a factor. H&r block free 1040ez   If capital investment is an important part of producing income, no more than 30% of your share of the net profits of the business is earned income. H&r block free 1040ez   If you have no net profits, the part of your gross profit that represents a reasonable allowance for personal services actually performed is considered earned income. H&r block free 1040ez Because you do not have a net profit, the 30% limit does not apply. H&r block free 1040ez Example 1. H&r block free 1040ez You are a U. H&r block free 1040ez S. H&r block free 1040ez citizen and meet the bona fide residence test. H&r block free 1040ez You invest in a partnership based in Cameroon that is engaged solely in selling merchandise outside the United States. H&r block free 1040ez You perform no services for the partnership. H&r block free 1040ez At the end of the tax year, your share of the net profits is $80,000. H&r block free 1040ez The entire $80,000 is unearned income. H&r block free 1040ez Example 2. H&r block free 1040ez Assume that in Example 1 you spend time operating the business. H&r block free 1040ez Your share of the net profits is $80,000; 30% of your share of the profits is $24,000. H&r block free 1040ez If the value of your services for the year is $15,000, your earned income is limited to the value of your services, $15,000. H&r block free 1040ez Capital not a factor. H&r block free 1040ez   If capital is not an income-producing factor and personal services produce the business income, the 30% rule does not apply. H&r block free 1040ez The entire amount of business income is earned income. H&r block free 1040ez Example. H&r block free 1040ez You and Lou Green are management consultants and operate as equal partners in performing services outside the United States. H&r block free 1040ez Because capital is not an income- producing factor, all the income from the partnership is considered earned income. H&r block free 1040ez Income from a corporation. H&r block free 1040ez   The salary you receive from a corporation is earned income only if it represents a reasonable allowance as compensation for work you do for the corporation. H&r block free 1040ez Any amount over what is considered a reasonable salary is unearned income. H&r block free 1040ez Example 1. H&r block free 1040ez You are a U. H&r block free 1040ez S. H&r block free 1040ez citizen and an officer and stockholder of a corporation in Honduras. H&r block free 1040ez You perform no work or service of any kind for the corporation. H&r block free 1040ez During the tax year you receive a $10,000 “salary” from the corporation. H&r block free 1040ez The $10,000 clearly is not for personal services and is unearned income. H&r block free 1040ez Example 2. H&r block free 1040ez You are a U. H&r block free 1040ez S. H&r block free 1040ez citizen and work full time as secretary-treasurer of your corporation. H&r block free 1040ez During the tax year you receive $100,000 as salary from the corporation. H&r block free 1040ez If $80,000 is a reasonable allowance as pay for the work you did, then $80,000 is earned income. H&r block free 1040ez Stock options. H&r block free 1040ez   You may have earned income if you disposed of stock that you got by exercising a stock option granted to you under an employee stock purchase plan. H&r block free 1040ez   If your gain on the disposition of stock you got by exercising an option is treated as capital gain, your gain is unearned income. H&r block free 1040ez   However, if you disposed of the stock less than 2 years after you were granted the option or less than 1 year after you got the stock, part of the gain on the disposition may be earned income. H&r block free 1040ez It is considered received in the year you disposed of the stock and earned in the year you performed the services for which you were granted the option. H&r block free 1040ez Any part of the earned income that is due to work you did outside the United States is foreign earned income. H&r block free 1040ez   See Publication 525, Taxable and Nontaxable Income, for a discussion of the treatment of stock options. H&r block free 1040ez Pensions and annuities. H&r block free 1040ez    For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, amounts received as pensions or annuities are unearned income. H&r block free 1040ez Royalties. H&r block free 1040ez   Royalties from the leasing of oil and mineral lands and patents generally are a form of rent or dividends and are unearned income. H&r block free 1040ez   Royalties received by a writer are earned income if they are received: For the transfer of property rights of the writer in the writer's product, or Under a contract to write a book or series of articles. H&r block free 1040ez Rental income. H&r block free 1040ez   Generally, rental income is unearned income. H&r block free 1040ez If you perform personal services in connection with the production of rent, up to 30% of your net rental income can be considered earned income. H&r block free 1040ez Example. H&r block free 1040ez Larry Smith, a U. H&r block free 1040ez S. H&r block free 1040ez citizen living in Australia, owns and operates a rooming house in Sydney. H&r block free 1040ez If he is operating the rooming house as a business that requires capital and personal services, he can consider up to 30% of net rental income as earned income. H&r block free 1040ez On the other hand, if he just owns the rooming house and performs no personal services connected with its operation, except perhaps making minor repairs and collecting rents, none of his net income from the house is considered earned income. H&r block free 1040ez It is all unearned income. H&r block free 1040ez Professional fees. H&r block free 1040ez   If you are engaged in a professional occupation (such as a doctor or lawyer), all fees received in the performance of these services are earned income. H&r block free 1040ez Income of an artist. H&r block free 1040ez   Income you receive from the sale of paintings you created is earned income. H&r block free 1040ez Scholarships and fellowships. H&r block free 1040ez   Any portion of a scholarship or fellowship grant that is paid to you for teaching, research or other services is considered earned income if you must include it in your gross income. H&r block free 1040ez If the payer of the grant is required to provide you with a Form W-2, Wage and Tax Statement, these amounts will be listed as wages. H&r block free 1040ez    Certain scholarship and fellowship income may be exempt under other provisions. H&r block free 1040ez See Publication 970, Tax Benefits for Education, chapter 1. H&r block free 1040ez Use of employer's property or facilities. H&r block free 1040ez   If you receive fringe benefits in the form of the right to use your employer's property or facilities, the fair market value of that right is earned income. H&r block free 1040ez Fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being required to buy or sell, and both having reasonable knowledge of all the necessary facts. H&r block free 1040ez Example. H&r block free 1040ez You are privately employed and live in Japan all year. H&r block free 1040ez You are paid a salary of $6,000 a month. H&r block free 1040ez You live rent-free in a house provided by your employer that has a fair rental value of $3,000 a month. H&r block free 1040ez The house is not provided for your employer's convenience. H&r block free 1040ez You report on the calendar-year, cash basis. H&r block free 1040ez You received $72,000 salary from foreign sources plus $36,000 fair rental value of the house, or a total of $108,000 of earned income. H&r block free 1040ez Reimbursement of employee expenses. H&r block free 1040ez   If you are reimbursed under an accountable plan (defined below) for expenses you incur on your employer's behalf and you have adequately accounted to your employer for the expenses, do not include the reimbursement for those expenses in your earned income. H&r block free 1040ez   The expenses for which you are reimbursed are not considered allocable (related) to your earned income. H&r block free 1040ez If expenses and reimbursement are equal, there is nothing to allocate to excluded income. H&r block free 1040ez If expenses are more than the reimbursement, the unreimbursed expenses are considered to have been incurred in producing earned income and must be divided between your excluded and included income in determining the amount of unreimbursed expenses you can deduct. H&r block free 1040ez (See chapter 5. H&r block free 1040ez ) If the reimbursement is more than the expenses, no expenses remain to be divided between excluded and included income and the excess reimbursement must be included in earned income. H&r block free 1040ez   These rules do not apply to the following individuals. H&r block free 1040ez Straight-commission salespersons. H&r block free 1040ez Employees who have arrangements with their employers under which taxes are not withheld on a percentage of the commissions because the employers consider that percentage to be attributable to the employees' expenses. H&r block free 1040ez Accountable plan. H&r block free 1040ez   An accountable plan is a reimbursement or allowance arrangement that includes all three of the following rules. H&r block free 1040ez The expenses covered under the plan must have a business connection. H&r block free 1040ez The employee must adequately account to the employer for these expenses within a reasonable period of time. H&r block free 1040ez The employee must return any excess reimbursement or allowance within a reasonable period of time. H&r block free 1040ez Reimbursement of moving expenses. H&r block free 1040ez   Reimbursement of moving expenses may be earned income. H&r block free 1040ez You must include as earned income: Any reimbursements of, or payments for, nondeductible moving expenses, Reimbursements that are more than your deductible expenses and that you do not return to your employer, Any reimbursements made (or treated as made) under a nonaccountable plan (any plan that does not meet the rules listed above for an accountable plan), even if they are for deductible expenses, and Any reimbursement of moving expenses you deducted in an earlier year. H&r block free 1040ez This section discusses reimbursements that must be included in earned income. H&r block free 1040ez Publication 521, Moving Expenses, discusses additional rules that apply to moving expense deductions and reimbursements. H&r block free 1040ez   The rules for determining when the reimbursement is considered earned or where the reimbursement is considered earned may differ somewhat from the general rules previously discussed. H&r block free 1040ez   Although you receive the reimbursement in one tax year, it may be considered earned for services performed, or to be performed, in another tax year. H&r block free 1040ez You must report the reimbursement as income on your return in the year you receive it, even if it is considered earned during a different year. H&r block free 1040ez Move from U. H&r block free 1040ez S. H&r block free 1040ez to foreign country. H&r block free 1040ez   If you move from the United States to a foreign country, your moving expense reimbursement is generally considered pay for future services to be performed at the new location. H&r block free 1040ez The reimbursement is considered earned solely in the year of the move if you qualify for the exclusion for a period that includes at least 120 days during that tax year. H&r block free 1040ez   If you are neither a bona fide resident of nor physically present in a foreign country or countries for a period that includes 120 days during the year of the move, a portion of the reimbursement is considered earned in the year of the move and a portion is considered earned in the year following the year of the move. H&r block free 1040ez To figure the amount earned in the year of the move, multiply the reimbursement by a fraction. H&r block free 1040ez The numerator (top number) is the number of days in your qualifying period that fall within the year of the move, and the denominator (bottom number) is the total number of days in the year of the move. H&r block free 1040ez   The difference between the total reimbursement and the amount considered earned in the year of the move is the amount considered earned in the year following the year of the move. H&r block free 1040ez The part earned in each year is figured as shown in the following example. H&r block free 1040ez Example. H&r block free 1040ez You are a U. H&r block free 1040ez S. H&r block free 1040ez citizen working in the United States. H&r block free 1040ez You were told in October 2012 that you were being transferred to a foreign country. H&r block free 1040ez You arrived in the foreign country on December 15, 2012, and you are a bona fide resident for the remainder of 2012 and all of 2013. H&r block free 1040ez Your employer reimbursed you $2,000 in January 2013 for the part of the moving expense that you were not allowed to deduct. H&r block free 1040ez Because you did not qualify for the exclusion under the bona fide residence test for at least 120 days in 2012 (the year of the move), the reimbursement is considered pay for services performed in the foreign country for both 2012 and 2013. H&r block free 1040ez You figure the part of the reimbursement for services performed in the foreign country in 2012 by multiplying the total reimbursement by a fraction. H&r block free 1040ez The fraction is the number of days during which you were a bona fide resident in 2012 (the year of the move) divided by 366. H&r block free 1040ez The remaining part of the reimbursement is for services performed in the foreign country in 2013. H&r block free 1040ez This computation is used only to determine when the reimbursement is considered earned. H&r block free 1040ez You would include the amount of the reimbursement in income in 2013, the year you received it. H&r block free 1040ez Move between foreign countries. H&r block free 1040ez   If you move between foreign countries, any moving expense reimbursement that you must include in income will be considered earned in the year of the move if you qualify for the foreign earned income exclusion for a period that includes at least 120 days in the year of the move. H&r block free 1040ez Move to U. H&r block free 1040ez S. H&r block free 1040ez   If you move to the United States, the moving expense reimbursement that you must include in income is generally considered to be U. H&r block free 1040ez S. H&r block free 1040ez source income. H&r block free 1040ez   However, if under either an agreement between you and your employer or a statement of company policy that is reduced to writing before your move to the foreign country, your employer will reimburse you for your move back to the United States regardless of whether you continue to work for the employer, the includible reimbursement is considered compensation for past services performed in the foreign country. H&r block free 1040ez The includible reimbursement is considered earned in the year of the move if you qualify for the foreign earned income exclusion for a period that includes at least 120 days during that year. H&r block free 1040ez Otherwise, you treat the includible reimbursement as received for services performed in the foreign country in the year of the move and the year immediately before the year of the move. H&r block free 1040ez   See the discussion under Move from U. H&r block free 1040ez S. H&r block free 1040ez to foreign country , earlier, to figure the amount of the includible reimbursement considered earned in the year of the move. H&r block free 1040ez The amount earned in the year before the year of the move is the difference between the total includible reimbursement and the amount earned in the year of the move. H&r block free 1040ez Example. H&r block free 1040ez You are a U. H&r block free 1040ez S. H&r block free 1040ez citizen employed in a foreign country. H&r block free 1040ez You retired from employment with your employer on March 31, 2013, and returned to the United States after having been a bona fide resident of the foreign country for several years. H&r block free 1040ez A written agreement with your employer entered into before you went abroad provided that you would be reimbursed for your move back to the United States. H&r block free 1040ez In April 2013, your former employer reimbursed you $4,000 for the part of the cost of your move back to the United States that you were not allowed to deduct. H&r block free 1040ez Because you were not a bona fide resident of a foreign country or countries for a period that included at least 120 days in 2013 (the year of the move), the includible reimbursement is considered pay for services performed in the foreign country for both 2013 and 2012. H&r block free 1040ez You figure the part of the moving expense reimbursement for services performed in the foreign country for 2013 by multiplying the total includible reimbursement by a fraction. H&r block free 1040ez The fraction is the number of days of foreign residence during the year (90) divided by the number of days in the year (365). H&r block free 1040ez The remaining part of the includible reimbursement is for services performed in the foreign country in 2012. H&r block free 1040ez You report the amount of the includible reimbursement in 2013, the year you received it. H&r block free 1040ez    In this example, if you met the physical presence test for a period that included at least 120 days in 2013, the moving expense reimbursement would be considered earned entirely in the year of the move. H&r block free 1040ez Storage expense reimbursements. H&r block free 1040ez   If you are reimbursed for storage expenses, the reimbursement is for services you perform during the period of time for which the storage expenses are incurred. H&r block free 1040ez U. H&r block free 1040ez S. H&r block free 1040ez Government Employees For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, foreign earned income does not include any amounts paid by the United States or any of its agencies to its employees. H&r block free 1040ez This includes amounts paid from both appropriated and nonappropriated funds. H&r block free 1040ez The following organizations (and other organizations similarly organized and operated under United States Army, Navy, or Air Force regulations) are integral parts of the Armed Forces, agencies, or instrumentalities of the United States. H&r block free 1040ez United States Armed Forces exchanges. H&r block free 1040ez Commissioned and noncommissioned officers' messes. H&r block free 1040ez Armed Forces motion picture services. H&r block free 1040ez Kindergartens on foreign Armed Forces installations. H&r block free 1040ez Amounts paid by the United States or its agencies to persons who are not their employees may qualify for exclusion or deduction. H&r block free 1040ez If you are a U. H&r block free 1040ez S. H&r block free 1040ez Government employee paid by a U. H&r block free 1040ez S. H&r block free 1040ez agency that assigned you to a foreign government to perform specific services for which the agency is reimbursed by the foreign government, your pay is from the U. H&r block free 1040ez S. H&r block free 1040ez Government and does not qualify for exclusion or deduction. H&r block free 1040ez If you have questions about whether you are an employee or an independent contractor, get Publication 15-A, Employer's Supplemental Tax Guide. H&r block free 1040ez American Institute in Taiwan. H&r block free 1040ez   Amounts paid by the American Institute in Taiwan are not foreign earned income for purposes of the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction. H&r block free 1040ez If you are an employee of the American Institute in Taiwan, allowances you receive are exempt from U. H&r block free 1040ez S. H&r block free 1040ez tax up to the amount that equals tax-exempt allowances received by civilian employees of the U. H&r block free 1040ez S. H&r block free 1040ez Government. H&r block free 1040ez Allowances. H&r block free 1040ez   Cost-of-living and foreign-area allowances paid under certain acts of Congress to U. H&r block free 1040ez S. H&r block free 1040ez civilian officers and employees stationed in Alaska and Hawaii or elsewhere outside the 48 contiguous states and the District of Columbia can be excluded from gross income. H&r block free 1040ez Post differentials are wages that must be included in gross income, regardless of the act of Congress under which they are paid. H&r block free 1040ez More information. H&r block free 1040ez   Publication 516, U. H&r block free 1040ez S. H&r block free 1040ez Government Civilian Employees Stationed Abroad, has more information for U. H&r block free 1040ez S. H&r block free 1040ez Government employees abroad. H&r block free 1040ez Exclusion of Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. H&r block free 1040ez The meals are furnished: On the business premises of your employer, and For the convenience of your employer. H&r block free 1040ez The lodging is furnished: On the business premises of your employer, For the convenience of your employer, and As a condition of your employment. H&r block free 1040ez If these conditions are met, do not include the value of the meals or lodging in your income, even if a law or your employment contract says that they are provided as compensation. H&r block free 1040ez Amounts you do not include in income because of these rules are not foreign earned income. H&r block free 1040ez If you receive a Form W-2, excludable amounts should not be included in the total reported in box 1 as wages. H&r block free 1040ez Family. H&r block free 1040ez   Your family, for this purpose, includes only your spouse and your dependents. H&r block free 1040ez Lodging. H&r block free 1040ez   The value of lodging includes the cost of heat, electricity, gas, water, sewer service, and similar items needed to make the lodging fit to live in. H&r block free 1040ez Business premises of employer. H&r block free 1040ez   Generally, the business premises of your employer is wherever you work. H&r block free 1040ez For example, if you work as a housekeeper, meals and lodging provided in your employer's home are provided on the business premises of your employer. H&r block free 1040ez Similarly, meals provided to cowhands while herding cattle on land leased or owned by their employer are considered provided on the premises of their employer. H&r block free 1040ez Convenience of employer. H&r block free 1040ez   Whether meals or lodging are provided for your employer's convenience must be determined from all the facts and circumstances. H&r block free 1040ez Meals furnished at no charge are considered provided for your employer's convenience if there is a good business reason for providing them, other than to give you more pay. H&r block free 1040ez   On the other hand, if your employer provides meals to you or your family as a means of giving you more pay, and there is no other business reason for providing them, their value is extra income to you because they are not furnished for the convenience of your employer. H&r block free 1040ez Condition of employment. H&r block free 1040ez   Lodging is provided as a condition of employment if you must accept the lodging to properly carry out the duties of your job. H&r block free 1040ez You must accept lodging to properly carry out your duties if, for example, you must be available for duty at all times or you could not perform your duties if the lodging was not furnished. H&r block free 1040ez Foreign camps. H&r block free 1040ez   If the lodging is in a camp located in a foreign country, the camp is considered part of your employer's business premises. H&r block free 1040ez The camp must be: Provided for your employer's convenience because the place where you work is in a remote area where satisfactory housing is not available to you on the open market within a reasonable commuting distance, Located as close as reasonably possible in the area where you work, and Provided in a common area or enclave that is not available to the general public for lodging or accommodations and that normally houses at least ten employees. H&r block free 1040ez Foreign Earned Income Exclusion If your tax home is in a foreign country and you meet the bona fide residence test or the physical presence test, you can choose to exclude from your income a limited amount of your foreign earned income. H&r block free 1040ez Foreign earned income was defined earlier in this chapter. H&r block free 1040ez You also can choose to exclude from your income a foreign housing amount. H&r block free 1040ez This is explained later under Foreign Housing Exclusion. H&r block free 1040ez If you choose to exclude a foreign housing amount, you must figure the foreign housing exclusion before you figure the foreign earned income exclusion. H&r block free 1040ez Your foreign earned income exclusion is limited to your foreign earned income minus your foreign housing exclusion. H&r block free 1040ez If you choose to exclude foreign earned income, you cannot deduct, exclude, or claim a credit for any item that can be allocated to or charged against the excluded amounts. H&r block free 1040ez This includes any expenses, losses, and other normally deductible items allocable to the excluded income. H&r block free 1040ez For more information about deductions and credits, see chapter 5 . H&r block free 1040ez Limit on Excludable Amount You may be able to exclude up to $97,600 of your foreign earned income in 2013. H&r block free 1040ez You cannot exclude more than the smaller of: $97,600, or Your foreign earned income (discussed earlier) for the tax year minus your foreign housing exclusion (discussed later). H&r block free 1040ez If both you and your spouse work abroad and each of you meets either the bona fide residence test or the physical presence test, you can each choose the foreign earned income exclusion. H&r block free 1040ez You do not both need to meet the same test. H&r block free 1040ez Together, you and your spouse can exclude as much as $195,200. H&r block free 1040ez Paid in year following work. H&r block free 1040ez   Generally, you are considered to have earned income in the year in which you do the work for which you receive the income, even if you work in one year but are not paid until the following year. H&r block free 1040ez If you report your income on a cash basis, you report the income on your return for the year you receive it. H&r block free 1040ez If you work one year, but are not paid for that work until the next year, the amount you can exclude in the year you are paid is the amount you could have excluded in the year you did the work if you had been paid in that year. H&r block free 1040ez For an exception to this general rule, see Year-end payroll period, later. H&r block free 1040ez Example. H&r block free 1040ez You were a bona fide resident of Brazil for all of 2012 and 2013. H&r block free 1040ez You report your income on the cash basis. H&r block free 1040ez In 2012, you were paid $84,200 for work you did in Brazil during that year. H&r block free 1040ez You excluded all of the $84,200 from your income in 2012. H&r block free 1040ez In 2013, you were paid $117,300 for your work in Brazil. H&r block free 1040ez $18,800 was for work you did in 2012 and $98,500 was for work you did in 2013. H&r block free 1040ez You can exclude $10,900 of the $18,800 from your income in 2013. H&r block free 1040ez This is the $95,100 maximum exclusion in 2012 minus the $84,200 actually excluded that year. H&r block free 1040ez You must include the remaining $7,900 in income in 2013 because you could not have excluded that income in 2012 if you had received it that year. H&r block free 1040ez You can exclude $97,600 of the $98,500 you were paid for work you did in 2013 from your 2013 income. H&r block free 1040ez Your total foreign earned income exclusion for 2013 is $108,500 ($10,900 for work you did in 2012 and $97,600 for work you did in 2013). H&r block free 1040ez You would include in your 2013 income $8,800 ($7,900 for the work you did in 2012 and $900 for the work you did in 2013). H&r block free 1040ez Year-end payroll period. H&r block free 1040ez   There is an exception to the general rule that income is considered earned in the year you do the work for which you receive the income. H&r block free 1040ez If you are a cash-basis taxpayer, any salary or wage payment you receive after the end of the year in which you do the work for which you receive the pay is considered earned entirely in the year you receive it if all four of the following apply. H&r block free 1040ez The period for which the payment is made is a normal payroll period of your employer that regularly applies to you. H&r block free 1040ez The payroll period includes the last day of your tax year (December 31 if you figure your taxes on a calendar-year basis). H&r block free 1040ez The payroll period is not longer than 16 days. H&r block free 1040ez The payday comes at the same time in relation to the payroll period that it would normally come and it comes before the end of the next payroll period. H&r block free 1040ez Example. H&r block free 1040ez You are paid twice a month. H&r block free 1040ez For the normal payroll period that begins on the first of the month and ends on the fifteenth of the month, you are paid on the sixteenth day of the month. H&r block free 1040ez For the normal payroll period that begins on the sixteenth of the month and ends on the last day of the month, you are paid on the first day of the following month. H&r block free 1040ez Because all of the above conditions are met, the pay you received on January 1, 2013, is considered earned in 2013. H&r block free 1040ez Income earned over more than 1 year. H&r block free 1040ez   Regardless of when you actually receive income, you must apply it to the year in which you earned it in figuring your excludable amount for that year. H&r block free 1040ez For example, a bonus may be based on work you did over several years. H&r block free 1040ez You determine the amount of the bonus that is considered earned in a particular year in two steps. H&r block free 1040ez Divide the bonus by the number of calendar months in the period when you did the work that resulted in the bonus. H&r block free 1040ez Multiply the result of (1) by the number of months you did the work during the year. H&r block free 1040ez This is the amount that is subject to the exclusion limit for that tax year. H&r block free 1040ez Income received more than 1 year after it was earned. H&r block free 1040ez   You cannot exclude income you receive after the end of the year following the year you do the work to earn it. H&r block free 1040ez Example. H&r block free 1040ez   You were a bona fide resident of Sweden for 2011, 2012, and 2013. H&r block free 1040ez You report your income on the cash basis. H&r block free 1040ez In 2011, you were paid $69,000 for work you did in Sweden that year and in 2012 you were paid $74,000 for that year's work in Sweden. H&r block free 1040ez You excluded all the income on your 2011 and 2012 returns. H&r block free 1040ez   In 2013, you were paid $92,000; $82,000 for your work in Sweden during 2013, and $10,000 for work you did in Sweden in 2011. H&r block free 1040ez You cannot exclude any of the $10,000 for work done in 2011 because you received it after the end of the year following the year in which you earned it. H&r block free 1040ez You must include the $10,000 in income. H&r block free 1040ez You can exclude all of the $82,000 received for work you did in 2013. H&r block free 1040ez Community income. H&r block free 1040ez   The maximum exclusion applies separately to the earnings of spouses. H&r block free 1040ez Ignore any community property laws when you figure your limit on the foreign earned income exclusion. H&r block free 1040ez Part-year exclusion. H&r block free 1040ez   If the period for which you qualify for the foreign earned income exclusion includes only part of the year, you must adjust the maximum limit based on the number of qualifying days in the year. H&r block free 1040ez The number of qualifying days is the number of days in the year within the period on which you both: Have your tax home in a foreign country, and Meet either the bona fide residence test or the physical presence test. H&r block free 1040ez   For this purpose, you can count as qualifying days all days within a period of 12 consecutive months once you are physically present and have your tax home in a foreign country for 330 full days. H&r block free 1040ez To figure your maximum exclusion, multiply the maximum excludable amount for the year by the number of your qualifying days in the year, and then divide the result by the number of days in the year. H&r block free 1040ez Example. H&r block free 1040ez You report your income on the calendar-year basis and you qualified for the foreign earned income exclusion under the bona fide residence test for 75 days in 2013. H&r block free 1040ez You can exclude a maximum of 75/365 of $97,600, or $20,055, of your foreign earned income for 2013. H&r block free 1040ez If you qualify under the bona fide residence test for all of 2014, you can exclude your foreign earned income up to the 2014 limit. H&r block free 1040ez Physical presence test. H&r block free 1040ez   Under the physical presence test, a 12-month period can be any period of 12 consecutive months that includes 330 full days. H&r block free 1040ez If you qualify for the foreign earned income exclusion under the physical presence test for part of a year, it is important to carefully choose the 12-month period that will allow the maximum exclusion for that year. H&r block free 1040ez Example. H&r block free 1040ez You are physically present and have your tax home in a foreign country for a 16-month period from June 1, 2012, through September 30, 2013, except for 16 days in December 2012 when you were on vacation in the United States. H&r block free 1040ez You figure the maximum exclusion for 2012 as follows. H&r block free 1040ez Beginning with June 1, 2012, count forward 330 full days. H&r block free 1040ez Do not count the 16 days you spent in the United States. H&r block free 1040ez The 330th day, May 12, 2013, is the last day of a 12-month period. H&r block free 1040ez Count backward 12 months from May 11, 2013, to find the first day of this 12-month period, May 12, 2012. H&r block free 1040ez This 12-month period runs from May 12, 2012, through May 11, 2013. H&r block free 1040ez Count the total days during 2012 that fall within this 12-month period. H&r block free 1040ez This is 234 days (May 12, 2012 – December 31, 2012). H&r block free 1040ez Multiply $95,100 (the maximum exclusion for 2012) by the fraction 234/366 to find your maximum exclusion for 2012 ($60,802). H&r block free 1040ez You figure the maximum exclusion for 2013 in the opposite manner. H&r block free 1040ez Beginning with your last full day, September 30, 2013, count backward 330 full days. H&r block free 1040ez Do not count the 16 days you spent in the United States. H&r block free 1040ez That day, October 20, 2012, is the first day of a 12-month period. H&r block free 1040ez Count forward 12 months from October 20, 2012, to find the last day of this 12-month period, October 19, 2013. H&r block free 1040ez This 12-month period runs from October 20, 2012, through October 19, 2013. H&r block free 1040ez Count the total days during 2013 that fall within this 12-month period. H&r block free 1040ez This is 292 days (January 1, 2013 – October 19, 2013). H&r block free 1040ez Multiply $97,600, the maximum limit, by the fraction 292/365 to find your maximum exclusion for 2013 ($78,080). H&r block free 1040ez Choosing the Exclusion The foreign earned income exclusion is voluntary. H&r block free 1040ez You can choose the exclusion by completing the appropriate parts of Form 2555. H&r block free 1040ez When You Can Choose the Exclusion Your initial choice of the exclusion on Form 2555 or Form 2555-EZ generally must be made with one of the following returns. H&r block free 1040ez A return filed by the due date (including any extensions). H&r block free 1040ez A return amending a timely-filed return. H&r block free 1040ez Amended returns generally must be filed by the later of 3 years after the filing date of the original return or 2 years after the tax is paid. H&r block free 1040ez A return filed within 1 year from the original due date of the return (determined without regard to any extensions). H&r block free 1040ez Filing after the above periods. H&r block free 1040ez   You can choose the exclusion on a return filed after the periods described above if you owe no federal income tax after taking into account the exclusion. H&r block free 1040ez If you owe federal income tax after taking into account the exclusion, you can choose the exclusion on a return filed after the periods described earlier if you file before the IRS discovers that you failed to choose the exclusion. H&r block free 1040ez Whether or not you owe federal income tax after taking the exclusion into account, if you file your return after the periods described earlier, you must type or legibly print at the top of the first page of the Form 1040 “Filed pursuant to section 1. H&r block free 1040ez 911-7(a)(2)(i)(D). H&r block free 1040ez ” If you owe federal income tax after taking into account the foreign earned income exclusion and the IRS discovered that you failed to choose the exclusion, you may still be able to choose the exclusion. H&r block free 1040ez You must request a private letter ruling under Income Tax Regulation 301. H&r block free 1040ez 9100-3 and Revenue Procedure 2013-1, 2013-1 I. H&r block free 1040ez R. H&r block free 1040ez B. H&r block free 1040ez 1, available at www. H&r block free 1040ez irs. H&r block free 1040ez gov/irb/2013-01_IRB/ar06. H&r block free 1040ez html. H&r block free 1040ez Effect of Choosing the Exclusion Once you choose to exclude your foreign earned income, that choice remains in effect for that year and all later years unless you revoke it. H&r block free 1040ez Foreign tax credit or deduction. H&r block free 1040ez  
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The H&r Block Free 1040ez

H&r block free 1040ez 37. H&r block free 1040ez   Other Credits Table of Contents What's New Introduction Useful Items - You may want to see: Nonrefundable CreditsAdoption Credit Alternative Motor Vehicle Credit Alternative Fuel Vehicle Refueling Property Credit Credit to Holders of Tax Credit Bonds Foreign Tax Credit Mortgage Interest Credit Nonrefundable Credit for Prior Year Minimum Tax Plug-in Electric Drive Motor Vehicle Credit Residential Energy Credits Retirement Savings Contributions Credit (Saver's Credit) Refundable CreditsCredit for Tax on Undistributed Capital Gain Health Coverage Tax Credit Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld What's New Adoption credit. H&r block free 1040ez  The maximum adoption credit is $12,970 for 2013. H&r block free 1040ez See Adoption Credit . H&r block free 1040ez Plug-in electric vehicle credit. H&r block free 1040ez  This credit has expired. H&r block free 1040ez Credit for prior year minimum tax. H&r block free 1040ez  The refundable portion of the credit for prior year minimum tax has expired. H&r block free 1040ez Excess withholding of social security and railroad retirement tax. H&r block free 1040ez  Social security tax and tier 1 railroad retirement (RRTA) tax were both withheld during 2013 at a rate of 6. H&r block free 1040ez 2% of wages up to $113,700. H&r block free 1040ez If you worked for more than one employer and had too much social security or RRTA tax withheld during 2013, you may be entitled to a credit for the excess withholding. H&r block free 1040ez See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld . H&r block free 1040ez Introduction This chapter discusses the following nonrefundable credits. H&r block free 1040ez Adoption credit. H&r block free 1040ez Alternative motor vehicle credit. H&r block free 1040ez Alternative fuel vehicle refueling property credit. H&r block free 1040ez Credit to holders of tax credit bonds. H&r block free 1040ez Foreign tax credit. H&r block free 1040ez Mortgage interest credit. H&r block free 1040ez Nonrefundable credit for prior year minimum tax. H&r block free 1040ez Plug-in electric drive motor vehicle credit. H&r block free 1040ez Residential energy credits. H&r block free 1040ez Retirement savings contributions credit. H&r block free 1040ez This chapter also discusses the following refundable credits. H&r block free 1040ez Credit for tax on undistributed capital gain. H&r block free 1040ez Health coverage tax credit. H&r block free 1040ez Credit for excess social security tax or railroad retirement tax withheld. H&r block free 1040ez Several other credits are discussed in other chapters in this publication. H&r block free 1040ez Child and dependent care credit (chapter 32). H&r block free 1040ez Credit for the elderly or the disabled (chapter 33). H&r block free 1040ez Child tax credit (chapter 34). H&r block free 1040ez Education credits (chapter 35). H&r block free 1040ez Earned income credit (chapter 36). H&r block free 1040ez Nonrefundable credits. H&r block free 1040ez   The first part of this chapter, Nonrefundable Credits , covers ten credits that you subtract from your tax. H&r block free 1040ez These credits may reduce your tax to zero. H&r block free 1040ez If these credits are more than your tax, the excess is not refunded to you. H&r block free 1040ez Refundable credits. H&r block free 1040ez   The second part of this chapter, Refundable Credits , covers three credits that are treated as payments and are refundable to you. H&r block free 1040ez These credits are added to the federal income tax withheld and any estimated tax payments you made. H&r block free 1040ez If this total is more than your total tax, the excess will be refunded to you. H&r block free 1040ez Useful Items - You may want to see: Publication 502 Medical and Dental Expenses 514 Foreign Tax Credit for  Individuals 530 Tax Information for Homeowners 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 1116 Foreign Tax Credit 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 5695 Residential Energy Credits 8396 Mortgage Interest Credit 8801 Credit For Prior Year Minimum Tax — Individuals, Estates, and Trusts 8828 Recapture of Federal Mortgage Subsidy 8839 Qualified Adoption Expenses 8880 Credit for Qualified Retirement Savings Contributions 8885 Health Coverage Tax Credit 8910 Alternative Motor Vehicle Credit 8911 Alternative Fuel Vehicle Refueling Property Credit 8912 Credit to Holders of Tax Credit Bonds 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit Nonrefundable Credits The credits discussed in this part of the chapter can reduce your tax. H&r block free 1040ez However, if the total of these credits is more than your tax, the excess is not refunded to you. H&r block free 1040ez Adoption Credit You may be able to take a tax credit of up to $12,970 for qualified expenses paid to adopt an eligible child. H&r block free 1040ez The credit may be allowed for the adoption of a child with special needs even if you do not have any qualified expenses. H&r block free 1040ez If your modified adjusted gross income (AGI) is more than $194,580, your credit is reduced. H&r block free 1040ez If your modified AGI is $234,580 or more, you cannot take the credit. H&r block free 1040ez Qualified adoption expenses. H&r block free 1040ez   Qualified adoption expenses are reasonable and necessary expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child. H&r block free 1040ez These expenses include: Adoption fees, Court costs, Attorney fees, Travel expenses (including amounts spent for meals and lodging) while away from home, and Re-adoption expenses to adopt a foreign child. H&r block free 1040ez Nonqualified expenses. H&r block free 1040ez   Qualified adoption expenses do not include expenses: That violate state or federal law, For carrying out any surrogate parenting arrangement, For the adoption of your spouse's child, For which you received funds under any federal, state, or local program, Allowed as a credit or deduction under any other federal income tax rule, or Paid or reimbursed by your employer or any other person or organization. H&r block free 1040ez Eligible child. H&r block free 1040ez   The term “eligible child” means any individual: Under 18 years old, or Physically or mentally incapable of caring for himself or herself. H&r block free 1040ez Child with special needs. H&r block free 1040ez   An eligible child is a child with special needs if all three of the following apply. H&r block free 1040ez The child was a citizen or resident of the United States (including U. H&r block free 1040ez S. H&r block free 1040ez possessions) at the time the adoption process began. H&r block free 1040ez A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents' home. H&r block free 1040ez The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. H&r block free 1040ez Factors used by states to make this determination include: The child's ethnic background, The child's age, Whether the child is a member of a minority or sibling group, and Whether the child has a medical condition or a physical, mental, or emotional handicap. H&r block free 1040ez When to take the credit. H&r block free 1040ez   Generally, until the adoption becomes final, you take the credit in the year after your qualified expenses were paid or incurred. H&r block free 1040ez If the adoption becomes final, you take the credit in the year your expenses were paid or incurred. H&r block free 1040ez See the Instructions for Form 8839 for more specific information on when to take the credit. H&r block free 1040ez Foreign child. H&r block free 1040ez   If the child is not a U. H&r block free 1040ez S. H&r block free 1040ez citizen or resident at the time the adoption process began, you cannot take the credit unless the adoption becomes final. H&r block free 1040ez You treat all adoption expenses paid or incurred in years before the adoption becomes final as paid or incurred in the year it becomes final. H&r block free 1040ez How to take the credit. H&r block free 1040ez   Figure your 2013 nonrefundable credit and any carryforward to 2014 on Form 8839 and attach it to your Form 1040. H&r block free 1040ez Include the credit in your total for Form 1040, line 53. H&r block free 1040ez Check box c and enter “8839” on the line next to that box. H&r block free 1040ez More information. H&r block free 1040ez   For more information, see the Instructions for Form 8839. H&r block free 1040ez Alternative Motor Vehicle Credit You may be able to take this credit if you place a qualified fuel cell vehicle in service in 2013. H&r block free 1040ez Amount of credit. H&r block free 1040ez   Generally, you can rely on the manufacturer's certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies. H&r block free 1040ez In the case of a foreign manufacturer, you generally can rely on its domestic distributor's certification to the IRS. H&r block free 1040ez   Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification to the IRS of the maximum credit allowable. H&r block free 1040ez How to take the credit. H&r block free 1040ez   To take the credit, you must complete Form 8910 and attach it to your Form 1040. H&r block free 1040ez Include the credit in your total for Form 1040, line 53. H&r block free 1040ez Check box c and enter “8910” on the line next to that box. H&r block free 1040ez More information. H&r block free 1040ez   For more information on the credit, see the Instructions for Form 8910. H&r block free 1040ez Alternative Fuel Vehicle Refueling Property Credit You may be able to take a credit if you place qualified alternative fuel vehicle refueling property in service in 2013. H&r block free 1040ez Qualified alternative fuel vehicle refueling property. H&r block free 1040ez   Qualified alternative fuel vehicle refueling property is any property (other than a building or its structural components) used for either of the following. H&r block free 1040ez To store or dispense alternative fuel into the fuel tank of a motor vehicle propelled by the fuel, but only if the storage or dispensing is at the point where the fuel is delivered into that tank. H&r block free 1040ez To recharge an electric vehicle, but only if the recharging property is located at the point where the vehicle is recharged. H&r block free 1040ez   The following are alternative fuels. H&r block free 1040ez Any fuel at least 85% of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen. H&r block free 1040ez Any mixture which consists of two or more of the following: biodiesel, diesel fuel, or kerosene, and at least 20% of the volume of which consists of biodiesel determined without regard to any kerosene. H&r block free 1040ez Electricity. H&r block free 1040ez Amount of the credit. H&r block free 1040ez   For personal use property, the credit is generally the smaller of 30% of the property's cost or $1,000. H&r block free 1040ez For business use property, the credit is generally the smaller of 30% of the property's cost or $30,000. H&r block free 1040ez How to take the credit. H&r block free 1040ez   To take the credit, you must complete Form 8911 and attach it to your Form 1040. H&r block free 1040ez Include the credit in your total for Form 1040, line 53. H&r block free 1040ez Check box c and enter “8911” on the line next to that box. H&r block free 1040ez More information. H&r block free 1040ez   For more information on the credit, see the Form 8911 instructions. H&r block free 1040ez Credit to Holders of Tax Credit Bonds Tax credit bonds are bonds in which the holder receives a tax credit in lieu of some or all of the interest on the bond. H&r block free 1040ez You may be able to take a credit if you are a holder of one of the following bonds. H&r block free 1040ez Clean renewable energy bonds (issued before 2010). H&r block free 1040ez New clean renewable energy bonds. H&r block free 1040ez Qualified energy conservation bonds. H&r block free 1040ez Qualified school construction bonds. H&r block free 1040ez Qualified zone academy bonds. H&r block free 1040ez Build America bonds. H&r block free 1040ez In some instances, an issuer may elect to receive a credit for interest paid on the bond. H&r block free 1040ez If the issuer makes this election, you cannot also claim a credit. H&r block free 1040ez Interest income. H&r block free 1040ez   The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return. H&r block free 1040ez How to take the credit. H&r block free 1040ez   Complete Form 8912 and attach it to your Form 1040. H&r block free 1040ez Include the credit in your total for Form 1040, line 53. H&r block free 1040ez Check box c and enter “8912” on the line next to that box. H&r block free 1040ez More information. H&r block free 1040ez   For more information, see the Instructions for Form 8912. H&r block free 1040ez Foreign Tax Credit You generally can choose to take income taxes you paid or accrued during the year to a foreign country or U. H&r block free 1040ez S. H&r block free 1040ez possession as a credit against your U. H&r block free 1040ez S. H&r block free 1040ez income tax. H&r block free 1040ez Or, you can deduct them as an itemized deduction (see chapter 22). H&r block free 1040ez You cannot take a credit (or deduction) for foreign income taxes paid on income that you exclude from U. H&r block free 1040ez S. H&r block free 1040ez tax under any of the following. H&r block free 1040ez Foreign earned income exclusion. H&r block free 1040ez Foreign housing exclusion. H&r block free 1040ez Income from Puerto Rico exempt from U. H&r block free 1040ez S. H&r block free 1040ez tax. H&r block free 1040ez Possession exclusion. H&r block free 1040ez Limit on the credit. H&r block free 1040ez   Unless you can elect not to file Form 1116 (see Exception , later), your foreign tax credit cannot be more than your U. H&r block free 1040ez S. H&r block free 1040ez tax liability (Form 1040, line 44), multiplied by a fraction. H&r block free 1040ez The numerator of the fraction is your taxable income from sources outside the United States. H&r block free 1040ez The denominator is your total taxable income from U. H&r block free 1040ez S. H&r block free 1040ez and foreign sources. H&r block free 1040ez See Publication 514 for more information. H&r block free 1040ez How to take the credit. H&r block free 1040ez   Complete Form 1116 and attach it to your Form 1040. H&r block free 1040ez Enter the credit on Form 1040, line 47. H&r block free 1040ez Exception. H&r block free 1040ez   You do not have to complete Form 1116 to take the credit if all of the following apply. H&r block free 1040ez All of your gross foreign source income was from interest and dividends and all of that income and the foreign tax paid on it were reported to you on Form 1099-INT, Form 1099-DIV, or Schedule K-1 (or substitute statement). H&r block free 1040ez If you had dividend income from shares of stock, you held those shares for at least 16 days. H&r block free 1040ez You are not filing Form 4563 or excluding income from sources within Puerto Rico. H&r block free 1040ez The total of your foreign taxes was not more than $300 (not more than $600 if married filing jointly). H&r block free 1040ez All of your foreign taxes were: Legally owed and not eligible for a refund, and Paid to countries that are recognized by the United States and do not support terrorism. H&r block free 1040ez More information. H&r block free 1040ez   For more information on the credit and these requirements, see the Instructions for Form 1116. H&r block free 1040ez Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals own a home. H&r block free 1040ez If you qualify, you can take the credit each year for part of the home mortgage interest you pay. H&r block free 1040ez Who qualifies. H&r block free 1040ez   You may be eligible for the credit if you were issued a qualified mortgage credit certificate (MCC) from your state or local government. H&r block free 1040ez Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. H&r block free 1040ez Amount of credit. H&r block free 1040ez   Figure your credit on Form 8396. H&r block free 1040ez If your mortgage loan amount is equal to (or smaller than) the certified indebtedness (loan) amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. H&r block free 1040ez   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. H&r block free 1040ez To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. H&r block free 1040ez      Certified indebtedness amount on your MCC     Original amount of your mortgage   Limit based on credit rate. H&r block free 1040ez   If the certificate credit rate is more than 20%, the credit you are allowed cannot be more than $2,000. H&r block free 1040ez If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, this $2,000 limit must be divided based on the interest held by each person. H&r block free 1040ez See Publication 530 for more information. H&r block free 1040ez Carryforward. H&r block free 1040ez   Your credit (after applying the limit based on the credit rate) is also subject to a limit based on your tax that is figured using Form 8396. H&r block free 1040ez If your allowable credit is reduced because of this tax liability limit, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. H&r block free 1040ez   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). H&r block free 1040ez How to take the credit. H&r block free 1040ez    Figure your 2013 credit and any carryforward to 2014 on Form 8396, and attach it to your Form 1040. H&r block free 1040ez Be sure to include any credit carryforward from 2010, 2011, and 2012. H&r block free 1040ez   Include the credit in your total for Form 1040, line 53. H&r block free 1040ez Check box c and enter “8396” on the line next to that box. H&r block free 1040ez Reduced home mortgage interest deduction. H&r block free 1040ez   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. H&r block free 1040ez You must do this even if part of that amount is to be carried forward to 2014. H&r block free 1040ez For more information about the home mortgage interest deduction, see chapter 23. H&r block free 1040ez Recapture of federal mortgage subsidy. H&r block free 1040ez   If you received an MCC with your mortgage loan, you may have to recapture (pay back) all or part of the benefit you received from that program. H&r block free 1040ez The recapture may be required if you sell or dispose of your home at a gain during the first 9 years after the date you closed your mortgage loan. H&r block free 1040ez See the Instructions for Form 8828 and chapter 15 for more information. H&r block free 1040ez More information. H&r block free 1040ez   For more information on the credit, see the Form 8396 instructions. H&r block free 1040ez Nonrefundable Credit for Prior Year Minimum Tax The tax laws give special treatment to some kinds of income and allow special deductions and credits for some kinds of expenses. H&r block free 1040ez If you benefit from these laws, you may have to pay at least a minimum amount of tax in addition to any other tax on these items. H&r block free 1040ez This is called the alternative minimum tax. H&r block free 1040ez The special treatment of some items of income and expenses only allows you to postpone paying tax until a later year. H&r block free 1040ez If in prior years you paid alternative minimum tax because of these tax postponement items, you may be able to take a credit for prior year minimum tax against your current year's regular tax. H&r block free 1040ez You may be able to take a credit against your regular tax if for 2012 you had: An alternative minimum tax liability and adjustments or preferences other than exclusion items, A minimum tax credit that you are carrying forward to 2013, or An unallowed qualified electric vehicle credit. H&r block free 1040ez How to take the credit. H&r block free 1040ez    Figure your 2013 nonrefundable credit (if any), and any carryforward to 2014 on Form 8801, and attach it to your Form 1040. H&r block free 1040ez Include the credit in your total for Form 1040, line 53, and check box b. H&r block free 1040ez You can carry forward any unused credit for prior year minimum tax to later years until it is completely used. H&r block free 1040ez More information. H&r block free 1040ez   For more information on the credit, see the Instructions for Form 8801. H&r block free 1040ez Plug-in Electric Drive Motor Vehicle Credit You may be able to take this credit if you placed in service for business or personal use a qualified plug-in electric drive motor vehicle or a qualified two- or three-wheeled plug-in electric vehicle in 2013 and you meet some other requirements. H&r block free 1040ez Qualified plug-in electric drive motor vehicle. H&r block free 1040ez   This is a new vehicle with at least four wheels that: Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 4 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. H&r block free 1040ez Qualified two- or three-wheeled plug-in electric vehicle. H&r block free 1040ez   This is a new vehicle with two or three wheels that: Is capable of achieving a speed of 45 miles per hour or greater, Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 2. H&r block free 1040ez 5 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. H&r block free 1040ez Certification and other requirements. H&r block free 1040ez   Generally, you can rely on the manufacturer's (or, in the case of a foreign manufacturer, its domestic distributor's) certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and, if applicable, the amount of the credit for which it qualifies. H&r block free 1040ez However, if the IRS publishes an announcement that the certification for any specific make, model, and model year vehicle has been withdrawn, you cannot rely on the certification for such a vehicle purchased after the date of publication of the withdrawal announcement. H&r block free 1040ez   The following requirements must also be met to qualify for the credit. H&r block free 1040ez You are the owner of the vehicle. H&r block free 1040ez If the vehicle is leased, only the lessor, and not the lessee, is entitled to the credit. H&r block free 1040ez You placed the vehicle in service during 2013. H&r block free 1040ez The vehicle is manufactured primarily for use on public streets, roads, and highways. H&r block free 1040ez The original use of the vehicle began with you. H&r block free 1040ez You acquired the vehicle for your use or to lease to others, and not for resale. H&r block free 1040ez In the case of the qualified two- or three-wheeled plug-in electric vehicle, the vehicle is acquired after 2011 and before 2014. H&r block free 1040ez You use the vehicle primarily in the United States. H&r block free 1040ez How to take the credit. H&r block free 1040ez   To take the credit, you must complete Form 8936 and attach it to your Form 1040. H&r block free 1040ez Include the credit in your total for Form 1040, line 53. H&r block free 1040ez Check box c and enter “8936” on the line next to that box. H&r block free 1040ez More information. H&r block free 1040ez   For more information on the credit, see the Form 8936 instructions. H&r block free 1040ez Residential Energy Credits You may be able to take one or both of the following credits if you made energy saving improvements to your home located in the United States in 2013. H&r block free 1040ez Nonbusiness energy property credit. H&r block free 1040ez Residential energy efficient property credit. H&r block free 1040ez If you are a member of a condominium management association for a condominium you own or a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any costs of the association or corporation for purposes of these credits. H&r block free 1040ez Nonbusiness energy property credit. H&r block free 1040ez   You may be able to take a credit equal to the sum of: 10% of the amount paid or incurred for qualified energy efficiency improvements installed during 2013, and Any residential energy property costs paid or incurred in 2013. H&r block free 1040ez   There is a lifetime limit of $500 for all years after 2005, of which only $200 can be for windows; $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any item of energy efficient building property. H&r block free 1040ez    If the total of nonbusiness energy property credits you have taken in previous years (after 2005) is more than $500, you cannot take this credit in 2013. H&r block free 1040ez   Qualified energy efficiency improvements are the following improvements that are new, can be expected to remain in use at least 5 years, and meet certain requirements for energy efficiency. H&r block free 1040ez Any insulation material or system that is specifically and primarily designed to reduce heat loss or gain of a home. H&r block free 1040ez Exterior window (including skylights). H&r block free 1040ez Exterior doors. H&r block free 1040ez Any metal or asphalt roof that has appropriate pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home. H&r block free 1040ez   Residential energy property is any of the following. H&r block free 1040ez Certain electric heat pump water heaters; electric heat pumps; central air conditioners; natural gas, propane, or oil water heater; and stoves that use biomass fuel. H&r block free 1040ez Qualified natural gas, propane, or oil furnaces; and qualified natural gas, propane, or oil hot water boilers. H&r block free 1040ez Certain advanced main air circulating fans used in natural gas, propane, or oil furnaces. H&r block free 1040ez Residential energy efficient property credit. H&r block free 1040ez   You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property. H&r block free 1040ez The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property. H&r block free 1040ez Basis reduction. H&r block free 1040ez   You must reduce the basis of your home by the amount of any credit allowed. H&r block free 1040ez How to take the credit. H&r block free 1040ez   Complete Form 5695 and attach it to your Form 1040. H&r block free 1040ez Enter the credit on Form 1040, line 52. H&r block free 1040ez More information. H&r block free 1040ez   For more information on these credits, see the Form 5695 instructions. H&r block free 1040ez Retirement Savings Contributions Credit (Saver's Credit) You may be able to take this credit if you, or your spouse if filing jointly, made: Contributions (other than rollover contributions) to a traditional or Roth IRA, Elective deferrals to a 401(k) or 403(b) plan (including designated Roth contributions) or to a governmental 457, SEP, or SIMPLE plan, Voluntary employee contributions to a qualified retirement plan (including the federal Thrift Savings Plan), or Contributions to a 501(c)(18)(D) plan. H&r block free 1040ez However, you cannot take the credit if either of the following applies. H&r block free 1040ez The amount on Form 1040, line 38, or Form 1040A, line 22, is more than $29,500 ($44,250 if head of household; $59,000 if married filing jointly). H&r block free 1040ez The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1996, (b) is claimed as a dependent on someone else's 2013 tax return, or (c) was a student (defined next). H&r block free 1040ez Student. H&r block free 1040ez   You were a student if during any part of 5 calendar months of 2013 you: Were enrolled as a full-time student at a school, or Took a full-time, on-farm training course given by a school or a state, county, or local government agency. H&r block free 1040ez School. H&r block free 1040ez   A school includes a technical, trade, or mechanical school. H&r block free 1040ez It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. H&r block free 1040ez How to take the credit. H&r block free 1040ez   Figure the credit on Form 8880. H&r block free 1040ez Enter the credit on your Form 1040, line 50, or your Form 1040A, line 32, and attach Form 8880 to your return. H&r block free 1040ez More information. H&r block free 1040ez   For more information on the credit, see the Form 8880 instructions. H&r block free 1040ez Refundable Credits The credits discussed in this part of the chapter are treated as payments of tax. H&r block free 1040ez If the total of these credits, withheld federal income tax, and estimated tax payments is more than your total tax, the excess can be refunded to you. H&r block free 1040ez Credit for Tax on Undistributed Capital Gain You must include in your income any amounts that regulated investment companies (commonly called mutual funds) or real estate investment trusts (REITs) allocated to you as capital gain distributions, even if you did not actually receive them. H&r block free 1040ez If the mutual fund or REIT paid a tax on the capital gain, you are allowed a credit for the tax since it is considered paid by you. H&r block free 1040ez The mutual fund or REIT will send you Form 2439 showing your share of the undistributed capital gains and the tax paid, if any. H&r block free 1040ez How to take the credit. H&r block free 1040ez   To take the credit, attach Copy B of Form 2439 to your Form 1040. H&r block free 1040ez Include the amount from box 2 of your Form 2439 in the total for Form 1040, line 71, and check box a. H&r block free 1040ez More information. H&r block free 1040ez   See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains. H&r block free 1040ez Health Coverage Tax Credit You may be able to take this credit for any month in which all the following statements were true on the first day of the month. H&r block free 1040ez You were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient (defined later); or you were a qualified family member of one of these individuals when the individual died or you finalized a divorce with one of these individuals. H&r block free 1040ez You and/or your family members were covered by a qualified health insurance plan for which you paid the entire premiums, or your portion of the premiums, directly to your health plan or to “U. H&r block free 1040ez S. H&r block free 1040ez Treasury–HCTC. H&r block free 1040ez ” You were not enrolled in Medicare Part A, B, or C, or you were enrolled in Medicare but your family member(s) qualified for the HCTC. H&r block free 1040ez You were not enrolled in Medicaid or the Children's Health Insurance Program (CHIP). H&r block free 1040ez You were not enrolled in the Federal Employees Health Benefits program (FEHBP) or eligible to receive benefits under the U. H&r block free 1040ez S. H&r block free 1040ez military health system (TRICARE). H&r block free 1040ez You were not imprisoned under federal, state, or local authority. H&r block free 1040ez Your employer did not pay 50% or more of the cost of coverage. H&r block free 1040ez You did not receive a 65% COBRA premium reduction from your former employer or COBRA administrator. H&r block free 1040ez But, you cannot take the credit if you can be claimed as a dependent on someone else's 2013 tax return. H&r block free 1040ez If you meet all of these conditions, you may be able to take a credit of up to 72. H&r block free 1040ez 5% of the amount you paid directly to a qualified health plan for you and any qualifying family members. H&r block free 1040ez You cannot take the credit for insurance premiums on coverage that was actually paid for with a National Emergency Grant. H&r block free 1040ez The amount you paid for qualified health insurance coverage must be reduced by any Archer MSA and health savings account distributions used to pay for the coverage. H&r block free 1040ez You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. H&r block free 1040ez If the credit is paid on your behalf in advance, that amount will reduce the amount of the credit you can take on your tax return. H&r block free 1040ez TAA recipient. H&r block free 1040ez   You were an eligible TAA recipient on the first day of the month if, for any day in that month or the prior month, you: Received a trade readjustment allowance, or Would have been entitled to receive such an allowance except that you had not exhausted all rights to any unemployment insurance (except additional compensation that is funded by a state and is not reimbursed from any federal funds) to which you were entitled (or would be entitled if you applied). H&r block free 1040ez Example. H&r block free 1040ez You received a trade adjustment allowance for January 2013. H&r block free 1040ez You were an eligible TAA recipient on the first day of January and February. H&r block free 1040ez Alternative TAA recipient. H&r block free 1040ez   You were an eligible alternative TAA recipient on the first day of the month if, for that month or the prior month, you received benefits under an alternative trade adjustment assistance program for older workers established by the Department of Labor. H&r block free 1040ez Example. H&r block free 1040ez You received benefits under an alternative trade adjustment assistance program for older workers for October 2013. H&r block free 1040ez The program was established by the Department of Labor. H&r block free 1040ez You were an eligible alternative TAA recipient on the first day of October and November. H&r block free 1040ez RTAA recipient. H&r block free 1040ez   You were an eligible RTAA recipient on the first day of the month if, for that month or the prior month, you received benefits under a reemployment trade adjustment assistance program for older workers established by the Department of Labor. H&r block free 1040ez PBGC pension recipient. H&r block free 1040ez   You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply. H&r block free 1040ez You were age 55 or older on the first day of the month. H&r block free 1040ez You received a benefit for that month paid by the PBGC under title IV of the Employee Retirement Income Security Act of 1974 (ERISA). H&r block free 1040ez If you received a lump-sum payment from the PBGC after August 5, 2002, you meet item (2) above for any month that you would have received a PBGC benefit if you had not received the lump-sum payment. H&r block free 1040ez How to take the credit. H&r block free 1040ez   To take the credit, complete Form 8885 and attach it to your Form 1040. H&r block free 1040ez Include your credit in the total for Form 1040, line 71, and check box c. H&r block free 1040ez   You must attach health insurance bills (or COBRA payment coupons) and proof of payment for any amounts you include on Form 8885, line 2. H&r block free 1040ez For details, see Publication 502 or Form 8885. H&r block free 1040ez More information. H&r block free 1040ez   For definitions and special rules, including those relating to qualified health insurance plans, qualifying family members, the effect of certain life events, and employer-sponsored health insurance plans, see Publication 502 and the Form 8885 instructions. H&r block free 1040ez Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld Most employers must withhold social security tax from your wages. H&r block free 1040ez If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax. H&r block free 1040ez If you worked for two or more employers in 2013, you may have had too much social security tax withheld from your pay. H&r block free 1040ez If one or more of those employers was a railroad employer, too much tier 1 RRTA tax may also have been withheld at the 6. H&r block free 1040ez 2% rate. H&r block free 1040ez You can claim the excess social security or tier 1 RRTA tax as a credit against your income tax when you file your return. H&r block free 1040ez For the tier 1 RRTA tax, only use the portion of the tier 1 RRTA tax that was taxed at the 6. H&r block free 1040ez 2% rate when figuring if excess tier 1 RRTA tax was withheld; do not include any portion of the tier 1 RRTA tax that was withheld at the Medicare tax rate (1. H&r block free 1040ez 45%) or the Additional Medicare Tax rate (. H&r block free 1040ez 9%). H&r block free 1040ez The following table shows the maximum amount of wages subject to tax and the maximum amount of tax that should have been withheld for 2013. H&r block free 1040ez Type of tax Maximum  wages subject to tax Maximum tax that should have been withheld Social security or RRTA tier 1 $113,700 $7,049. H&r block free 1040ez 40 RRTA tier 2 $84,300 $3,709. H&r block free 1040ez 20 All wages are subject to Medicare tax withholding. H&r block free 1040ez   Use Form 843, Claim for Refund and Request for Abatement, to claim a refund of excess tier 2 RRTA tax. H&r block free 1040ez Be sure to attach a copy of all of your W-2 forms. H&r block free 1040ez Use Worksheet 3-3 in Publication 505, Tax Withholding and Estimated Tax, to help you figure the excess amount. H&r block free 1040ez Employer's error. H&r block free 1040ez   If any one employer withheld too much social security or tier 1 RRTA tax, you cannot take the excess as a credit against your income tax. H&r block free 1040ez The employer should adjust the tax for you. H&r block free 1040ez If the employer does not adjust the overcollection, you can file a claim for refund using Form 843. H&r block free 1040ez Joint return. H&r block free 1040ez   If you are filing a joint return, you cannot add the social security or tier 1 RRTA tax withheld from your spouse's wages to the amount withheld from your wages. H&r block free 1040ez Figure the withholding separately for you and your spouse to determine if either of you has excess withholding. H&r block free 1040ez How to figure the credit if you did not work for a railroad. H&r block free 1040ez   If you did not work for a railroad during 2013, figure the credit as follows: 1. H&r block free 1040ez Add all social security tax withheld (but not more than $7,049. H&r block free 1040ez 40 for each employer). H&r block free 1040ez Enter the total here   2. H&r block free 1040ez Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. H&r block free 1040ez Add lines 1 and 2. H&r block free 1040ez If $7,049. H&r block free 1040ez 40 or less, stop here. H&r block free 1040ez You cannot take  the credit   4. H&r block free 1040ez Social security tax limit 7,049. H&r block free 1040ez 40 5. H&r block free 1040ez Credit. H&r block free 1040ez Subtract line 4 from line 3. H&r block free 1040ez Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ Example. H&r block free 1040ez You are married and file a joint return with your spouse who had no gross income in 2013. H&r block free 1040ez During 2013, you worked for the Brown Technology Company and earned $60,000 in wages. H&r block free 1040ez Social security tax of $3,720 was withheld. H&r block free 1040ez You also worked for another employer in 2013 and earned $55,000 in wages. H&r block free 1040ez $3,410 of social security tax was withheld from these wages. H&r block free 1040ez Because you worked for more than one employer and your total wages were more than $113,700, you can take a credit of $80. H&r block free 1040ez 60 for the excess social security tax withheld. H&r block free 1040ez 1. H&r block free 1040ez Add all social security tax withheld (but not more than $7,049. H&r block free 1040ez 40 for each employer). H&r block free 1040ez Enter the total here $7,130. H&r block free 1040ez 00 2. H&r block free 1040ez Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT” -0- 3. H&r block free 1040ez Add lines 1 and 2. H&r block free 1040ez If $7,049. H&r block free 1040ez 40 or less, stop here. H&r block free 1040ez You cannot take the credit 7,130. H&r block free 1040ez 00 4. H&r block free 1040ez Social security tax limit 7,049. H&r block free 1040ez 40 5. H&r block free 1040ez Credit. H&r block free 1040ez Subtract line 4 from line 3. H&r block free 1040ez Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $80. H&r block free 1040ez 60 How to figure the credit if you worked for a railroad. H&r block free 1040ez   If you were a railroad employee at any time during 2013, figure the credit as follows: 1. H&r block free 1040ez Add all social security and tier 1 RRTA tax withheld at the 6. H&r block free 1040ez 2% rate (but not more than $7,049. H&r block free 1040ez 40 for each employer). H&r block free 1040ez Enter the total here   2. H&r block free 1040ez Enter any uncollected social security and tier 1 RRTA tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. H&r block free 1040ez Add lines 1 and 2. H&r block free 1040ez If $7,049. H&r block free 1040ez 40 or less, stop here. H&r block free 1040ez You cannot take  the credit   4. H&r block free 1040ez Social security and tier 1 RRTA  tax limit 7,049. H&r block free 1040ez 40 5. H&r block free 1040ez Credit. H&r block free 1040ez Subtract line 4 from line 3. H&r block free 1040ez Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ How to take the credit. H&r block free 1040ez   Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 41. H&r block free 1040ez More information. H&r block free 1040ez   For more information on the credit, see Publication 505. H&r block free 1040ez Prev  Up  Next   Home   More Online Publications