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Irs 2012 Tax Forms 1040 Instructions

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Irs 2012 Tax Forms 1040 Instructions

Irs 2012 tax forms 1040 instructions 1. Irs 2012 tax forms 1040 instructions   Traditional IRAs Table of Contents What's New for 2013 What's New for 2014 Introduction Who Can Open a Traditional IRA?What Is Compensation? When Can a Traditional IRA Be Opened? How Can a Traditional IRA Be Opened?Individual Retirement Account Individual Retirement Annuity Individual Retirement Bonds Simplified Employee Pension (SEP) Employer and Employee Association Trust Accounts Required Disclosures How Much Can Be Contributed?Limit. Irs 2012 tax forms 1040 instructions When repayment contributions can be made. Irs 2012 tax forms 1040 instructions No deduction. Irs 2012 tax forms 1040 instructions Reserve component. Irs 2012 tax forms 1040 instructions Figuring your IRA deduction. Irs 2012 tax forms 1040 instructions Reporting the repayment. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions General Limit Kay Bailey Hutchison Spousal IRA Limit Filing Status Less Than Maximum Contributions More Than Maximum Contributions When Can Contributions Be Made? How Much Can You Deduct?Kay Bailey Hutchison Spousal IRA. Irs 2012 tax forms 1040 instructions Are You Covered by an Employer Plan? Limit if Covered by Employer Plan Reporting Deductible Contributions Nondeductible Contributions Examples — Worksheet for Reduced IRA Deduction for 2013 What if You Inherit an IRA?Treating it as your own. Irs 2012 tax forms 1040 instructions Can You Move Retirement Plan Assets?Transfers to Roth IRAs from other retirement plans. Irs 2012 tax forms 1040 instructions Trustee-to-Trustee Transfer Rollovers Transfers Incident To Divorce Converting From Any Traditional IRA Into a Roth IRA Recharacterizations When Can You Withdraw or Use Assets?Contributions Returned Before Due Date of Return When Must You Withdraw Assets? (Required Minimum Distributions)IRA Owners IRA Beneficiaries Which Table Do You Use To Determine Your Required Minimum Distribution? What Age(s) Do You Use With the Table(s)? Miscellaneous Rules for Required Minimum Distributions Are Distributions Taxable?January 2013 QCDs treated as made in 2012. Irs 2012 tax forms 1040 instructions 2013 Reporting. Irs 2012 tax forms 1040 instructions Additional reporting requirements if you made the election to treat a January 2013 QCD as made in 2012. Irs 2012 tax forms 1040 instructions One-time transfer. Irs 2012 tax forms 1040 instructions Testing period rules apply. Irs 2012 tax forms 1040 instructions More information. Irs 2012 tax forms 1040 instructions Distributions Fully or Partly Taxable Figuring the Nontaxable and Taxable Amounts Recognizing Losses on Traditional IRA Investments Other Special IRA Distribution Situations Reporting and Withholding Requirements for Taxable Amounts What Acts Result in Penalties or Additional Taxes?Prohibited Transactions Investment in Collectibles Excess Contributions Early Distributions Excess Accumulations (Insufficient Distributions) Reporting Additional Taxes What's New for 2013 Traditional IRA contribution and deduction limit. Irs 2012 tax forms 1040 instructions  The contribution limit to your traditional IRA for 2013 will be increased to the smaller of the following amounts: $5,500, or Your taxable compensation for the year. Irs 2012 tax forms 1040 instructions If you were age 50 or older before 2014, the most that can be contributed to your traditional IRA for 2013 will be the smaller of the following amounts: $6,500, or Your taxable compensation for the year. Irs 2012 tax forms 1040 instructions For more information, see How Much Can Be Contributed? in this chapter. Irs 2012 tax forms 1040 instructions Modified AGI limit for traditional IRA contributions increased. Irs 2012 tax forms 1040 instructions  For 2013, if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er), More than $59,000 but less than $69,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Irs 2012 tax forms 1040 instructions If you either lived with your spouse or file a joint return, and your spouse was covered by a retirement plan at work, but you were not, your deduction is phased out if your modified AGI is more than $178,000 but less than $188,000. Irs 2012 tax forms 1040 instructions If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. Irs 2012 tax forms 1040 instructions See How Much Can You Deduct? in this chapter. Irs 2012 tax forms 1040 instructions Net Investment Income Tax. Irs 2012 tax forms 1040 instructions  For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 457(b) plans, and IRAs). Irs 2012 tax forms 1040 instructions However, these distributions are taken into account when determining the modified adjusted gross income threshold. Irs 2012 tax forms 1040 instructions Distributions from a nonqualified retirement plan are included in net investment income. Irs 2012 tax forms 1040 instructions See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. Irs 2012 tax forms 1040 instructions What's New for 2014 Modified AGI limit for traditional IRA contributions increased. Irs 2012 tax forms 1040 instructions  For 2014, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $96,000 but less than $116,000 for a married couple filing a joint return or a qualifying widow(er), More than $60,000 but less than $70,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Irs 2012 tax forms 1040 instructions If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. Irs 2012 tax forms 1040 instructions If your modified AGI is $191,000 or more, you cannot take a deduction for contributions to a traditional IRA. Irs 2012 tax forms 1040 instructions Introduction This chapter discusses the original IRA. Irs 2012 tax forms 1040 instructions In this publication the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. Irs 2012 tax forms 1040 instructions ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. Irs 2012 tax forms 1040 instructions The following are two advantages of a traditional IRA: You may be able to deduct some or all of your contributions to it, depending on your circumstances. Irs 2012 tax forms 1040 instructions Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. Irs 2012 tax forms 1040 instructions Who Can Open a Traditional IRA? You can open and make contributions to a traditional IRA if: You (or, if you file a joint return, your spouse) received taxable compensation during the year, and You were not age 70½ by the end of the year. Irs 2012 tax forms 1040 instructions You can have a traditional IRA whether or not you are covered by any other retirement plan. Irs 2012 tax forms 1040 instructions However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. Irs 2012 tax forms 1040 instructions See How Much Can You Deduct , later. Irs 2012 tax forms 1040 instructions Both spouses have compensation. Irs 2012 tax forms 1040 instructions   If both you and your spouse have compensation and are under age 70½, each of you can open an IRA. Irs 2012 tax forms 1040 instructions You cannot both participate in the same IRA. Irs 2012 tax forms 1040 instructions If you file a joint return, only one of you needs to have compensation. Irs 2012 tax forms 1040 instructions What Is Compensation? Generally, compensation is what you earn from working. Irs 2012 tax forms 1040 instructions For a summary of what compensation does and does not include, see Table 1-1. Irs 2012 tax forms 1040 instructions Compensation includes all of the items discussed next (even if you have more than one type). Irs 2012 tax forms 1040 instructions Wages, salaries, etc. Irs 2012 tax forms 1040 instructions   Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. Irs 2012 tax forms 1040 instructions The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Irs 2012 tax forms 1040 instructions Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2. Irs 2012 tax forms 1040 instructions Commissions. Irs 2012 tax forms 1040 instructions   An amount you receive that is a percentage of profits or sales price is compensation. Irs 2012 tax forms 1040 instructions Self-employment income. Irs 2012 tax forms 1040 instructions   If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of: The deduction for contributions made on your behalf to retirement plans, and The deduction allowed for the deductible part of your self-employment taxes. Irs 2012 tax forms 1040 instructions   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. Irs 2012 tax forms 1040 instructions Self-employment loss. Irs 2012 tax forms 1040 instructions   If you have a net loss from self-employment, do not subtract the loss from your salaries or wages when figuring your total compensation. Irs 2012 tax forms 1040 instructions Alimony and separate maintenance. Irs 2012 tax forms 1040 instructions   For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance. Irs 2012 tax forms 1040 instructions Nontaxable combat pay. Irs 2012 tax forms 1040 instructions   If you were a member of the U. Irs 2012 tax forms 1040 instructions S. Irs 2012 tax forms 1040 instructions Armed Forces, compensation includes any nontaxable combat pay you received. Irs 2012 tax forms 1040 instructions This amount should be reported in box 12 of your 2013 Form W-2 with code Q. Irs 2012 tax forms 1040 instructions Table 1-1. Irs 2012 tax forms 1040 instructions Compensation for Purposes of an IRA Includes . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions Does not include . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions   earnings and profits from property. Irs 2012 tax forms 1040 instructions wages, salaries, etc. Irs 2012 tax forms 1040 instructions     interest and dividend income. Irs 2012 tax forms 1040 instructions commissions. Irs 2012 tax forms 1040 instructions     pension or annuity income. Irs 2012 tax forms 1040 instructions self-employment income. Irs 2012 tax forms 1040 instructions     deferred compensation. Irs 2012 tax forms 1040 instructions alimony and separate maintenance. Irs 2012 tax forms 1040 instructions     income from certain  partnerships. Irs 2012 tax forms 1040 instructions nontaxable combat pay. Irs 2012 tax forms 1040 instructions     any amounts you exclude from income. Irs 2012 tax forms 1040 instructions     What Is Not Compensation? Compensation does not include any of the following items. Irs 2012 tax forms 1040 instructions Earnings and profits from property, such as rental income, interest income, and dividend income. Irs 2012 tax forms 1040 instructions Pension or annuity income. Irs 2012 tax forms 1040 instructions Deferred compensation received (compensation payments postponed from a past year). Irs 2012 tax forms 1040 instructions Income from a partnership for which you do not provide services that are a material income-producing factor. Irs 2012 tax forms 1040 instructions Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. Irs 2012 tax forms 1040 instructions Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. Irs 2012 tax forms 1040 instructions When Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. Irs 2012 tax forms 1040 instructions However, the time for making contributions for any year is limited. Irs 2012 tax forms 1040 instructions See When Can Contributions Be Made , later. Irs 2012 tax forms 1040 instructions How Can a Traditional IRA Be Opened? You can open different kinds of IRAs with a variety of organizations. Irs 2012 tax forms 1040 instructions You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. Irs 2012 tax forms 1040 instructions You can also open an IRA through your stockbroker. Irs 2012 tax forms 1040 instructions Any IRA must meet Internal Revenue Code requirements. Irs 2012 tax forms 1040 instructions The requirements for the various arrangements are discussed below. Irs 2012 tax forms 1040 instructions Kinds of traditional IRAs. Irs 2012 tax forms 1040 instructions   Your traditional IRA can be an individual retirement account or annuity. Irs 2012 tax forms 1040 instructions It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. Irs 2012 tax forms 1040 instructions Individual Retirement Account An individual retirement account is a trust or custodial account set up in the United States for the exclusive benefit of you or your beneficiaries. Irs 2012 tax forms 1040 instructions The account is created by a written document. Irs 2012 tax forms 1040 instructions The document must show that the account meets all of the following requirements. Irs 2012 tax forms 1040 instructions The trustee or custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian. Irs 2012 tax forms 1040 instructions The trustee or custodian generally cannot accept contributions of more than the deductible amount for the year. Irs 2012 tax forms 1040 instructions However, rollover contributions and employer contributions to a simplified employee pension (SEP) can be more than this amount. Irs 2012 tax forms 1040 instructions Contributions, except for rollover contributions, must be in cash. Irs 2012 tax forms 1040 instructions See Rollovers , later. Irs 2012 tax forms 1040 instructions You must have a nonforfeitable right to the amount at all times. Irs 2012 tax forms 1040 instructions Money in your account cannot be used to buy a life insurance policy. Irs 2012 tax forms 1040 instructions Assets in your account cannot be combined with other property, except in a common trust fund or common investment fund. Irs 2012 tax forms 1040 instructions You must start receiving distributions by April 1 of the year following the year in which you reach age 70½. Irs 2012 tax forms 1040 instructions See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Irs 2012 tax forms 1040 instructions Individual Retirement Annuity You can open an individual retirement annuity by purchasing an annuity contract or an endowment contract from a life insurance company. Irs 2012 tax forms 1040 instructions An individual retirement annuity must be issued in your name as the owner, and either you or your beneficiaries who survive you are the only ones who can receive the benefits or payments. Irs 2012 tax forms 1040 instructions An individual retirement annuity must meet all the following requirements. Irs 2012 tax forms 1040 instructions Your entire interest in the contract must be nonforfeitable. Irs 2012 tax forms 1040 instructions The contract must provide that you cannot transfer any portion of it to any person other than the issuer. Irs 2012 tax forms 1040 instructions There must be flexible premiums so that if your compensation changes, your payment can also change. Irs 2012 tax forms 1040 instructions This provision applies to contracts issued after November 6, 1978. Irs 2012 tax forms 1040 instructions The contract must provide that contributions cannot be more than the deductible amount for an IRA for the year, and that you must use any refunded premiums to pay for future premiums or to buy more benefits before the end of the calendar year after the year in which you receive the refund. Irs 2012 tax forms 1040 instructions Distributions must begin by April 1 of the year following the year in which you reach age 70½. Irs 2012 tax forms 1040 instructions See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Irs 2012 tax forms 1040 instructions Individual Retirement Bonds The sale of individual retirement bonds issued by the federal government was suspended after April 30, 1982. Irs 2012 tax forms 1040 instructions The bonds have the following features. Irs 2012 tax forms 1040 instructions They stop earning interest when you reach age 70½. Irs 2012 tax forms 1040 instructions If you die, interest will stop 5 years after your death, or on the date you would have reached age 70½, whichever is earlier. Irs 2012 tax forms 1040 instructions You cannot transfer the bonds. Irs 2012 tax forms 1040 instructions If you cash (redeem) the bonds before the year in which you reach age 59½, you may be subject to a 10% additional tax. Irs 2012 tax forms 1040 instructions See Age 59½ Rule under Early Distributions, later. Irs 2012 tax forms 1040 instructions You can roll over redemption proceeds into IRAs. Irs 2012 tax forms 1040 instructions Simplified Employee Pension (SEP) A simplified employee pension (SEP) is a written arrangement that allows your employer to make deductible contributions to a traditional IRA (a SEP IRA) set up for you to receive such contributions. Irs 2012 tax forms 1040 instructions Generally, distributions from SEP IRAs are subject to the withdrawal and tax rules that apply to traditional IRAs. Irs 2012 tax forms 1040 instructions See Publication 560 for more information about SEPs. Irs 2012 tax forms 1040 instructions Employer and Employee Association Trust Accounts Your employer or your labor union or other employee association can set up a trust to provide individual retirement accounts for employees or members. Irs 2012 tax forms 1040 instructions The requirements for individual retirement accounts apply to these traditional IRAs. Irs 2012 tax forms 1040 instructions Required Disclosures The trustee or issuer (sometimes called the sponsor) of your traditional IRA generally must give you a disclosure statement at least 7 days before you open your IRA. Irs 2012 tax forms 1040 instructions However, the sponsor does not have to give you the statement until the date you open (or purchase, if earlier) your IRA, provided you are given at least 7 days from that date to revoke the IRA. Irs 2012 tax forms 1040 instructions The disclosure statement must explain certain items in plain language. Irs 2012 tax forms 1040 instructions For example, the statement should explain when and how you can revoke the IRA, and include the name, address, and telephone number of the person to receive the notice of cancellation. Irs 2012 tax forms 1040 instructions This explanation must appear at the beginning of the disclosure statement. Irs 2012 tax forms 1040 instructions If you revoke your IRA within the revocation period, the sponsor must return to you the entire amount you paid. Irs 2012 tax forms 1040 instructions The sponsor must report on the appropriate IRS forms both your contribution to the IRA (unless it was made by a trustee-to-trustee transfer) and the amount returned to you. Irs 2012 tax forms 1040 instructions These requirements apply to all sponsors. Irs 2012 tax forms 1040 instructions How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. Irs 2012 tax forms 1040 instructions These limits and rules are explained below. Irs 2012 tax forms 1040 instructions Community property laws. Irs 2012 tax forms 1040 instructions   Except as discussed later under Kay Bailey Hutchison Spousal IRA Limit , each spouse figures his or her limit separately, using his or her own compensation. Irs 2012 tax forms 1040 instructions This is the rule even in states with community property laws. Irs 2012 tax forms 1040 instructions Brokers' commissions. Irs 2012 tax forms 1040 instructions   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. Irs 2012 tax forms 1040 instructions For information about whether you can deduct brokers' commissions, see Brokers' commissions , later, under How Much Can You Deduct. Irs 2012 tax forms 1040 instructions Trustees' fees. Irs 2012 tax forms 1040 instructions   Trustees' administrative fees are not subject to the contribution limit. Irs 2012 tax forms 1040 instructions For information about whether you can deduct trustees' fees, see Trustees' fees , later, under How Much Can You Deduct. Irs 2012 tax forms 1040 instructions Qualified reservist repayments. Irs 2012 tax forms 1040 instructions   If you were a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions (defined later under Early Distributions) you received. Irs 2012 tax forms 1040 instructions You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. Irs 2012 tax forms 1040 instructions To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or a similar arrangement. Irs 2012 tax forms 1040 instructions Limit. Irs 2012 tax forms 1040 instructions   Your qualified reservist repayments cannot be more than your qualified reservist distributions, explained under Early Distributions , later. Irs 2012 tax forms 1040 instructions When repayment contributions can be made. Irs 2012 tax forms 1040 instructions   You cannot make these repayment contributions later than the date that is 2 years after your active duty period ends. Irs 2012 tax forms 1040 instructions No deduction. Irs 2012 tax forms 1040 instructions   You cannot deduct qualified reservist repayments. Irs 2012 tax forms 1040 instructions Reserve component. Irs 2012 tax forms 1040 instructions   The term “reserve component” means the: Army National Guard of the United States, Army Reserve, Naval Reserve, Marine Corps Reserve, Air National Guard of the United States, Air Force Reserve, Coast Guard Reserve, or Reserve Corps of the Public Health Service. Irs 2012 tax forms 1040 instructions Figuring your IRA deduction. Irs 2012 tax forms 1040 instructions   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. Irs 2012 tax forms 1040 instructions Reporting the repayment. Irs 2012 tax forms 1040 instructions   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions   In 2013, your IRA contribution limit is $5,500. Irs 2012 tax forms 1040 instructions However, because of your filing status and AGI, the limit on the amount you can deduct is $3,500. Irs 2012 tax forms 1040 instructions You can make a nondeductible contribution of $2,000 ($5,500 - $3,500). Irs 2012 tax forms 1040 instructions In an earlier year you received a $3,000 qualified reservist distribution, which you would like to repay this year. Irs 2012 tax forms 1040 instructions   For 2013, you can contribute a total of $8,500 to your IRA. Irs 2012 tax forms 1040 instructions This is made up of the maximum deductible contribution of $3,500; a nondeductible contribution of $2,000; and a $3,000 qualified reservist repayment. Irs 2012 tax forms 1040 instructions You contribute the maximum allowable for the year. Irs 2012 tax forms 1040 instructions Since you are making a nondeductible contribution ($2,000) and a qualified reservist repayment ($3,000), you must file Form 8606 with your return and include $5,000 ($2,000 + $3,000) on line 1 of Form 8606. Irs 2012 tax forms 1040 instructions The qualified reservist repayment is not deductible. Irs 2012 tax forms 1040 instructions Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. Irs 2012 tax forms 1040 instructions See chapter 2 for information about Roth IRAs. Irs 2012 tax forms 1040 instructions General Limit For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation (defined earlier) for the year. Irs 2012 tax forms 1040 instructions Note. Irs 2012 tax forms 1040 instructions This limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). Irs 2012 tax forms 1040 instructions This is the most that can be contributed regardless of whether the contributions are to one or more traditional IRAs or whether all or part of the contributions are nondeductible. Irs 2012 tax forms 1040 instructions (See Nondeductible Contributions , later. Irs 2012 tax forms 1040 instructions ) Qualified reservist repayments do not affect this limit. Irs 2012 tax forms 1040 instructions Examples. Irs 2012 tax forms 1040 instructions George, who is 34 years old and single, earns $24,000 in 2013. Irs 2012 tax forms 1040 instructions His IRA contributions for 2013 are limited to $5,500. Irs 2012 tax forms 1040 instructions Danny, an unmarried college student working part time, earns $3,500 in 2013. Irs 2012 tax forms 1040 instructions His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. Irs 2012 tax forms 1040 instructions More than one IRA. Irs 2012 tax forms 1040 instructions   If you have more than one IRA, the limit applies to the total contributions made on your behalf to all your traditional IRAs for the year. Irs 2012 tax forms 1040 instructions Annuity or endowment contracts. Irs 2012 tax forms 1040 instructions   If you invest in an annuity or endowment contract under an individual retirement annuity, no more than $5,500 ($6,500 if you are age 50 or older) can be contributed toward its cost for the tax year, including the cost of life insurance coverage. Irs 2012 tax forms 1040 instructions If more than this amount is contributed, the annuity or endowment contract is disqualified. Irs 2012 tax forms 1040 instructions Kay Bailey Hutchison Spousal IRA Limit For 2013, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following two amounts: $5,500 ($6,500 if you are age 50 or older), or The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. Irs 2012 tax forms 1040 instructions Your spouse's IRA contribution for the year to a traditional IRA. Irs 2012 tax forms 1040 instructions Any contributions for the year to a Roth IRA on behalf of your spouse. Irs 2012 tax forms 1040 instructions This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $11,000 ($12,000 if only one of you is age 50 or older or $13,000 if both of you are age 50 or older). Irs 2012 tax forms 1040 instructions Note. Irs 2012 tax forms 1040 instructions This traditional IRA limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions Kristin, a full-time student with no taxable compensation, marries Carl during the year. Irs 2012 tax forms 1040 instructions Neither of them was age 50 by the end of 2013. Irs 2012 tax forms 1040 instructions For the year, Carl has taxable compensation of $30,000. Irs 2012 tax forms 1040 instructions He plans to contribute (and deduct) $5,500 to a traditional IRA. Irs 2012 tax forms 1040 instructions If he and Kristin file a joint return, each can contribute $5,500 to a traditional IRA. Irs 2012 tax forms 1040 instructions This is because Kristin, who has no compensation, can add Carl's compensation, reduced by the amount of his IRA contribution ($30,000 − $5,500 = $24,500), to her own compensation (-0-) to figure her maximum contribution to a traditional IRA. Irs 2012 tax forms 1040 instructions In her case, $5,500 is her contribution limit, because $5,500 is less than $24,500 (her compensation for purposes of figuring her contribution limit). Irs 2012 tax forms 1040 instructions Filing Status Generally, except as discussed earlier under Kay Bailey Hutchison Spousal IRA Limit , your filing status has no effect on the amount of allowable contributions to your traditional IRA. Irs 2012 tax forms 1040 instructions However, if during the year either you or your spouse was covered by a retirement plan at work, your deduction may be reduced or eliminated, depending on your filing status and income. Irs 2012 tax forms 1040 instructions See How Much Can You Deduct , later. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions Tom and Darcy are married and both are 53. Irs 2012 tax forms 1040 instructions They both work and each has a traditional IRA. Irs 2012 tax forms 1040 instructions Tom earned $3,800 and Darcy earned $48,000 in 2013. Irs 2012 tax forms 1040 instructions Because of the Kay Bailey Hutchison Spousal IRA limit rule, even though Tom earned less than $6,500, they can contribute up to $6,500 to his IRA for 2013 if they file a joint return. Irs 2012 tax forms 1040 instructions They can contribute up to $6,500 to Darcy's IRA. Irs 2012 tax forms 1040 instructions If they file separate returns, the amount that can be contributed to Tom's IRA is limited by his earned income, $3,800. Irs 2012 tax forms 1040 instructions Less Than Maximum Contributions If contributions to your traditional IRA for a year were less than the limit, you cannot contribute more after the due date of your return for that year to make up the difference. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions Rafael, who is 40, earns $30,000 in 2013. Irs 2012 tax forms 1040 instructions Although he can contribute up to $5,500 for 2013, he contributes only $3,000. Irs 2012 tax forms 1040 instructions After April 15, 2014, Rafael cannot make up the difference between his actual contributions for 2013 ($3,000) and his 2013 limit ($5,500). Irs 2012 tax forms 1040 instructions He cannot contribute $2,500 more than the limit for any later year. Irs 2012 tax forms 1040 instructions More Than Maximum Contributions If contributions to your IRA for a year were more than the limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year. Irs 2012 tax forms 1040 instructions However, a penalty or additional tax may apply. Irs 2012 tax forms 1040 instructions See Excess Contributions , later, under What Acts Result in Penalties or Additional Taxes. Irs 2012 tax forms 1040 instructions When Can Contributions Be Made? As soon as you open your traditional IRA, contributions can be made to it through your chosen sponsor (trustee or other administrator). Irs 2012 tax forms 1040 instructions Contributions must be in the form of money (cash, check, or money order). Irs 2012 tax forms 1040 instructions Property cannot be contributed. Irs 2012 tax forms 1040 instructions Although property cannot be contributed, your IRA may invest in certain property. Irs 2012 tax forms 1040 instructions For example, your IRA may purchase shares of stock. Irs 2012 tax forms 1040 instructions For other restrictions on the use of funds in your IRA, see Prohibited Transactions , later in this chapter. Irs 2012 tax forms 1040 instructions You may be able to transfer or roll over certain property from one retirement plan to another. Irs 2012 tax forms 1040 instructions See the discussion of rollovers and other transfers later in this chapter under Can You Move Retirement Plan Assets . Irs 2012 tax forms 1040 instructions You can make a contribution to your IRA by having your income tax refund (or a portion of your refund), if any, paid directly to your traditional IRA, Roth IRA, or SEP IRA. Irs 2012 tax forms 1040 instructions For details, see the instructions for your income tax return or Form 8888, Allocation of Refund (Including Savings Bond Purchases). Irs 2012 tax forms 1040 instructions Contributions can be made to your traditional IRA for each year that you receive compensation and have not reached age 70½. Irs 2012 tax forms 1040 instructions For any year in which you do not work, contributions cannot be made to your IRA unless you receive alimony, nontaxable combat pay, military differential pay, or file a joint return with a spouse who has compensation. Irs 2012 tax forms 1040 instructions See Who Can Open a Traditional IRA , earlier. Irs 2012 tax forms 1040 instructions Even if contributions cannot be made for the current year, the amounts contributed for years in which you did qualify can remain in your IRA. Irs 2012 tax forms 1040 instructions Contributions can resume for any years that you qualify. Irs 2012 tax forms 1040 instructions Contributions must be made by due date. Irs 2012 tax forms 1040 instructions   Contributions can be made to your traditional IRA for a year at any time during the year or by the due date for filing your return for that year, not including extensions. Irs 2012 tax forms 1040 instructions For most people, this means that contributions for 2013 must be made by April 15, 2014, and contributions for 2014 must be made by April 15, 2015. Irs 2012 tax forms 1040 instructions Age 70½ rule. Irs 2012 tax forms 1040 instructions   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. Irs 2012 tax forms 1040 instructions   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. Irs 2012 tax forms 1040 instructions If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. Irs 2012 tax forms 1040 instructions Designating year for which contribution is made. Irs 2012 tax forms 1040 instructions   If an amount is contributed to your traditional IRA between January 1 and April 15, you should tell the sponsor which year (the current year or the previous year) the contribution is for. Irs 2012 tax forms 1040 instructions If you do not tell the sponsor which year it is for, the sponsor can assume, and report to the IRS, that the contribution is for the current year (the year the sponsor received it). Irs 2012 tax forms 1040 instructions Filing before a contribution is made. Irs 2012 tax forms 1040 instructions    You can file your return claiming a traditional IRA contribution before the contribution is actually made. Irs 2012 tax forms 1040 instructions Generally, the contribution must be made by the due date of your return, not including extensions. Irs 2012 tax forms 1040 instructions Contributions not required. Irs 2012 tax forms 1040 instructions   You do not have to contribute to your traditional IRA for every tax year, even if you can. Irs 2012 tax forms 1040 instructions How Much Can You Deduct? Generally, you can deduct the lesser of: The contributions to your traditional IRA for the year, or The general limit (or the Kay Bailey Hutchison Spousal IRA limit, if applicable) explained earlier under How Much Can Be Contributed . Irs 2012 tax forms 1040 instructions However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. Irs 2012 tax forms 1040 instructions See Limit if Covered by Employer Plan , later. Irs 2012 tax forms 1040 instructions You may be able to claim a credit for contributions to your traditional IRA. Irs 2012 tax forms 1040 instructions For more information, see chapter 4. Irs 2012 tax forms 1040 instructions Trustees' fees. Irs 2012 tax forms 1040 instructions   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. Irs 2012 tax forms 1040 instructions However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). Irs 2012 tax forms 1040 instructions For information about miscellaneous itemized deductions, see Publication 529, Miscellaneous Deductions. Irs 2012 tax forms 1040 instructions Brokers' commissions. Irs 2012 tax forms 1040 instructions   These commissions are part of your IRA contribution and, as such, are deductible subject to the limits. Irs 2012 tax forms 1040 instructions Full deduction. Irs 2012 tax forms 1040 instructions   If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more of your traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older), or 100% of your compensation. Irs 2012 tax forms 1040 instructions   This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. Irs 2012 tax forms 1040 instructions Kay Bailey Hutchison Spousal IRA. Irs 2012 tax forms 1040 instructions   In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of: $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older), or The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. Irs 2012 tax forms 1040 instructions The IRA deduction for the year of the spouse with the greater compensation. Irs 2012 tax forms 1040 instructions Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. Irs 2012 tax forms 1040 instructions Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. Irs 2012 tax forms 1040 instructions   This limit is reduced by any contributions to a section 501(c)(18) plan on behalf of the spouse with the lesser compensation. Irs 2012 tax forms 1040 instructions Note. Irs 2012 tax forms 1040 instructions If you were divorced or legally separated (and did not remarry) before the end of the year, you cannot deduct any contributions to your spouse's IRA. Irs 2012 tax forms 1040 instructions After a divorce or legal separation, you can deduct only the contributions to your own IRA. Irs 2012 tax forms 1040 instructions Your deductions are subject to the rules for single individuals. Irs 2012 tax forms 1040 instructions Covered by an employer retirement plan. Irs 2012 tax forms 1040 instructions   If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. Irs 2012 tax forms 1040 instructions This is discussed later under Limit if Covered by Employer Plan . Irs 2012 tax forms 1040 instructions Limits on the amount you can deduct do not affect the amount that can be contributed. Irs 2012 tax forms 1040 instructions Are You Covered by an Employer Plan? The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. Irs 2012 tax forms 1040 instructions The “Retirement Plan” box should be checked if you were covered. Irs 2012 tax forms 1040 instructions Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered , later. Irs 2012 tax forms 1040 instructions If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. Irs 2012 tax forms 1040 instructions Federal judges. Irs 2012 tax forms 1040 instructions   For purposes of the IRA deduction, federal judges are covered by an employer plan. Irs 2012 tax forms 1040 instructions For Which Year(s) Are You Covered? Special rules apply to determine the tax years for which you are covered by an employer plan. Irs 2012 tax forms 1040 instructions These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. Irs 2012 tax forms 1040 instructions Tax year. Irs 2012 tax forms 1040 instructions   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. Irs 2012 tax forms 1040 instructions For almost all people, the tax year is the calendar year. Irs 2012 tax forms 1040 instructions Defined contribution plan. Irs 2012 tax forms 1040 instructions   Generally, you are covered by a defined contribution plan for a tax year if amounts are contributed or allocated to your account for the plan year that ends with or within that tax year. Irs 2012 tax forms 1040 instructions However, also see Situations in Which You Are Not Covered , later. Irs 2012 tax forms 1040 instructions   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Irs 2012 tax forms 1040 instructions In a defined contribution plan, the amount to be contributed to each participant's account is spelled out in the plan. Irs 2012 tax forms 1040 instructions The level of benefits actually provided to a participant depends on the total amount contributed to that participant's account and any earnings and losses on those contributions. Irs 2012 tax forms 1040 instructions Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions Company A has a money purchase pension plan. Irs 2012 tax forms 1040 instructions Its plan year is from July 1 to June 30. Irs 2012 tax forms 1040 instructions The plan provides that contributions must be allocated as of June 30. Irs 2012 tax forms 1040 instructions Bob, an employee, leaves Company A on December 31, 2012. Irs 2012 tax forms 1040 instructions The contribution for the plan year ending on June 30, 2013, is made February 15, 2014. Irs 2012 tax forms 1040 instructions Because an amount is contributed to Bob's account for the plan year, Bob is covered by the plan for his 2013 tax year. Irs 2012 tax forms 1040 instructions   A special rule applies to certain plans in which it is not possible to determine if an amount will be contributed to your account for a given plan year. Irs 2012 tax forms 1040 instructions If, for a plan year, no amounts have been allocated to your account that are attributable to employer contributions, employee contributions, or forfeitures, by the last day of the plan year, and contributions are discretionary for the plan year, you are not covered for the tax year in which the plan year ends. Irs 2012 tax forms 1040 instructions If, after the plan year ends, the employer makes a contribution for that plan year, you are covered for the tax year in which the contribution is made. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions Mickey was covered by a profit-sharing plan and left the company on December 31, 2012. Irs 2012 tax forms 1040 instructions The plan year runs from July 1 to June 30. Irs 2012 tax forms 1040 instructions Under the terms of the plan, employer contributions do not have to be made, but if they are made, they are contributed to the plan before the due date for filing the company's tax return. Irs 2012 tax forms 1040 instructions Such contributions are allocated as of the last day of the plan year, and allocations are made to the accounts of individuals who have any service during the plan year. Irs 2012 tax forms 1040 instructions As of June 30, 2013, no contributions were made that were allocated to the June 30, 2013, plan year, and no forfeitures had been allocated within the plan year. Irs 2012 tax forms 1040 instructions In addition, as of that date, the company was not obligated to make a contribution for such plan year and it was impossible to determine whether or not a contribution would be made for the plan year. Irs 2012 tax forms 1040 instructions On December 31, 2013, the company decided to contribute to the plan for the plan year ending June 30, 2013. Irs 2012 tax forms 1040 instructions That contribution was made on February 15, 2014. Irs 2012 tax forms 1040 instructions Mickey is an active participant in the plan for his 2014 tax year but not for his 2013 tax year. Irs 2012 tax forms 1040 instructions No vested interest. Irs 2012 tax forms 1040 instructions   If an amount is allocated to your account for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the account. Irs 2012 tax forms 1040 instructions Defined benefit plan. Irs 2012 tax forms 1040 instructions   If you are eligible to participate in your employer's defined benefit plan for the plan year that ends within your tax year, you are covered by the plan. Irs 2012 tax forms 1040 instructions This rule applies even if you: Declined to participate in the plan, Did not make a required contribution, or Did not perform the minimum service required to accrue a benefit for the year. Irs 2012 tax forms 1040 instructions   A defined benefit plan is any plan that is not a defined contribution plan. Irs 2012 tax forms 1040 instructions In a defined benefit plan, the level of benefits to be provided to each participant is spelled out in the plan. Irs 2012 tax forms 1040 instructions The plan administrator figures the amount needed to provide those benefits and those amounts are contributed to the plan. Irs 2012 tax forms 1040 instructions Defined benefit plans include pension plans and annuity plans. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions Nick, an employee of Company B, is eligible to participate in Company B's defined benefit plan, which has a July 1 to June 30 plan year. Irs 2012 tax forms 1040 instructions Nick leaves Company B on December 31, 2012. Irs 2012 tax forms 1040 instructions Because Nick is eligible to participate in the plan for its year ending June 30, 2013, he is covered by the plan for his 2013 tax year. Irs 2012 tax forms 1040 instructions No vested interest. Irs 2012 tax forms 1040 instructions   If you accrue a benefit for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the accrual. Irs 2012 tax forms 1040 instructions Situations in Which You Are Not Covered Unless you are covered by another employer plan, you are not covered by an employer plan if you are in one of the situations described below. Irs 2012 tax forms 1040 instructions Social security or railroad retirement. Irs 2012 tax forms 1040 instructions   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. Irs 2012 tax forms 1040 instructions Benefits from previous employer's plan. Irs 2012 tax forms 1040 instructions   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. Irs 2012 tax forms 1040 instructions Reservists. Irs 2012 tax forms 1040 instructions   If the only reason you participate in a plan is because you are a member of a reserve unit of the Armed Forces, you may not be covered by the plan. Irs 2012 tax forms 1040 instructions You are not covered by the plan if both of the following conditions are met. Irs 2012 tax forms 1040 instructions The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Irs 2012 tax forms 1040 instructions You did not serve more than 90 days on active duty during the year (not counting duty for training). Irs 2012 tax forms 1040 instructions Volunteer firefighters. Irs 2012 tax forms 1040 instructions   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. Irs 2012 tax forms 1040 instructions You are not covered by the plan if both of the following conditions are met. Irs 2012 tax forms 1040 instructions The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Irs 2012 tax forms 1040 instructions Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. Irs 2012 tax forms 1040 instructions Limit if Covered by Employer Plan As discussed earlier, the deduction you can take for contributions made to your traditional IRA depends on whether you or your spouse was covered for any part of the year by an employer retirement plan. Irs 2012 tax forms 1040 instructions Your deduction is also affected by how much income you had and by your filing status. Irs 2012 tax forms 1040 instructions Your deduction may also be affected by social security benefits you received. Irs 2012 tax forms 1040 instructions Reduced or no deduction. Irs 2012 tax forms 1040 instructions   If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status. Irs 2012 tax forms 1040 instructions   Your deduction begins to decrease (phase out) when your income rises above a certain amount and is eliminated altogether when it reaches a higher amount. Irs 2012 tax forms 1040 instructions These amounts vary depending on your filing status. Irs 2012 tax forms 1040 instructions   To determine if your deduction is subject to the phaseout, you must determine your modified adjusted gross income (AGI) and your filing status, as explained later under Deduction Phaseout . Irs 2012 tax forms 1040 instructions Once you have determined your modified AGI and your filing status, you can use Table 1-2 or Table 1-3 to determine if the phaseout applies. Irs 2012 tax forms 1040 instructions Social Security Recipients Instead of using Table 1-2 or Table 1-3 and Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, later, complete the worksheets in Appendix B of this publication if, for the year, all of the following apply. Irs 2012 tax forms 1040 instructions You received social security benefits. Irs 2012 tax forms 1040 instructions You received taxable compensation. Irs 2012 tax forms 1040 instructions Contributions were made to your traditional IRA. Irs 2012 tax forms 1040 instructions You or your spouse was covered by an employer retirement plan. Irs 2012 tax forms 1040 instructions Use the worksheets in Appendix B to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. Irs 2012 tax forms 1040 instructions Appendix B includes an example with filled-in worksheets to assist you. Irs 2012 tax forms 1040 instructions Table 1-2. Irs 2012 tax forms 1040 instructions Effect of Modified AGI1 on Deduction if You Are Covered by a Retirement Plan at Work If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Irs 2012 tax forms 1040 instructions IF your filing status is . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions AND your modified adjusted gross income (modified AGI) is . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions THEN you can take . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions single or head of household $59,000 or less a full deduction. Irs 2012 tax forms 1040 instructions more than $59,000 but less than $69,000 a partial deduction. Irs 2012 tax forms 1040 instructions $69,000 or more no deduction. Irs 2012 tax forms 1040 instructions married filing jointly or  qualifying widow(er) $95,000 or less a full deduction. Irs 2012 tax forms 1040 instructions more than $95,000 but less than $115,000 a partial deduction. Irs 2012 tax forms 1040 instructions $115,000 or more no deduction. Irs 2012 tax forms 1040 instructions married filing separately2 less than $10,000 a partial deduction. Irs 2012 tax forms 1040 instructions $10,000 or more no deduction. Irs 2012 tax forms 1040 instructions 1 Modified AGI (adjusted gross income). Irs 2012 tax forms 1040 instructions See Modified adjusted gross income (AGI) , later. Irs 2012 tax forms 1040 instructions  2 If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” filing status). Irs 2012 tax forms 1040 instructions Table 1-3. Irs 2012 tax forms 1040 instructions Effect of Modified AGI1 on Deduction if You Are NOT Covered by a Retirement Plan at Work If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Irs 2012 tax forms 1040 instructions IF your filing status is . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions AND your modified adjusted gross income (modified AGI) is . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions THEN you can take . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions single, head of household, or qualifying widow(er) any amount a full deduction. Irs 2012 tax forms 1040 instructions married filing jointly or separately with a spouse who is not covered by a plan at work any amount a full deduction. Irs 2012 tax forms 1040 instructions married filing jointly with a spouse who is covered by a plan at work $178,000 or less a full deduction. Irs 2012 tax forms 1040 instructions more than $178,000 but less than $188,000 a partial deduction. Irs 2012 tax forms 1040 instructions $188,000 or more no deduction. Irs 2012 tax forms 1040 instructions married filing separately with a spouse who is covered by a plan at work2 less than $10,000 a partial deduction. Irs 2012 tax forms 1040 instructions $10,000 or more no deduction. Irs 2012 tax forms 1040 instructions 1 Modified AGI (adjusted gross income). Irs 2012 tax forms 1040 instructions See Modified adjusted gross income (AGI) , later. Irs 2012 tax forms 1040 instructions  2 You are entitled to the full deduction if you did not live with your spouse at any time during the year. Irs 2012 tax forms 1040 instructions For 2014, if you are not covered by a retirement plan at work and you are married filing jointly with a spouse who is covered by a plan at work, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. Irs 2012 tax forms 1040 instructions If your AGI is $191,000 or more, you cannot take a deduction for a contribution to a traditional IRA. Irs 2012 tax forms 1040 instructions Deduction Phaseout The amount of any reduction in the limit on your IRA deduction (phaseout) depends on whether you or your spouse was covered by an employer retirement plan. Irs 2012 tax forms 1040 instructions Covered by a retirement plan. Irs 2012 tax forms 1040 instructions   If you are covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI, as shown in Table 1-2. Irs 2012 tax forms 1040 instructions For 2014, if you are covered by a retirement plan at work, your IRA deduction will not be reduced (phased out) unless your modified AGI is: More than $60,000 but less than $70,000 for a single individual (or head of household), More than $96,000 but less than $116,000 for a married couple filing a joint return (or a qualifying widow(er)), or Less than $10,000 for a married individual filing a separate return. Irs 2012 tax forms 1040 instructions If your spouse is covered. Irs 2012 tax forms 1040 instructions   If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 1-3. Irs 2012 tax forms 1040 instructions Filing status. Irs 2012 tax forms 1040 instructions   Your filing status depends primarily on your marital status. Irs 2012 tax forms 1040 instructions For this purpose, you need to know if your filing status is single or head of household, married filing jointly or qualifying widow(er), or married filing separately. Irs 2012 tax forms 1040 instructions If you need more information on filing status, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Irs 2012 tax forms 1040 instructions Lived apart from spouse. Irs 2012 tax forms 1040 instructions   If you did not live with your spouse at any time during the year and you file a separate return, your filing status, for this purpose, is single. Irs 2012 tax forms 1040 instructions Modified adjusted gross income (AGI). Irs 2012 tax forms 1040 instructions   You can use Worksheet 1-1 to figure your modified AGI. Irs 2012 tax forms 1040 instructions If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Both contributions for 2013 and distributions in 2013 , later. Irs 2012 tax forms 1040 instructions    Do not assume that your modified AGI is the same as your compensation. Irs 2012 tax forms 1040 instructions Your modified AGI may include income in addition to your compensation (discussed earlier) such as interest, dividends, and income from IRA distributions. Irs 2012 tax forms 1040 instructions Form 1040. Irs 2012 tax forms 1040 instructions   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Irs 2012 tax forms 1040 instructions IRA deduction. Irs 2012 tax forms 1040 instructions Student loan interest deduction. Irs 2012 tax forms 1040 instructions Tuition and fees deduction. Irs 2012 tax forms 1040 instructions Domestic production activities deduction. Irs 2012 tax forms 1040 instructions Foreign earned income exclusion. Irs 2012 tax forms 1040 instructions Foreign housing exclusion or deduction. Irs 2012 tax forms 1040 instructions Exclusion of qualified savings bond interest shown on Form 8815. Irs 2012 tax forms 1040 instructions Exclusion of employer-provided adoption benefits shown on Form 8839. Irs 2012 tax forms 1040 instructions This is your modified AGI. Irs 2012 tax forms 1040 instructions Form 1040A. Irs 2012 tax forms 1040 instructions   If you file Form 1040A, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Irs 2012 tax forms 1040 instructions IRA deduction. Irs 2012 tax forms 1040 instructions Student loan interest deduction. Irs 2012 tax forms 1040 instructions Tuition and fees deduction. Irs 2012 tax forms 1040 instructions Exclusion of qualified savings bond interest shown on Form 8815. Irs 2012 tax forms 1040 instructions This is your modified AGI. Irs 2012 tax forms 1040 instructions Form 1040NR. Irs 2012 tax forms 1040 instructions   If you file Form 1040NR, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Irs 2012 tax forms 1040 instructions IRA deduction. Irs 2012 tax forms 1040 instructions Student loan interest deduction. Irs 2012 tax forms 1040 instructions Domestic production activities deduction. Irs 2012 tax forms 1040 instructions Exclusion of qualified savings bond interest shown on Form 8815. Irs 2012 tax forms 1040 instructions Exclusion of employer-provided adoption benefits shown on Form 8839. Irs 2012 tax forms 1040 instructions This is your modified AGI. Irs 2012 tax forms 1040 instructions Income from IRA distributions. Irs 2012 tax forms 1040 instructions   If you received distributions in 2013 from one or more traditional IRAs and your traditional IRAs include only deductible contributions, the distributions are fully taxable and are included in your modified AGI. Irs 2012 tax forms 1040 instructions Both contributions for 2013 and distributions in 2013. Irs 2012 tax forms 1040 instructions   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. Irs 2012 tax forms 1040 instructions You received distributions in 2013 from one or more traditional IRAs, You made contributions to a traditional IRA for 2013, and Some of those contributions may be nondeductible contributions. Irs 2012 tax forms 1040 instructions (See Nondeductible Contributions and Worksheet 1-2, later. Irs 2012 tax forms 1040 instructions ) If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. Irs 2012 tax forms 1040 instructions To do this, you can use Worksheet 1-5, later. Irs 2012 tax forms 1040 instructions   If at least one of the above does not apply, figure your modified AGI using Worksheet 1-1, later. Irs 2012 tax forms 1040 instructions How To Figure Your Reduced IRA Deduction If you or your spouse is covered by an employer retirement plan and you did not receive any social security benefits, you can figure your reduced IRA deduction by using Worksheet 1-2. Irs 2012 tax forms 1040 instructions Figuring Your Reduced IRA Deduction for 2013. Irs 2012 tax forms 1040 instructions The Instructions for Form 1040, Form 1040A, and Form 1040NR include similar worksheets that you can use instead of the worksheet in this publication. Irs 2012 tax forms 1040 instructions If you or your spouse is covered by an employer retirement plan, and you received any social security benefits, see Social Security Recipients , earlier. Irs 2012 tax forms 1040 instructions Note. Irs 2012 tax forms 1040 instructions If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Irs 2012 tax forms 1040 instructions Worksheet 1-1. Irs 2012 tax forms 1040 instructions Figuring Your Modified AGI Use this worksheet to figure your modified AGI for traditional IRA purposes. Irs 2012 tax forms 1040 instructions 1. Irs 2012 tax forms 1040 instructions Enter your adjusted gross income (AGI) from Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37, figured without taking into account the amount from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32 1. Irs 2012 tax forms 1040 instructions   2. Irs 2012 tax forms 1040 instructions Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 2. Irs 2012 tax forms 1040 instructions   3. Irs 2012 tax forms 1040 instructions Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. Irs 2012 tax forms 1040 instructions   4. Irs 2012 tax forms 1040 instructions Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 4. Irs 2012 tax forms 1040 instructions   5. Irs 2012 tax forms 1040 instructions Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. Irs 2012 tax forms 1040 instructions   6. Irs 2012 tax forms 1040 instructions Enter any foreign housing deduction from Form 2555, line 50 6. Irs 2012 tax forms 1040 instructions   7. Irs 2012 tax forms 1040 instructions Enter any excludable savings bond interest from Form 8815, line 14 7. Irs 2012 tax forms 1040 instructions   8. Irs 2012 tax forms 1040 instructions Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. Irs 2012 tax forms 1040 instructions   9. Irs 2012 tax forms 1040 instructions Add lines 1 through 8. Irs 2012 tax forms 1040 instructions This is your Modified AGI for traditional IRA purposes 9. Irs 2012 tax forms 1040 instructions   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. Irs 2012 tax forms 1040 instructions If you file Form 1040A, enter your IRA deduction on line 17 of that form. Irs 2012 tax forms 1040 instructions If you file Form 1040NR, enter your IRA deduction on line 32 of that form. Irs 2012 tax forms 1040 instructions You cannot deduct IRA contributions on Form 1040EZ or Form 1040NR-EZ. Irs 2012 tax forms 1040 instructions Self-employed. Irs 2012 tax forms 1040 instructions   If you are self-employed (a sole proprietor or partner) and have a SIMPLE IRA, enter your deduction for allowable plan contributions on Form 1040, line 28. Irs 2012 tax forms 1040 instructions If you file Form 1040NR, enter your deduction on line 28 of that form. Irs 2012 tax forms 1040 instructions Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA of up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. Irs 2012 tax forms 1040 instructions The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions Tony is 29 years old and single. Irs 2012 tax forms 1040 instructions In 2013, he was covered by a retirement plan at work. Irs 2012 tax forms 1040 instructions His salary is $62,000. Irs 2012 tax forms 1040 instructions His modified AGI is $70,000. Irs 2012 tax forms 1040 instructions Tony makes a $5,500 IRA contribution for 2013. Irs 2012 tax forms 1040 instructions Because he was covered by a retirement plan and his modified AGI is above $69,000, he cannot deduct his $5,500 IRA contribution. Irs 2012 tax forms 1040 instructions He must designate this contribution as a nondeductible contribution by reporting it on Form 8606. Irs 2012 tax forms 1040 instructions Repayment of reservist distributions. Irs 2012 tax forms 1040 instructions   Nondeductible contributions may include repayments of qualified reservist distributions. Irs 2012 tax forms 1040 instructions For more information, see Qualified reservist repayments under How Much Can Be Contributed, earlier. Irs 2012 tax forms 1040 instructions Form 8606. Irs 2012 tax forms 1040 instructions   To designate contributions as nondeductible, you must file Form 8606. Irs 2012 tax forms 1040 instructions (See the filled-in Forms 8606 in this chapter. Irs 2012 tax forms 1040 instructions )   You do not have to designate a contribution as nondeductible until you file your tax return. Irs 2012 tax forms 1040 instructions When you file, you can even designate otherwise deductible contributions as nondeductible contributions. Irs 2012 tax forms 1040 instructions   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. Irs 2012 tax forms 1040 instructions    A Form 8606 is not used for the year that you make a rollover from a qualified retirement plan to a traditional IRA and the rollover includes nontaxable amounts. Irs 2012 tax forms 1040 instructions In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. Irs 2012 tax forms 1040 instructions See Form 8606 under Distributions Fully or Partly Taxable, later. Irs 2012 tax forms 1040 instructions Failure to report nondeductible contributions. Irs 2012 tax forms 1040 instructions   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated like deductible contributions when withdrawn. Irs 2012 tax forms 1040 instructions All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Irs 2012 tax forms 1040 instructions Penalty for overstatement. Irs 2012 tax forms 1040 instructions   If you overstate the amount of nondeductible contributions on your Form 8606 for any tax year, you must pay a penalty of $100 for each overstatement, unless it was due to reasonable cause. Irs 2012 tax forms 1040 instructions Penalty for failure to file Form 8606. Irs 2012 tax forms 1040 instructions   You will have to pay a $50 penalty if you do not file a required Form 8606, unless you can prove that the failure was due to reasonable cause. Irs 2012 tax forms 1040 instructions Tax on earnings on nondeductible contributions. Irs 2012 tax forms 1040 instructions   As long as contributions are within the contribution limits, none of the earnings or gains on contributions (deductible or nondeductible) will be taxed until they are distributed. Irs 2012 tax forms 1040 instructions Cost basis. Irs 2012 tax forms 1040 instructions   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Irs 2012 tax forms 1040 instructions Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. Irs 2012 tax forms 1040 instructions    Commonly, distributions from your traditional IRAs will include both taxable and nontaxable (cost basis) amounts. Irs 2012 tax forms 1040 instructions See Are Distributions Taxable, later, for more information. Irs 2012 tax forms 1040 instructions Recordkeeping. Irs 2012 tax forms 1040 instructions There is a recordkeeping worksheet, Appendix A. Irs 2012 tax forms 1040 instructions Summary Record of Traditional IRA(s) for 2013 , that you can use to keep a record of deductible and nondeductible IRA contributions. Irs 2012 tax forms 1040 instructions Examples — Worksheet for Reduced IRA Deduction for 2013 The following examples illustrate the use of Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013. Irs 2012 tax forms 1040 instructions Example 1. Irs 2012 tax forms 1040 instructions For 2013, Tom and Betty file a joint return on Form 1040. Irs 2012 tax forms 1040 instructions They are both 39 years old. Irs 2012 tax forms 1040 instructions They are both employed and Tom is covered by his employer's retirement plan. Irs 2012 tax forms 1040 instructions Tom's salary is $59,000 and Betty's is $32,555. Irs 2012 tax forms 1040 instructions They each have a traditional IRA and their combined modified AGI, which includes $5,000 interest and dividend income, is $96,555. Irs 2012 tax forms 1040 instructions Because their modified AGI is between $95,000 and $115,000 and Tom is covered by an employer plan, Tom is subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . Irs 2012 tax forms 1040 instructions For 2013, Tom contributed $5,500 to his IRA and Betty contributed $5,500 to hers. Irs 2012 tax forms 1040 instructions Even though they file a joint return, they must use separate worksheets to figure the IRA deduction for each of them. Irs 2012 tax forms 1040 instructions Tom can take a deduction of only $5,080. Irs 2012 tax forms 1040 instructions He can choose to treat the $5,080 as either deductible or nondeductible contributions. Irs 2012 tax forms 1040 instructions He can either leave the $420 ($5,500 − $5,080) of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Irs 2012 tax forms 1040 instructions He decides to treat the $5,080 as deductible contributions and leave the $420 of nondeductible contributions in his IRA. Irs 2012 tax forms 1040 instructions Using Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, Tom figures his deductible and nondeductible amounts as shown on Worksheet 1-2. Irs 2012 tax forms 1040 instructions Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated. Irs 2012 tax forms 1040 instructions Betty figures her IRA deduction as follows. Irs 2012 tax forms 1040 instructions Betty can treat all or part of her contributions as either deductible or nondeductible. Irs 2012 tax forms 1040 instructions This is because her $5,500 contribution for 2013 is not subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . Irs 2012 tax forms 1040 instructions She does not need to use Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, because their modified AGI is not within the phaseout range that applies. Irs 2012 tax forms 1040 instructions Betty decides to treat her $5,500 IRA contributions as deductible. Irs 2012 tax forms 1040 instructions The IRA deductions of $5,080 and $5,500 on the joint return for Tom and Betty total $10,580. Irs 2012 tax forms 1040 instructions Example 2. Irs 2012 tax forms 1040 instructions For 2013, Ed and Sue file a joint return on Form 1040. Irs 2012 tax forms 1040 instructions They are both 39 years old. Irs 2012 tax forms 1040 instructions Ed is covered by his employer's retirement plan. Irs 2012 tax forms 1040 instructions Ed's salary is $45,000. Irs 2012 tax forms 1040 instructions Sue had no compensation for the year and did not contribute to an IRA. Irs 2012 tax forms 1040 instructions Sue is not covered by an employer plan. Irs 2012 tax forms 1040 instructions Ed contributed $5,500 to his traditional IRA and $5,500 to a traditional IRA for Sue (a Kay Bailey Hutchison Spousal IRA). Irs 2012 tax forms 1040 instructions Their combined modified AGI, which includes $2,000 interest and dividend income and a large capital gain from the sale of stock, is $180,555. Irs 2012 tax forms 1040 instructions Because the combined modified AGI is $115,000 or more, Ed cannot deduct any of the contribution to his traditional IRA. Irs 2012 tax forms 1040 instructions He can either leave the $5,500 of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Irs 2012 tax forms 1040 instructions Sue figures her IRA deduction as shown on Worksheet 1-2. Irs 2012 tax forms 1040 instructions Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated. Irs 2012 tax forms 1040 instructions Worksheet 1-2. Irs 2012 tax forms 1040 instructions Figuring Your Reduced IRA Deduction for 2013 (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Irs 2012 tax forms 1040 instructions ) Note. Irs 2012 tax forms 1040 instructions If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Irs 2012 tax forms 1040 instructions IF you . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions AND your  filing status is . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions AND your modified AGI is over . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions THEN enter on  line 1 below . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Irs 2012 tax forms 1040 instructions Enter applicable amount from table above 1. Irs 2012 tax forms 1040 instructions   2. Irs 2012 tax forms 1040 instructions Enter your modified AGI (that of both spouses, if married filing jointly) 2. Irs 2012 tax forms 1040 instructions     Note. Irs 2012 tax forms 1040 instructions If line 2 is equal to or more than the amount on line 1, stop here. Irs 2012 tax forms 1040 instructions  Your IRA contributions are not deductible. Irs 2012 tax forms 1040 instructions See Nondeductible Contributions , earlier. Irs 2012 tax forms 1040 instructions     3. Irs 2012 tax forms 1040 instructions Subtract line 2 from line 1. Irs 2012 tax forms 1040 instructions If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Irs 2012 tax forms 1040 instructions You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Irs 2012 tax forms 1040 instructions   4. Irs 2012 tax forms 1040 instructions Multiply line 3 by the percentage below that applies to you. Irs 2012 tax forms 1040 instructions If the result is not a multiple of $10, round it to the next highest multiple of $10. Irs 2012 tax forms 1040 instructions (For example, $611. Irs 2012 tax forms 1040 instructions 40 is rounded to $620. Irs 2012 tax forms 1040 instructions ) However, if the result is less than $200, enter $200. Irs 2012 tax forms 1040 instructions         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Irs 2012 tax forms 1040 instructions 5% (. Irs 2012 tax forms 1040 instructions 275) (by 32. Irs 2012 tax forms 1040 instructions 5% (. Irs 2012 tax forms 1040 instructions 325) if you are age 50 or older). Irs 2012 tax forms 1040 instructions All others, multiply line 3 by 55% (. Irs 2012 tax forms 1040 instructions 55) (by 65% (. Irs 2012 tax forms 1040 instructions 65) if you are age 50 or older). Irs 2012 tax forms 1040 instructions 4. Irs 2012 tax forms 1040 instructions   5. Irs 2012 tax forms 1040 instructions Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Irs 2012 tax forms 1040 instructions If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Irs 2012 tax forms 1040 instructions If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Irs 2012 tax forms 1040 instructions   6. Irs 2012 tax forms 1040 instructions Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Irs 2012 tax forms 1040 instructions If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Irs 2012 tax forms 1040 instructions 6. Irs 2012 tax forms 1040 instructions   7. Irs 2012 tax forms 1040 instructions IRA deduction. Irs 2012 tax forms 1040 instructions Compare lines 4, 5, and 6. Irs 2012 tax forms 1040 instructions Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Irs 2012 tax forms 1040 instructions If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Irs 2012 tax forms 1040 instructions   8. Irs 2012 tax forms 1040 instructions Nondeductible contribution. Irs 2012 tax forms 1040 instructions Subtract line 7 from line 5 or 6, whichever is smaller. Irs 2012 tax forms 1040 instructions  Enter the result here and on line 1 of your Form 8606 8. Irs 2012 tax forms 1040 instructions   Worksheet 1-2. Irs 2012 tax forms 1040 instructions Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Irs 2012 tax forms 1040 instructions ) Note. Irs 2012 tax forms 1040 instructions If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Irs 2012 tax forms 1040 instructions IF you . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions AND your  filing status is . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions AND your modified AGI is over . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions THEN enter on  line 1 below . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Irs 2012 tax forms 1040 instructions Enter applicable amount from table above 1. Irs 2012 tax forms 1040 instructions 115,000 2. Irs 2012 tax forms 1040 instructions Enter your modified AGI (that of both spouses, if married filing jointly) 2. Irs 2012 tax forms 1040 instructions 96,555   Note. Irs 2012 tax forms 1040 instructions If line 2 is equal to or more than the amount on line 1, stop here. Irs 2012 tax forms 1040 instructions  Your IRA contributions are not deductible. Irs 2012 tax forms 1040 instructions See Nondeductible Contributions , earlier. Irs 2012 tax forms 1040 instructions     3. Irs 2012 tax forms 1040 instructions Subtract line 2 from line 1. Irs 2012 tax forms 1040 instructions If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Irs 2012 tax forms 1040 instructions You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Irs 2012 tax forms 1040 instructions 18,445 4. Irs 2012 tax forms 1040 instructions Multiply line 3 by the percentage below that applies to you. Irs 2012 tax forms 1040 instructions If the result is not a multiple of $10, round it to the next highest multiple of $10. Irs 2012 tax forms 1040 instructions (For example, $611. Irs 2012 tax forms 1040 instructions 40 is rounded to $620. Irs 2012 tax forms 1040 instructions ) However, if the result is less than $200, enter $200. Irs 2012 tax forms 1040 instructions         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Irs 2012 tax forms 1040 instructions 5% (. Irs 2012 tax forms 1040 instructions 275) (by 32. Irs 2012 tax forms 1040 instructions 5% (. Irs 2012 tax forms 1040 instructions 325) if you are age 50 or older). Irs 2012 tax forms 1040 instructions All others, multiply line 3 by 55% (. Irs 2012 tax forms 1040 instructions 55) (by 65% (. Irs 2012 tax forms 1040 instructions 65) if you are age 50 or older). Irs 2012 tax forms 1040 instructions 4. Irs 2012 tax forms 1040 instructions 5,080 5. Irs 2012 tax forms 1040 instructions Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Irs 2012 tax forms 1040 instructions If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Irs 2012 tax forms 1040 instructions If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Irs 2012 tax forms 1040 instructions 59,000 6. Irs 2012 tax forms 1040 instructions Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Irs 2012 tax forms 1040 instructions If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Irs 2012 tax forms 1040 instructions 6. Irs 2012 tax forms 1040 instructions 5,500 7. Irs 2012 tax forms 1040 instructions IRA deduction. Irs 2012 tax forms 1040 instructions Compare lines 4, 5, and 6. Irs 2012 tax forms 1040 instructions Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Irs 2012 tax forms 1040 instructions If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Irs 2012 tax forms 1040 instructions 5,080 8. Irs 2012 tax forms 1040 instructions Nondeductible contribution. Irs 2012 tax forms 1040 instructions Subtract line 7 from line 5 or 6, whichever is smaller. Irs 2012 tax forms 1040 instructions  Enter the result here and on line 1 of your Form 8606 8. Irs 2012 tax forms 1040 instructions 420 Worksheet 1-2. Irs 2012 tax forms 1040 instructions Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Irs 2012 tax forms 1040 instructions ) Note. Irs 2012 tax forms 1040 instructions If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Irs 2012 tax forms 1040 instructions IF you . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions AND your  filing status is . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions AND your modified AGI is over . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions THEN enter on  line 1 below . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions . Irs 2012 tax forms 1040 instructions       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Irs 2012 tax forms 1040 instructions Enter applicable amount from table above 1. Irs 2012 tax forms 1040 instructions 188,000 2. Irs 2012 tax forms 1040 instructions Enter your modified AGI (that of both spouses, if married filing jointly) 2. Irs 2012 tax forms 1040 instructions 180,555   Note. Irs 2012 tax forms 1040 instructions If line 2 is equal to or more than the amount on line 1, stop here. Irs 2012 tax forms 1040 instructions  Your IRA contributions are not deductible. Irs 2012 tax forms 1040 instructions See Nondeductible Contributions , earlier. Irs 2012 tax forms 1040 instructions     3. Irs 2012 tax forms 1040 instructions Subtract line 2 from line 1. Irs 2012 tax forms 1040 instructions If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Irs 2012 tax forms 1040 instructions You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Irs 2012 tax forms 1040 instructions 7,445 4. Irs 2012 tax forms 1040 instructions Multiply line 3 by the percentage below that applies to you. Irs 2012 tax forms 1040 instructions If the result is not a multiple of $10, round it to the next highest multiple of $10. Irs 2012 tax forms 1040 instructions (For example, $611. Irs 2012 tax forms 1040 instructions 40 is rounded to $620. Irs 2012 tax forms 1040 instructions ) However, if the result is less than $200, enter $200. Irs 2012 tax forms 1040 instructions         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Irs 2012 tax forms 1040 instructions 5% (. Irs 2012 tax forms 1040 instructions 275) (by 32. Irs 2012 tax forms 1040 instructions 5% (. Irs 2012 tax forms 1040 instructions 325) if you are age 50 or older). Irs 2012 tax forms 1040 instructions All others, multiply line 3 by 55% (. Irs 2012 tax forms 1040 instructions 55) (by 65% (. Irs 2012 tax forms 1040 instructions 65) if you are age 50 or older). Irs 2012 tax forms 1040 instructions 4. Irs 2012 tax forms 1040 instructions 4,100 5. Irs 2012 tax forms 1040 instructions Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Irs 2012 tax forms 1040 instructions If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Irs 2012 tax forms 1040 instructions If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Irs 2012 tax forms 1040 instructions 39,500 6. Irs 2012 tax forms 1040 instructions Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Irs 2012 tax forms 1040 instructions If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Irs 2012 tax forms 1040 instructions 6. Irs 2012 tax forms 1040 instructions 5,500 7. Irs 2012 tax forms 1040 instructions IRA deduction. Irs 2012 tax forms 1040 instructions Compare lines 4, 5, and 6. Irs 2012 tax forms 1040 instructions Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Irs 2012 tax forms 1040 instructions If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Irs 2012 tax forms 1040 instructions 4,100 8. Irs 2012 tax forms 1040 instructions Nondeductible contribution. Irs 2012 tax forms 1040 instructions Subtract line 7 from line 5 or 6, whichever is smaller. Irs 2012 tax forms 1040 instructions  Enter the result here and on line 1 of your Form 8606 8. Irs 2012 tax forms 1040 instructions 1,400 What if You Inherit an IRA? If you inherit a traditional IRA, you are called a beneficiary. Irs 2012 tax forms 1040 instructions A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Irs 2012 tax forms 1040 instructions Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. Irs 2012 tax forms 1040 instructions Inherited from spouse. Irs 2012 tax forms 1040 instructions   If you inherit a traditional IRA from your spouse, you generally have the following three choices. Irs 2012 tax forms 1040 instructions You can: Treat it as your own IRA by designating yourself as the account owner. Irs 2012 tax forms 1040 instructions Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a: Qualified employer plan, Qualified employee annuity plan (section 403(a) plan), Tax-sheltered annuity plan (s
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Selective Service System (SSS)

The Selective Service System is charged with providing the Department of Defense trained and untrained personnel in the event of a national emergency. Almost all male citizens and immigrants between the agees of 18-26 must register with the Selective Service. The Selective Service also provides alternative service options for concientious objectors.

Contact the Agency or Department

Website: Selective Service System (SSS) Who Must Register with the Selective Service? What Happens in a Draft?

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Address: P.O. Box 94638
Palatine, IL 60094-4638

Phone Number: (847) 688-6888

Toll-free: (888) 655-1825

TTY: (847) 688-2567

The Irs 2012 Tax Forms 1040 Instructions

Irs 2012 tax forms 1040 instructions 2. Irs 2012 tax forms 1040 instructions   Electing the Section 179 Deduction Table of Contents Introduction Useful Items - You may want to see: What Property Qualifies?Eligible Property Property Acquired for Business Use Property Acquired by Purchase What Property Does Not Qualify?Land and Improvements Excepted Property How Much Can You Deduct?Dollar Limits Business Income Limit Partnerships and Partners S Corporations Other Corporations How Do You Elect the Deduction? When Must You Recapture the Deduction? Introduction You can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. Irs 2012 tax forms 1040 instructions This is the section 179 deduction. Irs 2012 tax forms 1040 instructions You can elect the section 179 deduction instead of recovering the cost by taking depreciation deductions. Irs 2012 tax forms 1040 instructions Estates and trusts cannot elect the section 179 deduction. Irs 2012 tax forms 1040 instructions This chapter explains what property does and does not qualify for the section 179 deduction, what limits apply to the deduction (including special rules for partnerships and corporations), and how to elect it. Irs 2012 tax forms 1040 instructions It also explains when and how to recapture the deduction. Irs 2012 tax forms 1040 instructions Useful Items - You may want to see: Publication 537 Installment Sales 544 Sales and Other Dispositions of Assets 954 Tax Incentives for Distressed Communities Form (and Instructions) 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. Irs 2012 tax forms 1040 instructions What Property Qualifies? To qualify for the section 179 deduction, your property must meet all the following requirements. Irs 2012 tax forms 1040 instructions It must be eligible property. Irs 2012 tax forms 1040 instructions It must be acquired for business use. Irs 2012 tax forms 1040 instructions It must have been acquired by purchase. Irs 2012 tax forms 1040 instructions It must not be property described later under What Property Does Not Qualify . Irs 2012 tax forms 1040 instructions The following discussions provide information about these requirements and exceptions. Irs 2012 tax forms 1040 instructions Eligible Property To qualify for the section 179 deduction, your property must be one of the following types of depreciable property. Irs 2012 tax forms 1040 instructions Tangible personal property. Irs 2012 tax forms 1040 instructions Other tangible property (except buildings and their structural components) used as: An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services, A research facility used in connection with any of the activities in (a) above, or A facility used in connection with any of the activities in (a) for the bulk storage of fungible commodities. Irs 2012 tax forms 1040 instructions Single purpose agricultural (livestock) or horticultural structures. Irs 2012 tax forms 1040 instructions See chapter 7 of Publication 225 for definitions and information regarding the use requirements that apply to these structures. Irs 2012 tax forms 1040 instructions Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum. Irs 2012 tax forms 1040 instructions Off-the-shelf computer software. Irs 2012 tax forms 1040 instructions Qualified real property (described below). Irs 2012 tax forms 1040 instructions Tangible personal property. Irs 2012 tax forms 1040 instructions   Tangible personal property is any tangible property that is not real property. Irs 2012 tax forms 1040 instructions It includes the following property. Irs 2012 tax forms 1040 instructions Machinery and equipment. Irs 2012 tax forms 1040 instructions Property contained in or attached to a building (other than structural components), such as refrigerators, grocery store counters, office equipment, printing presses, testing equipment, and signs. Irs 2012 tax forms 1040 instructions Gasoline storage tanks and pumps at retail service stations. Irs 2012 tax forms 1040 instructions Livestock, including horses, cattle, hogs, sheep, goats, and mink and other furbearing animals. Irs 2012 tax forms 1040 instructions   The treatment of property as tangible personal property for the section 179 deduction is not controlled by its treatment under local law. Irs 2012 tax forms 1040 instructions For example, property may not be tangible personal property for the deduction even if treated so under local law, and some property (such as fixtures) may be tangible personal property for the deduction even if treated as real property under local law. Irs 2012 tax forms 1040 instructions Off-the-shelf computer software. Irs 2012 tax forms 1040 instructions   Off-the-shelf computer software placed in service during the tax year is qualifying property for purposes of the section 179 deduction. Irs 2012 tax forms 1040 instructions This is computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. Irs 2012 tax forms 1040 instructions It includes any program designed to cause a computer to perform a desired function. Irs 2012 tax forms 1040 instructions However, a database or similar item is not considered computer software unless it is in the public domain and is incidental to the operation of otherwise qualifying software. Irs 2012 tax forms 1040 instructions Qualified real property. Irs 2012 tax forms 1040 instructions   You can elect to treat certain qualified real property you placed in service as section 179 property for tax years beginning in 2013. Irs 2012 tax forms 1040 instructions If this election is made, the term “section 179 property” will include any qualified real property that is: Qualified leasehold improvement property, Qualified restaurant property, or Qualified retail improvement property. Irs 2012 tax forms 1040 instructions The maximum section 179 expense deduction that can be elected for qualified section 179 real property is $250,000 of the maximum section 179 deduction of $500,000 in 2013. Irs 2012 tax forms 1040 instructions For more information, see Special rules for qualified section 179 real property, later. Irs 2012 tax forms 1040 instructions Also, see Election for certain qualified section 179 real property, later, for information on how to make this election. Irs 2012 tax forms 1040 instructions Qualified leasehold improvement property. Irs 2012 tax forms 1040 instructions   Generally, this is any improvement to an interior part of a building (placed in service before January 1, 2014) that is nonresidential real property, provided all of the requirements discussed in chapter 3 under Qualified leasehold improvement property are met. Irs 2012 tax forms 1040 instructions   In addition, an improvement made by the lessor does not qualify as qualified leasehold improvement property to any subsequent owner unless it is acquired from the original lessor by reason of the lessor’s death or in any of the following types of transactions. Irs 2012 tax forms 1040 instructions A transaction to which section 381(a) applies, A mere change in the form of conducting the trade or business so long as the property is retained in the trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in the trade or business, A like-kind exchange, involuntary conversion, or re-acquisition of real property to the extent that the basis in the property represents the carryover basis, or Certain nonrecognition transactions to the extent that your basis in the property is determined by reference to the transferor’s or distributor’s basis in the property. Irs 2012 tax forms 1040 instructions Examples include the following. Irs 2012 tax forms 1040 instructions A complete liquidation of a subsidiary. Irs 2012 tax forms 1040 instructions A transfer to a corporation controlled by the transferor. Irs 2012 tax forms 1040 instructions An exchange of property by a corporation solely for stock or securities in another corporation in a reorganization. Irs 2012 tax forms 1040 instructions Qualified restaurant property. Irs 2012 tax forms 1040 instructions   Qualified restaurant property is any section 1250 property that is a building or an improvement to a building placed in service after December 31, 2008, and before January 1, 2014. Irs 2012 tax forms 1040 instructions Also, more than 50% of the building’s square footage must be devoted to preparation of meals and seating for on-premise consumption of prepared meals. Irs 2012 tax forms 1040 instructions Qualified retail improvement property. Irs 2012 tax forms 1040 instructions   Generally, this is any improvement (placed in service after December 31, 2008, and before January 1, 2014) to an interior portion of nonresidential real property if it meets the following requirements. Irs 2012 tax forms 1040 instructions The portion is open to the general public and is used in the retail trade or business of selling tangible property to the general public. Irs 2012 tax forms 1040 instructions The improvement is placed in service more than 3 years after the date the building was first placed in service. Irs 2012 tax forms 1040 instructions The expenses are not for the enlargement of the building, any elevator or escalator, any structural components benefiting a common area, or the internal structural framework of the building. Irs 2012 tax forms 1040 instructions In addition, an improvement made by the lessor does not qualify as qualified retail improvement property to any subsequent owner unless it is acquired from the original lessor by reason of the lessor’s death or in any of the following types of transactions. Irs 2012 tax forms 1040 instructions A transaction to which section 381(a) applies, A mere change in the form of conducting the trade or business so long as the property is retained in the trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in the trade or business, A like-kind exchange, involuntary conversion, or re-acquisition of real property to the extent that the basis in the property represents the carryover basis, or Certain nonrecognition transactions to the extent that your basis in the property is determined by reference to the transferor’s or distributor’s basis in the property. Irs 2012 tax forms 1040 instructions Examples include the following. Irs 2012 tax forms 1040 instructions A complete liquidation of a subsidiary. Irs 2012 tax forms 1040 instructions A transfer to a corporation controlled by the transferor. Irs 2012 tax forms 1040 instructions An exchange of property by a corporation solely for stock or securities in another corporation in a reorganization. Irs 2012 tax forms 1040 instructions Property Acquired for Business Use To qualify for the section 179 deduction, your property must have been acquired for use in your trade or business. Irs 2012 tax forms 1040 instructions Property you acquire only for the production of income, such as investment property, rental property (if renting property is not your trade or business), and property that produces royalties, does not qualify. Irs 2012 tax forms 1040 instructions Partial business use. Irs 2012 tax forms 1040 instructions   When you use property for both business and nonbusiness purposes, you can elect the section 179 deduction only if you use the property more than 50% for business in the year you place it in service. Irs 2012 tax forms 1040 instructions If you use the property more than 50% for business, multiply the cost of the property by the percentage of business use. Irs 2012 tax forms 1040 instructions Use the resulting business cost to figure your section 179 deduction. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions May Oak bought and placed in service an item of section 179 property costing $11,000. Irs 2012 tax forms 1040 instructions She used the property 80% for her business and 20% for personal purposes. Irs 2012 tax forms 1040 instructions The business part of the cost of the property is $8,800 (80% × $11,000). Irs 2012 tax forms 1040 instructions Property Acquired by Purchase To qualify for the section 179 deduction, your property must have been acquired by purchase. Irs 2012 tax forms 1040 instructions For example, property acquired by gift or inheritance does not qualify. Irs 2012 tax forms 1040 instructions Property is not considered acquired by purchase in the following situations. Irs 2012 tax forms 1040 instructions It is acquired by one component member of a controlled group from another component member of the same group. Irs 2012 tax forms 1040 instructions Its basis is determined either— In whole or in part by its adjusted basis in the hands of the person from whom it was acquired, or Under the stepped-up basis rules for property acquired from a decedent. Irs 2012 tax forms 1040 instructions It is acquired from a related person. Irs 2012 tax forms 1040 instructions Related persons. Irs 2012 tax forms 1040 instructions   Related persons are described under Related persons earlier. Irs 2012 tax forms 1040 instructions However, to determine whether property qualifies for the section 179 deduction, treat as an individual's family only his or her spouse, ancestors, and lineal descendants and substitute "50%" for "10%" each place it appears. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions Ken Larch is a tailor. Irs 2012 tax forms 1040 instructions He bought two industrial sewing machines from his father. Irs 2012 tax forms 1040 instructions He placed both machines in service in the same year he bought them. Irs 2012 tax forms 1040 instructions They do not qualify as section 179 property because Ken and his father are related persons. Irs 2012 tax forms 1040 instructions He cannot claim a section 179 deduction for the cost of these machines. Irs 2012 tax forms 1040 instructions What Property Does Not Qualify? Certain property does not qualify for the section 179 deduction. Irs 2012 tax forms 1040 instructions This includes the following. Irs 2012 tax forms 1040 instructions Land and Improvements Land and land improvements do not qualify as section 179 property. Irs 2012 tax forms 1040 instructions Land improvements include swimming pools, paved parking areas, wharves, docks, bridges, and fences. Irs 2012 tax forms 1040 instructions Excepted Property Even if the requirements explained earlier under What Property Qualifies are met, you cannot elect the section 179 deduction for the following property. Irs 2012 tax forms 1040 instructions Certain property you lease to others (if you are a noncorporate lessor). Irs 2012 tax forms 1040 instructions Certain property used predominantly to furnish lodging or in connection with the furnishing of lodging. Irs 2012 tax forms 1040 instructions Air conditioning or heating units. Irs 2012 tax forms 1040 instructions Property used predominantly outside the United States, except property described in section 168(g)(4) of the Internal Revenue Code. Irs 2012 tax forms 1040 instructions Property used by certain tax-exempt organizations, except property used in connection with the production of income subject to the tax on unrelated trade or business income. Irs 2012 tax forms 1040 instructions Property used by governmental units or foreign persons or entities, except property used under a lease with a term of less than 6 months. Irs 2012 tax forms 1040 instructions Leased property. Irs 2012 tax forms 1040 instructions   Generally, you cannot claim a section 179 deduction based on the cost of property you lease to someone else. Irs 2012 tax forms 1040 instructions This rule does not apply to corporations. Irs 2012 tax forms 1040 instructions However, you can claim a section 179 deduction for the cost of the following property. Irs 2012 tax forms 1040 instructions Property you manufacture or produce and lease to others. Irs 2012 tax forms 1040 instructions Property you purchase and lease to others if both the following tests are met. Irs 2012 tax forms 1040 instructions The term of the lease (including options to renew) is less than 50% of the property's class life. Irs 2012 tax forms 1040 instructions For the first 12 months after the property is transferred to the lessee, the total business deductions you are allowed on the property (other than rents and reimbursed amounts) are more than 15% of the rental income from the property. Irs 2012 tax forms 1040 instructions Property used for lodging. Irs 2012 tax forms 1040 instructions   Generally, you cannot claim a section 179 deduction for property used predominantly to furnish lodging or in connection with the furnishing of lodging. Irs 2012 tax forms 1040 instructions However, this does not apply to the following types of property. Irs 2012 tax forms 1040 instructions Nonlodging commercial facilities that are available to those not using the lodging facilities on the same basis as they are available to those using the lodging facilities. Irs 2012 tax forms 1040 instructions Property used by a hotel or motel in connection with the trade or business of furnishing lodging where the predominant portion of the accommodations is used by transients. Irs 2012 tax forms 1040 instructions Any certified historic structure to the extent its basis is due to qualified rehabilitation expenditures. Irs 2012 tax forms 1040 instructions Any energy property. Irs 2012 tax forms 1040 instructions Energy property. Irs 2012 tax forms 1040 instructions   Energy property is property that meets the following requirements. Irs 2012 tax forms 1040 instructions It is one of the following types of property. Irs 2012 tax forms 1040 instructions Equipment that uses solar energy to generate electricity, to heat or cool a structure, to provide hot water for use in a structure, or to provide solar process heat, except for equipment used to generate energy to heat a swimming pool. Irs 2012 tax forms 1040 instructions Equipment placed in service after December 31, 2005, and before January 1, 2017, that uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight. Irs 2012 tax forms 1040 instructions Equipment used to produce, distribute, or use energy derived from a geothermal deposit. Irs 2012 tax forms 1040 instructions For electricity generated by geothermal power, this includes equipment up to (but not including) the electrical transmission stage. Irs 2012 tax forms 1040 instructions Qualified fuel cell property or qualified microturbine property placed in service after December 31, 2005, and before January 1, 2017. Irs 2012 tax forms 1040 instructions The construction, reconstruction, or erection of the property must be completed by you. Irs 2012 tax forms 1040 instructions For property you acquire, the original use of the property must begin with you. Irs 2012 tax forms 1040 instructions The property must meet the performance and quality standards, if any, prescribed by Income Tax Regulations in effect at the time you get the property. Irs 2012 tax forms 1040 instructions   For periods before February 14, 2008, energy property does not include any property that is public utility property as defined by section 46(f)(5) of the Internal Revenue Code (as in effect on November 4, 1990). Irs 2012 tax forms 1040 instructions How Much Can You Deduct? Your section 179 deduction is generally the cost of the qualifying property. Irs 2012 tax forms 1040 instructions However, the total amount you can elect to deduct under section 179 is subject to a dollar limit and a business income limit. Irs 2012 tax forms 1040 instructions These limits apply to each taxpayer, not to each business. Irs 2012 tax forms 1040 instructions However, see Married Individuals under Dollar Limits , later. Irs 2012 tax forms 1040 instructions For a passenger automobile, the total section 179 deduction and depreciation deduction are limited. Irs 2012 tax forms 1040 instructions See Do the Passenger Automobile Limits Apply in chapter 5 . Irs 2012 tax forms 1040 instructions If you deduct only part of the cost of qualifying property as a section 179 deduction, you can generally depreciate the cost you do not deduct. Irs 2012 tax forms 1040 instructions Trade-in of other property. Irs 2012 tax forms 1040 instructions   If you buy qualifying property with cash and a trade-in, its cost for purposes of the section 179 deduction includes only the cash you paid. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions Silver Leaf, a retail bakery, traded two ovens having a total adjusted basis of $680 for a new oven costing $1,320. Irs 2012 tax forms 1040 instructions They received an $800 trade-in allowance for the old ovens and paid $520 in cash for the new oven. Irs 2012 tax forms 1040 instructions The bakery also traded a used van with an adjusted basis of $4,500 for a new van costing $9,000. Irs 2012 tax forms 1040 instructions They received a $4,800 trade-in allowance on the used van and paid $4,200 in cash for the new van. Irs 2012 tax forms 1040 instructions Only the portion of the new property's basis paid by cash qualifies for the section 179 deduction. Irs 2012 tax forms 1040 instructions Therefore, Silver Leaf's qualifying costs for the section 179 deduction are $4,720 ($520 + $4,200). Irs 2012 tax forms 1040 instructions Dollar Limits The total amount you can elect to deduct under section 179 for most property placed in service in 2013 generally cannot be more than $500,000. Irs 2012 tax forms 1040 instructions If you acquire and place in service more than one item of qualifying property during the year, you can allocate the section 179 deduction among the items in any way, as long as the total deduction is not more than $500,000. Irs 2012 tax forms 1040 instructions You do not have to claim the full $500,000. Irs 2012 tax forms 1040 instructions Qualified real property (described earlier) that you elected to treat as section 179 real property is limited to $250,000 of the maximum deduction of $500,000 for 2013. Irs 2012 tax forms 1040 instructions The amount you can elect to deduct is not affected if you place qualifying property in service in a short tax year or if you place qualifying property in service for only a part of a 12-month tax year. Irs 2012 tax forms 1040 instructions After you apply the dollar limit to determine a tentative deduction, you must apply the business income limit (described later) to determine your actual section 179 deduction. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions In 2013, you bought and placed in service $500,000 in machinery and a $25,000 circular saw for your business. Irs 2012 tax forms 1040 instructions You elect to deduct $475,000 for the machinery and the entire $25,000 for the saw, a total of $500,000. Irs 2012 tax forms 1040 instructions This is the maximum amount you can deduct. Irs 2012 tax forms 1040 instructions Your $25,000 deduction for the saw completely recovered its cost. Irs 2012 tax forms 1040 instructions Your basis for depreciation is zero. Irs 2012 tax forms 1040 instructions The basis for depreciation of your machinery is $25,000. Irs 2012 tax forms 1040 instructions You figure this by subtracting your $475,000 section 179 deduction for the machinery from the $500,000 cost of the machinery. Irs 2012 tax forms 1040 instructions Situations affecting dollar limit. Irs 2012 tax forms 1040 instructions   Under certain circumstances, the general dollar limits on the section 179 deduction may be reduced or increased or there may be additional dollar limits. Irs 2012 tax forms 1040 instructions The general dollar limit is affected by any of the following situations. Irs 2012 tax forms 1040 instructions The cost of your section 179 property placed in service exceeds $2,000,000. Irs 2012 tax forms 1040 instructions Your business is an enterprise zone business. Irs 2012 tax forms 1040 instructions You placed in service a sport utility or certain other vehicles. Irs 2012 tax forms 1040 instructions You are married filing a joint or separate return. Irs 2012 tax forms 1040 instructions Costs exceeding $2,000,000 If the cost of your qualifying section 179 property placed in service in a year is more than $2,000,000, you generally must reduce the dollar limit (but not below zero) by the amount of cost over $2,000,000. Irs 2012 tax forms 1040 instructions If the cost of your section 179 property placed in service during 2013 is $2,500,000 or more, you cannot take a section 179 deduction. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions In 2013, Jane Ash placed in service machinery costing $2,100,000. Irs 2012 tax forms 1040 instructions This cost is $100,000 more than $2,000,000, so she must reduce her dollar limit to $400,000 ($500,000 − $100,000). Irs 2012 tax forms 1040 instructions Enterprise Zone Businesses An increased section 179 deduction is available to enterprise zone businesses for qualified zone property placed in service during the tax year, in an empowerment zone. Irs 2012 tax forms 1040 instructions For more information including the definitions of “enterprise zone business” and “qualified zone property,” see sections 1397A, 1397C, and 1397D of the Internal Revenue Code. Irs 2012 tax forms 1040 instructions The dollar limit on the section 179 deduction is increased by the smaller of: $35,000, or The cost of section 179 property that is also qualified zone property placed in service before January 1, 2014 (including such property placed in service by your spouse, even if you are filing a separate return). Irs 2012 tax forms 1040 instructions Note. Irs 2012 tax forms 1040 instructions   You take into account only 50% (instead of 100%) of the cost of qualified zone property placed in service in a year when figuring the reduced dollar limit for costs exceeding $2,000,000 (explained earlier). Irs 2012 tax forms 1040 instructions Sport Utility and Certain Other Vehicles You cannot elect to expense more than $25,000 of the cost of any heavy sport utility vehicle (SUV) and certain other vehicles placed in service during the tax year. Irs 2012 tax forms 1040 instructions This rule applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways, that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. Irs 2012 tax forms 1040 instructions However, the $25,000 limit does not apply to any vehicle: Designed to seat more than nine passengers behind the driver's seat, Equipped with a cargo area (either open or enclosed by a cap) of at least six feet in interior length that is not readily accessible from the passenger compartment, or That has an integral enclosure fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield. Irs 2012 tax forms 1040 instructions Married Individuals If you are married, how you figure your section 179 deduction depends on whether you file jointly or separately. Irs 2012 tax forms 1040 instructions If you file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service. Irs 2012 tax forms 1040 instructions If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit, including the reduction for costs over $2,000,000. Irs 2012 tax forms 1040 instructions You must allocate the dollar limit (after any reduction) between you equally, unless you both elect a different allocation. Irs 2012 tax forms 1040 instructions If the percentages elected by each of you do not total 100%, 50% will be allocated to each of you. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions Jack Elm is married. Irs 2012 tax forms 1040 instructions He and his wife file separate returns. Irs 2012 tax forms 1040 instructions Jack bought and placed in service $2,000,000 of qualified farm machinery in 2013. Irs 2012 tax forms 1040 instructions His wife has her own business, and she bought and placed in service $30,000 of qualified business equipment. Irs 2012 tax forms 1040 instructions Their combined dollar limit is $470,000. Irs 2012 tax forms 1040 instructions This is because they must figure the limit as if they were one taxpayer. Irs 2012 tax forms 1040 instructions They reduce the $500,000 dollar limit by the $30,000 excess of their costs over $2,000,000. Irs 2012 tax forms 1040 instructions They elect to allocate the $470,000 dollar limit as follows. Irs 2012 tax forms 1040 instructions $446,500 ($470,000 x 95%) to Mr. Irs 2012 tax forms 1040 instructions Elm's machinery. Irs 2012 tax forms 1040 instructions $23,500 ($470,000 x 5%) to Mrs. Irs 2012 tax forms 1040 instructions Elm's equipment. Irs 2012 tax forms 1040 instructions If they did not make an election to allocate their costs in this way, they would have to allocate $235,000 ($470,000 × 50%) to each of them. Irs 2012 tax forms 1040 instructions Joint return after filing separate returns. Irs 2012 tax forms 1040 instructions   If you and your spouse elect to amend your separate returns by filing a joint return after the due date for filing your return, the dollar limit on the joint return is the lesser of the following amounts. Irs 2012 tax forms 1040 instructions The dollar limit (after reduction for any cost of section 179 property over $2,000,000). Irs 2012 tax forms 1040 instructions The total cost of section 179 property you and your spouse elected to expense on your separate returns. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions The facts are the same as in the previous example except that Jack elected to deduct $30,000 of the cost of section 179 property on his separate return and his wife elected to deduct $2,000. Irs 2012 tax forms 1040 instructions After the due date of their returns, they file a joint return. Irs 2012 tax forms 1040 instructions Their dollar limit for the section 179 deduction is $32,000. Irs 2012 tax forms 1040 instructions This is the lesser of the following amounts. Irs 2012 tax forms 1040 instructions $470,000—The dollar limit less the cost of section 179 property over $2,000,000. Irs 2012 tax forms 1040 instructions $32,000—The total they elected to expense on their separate returns. Irs 2012 tax forms 1040 instructions Business Income Limit The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Irs 2012 tax forms 1040 instructions Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the management or operations of the trade or business. Irs 2012 tax forms 1040 instructions Any cost not deductible in one year under section 179 because of this limit can be carried to the next year. Irs 2012 tax forms 1040 instructions Special rules apply to a 2013 deduction of qualified section 179 real property that is disallowed because of the business income limit. Irs 2012 tax forms 1040 instructions See Special rules for qualified section 179 property under Carryover of disallowed deduction, later. Irs 2012 tax forms 1040 instructions Taxable income. Irs 2012 tax forms 1040 instructions   In general, figure taxable income for this purpose by totaling the net income and losses from all trades and businesses you actively conducted during the year. Irs 2012 tax forms 1040 instructions Net income or loss from a trade or business includes the following items. Irs 2012 tax forms 1040 instructions Section 1231 gains (or losses). Irs 2012 tax forms 1040 instructions Interest from working capital of your trade or business. Irs 2012 tax forms 1040 instructions Wages, salaries, tips, or other pay earned as an employee. Irs 2012 tax forms 1040 instructions For information about section 1231 gains and losses, see chapter 3 in Publication 544. Irs 2012 tax forms 1040 instructions   In addition, figure taxable income without regard to any of the following. Irs 2012 tax forms 1040 instructions The section 179 deduction. Irs 2012 tax forms 1040 instructions The self-employment tax deduction. Irs 2012 tax forms 1040 instructions Any net operating loss carryback or carryforward. Irs 2012 tax forms 1040 instructions Any unreimbursed employee business expenses. Irs 2012 tax forms 1040 instructions Two different taxable income limits. Irs 2012 tax forms 1040 instructions   In addition to the business income limit for your section 179 deduction, you may have a taxable income limit for some other deduction. Irs 2012 tax forms 1040 instructions You may have to figure the limit for this other deduction taking into account the section 179 deduction. Irs 2012 tax forms 1040 instructions If so, complete the following steps. Irs 2012 tax forms 1040 instructions Step Action 1 Figure taxable income without the section 179 deduction or the other deduction. Irs 2012 tax forms 1040 instructions 2 Figure a hypothetical section 179 deduction using the taxable income figured in Step 1. Irs 2012 tax forms 1040 instructions 3 Subtract the hypothetical section 179 deduction figured in Step 2 from the taxable income figured in Step 1. Irs 2012 tax forms 1040 instructions 4 Figure a hypothetical amount for the other deduction using the amount figured in Step 3 as taxable income. Irs 2012 tax forms 1040 instructions 5 Subtract the hypothetical other deduction figured in Step 4 from the taxable income figured in Step 1. Irs 2012 tax forms 1040 instructions 6 Figure your actual section 179 deduction using the taxable income figured in Step 5. Irs 2012 tax forms 1040 instructions 7 Subtract your actual section 179 deduction figured in Step 6 from the taxable income figured in Step 1. Irs 2012 tax forms 1040 instructions 8 Figure your actual other deduction using the taxable income figured in Step 7. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions On February 1, 2013, the XYZ corporation purchased and placed in service qualifying section 179 property that cost $500,000. Irs 2012 tax forms 1040 instructions It elects to expense the entire $500,000 cost under section 179. Irs 2012 tax forms 1040 instructions In June, the corporation gave a charitable contribution of $10,000. Irs 2012 tax forms 1040 instructions A corporation's limit on charitable contributions is figured after subtracting any section 179 deduction. Irs 2012 tax forms 1040 instructions The business income limit for the section 179 deduction is figured after subtracting any allowable charitable contributions. Irs 2012 tax forms 1040 instructions XYZ's taxable income figured without the section 179 deduction or the deduction for charitable contributions is $520,000. Irs 2012 tax forms 1040 instructions XYZ figures its section 179 deduction and its deduction for charitable contributions as follows. Irs 2012 tax forms 1040 instructions Step 1– Taxable income figured without either deduction is $520,000. Irs 2012 tax forms 1040 instructions Step 2– Using $520,000 as taxable income, XYZ's hypothetical section 179 deduction is $500,000. Irs 2012 tax forms 1040 instructions Step 3– $20,000 ($520,000 − $500,000). Irs 2012 tax forms 1040 instructions Step 4– Using $20,000 (from Step 3) as taxable income, XYZ's hypothetical charitable contribution (limited to 10% of taxable income) is $2,000. Irs 2012 tax forms 1040 instructions Step 5– $518,000 ($520,000 − $2,000). Irs 2012 tax forms 1040 instructions Step 6– Using $518,000 (from Step 5) as taxable income, XYZ figures the actual section 179 deduction. Irs 2012 tax forms 1040 instructions Because the taxable income is at least $500,000, XYZ can take a $500,000 section 179 deduction. Irs 2012 tax forms 1040 instructions Step 7– $20,000 ($520,000 − $500,000). Irs 2012 tax forms 1040 instructions Step 8– Using $20,000 (from Step 7) as taxable income, XYZ's actual charitable contribution (limited to 10% of taxable income) is $2,000. Irs 2012 tax forms 1040 instructions Carryover of disallowed deduction. Irs 2012 tax forms 1040 instructions   You can carry over for an unlimited number of years the cost of any section 179 property you elected to expense but were unable to because of the business income limit. Irs 2012 tax forms 1040 instructions This disallowed deduction amount is shown on line 13 of Form 4562. Irs 2012 tax forms 1040 instructions You use the amount you carry over to determine your section 179 deduction in the next year. Irs 2012 tax forms 1040 instructions Enter that amount on line 10 of your Form 4562 for the next year. Irs 2012 tax forms 1040 instructions   If you place more than one property in service in a year, you can select the properties for which all or a part of the costs will be carried forward. Irs 2012 tax forms 1040 instructions Your selections must be shown in your books and records. Irs 2012 tax forms 1040 instructions For this purpose, treat section 179 costs allocated from a partnership or an S corporation as one item of section 179 property. Irs 2012 tax forms 1040 instructions If you do not make a selection, the total carryover will be allocated equally among the properties you elected to expense for the year. Irs 2012 tax forms 1040 instructions   If costs from more than one year are carried forward to a subsequent year in which only part of the total carryover can be deducted, you must deduct the costs being carried forward from the earliest year first. Irs 2012 tax forms 1040 instructions Special rules for qualified section 179 real property. Irs 2012 tax forms 1040 instructions   You can carry over to 2013 a 2012 deduction attributable to qualified section 179 real property that you elected to expense but were unable to take because of the business income limitation. Irs 2012 tax forms 1040 instructions Any such 2012 carryover amounts that are not deducted in 2013, plus any 2013 disallowed section 179 expense deductions attributable to qualified real property, are not carried over to 2014. Irs 2012 tax forms 1040 instructions Instead these amounts are treated as property placed in service on the first day of 2013 for purposes of computing depreciation (including the special depreciation allowance, if applicable). Irs 2012 tax forms 1040 instructions See section 179(f) of the Internal Revenue Code and Notice 2013-59 for more information. Irs 2012 tax forms 1040 instructions If there is a sale or other disposition of your property (including a transfer at death) before you can use the full amount of any outstanding carryover of your disallowed section 179 deduction, neither you nor the new owner can deduct any of the unused amount. Irs 2012 tax forms 1040 instructions Instead, you must add it back to the property's basis. Irs 2012 tax forms 1040 instructions Partnerships and Partners The section 179 deduction limits apply both to the partnership and to each partner. Irs 2012 tax forms 1040 instructions The partnership determines its section 179 deduction subject to the limits. Irs 2012 tax forms 1040 instructions It then allocates the deduction among its partners. Irs 2012 tax forms 1040 instructions Each partner adds the amount allocated from partnerships (shown on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Irs 2012 tax forms 1040 instructions ) to his or her nonpartnership section 179 costs and then applies the dollar limit to this total. Irs 2012 tax forms 1040 instructions To determine any reduction in the dollar limit for costs over $2,000,000, the partner does not include any of the cost of section 179 property placed in service by the partnership. Irs 2012 tax forms 1040 instructions After the dollar limit (reduced for any nonpartnership section 179 costs over $2,000,000) is applied, any remaining cost of the partnership and nonpartnership section 179 property is subject to the business income limit. Irs 2012 tax forms 1040 instructions Partnership's taxable income. Irs 2012 tax forms 1040 instructions   For purposes of the business income limit, figure the partnership's taxable income by adding together the net income and losses from all trades or businesses actively conducted by the partnership during the year. Irs 2012 tax forms 1040 instructions See the Instructions for Form 1065 for information on how to figure partnership net income (or loss). Irs 2012 tax forms 1040 instructions However, figure taxable income without regard to credits, tax-exempt income, the section 179 deduction, and guaranteed payments under section 707(c) of the Internal Revenue Code. Irs 2012 tax forms 1040 instructions Partner's share of partnership's taxable income. Irs 2012 tax forms 1040 instructions   For purposes of the business income limit, the taxable income of a partner engaged in the active conduct of one or more of a partnership's trades or businesses includes his or her allocable share of taxable income derived from the partnership's active conduct of any trade or business. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions In 2013, Beech Partnership placed in service section 179 property with a total cost of $2,025,000. Irs 2012 tax forms 1040 instructions The partnership must reduce its dollar limit by $25,000 ($2,025,000 − $2,000,000). Irs 2012 tax forms 1040 instructions Its maximum section 179 deduction is $475,000 ($500,000 − $25,000), and it elects to expense that amount. Irs 2012 tax forms 1040 instructions The partnership's taxable income from the active conduct of all its trades or businesses for the year was $600,000, so it can deduct the full $475,000. Irs 2012 tax forms 1040 instructions It allocates $40,000 of its section 179 deduction and $50,000 of its taxable income to Dean, one of its partners. Irs 2012 tax forms 1040 instructions In addition to being a partner in Beech Partnership, Dean is also a partner in the Cedar Partnership, which allocated to him a $30,000 section 179 deduction and $35,000 of its taxable income from the active conduct of its business. Irs 2012 tax forms 1040 instructions He also conducts a business as a sole proprietor and, in 2013, placed in service in that business qualifying section 179 property costing $55,000. Irs 2012 tax forms 1040 instructions He had a net loss of $5,000 from that business for the year. Irs 2012 tax forms 1040 instructions Dean does not have to include section 179 partnership costs to figure any reduction in his dollar limit, so his total section 179 costs for the year are not more than $2,000,000 and his dollar limit is not reduced. Irs 2012 tax forms 1040 instructions His maximum section 179 deduction is $500,000. Irs 2012 tax forms 1040 instructions He elects to expense all of the $70,000 in section 179 deductions allocated from the partnerships ($40,000 from Beech Partnership plus $30,000 from Cedar Partnership), plus $55,000 of his sole proprietorship's section 179 costs, and notes that information in his books and records. Irs 2012 tax forms 1040 instructions However, his deduction is limited to his business taxable income of $80,000 ($50,000 from Beech Partnership, plus $35,000 from Cedar Partnership minus $5,000 loss from his sole proprietorship). Irs 2012 tax forms 1040 instructions He carries over $45,000 ($125,000 − $80,000) of the elected section 179 costs to 2014. Irs 2012 tax forms 1040 instructions He allocates the carryover amount to the cost of section 179 property placed in service in his sole proprietorship, and notes that allocation in his books and records. Irs 2012 tax forms 1040 instructions Different tax years. Irs 2012 tax forms 1040 instructions   For purposes of the business income limit, if the partner's tax year and that of the partnership differ, the partner's share of the partnership's taxable income for a tax year is generally the partner's distributive share for the partnership tax year that ends with or within the partner's tax year. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions John and James Oak are equal partners in Oak Partnership. Irs 2012 tax forms 1040 instructions Oak Partnership uses a tax year ending January 31. Irs 2012 tax forms 1040 instructions John and James both use a tax year ending December 31. Irs 2012 tax forms 1040 instructions For its tax year ending January 31, 2013, Oak Partnership's taxable income from the active conduct of its business is $80,000, of which $70,000 was earned during 2012. Irs 2012 tax forms 1040 instructions John and James each include $40,000 (each partner's entire share) of partnership taxable income in computing their business income limit for the 2013 tax year. Irs 2012 tax forms 1040 instructions Adjustment of partner's basis in partnership. Irs 2012 tax forms 1040 instructions   A partner must reduce the basis of his or her partnership interest by the total amount of section 179 expenses allocated from the partnership even if the partner cannot currently deduct the total amount. Irs 2012 tax forms 1040 instructions If the partner disposes of his or her partnership interest, the partner's basis for determining gain or loss is increased by any outstanding carryover of disallowed section 179 expenses allocated from the partnership. Irs 2012 tax forms 1040 instructions Adjustment of partnership's basis in section 179 property. Irs 2012 tax forms 1040 instructions   The basis of a partnership's section 179 property must be reduced by the section 179 deduction elected by the partnership. Irs 2012 tax forms 1040 instructions This reduction of basis must be made even if a partner cannot deduct all or part of the section 179 deduction allocated to that partner by the partnership because of the limits. Irs 2012 tax forms 1040 instructions S Corporations Generally, the rules that apply to a partnership and its partners also apply to an S corporation and its shareholders. Irs 2012 tax forms 1040 instructions The deduction limits apply to an S corporation and to each shareholder. Irs 2012 tax forms 1040 instructions The S corporation allocates its deduction to the shareholders who then take their section 179 deduction subject to the limits. Irs 2012 tax forms 1040 instructions Figuring taxable income for an S corporation. Irs 2012 tax forms 1040 instructions   To figure taxable income (or loss) from the active conduct by an S corporation of any trade or business, you total the net income and losses from all trades or businesses actively conducted by the S corporation during the year. Irs 2012 tax forms 1040 instructions   To figure the net income (or loss) from a trade or business actively conducted by an S corporation, you take into account the items from that trade or business that are passed through to the shareholders and used in determining each shareholder's tax liability. Irs 2012 tax forms 1040 instructions However, you do not take into account any credits, tax-exempt income, the section 179 deduction, and deductions for compensation paid to shareholder-employees. Irs 2012 tax forms 1040 instructions For purposes of determining the total amount of S corporation items, treat deductions and losses as negative income. Irs 2012 tax forms 1040 instructions In figuring the taxable income of an S corporation, disregard any limits on the amount of an S corporation item that must be taken into account when figuring a shareholder's taxable income. Irs 2012 tax forms 1040 instructions Other Corporations A corporation's taxable income from its active conduct of any trade or business is its taxable income figured with the following changes. Irs 2012 tax forms 1040 instructions It is figured before deducting the section 179 deduction, any net operating loss deduction, and special deductions (as reported on the corporation's income tax return). Irs 2012 tax forms 1040 instructions It is adjusted for items of income or deduction included in the amount figured in 1, above, not derived from a trade or business actively conducted by the corporation during the tax year. Irs 2012 tax forms 1040 instructions How Do You Elect the Deduction? You elect to take the section 179 deduction by completing Part I of Form 4562. Irs 2012 tax forms 1040 instructions If you elect the deduction for listed property (described in chapter 5), complete Part V of Form 4562 before completing Part I. Irs 2012 tax forms 1040 instructions For property placed in service in 2013, file Form 4562 with either of the following. Irs 2012 tax forms 1040 instructions Your original 2013 tax return, whether or not you file it timely. Irs 2012 tax forms 1040 instructions An amended return for 2013 filed within the time prescribed by law. Irs 2012 tax forms 1040 instructions An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. Irs 2012 tax forms 1040 instructions The amended return must also include any resulting adjustments to taxable income. Irs 2012 tax forms 1040 instructions You must keep records that show the specific identification of each piece of qualifying section 179 property. Irs 2012 tax forms 1040 instructions These records must show how you acquired the property, the person you acquired it from, and when you placed it in service. Irs 2012 tax forms 1040 instructions Election for certain qualified section 179 real property. Irs 2012 tax forms 1040 instructions   You can elect to expense certain qualified real property that you placed in service as section 179 property for tax years beginning in 2013. Irs 2012 tax forms 1040 instructions If you elect to treat this property as section 179 property, you must elect the application of the special rules for qualified real property described in section 179(f) of the Internal Revenue Code. Irs 2012 tax forms 1040 instructions   To make the election, attach a statement indicating you are “electing the application of section 179(f) of the Internal Revenue Code” with either of the following. Irs 2012 tax forms 1040 instructions Your original 2013 tax return, whether or not you file it timely. Irs 2012 tax forms 1040 instructions An amended return for 2013 filed within the time prescribed by law. Irs 2012 tax forms 1040 instructions The amended return must also include any adjustments to taxable income. Irs 2012 tax forms 1040 instructions   The statement should indicate your election to expense certain qualified real property under section 179(f) on your return. Irs 2012 tax forms 1040 instructions It must specify one or more of the three types of qualified property (described under Qualified real property ) to which the election applies, the cost of each such type, and the portion of the cost of each such property to be taken into account. Irs 2012 tax forms 1040 instructions Also, report this on line 6 of Form 4562. Irs 2012 tax forms 1040 instructions    The maximum section 179 expense deduction that can be taken for qualified section 179 real property is limited to $250,000. Irs 2012 tax forms 1040 instructions Revoking an election. Irs 2012 tax forms 1040 instructions   An election (or any specification made in the election) to take a section 179 deduction for 2013 can be revoked without IRS approval by filing an amended return. Irs 2012 tax forms 1040 instructions The amended return must be filed within the time prescribed by law. Irs 2012 tax forms 1040 instructions The amended return must also include any resulting adjustments to taxable income. Irs 2012 tax forms 1040 instructions Once made, the revocation is irrevocable. Irs 2012 tax forms 1040 instructions When Must You Recapture the Deduction? You may have to recapture the section 179 deduction if, in any year during the property's recovery period, the percentage of business use drops to 50% or less. Irs 2012 tax forms 1040 instructions In the year the business use drops to 50% or less, you include the recapture amount as ordinary income in Part IV of Form 4797. Irs 2012 tax forms 1040 instructions You also increase the basis of the property by the recapture amount. Irs 2012 tax forms 1040 instructions Recovery periods for property are discussed under Which Recovery Period Applies in chapter 4 . Irs 2012 tax forms 1040 instructions If you sell, exchange, or otherwise dispose of the property, do not figure the recapture amount under the rules explained in this discussion. Irs 2012 tax forms 1040 instructions Instead, use the rules for recapturing depreciation explained in chapter 3 of Publication 544 under Section 1245 Property. Irs 2012 tax forms 1040 instructions For qualified real property (described earlier), see Notice 2013-59 for determining the portion of the gain that is attributable to section 1245 property upon the sale or other disposition of qualified real property. Irs 2012 tax forms 1040 instructions If the property is listed property (described in chapter 5 ), do not figure the recapture amount under the rules explained in this discussion when the percentage of business use drops to 50% or less. Irs 2012 tax forms 1040 instructions Instead, use the rules for recapturing excess depreciation in chapter 5 under What Is the Business-Use Requirement. Irs 2012 tax forms 1040 instructions Figuring the recapture amount. Irs 2012 tax forms 1040 instructions   To figure the amount to recapture, take the following steps. Irs 2012 tax forms 1040 instructions Figure the depreciation that would have been allowable on the section 179 deduction you claimed. Irs 2012 tax forms 1040 instructions Begin with the year you placed the property in service and include the year of recapture. Irs 2012 tax forms 1040 instructions Subtract the depreciation figured in (1) from the section 179 deduction you claimed. Irs 2012 tax forms 1040 instructions The result is the amount you must recapture. Irs 2012 tax forms 1040 instructions Example. Irs 2012 tax forms 1040 instructions In January 2011, Paul Lamb, a calendar year taxpayer, bought and placed in service section 179 property costing $10,000. Irs 2012 tax forms 1040 instructions The property is not listed property. Irs 2012 tax forms 1040 instructions The property is 3-year property. Irs 2012 tax forms 1040 instructions He elected a $5,000 section 179 deduction for the property and also elected not to claim a special depreciation allowance. Irs 2012 tax forms 1040 instructions He used the property only for business in 2011 and 2012. Irs 2012 tax forms 1040 instructions In 2013, he used the property 40% for business and 60% for personal use. Irs 2012 tax forms 1040 instructions He figures his recapture amount as follows. Irs 2012 tax forms 1040 instructions Section 179 deduction claimed (2011) $5,000. Irs 2012 tax forms 1040 instructions 00 Minus: Allowable depreciation using Table A-1 (instead of section 179 deduction):   2011 $1,666. Irs 2012 tax forms 1040 instructions 50   2012 2,222. Irs 2012 tax forms 1040 instructions 50   2013 ($740. Irs 2012 tax forms 1040 instructions 50 × 40% (business)) 296. Irs 2012 tax forms 1040 instructions 20 4,185. Irs 2012 tax forms 1040 instructions 20 2013 — Recapture amount $ 814. Irs 2012 tax forms 1040 instructions 80 Paul must include $814. Irs 2012 tax forms 1040 instructions 80 in income for 2013. Irs 2012 tax forms 1040 instructions If any qualified zone property placed in service during the year ceases to be used in an empowerment zone by an enterprise zone business in a later year, the benefit of the increased section 179 deduction must be reported as other income on your return. Irs 2012 tax forms 1040 instructions Prev  Up  Next   Home   More Online Publications