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

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

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

3. E-File for FREE

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

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

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

Http Freefile Irs Gov

Student Filing Taxes 2013Form1040xTax Filing TipsFile An Extension On My TaxesIrs Tax Return 2011Free Amended Tax Return OnlineFree Tax Filing For Low IncomeBlank Printable 1040ez FormForm 1040ez 2011 Instructions2011 Irs Form 1040a1040ez Tax FormFile 2011 Taxes2012 Ez Tax Form2012 Tax Return SoftwareTurbotax 2012 ReturnEz Tax Form 2011File 1040 EzIrs Forms And PublicationsFree State Income Tax E File1040ez Form 2011 Printable1040nr Ez SoftwareWww Irs GovlefileE File Back TaxesSearch Irs Gov FreefileFree Electronic Tax FilingFile 1040x Online FreeForm 1040 20121040e1040x Free Software Downloads1040 Short FormTurbo Tax Filing 2012Irs Tax FormsTurbotax 2008 Free EditionFree 2012 Tax Filing Online1040 Ez Instructions 2014Irs1040How Do I Amend My 2013 Tax ReturnTax 1040ezE File Tax ExtensionCan I Still File My 2011 State Taxes

Http Freefile Irs Gov

Http freefile irs gov 37. Http freefile irs gov   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. Http freefile irs gov  The maximum adoption credit is $12,970 for 2013. Http freefile irs gov See Adoption Credit . Http freefile irs gov Plug-in electric vehicle credit. Http freefile irs gov  This credit has expired. Http freefile irs gov Credit for prior year minimum tax. Http freefile irs gov  The refundable portion of the credit for prior year minimum tax has expired. Http freefile irs gov Excess withholding of social security and railroad retirement tax. Http freefile irs gov  Social security tax and tier 1 railroad retirement (RRTA) tax were both withheld during 2013 at a rate of 6. Http freefile irs gov 2% of wages up to $113,700. Http freefile irs gov 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. Http freefile irs gov See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld . Http freefile irs gov Introduction This chapter discusses the following nonrefundable credits. Http freefile irs gov Adoption credit. Http freefile irs gov Alternative motor vehicle credit. Http freefile irs gov Alternative fuel vehicle refueling property credit. Http freefile irs gov Credit to holders of tax credit bonds. Http freefile irs gov Foreign tax credit. Http freefile irs gov Mortgage interest credit. Http freefile irs gov Nonrefundable credit for prior year minimum tax. Http freefile irs gov Plug-in electric drive motor vehicle credit. Http freefile irs gov Residential energy credits. Http freefile irs gov Retirement savings contributions credit. Http freefile irs gov This chapter also discusses the following refundable credits. Http freefile irs gov Credit for tax on undistributed capital gain. Http freefile irs gov Health coverage tax credit. Http freefile irs gov Credit for excess social security tax or railroad retirement tax withheld. Http freefile irs gov Several other credits are discussed in other chapters in this publication. Http freefile irs gov Child and dependent care credit (chapter 32). Http freefile irs gov Credit for the elderly or the disabled (chapter 33). Http freefile irs gov Child tax credit (chapter 34). Http freefile irs gov Education credits (chapter 35). Http freefile irs gov Earned income credit (chapter 36). Http freefile irs gov Nonrefundable credits. Http freefile irs gov   The first part of this chapter, Nonrefundable Credits , covers ten credits that you subtract from your tax. Http freefile irs gov These credits may reduce your tax to zero. Http freefile irs gov If these credits are more than your tax, the excess is not refunded to you. Http freefile irs gov Refundable credits. Http freefile irs gov   The second part of this chapter, Refundable Credits , covers three credits that are treated as payments and are refundable to you. Http freefile irs gov These credits are added to the federal income tax withheld and any estimated tax payments you made. Http freefile irs gov If this total is more than your total tax, the excess will be refunded to you. Http freefile irs gov 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. Http freefile irs gov However, if the total of these credits is more than your tax, the excess is not refunded to you. Http freefile irs gov 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. Http freefile irs gov The credit may be allowed for the adoption of a child with special needs even if you do not have any qualified expenses. Http freefile irs gov If your modified adjusted gross income (AGI) is more than $194,580, your credit is reduced. Http freefile irs gov If your modified AGI is $234,580 or more, you cannot take the credit. Http freefile irs gov Qualified adoption expenses. Http freefile irs gov   Qualified adoption expenses are reasonable and necessary expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child. Http freefile irs gov 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. Http freefile irs gov Nonqualified expenses. Http freefile irs gov   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. Http freefile irs gov Eligible child. Http freefile irs gov   The term “eligible child” means any individual: Under 18 years old, or Physically or mentally incapable of caring for himself or herself. Http freefile irs gov Child with special needs. Http freefile irs gov   An eligible child is a child with special needs if all three of the following apply. Http freefile irs gov The child was a citizen or resident of the United States (including U. Http freefile irs gov S. Http freefile irs gov possessions) at the time the adoption process began. Http freefile irs gov A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents' home. Http freefile irs gov The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. Http freefile irs gov 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. Http freefile irs gov When to take the credit. Http freefile irs gov   Generally, until the adoption becomes final, you take the credit in the year after your qualified expenses were paid or incurred. Http freefile irs gov If the adoption becomes final, you take the credit in the year your expenses were paid or incurred. Http freefile irs gov See the Instructions for Form 8839 for more specific information on when to take the credit. Http freefile irs gov Foreign child. Http freefile irs gov   If the child is not a U. Http freefile irs gov S. Http freefile irs gov citizen or resident at the time the adoption process began, you cannot take the credit unless the adoption becomes final. Http freefile irs gov 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. Http freefile irs gov How to take the credit. Http freefile irs gov   Figure your 2013 nonrefundable credit and any carryforward to 2014 on Form 8839 and attach it to your Form 1040. Http freefile irs gov Include the credit in your total for Form 1040, line 53. Http freefile irs gov Check box c and enter “8839” on the line next to that box. Http freefile irs gov More information. Http freefile irs gov   For more information, see the Instructions for Form 8839. Http freefile irs gov Alternative Motor Vehicle Credit You may be able to take this credit if you place a qualified fuel cell vehicle in service in 2013. Http freefile irs gov Amount of credit. Http freefile irs gov   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. Http freefile irs gov In the case of a foreign manufacturer, you generally can rely on its domestic distributor's certification to the IRS. Http freefile irs gov   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. Http freefile irs gov How to take the credit. Http freefile irs gov   To take the credit, you must complete Form 8910 and attach it to your Form 1040. Http freefile irs gov Include the credit in your total for Form 1040, line 53. Http freefile irs gov Check box c and enter “8910” on the line next to that box. Http freefile irs gov More information. Http freefile irs gov   For more information on the credit, see the Instructions for Form 8910. Http freefile irs gov 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. Http freefile irs gov Qualified alternative fuel vehicle refueling property. Http freefile irs gov   Qualified alternative fuel vehicle refueling property is any property (other than a building or its structural components) used for either of the following. Http freefile irs gov 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. Http freefile irs gov To recharge an electric vehicle, but only if the recharging property is located at the point where the vehicle is recharged. Http freefile irs gov   The following are alternative fuels. Http freefile irs gov 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. Http freefile irs gov 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. Http freefile irs gov Electricity. Http freefile irs gov Amount of the credit. Http freefile irs gov   For personal use property, the credit is generally the smaller of 30% of the property's cost or $1,000. Http freefile irs gov For business use property, the credit is generally the smaller of 30% of the property's cost or $30,000. Http freefile irs gov How to take the credit. Http freefile irs gov   To take the credit, you must complete Form 8911 and attach it to your Form 1040. Http freefile irs gov Include the credit in your total for Form 1040, line 53. Http freefile irs gov Check box c and enter “8911” on the line next to that box. Http freefile irs gov More information. Http freefile irs gov   For more information on the credit, see the Form 8911 instructions. Http freefile irs gov 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. Http freefile irs gov You may be able to take a credit if you are a holder of one of the following bonds. Http freefile irs gov Clean renewable energy bonds (issued before 2010). Http freefile irs gov New clean renewable energy bonds. Http freefile irs gov Qualified energy conservation bonds. Http freefile irs gov Qualified school construction bonds. Http freefile irs gov Qualified zone academy bonds. Http freefile irs gov Build America bonds. Http freefile irs gov In some instances, an issuer may elect to receive a credit for interest paid on the bond. Http freefile irs gov If the issuer makes this election, you cannot also claim a credit. Http freefile irs gov Interest income. Http freefile irs gov   The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return. Http freefile irs gov How to take the credit. Http freefile irs gov   Complete Form 8912 and attach it to your Form 1040. Http freefile irs gov Include the credit in your total for Form 1040, line 53. Http freefile irs gov Check box c and enter “8912” on the line next to that box. Http freefile irs gov More information. Http freefile irs gov   For more information, see the Instructions for Form 8912. Http freefile irs gov Foreign Tax Credit You generally can choose to take income taxes you paid or accrued during the year to a foreign country or U. Http freefile irs gov S. Http freefile irs gov possession as a credit against your U. Http freefile irs gov S. Http freefile irs gov income tax. Http freefile irs gov Or, you can deduct them as an itemized deduction (see chapter 22). Http freefile irs gov You cannot take a credit (or deduction) for foreign income taxes paid on income that you exclude from U. Http freefile irs gov S. Http freefile irs gov tax under any of the following. Http freefile irs gov Foreign earned income exclusion. Http freefile irs gov Foreign housing exclusion. Http freefile irs gov Income from Puerto Rico exempt from U. Http freefile irs gov S. Http freefile irs gov tax. Http freefile irs gov Possession exclusion. Http freefile irs gov Limit on the credit. Http freefile irs gov   Unless you can elect not to file Form 1116 (see Exception , later), your foreign tax credit cannot be more than your U. Http freefile irs gov S. Http freefile irs gov tax liability (Form 1040, line 44), multiplied by a fraction. Http freefile irs gov The numerator of the fraction is your taxable income from sources outside the United States. Http freefile irs gov The denominator is your total taxable income from U. Http freefile irs gov S. Http freefile irs gov and foreign sources. Http freefile irs gov See Publication 514 for more information. Http freefile irs gov How to take the credit. Http freefile irs gov   Complete Form 1116 and attach it to your Form 1040. Http freefile irs gov Enter the credit on Form 1040, line 47. Http freefile irs gov Exception. Http freefile irs gov   You do not have to complete Form 1116 to take the credit if all of the following apply. Http freefile irs gov 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). Http freefile irs gov If you had dividend income from shares of stock, you held those shares for at least 16 days. Http freefile irs gov You are not filing Form 4563 or excluding income from sources within Puerto Rico. Http freefile irs gov The total of your foreign taxes was not more than $300 (not more than $600 if married filing jointly). Http freefile irs gov 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. Http freefile irs gov More information. Http freefile irs gov   For more information on the credit and these requirements, see the Instructions for Form 1116. Http freefile irs gov Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals own a home. Http freefile irs gov If you qualify, you can take the credit each year for part of the home mortgage interest you pay. Http freefile irs gov Who qualifies. Http freefile irs gov   You may be eligible for the credit if you were issued a qualified mortgage credit certificate (MCC) from your state or local government. Http freefile irs gov Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. Http freefile irs gov Amount of credit. Http freefile irs gov   Figure your credit on Form 8396. Http freefile irs gov 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. Http freefile irs gov   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. Http freefile irs gov 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. Http freefile irs gov      Certified indebtedness amount on your MCC     Original amount of your mortgage   Limit based on credit rate. Http freefile irs gov   If the certificate credit rate is more than 20%, the credit you are allowed cannot be more than $2,000. Http freefile irs gov 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. Http freefile irs gov See Publication 530 for more information. Http freefile irs gov Carryforward. Http freefile irs gov   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. Http freefile irs gov 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. Http freefile irs gov   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). Http freefile irs gov How to take the credit. Http freefile irs gov    Figure your 2013 credit and any carryforward to 2014 on Form 8396, and attach it to your Form 1040. Http freefile irs gov Be sure to include any credit carryforward from 2010, 2011, and 2012. Http freefile irs gov   Include the credit in your total for Form 1040, line 53. Http freefile irs gov Check box c and enter “8396” on the line next to that box. Http freefile irs gov Reduced home mortgage interest deduction. Http freefile irs gov   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. Http freefile irs gov You must do this even if part of that amount is to be carried forward to 2014. Http freefile irs gov For more information about the home mortgage interest deduction, see chapter 23. Http freefile irs gov Recapture of federal mortgage subsidy. Http freefile irs gov   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. Http freefile irs gov 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. Http freefile irs gov See the Instructions for Form 8828 and chapter 15 for more information. Http freefile irs gov More information. Http freefile irs gov   For more information on the credit, see the Form 8396 instructions. Http freefile irs gov 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. Http freefile irs gov 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. Http freefile irs gov This is called the alternative minimum tax. Http freefile irs gov The special treatment of some items of income and expenses only allows you to postpone paying tax until a later year. Http freefile irs gov 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. Http freefile irs gov 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. Http freefile irs gov How to take the credit. Http freefile irs gov    Figure your 2013 nonrefundable credit (if any), and any carryforward to 2014 on Form 8801, and attach it to your Form 1040. Http freefile irs gov Include the credit in your total for Form 1040, line 53, and check box b. Http freefile irs gov You can carry forward any unused credit for prior year minimum tax to later years until it is completely used. Http freefile irs gov More information. Http freefile irs gov   For more information on the credit, see the Instructions for Form 8801. Http freefile irs gov 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. Http freefile irs gov Qualified plug-in electric drive motor vehicle. Http freefile irs gov   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. Http freefile irs gov Qualified two- or three-wheeled plug-in electric vehicle. Http freefile irs gov   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. Http freefile irs gov 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. Http freefile irs gov Certification and other requirements. Http freefile irs gov   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. Http freefile irs gov 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. Http freefile irs gov   The following requirements must also be met to qualify for the credit. Http freefile irs gov You are the owner of the vehicle. Http freefile irs gov If the vehicle is leased, only the lessor, and not the lessee, is entitled to the credit. Http freefile irs gov You placed the vehicle in service during 2013. Http freefile irs gov The vehicle is manufactured primarily for use on public streets, roads, and highways. Http freefile irs gov The original use of the vehicle began with you. Http freefile irs gov You acquired the vehicle for your use or to lease to others, and not for resale. Http freefile irs gov In the case of the qualified two- or three-wheeled plug-in electric vehicle, the vehicle is acquired after 2011 and before 2014. Http freefile irs gov You use the vehicle primarily in the United States. Http freefile irs gov How to take the credit. Http freefile irs gov   To take the credit, you must complete Form 8936 and attach it to your Form 1040. Http freefile irs gov Include the credit in your total for Form 1040, line 53. Http freefile irs gov Check box c and enter “8936” on the line next to that box. Http freefile irs gov More information. Http freefile irs gov   For more information on the credit, see the Form 8936 instructions. Http freefile irs gov 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. Http freefile irs gov Nonbusiness energy property credit. Http freefile irs gov Residential energy efficient property credit. Http freefile irs gov 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. Http freefile irs gov Nonbusiness energy property credit. Http freefile irs gov   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. Http freefile irs gov   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. Http freefile irs gov    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. Http freefile irs gov   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. Http freefile irs gov Any insulation material or system that is specifically and primarily designed to reduce heat loss or gain of a home. Http freefile irs gov Exterior window (including skylights). Http freefile irs gov Exterior doors. Http freefile irs gov Any metal or asphalt roof that has appropriate pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home. Http freefile irs gov   Residential energy property is any of the following. Http freefile irs gov 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. Http freefile irs gov Qualified natural gas, propane, or oil furnaces; and qualified natural gas, propane, or oil hot water boilers. Http freefile irs gov Certain advanced main air circulating fans used in natural gas, propane, or oil furnaces. Http freefile irs gov Residential energy efficient property credit. Http freefile irs gov   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. Http freefile irs gov 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. Http freefile irs gov Basis reduction. Http freefile irs gov   You must reduce the basis of your home by the amount of any credit allowed. Http freefile irs gov How to take the credit. Http freefile irs gov   Complete Form 5695 and attach it to your Form 1040. Http freefile irs gov Enter the credit on Form 1040, line 52. Http freefile irs gov More information. Http freefile irs gov   For more information on these credits, see the Form 5695 instructions. Http freefile irs gov 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. Http freefile irs gov However, you cannot take the credit if either of the following applies. Http freefile irs gov 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). Http freefile irs gov 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). Http freefile irs gov Student. Http freefile irs gov   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. Http freefile irs gov School. Http freefile irs gov   A school includes a technical, trade, or mechanical school. Http freefile irs gov It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Http freefile irs gov How to take the credit. Http freefile irs gov   Figure the credit on Form 8880. Http freefile irs gov Enter the credit on your Form 1040, line 50, or your Form 1040A, line 32, and attach Form 8880 to your return. Http freefile irs gov More information. Http freefile irs gov   For more information on the credit, see the Form 8880 instructions. Http freefile irs gov Refundable Credits The credits discussed in this part of the chapter are treated as payments of tax. Http freefile irs gov 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. Http freefile irs gov 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. Http freefile irs gov 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. Http freefile irs gov The mutual fund or REIT will send you Form 2439 showing your share of the undistributed capital gains and the tax paid, if any. Http freefile irs gov How to take the credit. Http freefile irs gov   To take the credit, attach Copy B of Form 2439 to your Form 1040. Http freefile irs gov Include the amount from box 2 of your Form 2439 in the total for Form 1040, line 71, and check box a. Http freefile irs gov More information. Http freefile irs gov   See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains. Http freefile irs gov 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. Http freefile irs gov 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. Http freefile irs gov 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. Http freefile irs gov S. Http freefile irs gov Treasury–HCTC. Http freefile irs gov ” 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. Http freefile irs gov You were not enrolled in Medicaid or the Children's Health Insurance Program (CHIP). Http freefile irs gov You were not enrolled in the Federal Employees Health Benefits program (FEHBP) or eligible to receive benefits under the U. Http freefile irs gov S. Http freefile irs gov military health system (TRICARE). Http freefile irs gov You were not imprisoned under federal, state, or local authority. Http freefile irs gov Your employer did not pay 50% or more of the cost of coverage. Http freefile irs gov You did not receive a 65% COBRA premium reduction from your former employer or COBRA administrator. Http freefile irs gov But, you cannot take the credit if you can be claimed as a dependent on someone else's 2013 tax return. Http freefile irs gov If you meet all of these conditions, you may be able to take a credit of up to 72. Http freefile irs gov 5% of the amount you paid directly to a qualified health plan for you and any qualifying family members. Http freefile irs gov You cannot take the credit for insurance premiums on coverage that was actually paid for with a National Emergency Grant. Http freefile irs gov 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. Http freefile irs gov You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. Http freefile irs gov 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. Http freefile irs gov TAA recipient. Http freefile irs gov   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). Http freefile irs gov Example. Http freefile irs gov You received a trade adjustment allowance for January 2013. Http freefile irs gov You were an eligible TAA recipient on the first day of January and February. Http freefile irs gov Alternative TAA recipient. Http freefile irs gov   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. Http freefile irs gov Example. Http freefile irs gov You received benefits under an alternative trade adjustment assistance program for older workers for October 2013. Http freefile irs gov The program was established by the Department of Labor. Http freefile irs gov You were an eligible alternative TAA recipient on the first day of October and November. Http freefile irs gov RTAA recipient. Http freefile irs gov   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. Http freefile irs gov PBGC pension recipient. Http freefile irs gov   You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply. Http freefile irs gov You were age 55 or older on the first day of the month. Http freefile irs gov You received a benefit for that month paid by the PBGC under title IV of the Employee Retirement Income Security Act of 1974 (ERISA). Http freefile irs gov 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. Http freefile irs gov How to take the credit. Http freefile irs gov   To take the credit, complete Form 8885 and attach it to your Form 1040. Http freefile irs gov Include your credit in the total for Form 1040, line 71, and check box c. Http freefile irs gov   You must attach health insurance bills (or COBRA payment coupons) and proof of payment for any amounts you include on Form 8885, line 2. Http freefile irs gov For details, see Publication 502 or Form 8885. Http freefile irs gov More information. Http freefile irs gov   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. Http freefile irs gov Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld Most employers must withhold social security tax from your wages. Http freefile irs gov If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax. Http freefile irs gov If you worked for two or more employers in 2013, you may have had too much social security tax withheld from your pay. Http freefile irs gov 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. Http freefile irs gov 2% rate. Http freefile irs gov You can claim the excess social security or tier 1 RRTA tax as a credit against your income tax when you file your return. Http freefile irs gov For the tier 1 RRTA tax, only use the portion of the tier 1 RRTA tax that was taxed at the 6. Http freefile irs gov 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. Http freefile irs gov 45%) or the Additional Medicare Tax rate (. Http freefile irs gov 9%). Http freefile irs gov 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. Http freefile irs gov 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. Http freefile irs gov 40 RRTA tier 2 $84,300 $3,709. Http freefile irs gov 20 All wages are subject to Medicare tax withholding. Http freefile irs gov   Use Form 843, Claim for Refund and Request for Abatement, to claim a refund of excess tier 2 RRTA tax. Http freefile irs gov Be sure to attach a copy of all of your W-2 forms. Http freefile irs gov Use Worksheet 3-3 in Publication 505, Tax Withholding and Estimated Tax, to help you figure the excess amount. Http freefile irs gov Employer's error. Http freefile irs gov   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. Http freefile irs gov The employer should adjust the tax for you. Http freefile irs gov If the employer does not adjust the overcollection, you can file a claim for refund using Form 843. Http freefile irs gov Joint return. Http freefile irs gov   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. Http freefile irs gov Figure the withholding separately for you and your spouse to determine if either of you has excess withholding. Http freefile irs gov How to figure the credit if you did not work for a railroad. Http freefile irs gov   If you did not work for a railroad during 2013, figure the credit as follows: 1. Http freefile irs gov Add all social security tax withheld (but not more than $7,049. Http freefile irs gov 40 for each employer). Http freefile irs gov Enter the total here   2. Http freefile irs gov 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. Http freefile irs gov Add lines 1 and 2. Http freefile irs gov If $7,049. Http freefile irs gov 40 or less, stop here. Http freefile irs gov You cannot take  the credit   4. Http freefile irs gov Social security tax limit 7,049. Http freefile irs gov 40 5. Http freefile irs gov Credit. Http freefile irs gov Subtract line 4 from line 3. Http freefile irs gov Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ Example. Http freefile irs gov You are married and file a joint return with your spouse who had no gross income in 2013. Http freefile irs gov During 2013, you worked for the Brown Technology Company and earned $60,000 in wages. Http freefile irs gov Social security tax of $3,720 was withheld. Http freefile irs gov You also worked for another employer in 2013 and earned $55,000 in wages. Http freefile irs gov $3,410 of social security tax was withheld from these wages. Http freefile irs gov Because you worked for more than one employer and your total wages were more than $113,700, you can take a credit of $80. Http freefile irs gov 60 for the excess social security tax withheld. Http freefile irs gov 1. Http freefile irs gov Add all social security tax withheld (but not more than $7,049. Http freefile irs gov 40 for each employer). Http freefile irs gov Enter the total here $7,130. Http freefile irs gov 00 2. Http freefile irs gov 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. Http freefile irs gov Add lines 1 and 2. Http freefile irs gov If $7,049. Http freefile irs gov 40 or less, stop here. Http freefile irs gov You cannot take the credit 7,130. Http freefile irs gov 00 4. Http freefile irs gov Social security tax limit 7,049. Http freefile irs gov 40 5. Http freefile irs gov Credit. Http freefile irs gov Subtract line 4 from line 3. Http freefile irs gov Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $80. Http freefile irs gov 60 How to figure the credit if you worked for a railroad. Http freefile irs gov   If you were a railroad employee at any time during 2013, figure the credit as follows: 1. Http freefile irs gov Add all social security and tier 1 RRTA tax withheld at the 6. Http freefile irs gov 2% rate (but not more than $7,049. Http freefile irs gov 40 for each employer). Http freefile irs gov Enter the total here   2. Http freefile irs gov 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. Http freefile irs gov Add lines 1 and 2. Http freefile irs gov If $7,049. Http freefile irs gov 40 or less, stop here. Http freefile irs gov You cannot take  the credit   4. Http freefile irs gov Social security and tier 1 RRTA  tax limit 7,049. Http freefile irs gov 40 5. Http freefile irs gov Credit. Http freefile irs gov Subtract line 4 from line 3. Http freefile irs gov Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ How to take the credit. Http freefile irs gov   Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 41. Http freefile irs gov More information. Http freefile irs gov   For more information on the credit, see Publication 505. Http freefile irs gov Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Newsletters

Subscribe
For free IRS Newsletters

Employee Plans News
Geared toward retirement plan practitioners - attorneys, accountants, actuaries, and others - this newsletter presents information about retirement plans. View our current edition, browse the newsletter archive, or subscribe to future editions.

Retirement News for Employers
For employers, business owners and their tax advisors – the latest on retirement plan rules, forms, plain language publications from IRS and other federal agencies. View current or prior editions.

Governmental Plans Updates
Recent developments for governmental plans.

Page Last Reviewed or Updated: 28-Mar-2014

The Http Freefile Irs Gov

Http freefile irs gov 5. Http freefile irs gov   Taxes Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: When To Deduct Taxes Real Estate TaxesSeparate elections. Http freefile irs gov Making the election. Http freefile irs gov Form 3115. Http freefile irs gov Income TaxesAccrual of contested income taxes. Http freefile irs gov Employment Taxes Other TaxesAdditional Medicare Tax. Http freefile irs gov What's New Additional Medicare Tax. Http freefile irs gov  Beginning in 2013, you must withhold a 0. Http freefile irs gov 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Http freefile irs gov Also, self-employed individuals may be required to pay Additional Medicare Tax on self-employment income. Http freefile irs gov See Employment Taxes , and Self-employment tax , later. Http freefile irs gov Introduction You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses. Http freefile irs gov You cannot deduct federal income taxes, estate and gift taxes, or state inheritance, legacy, and succession taxes. Http freefile irs gov Topics - This chapter discusses: When to deduct taxes Real estate taxes Income taxes Employment taxes Other taxes Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 334 Tax Guide for Small Business 510 Excise Taxes 538 Accounting Periods and Methods 551 Basis of Assets Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch SE (Form 1040) Self-Employment Tax 3115 Application for Change in Accounting Method 8959 Additional Medicare Tax See chapter 12 for information about getting publications and forms. Http freefile irs gov When To Deduct Taxes Generally, you can only deduct taxes in the year you pay them. Http freefile irs gov This applies whether you use the cash method or an accrual method of accounting. Http freefile irs gov Under an accrual method, you can deduct a tax before you pay it if you meet the exception for recurring items discussed under Economic Performance in Publication 538. Http freefile irs gov You can also elect to ratably accrue real estate taxes as discussed later under Real Estate Taxes . Http freefile irs gov Limit on accrual of taxes. Http freefile irs gov   A taxing jurisdiction can require the use of a date for accruing taxes that is earlier than the date it originally required. Http freefile irs gov However, if you use an accrual method, and can deduct the tax before you pay it, use the original accrual date for the year of change and all future years to determine when you can deduct the tax. Http freefile irs gov Example. Http freefile irs gov Your state imposes a tax on personal property used in a trade or business conducted in the state. Http freefile irs gov This tax is assessed and becomes a lien as of July 1 (accrual date). Http freefile irs gov In 2013, the state changed the assessment and lien dates from July 1, 2014, to December 31, 2013, for property tax year 2014. Http freefile irs gov Use the original accrual date (July 1, 2014) to determine when you can deduct the tax. Http freefile irs gov You must also use the July 1 accrual date for all future years to determine when you can deduct the tax. Http freefile irs gov Uniform capitalization rules. Http freefile irs gov   Uniform capitalization rules apply to certain taxpayers who produce real property or tangible personal property for use in a trade or business or for sale to customers. Http freefile irs gov They also apply to certain taxpayers who acquire property for resale. Http freefile irs gov Under these rules, you either include certain costs in inventory or capitalize certain expenses related to the property, such as taxes. Http freefile irs gov For more information, see chapter 1. Http freefile irs gov Carrying charges. Http freefile irs gov   Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. Http freefile irs gov You can elect to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. Http freefile irs gov For more information, see chapter 7. Http freefile irs gov Refunds of taxes. Http freefile irs gov   If you receive a refund for any taxes you deducted in an earlier year, include the refund in income to the extent the deduction reduced your federal income tax in the earlier year. Http freefile irs gov For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1. Http freefile irs gov    You must include in income any interest you receive on tax refunds. Http freefile irs gov Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. Http freefile irs gov The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. Http freefile irs gov Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. Http freefile irs gov See Taxes for local benefits , later. Http freefile irs gov If you use an accrual method, you generally cannot accrue real estate taxes until you pay them to the government authority. Http freefile irs gov However, you can elect to ratably accrue the taxes during the year. Http freefile irs gov See Electing to ratably accrue , later. Http freefile irs gov Taxes for local benefits. Http freefile irs gov   Generally, you cannot deduct taxes charged for local benefits and improvements that tend to increase the value of your property. Http freefile irs gov These include assessments for streets, sidewalks, water mains, sewer lines, and public parking facilities. Http freefile irs gov You should increase the basis of your property by the amount of the assessment. Http freefile irs gov   You can deduct taxes for these local benefits only if the taxes are for maintenance, repairs, or interest charges related to those benefits. Http freefile irs gov If part of the tax is for maintenance, repairs, or interest, you must be able to show how much of the tax is for these expenses to claim a deduction for that part of the tax. Http freefile irs gov Example. Http freefile irs gov To improve downtown commercial business, Waterfront City converted a downtown business area street into an enclosed pedestrian mall. Http freefile irs gov The city assessed the full cost of construction, financed with 10-year bonds, against the affected properties. Http freefile irs gov The city is paying the principal and interest with the annual payments made by the property owners. Http freefile irs gov The assessments for construction costs are not deductible as taxes or as business expenses, but are depreciable capital expenses. Http freefile irs gov The part of the payments used to pay the interest charges on the bonds is deductible as taxes. Http freefile irs gov Charges for services. Http freefile irs gov   Water bills, sewerage, and other service charges assessed against your business property are not real estate taxes, but are deductible as business expenses. Http freefile irs gov Purchase or sale of real estate. Http freefile irs gov   If real estate is sold, the real estate taxes must be allocated between the buyer and the seller. Http freefile irs gov   The buyer and seller must allocate the real estate taxes according to the number of days in the real property tax year (the period to which the tax imposed relates) that each owned the property. Http freefile irs gov Treat the seller as paying the taxes up to but not including the date of sale. Http freefile irs gov Treat the buyer as paying the taxes beginning with the date of sale. Http freefile irs gov You can usually find this information on the settlement statement you received at closing. Http freefile irs gov   If you (the seller) use an accrual method and have not elected to ratably accrue real estate taxes, you are considered to have accrued your part of the tax on the date you sell the property. Http freefile irs gov Example. Http freefile irs gov Alberto Verde, a calendar year accrual method taxpayer, owns real estate in Olmo County. Http freefile irs gov He has not elected to ratably accrue property taxes. Http freefile irs gov November 30 of each year is the assessment and lien date for the current real property tax year, which is the calendar year. Http freefile irs gov He sold the property on June 30, 2013. Http freefile irs gov Under his accounting method he would not be able to claim a deduction for the taxes because the sale occurred before November 30. Http freefile irs gov He is treated as having accrued his part of the tax, 181/366  (January 1–June 29), on June 30, and he can deduct it for 2013. Http freefile irs gov Electing to ratably accrue. Http freefile irs gov   If you use an accrual method, you can elect to accrue real estate tax related to a definite period ratably over that period. Http freefile irs gov Example. Http freefile irs gov Juan Sanchez is a calendar year taxpayer who uses an accrual method. Http freefile irs gov His real estate taxes for the real property tax year, July 1, 2013, to June 30, 2014, are $1,200. Http freefile irs gov July 1 is the assessment and lien date. Http freefile irs gov If Juan elects to ratably accrue the taxes, $600 will accrue in 2013 ($1,200 × 6/12, July 1–December 31) and the balance will accrue in 2014. Http freefile irs gov Separate elections. Http freefile irs gov   You can elect to ratably accrue the taxes for each separate trade or business and for nonbusiness activities if you account for them separately. Http freefile irs gov Once you elect to ratably accrue real estate taxes, you must use that method unless you get permission from the IRS to change. Http freefile irs gov See Form 3115 , later. Http freefile irs gov Making the election. Http freefile irs gov   If you elect to ratably accrue the taxes for the first year in which you incur real estate taxes, attach a statement to your income tax return for that year. Http freefile irs gov The statement should show all the following items. Http freefile irs gov The trades or businesses to which the election applies and the accounting method or methods used. Http freefile irs gov The period to which the taxes relate. Http freefile irs gov The computation of the real estate tax deduction for that first year. Http freefile irs gov   Generally, you must file your return by the due date (including extensions). Http freefile irs gov However, if you timely filed your return for the year without electing to ratably accrue, you can still make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). Http freefile irs gov Attach the statement to the amended return and write “Filed pursuant to section 301. Http freefile irs gov 9100-2” on the statement. Http freefile irs gov File the amended return at the same address where you filed the original return. Http freefile irs gov Form 3115. Http freefile irs gov    If you elect to ratably accrue real estate taxes for a year after the first year in which you incur real estate taxes, or if you want to revoke your election to ratably accrue real estate taxes, file Form 3115. Http freefile irs gov For more information, including applicable time frames for filing, see the Instructions for Form 3115. Http freefile irs gov Note. Http freefile irs gov If you are filing an application for a change in accounting method filed after January 9, 2011, for a year of change ending after April 29, 2010, see Revenue Procedure 2011-14, 2011-4 I. Http freefile irs gov R. Http freefile irs gov B. Http freefile irs gov 330, as modified and clarified by Revenue Procedure 2012-19, 2012-14 I. Http freefile irs gov R. Http freefile irs gov B. Http freefile irs gov 689, and Revenue Procedure 2012-20, 2012-14 I. Http freefile irs gov R. Http freefile irs gov B. Http freefile irs gov 700, or any successor. Http freefile irs gov Revenue Procedure 2011-14 is available at  www. Http freefile irs gov irs. Http freefile irs gov gov/irb/2011-04IRB/ar08. Http freefile irs gov html. Http freefile irs gov Income Taxes This section discusses federal, state, local, and foreign income taxes. Http freefile irs gov Federal income taxes. Http freefile irs gov   You cannot deduct federal income taxes. Http freefile irs gov State and local income taxes. Http freefile irs gov   A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses. Http freefile irs gov An individual can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). Http freefile irs gov   However, an individual can deduct a state tax on gross income (as distinguished from net income) directly attributable to a trade or business as a business expense. Http freefile irs gov Accrual of contested income taxes. Http freefile irs gov   If you use an accrual method, and you contest a state or local income tax liability, you must accrue and deduct any contested amount in the tax year in which the liability is finally determined. Http freefile irs gov   If additional state or local income taxes for a prior year are assessed in a later year, you can deduct the taxes in the year in which they were originally imposed (the prior year) if the tax liability is not contested. Http freefile irs gov You cannot deduct them in the year in which the liability is finally determined. Http freefile irs gov    The filing of an income tax return is not considered a contest and, in the absence of an overt act of protest, you can deduct the tax in the prior year. Http freefile irs gov Also, you can deduct any additional taxes in the prior year if you do not show some affirmative evidence of denial of the liability. Http freefile irs gov   However, if you consistently deduct additional assessments in the year they are paid or finally determined (including those for which there was no contest), you must continue to do so. Http freefile irs gov You cannot take a deduction in the earlier year unless you receive permission to change your method of accounting. Http freefile irs gov For more information on accounting methods, see When Can I Deduct an Expense in chapter 1. Http freefile irs gov Foreign income taxes. Http freefile irs gov   Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. Http freefile irs gov S. Http freefile irs gov possession. Http freefile irs gov However, an individual cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. Http freefile irs gov S. Http freefile irs gov tax under the foreign earned income exclusion or the foreign housing exclusion. Http freefile irs gov For information on these exclusions, see Publication 54, Tax Guide for U. Http freefile irs gov S. Http freefile irs gov Citizens and Resident Aliens Abroad. Http freefile irs gov For information on the foreign tax credit, see Publication 514, Foreign Tax Credit for Individuals. Http freefile irs gov Employment Taxes If you have employees, you must withhold various taxes from your employees' pay. Http freefile irs gov Most employers must withhold their employees' share of social security, Medicare taxes, and Additional Medicare Tax (if applicable) along with state and federal income taxes. Http freefile irs gov You may also need to pay certain employment taxes from your own funds. Http freefile irs gov These include your share of social security and Medicare taxes as an employer, along with unemployment taxes. Http freefile irs gov Note. Http freefile irs gov Additional Medicare Tax is only imposed on the employee. Http freefile irs gov There is no employer share of Additional Medicare Tax. Http freefile irs gov Your deduction for wages paid is not reduced by the social security and Medicare taxes, Additional Medicare Tax, and income taxes you withhold from your employees. Http freefile irs gov You can deduct the employment taxes you must pay from your own funds as taxes. Http freefile irs gov Example. Http freefile irs gov You pay your employee $18,000 a year. Http freefile irs gov However, after you withhold various taxes, your employee receives $14,500. Http freefile irs gov You also pay an additional $1,500 in employment taxes. Http freefile irs gov You should deduct the full $18,000 as wages. Http freefile irs gov You can deduct the $1,500 you pay from your own funds as taxes. Http freefile irs gov For more information on employment taxes, see Publication 15 (Circular E). Http freefile irs gov Unemployment fund taxes. Http freefile irs gov   As an employer, you may have to make payments to a state unemployment compensation fund or to a state disability benefit fund. Http freefile irs gov Deduct these payments as taxes. Http freefile irs gov Other Taxes The following are other taxes you can deduct if you incur them in the ordinary course of your trade or business. Http freefile irs gov Excise taxes. Http freefile irs gov   Generally, you can deduct as a business expense all excise taxes that are ordinary and necessary expenses of carrying on your trade or business. Http freefile irs gov However, see Fuel taxes , later. Http freefile irs gov   For more information on excise taxes, see Publication 510. Http freefile irs gov Franchise taxes. Http freefile irs gov   You can deduct corporate franchise taxes as a business expense. Http freefile irs gov Fuel taxes. Http freefile irs gov   Generally, taxes on gasoline, diesel fuel, and other motor fuels that you use in your business are included as part of the cost of the fuel. Http freefile irs gov Do not deduct these taxes as a separate item. Http freefile irs gov   You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. Http freefile irs gov For more information, see Publication 510. Http freefile irs gov Occupational taxes. Http freefile irs gov   You can deduct as a business expense an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Http freefile irs gov Personal property tax. Http freefile irs gov   You can deduct any tax imposed by a state or local government on personal property used in your trade or business. Http freefile irs gov Sales tax. Http freefile irs gov   Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. Http freefile irs gov If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. Http freefile irs gov If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. Http freefile irs gov If the property is depreciable, add the sales tax to the basis for depreciation. Http freefile irs gov For more information on basis, see Publication 551. Http freefile irs gov    Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. Http freefile irs gov Also, do not include these taxes in gross receipts or sales. Http freefile irs gov Self-employment tax. Http freefile irs gov   You can deduct part of your self-employment tax as a business expense in figuring your adjusted gross income. Http freefile irs gov This deduction only affects your income tax. Http freefile irs gov It does not affect your net earnings from self-employment or your self-employment tax. Http freefile irs gov   To deduct the tax, enter on Form 1040, line 27, the amount shown on the Deduction for one-half of self-employment tax line of Schedule SE (Form 1040). Http freefile irs gov   For more information on self-employment tax, see Publication 334. Http freefile irs gov Additional Medicare Tax. Http freefile irs gov   Beginning in 2013, you may be required to pay Additional Medicare Tax on self-employment income. Http freefile irs gov See Form 8959 and the Instructions for Form 8959 for more information on the Additional Medicare Tax. Http freefile irs gov Prev  Up  Next   Home   More Online Publications