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Irs Gov Form 1040a For 2012

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Irs Gov Form 1040a For 2012

Irs gov form 1040a for 2012 Publication 925 - Main Content Table of Contents Passive Activity LimitsWho Must Use These Rules? Passive Activity Loss Passive Activity Credit Publicly Traded Partnership Excess Farm Loss Passive Activities Activities That Are Not Passive Activities Passive Activity Income and Deductions Grouping Your Activities Recharacterization of Passive Income Dispositions How To Report Your Passive Activity Loss Comprehensive ExampleGeneral Information At-Risk LimitsWho Is Affected? Activities Covered by the At-Risk Rules At-Risk Amounts Amounts Not At Risk Reductions of Amounts At Risk Recapture Rule How To Get Tax HelpLow Income Taxpayer Clinics Passive Activity Limits Who Must Use These Rules? The passive activity rules apply to: Individuals, Estates, Trusts (other than grantor trusts), Personal service corporations, and Closely held corporations. Irs gov form 1040a for 2012 Even though the rules do not apply to grantor trusts, partnerships, and S corporations directly, they do apply to the owners of these entities. Irs gov form 1040a for 2012 For information about personal service corporations and closely held corporations, including definitions and how the passive activity rules apply to these corporations, see Form 8810 and its instructions. Irs gov form 1040a for 2012 Before applying the passive activity limits, you must first determine the amount of the deductions disallowed under the basis, excess farm loss, or at-risk rules. Irs gov form 1040a for 2012 See Passive Activity Deductions, later. Irs gov form 1040a for 2012 Passive Activity Loss Generally, the passive activity loss for the tax year is not allowed. Irs gov form 1040a for 2012 However, there is a special allowance under which some or all of your passive activity loss may be allowed. Irs gov form 1040a for 2012 See Special $25,000 allowance , later. Irs gov form 1040a for 2012 Definition of passive activity loss. Irs gov form 1040a for 2012    Generally, your passive activity loss for the tax year is the excess of your passive activity deductions over your passive activity gross income. Irs gov form 1040a for 2012 See Passive Activity Income and Deductions , later. Irs gov form 1040a for 2012   For a closely held corporation, the passive activity loss is the excess of passive activity deductions over the sum of passive activity gross income and net active income. Irs gov form 1040a for 2012 For details on net active income, see the Instructions for Form 8810. Irs gov form 1040a for 2012 For the definition of passive activity gross income, see Passive Activity Income , later. Irs gov form 1040a for 2012 For the definition of passive activity deductions, see Passive Activity Deductions , later. Irs gov form 1040a for 2012 Identification of Disallowed Passive Activity Deductions If all or a part of your passive activity loss is disallowed for the tax year, you may need to allocate the disallowed passive activity loss among different passive activities and among different deductions within a passive activity. Irs gov form 1040a for 2012 Allocation of disallowed passive activity loss among activities. Irs gov form 1040a for 2012   If all or any part of your passive activity loss is disallowed for the tax year, a ratable portion of the loss (if any) from each of your passive activities is disallowed. Irs gov form 1040a for 2012 The ratable portion of a loss from an activity is computed by multiplying the passive activity loss that is disallowed for the tax year by the fraction obtained by dividing: The loss from the activity for the tax year; by The sum of the losses for the tax year from all activities having losses for the tax year. Irs gov form 1040a for 2012 Use Worksheet 5 of Form 8582 to figure the ratable portion of the loss from each activity that is disallowed. Irs gov form 1040a for 2012 Loss from an activity. Irs gov form 1040a for 2012   The term “loss from an activity” means: The amount by which the passive activity deductions (defined later) from the activity for the tax year exceed the passive activity gross income (defined later) from the activity for the tax year; reduced by Any part of such amount that is allowed under the Special $25,000 Allowance , later. Irs gov form 1040a for 2012   If your passive activity gross income from significant participation passive activities (defined later) for the tax year is more than your passive activity deductions from those activities for the tax year, those activities shall be treated, solely for purposes of figuring your loss from the activity, as a single activity that does not have a loss for such taxable year. Irs gov form 1040a for 2012 See Significant Participation Passive Activities , later. Irs gov form 1040a for 2012 Example. Irs gov form 1040a for 2012 John Pine holds interests in three passive activities, A, B, and C. Irs gov form 1040a for 2012 The gross income and deductions from these activities for the taxable year are as follows:   A B C Total Gross income $7,000 $4,000 $12,000 $23,000 Deductions (16,000) (20,000) (8,000) (44,000)           Net income (loss) ($9,000) ($16,000) $4,000 ($21,000)   John Pine’s $21,000 passive activity loss for the taxable year is disallowed. Irs gov form 1040a for 2012 Therefore, a ratable portion of the losses from activities A and B is disallowed. Irs gov form 1040a for 2012 He figures the disallowed portion of each loss as follows: A: $21,000 x $9,000/$25,000 $7,560 B: $21,000 x $16,000/$25,000 13,440     Total $21,000 Allocation within loss activities. Irs gov form 1040a for 2012   If all or any part of your loss from an activity is disallowed under Allocation of disallowed passive activity loss among activities for the tax year, a ratable portion of each of your passive activity deductions (defined later), other than an excluded deduction (defined below) from such activity is disallowed. Irs gov form 1040a for 2012 The ratable portion of a passive activity deduction is the amount of the disallowed portion of the loss from the activity for the tax year multiplied by the fraction obtained by dividing: The amount of such deduction; by The sum of all of your passive activity deductions (other than excluded deductions) from that activity from the tax year. Irs gov form 1040a for 2012 Excluded deductions. Irs gov form 1040a for 2012    “Excluded deduction” means any passive activity deduction that is taken into account in computing your net income from an item of property for a taxable year in which an amount of the taxpayer's gross income from such item of property is treated as not from a passive activity. Irs gov form 1040a for 2012 See Recharacterization of Passive Income , later. Irs gov form 1040a for 2012 Separately identified deductions. Irs gov form 1040a for 2012   In identifying the deductions from an activity that are disallowed, you do not need to account separately for a deduction unless such deduction may, if separately taken into account, result in an income tax liability for any tax year different from that which would result were such deduction not taken into account separately. Irs gov form 1040a for 2012   Use Form 8582, Worksheet 7, for any activity if you have passive activity deductions for that activity that must be separately identified. Irs gov form 1040a for 2012   Deductions that must be accounted for separately include (but are not limited to) the following deductions. Irs gov form 1040a for 2012 Deductions that arise in a rental real estate activity in tax years in which you actively participate in such activity. Irs gov form 1040a for 2012 See Active participation , later. Irs gov form 1040a for 2012 Deductions that arise in a rental real estate activity in tax years in which you do not actively participate in such activity. Irs gov form 1040a for 2012 See Active participation , later. Irs gov form 1040a for 2012 Losses from sales or exchanges of capital assets. Irs gov form 1040a for 2012 Section 1231 losses. Irs gov form 1040a for 2012 See Section 1231 Gains and Losses in Publication 544, Sales and Other Disposition of Assets, for more information. Irs gov form 1040a for 2012 Carryover of Disallowed Deductions In the case of an activity with respect to which any deductions or credits are disallowed for a taxable year (the loss activity), the disallowed deductions are allocated among your activities for the next tax year in a manner that reasonably reflects the extent to which each activity continues the loss activity. Irs gov form 1040a for 2012 The disallowed deductions or credits allocated to an activity under the preceding sentence are treated as deductions or credits from the activity for the next tax year. Irs gov form 1040a for 2012 For more information, see Regulations section 1. Irs gov form 1040a for 2012 469-1(f)(4). Irs gov form 1040a for 2012 Passive Activity Credit Generally, the passive activity credit for the tax year is disallowed. Irs gov form 1040a for 2012 The passive activity credit is the amount by which the sum of all your credits subject to the passive activity rules exceed your regular tax liability allocable to all passive activities for the tax year. Irs gov form 1040a for 2012 Credits that are included in figuring the general business credit are subject to the passive activity rules. Irs gov form 1040a for 2012 See the Instructions for Form 8582-CR for more information. Irs gov form 1040a for 2012 Publicly Traded Partnership You must apply the rules in this part separately to your income or loss from a passive activity held through a publicly traded partnership (PTP). Irs gov form 1040a for 2012 You also must apply the limit on passive activity credits separately to your credits from a passive activity held through a PTP. Irs gov form 1040a for 2012 You can offset deductions from passive activities of a PTP only against income or gain from passive activities of the same PTP. Irs gov form 1040a for 2012 Likewise, you can offset credits from passive activities of a PTP only against the tax on the net passive income from the same PTP. Irs gov form 1040a for 2012 This separate treatment rule also applies to a regulated investment company holding an interest in a PTP for the items attributable to that interest. Irs gov form 1040a for 2012 For more information on how to apply the passive activity loss rules to PTPs, and on how to apply the limit on passive activity credits to PTPs, see Publicly Traded Partnerships (PTPs) in the Instructions for Forms 8582 and 8582-CR, respectively. Irs gov form 1040a for 2012 Excess Farm Loss If you receive an applicable subsidy for any tax year and you have an excess farm loss for the tax year, special rules apply. Irs gov form 1040a for 2012 These rules do not apply to C corporations. Irs gov form 1040a for 2012 For information, see the Instructions for Schedule F (Form 1040), Profit or Loss From Farming. Irs gov form 1040a for 2012 Passive Activities There are two kinds of passive activities. Irs gov form 1040a for 2012 Trade or business activities in which you do not materially participate during the year. Irs gov form 1040a for 2012 Rental activities, even if you do materially participate in them, unless you are a real estate professional. Irs gov form 1040a for 2012 Material participation in a trade or business is discussed later, under Activities That Are Not Passive Activities . Irs gov form 1040a for 2012 Treatment of former passive activities. Irs gov form 1040a for 2012   A former passive activity is an activity that was a passive activity in any earlier tax year, but is not a passive activity in the current tax year. Irs gov form 1040a for 2012 You can deduct a prior year's unallowed loss from the activity up to the amount of your current year net income from the activity. Irs gov form 1040a for 2012 Treat any remaining prior year unallowed loss like you treat any other passive loss. Irs gov form 1040a for 2012   In addition, any prior year unallowed passive activity credits from a former passive activity offset the allocable part of your current year tax liability. Irs gov form 1040a for 2012 The allocable part of your current year tax liability is that part of this year's tax liability that is allocable to the current year net income from the former passive activity. Irs gov form 1040a for 2012 You figure this after you reduce your net income from the activity by any prior year unallowed loss from that activity (but not below zero). Irs gov form 1040a for 2012 Trade or Business Activities A trade or business activity is an activity that: Involves the conduct of a trade or business (that is, deductions would be allowable under section 162 of the Internal Revenue Code if other limitations, such as the passive activity rules, did not apply), Is conducted in anticipation of starting a trade or business, or Involves research or experimental expenditures that are deductible under Internal Revenue Code section 174 (or that would be deductible if you chose to deduct rather than capitalize them). Irs gov form 1040a for 2012 A trade or business activity does not include a rental activity or the rental of property that is incidental to an activity of holding the property for investment. Irs gov form 1040a for 2012 You generally report trade or business activities on Schedule C, C-EZ, F, or in Part II or III of Schedule E. Irs gov form 1040a for 2012 Rental Activities A rental activity is a passive activity even if you materially participated in that activity, unless you materially participated as a real estate professional. Irs gov form 1040a for 2012 See Real Estate Professional under Activities That Are Not Passive Activities, later. Irs gov form 1040a for 2012 An activity is a rental activity if tangible property (real or personal) is used by customers or held for use by customers, and the gross income (or expected gross income) from the activity represents amounts paid (or to be paid) mainly for the use of the property. Irs gov form 1040a for 2012 It does not matter whether the use is under a lease, a service contract, or some other arrangement. Irs gov form 1040a for 2012 Exceptions. Irs gov form 1040a for 2012   Your activity is not a rental activity if any of the following apply. Irs gov form 1040a for 2012 The average period of customer use of the property is 7 days or less. Irs gov form 1040a for 2012 You figure the average period of customer use by dividing the total number of days in all rental periods by the number of rentals during the tax year. Irs gov form 1040a for 2012 If the activity involves renting more than one class of property, multiply the average period of customer use of each class by a fraction. Irs gov form 1040a for 2012 The numerator of the fraction is the gross rental income from that class of property and the denominator is the activity's total gross rental income. Irs gov form 1040a for 2012 The activity's average period of customer use will equal the sum of the amounts for each class. Irs gov form 1040a for 2012 The average period of customer use of the property, as figured in (1) above, is 30 days or less and you provide significant personal services with the rentals. Irs gov form 1040a for 2012 Significant personal services include only services performed by individuals. Irs gov form 1040a for 2012 To determine if personal services are significant, all relevant facts and circumstances are taken into consideration, including the frequency of the services, the type and amount of labor required to perform the services, and the value of the services relative to the amount charged for use of the property. Irs gov form 1040a for 2012 Significant personal services do not include the following. Irs gov form 1040a for 2012 Services needed to permit the lawful use of the property, Services to repair or improve property that would extend its useful life for a period substantially longer than the average rental, and Services that are similar to those commonly provided with long-term rentals of real estate, such as cleaning and maintenance of common areas or routine repairs. Irs gov form 1040a for 2012 You provide extraordinary personal services in making the rental property available for customer use. Irs gov form 1040a for 2012 Services are extraordinary personal services if they are performed by individuals and the customers' use of the property is incidental to their receipt of the services. Irs gov form 1040a for 2012 The rental is incidental to a nonrental activity. Irs gov form 1040a for 2012 The rental of property is incidental to an activity of holding property for investment if the main purpose of holding the property is to realize a gain from its appreciation and the gross rental income from the property is less than 2% of the smaller of the property's unadjusted basis or fair market value. Irs gov form 1040a for 2012 The unadjusted basis of property is its cost not reduced by depreciation or any other basis adjustment. Irs gov form 1040a for 2012 The rental of property is incidental to a trade or business activity if all of the following apply. Irs gov form 1040a for 2012 You own an interest in the trade or business activity during the year. Irs gov form 1040a for 2012 The rental property was used mainly in that trade or business activity during the current year, or during at least 2 of the 5 preceding tax years. Irs gov form 1040a for 2012 Your gross rental income from the property is less than 2% of the smaller of its unadjusted basis or fair market value. Irs gov form 1040a for 2012 Lodging provided to an employee or the employee's spouse or dependents is incidental to the activity or activities in which the employee performs services if the lodging is furnished for the employer's convenience. Irs gov form 1040a for 2012 You customarily make the rental property available during defined business hours for nonexclusive use by various customers. Irs gov form 1040a for 2012 You provide the property for use in a nonrental activity in your capacity as an owner of an interest in the partnership, S corporation, or joint venture conducting that activity. Irs gov form 1040a for 2012    If you meet any of the exceptions listed above, see the instructions for Form 8582 for information about how to report any income or loss from the activity. Irs gov form 1040a for 2012 Special $25,000 allowance. Irs gov form 1040a for 2012   If you or your spouse actively participated in a passive rental real estate activity, the amount of the passive activity loss that is disallowed is decreased and you therefore can deduct up to $25,000 of loss from the activity from your nonpassive income. Irs gov form 1040a for 2012 This special allowance is an exception to the general rule disallowing the passive activity loss. Irs gov form 1040a for 2012 Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. Irs gov form 1040a for 2012   If you are married, filing a separate return, and lived apart from your spouse for the entire tax year, your special allowance cannot be more than $12,500. Irs gov form 1040a for 2012 If you lived with your spouse at any time during the year and are filing a separate return, you cannot use the special allowance to reduce your nonpassive income or tax on nonpassive income. Irs gov form 1040a for 2012   The maximum special allowance is reduced if your modified adjusted gross income exceeds certain amounts. Irs gov form 1040a for 2012 See Phaseout rule , later. Irs gov form 1040a for 2012 Example. Irs gov form 1040a for 2012 Kate, a single taxpayer, has $70,000 in wages, $15,000 income from a limited partnership, a $26,000 loss from rental real estate activities in which she actively participated, and is not subject to the modified adjusted gross income phaseout rule. Irs gov form 1040a for 2012 She can use $15,000 of her $26,000 loss to offset her $15,000 passive income from the partnership. Irs gov form 1040a for 2012 She actively participated in her rental real estate activities, so she can use the remaining $11,000 rental real estate loss to offset $11,000 of her nonpassive income (wages). Irs gov form 1040a for 2012 Commercial revitalization deduction (CRD). Irs gov form 1040a for 2012   The special allowance must first be applied to losses from rental real estate activities figured without the CRD. Irs gov form 1040a for 2012 Any remaining part of the special allowance is available for the CRD from the rental real estate activities and is not subject to the active participation rules or the phaseout based on modified adjusted gross income. Irs gov form 1040a for 2012 You cannot claim a CRD for a building placed in service after December 31, 2009. Irs gov form 1040a for 2012 Active participation. Irs gov form 1040a for 2012   Active participation is not the same as material participation (defined later). Irs gov form 1040a for 2012 Active participation is a less stringent standard than material participation. Irs gov form 1040a for 2012 For example, you may be treated as actively participating if you make management decisions in a significant and bona fide sense. Irs gov form 1040a for 2012 Management decisions that count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions. Irs gov form 1040a for 2012   Only individuals can actively participate in rental real estate activities. Irs gov form 1040a for 2012 However, a decedent's estate is treated as actively participating for its tax years ending less than 2 years after the decedent's death, if the decedent would have satisfied the active participation requirement for the activity for the tax year the decedent died. Irs gov form 1040a for 2012   A decedent's qualified revocable trust can also be treated as actively participating if both the trustee and the executor (if any) of the estate choose to treat the trust as part of the estate. Irs gov form 1040a for 2012 The choice applies to tax years ending after the decedent's death and before: 2 years after the decedent's death if no estate tax return is required, or 6 months after the estate tax liability is finally determined if an estate tax return is required. Irs gov form 1040a for 2012   The choice is irrevocable and cannot be made later than the due date for the estate's first income tax return (including any extensions). Irs gov form 1040a for 2012   Limited partners are not treated as actively participating in a partnership's rental real estate activities. Irs gov form 1040a for 2012   You are not treated as actively participating in a rental real estate activity unless your interest in the activity (including your spouse's interest) was at least 10% (by value) of all interests in the activity throughout the year. Irs gov form 1040a for 2012   Active participation is not required to take the low-income housing credit, the rehabilitation investment credit, or CRD from rental real estate activities. Irs gov form 1040a for 2012 Example. Irs gov form 1040a for 2012 Mike, a single taxpayer, had the following income and loss during the tax year: Salary $42,300 Dividends 300 Interest 1,400 Rental loss (4,000) The rental loss came from a house Mike owned. Irs gov form 1040a for 2012 He advertised and rented the house to the current tenant himself. Irs gov form 1040a for 2012 He also collected the rents and did the repairs or hired someone to do them. Irs gov form 1040a for 2012 Even though the rental loss is a loss from a passive activity, Mike can use the entire $4,000 loss to offset his other income because he actively participated. Irs gov form 1040a for 2012 Phaseout rule. Irs gov form 1040a for 2012   The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that is more than $100,000 ($50,000 if you are married filing separately). Irs gov form 1040a for 2012 If your modified adjusted gross income is $150,000 or more ($75,000 or more if you are married filing separately), you generally cannot use the special allowance. Irs gov form 1040a for 2012    Modified adjusted gross income for this purpose is your adjusted gross income figured without the following. Irs gov form 1040a for 2012 Taxable social security and tier 1 railroad retirement benefits. Irs gov form 1040a for 2012 Deductible contributions to individual retirement accounts (IRAs) and section 501(c)(18) pension plans. Irs gov form 1040a for 2012 The exclusion from income of interest from qualified U. Irs gov form 1040a for 2012 S. Irs gov form 1040a for 2012 savings bonds used to pay qualified higher education expenses. Irs gov form 1040a for 2012 The exclusion from income of amounts received from an employer's adoption assistance program. Irs gov form 1040a for 2012 Passive activity income or loss included on Form 8582. Irs gov form 1040a for 2012 Any rental real estate loss allowed because you materially participated in the rental activity as a Real Estate Professional (as discussed later, under Activities That Are Not Passive Activities). Irs gov form 1040a for 2012 Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the instructions for Form 8582). Irs gov form 1040a for 2012 The deduction for the employer-equivalent portion of self-employment tax. Irs gov form 1040a for 2012 The deduction for domestic production activities. Irs gov form 1040a for 2012 The deduction allowed for interest on student loans. Irs gov form 1040a for 2012 The deduction for qualified tuition and related expenses. Irs gov form 1040a for 2012 Example. Irs gov form 1040a for 2012 During 2013, John was unmarried and was not a real estate professional. Irs gov form 1040a for 2012 For 2013, he had $120,000 in salary and a $31,000 loss from his rental real estate activities in which he actively participated. Irs gov form 1040a for 2012 His modified adjusted gross income is $120,000. Irs gov form 1040a for 2012 When he files his 2013 return, he can deduct only $15,000 of his passive activity loss. Irs gov form 1040a for 2012 He must carry over the remaining $16,000 passive activity loss to 2014. Irs gov form 1040a for 2012 He figures his deduction and carryover as follows: Adjusted gross income, modified as required $120,000       Minus amount not subject to phaseout 100,000 Amount subject to phaseout rule $20,000 Multiply by 50% × 50% Required reduction to special allowance $10,000 Maximum special allowance $25,000 Minus required reduction (see above) 10,000 Adjusted special allowance $15,000 Passive loss from rental real estate $31,000 Deduction allowable/Adjusted  special allowance (see above) 15,000       Amount that must be carried forward $16,000 Exceptions to the phaseout rules. Irs gov form 1040a for 2012   A higher phaseout range applies to rehabilitation investment credits from rental real estate activities. Irs gov form 1040a for 2012 For those credits, the phaseout of the $25,000 special allowance starts when your modified adjusted gross income exceeds $200,000 ($100,000 if you are a married individual filing a separate return and living apart at all times during the year). Irs gov form 1040a for 2012   There is no phaseout of the $25,000 special allowance for low-income housing credits or for the CRD. Irs gov form 1040a for 2012 Ordering rules. Irs gov form 1040a for 2012   If you have more than one of the exceptions to the phaseout rules in the same tax year, you must apply the $25,000 phaseout against your passive activity losses and credits in the following order. Irs gov form 1040a for 2012 The portion of passive activity losses not attributable to the CRD. Irs gov form 1040a for 2012 The portion of passive activity losses attributable to the CRD. Irs gov form 1040a for 2012 The portion of passive activity credits attributable to credits other than the rehabilitation and low-income housing credits. Irs gov form 1040a for 2012 The portion of passive activity credits attributable to the rehabilitation credit. Irs gov form 1040a for 2012 The portion of passive activity credits attributable to the low-income housing credit. Irs gov form 1040a for 2012 Activities That Are Not Passive Activities The following are not passive activities. Irs gov form 1040a for 2012 Trade or business activities in which you materially participated for the tax year. Irs gov form 1040a for 2012 A working interest in an oil or gas well which you hold directly or through an entity that does not limit your liability (such as a general partner interest in a partnership). Irs gov form 1040a for 2012 It does not matter whether you materially participated in the activity for the tax year. Irs gov form 1040a for 2012 However, if your liability was limited for part of the year (for example, you converted your general partner interest to a limited partner interest during the year) and you had a net loss from the well for the year, some of your income and deductions from the working interest may be treated as passive activity gross income and passive activity deductions. Irs gov form 1040a for 2012  See Temporary Regulations section 1. Irs gov form 1040a for 2012 469-1T(e)(4)(ii). Irs gov form 1040a for 2012 The rental of a dwelling unit that you also used for personal purposes during the year for more than the greater of 14 days or 10% of the number of days during the year that the home was rented at a fair rental. Irs gov form 1040a for 2012 An activity of trading personal property for the account of those who own interests in the activity. Irs gov form 1040a for 2012 See Temporary Regulations section 1. Irs gov form 1040a for 2012 469-1T(e)(6). Irs gov form 1040a for 2012 Rental real estate activities in which you materially participated as a real estate professional. Irs gov form 1040a for 2012 See Real Estate Professional , later. Irs gov form 1040a for 2012 You should not enter income and losses from these activities on Form 8582. Irs gov form 1040a for 2012 Instead, enter them on the forms or schedules you would normally use. Irs gov form 1040a for 2012 Material Participation A trade or business activity is not a passive activity if you materially participated in the activity. Irs gov form 1040a for 2012 Material participation tests. Irs gov form 1040a for 2012    You materially participated in a trade or business activity for a tax year if you satisfy any of the following tests. Irs gov form 1040a for 2012 You participated in the activity for more than 500 hours. Irs gov form 1040a for 2012 Your participation was substantially all the participation in the activity of all individuals for the tax year, including the participation of individuals who did not own any interest in the activity. Irs gov form 1040a for 2012 You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other individual (including individuals who did not own any interest in the activity) for the year. Irs gov form 1040a for 2012 The activity is a significant participation activity, and you participated in all significant participation activities for more than 500 hours. Irs gov form 1040a for 2012 A significant participation activity is any trade or business activity in which you participated for more than 100 hours during the year and in which you did not materially participate under any of the material participation tests, other than this test. Irs gov form 1040a for 2012 See Significant Participation Passive Activities , under Recharacterization of Passive Income, later. Irs gov form 1040a for 2012 You materially participated in the activity for any 5 (whether or not consecutive) of the 10 immediately preceding tax years. Irs gov form 1040a for 2012 The activity is a personal service activity in which you materially participated for any 3 (whether or not consecutive) preceding tax years. Irs gov form 1040a for 2012 An activity is a personal service activity if it involves the performance of personal services in the fields of health (including veterinary services), law, engineering, architecture, accounting, actuarial science, performing arts, consulting, or any other trade or business in which capital is not a material income-producing factor. Irs gov form 1040a for 2012 Based on all the facts and circumstances, you participated in the activity on a regular, continuous, and substantial basis during the year. Irs gov form 1040a for 2012   You did not materially participate in the activity under test (7) if you participated in the activity for 100 hours or less during the year. Irs gov form 1040a for 2012 Your participation in managing the activity does not count in determining whether you materially participated under this test if: Any person other than you received compensation for managing the activity, or Any individual spent more hours during the tax year managing the activity than you did (regardless of whether the individual was compensated for the management services). Irs gov form 1040a for 2012 Participation. Irs gov form 1040a for 2012   In general, any work you do in connection with an activity in which you own an interest is treated as participation in the activity. Irs gov form 1040a for 2012 Work not usually performed by owners. Irs gov form 1040a for 2012   You do not treat the work you do in connection with an activity as participation in the activity if both of the following are true. Irs gov form 1040a for 2012 The work is not work that is customarily done by the owner of that type of activity. Irs gov form 1040a for 2012 One of your main reasons for doing the work is to avoid the disallowance of any loss or credit from the activity under the passive activity rules. Irs gov form 1040a for 2012 Participation as an investor. Irs gov form 1040a for 2012   You do not treat the work you do in your capacity as an investor in an activity as participation unless you are directly involved in the day-to-day management or operations of the activity. Irs gov form 1040a for 2012 Work you do as an investor includes: Studying and reviewing financial statements or reports on operations of the activity, Preparing or compiling summaries or analyses of the finances or operations of the activity for your own use, and Monitoring the finances or operations of the activity in a nonmanagerial capacity. Irs gov form 1040a for 2012 Spouse's participation. Irs gov form 1040a for 2012   Your participation in an activity includes your spouse's participation. Irs gov form 1040a for 2012 This applies even if your spouse did not own any interest in the activity and you and your spouse do not file a joint return for the year. Irs gov form 1040a for 2012 Proof of participation. Irs gov form 1040a for 2012 You can use any reasonable method to prove your participation in an activity for the year. Irs gov form 1040a for 2012 You do not have to keep contemporaneous daily time reports, logs, or similar documents if you can establish your participation in some other way. Irs gov form 1040a for 2012 For example, you can show the services you performed and the approximate number of hours spent by using an appointment book, calendar, or narrative summary. Irs gov form 1040a for 2012 Limited partners. Irs gov form 1040a for 2012   If you owned an activity as a limited partner, you generally are not treated as materially participating in the activity. Irs gov form 1040a for 2012 However, you are treated as materially participating in the activity if you met test (1), (5), or (6) under Material participation tests , discussed earlier, for the tax year. Irs gov form 1040a for 2012   You are not treated as a limited partner, however, if you also were a general partner in the partnership at all times during the partnership's tax year ending with or within your tax year (or, if shorter, during that part of the partnership's tax year in which you directly or indirectly owned your limited partner interest). Irs gov form 1040a for 2012 Retired or disabled farmer and surviving spouse of a farmer. Irs gov form 1040a for 2012   If you are a retired or disabled farmer, you are treated as materially participating in a farming activity if you materially participated for 5 or more of the 8 years before your retirement or disability. Irs gov form 1040a for 2012 Similarly, if you are a surviving spouse of a farmer, you are treated as materially participating in a farming activity if the real property used in the activity meets the estate tax rules for special valuation of farm property passed from a qualifying decedent, and you actively manage the farm. Irs gov form 1040a for 2012 Corporations. Irs gov form 1040a for 2012   A closely held corporation or a personal service corporation is treated as materially participating in an activity only if one or more shareholders holding more than 50% by value of the outstanding stock of the corporation materially participate in the activity. Irs gov form 1040a for 2012   A closely held corporation can also satisfy the material participation standard by meeting the first two requirements for the qualifying business exception from the at-risk limits. Irs gov form 1040a for 2012 See Special exception for qualified corporations under Activities Covered by the At-Risk Rules, later. Irs gov form 1040a for 2012 Real Estate Professional Generally, rental activities are passive activities even if you materially participated in them. Irs gov form 1040a for 2012 However, if you qualified as a real estate professional, rental real estate activities in which you materially participated are not passive activities. Irs gov form 1040a for 2012 For this purpose, each interest you have in a rental real estate activity is a separate activity, unless you choose to treat all interests in rental real estate activities as one activity. Irs gov form 1040a for 2012 See the Instructions for Schedule E (Form 1040), Supplemental Income and Loss, for information about making this choice. Irs gov form 1040a for 2012 If you qualified as a real estate professional for 2013, report income or losses from rental real estate activities in which you materially participated as nonpassive income or losses, and complete line 43 of Schedule E (Form 1040). Irs gov form 1040a for 2012 If you also have an unallowed loss from these activities from an earlier year when you did not qualify, see Treatment of former passive activities under Passive Activities, earlier. Irs gov form 1040a for 2012 Qualifications. Irs gov form 1040a for 2012   You qualified as a real estate professional for the year if you met both of the following requirements. Irs gov form 1040a for 2012 More than half of the personal services you performed in all trades or businesses during the tax year were performed in real property trades or businesses in which you materially participated. Irs gov form 1040a for 2012 You performed more than 750 hours of services during the tax year in real property trades or businesses in which you materially participated. Irs gov form 1040a for 2012   Do not count personal services you performed as an employee in real property trades or businesses unless you were a 5% owner of your employer. Irs gov form 1040a for 2012 You were a 5% owner if you owned (or are considered to have owned) more than 5% of your employer's outstanding stock, outstanding voting stock, or capital or profits interest. Irs gov form 1040a for 2012   If you file a joint return, do not count your spouse's personal services to determine whether you met the preceding requirements. Irs gov form 1040a for 2012 However, you can count your spouse's participation in an activity in determining if you materially participated. Irs gov form 1040a for 2012 Real property trades or businesses. Irs gov form 1040a for 2012   A real property trade or business is a trade or business that does any of the following with real property. Irs gov form 1040a for 2012 Develops or redevelops it. Irs gov form 1040a for 2012 Constructs or reconstructs it. Irs gov form 1040a for 2012 Acquires it. Irs gov form 1040a for 2012 Converts it. Irs gov form 1040a for 2012 Rents or leases it. Irs gov form 1040a for 2012 Operates or manages it. Irs gov form 1040a for 2012 Brokers it. Irs gov form 1040a for 2012 Closely held corporations. Irs gov form 1040a for 2012   A closely held corporation can qualify as a real estate professional if more than 50% of the gross receipts for its tax year came from real property trades or businesses in which it materially participated. Irs gov form 1040a for 2012 Passive Activity Income and Deductions In figuring your net income or loss from a passive activity, take into account only passive activity income and passive activity deductions. Irs gov form 1040a for 2012 Self-charged interest. Irs gov form 1040a for 2012   Certain self-charged interest income or deductions may be treated as passive activity gross income or passive activity deductions if the loan proceeds are used in a passive activity. Irs gov form 1040a for 2012   Generally, self-charged interest income and deductions result from loans between you and a partnership or S corporation in which you had a direct or indirect ownership interest. Irs gov form 1040a for 2012 This includes both loans you made to the partnership or S corporation and loans the partnership or S corporation made to you. Irs gov form 1040a for 2012   It also includes loans from one partnership or S corporation to another partnership or S corporation if each owner in the borrowing entity has the same proportional ownership interest in the lending entity. Irs gov form 1040a for 2012    Exception. Irs gov form 1040a for 2012 The self-charged interest rules do not apply to your interest in a partnership or S corporation if the entity made an election under Regulations section 1. Irs gov form 1040a for 2012 469-7(g) to avoid the application of these rules. Irs gov form 1040a for 2012 For more details on the self-charged interest rules, see Regulations section 1. Irs gov form 1040a for 2012 469-7. Irs gov form 1040a for 2012 Passive Activity Income Passive activity income includes all income from passive activities and generally includes gain from disposition of an interest in a passive activity or property used in a passive activity. Irs gov form 1040a for 2012 Passive activity income does not include the following items. Irs gov form 1040a for 2012 Income from an activity that is not a passive activity. Irs gov form 1040a for 2012 These activities are discussed under Activities That Are Not Passive Activities , earlier. Irs gov form 1040a for 2012 Portfolio income. Irs gov form 1040a for 2012 This includes interest, dividends, annuities, and royalties not derived in the ordinary course of a trade or business. Irs gov form 1040a for 2012 It includes gain or loss from the disposition of property that produces these types of income or that is held for investment. Irs gov form 1040a for 2012 The exclusion for portfolio income does not apply to self-charged interest treated as passive activity income. Irs gov form 1040a for 2012 For more information on self-charged interest, see Self-charged interest , earlier. Irs gov form 1040a for 2012 Personal service income. Irs gov form 1040a for 2012 This includes salaries, wages, commissions, self-employment income from trade or business activities in which you materially participated, deferred compensation, taxable social security and other retirement benefits, and payments from partnerships to partners for personal services. Irs gov form 1040a for 2012 Income from positive section 481 adjustments allocated to activities other than passive activities. Irs gov form 1040a for 2012 (Section 481 adjustments are adjustments that must be made due to changes in your accounting method. Irs gov form 1040a for 2012 ) Income or gain from investments of working capital. Irs gov form 1040a for 2012 Income from an oil or gas property if you treated any loss from a working interest in the property for any tax year beginning after 1986 as a nonpassive loss, as discussed in item (2) under Activities That Are Not Passive Activities , earlier. Irs gov form 1040a for 2012 This also applies to income from other oil and gas property the basis of which is determined wholly or partly by the basis of the property in the preceding sentence. Irs gov form 1040a for 2012 Any income from intangible property, such as a patent, copyright, or literary, musical, or artistic composition, if your personal efforts significantly contributed to the creation of the property. Irs gov form 1040a for 2012 Any other income that must be treated as nonpassive income. Irs gov form 1040a for 2012 See Recharacterization of Passive Income , later. Irs gov form 1040a for 2012 Overall gain from any interest in a publicly traded partnership. Irs gov form 1040a for 2012 See Publicly Traded Partnerships (PTPs) in the instructions for Form 8582. Irs gov form 1040a for 2012 State, local, and foreign income tax refunds. Irs gov form 1040a for 2012 Income from a covenant not to compete. Irs gov form 1040a for 2012 Reimbursement of a casualty or theft loss included in gross income to recover all or part of a prior year loss deduction, if the loss deduction was not a passive activity deduction. Irs gov form 1040a for 2012 Alaska Permanent Fund dividends. Irs gov form 1040a for 2012 Cancellation of debt income, if at the time the debt is discharged the debt is not allocated to passive activities under the interest expense allocation rules. Irs gov form 1040a for 2012 See chapter 4 of Publication 535, Business Expenses, for information about the rules for allocating interest. Irs gov form 1040a for 2012 Disposition of property interests. Irs gov form 1040a for 2012   Gain on the disposition of an interest in property generally is passive activity income if, at the time of the disposition, the property was used in an activity that was a passive activity in the year of disposition. Irs gov form 1040a for 2012 The gain generally is not passive activity income if, at the time of disposition, the property was used in an activity that was not a passive activity in the year of disposition. Irs gov form 1040a for 2012 An exception to this general rule may apply if you previously used the property in a different activity. Irs gov form 1040a for 2012 Exception for more than one use in the preceding 12 months. Irs gov form 1040a for 2012   If you used the property in more than one activity during the 12-month period before its disposition, you must allocate the gain between the activities on a basis that reasonably reflects the property's use during that period. Irs gov form 1040a for 2012 Any gain allocated to a passive activity is passive activity income. Irs gov form 1040a for 2012   For this purpose, an allocation of the gain solely to the activity in which the property was mainly used during that period reasonably reflects the property's use if the fair market value of your interest in the property is not more than the lesser of: $10,000, or 10% of the total of the fair market value of your interest in the property and the fair market value of all other property used in that activity immediately before the disposition. Irs gov form 1040a for 2012 Exception for substantially appreciated property. Irs gov form 1040a for 2012   The gain is passive activity income if the fair market value of the property at disposition was more than 120% of its adjusted basis and either of the following conditions applies. Irs gov form 1040a for 2012 You used the property in a passive activity for 20% of the time you held your interest in the property. Irs gov form 1040a for 2012 You used the property in a passive activity for the entire 24-month period before its disposition. Irs gov form 1040a for 2012 If neither condition applies, the gain is not passive activity income. Irs gov form 1040a for 2012 However, it is treated as portfolio income only if you held the property for investment for more than half of the time you held it in nonpassive activities. Irs gov form 1040a for 2012   For this purpose, treat property you held through a corporation (other than an S corporation) or other entity whose owners receive only portfolio income as property held in a nonpassive activity and as property held for investment. Irs gov form 1040a for 2012 Also, treat the date you agree to transfer your interest for a fixed or determinable amount as the disposition date. Irs gov form 1040a for 2012   If you used the property in more than one activity during the 12-month period before its disposition, this exception applies only to the part of the gain allocated to a passive activity under the rules described in the preceding discussion. Irs gov form 1040a for 2012 Disposition of property converted to inventory. Irs gov form 1040a for 2012   If you disposed of property that you had converted to inventory from its use in another activity (for example, you sold condominium units you previously held for use in a rental activity), a special rule may apply. Irs gov form 1040a for 2012 Under this rule, you disregard the property's use as inventory and treat it as if it were still used in that other activity at the time of disposition. Irs gov form 1040a for 2012 This rule applies only if you meet all of the following conditions. Irs gov form 1040a for 2012 At the time of disposition, you held your interest in the property in a dealing activity (an activity that involves holding the property or similar property mainly for sale to customers in the ordinary course of a trade or business). Irs gov form 1040a for 2012 Your other activities included a nondealing activity (an activity that does not involve holding similar property for sale to customers in the ordinary course of a trade or business) in which you used the property for more than 80% of the period you held it. Irs gov form 1040a for 2012 You did not acquire or hold your interest in the property for the main purpose of selling it to customers in the ordinary course of a trade or business. Irs gov form 1040a for 2012 Passive Activity Deductions Generally, a deduction is a passive activity deduction for a taxable year if and only if such deduction either: Arises in connection with the conduct of an activity that is a passive activity for the tax year; or Is treated as a deduction from an activity for the tax year because it was disallowed by the passive activity rules in the preceding year and carried forward to the tax year. Irs gov form 1040a for 2012 For purposes of item (1), above, an item of deduction arises in the taxable year in which the item would be allowable as a deduction under the taxpayer's method of accounting if taxable income for all taxable years were determined without regard to the passive activity rules and without regard to the basis, excess farm loss, and at-risk limits. Irs gov form 1040a for 2012 See Coordination with other limitations on deductions that apply before the passive activity rules , later. Irs gov form 1040a for 2012 Passive activity deductions generally include losses from dispositions of property used in a passive activity at the time of the disposition and losses from a disposition of less than your entire interest in a passive activity. Irs gov form 1040a for 2012 Exceptions. Irs gov form 1040a for 2012   Passive activity deductions do not include the following items. Irs gov form 1040a for 2012 Deductions for expenses (other than interest expense) that are clearly and directly allocable to portfolio income. Irs gov form 1040a for 2012 Qualified home mortgage interest, capitalized interest expenses, and other interest expenses (other than self-charged interest) properly allocable to passive activities. Irs gov form 1040a for 2012 For more information on self-charged interest, see Self-charged interest under Passive Activity Income and Deductions, earlier. Irs gov form 1040a for 2012 Losses from dispositions of property that produce portfolio income or property held for investment. Irs gov form 1040a for 2012 State, local, and foreign income taxes. Irs gov form 1040a for 2012 Miscellaneous itemized deductions that may be disallowed because of the 2%-of-adjusted-gross-income limit. Irs gov form 1040a for 2012 Charitable contribution deductions. Irs gov form 1040a for 2012 Net operating loss deductions. Irs gov form 1040a for 2012 Percentage depletion carryovers for oil and gas wells. Irs gov form 1040a for 2012 Capital loss carrybacks and carryovers. Irs gov form 1040a for 2012 Items of deduction from a passive activity that are disallowed under the limits on deductions that apply before the passive activity rules. Irs gov form 1040a for 2012 See Coordination with other limitations on deductions that apply before the passive activity rules , later. Irs gov form 1040a for 2012 Deductions and losses that would have been allowed for tax years beginning before 1987 but for basis or at-risk limits. Irs gov form 1040a for 2012 Net negative section 481 adjustments allocated to activities other than passive activities. Irs gov form 1040a for 2012 (Section 481 adjustments are adjustments required due to changes in accounting methods. Irs gov form 1040a for 2012 ) Casualty and theft losses, unless losses similar in cause and severity recur regularly in the activity. Irs gov form 1040a for 2012 The deduction for the employer-equivalent portion of self-employment tax. Irs gov form 1040a for 2012 Coordination with other limitations on deductions that apply before the passive activity rules. Irs gov form 1040a for 2012   An item of deduction from a passive activity that is disallowed for a tax year under the basis or at-risk limitations is not a passive activity deduction for the tax year. Irs gov form 1040a for 2012 The following sections provide rules for figuring the extent to which items of deduction from a passive activity are disallowed for a tax year under the basis or at-risk limitations. Irs gov form 1040a for 2012 Proration of deductions disallowed under basis limitations. Irs gov form 1040a for 2012   If any amount of your distributive share of a partnership's loss for the tax year is disallowed under the basis limitation, a ratable portion of your distributive share of each item of deduction or loss of the partnership is disallowed for the tax year. Irs gov form 1040a for 2012 For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of your distributive share of partnership loss that is disallowed for the taxable year; by The sum of your distributive shares of all items of deduction and loss of the partnership for the tax year. Irs gov form 1040a for 2012   If any amount of your pro rata share of an S corporation's loss for the tax year is disallowed under the basis limitation, a ratable portion of your pro rata share of each item of deduction or loss of the S corporation is disallowed for the tax year. Irs gov form 1040a for 2012 For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of your share of S corporation loss that is disallowed for the tax year; by The sum of your pro rata shares of all items of deduction and loss of the corporation for the tax year. Irs gov form 1040a for 2012 Proration of deductions disallowed under at-risk limitation. Irs gov form 1040a for 2012   If any amount of your loss from an activity (as defined in Activities Covered by the At-Risk Rules , later) is disallowed under the at-risk rules for the tax year, a ratable portion of each item of deduction or loss from the activity is disallowed for the tax year. Irs gov form 1040a for 2012 For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of the loss from the activity that is disallowed for the tax year; by The sum of all deductions from the activity for the taxable year. Irs gov form 1040a for 2012 Coordination of basis and at-risk limitations. Irs gov form 1040a for 2012   The portion of any item of deduction or loss that is disallowed for the tax year under the basis limitations is not taken into account for the taxable year in determining the loss from an activity (as defined in Activities Covered by the At-Risk Rules , later) for purposes of applying the at-risk rules. Irs gov form 1040a for 2012 Separately identified items of deduction and loss. Irs gov form 1040a for 2012   In identifying the items of deduction and loss from an activity that are not disallowed under the basis and at-risk limitations (and that therefore may be treated as passive activity deductions), you need not account separately for any item of deduction or loss unless such item may, if separately taken into account, result in an income tax liability different from that which would result were such item of deduction or loss taken into account separately. Irs gov form 1040a for 2012   Items of deduction or loss that must be accounted for separately include (but are not limited to) items of deduction or loss that: Are attributable to separate activities. Irs gov form 1040a for 2012 See Grouping Your Activities , later. Irs gov form 1040a for 2012 Arise in a rental real estate activity in tax years in which you actively participate in such activity; Arise in a rental real estate activity in taxable years in which you do not actively participate in such activity; Arose in a taxable year beginning before 1987 and were not allowed for such taxable year under the basis or at-risk limitations; Are taken into account under section 613A(d) (relating to limitations on certain depletion deductions); Are taken into account under section 1211 (relating to the limitation on capital losses); Are taken into account under section 1231 (relating to property used in a trade or business and involuntary conversions). Irs gov form 1040a for 2012 See Section 1231 Gains and Losses in Publication 544 for more information. Irs gov form 1040a for 2012 Are attributable to pre-enactment interests in activities. Irs gov form 1040a for 2012 See Regulations section 1. Irs gov form 1040a for 2012 469-11T(c). Irs gov form 1040a for 2012 Grouping Your Activities You can treat one or more trade or business activities, or rental activities, as a single activity if those activities form an appropriate economic unit for measuring gain or loss under the passive activity rules. Irs gov form 1040a for 2012 Grouping is important for a number of reasons. Irs gov form 1040a for 2012 If you group two activities into one larger activity, you need only show material participation in the activity as a whole. Irs gov form 1040a for 2012 But if the two activities are separate, you must show material participation in each one. Irs gov form 1040a for 2012 On the other hand, if you group two activities into one larger activity and you dispose of one of the two, then you have disposed of only part of your entire interest in the activity. Irs gov form 1040a for 2012 But if the two activities are separate and you dispose of one of them, then you have disposed of your entire interest in that activity. Irs gov form 1040a for 2012 Grouping can also be important in determining whether you meet the 10% ownership requirement for actively participating in a rental real estate activity. Irs gov form 1040a for 2012 Appropriate Economic Units Generally, to determine if activities form an appropriate economic unit, you must consider all the relevant facts and circumstances. Irs gov form 1040a for 2012 You can use any reasonable method of applying the relevant facts and circumstances in grouping activities. Irs gov form 1040a for 2012 The following factors have the greatest weight in determining whether activities form an appropriate economic unit. Irs gov form 1040a for 2012 All of the factors do not have to apply to treat more than one activity as a single activity. Irs gov form 1040a for 2012 The factors that you should consider are: The similarities and differences in the types of trades or businesses, The extent of common control, The extent of common ownership, The geographical location, and The interdependencies between or among activities, which may include the extent to which the activities: Buy or sell goods between or among themselves, Involve products or services that are generally provided together, Have the same customers, Have the same employees, or Use a single set of books and records to account for the activities. Irs gov form 1040a for 2012 Example 1. Irs gov form 1040a for 2012 John Jackson owns a bakery and a movie theater at a shopping mall in Baltimore and a bakery and movie theater in Philadelphia. Irs gov form 1040a for 2012 Based on all the relevant facts and circumstances, there may be more than one reasonable method for grouping John's activities. Irs gov form 1040a for 2012 For example, John may be able to group the movie theaters and the bakeries into: One activity, A movie theater activity and a bakery activity, A Baltimore activity and a Philadelphia activity, or Four separate activities. Irs gov form 1040a for 2012 Example 2. Irs gov form 1040a for 2012 Betty is a partner in ABC partnership, which sells nonfood items to grocery stores. Irs gov form 1040a for 2012 Betty is also a partner in DEF (a trucking business). Irs gov form 1040a for 2012 ABC and DEF are under common control. Irs gov form 1040a for 2012 The main part of DEF's business is transporting goods for ABC. Irs gov form 1040a for 2012 DEF is the only trucking business in which Betty is involved. Irs gov form 1040a for 2012 Based on the rules of this section, Betty treats ABC's wholesale activity and DEF's trucking activity as a single activity. Irs gov form 1040a for 2012 Consistency and disclosure requirement. Irs gov form 1040a for 2012   Generally, when you group activities into appropriate economic units, you may not regroup those activities in a later tax year. Irs gov form 1040a for 2012 You must meet any disclosure requirements of the IRS when you first group your activities and when you add or dispose of any activities in your groupings. Irs gov form 1040a for 2012   However, if the original grouping is clearly inappropriate or there is a material change in the facts and circumstances that makes the original grouping clearly inappropriate, you must regroup the activities and comply with any disclosure requirements of the IRS. Irs gov form 1040a for 2012   See Disclosure Requirement , later. Irs gov form 1040a for 2012 Regrouping by the IRS. Irs gov form 1040a for 2012   If any of the activities resulting from your grouping is not an appropriate economic unit and one of the primary purposes of your grouping (or failure to regroup) is to avoid the passive activity rules, the IRS may regroup your activities. Irs gov form 1040a for 2012 Rental activities. Irs gov form 1040a for 2012   In general, you cannot group a rental activity with a trade or business activity. Irs gov form 1040a for 2012 However, you can group them together if the activities form an appropriate economic unit and: The rental activity is insubstantial in relation to the trade or business activity, The trade or business activity is insubstantial in relation to the rental activity, or Each owner of the trade or business activity has the same ownership interest in the rental activity, in which case the part of the rental activity that involves the rental of items of property for use in the trade or business activity may be grouped with the trade or business activity. Irs gov form 1040a for 2012 Example. Irs gov form 1040a for 2012 Herbert and Wilma are married and file a joint return. Irs gov form 1040a for 2012 Healthy Food, an S corporation, is a grocery store business. Irs gov form 1040a for 2012 Herbert is Healthy Food's only shareholder. Irs gov form 1040a for 2012 Plum Tower, an S corporation, owns and rents out the building. Irs gov form 1040a for 2012 Wilma is Plum Tower's only shareholder. Irs gov form 1040a for 2012 Plum Tower rents part of its building to Healthy Food. Irs gov form 1040a for 2012 Plum Tower's grocery store rental business and Healthy Food's grocery business are not insubstantial in relation to each other. Irs gov form 1040a for 2012 Herbert and Wilma file a joint return, so they are treated as one taxpayer for purposes of the passive activity rules. Irs gov form 1040a for 2012 The same owner (Herbert and Wilma) owns both Healthy Food and Plum Tower with the same ownership interest (100% in each). Irs gov form 1040a for 2012 If the grouping forms an appropriate economic unit, as discussed earlier, Herbert and Wilma can group Plum Tower's grocery store rental and Healthy Food's grocery business into a single trade or business activity. Irs gov form 1040a for 2012 Grouping of real and personal property rentals. Irs gov form 1040a for 2012   In general, you cannot treat an activity involving the rental of real property and an activity involving the rental of personal property as a single activity. Irs gov form 1040a for 2012 However, you can treat them as a single activity if you provide the personal property in connection with the real property or the real property in connection with the personal property. Irs gov form 1040a for 2012 Certain activities may not be grouped. Irs gov form 1040a for 2012   In general, if you own an interest as a limited partner or a limited entrepreneur in one of the following activities, you may not group that activity with any other activity in another type of business. Irs gov form 1040a for 2012 Holding, producing, or distributing motion picture films or video tapes. Irs gov form 1040a for 2012 Farming. Irs gov form 1040a for 2012 Leasing any section 1245 property (as defined in section 1245(a)(3) of the Internal Revenue Code). Irs gov form 1040a for 2012 For a list of section 1245 property, see Section 1245 property under Activities Covered by the At-Risk Rules , later. Irs gov form 1040a for 2012 Exploring for, or exploiting, oil and gas resources. Irs gov form 1040a for 2012 Exploring for, or exploiting, geothermal deposits. Irs gov form 1040a for 2012   If you own an interest as a limited partner or a limited entrepreneur in an activity described in the list above, you may group that activity with another activity in the same type of business if the grouping forms an appropriate economic unit as discussed earlier. Irs gov form 1040a for 2012 Limited entrepreneur. Irs gov form 1040a for 2012   A limited entrepreneur is a person who: Has an interest in an enterprise other than as a limited partner, and Does not actively participate in the management of the enterprise. Irs gov form 1040a for 2012 Activities conducted through another entity. Irs gov form 1040a for 2012   A personal service corporation, closely held corporation, partnership, or S corporation must group its activities using the rules discussed in this section. Irs gov form 1040a for 2012 Once the entity groups its activities, you, as the partner or shareholder of the entity, may group those activities (following the rules of this section): With each other, With activities conducted directly by you, or With activities conducted through other entities. Irs gov form 1040a for 2012    You may not treat activities grouped together by the entity as separate activities. Irs gov form 1040a for 2012 Personal service and closely held corporations. Irs gov form 1040a for 2012   You may group an activity conducted through a personal service or closely held corporation with your other activities only to determine whether you materially or significantly participated in those other activities. Irs gov form 1040a for 2012 See Material Participation , earlier, and Significant Participation Passive Activities , later. Irs gov form 1040a for 2012 Publicly traded partnership (PTP). Irs gov form 1040a for 2012   You may not group activities conducted through a PTP with any other activity, including an activity conducted through another PTP. Irs gov form 1040a for 2012 Partial dispositions. Irs gov form 1040a for 2012   If you dispose of substantially all of an activity during your tax year, you may treat the part disposed of as a separate activity. Irs gov form 1040a for 2012 However, you can do this only if you can show with reasonable certainty: The amount of deductions and credits disallowed in prior years under the passive activity rules that is allocable to the part of the activity disposed of, and The amount of gross income and any other deductions and credits for the current tax year that is allocable to the part of the activity disposed of. Irs gov form 1040a for 2012 Disclosure Requirement For tax years beginning after January 24, 2010, the following disclosure requirements for groupings apply. Irs gov form 1040a for 2012 You are required to report certain changes to your groupings that occur during the tax year to the IRS. Irs gov form 1040a for 2012 If you fail to report these changes, each trade or business activity or rental activity will be treated as a separate activity. Irs gov form 1040a for 2012 You will be considered to have made a timely disclosure if you filed all affected income tax returns consistent with the claimed grouping and make the required disclosure on the income tax return for the year in which you first discovered the failure to disclose. Irs gov form 1040a for 2012 If the IRS discovered the failure to disclose, you must have reasonable cause for not making the required disclosure. Irs gov form 1040a for 2012 New grouping. Irs gov form 1040a for 2012   You must file a written statement with your original income tax return for the first tax year in which two or more activities are originally grouped into a single activity. Irs gov form 1040a for 2012 The statement must provide the names, addresses, and employer identification numbers (EINs), if applicable, for the activities being grouped as a single activity. Irs gov form 1040a for 2012 In addition, the statement must contain a declaration that the grouped activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. Irs gov form 1040a for 2012 Addition to an existing grouping. Irs gov form 1040a for 2012   You must file a written statement with your original income tax return for the tax year in which you add a new activity to an existing group. Irs gov form 1040a for 2012 The statement must provide the name, address, and EIN, if applicable, for the activity that is being added and for the activities in the existing group. Irs gov form 1040a for 2012 In addition, the statement must contain a declaration that the activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. Irs gov form 1040a for 2012 Regrouping. Irs gov form 1040a for 2012   You must file a written statement with your original income tax return for the tax year in which you regroup the activities. Irs gov form 1040a for 2012 The statement must provide the names, addresses, and EINs, if applicable, for the activities that are being regrouped. Irs gov form 1040a for 2012 If two or more activities are being regrouped into a single activity, the statement must contain a declaration that the regrouped activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. Irs gov form 1040a for 2012 In addition, the statement must contain an explanation of the material change in the facts and circumstances that made the original grouping clearly inappropriate. Irs gov form 1040a for 2012 Groupings by partnerships and S corporations. Irs gov form 1040a for 2012   Partnerships and S corporations are not subject to the rules for new grouping, addition to an existing grouping, or regrouping. Irs gov form 1040a for 2012 Instead, they must comply with the disclosure instructions for grouping activities provided in their Form 1065, U. Irs gov form 1040a for 2012 S. Irs gov form 1040a for 2012 Return of Partnership Income, or Form 1120S, U. Irs gov form 1040a for 2012 S. Irs gov form 1040a for 2012 Income Tax Return for an S Corporation, whichever is applicable. Irs gov form 1040a for 2012   The partner or shareholder is not required to make a separate disclosure of the groupings disclosed by the entity unless the partner or shareholder: Groups together any of the activities that the entity does not group together, Groups the entity's activities with activities conducted directly by the partner or shareholder, or Groups an entity's activities with activities conducted through another entity. Irs gov form 1040a for 2012   A partner or shareholder may not treat activities grouped together by the entity as separate activities. Irs gov form 1040a for 2012 Recharacterization of Passive Income Net income from the following passive activities may have to be recharacterized and excluded from passive activity income. Irs gov form 1040a for 2012 Significant participation passive activities, Rental of property when less than 30% of the unadjusted basis of the property is subject to depreciation, Equity-financed lending activities, Rental of property incidental to development activities, Rental of property to nonpassive activities, and Licensing of intangible property by  pass-through entities. Irs gov form 1040a for 2012 If you are engaged in or have an interest in one of these activities during the tax year (either directly or through a partnership or an S corporation), combine the income and losses from the activity to determine if you have a net loss or net income from that activity. Irs gov form 1040a for 2012 If the result is a net loss, treat the income and losses the same as any other income or losses from that type of passive activity (trade or business activity or rental activity). Irs gov form 1040a for 2012 If the result is net income, do not enter any of the income or losses from the activity or property on Form 8582 or its worksheets. Irs gov form 1040a for 2012 Instead, enter income or losses on the form and schedules you normally use. Irs gov form 1040a for 2012 However, see Significant Participation Passive Activities , later, if the activity is a significant participation passive activity and you also have a net loss from a different significant participation passive activity. Irs gov form 1040a for 2012 Limit on recharacterized passive income. Irs gov form 1040a for 2012   The total amount that you treat as nonpassive income under the rules described later in this discussion for significant participation passive activities, rental of nondepreciable property, and equity-financed lending activities cannot exceed the greatest amount that you treat as nonpassive income under any one of these rules. Irs gov form 1040a for 2012 Investment income and investment expense. Irs gov form 1040a for 2012   To figure your investment interest expense limitation on Form 4952, treat as investment income any net passive income recharacterized as nonpassive income from rental of nondepreciable property, equity-financed lending activity, or licensing of intangible property by a pass-through entity. Irs gov form 1040a for 2012 Significant Participation Passive Activities A significant participation passive activity is any trade or business activity in which you participated for more than 100 hours during the tax year but did not materially participate. Irs gov form 1040a for 2012 If your gross income from all significant participation passive activities is more than your deductions from those activities, a part of your net income from each significant participation passive activity is treated as nonpassive income. Irs gov form 1040a for 2012 Corporations. Irs gov form 1040a for 2012   An activity of a personal service corporation or closely held corporation is a significant participation passive activity if both of the following statements are true. Irs gov form 1040a for 2012 The corporation is not treated as materially participating in the activity for the year. Irs gov form 1040a for 2012 One or more individuals, each of whom is treated as significantly participating in the activity, directly or indirectly hold (in total) more than 50% (by value) of the corporation's outstanding stock. Irs gov form 1040a for 2012 Worksheet A. Irs gov form 1040a for 2012   Complete Worksheet A. Irs gov form 1040a for 2012 Significant Participation Passive Activities , below, if you have income or losses from any significant participation activity. Irs gov form 1040a for 2012 Begin by entering the name of each activity in the left column. Irs gov form 1040a for 2012 Column (a). Irs gov form 1040a for 2012   Enter the number of hours you participated in each activity and total the column. Irs gov form 1040a for 2012   If the total is more than 500, do not complete Worksheet A or B. Irs gov form 1040a for 2012 None of the activities are passive activities because you satisfy test 4 for material participation. Irs gov form 1040a for 2012 (See Material participation tests , earlier. Irs gov form 1040a for 2012 ) Report all the income and losses from these activities on the forms and schedules you normally use. Irs gov form 1040a for 2012 Do not include the income and losses on Form 8582. Irs gov form 1040a for 2012 Column (b). Irs gov form 1040a for 2012   Enter the net loss, if any, from the activity. Irs gov form 1040a for 2012 Net loss from an activity means either: The activity's current year net loss (if any) plus prior year unallowed losses (if any), or The excess of prior year unallowed losses over the current year net income (if any). Irs gov form 1040a for 2012 Enter -0- here if the prior year unallowed loss is the same as the current year net income. Irs gov form 1040a for 2012 Column (c). Irs gov form 1040a for 2012   Enter net income (if any) from the activity. Irs gov form 1040a for 2012 Net income means the excess of the current year's net income from the activity over any prior year unallowed losses from the activity. Irs gov form 1040a for 2012 Column (d). Irs gov form 1040a for 2012   Combine amounts in the Totals row for columns (b) and (c) and enter the total net income or net loss in the Totals row of column (d). Irs gov form 1040a for 2012 If column (d) is a net loss, skip Worksheet B, Significant Participation Activities With Net Income. Irs gov form 1040a for 2012 Include the income and losses in Worksheet 3 of Form 8582 (or Worksheet 2 in the Form 88
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How Much Can I Deduct for Each Exemption I Claim?

There are two types of exemptions, personal exemptions and exemptions for dependents. You usually can claim exemptions for yourself, your spouse and each person you can claim as a dependent. 

Information You Will Need:

  • Marital status, relationship to the dependent and the amount of support provided
  • Basic income information such as your adjusted gross income

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Page Last Reviewed or Updated: 14-Feb-2014

The Irs Gov Form 1040a For 2012

Irs gov form 1040a for 2012 21. Irs gov form 1040a for 2012   Medical and Dental Expenses Table of Contents What's New Introduction Useful Items - You may want to see: What Are Medical Expenses? What Expenses Can You Include This Year?Community property states. Irs gov form 1040a for 2012 How Much of the Expenses Can You Deduct? Whose Medical Expenses Can You Include?Yourself Spouse Dependent Decedent What Medical Expenses Are Includible?Insurance Premiums Meals and Lodging Transportation Disabled Dependent Care Expenses How Do You Treat Reimbursements?Insurance Reimbursement Damages for Personal Injuries How Do You Figure and Report the Deduction on Your Tax Return?What Tax Form Do You Use? Impairment-Related Work Expenses Health Insurance Costs for Self-Employed Persons What's New Medical and dental expenses. Irs gov form 1040a for 2012  Beginning January 1, 2013, you can deduct only the part of your medical and dental expenses that exceed 10% of your adjusted gross income (AGI) (7. Irs gov form 1040a for 2012 5% if either you or your spouse is age 65 or older). Irs gov form 1040a for 2012 Standard mileage rate. Irs gov form 1040a for 2012  The standard mileage rate allowed for operating expenses for a car when you use it for medical reasons is 24 cents per mile. Irs gov form 1040a for 2012 See Transportation under What Medical Expenses Are Includible. Irs gov form 1040a for 2012 Introduction This chapter will help you determine the following. Irs gov form 1040a for 2012 What medical expenses are. Irs gov form 1040a for 2012 What expenses you can include this year. Irs gov form 1040a for 2012 How much of the expenses you can deduct. Irs gov form 1040a for 2012 Whose medical expenses you can include. Irs gov form 1040a for 2012 What medical expenses are includible. Irs gov form 1040a for 2012 How to treat reimbursements. Irs gov form 1040a for 2012 How to report the deduction on your tax return. Irs gov form 1040a for 2012 How to report impairment-related work expenses. Irs gov form 1040a for 2012 How to report health insurance costs if you are self-employed. Irs gov form 1040a for 2012 Useful Items - You may want to see: Publications 502 Medical and Dental Expenses 969 Health Savings Accounts and Other Tax-Favored Health Plans Form (and Instructions) Schedule A (Form 1040) Itemized Deductions What Are Medical Expenses? Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. Irs gov form 1040a for 2012 These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. Irs gov form 1040a for 2012 They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. Irs gov form 1040a for 2012 Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. Irs gov form 1040a for 2012 They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation. Irs gov form 1040a for 2012 Medical expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for transportation to get medical care. Irs gov form 1040a for 2012 Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract. Irs gov form 1040a for 2012 What Expenses Can You Include This Year? You can include only the medical and dental expenses you paid this year, regardless of when the services were provided. Irs gov form 1040a for 2012 If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. Irs gov form 1040a for 2012 If you use a “pay-by-phone” or “online” account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. Irs gov form 1040a for 2012 If you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged. Irs gov form 1040a for 2012 Separate returns. Irs gov form 1040a for 2012   If you and your spouse live in a noncommunity property state and file separate returns, each of you can include only the medical expenses each actually paid. Irs gov form 1040a for 2012 Any medical expenses paid out of a joint checking account in which you and your spouse have the same interest are considered to have been paid equally by each of you, unless you can show otherwise. Irs gov form 1040a for 2012 Community property states. Irs gov form 1040a for 2012   If you and your spouse live in a community property state and file separate returns, or are registered domestic partners in Nevada, Washington, or California, any medical expenses paid out of community funds are divided equally. Irs gov form 1040a for 2012 Each of you should include half the expenses. Irs gov form 1040a for 2012 If medical expenses are paid out of the separate funds of one individual, only the individual who paid the medical expenses can include them. Irs gov form 1040a for 2012 If you live in a community property state, and are not filing a joint return, see Publication 555, Community Property. Irs gov form 1040a for 2012 How Much of the Expenses Can You Deduct? Generally, you can deduct on Schedule A (Form 1040) only the amount of your medical and dental expenses that is more than 10% of your AGI (7. Irs gov form 1040a for 2012 5% of your AGI if either you or your spouse is age 65 or older)(Form 1040, line 38). Irs gov form 1040a for 2012 Example. Irs gov form 1040a for 2012 You are unmarried and under age 65 and your AGI is $40,000, 10% of which is $4,000. Irs gov form 1040a for 2012 You paid medical expenses of $2,500. Irs gov form 1040a for 2012 You cannot deduct any of your medical expenses because they are not more than 10% of your AGI. Irs gov form 1040a for 2012 Whose Medical Expenses Can You Include? You can generally include medical expenses you pay for yourself, as well as those you pay for someone who was your spouse or your dependent either when the services were provided or when you paid for them. Irs gov form 1040a for 2012 There are different rules for decedents and for individuals who are the subject of multiple support agreements. Irs gov form 1040a for 2012 See Support claimed under a multiple support agreement , later. Irs gov form 1040a for 2012 Yourself You can include medical expenses you paid for yourself. Irs gov form 1040a for 2012 Spouse You can include medical expenses you paid for your spouse. Irs gov form 1040a for 2012 To include these expenses, you must have been married either at the time your spouse received the medical services or at the time you paid the medical expenses. Irs gov form 1040a for 2012 Example 1. Irs gov form 1040a for 2012 Mary received medical treatment before she married Bill. Irs gov form 1040a for 2012 Bill paid for the treatment after they married. Irs gov form 1040a for 2012 Bill can include these expenses in figuring his medical expense deduction even if Bill and Mary file separate returns. Irs gov form 1040a for 2012 If Mary had paid the expenses, Bill could not include Mary's expenses in his separate return. Irs gov form 1040a for 2012 Mary would include the amounts she paid during the year in her separate return. Irs gov form 1040a for 2012 If they filed a joint return, the medical expenses both paid during the year would be used to figure their medical expense deduction. Irs gov form 1040a for 2012 Example 2. Irs gov form 1040a for 2012 This year, John paid medical expenses for his wife Louise, who died last year. Irs gov form 1040a for 2012 John married Belle this year and they file a joint return. Irs gov form 1040a for 2012 Because John was married to Louise when she received the medical services, he can include those expenses in figuring his medical expense deduction for this year. Irs gov form 1040a for 2012 Dependent You can include medical expenses you paid for your dependent. Irs gov form 1040a for 2012 For you to include these expenses, the person must have been your dependent either at the time the medical services were provided or at the time you paid the expenses. Irs gov form 1040a for 2012 A person generally qualifies as your dependent for purposes of the medical expense deduction if both of the following requirements are met. Irs gov form 1040a for 2012 The person was a qualifying child (defined later) or a qualifying relative (defined later), and The person was a U. Irs gov form 1040a for 2012 S. Irs gov form 1040a for 2012 citizen or national, or a resident of the United States, Canada, or Mexico. Irs gov form 1040a for 2012 If your qualifying child was adopted, see Exception for adopted child , next. Irs gov form 1040a for 2012 You can include medical expenses you paid for an individual that would have been your dependent except that: He or she received gross income of $3,900 or more in 2013, He or she filed a joint return for 2013, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Irs gov form 1040a for 2012 Exception for adopted child. Irs gov form 1040a for 2012   If you are a U. Irs gov form 1040a for 2012 S. Irs gov form 1040a for 2012 citizen or U. Irs gov form 1040a for 2012 S. Irs gov form 1040a for 2012 national and your adopted child lived with you as a member of your household for 2013, that child does not have to be a U. Irs gov form 1040a for 2012 S. Irs gov form 1040a for 2012 citizen or national or a resident of the United States, Canada, or Mexico. Irs gov form 1040a for 2012 Qualifying Child A qualifying child is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a full-time student, and younger than you (or your spouse, if filing jointly), or Any age and permanently and totally disabled, Lived with you for more than half of 2013, Did not provide over half of his or her own support for 2013, and Did not file a joint return, or, if he or she did, it was only to claim a refund. Irs gov form 1040a for 2012 Adopted child. Irs gov form 1040a for 2012   A legally adopted child is treated as your own child. Irs gov form 1040a for 2012 This includes a child lawfully placed with you for legal adoption. Irs gov form 1040a for 2012   You can include medical expenses that you paid for a child before adoption if the child qualified as your dependent when the medical services were provided or when the expenses were paid. Irs gov form 1040a for 2012   If you pay back an adoption agency or other persons for medical expenses they paid under an agreement with you, you are treated as having paid those expenses provided you clearly substantiate that the payment is directly attributable to the medical care of the child. Irs gov form 1040a for 2012   But if you pay the agency or other person for medical care that was provided and paid for before adoption negotiations began, you cannot include them as medical expenses. Irs gov form 1040a for 2012    You may be able to take an adoption credit for other expenses related to an adoption. Irs gov form 1040a for 2012 See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. Irs gov form 1040a for 2012 Child of divorced or separated parents. Irs gov form 1040a for 2012   For purposes of the medical and dental expenses deduction, a child of divorced or separated parents can be treated as a dependent of both parents. Irs gov form 1040a for 2012 Each parent can include the medical expenses he or she pays for the child, even if the other parent claims the child's dependency exemption, if: The child is in the custody of one or both parents for more than half the year, The child receives over half of his or her support during the year from his or her parents, and The child's parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Live apart at all times during the last 6 months of the year. Irs gov form 1040a for 2012 This does not apply if the child's exemption is being claimed under a multiple support agreement (discussed later). Irs gov form 1040a for 2012 Qualifying Relative A qualifying relative is a person: Who is your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), Brother, sister, half brother, half sister, or a son or daughter of either of them, Father, mother, or an ancestor or sibling of either of them (for example, your grandmother, grandfather, aunt, or uncle), Stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, or Any other person (other than your spouse) who lived with you all year as a member of your household if your relationship did not violate local law, Who was not a qualifying child (see Qualifying Child earlier) of any other person for 2013, and For whom you provided over half of the support in 2013. Irs gov form 1040a for 2012 But see Child of divorced or separated parents , earlier, and Support claimed under a multiple support agreement, next. Irs gov form 1040a for 2012 Support claimed under a multiple support agreement. Irs gov form 1040a for 2012   If you are considered to have provided more than half of a qualifying relative's support under a multiple support agreement, you can include medical expenses you pay for that person. Irs gov form 1040a for 2012 A multiple support agreement is used when two or more people provide more than half of a person's support, but no one alone provides more than half. Irs gov form 1040a for 2012   Any medical expenses paid by others who joined you in the agreement cannot be included as medical expenses by anyone. Irs gov form 1040a for 2012 However, you can include the entire unreimbursed amount you paid for medical expenses. Irs gov form 1040a for 2012 Example. Irs gov form 1040a for 2012 You and your three brothers each provide one-fourth of your mother's total support. Irs gov form 1040a for 2012 Under a multiple support agreement, you treat your mother as your dependent. Irs gov form 1040a for 2012 You paid all of her medical expenses. Irs gov form 1040a for 2012 Your brothers reimbursed you for three-fourths of these expenses. Irs gov form 1040a for 2012 In figuring your medical expense deduction, you can include only one-fourth of your mother's medical expenses. Irs gov form 1040a for 2012 Your brothers cannot include any part of the expenses. Irs gov form 1040a for 2012 However, if you and your brothers share the nonmedical support items and you separately pay all of your mother's medical expenses, you can include the unreimbursed amount you paid for her medical expenses in your medical expenses. Irs gov form 1040a for 2012 Decedent Medical expenses paid before death by the decedent are included in figuring any deduction for medical and dental expenses on the decedent's final income tax return. Irs gov form 1040a for 2012 This includes expenses for the decedent's spouse and dependents as well as for the decedent. Irs gov form 1040a for 2012 The survivor or personal representative of a decedent can choose to treat certain expenses paid by the decedent's estate for the decedent's medical care as paid by the decedent at the time the medical services were provided. Irs gov form 1040a for 2012 The expenses must be paid within the 1-year period beginning with the day after the date of death. Irs gov form 1040a for 2012 If you are the survivor or personal representative making this choice, you must attach a statement to the decedent's Form 1040 (or the decedent's amended return, Form 1040X) saying that the expenses have not been and will not be claimed on the estate tax return. Irs gov form 1040a for 2012 Qualified medical expenses paid before death by the decedent are not deductible if paid with a tax-free distribution from any Archer MSA, Medicare Advantage MSA, or health savings account. Irs gov form 1040a for 2012 Amended returns and claims for refund are discussed in chapter 1. Irs gov form 1040a for 2012 What if you pay medical expenses of a deceased spouse or dependent?   If you paid medical expenses for your deceased spouse or dependent, include them as medical expenses on your Form 1040 in the year paid, whether they are paid before or after the decedent's death. Irs gov form 1040a for 2012 The expenses can be included if the person was your spouse or dependent either at the time the medical services were provided or at the time you paid the expenses. Irs gov form 1040a for 2012 What Medical Expenses Are Includible? Use Table 21-1, later, as a guide to determine which medical and dental expenses you can include on Schedule A (Form 1040). Irs gov form 1040a for 2012 This table does not include all possible medical expenses. Irs gov form 1040a for 2012 To determine if an expense not listed can be included in figuring your medical expense deduction, see What Are Medical Expenses , earlier. Irs gov form 1040a for 2012 Insurance Premiums You can include in medical expenses insurance premiums you pay for policies that cover medical care. Irs gov form 1040a for 2012 Medical care policies can provide payment for treatment that includes: Hospitalization, surgical services, X-rays, Prescription drugs and insulin, Dental care, Replacement of lost or damaged contact lenses, and Long-term care (subject to additional limitations). Irs gov form 1040a for 2012 See Qualified Long-Term Care Insurance Contracts in Publication 502. Irs gov form 1040a for 2012 If you have a policy that provides payments for other than medical care, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. Irs gov form 1040a for 2012 The cost of the medical part must be separately stated in the insurance contract or given to you in a separate statement. Irs gov form 1040a for 2012 Note. Irs gov form 1040a for 2012 When figuring the amount of insurance premiums you can include in medical expenses on Schedule A, do not include any health coverage tax credit advance payments shown in box 1 of Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Irs gov form 1040a for 2012 Also, do not include insurance premiums attributable to a nondependent child under age 27 if your premiums increased as a result of adding this child to your policy. Irs gov form 1040a for 2012 Employer-sponsored health insurance plan. Irs gov form 1040a for 2012   Do not include in your medical and dental expenses any insurance premiums paid by an employer-sponsored health insurance plan unless the premiums are included in box 1 of your Form W-2. Irs gov form 1040a for 2012 Also, do not include any other medical and dental expenses paid by the plan unless the amount paid is included in box 1 of your Form W-2. Irs gov form 1040a for 2012 Example. Irs gov form 1040a for 2012 You are a federal employee participating in the premium conversion plan of the Federal Employee Health Benefits (FEHB) program. Irs gov form 1040a for 2012 Your share of the FEHB premium is paid by making a pre-tax reduction in your salary. Irs gov form 1040a for 2012 Because you are an employee whose insurance premiums are paid with money that is never included in your gross income, you cannot deduct the premiums paid with that money. Irs gov form 1040a for 2012 Long-term care services. Irs gov form 1040a for 2012   Contributions made by your employer to provide coverage for qualified long-term care services under a flexible spending or similar arrangement must be included in your income. Irs gov form 1040a for 2012 This amount will be reported as wages in box 1 of your Form W-2. Irs gov form 1040a for 2012 Health reimbursement arrangement (HRA). Irs gov form 1040a for 2012   If you have medical expenses that are reimbursed by a health reimbursement arrangement, you cannot include those expenses in your medical expenses. Irs gov form 1040a for 2012 This is because an HRA is funded solely by the employer. Irs gov form 1040a for 2012 Retired public safety officers. Irs gov form 1040a for 2012   If you are a retired public safety officer, do not include as medical expenses any health or long-term care premiums that you elected to have paid with tax-free distributions from your retirement plan. Irs gov form 1040a for 2012 This applies only to distributions that would otherwise be included in income. Irs gov form 1040a for 2012 Medicare A. Irs gov form 1040a for 2012   If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare A. Irs gov form 1040a for 2012 The payroll tax paid for Medicare A is not a medical expense. Irs gov form 1040a for 2012   If you are not covered under social security (or were not a government employee who paid Medicare tax), you can voluntarily enroll in Medicare A. Irs gov form 1040a for 2012 In this situation you can include the premiums you paid for Medicare A as a medical expense. Irs gov form 1040a for 2012 Medicare B. Irs gov form 1040a for 2012   Medicare B is supplemental medical insurance. Irs gov form 1040a for 2012 Premiums you pay for Medicare B are a medical expense. Irs gov form 1040a for 2012 Check the information you received from the Social Security Administration to find out your premium. Irs gov form 1040a for 2012 Medicare D. Irs gov form 1040a for 2012    Medicare D is a voluntary prescription drug insurance program for persons with Medicare A or B. Irs gov form 1040a for 2012 You can include as a medical expense premiums you pay for Medicare D. Irs gov form 1040a for 2012 Prepaid insurance premiums. Irs gov form 1040a for 2012   Premiums you pay before you are age 65 for insurance for medical care for yourself, your spouse, or your dependents after you reach age 65 are medical care expenses in the year paid if they are: Payable in equal yearly installments, or more often, and Payable for at least 10 years, or until you reach age 65 (but not for less than 5 years). Irs gov form 1040a for 2012 Unused sick leave used to pay premiums. Irs gov form 1040a for 2012   You must include in gross income cash payments you receive at the time of retirement for unused sick leave. Irs gov form 1040a for 2012 You also must include in gross income the value of unused sick leave that, at your option, your employer applies to the cost of your continuing participation in your employer's health plan after you retire. Irs gov form 1040a for 2012 You can include this cost of continuing participation in the health plan as a medical expense. Irs gov form 1040a for 2012   If you participate in a health plan where your employer automatically applies the value of unused sick leave to the cost of your continuing participation in the health plan (and you do not have the option to receive cash), do not include the value of the unused sick leave in gross income. Irs gov form 1040a for 2012 You cannot include this cost of continuing participation in that health plan as a medical expense. Irs gov form 1040a for 2012 Table 21-1. Irs gov form 1040a for 2012 Medical and Dental Expenses Checklist. Irs gov form 1040a for 2012 See Publication 502 for more information about these and other expenses. Irs gov form 1040a for 2012 You can include: You cannot include: Bandages Birth control pills prescribed by your doctor Body scan Braille books Breast pump and supplies Capital expenses for equipment or improvements to your home needed for medical care (see the worksheet in Publication 502) Diagnostic devices Expenses of an organ donor Eye surgery—to promote the correct function of the eye Fertility enhancement, certain procedures Guide dogs or other animals aiding the blind, deaf, and disabled Hospital services fees (lab work, therapy, nursing services, surgery, etc. Irs gov form 1040a for 2012 ) Lead-based paint removal Legal abortion Legal operation to prevent having children such as a vasectomy or tubal ligation Long-term care contracts, qualified Meals and lodging provided by a hospital during medical treatment Medical services fees (from doctors, dentists, surgeons, specialists, and other medical practitioners) Medicare Part D premiums Medical and hospital insurance premiums Nursing services Oxygen equipment and oxygen Part of life-care fee paid to retirement home designated for medical care Physical examination Pregnancy test kit Prescription medicines (prescribed by a doctor) and insulin Psychiatric and psychological treatment Social security tax, Medicare tax, FUTA, and state employment tax for worker providing medical care (see Wages for nursing services, below) Special items (artificial limbs, false teeth, eye-glasses, contact lenses, hearing aids, crutches, wheelchair, etc. Irs gov form 1040a for 2012 ) Special education for mentally or physically disabled persons Stop-smoking programs Transportation for needed medical care Treatment at a drug or alcohol center (includes meals and lodging provided by the center) Wages for nursing services Weight-loss, certain expenses for obesity Baby sitting and childcare Bottled water Contributions to Archer MSAs (see Publication 969) Diaper service Expenses for your general health (even if following your doctor's advice) such as— —Health club dues —Household help (even if recommended by a doctor) —Social activities, such as dancing or swimming lessons —Trip for general health improvement Flexible spending account reimbursements for medical expenses (if contributions were on a pre-tax basis) Funeral, burial, or cremation expenses Health savings account payments for medical expenses Illegal operation, treatment, or medicine Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc. Irs gov form 1040a for 2012 Maternity clothes Medical insurance included in a car insurance policy covering all persons injured in or by your car Medicine you buy without a prescription Nursing care for a healthy baby Prescription drugs you brought in (or ordered shipped) from another country, in most cases Nutritional supplements, vitamins, herbal supplements, “natural medicines,” etc. Irs gov form 1040a for 2012 , unless recommended by a medical practitioner as a treatment for a specific medical condition diagnosed by a physician Surgery for purely cosmetic reasons Toothpaste, toiletries, cosmetics, etc. Irs gov form 1040a for 2012 Teeth whitening Weight-loss expenses not for the treatment of obesity or other disease Meals and Lodging You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if a principal reason for being there is to get medical care. Irs gov form 1040a for 2012 See Nursing home , later. Irs gov form 1040a for 2012 You may be able to include in medical expenses the cost of lodging not provided in a hospital or similar institution. Irs gov form 1040a for 2012 You can include the cost of such lodging while away from home if all of the following requirements are met. Irs gov form 1040a for 2012 The lodging is primarily for and essential to medical care. Irs gov form 1040a for 2012 The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital. Irs gov form 1040a for 2012 The lodging is not lavish or extravagant under the circumstances. Irs gov form 1040a for 2012 There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. Irs gov form 1040a for 2012 The amount you include in medical expenses for lodging cannot be more than $50 for each night for each person. Irs gov form 1040a for 2012 You can include lodging for a person traveling with the person receiving the medical care. Irs gov form 1040a for 2012 For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Irs gov form 1040a for 2012 Meals are not included. Irs gov form 1040a for 2012 Nursing home. Irs gov form 1040a for 2012   You can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. Irs gov form 1040a for 2012 This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care. Irs gov form 1040a for 2012   Do not include the cost of meals and lodging if the reason for being in the home is personal. Irs gov form 1040a for 2012 You can, however, include in medical expenses the part of the cost that is for medical or nursing care. Irs gov form 1040a for 2012 Transportation Include in medical expenses amounts paid for transportation primarily for, and essential to, medical care. Irs gov form 1040a for 2012 You can include: Bus, taxi, train, or plane fares, or ambulance service, Transportation expenses of a parent who must go with a child who needs medical care, Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone, and Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment. Irs gov form 1040a for 2012 Car expenses. Irs gov form 1040a for 2012   You can include out-of-pocket expenses, such as the cost of gas and oil, when you use your car for medical reasons. Irs gov form 1040a for 2012 You cannot include depreciation, insurance, general repair, or maintenance expenses. Irs gov form 1040a for 2012   If you do not want to use your actual expenses for 2013, you can use the standard medical mileage rate of 24 cents per mile. Irs gov form 1040a for 2012    You can also include parking fees and tolls. Irs gov form 1040a for 2012 You can add these fees and tolls to your medical expenses whether you use actual expenses or use the standard mileage rate. Irs gov form 1040a for 2012 Example. Irs gov form 1040a for 2012 In 2013, Bill Jones drove 2,800 miles for medical reasons. Irs gov form 1040a for 2012 He spent $500 for gas, $30 for oil, and $100 for tolls and parking. Irs gov form 1040a for 2012 He wants to figure the amount he can include in medical expenses both ways to see which gives him the greater deduction. Irs gov form 1040a for 2012 He figures the actual expenses first. Irs gov form 1040a for 2012 He adds the $500 for gas, the $30 for oil, and the $100 for tolls and parking for a total of $630. Irs gov form 1040a for 2012 He then figures the standard mileage amount. Irs gov form 1040a for 2012 He multiplies 2,800 miles by 24 cents a mile for a total of $672. Irs gov form 1040a for 2012 He then adds the $100 tolls and parking for a total of $772. Irs gov form 1040a for 2012 Bill includes the $772 of car expenses with his other medical expenses for the year because the $772 is more than the $630 he figured using actual expenses. Irs gov form 1040a for 2012 Transportation expenses you cannot include. Irs gov form 1040a for 2012   You cannot include in medical expenses the cost of transportation in the following situations. Irs gov form 1040a for 2012 Going to and from work, even if your condition requires an unusual means of transportation. Irs gov form 1040a for 2012 Travel for purely personal reasons to another city for an operation or other medical care. Irs gov form 1040a for 2012 Travel that is merely for the general improvement of one's health. Irs gov form 1040a for 2012 The costs of operating a specially equipped car for other than medical reasons. Irs gov form 1040a for 2012 Disabled Dependent Care Expenses Some disabled dependent care expenses may qualify as either: Medical expenses, or Work-related expenses for purposes of taking a credit for dependent care. Irs gov form 1040a for 2012 (See chapter 32 and Publication 503, Child and Dependent Care Expenses. Irs gov form 1040a for 2012 ) You can choose to apply them either way as long as you do not use the same expenses to claim both a credit and a medical expense deduction. Irs gov form 1040a for 2012 How Do You Treat Reimbursements? You can include in medical expenses only those amounts paid during the taxable year for which you received no insurance or other reimbursement. Irs gov form 1040a for 2012 Insurance Reimbursement You must reduce your total medical expenses for the year by all reimbursements for medical expenses that you receive from insurance or other sources during the year. Irs gov form 1040a for 2012 This includes payments from Medicare. Irs gov form 1040a for 2012 Even if a policy provides reimbursement for only certain specific medical expenses, you must use amounts you receive from that policy to reduce your total medical expenses, including those it does not reimburse. Irs gov form 1040a for 2012 Example. Irs gov form 1040a for 2012 You have insurance policies that cover your hospital and doctors' bills but not your nursing bills. Irs gov form 1040a for 2012 The insurance you receive for the hospital and doctors' bills is more than their charges. Irs gov form 1040a for 2012 In figuring your medical deduction, you must reduce the total amount you spent for medical care by the total amount of insurance you received, even if the policies do not cover some of your medical expenses. Irs gov form 1040a for 2012 Health reimbursement arrangement (HRA). Irs gov form 1040a for 2012   A health reimbursement arrangement is an employer-funded plan that reimburses employees for medical care expenses and allows unused amounts to be carried forward. Irs gov form 1040a for 2012 An HRA is funded solely by the employer and the reimbursements for medical expenses, up to a maximum dollar amount for a coverage period, are not included in your income. Irs gov form 1040a for 2012 Other reimbursements. Irs gov form 1040a for 2012   Generally, you do not reduce medical expenses by payments you receive for: Permanent loss or loss of use of a member or function of the body (loss of limb, sight, hearing, etc. Irs gov form 1040a for 2012 ) or disfigurement to the extent the payment is based on the nature of the injury without regard to the amount of time lost from work, or Loss of earnings. Irs gov form 1040a for 2012   You must, however, reduce your medical expenses by any part of these payments that is designated for medical costs. Irs gov form 1040a for 2012 See How Do You Figure and Report the Deduction on Your Tax Return , later. Irs gov form 1040a for 2012   For how to treat damages received for personal injury or sickness, see Damages for Personal Injuries , later. Irs gov form 1040a for 2012 You do not have a medical deduction if you are reimbursed for all of your medical expenses for the year. Irs gov form 1040a for 2012 Excess reimbursement. Irs gov form 1040a for 2012   If you are reimbursed more than your medical expenses, you may have to include the excess in income. Irs gov form 1040a for 2012 You may want to use Figure 21-A to help you decide if any of your reimbursement is taxable. Irs gov form 1040a for 2012 Premiums paid by you. Irs gov form 1040a for 2012   If you pay either the entire premium for your medical insurance or all of the costs of a plan similar to medical insurance and your insurance payments or other reimbursements are more than your total medical expenses for the year, you have an excess reimbursement. Irs gov form 1040a for 2012 Generally, you do not include the excess reimbursement in your gross income. Irs gov form 1040a for 2012 Premiums paid by you and your employer. Irs gov form 1040a for 2012   If both you and your employer contribute to your medical insurance plan and your employer's contributions are not included in your gross income, you must include in your gross income the part of your excess reimbursement that is from your employer's contribution. Irs gov form 1040a for 2012   See Publication 502 to figure the amount of the excess reimbursement you must include in gross income. Irs gov form 1040a for 2012 Reimbursement in a later year. Irs gov form 1040a for 2012   If you are reimbursed in a later year for medical expenses you deducted in an earlier year, you generally must report the reimbursement as income up to the amount you previously deducted as medical expenses. Irs gov form 1040a for 2012   However, do not report as income the amount of reimbursement you received up to the amount of your medical deductions that did not reduce your tax for the earlier year. Irs gov form 1040a for 2012 For more information about the recovery of an amount that you claimed as an itemized deduction in an earlier year, see Itemized Deduction Recoveries in chapter 12. Irs gov form 1040a for 2012 Figure 21-A. Irs gov form 1040a for 2012 Is Your Excess Medical Reimbursement Taxable? Please click here for the text description of the image. Irs gov form 1040a for 2012 Figure 21-A. Irs gov form 1040a for 2012 Is Your Excess Medical Reimbursement Taxable? Medical expenses not deducted. Irs gov form 1040a for 2012   If you did not deduct a medical expense in the year you paid it because your medical expenses were not more than 10% of your AGI (7. Irs gov form 1040a for 2012 5% of your AGI if either you or your spouse was age 65 or older), or because you did not itemize deductions, do not include the reimbursement up to the amount of the expense in income. Irs gov form 1040a for 2012 However, if the reimbursement is more than the expense, see Excess reimbursement , earlier. Irs gov form 1040a for 2012 Example. Irs gov form 1040a for 2012 For 2013, you were unmarried and under age 65 and you had medical expenses of $500. Irs gov form 1040a for 2012 You cannot deduct the $500 because it is less than 10% of your AGI. Irs gov form 1040a for 2012 If, in a later year, you are reimbursed for any of the $500 in medical expenses, you do not include the amount reimbursed in your gross income. Irs gov form 1040a for 2012 Damages for Personal Injuries If you receive an amount in settlement of a personal injury suit, part of that award may be for medical expenses that you deducted in an earlier year. Irs gov form 1040a for 2012 If it is, you must include that part in your income in the year you receive it to the extent it reduced your taxable income in the earlier year. Irs gov form 1040a for 2012 See Reimbursement in a Later Year , discussed under How Do You Treat Reimbursements, earlier. Irs gov form 1040a for 2012 Future medical expenses. Irs gov form 1040a for 2012   If you receive an amount in settlement of a damage suit for personal injuries, part of that award may be for future medical expenses. Irs gov form 1040a for 2012 If it is, you must reduce any future medical expenses for these injuries until the amount you received has been completely used. Irs gov form 1040a for 2012 How Do You Figure and Report the Deduction on Your Tax Return? Once you have determined which medical expenses you can include, you figure and report the deduction on your tax return. Irs gov form 1040a for 2012 What Tax Form Do You Use? You figure your medical expense deduction on Schedule A (Form 1040). Irs gov form 1040a for 2012 You cannot claim medical expenses on Form 1040A or Form 1040EZ. Irs gov form 1040a for 2012 If you need more information on itemized deductions or you are not sure if you can itemize, see chapter 20. Irs gov form 1040a for 2012 Enter the amount you paid for medical and dental expenses on Schedule A (Form 1040). Irs gov form 1040a for 2012 This should be your expenses that were not reimbursed by insurance or any other sources. Irs gov form 1040a for 2012 Generally, you can deduct only the amount of your medical and dental expenses that is more than 10% of your AGI (7. Irs gov form 1040a for 2012 5% if either you or your spouse was age 65 or older) shown on line 38, Form 1040. Irs gov form 1040a for 2012 Impairment-Related Work Expenses If you are a person with a disability, you can take a business deduction for expenses that are necessary for you to be able to work. Irs gov form 1040a for 2012 If you take a business deduction for impairment-related work expenses, do not take a medical deduction for the same expenses. Irs gov form 1040a for 2012 You have a disability if you have: A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed, or A physical or mental impairment (for example, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working. Irs gov form 1040a for 2012 Impairment-related expenses defined. Irs gov form 1040a for 2012   Impairment-related expenses are those ordinary and necessary business expenses that are: Necessary for you to do your work satisfactorily, For goods and services not required or used, other than incidentally, in your personal activities, and Not specifically covered under other income tax laws. Irs gov form 1040a for 2012 Where to report. Irs gov form 1040a for 2012   If you are self-employed, deduct the business expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. Irs gov form 1040a for 2012   If you are an employee, complete Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses. Irs gov form 1040a for 2012 Enter on Schedule A (Form 1040), that part of the amount on Form 2106, or Form 2106-EZ, that is related to your impairment. Irs gov form 1040a for 2012 Enter the amount that is unrelated to your impairment also on Schedule A (Form 1040). Irs gov form 1040a for 2012 Your impairment-related work expenses are not subject to the 2%-of-adjusted-gross-income limit that applies to other employee business expenses. Irs gov form 1040a for 2012 Example. Irs gov form 1040a for 2012 You are blind. Irs gov form 1040a for 2012 You must use a reader to do your work. Irs gov form 1040a for 2012 You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. Irs gov form 1040a for 2012 The reader's services are only for your work. Irs gov form 1040a for 2012 You can deduct your expenses for the reader as business expenses. Irs gov form 1040a for 2012 Health Insurance Costs for Self-Employed Persons If you were self-employed and had a net profit for the year, you may be able to deduct, as an adjustment to income, amounts paid for medical and qualified long-term care insurance on behalf of yourself, your spouse, your dependents, and, your children who were under age 27 at the end of 2013. Irs gov form 1040a for 2012 For this purpose, you were self-employed if you were a general partner (or a limited partner receiving guaranteed payments) or you received wages from an S corporation in which you were more than a 2% shareholder. Irs gov form 1040a for 2012 The insurance plan must be established under your trade or business and the deduction cannot be more than your earned income from that trade or business. Irs gov form 1040a for 2012 You cannot deduct payments for medical insurance for any month in which you were eligible to participate in a health plan subsidized by your employer, your spouse's employer, or, an employer of your dependent or your child under age 27 at the end of 2013. Irs gov form 1040a for 2012 You cannot deduct payments for a qualified long-term care insurance contract for any month in which you were eligible to participate in a long-term care insurance plan subsidized by your employer or your spouse's employer. Irs gov form 1040a for 2012 If you qualify to take the deduction, use the Self-Employed Health Insurance Deduction Worksheet in the Form 1040 instructions to figure the amount you can deduct. Irs gov form 1040a for 2012 But if any of the following applies, do not use that worksheet. Irs gov form 1040a for 2012 You had more than one source of income subject to self-employment tax. Irs gov form 1040a for 2012 You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. Irs gov form 1040a for 2012 You are using amounts paid for qualified long-term care insurance to figure the deduction. Irs gov form 1040a for 2012 If you cannot use the worksheet in the Form 1040 instructions, use the worksheet in Publication 535, Business Expenses, to figure your deduction. Irs gov form 1040a for 2012 Note. Irs gov form 1040a for 2012 When figuring the amount you can deduct for insurance premiums, do not include any advance payments shown on Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Irs gov form 1040a for 2012 If you are claiming the health coverage tax credit, subtract the amount shown on Form 8885, from the total insurance premiums you paid. Irs gov form 1040a for 2012 Do not include amounts paid for health insurance coverage with retirement plan distributions that were tax-free because you are a retired public safety officer. Irs gov form 1040a for 2012 Where to report. Irs gov form 1040a for 2012    You take this deduction on Form 1040. Irs gov form 1040a for 2012 If you itemize your deductions and do not claim 100% of your self-employed health insurance on Form 1040, you can generally include any remaining premiums with all other medical expenses on Schedule A (Form 1040), subject to the 10% limit (7. Irs gov form 1040a for 2012 5% if either you or your spouse was age 65 or older). Irs gov form 1040a for 2012 See Self-Employed Health Insurance Deduction in chapter 6 of Publication 535, Business Expenses, and Medical and Dental Expenses in the Instructions for Schedule A (Form 1040), for more information. Irs gov form 1040a for 2012 Prev  Up  Next   Home   More Online Publications