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Military Star Card

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Military Star Card

Military star card 5. Military star card   Figuring Your Tax Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Tax Year Identification NumberF-1 and M-1 visa holders. Military star card J-1 visa holders. Military star card Filing StatusResident Aliens Nonresident Aliens Reporting Your Income DeductionsResident Aliens Nonresident Aliens ExemptionsResident Aliens Nonresident Aliens Itemized DeductionsResident Aliens Nonresident Aliens Tax Credits and PaymentsResident Aliens Nonresident Aliens Bona Fide Residents of American Samoa or Puerto Rico Introduction After you have determined your alien status, the source of your income, and if and how that income is taxed in the United States, your next step is to figure your tax. Military star card The information in this chapter is not as comprehensive for resident aliens as it is for nonresident aliens. Military star card Resident aliens should get publications, forms, and instructions for U. Military star card S. Military star card citizens, because the information for filing returns for resident aliens is generally the same as for U. Military star card S. Military star card citizens. Military star card If you are both a nonresident alien and a resident alien in the same tax year, see chapter 6 for a discussion of dual-status aliens. Military star card Topics - This chapter discusses: Identification numbers, Filing status, Deductions, Exemptions, Tax credits and payments, and Special rules for bona fide residents of American Samoa and Puerto Rico. Military star card Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 501 Exemptions, Standard Deduction, and Filing Information 521 Moving Expenses 526 Charitable Contributions 535 Business Expenses 597 Information on the United States–Canada Income Tax Treaty Form (and Instructions) W-7 Application for IRS Individual Taxpayer Identification Number 1040 U. Military star card S. Military star card Individual Income Tax Return 1040NR U. Military star card S. Military star card Nonresident Alien Income Tax Return 1040NR-EZ U. Military star card S. Military star card Income Tax Return for Certain Nonresident Aliens With No Dependents 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 3903 Moving Expenses 4563 Exclusion of Income for Bona Fide Residents of American Samoa 8959 Additional Medicare Tax See chapter 12 for information about getting these publications and forms. Military star card Tax Year You must figure your income and file a tax return on the basis of an annual accounting period called a tax year. Military star card If you have not previously established a fiscal tax year, your tax year is the calendar year. Military star card A calendar year is 12 consecutive months ending on December 31. Military star card If you have previously established a regular fiscal year (12 consecutive months ending on the last day of a month other than December or a 52–53 week year) and are considered to be a U. Military star card S. Military star card resident for any calendar year, you will be treated as a U. Military star card S. Military star card resident for any part of your fiscal year that falls within that calendar year. Military star card Identification Number A taxpayer identification number must be furnished on returns, statements, and other tax-related documents. Military star card For an individual, this is a social security number (SSN). Military star card If you do not have and are not eligible to get an SSN, you must apply for an individual taxpayer identification number (ITIN). Military star card An employer identification number (EIN) is required if you are engaged in a trade or business as a sole proprietor and have employees or a qualified retirement plan. Military star card You must furnish a taxpayer identification number if you are: An alien who has income effectively connected with the conduct of a U. Military star card S. Military star card trade or business at any time during the year, An alien who has a U. Military star card S. Military star card office or place of business at any time during the year, A nonresident alien spouse treated as a resident, as discussed in chapter 1, or Any other alien who files a tax return, an amended return, or a refund claim (but not information returns). Military star card Social security number (SSN). Military star card   Generally, you can get an SSN if you have been lawfully admitted to the United States for permanent residence or under other immigration categories that authorize U. Military star card S. Military star card employment. Military star card   To apply for this number, get Form SS-5, Application for a Social Security Card, from your local Social Security Administration (SSA) office or call the SSA at 1-800-772-1213. Military star card You can also download Form SS-5 from the SSA's website at www. Military star card socialsecurity. Military star card gov/ssnumber/ss5. Military star card htm. Military star card You must visit an SSA office in person and submit your Form SS-5 along with original documentation showing your age, identity, immigration status, and authority to work in the United States. Military star card Generally, you will receive your card about 2 weeks after the SSA has all of the necessary information. Military star card F-1 and M-1 visa holders. Military star card    If you are an F-1 or M-1 student, you must also show your Form I-20. Military star card For more information, see SSA Publication 05-10181, International Students and Social Security Numbers, available online at www. Military star card socialsecurity. Military star card gov/pubs/10181. Military star card html. Military star card J-1 visa holders. Military star card   If you are a J-1 exchange visitor, you will also need to show your Form DS-2019. Military star card For more information, see SSA Publication 05-10107, Foreign Workers and Social Security Numbers, available online at www. Military star card socialsecurity. Military star card gov/pubs/10107. Military star card html. Military star card Individual taxpayer identification number (ITIN). Military star card   If you do not have and are not eligible to get an SSN, you must apply for an ITIN. Military star card For details on how to do so, see Form W-7 and its instructions. Military star card Allow 6 to 10 weeks for the IRS to notify you of your ITIN. Military star card If you already have an ITIN, enter it wherever an SSN is required on your tax return. Military star card   An ITIN is for tax use only. Military star card It does not entitle you to social security benefits or change your employment or immigration status under U. Military star card S. Military star card law. Military star card   In addition to those aliens who are required to furnish a taxpayer identification number and are not eligible for an SSN, a Form W-7 must be filed for: Alien individuals who are claimed as dependents and are not eligible for an SSN, and Alien spouses who are claimed as exemptions and are not eligible for an SSN. Military star card Employer identification number (EIN). Military star card   An individual may use an SSN (or ITIN) for individual taxes and an EIN for business taxes. Military star card To apply for an EIN, file Form SS-4, Application for Employer Identification Number, with the IRS. Military star card Filing Status The amount of your tax depends on your filing status. Military star card Your filing status is important in determining whether you can take certain deductions and credits. Military star card The rules for determining your filing status are different for resident aliens and nonresident aliens. Military star card Resident Aliens Resident aliens can use the same filing statuses available to U. Military star card S. Military star card citizens. Military star card See your form instructions or Publication 501 for more information on filing status. Military star card Married filing jointly. Military star card   Generally, you can file as married filing jointly only if both you and your spouse were resident aliens for the entire tax year, or if you make one of the choices discussed in chapter 1 to treat your spouse as a resident alien for the entire tax year. Military star card Qualifying widow(er). Military star card   If your spouse died in 2011 or 2012, you did not remarry before the end of 2013, and you have a dependent child living with you, you may qualify to file as a qualifying widow(er) and use the joint return tax rates. Military star card This applies only if you could have filed a joint return with your spouse for the year your spouse died. Military star card Head of household. Military star card   You can qualify as head of household if you are unmarried or considered unmarried on the last day of the year and you pay more than half the cost of keeping up a home for you and a qualifying person. Military star card You must be a resident alien for the entire tax year. Military star card   You are considered unmarried for this purpose if your spouse was a nonresident alien at any time during the year and you do not make one of the choices discussed in chapter 1 to treat your spouse as a resident alien for the entire tax year. Military star card Note. Military star card   Even if you are considered unmarried for head of household purposes because you are married to a nonresident alien, you may still be considered married for purposes of the earned income credit. Military star card In that case, you will not be entitled to the credit. Military star card See Publication 596 for more information. Military star card Nonresident Aliens If you are a nonresident alien filing Form 1040NR, you may be able to use one of the filing statuses discussed later. Military star card If you are filing Form 1040NR-EZ, you can only claim “Single nonresident alien” or “Married nonresident alien” as your filing status. Military star card Married nonresident alien. Military star card   Married nonresident aliens who are not married to U. Military star card S. Military star card citizens or residents generally must use the Tax Table column or the Tax Computation Worksheet for married filing separate returns when determining the tax on income effectively connected with a U. Military star card S. Military star card trade or business. Military star card Exceptions. Military star card   Married nonresident aliens normally cannot use the Tax Table column or the Tax Computation Worksheet for single individuals. Military star card However, you may be able to file as single if you lived apart from your spouse during the last 6 months of the year and you are a married resident of Canada, Mexico, South Korea, or are a married U. Military star card S. Military star card national. Military star card See the instructions for Form 1040NR or Form 1040NR-EZ to see if you qualify. Military star card U. Military star card S. Military star card national is defined later in this section under Qualifying widow(er) . Military star card   A nonresident alien generally cannot file as married filing jointly. Military star card However, a nonresident alien who is married to a U. Military star card S. Military star card citizen or resident can choose to be treated as a resident and file a joint return on Form 1040, Form 1040A, or Form 1040EZ. Military star card For information on these choices, see chapter 1. Military star card If you do not make the choice to file jointly, file Form 1040NR or Form 1040NR-EZ and use the Tax Table column or the Tax Computation Worksheet for married individuals filing separately. Military star card Qualifying widow(er). Military star card   You may be eligible to file as a qualifying widow(er) and use the joint return tax rates if all of the following conditions apply. Military star card You were a resident of Canada, Mexico, or South Korea, or a U. Military star card S. Military star card national (defined later). Military star card Your spouse died in 2011 or 2012 and you did not remarry before the end of 2013. Military star card You have a dependent child living with you. Military star card See the instructions for Form 1040NR for the rules for filing as a qualifying widow(er) with a dependent child. Military star card   A U. Military star card S. Military star card national is an individual who, although not a U. Military star card S. Military star card citizen, owes his or her allegiance to the United States. Military star card U. Military star card S. Military star card nationals include American Samoans and Northern Mariana Islanders who chose to become U. Military star card S. Military star card nationals instead of U. Military star card S. Military star card citizens. Military star card Head of household. Military star card   You cannot file as head of household if you are a nonresident alien at any time during the tax year. Military star card However, if you are married, your spouse can qualify as a head of household if: Your spouse is a resident alien or U. Military star card S. Military star card citizen for the entire tax year, You do not choose to be treated as a resident alien, and Your spouse meets the other requirements for this filing status, as discussed earlier under Resident Aliens . Military star card Note. Military star card   Even if your spouse is considered unmarried for head of household purposes because you are a nonresident alien, your spouse may still be considered married for purposes of the earned income credit. Military star card In that case, your spouse will not be entitled to the credit. Military star card See Publication 596 for more information. Military star card Estates and trusts. Military star card   A nonresident alien estate or trust using Form 1040NR must use Tax Rate Schedule W in the Form 1040NR instructions when determining the tax on income effectively connected with a U. Military star card S. Military star card trade or business. Military star card Special rules for aliens from certain U. Military star card S. Military star card possessions. Military star card   A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico for the entire tax year and who is temporarily working in the United States should read Bona Fide Residents of American Samoa or Puerto Rico, at the end of this chapter, for information about special rules. Military star card Reporting Your Income You must report each item of income that is taxable according to the rules in chapters 2, 3, and 4. Military star card For resident aliens, this includes income from sources both within and outside the United States. Military star card For nonresident aliens, this includes both income that is effectively connected with a trade or business in the United States (subject to graduated tax rates) and income from U. Military star card S. Military star card sources that is not effectively connected (subject to a flat 30% tax rate or lower tax treaty rate). Military star card Deductions Resident and nonresident aliens can claim similar deductions on their U. Military star card S. Military star card tax returns. Military star card However, nonresident aliens generally can claim only deductions related to income that is effectively connected with their U. Military star card S. Military star card trade or business. Military star card Resident Aliens You can claim the same deductions allowed to U. Military star card S. Military star card citizens if you are a resident alien for the entire tax year. Military star card While the discussion that follows contains some of the same general rules and guidelines that apply to you, it is specifically directed toward nonresident aliens. Military star card You should get Form 1040 and instructions for more information on how to claim your allowable deductions. Military star card Nonresident Aliens You can claim deductions to figure your effectively connected taxable income. Military star card You generally cannot claim deductions related to income that is not connected with your U. Military star card S. Military star card business activities. Military star card Except for personal exemptions, and certain itemized deductions, discussed later, you can claim deductions only to the extent they are connected with your effectively connected income. Military star card Ordinary and necessary business expenses. Military star card   You can deduct all ordinary and necessary expenses in the operation of your U. Military star card S. Military star card trade or business to the extent they relate to income effectively connected with that trade or business. Military star card The deduction for travel expenses while in the United States is discussed under Itemized Deductions, later. Military star card For information about other business expenses, see Publication 535. Military star card Losses. Military star card   You can deduct losses resulting from transactions that you entered into for profit and that you were not reimbursed for by insurance, etc. Military star card to the extent that they relate to income that is effectively connected with a trade or business in the United States. Military star card Educator expenses. Military star card   If you were an eligible educator in 2013, you can deduct as an adjustment to income up to $250 in unreimbursed qualified expenses you paid or incurred during 2013 for books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment, and other equipment and materials used in the classroom. Military star card For more information, see your tax form instructions. Military star card Individual retirement arrangement (IRA). Military star card   If you made contributions to a traditional IRA for 2013, you may be able to take an IRA deduction. Military star card But you must have taxable compensation effectively connected with a U. Military star card S. Military star card trade or business to do so. Military star card A Form 5498 should be sent to you by May 31, 2014, that shows all contributions to your traditional IRA for 2013. Military star card If you were covered by a retirement plan (qualified pension, profit-sharing (including 401(k)), annuity, SEP, SIMPLE, etc. Military star card ) at work or through self-employment, your IRA deduction may be reduced or eliminated. Military star card But you can still make contributions to a traditional IRA even if you cannot deduct them. Military star card If you made nondeductible contributions to a traditional IRA for 2013, you must report them on Form 8606, Nondeductible IRAs. Military star card   For more information, see Publication 590, Individual Retirement Arrangements (IRAs). Military star card Moving expenses. Military star card   If you are a nonresident alien temporarily in the United States earning taxable income for performing personal services, you can deduct moving expenses to the United States if you meet both of the following tests. Military star card You are a full-time employee for at least 39 weeks during the 12 months right after you move, or if you are self-employed, you work full time for at least 39 weeks during the first 12 months and 78 weeks during the first 24 months right after you move. Military star card Your new job location is at least 50 miles farther (by the shortest commonly traveled route) from your former home than your former job location was. Military star card If you had no former job location, the new job location must be at least 50 miles from your former home. Military star card   You cannot deduct the moving expense you have when returning to your home abroad or moving to a foreign job site. Military star card   Figure your deductible moving expenses to the United States on Form 3903, and deduct them on line 26 of Form 1040NR. Military star card   For more information on the moving expense deduction, see Publication 521. Military star card Reimbursements. Military star card   If your employer reimbursed you for allowable moving expenses under an accountable plan, your employer should have excluded these reimbursements from your income. Military star card You can only deduct allowable moving expenses that were not reimbursed by your employer or that were reimbursed but the reimbursement was included in your income. Military star card For more information, see Publication 521. Military star card Moving expense or travel expense. Military star card   If you deduct moving expenses to the United States, you cannot also deduct travel expenses (discussed later under Itemized Deductions) while temporarily away from your tax home in a foreign country. Military star card Moving expenses are based on a change in your principal place of business while travel expenses are based on your temporary absence from your principal place of business. Military star card Self-employed SEP, SIMPLE, and qualified retirement plans. Military star card   If you are self-employed, you may be able to deduct contributions to a SEP, SIMPLE, or qualified retirement plan that provides retirement benefits for yourself and your common-law employees, if any. Military star card To make deductible contributions for yourself, you must have net earnings from self-employment that are effectively connected with your U. Military star card S. Military star card trade or business. Military star card   Get Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans), for further information. Military star card Penalty on early withdrawal of savings. Military star card   You must include in income all effectively connected interest income you receive or that is credited to your account during the year. Military star card Do not reduce it by any penalty you must pay on an early withdrawal from a time savings account. Military star card However, if the interest income is effectively connected with your U. Military star card S. Military star card trade or business during the year, you can deduct on line 30 of Form 1040NR the amount of the early withdrawal penalty that the banking institution charged. Military star card Student loan interest expense. Military star card   If you paid interest on a student loan in 2013, you may be able to deduct up to $2,500 of the interest you paid. Military star card Generally, you can claim the deduction if all the following requirements are met. Military star card Your filing status is any filing status except married filing separately. Military star card Your modified adjusted gross income is less than $75,000. Military star card No one else is claiming an exemption for you on his or her 2013 tax return. Military star card You paid interest on a loan taken out only to pay tuition and other qualified higher education expenses for yourself, your spouse, someone who was your dependent when the loan was taken out, or someone you could have claimed as a dependent for the year the loan was taken out except that: The person filed a joint return, The person had gross income that was equal to or more than the exemption amount for that year ($3,900 for 2013), or You could be claimed as a dependent on someone else's return. Military star card The loan is not from a related person or a person who borrowed the proceeds under a qualified employer plan or a contract purchased under such a plan. Military star card The education expenses were paid or incurred within a reasonable period of time before or after the loan was taken out. Military star card The person for whom the expenses were paid or incurred was an eligible student. Military star card Use the worksheet in the Form 1040NR or Form 1040NR-EZ instructions to figure the deduction. Military star card For more information, see Publication 970, Tax Benefits for Education. Military star card Exemptions Resident aliens can claim personal exemptions and exemptions for dependents in the same way as U. Military star card S. Military star card citizens. Military star card However, nonresident aliens generally can claim only a personal exemption for themselves on their U. Military star card S. Military star card tax return. Military star card Resident Aliens You can claim personal exemptions and exemptions for dependents according to the dependency rules for U. Military star card S. Military star card citizens. Military star card You can claim an exemption for your spouse on a separate return if your spouse had no gross income for U. Military star card S. Military star card tax purposes and was not the dependent of another taxpayer. Military star card You can claim this exemption even if your spouse has not been a resident alien for a full tax year or is an alien who has not come to the United States. Military star card You can claim an exemption for each person who qualifies as a dependent according to the rules for U. Military star card S. Military star card citizens. Military star card The dependent must be a citizen or national (defined earlier) of the United States or be a resident of the United States, Canada, or Mexico for some part of the calendar year in which your tax year begins. Military star card Get Publication 501 for more information. Military star card Your spouse and each dependent for whom you claim an exemption must have either an SSN or an ITIN. Military star card See Identification Number, earlier. Military star card Nonresident Aliens Generally, if you are a nonresident alien engaged in a trade or business in the United States, you can claim only one personal exemption ($3,900 for 2013). Military star card You may be able to claim an exemption for a spouse and a dependent if you are described in any of the following discussions. Military star card Your spouse and each dependent for whom you claim an exemption must have either an SSN or an ITIN. Military star card See Identification Number, earlier. Military star card Residents of Mexico or Canada or U. Military star card S. Military star card nationals. Military star card   If you are a resident of Mexico or Canada or a national of the United States (defined earlier), you can also claim a personal exemption for your spouse if your spouse had no gross income for U. Military star card S. Military star card tax purposes and cannot be claimed as the dependent on another U. Military star card S. Military star card taxpayer's return. Military star card In addition, you can claim exemptions for your dependents who meet certain tests. Military star card Residents of Mexico, Canada, or nationals of the United States must use the same rules as U. Military star card S. Military star card citizens to determine who is a dependent and for which dependents exemptions can be claimed. Military star card See Publication 501 for these rules. Military star card For purposes of these rules, dependents who are U. Military star card S. Military star card nationals meet the citizenship test discussed in Publication 501. Military star card Residents of South Korea. Military star card   Nonresident aliens who are residents of South Korea may be able to claim exemptions for a spouse and children. Military star card The income tax treaty with South Korea imposes two additional requirements on South Korean residents: The spouse and all children claimed must live with the alien in the United States at some time during the tax year, and The additional deduction for the exemptions must be prorated based on the ratio of the alien's U. Military star card S. Military star card source gross income effectively connected with a U. Military star card S. Military star card trade or business for the tax year to the alien's entire income from all sources during the tax year. Military star card Example. Military star card Mr. Military star card Park, a nonresident alien who is a resident of South Korea, lives temporarily in the United States with his wife and two children. Military star card During the tax year he receives U. Military star card S. Military star card compensation of $18,000. Military star card He also receives $6,000 of income from sources outside the United States that is not effectively connected with his U. Military star card S. Military star card trade or business. Military star card Thus, his total income for the year is $24,000. Military star card Mr. Military star card Park meets all requirements for claiming exemptions for his spouse and two children. Military star card The additional deduction for 2013 is $8,775 figured as follows: $18,000 $24,000 × $11,700* = $8,775               *3 × $3,900 = $11,700   Students and business apprentices from India. Military star card   Students and business apprentices who are eligible for the benefits of Article 21(2) of the United States–India Income Tax Treaty may be able to claim exemptions for their spouse and dependents. Military star card   You can claim an exemption for your spouse if he or she had no gross income during the year and cannot be claimed as a dependent on another U. Military star card S. Military star card taxpayer's return. Military star card   You can claim exemptions for each of your dependents not admitted to the United States on “F-2,” “J-2,” or “M-2” visas if they meet the same rules that apply to U. Military star card S. Military star card citizens. Military star card See Publication 501 for these rules. Military star card   List your spouse and dependents on line 7c of Form 1040NR. Military star card Enter the total on the appropriate line to the right of line 7c. Military star card Itemized Deductions Nonresident aliens can claim some of the same itemized deductions that resident aliens can claim. Military star card However, nonresident aliens can claim itemized deductions only if they have income effectively connected with their U. Military star card S. Military star card trade or business. Military star card Resident Aliens You can claim the same itemized deductions as U. Military star card S. Military star card citizens, using Schedule A of Form 1040. Military star card These deductions include certain medical and dental expenses, state and local income taxes, real estate taxes, interest you paid on a home mortgage, charitable contributions, casualty and theft losses, and miscellaneous deductions. Military star card If you do not itemize your deductions, you can claim the standard deduction for your particular filing status. Military star card For further information, see Form 1040 and instructions. Military star card Nonresident Aliens You can deduct certain itemized deductions if you receive income effectively connected with your U. Military star card S. Military star card trade or business. Military star card These deductions include state and local income taxes, charitable contributions to U. Military star card S. Military star card organizations, casualty and theft losses, and miscellaneous deductions. Military star card Use Schedule A of Form 1040NR to claim itemized deductions. Military star card If you are filing Form 1040NR-EZ, you can only claim a deduction for state or local income taxes. Military star card If you are claiming any other itemized deduction, you must file Form 1040NR. Military star card Standard deduction. Military star card   Nonresident aliens cannot claim the standard deduction. Military star card However, see Students and business apprentices from India , next. Military star card Students and business apprentices from India. Military star card   A special rule applies to students and business apprentices who are eligible for the benefits of Article 21(2) of the United States–India Income Tax Treaty. Military star card You can claim the standard deduction provided you do not claim itemized deductions. Military star card   Use Worksheet 5-1 to figure your standard deduction. Military star card If you are married and your spouse files a return and itemizes deductions, you cannot take the standard deduction. Military star card State and local income taxes. Military star card   You can deduct state and local income taxes you paid on income that is effectively connected with a trade or business in the United States. Military star card If you received a refund or rebate in 2013 of taxes you paid in an earlier year, do not reduce your deduction by that amount. Military star card Instead, you must include the refund or rebate in income if you deducted the taxes in the earlier year and the deduction reduced your tax. Military star card See Recoveries in Publication 525 for details on how to figure the amount to include in income. Military star card Charitable contributions. Military star card   You can deduct your charitable contributions or gifts to qualified organizations subject to certain limits. Military star card Qualified organizations include organizations that are religious, charitable, educational, scientific, or literary in nature, or that work to prevent cruelty to children or animals. Military star card Certain organizations that promote national or international amateur sports competition are also qualified organizations. Military star card Foreign organizations. Military star card   Contributions made directly to a foreign organization are not deductible. Military star card However, you can deduct contributions to a U. Military star card S. Military star card organization that transfers funds to a charitable foreign organization if the U. Military star card S. Military star card organization controls the use of the funds or if the foreign organization is only an administrative arm of the U. Military star card S. Military star card organization. Military star card   For more information about organizations that qualify to receive charitable contributions, see Publication 526, Charitable Contributions. Military star card Worksheet 5-1. Military star card 2013 Standard Deduction Worksheet for Students and Business Apprentices From India Caution. Military star card If you are married filing a separate return and your spouse itemizes deductions, do not complete this worksheet. Military star card You cannot take the standard deduction even if you were born before January 2, 1949, or are blind. Military star card 1 Enter the amount shown below for your filing status. Military star card           Single or married filing separately—$6,100 Qualifying widow(er)—$12,200 1. Military star card           2 Can you be claimed as a dependent on someone else's U. Military star card S. Military star card income tax return?  No. Military star card Enter the amount from line 1 on line 4. Military star card Skip line 3 and go to line 5. Military star card   Yes. Military star card Go to line 3. Military star card         3 Is your earned income* more than $650?           Yes. Military star card Add $350 to your earned income. Military star card Enter the total. Military star card           No. Military star card Enter $1,000 3. Military star card       4 Enter the smaller of line 1 or line 3 4. Military star card   5 If born before January 2, 1949, OR blind, enter $1,200 ($1,500 if single). Military star card If born before January 2, 1949, AND blind, enter $2,400 ($3,000 if single). Military star card Otherwise, enter -0- 5. Military star card   6 Add lines 4 and 5. Military star card Enter the total here and on Form 1040NR, line 38 (or Form 1040NR-EZ, line 11). Military star card Print “Standard Deduction Allowed Under U. Military star card S. Military star card –India Income Tax Treaty” in the space to the left of these lines. Military star card This is your standard deduction for 2013. Military star card 6. Military star card   *Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. Military star card It also includes any amount received as a scholarship that you must include in your income. Military star card Generally, your earned income is the total of the amount(s) you reported on Form 1040NR, lines 8,12,13, and 19, minus amounts on lines 27 and 31 (or Form 1040NR-EZ, lines 3 and 5, minus any amount on line 8). Military star card Contributions from which you benefit. Military star card   If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive. Military star card   If you pay more than the fair market value to a qualified organization for merchandise, goods, or services, the amount you pay that is more than the value of the item can be a charitable contribution. Military star card For the excess amount to qualify, you must pay it with the intent to make a charitable contribution. Military star card Cash contributions. Military star card   You cannot deduct a cash contribution, regardless of the amount, unless you keep as a record of the contribution a bank record (such as a canceled check, a bank copy of a canceled check, or a bank statement containing the name of the charity, the date, and the amount) or a written record from the charity. Military star card The written record must include the name of the charity, date of the contribution, and the amount of the contribution. Military star card   You may deduct a cash contribution of $250 or more only if you have a written statement from the charitable organization showing: The amount of any money contributed, Whether the organization gave you any goods or services in return for your contribution, and A description and estimate of the value of any goods or services described in (2). Military star card If you received only intangible religious benefits, the organization must state this, but it does not have to describe or value the benefit. Military star card Noncash contributions. Military star card   For contributions not made in cash, the records you must keep depend on the amount of your deduction. Military star card See Publication 526 for details. Military star card For example, if you make a noncash contribution and the amount of your deduction is more than $500, you must complete and attach to your tax return Form 8283, Noncash Charitable Contributions. Military star card If you deduct more than $500 for a contribution of a motor vehicle, boat, or airplane, you must also attach a statement from the charitable organization to your return. Military star card If your total deduction is over $5,000, you also may have to get appraisals of the values of the property. Military star card If the donated property is valued at more than $5,000, you must obtain a qualified appraisal. Military star card You generally must attach to your tax return an appraisal of any property if your deduction for the property is more than $500,000. Military star card See Form 8283 and its instructions for details. Military star card Contributions of appreciated property. Military star card   If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution. Military star card However, if you contribute property with a fair market value that is more than your basis in it, you may have to reduce the fair market value by the amount of appreciation (increase in value) when you figure your deduction. Military star card Your basis in the property is generally what you paid for it. Military star card If you need more information about basis, get Publication 551, Basis of Assets. Military star card   Different rules apply to figuring your deduction, depending on whether the property is: Ordinary income property, or Capital gain property. Military star card For information about these rules, see Publication 526. Military star card Limit. Military star card   The amount you can deduct in a tax year is limited in the same way it is for a citizen or resident of the United States. Military star card For a discussion of limits on charitable contributions and other information, get Publication 526. Military star card Casualty and theft losses. Military star card   You can deduct your loss from fire, storm, shipwreck, or other casualty, or theft of property even though your property is not connected with a U. Military star card S. Military star card trade or business. Military star card The property can be personal use property or income-producing property not connected with a U. Military star card S. Military star card trade or business. Military star card The property must be located in the United States at the time of the casualty or theft. Military star card You can deduct theft losses only in the year in which you discover the loss. Military star card   The amount of the loss is the fair market value of the property immediately before the casualty or theft less its fair market value immediately after the casualty or theft (but not more than its cost or adjusted basis) less any insurance or other reimbursement. Military star card The fair market value of property immediately after a theft is considered zero, because you no longer have the property. Military star card   If your property is covered by insurance, you should file a timely insurance claim for reimbursement. Military star card If you do not, you cannot deduct this loss as a casualty or theft loss. Military star card   Figure your deductible casualty and theft losses on Form 4684, Casualties and Thefts. Military star card Losses from personal use property. Military star card    You cannot deduct the first $100 of each casualty or theft loss to property held for personal use. Military star card You can deduct only the total of these losses for the year (reduced by the $100 limit) that is more than 10% of your adjusted gross income (line 37, Form 1040NR) for the year. Military star card Losses from income-producing property. Military star card   These losses are not subject to the limitations that apply to personal use property. Military star card Use Section B of Form 4684 to figure your deduction for these losses. Military star card Job expenses and other miscellaneous deductions. Military star card   You can deduct job expenses, such as allowable unreimbursed travel expenses (discussed next), and other miscellaneous deductions. Military star card Generally, the allowable deductions must be related to effectively connected income. Military star card Deductible expenses include: Union dues, Safety equipment and small tools needed for your job, Dues to professional organizations, Subscriptions to professional journals, Tax return preparation fees, and Casualty and theft losses of property used in performing services as an employee (employee property). Military star card   Most miscellaneous itemized deductions are deductible only if they are more than 2% of your adjusted gross income (line 37, Form 1040NR). Military star card For more information on miscellaneous deductions, see the instructions for Form 1040NR. Military star card Travel expenses. Military star card   You may be able to deduct your ordinary and necessary travel expenses while you are temporarily performing personal services in the United States. Military star card Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for one year or less. Military star card You must be able to show you were present in the United States on an activity that required your temporary absence from your regular place of work. Military star card   For example, if you have established a “tax home” through regular employment in a foreign country, and intend to return to similar employment in the same country at the end of your temporary stay in the United States, you can deduct reasonable travel expenses you paid. Military star card You cannot deduct travel expenses for other members of your family or party. Military star card Deductible travel expenses. Military star card   If you qualify, you can deduct your expenses for: Transportation—airfare, local transportation, including train, bus, etc. Military star card , Lodging—rent paid, utilities (do not include telephone), hotel or motel room expenses, and Meal expenses—actual expenses allowed if you keep records of the amounts, or, if you do not wish to keep detailed records, you are generally allowed a standard meal allowance amount depending on the date and area of your travel. Military star card You generally can deduct only 50% of unreimbursed meal expenses. Military star card The standard meal allowance rates for high-cost areas are available at www. Military star card gsa. Military star card gov/perdiem. Military star card The rates for other areas are in Publication 463. Military star card   Use Form 2106 or 2106-EZ to figure your allowable expenses that you claim on line 7 of Schedule A (Form 1040NR). Military star card Expenses allocable to U. Military star card S. Military star card tax-exempt income. Military star card   You cannot deduct an expense, or part of an expense, that is allocable to U. Military star card S. Military star card tax-exempt income, including income exempt by tax treaty. Military star card Example. Military star card Irina Oak, a citizen of Poland, resided in the United States for part of the year to acquire business experience from a U. Military star card S. Military star card company. Military star card During her stay in the United States, she received a salary of $8,000 from her Polish employer. Military star card She received no other U. Military star card S. Military star card source income. Military star card She spent $3,000 on travel expenses, of which $1,000 were for meals. Military star card None of these expenses were reimbursed. Military star card Under the tax treaty with Poland, $5,000 of her salary is exempt from U. Military star card S. Military star card income tax. Military star card In filling out Form 2106-EZ, she must reduce her deductible meal expenses by half ($500). Military star card She must reduce the remaining $2,500 of travel expenses by 62. Military star card 5% ($1,563) because 62. Military star card 5% ($5,000 ÷ $8,000) of her salary is exempt from tax. Military star card She enters the remaining total of $937 on line 7 of Schedule A (Form 1040NR). Military star card She completes the remaining lines according to the instructions for Schedule A. Military star card More information. Military star card   For more information about deductible expenses, reimbursements, and recordkeeping, get Publication 463. Military star card Tax Credits and Payments This discussion covers tax credits and payments for resident aliens, followed by a discussion of the credits and payments for nonresident aliens. Military star card Resident Aliens Resident aliens generally claim tax credits and report tax payments, including withholding, using the same rules that apply to U. Military star card S. Military star card citizens. Military star card The following items are some of the credits you may be able to claim. Military star card Foreign tax credit. Military star card   You can claim a credit, subject to certain limits, for income tax you paid or accrued to a foreign country on foreign source income. Military star card You cannot claim a credit for taxes paid or accrued on excluded foreign earned income. Military star card To claim a credit for income taxes paid or accrued to a foreign country, you generally will file Form 1116, Foreign Tax Credit (Individual, Estate, or Trust), with your Form 1040. Military star card   For more information, get Publication 514, Foreign Tax Credit for Individuals. Military star card Child and dependent care credit. Military star card   You may be able to take this credit if you pay someone to care for your qualifying child who is under age 13, or your disabled dependent or disabled spouse, so that you can work or look for work. Military star card Generally, you must be able to claim an exemption for your dependent. Military star card   For more information, get Publication 503, Child and Dependent Care Expenses, and Form 2441, Child and Dependent Care Expenses. Military star card Credit for the elderly or the disabled. Military star card   You may qualify for this credit if you are 65 or older or if you retired on permanent and total disability. Military star card For more information on this credit, get Publication 524, Credit for the Elderly or the Disabled, and Schedule R (Form 1040A or 1040). Military star card Education credits. Military star card   You may qualify for these credits if you paid qualified education expenses for yourself, your spouse, or your dependent. Military star card There are two education credits: the American Opportunity Credit and the lifetime learning credit. Military star card You cannot claim these credits if you are married filing separately. Military star card Use Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits), to figure the credit. Military star card For more information, see Publication 970. Military star card Retirement savings contributions credit. Military star card   You may qualify for this credit (also known as the saver's credit) if you made eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement (IRA) in 2013. Military star card You cannot claim this credit if: You were born after January 1, 1996, You were a full-time student, Your exemption is claimed by someone else on his or her 2013 tax return, or Your adjusted gross income is more than: $59,000, if your filing status is married filing jointly, $44,250, if your filing status is head of household, or $29,500, if your filing status is single, married filing separately, or qualifying widow(er). Military star card Use Form 8880, Credit for Qualified Retirement Savings Contributions, to figure the credit. Military star card For more information, see Publication 590. Military star card Child tax credit. Military star card   You may be able to take this credit if you have a qualifying child. Military star card   A qualifying child for purposes of the child tax credit is a child who: Was under age 17 at the end of 2013. Military star card 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). Military star card Is a U. Military star card S. Military star card citizen, a U. Military star card S. Military star card national, or a resident alien. Military star card Did not provide over half of his or her own support for 2013. Military star card Lived with you more than half of 2013. Military star card Temporary absences, such as for school, vacation, or medical care, count as time lived in the home. Military star card Is claimed as a dependent on your return. Military star card An adopted child is always treated as your own child. Military star card An adopted child includes a child lawfully placed with you for legal adoption. Military star card   See your form instructions for additional details. Military star card Adoption credit. Military star card   You may qualify to take a tax credit of up to $12,970 for qualifying expenses paid to adopt an eligible child. Military star card This amount may be allowed for the adoption of a child with special needs regardless of whether you have qualifying expenses. Military star card To claim the adoption credit, file Form 8839, Qualified Adoption Expenses, with your Form 1040. Military star card Earned income credit. Military star card   You may qualify for an earned income credit of up to $3,250 if a child lived with you in the United States and your earned income and adjusted gross income were each less than $37,870 ($43,210 if married filing jointly). Military star card If two children lived with you in the United States and your earned income and adjusted gross income were each less than $43,038 ($48,378 if married filing jointly), your credit could be as much as $5,372. Military star card If three or more children lived with you in the United States and your earned income and adjusted gross income were each less than $46,227 ($51,567 if married filing jointly), your credit could be as much as $6,044. Military star card If you do not have a qualifying child and your earned income and adjusted gross income were each less than $14,340 ($19,680 if married filing jointly), your credit could be as much as $487. Military star card You cannot claim the earned income credit if your filing status is married filing separately. Military star card    You and your spouse (if filing a joint return) and any qualifying child must have valid SSNs to claim this credit. Military star card You cannot claim the credit using an ITIN. Military star card If a social security card has a legend that says Not Valid for Employment and the number was issued so that you (or your spouse or your qualifying child) could receive a federally funded benefit, you cannot claim the earned income credit. Military star card An example of a federally funded benefit is Medicaid. Military star card If a card has this legend and the individual's immigration status has changed so that the individual is now a U. Military star card S. Military star card citizen or lawful permanent resident, ask the SSA to issue a new social security card without the legend. Military star card Other information. Military star card   There are other eligibility rules that are not discussed here. Military star card For more information, get Publication 596, Earned Income Credit. Military star card Nonresident Aliens You can claim some of the same credits that resident aliens can claim. Military star card You can also report certain taxes you paid, are considered to have paid, or that were withheld from your income. Military star card Credits Credits are allowed only if you receive effectively connected income. Military star card You may be able to claim some of the following credits. Military star card Foreign tax credit. Military star card   If you receive foreign source income that is effectively connected with a trade or business in the United States, you can claim a credit for any income taxes paid or accrued to any foreign country or U. Military star card S. Military star card possession on that income. Military star card   If you do not have foreign source income effectively connected with a U. Military star card S. Military star card trade or business, you cannot claim credits against your U. Military star card S. Military star card tax for taxes paid or accrued to a foreign country or U. Military star card S. Military star card possession. Military star card   You cannot take any credit for taxes imposed by a foreign country or U. Military star card S. Military star card possession on your U. Military star card S. Military star card source income if those taxes were imposed only because you are a citizen or resident of the foreign country or possession. Military star card   If you claim a foreign tax credit, you generally will have to attach to your return a Form 1116. Military star card See Publication 514 for more information. Military star card Child and dependent care credit. Military star card   You may qualify for this credit if you pay someone to care for your qualifying child who is under age 13, or your disabled dependent or disabled spouse, so that you can work or look for work. Military star card Generally, you must be able to claim an exemption for your dependent. Military star card   Married nonresident aliens can claim the credit only if they choose to file a joint return with a U. Military star card S. Military star card citizen or resident spouse as discussed in chapter 1, or if they qualify as certain married individuals living apart (see Joint Return Test in Publication 503). Military star card   The amount of your child and dependent care expense that qualifies for the credit in any tax year cannot be more than your earned income from the United States for that tax year. Military star card Earned income generally means wages, salaries, and professional fees for personal services performed. Military star card   For more information, get Publication 503. Military star card Education credits. Military star card   If you are a nonresident alien for any part of the year, you generally cannot claim the education credits. Military star card However, if you are married and choose to file a joint return with a U. Military star card S. Military star card citizen or resident spouse as discussed in chapter 1, you may be eligible for these credits. Military star card Retirement savings contributions credit. Military star card   You may qualify for this credit (also known as the saver's credit) if you made eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement (IRA) in 2013. Military star card You cannot claim this credit if: You were born after January 1, 1996, You were a full-time student, Your exemption is claimed by someone else on his or her 2013 tax return, or Your adjusted gross income is more than $29,500. Military star card Use Form 8880 to figure the credit. Military star card For more information, see Publication 590. Military star card Child tax credit. Military star card   You may be able to take this credit if you have a qualifying child. Military star card   A qualifying child for purposes of the child tax credit is a child who: Was under age 17 at the end of 2013. Military star card 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). Military star card Is a U. Military star card S. Military star card citizen, a U. Military star card S. Military star card national, or a resident alien. Military star card Did not provide over half of his or her own support for 2013. Military star card Lived with you more than half of 2013. Military star card Temporary absences, such as for school, vacation, or medical care, count as time lived in the home. Military star card Is claimed as a dependent on your return. Military star card An adopted child is always treated as your own child. Military star card An adopted child includes a child lawfully placed with you for legal adoption. Military star card   See your form instructions for additional details. Military star card Adoption credit. Military star card   You may qualify to take a tax credit of up to $12,970 for qualifying expenses paid to adopt an eligible child. Military star card This amount may be allowed for the adoption of a child with special needs regardless of whether you have qualifying expenses. Military star card To claim the adoption credit, file Form 8839 with your Form 1040NR. Military star card   Married nonresident aliens can claim the credit only if they choose to file a joint return with a U. Military star card S. Military star card citizen or resident spouse as discussed in chapter 1, or if they qualify as certain married individuals living apart (see Married Persons Not Filing Jointly in the Form 8839 instructions). Military star card Credit for prior year minimum tax. Military star card   If you paid alternative minimum tax in a prior year, get Form 8801, Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts, to see if you qualify for this credit. Military star card Earned income credit. Military star card   If you are a nonresident alien for any part of the tax year, you generally cannot get the earned income credit. Military star card However, if you are married and choose to file a joint return with a U. Military star card S. Military star card citizen or resident spouse as discussed in chapter 1, you may be eligible for the credit. Military star card    You, your spouse, and any qualifying child must have valid SSNs to claim this credit. Military star card You cannot claim the credit using an ITIN. Military star card If a social security card has a legend that says Not Valid for Employment and the number was issued so that you (or your spouse or your qualifying child) could receive a federally funded benefit, you cannot claim the earned income credit. Military star card An example of a federally funded benefit is Medicaid. Military star card If a card has this legend and the individual's immigration status has changed so that the individual is now a U. Military star card S. Military star card citizen or lawful permanent resident, ask the SSA to issue a new social security card without the legend. Military star card   See Publication 596 for more information on the credit. Military star card Tax Withheld You can claim the tax withheld during the year as a payment against your U. Military star card S. Military star card tax. Military star card You claim it on line 61 of Form 1040NR or on line 18 of Form 1040NR-EZ. Military star card The tax withheld reduces any tax you owe with Form 1040NR or Form 1040NR-EZ. Military star card Withholding from wages. Military star card   Any federal income tax withheld from your wages during the tax year while you were a nonresident alien is allowed as a payment against your U. Military star card S. Military star card income tax liability for the same year. Military star card You can claim the income tax withheld whether or not you were engaged in a trade or business in the United States during the year, and whether or not the wages (or any other income) were connected with a trade or business in the United States. Military star card Excess social security tax withheld. Military star card   If you have two or more employers, you may be able to claim a credit against your U. Military star card S. Military star card income tax liability for social security tax withheld in excess of the maximum required. Military star card See Social Security and Medicare Taxes in chapter 8 for more information. Military star card Additional Medicare Tax. Military star card   Your employer is responsible for withholding the 0. Military star card 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000 in 2013. Military star card If you do not owe Additional Medicare Tax, you can claim a credit for any withheld Additional Medicare Tax against the total tax liability shown on your tax return by filing Form 8959. Military star card Tax paid on undistributed long-term capital gains. Military star card   If you are a shareholder in a mutual fund (or other regulated investment company) or real estate investment trust, you can claim a credit for your share of any taxes paid by the company on its undistributed long-term capital gains. Military star card You will receive information on Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains, which you must attach to your return. Military star card Tax withheld at the source. Military star card   You can claim as a payment any tax withheld at the source on investment and other fixed or determinable annual or periodic income paid to you. Military star card Fixed or determinable income includes interest, dividend, rental, and royalty income that you do not claim to be effectively connected income. Military star card Wage or salary payments can be fixed or determinable income to you, but usually are subject to withholding as discussed above. Military star card Taxes on fixed or determinable income are withheld at a 30% rate or at a lower treaty rate. Military star card Tax withheld on partnership income. Military star card   If you are a foreign partner in a partnership, the partnership will withhold tax on your share of effectively connected taxable income from the partnership. Military star card The partnership will give you a statement on Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, showing the tax withheld. Military star card A partnership that is publicly traded may withhold on your actual distributions of effectively connected income. Military star card In this case, the partnership will give you a statement on Form 1042-S. Military star card Claim the tax withheld as a payment on line 61b or 61d of Form 1040NR, as appropriate. Military star card Claiming tax withheld on your return. Military star card   When you fill out your tax return, take extra care to enter the correct amount of any tax withheld shown on your information documents. Military star card The following table lists some of the more common information documents and shows where to find the amount of tax withheld. Military star card Form number Location  of tax  withheld RRB-1042S Box 12 SSA-1042S Box 9 W-2 Box 2 W-2c Box 2 1042-S Box 9 8805 Line 10 8288-A Box 2 Bona Fide Residents of American Samoa or Puerto Rico If you are a nonresident alien who is a bona fide resident of American Samoa or Puerto Rico for the entire tax year, you generally are taxed the same as resident aliens. Military star card You should file Form 1040 and report all income from sources both in and outside the United States. Military star card However, you can exclude the income discussed in the following paragraphs. Military star card For tax purposes other than reporting income, however, you will be treated as a nonresident alien. Military star card For example, you are not allowed the standard deduction, you cannot file a joint return, and you are not allowed a deduction for a dependent unless that person is a citizen or national of the United States. Military star card There are also limits on what deductions and credits are allowed. Military star card See Nonresident Aliens under Deductions , Itemized Deductions , and Tax Credits and Payments in this chapter. Military star card Residents of Puerto Rico. Military star card   If you are a bona fide resident of Puerto Rico for the entire year, you can exclude from gross income all income from sources in Puerto Rico (other than amounts for services performed as an employee of the United States or any of its agencies). Military star card   If you report income on a calendar year basis and you do not have wages subject to withholding, file your return and pay your tax by June 15. Military star card You must also make your first payment of estimated tax by June 15. Military star card You cannot file a joint income tax return or make joint payments of estimated tax. Military star card However, if you are married to a U. Military star card S. Military star card citizen or resident, see Nonresident Spouse Treated as a Resident in chapter 1. Military star card   If you earn wages subject to withholding, your U. Military star card S. Military star card income tax return is due by April 15. Military star card Your first payment of estimated tax is also due by April 15. Military star card For information on withholding and estimated tax, see chapter 8 . Military star card Residents of American Samoa. Military star card   If you are a bona fide resident of American Samoa for the entire year, you can exclude from gross income all income from sources in American Samoa (other than amounts for services performed as an employee of the U. Military star card S. Military star card government or any of its agencies). Military star card An employee of the American Samoan government is not considered an employee of the U. Military star card S. Military star card government or any of its agencies for purposes of the exclusion. Military star card For more information about this exclusion, get Form 4563 and Publication 570, Tax Guide for Individuals With Income From U. Military star card S. Military star card Possessions. 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Report Phishing

The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

What is phishing?
Phishing is a scam typically carried out by unsolicited email and/or websites that pose as legitimate sites and lure unsuspecting victims to provide personal and financial information.

All unsolicited email claiming to be from either the IRS or any other IRS-related components such as the Office of Professional Responsibility or EFTPS, should be reported to phishing@irs.gov.

However, if you have experienced monetary losses due to an IRS-related incident please file a complaint with the Federal Trade Commission through their Complaint Assistant to make that information available to investigators.

ALERT: IRS Warns of Phone Scam

What to do if you receive a suspicious IRS-related communication

If

Then

You receive an email claiming to be from the IRS that contains a request for personal information …
  1. Do not reply.
  2. Do not open any attachments. Attachments may contain malicious code that will infect your computer.
  3. Do not click on any links.
    If you clicked on links in a suspicious email or phishing website and entered confidential information, visit our identity protection page.
  4. Forward the email as-is, to us at phishing@irs.gov.
  5. After you forward the email and/or header information to us, delete the original email message you received.

Note:
Please forward the full original email to us at phishing@irs.gov. Do not forward scanned images of printed emails as that strips the email of valuable information only available in the electronic copy.

You discover a website on the Internet that claims to be the IRS but you suspect it is bogus … ... send the URL of the suspicious site to phishing@irs.gov. Please add in the subject line of the email, 'Suspicious website'.
You receive a phone call or paper letter via mail from an individual claiming to be the IRS but you suspect they are not an IRS employee …

Phone call:

  1. Ask for a call back number and employee badge number.
  2. Contact the IRS to determine if the caller is an IRS employee with a legitimate need to contact you.
  3. If you determine the person calling you is an IRS employee with a legitimate need to contact you, call them back.

Letter or notice via paper mail:

  1. Contact the IRS to determine if the mail is a legitimate IRS letter.
  2. If it is a legitimate IRS letter, reply if needed.

Report the incident to the Treasury Inspector General for Tax Administration if the caller or party that sent the paper letter is not legitimate.

You receive an unsolicited e-mail or fax, involving a stock or share purchase 

... and you are a U.S. citizen located in the United States or its territories or a U.S. citizen living abroad.

  1. Complete the appropriate complaint form with the U.S. Securities and Exchange Commission.
  2. Forward email to phishing@irs.gov.
    Please add in the subject line of the email, 'Stock'.
  3. If you are a victim of monetary or identity theft, you may submit a complaint through the FTC Complaint Assistant.  

... and you are not a U.S. citizen and reside outside the United States.

  1. Complete the appropriate complaint form with the U.S. Securities and Exchange Commission.
  2. Contact your securities regulator and file a complaint.
  3. Forward email to phishing@irs.gov.
    Please add in the subject line of the e-mail, 'Stock'.
  4. If you are a victim of monetary or identity theft, you may report your complaint to econsumer.gov.
You receive an unsolicited fax (such as Form W8-BEN) claiming to be from the IRS, requesting personal information … Contact the IRS to determine if the fax is from the IRS.
  • If you learn the fax is not from the IRS, please send us the information via email at phishing@irs.gov. In the subject line of the email, please type the word ‘FAX’.
You receive a text message or Short Message Service (SMS) message claiming to be from the IRS …
  1. Do not reply.
  2. Do not open any attachments. Attachments may contain malicious code that will infect your computer or mobile phone.
  3. Do not click on any links. If you clicked on links in a suspicious SMS and entered confidential information, visit our identity protection page.
  4. Forward the text as-is, to us at 202-552-1226. Note: Standard text messaging rates apply.
  5. If possible, in a separate text, forward the originating number to us at 202-552-1226
  6. After you forward the text, please delete the original text.

You have a tax-related question ...

Note: Do not submit tax-related questions to phishing@irs.gov.

If you have a tax-related question, unrelated to phishing or identity theft, please contact the IRS.

How to identify phishing email scams claiming to be from the IRS and bogus IRS websites


The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.

The IRS does not:

  • request detailed personal information through e-mail.
  • send any communication requesting your PIN numbers, passwords or similar access information for credit cards, banks or other financial accounts.

What to do if you receive a suspicious email message that does not claim to be from the IRS

 If

 Then

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The Military Star Card

Military star card 13. Military star card   Basis of Property Table of Contents Introduction Useful Items - You may want to see: Cost BasisReal Property Adjusted BasisIncreases to Basis Decreases to Basis Basis Other Than CostProperty Received for Services Taxable Exchanges Involuntary Conversions Nontaxable Exchanges Property Transferred From a Spouse Property Received as a Gift Inherited Property Property Changed From Personal to Business or Rental Use Stocks and Bonds Introduction This chapter discusses how to figure your basis in property. Military star card It is divided into the following sections. Military star card Cost basis. Military star card Adjusted basis. Military star card Basis other than cost. Military star card Your basis is the amount of your investment in property for tax purposes. Military star card Use the basis to figure gain or loss on the sale, exchange, or other disposition of property. Military star card Also use it to figure deductions for depreciation, amortization, depletion, and casualty losses. Military star card If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. Military star card Only the basis allocated to the business or investment use of the property can be depreciated. Military star card Your original basis in property is adjusted (increased or decreased) by certain events. Military star card For example, if you make improvements to the property, increase your basis. Military star card If you take deductions for depreciation or casualty losses, or claim certain credits, reduce your basis. Military star card Keep accurate records of all items that affect the basis of your property. Military star card For more information on keeping records, see chapter 1. Military star card Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 525 Taxable and Nontaxable Income 535 Business Expenses 537 Installment Sales 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 551 Basis of Assets 946 How To Depreciate Property Cost Basis The basis of property you buy is usually its cost. Military star card The cost is the amount you pay in cash, debt obligations, other property, or services. Military star card Your cost also includes amounts you pay for the following items: Sales tax, Freight, Installation and testing, Excise taxes, Legal and accounting fees (when they must be capitalized), Revenue stamps, Recording fees, and Real estate taxes (if you assume liability for the seller). Military star card In addition, the basis of real estate and business assets may include other items. Military star card Loans with low or no interest. Military star card    If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price minus any amount considered to be unstated interest. Military star card You generally have unstated interest if your interest rate is less than the applicable federal rate. Military star card   For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Military star card Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. Military star card If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. Military star card Lump sum purchase. Military star card   If you buy buildings and the land on which they stand for a lump sum, allocate the cost basis among the land and the buildings. Military star card Allocate the cost basis according to the respective fair market values (FMVs) of the land and buildings at the time of purchase. Military star card Figure the basis of each asset by multiplying the lump sum by a fraction. Military star card The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Military star card    If you are not certain of the FMVs of the land and buildings, you can allocate the basis according to their assessed values for real estate tax purposes. Military star card Fair market value (FMV). Military star card   FMV is the price at which the property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the necessary facts. Military star card Sales of similar property on or about the same date may be helpful in figuring the FMV of the property. Military star card Assumption of mortgage. Military star card   If you buy property and assume (or buy the property subject to) an existing mortgage on the property, your basis includes the amount you pay for the property plus the amount to be paid on the mortgage. Military star card Settlement costs. Military star card   Your basis includes the settlement fees and closing costs you paid for buying the property. Military star card (A fee for buying property is a cost that must be paid even if you buy the property for cash. Military star card ) Do not include fees and costs for getting a loan on the property in your basis. Military star card   The following are some of the settlement fees or closing costs you can include in the basis of your property. Military star card Abstract fees (abstract of title fees). Military star card Charges for installing utility services. Military star card Legal fees (including fees for the title search and preparation of the sales contract and deed). Military star card Recording fees. Military star card Survey fees. Military star card Transfer taxes. Military star card Owner's title insurance. Military star card Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Military star card   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Military star card   The following are some of the settlement fees and closing costs you cannot include in the basis of property. Military star card Casualty insurance premiums. Military star card Rent for occupancy of the property before closing. Military star card Charges for utilities or other services related to occupancy of the property before closing. Military star card Charges connected with getting a loan, such as points (discount points, loan origination fees), mortgage insurance premiums, loan assumption fees, cost of a credit report, and fees for an appraisal required by a lender. Military star card Fees for refinancing a mortgage. Military star card Real estate taxes. Military star card   If you pay real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. Military star card You cannot deduct them as an expense. Military star card    If you reimburse the seller for taxes the seller paid for you, you can usually deduct that amount as an expense in the year of purchase. Military star card Do not include that amount in the basis of your property. Military star card If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Military star card Points. Military star card   If you pay points to get a loan (including a mortgage, second mortgage, line of credit, or a home equity loan), do not add the points to the basis of the related property. Military star card Generally, you deduct the points over the term of the loan. Military star card For more information on how to deduct points, see chapter 23. Military star card Points on home mortgage. Military star card   Special rules may apply to points you and the seller pay when you get a mortgage to buy your main home. Military star card If certain requirements are met, you can deduct the points in full for the year in which they are paid. Military star card Reduce the basis of your home by any seller-paid points. Military star card Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments (increases and decreases) to the cost basis or basis other than cost (discussed later) of the property. Military star card The result is the adjusted basis. Military star card Increases to Basis Increase the basis of any property by all items properly added to a capital account. Military star card Examples of items that increase basis are shown in Table 13-1. Military star card These include the items discussed below. Military star card Improvements. Military star card   Add to your basis in property the cost of improvements having a useful life of more than 1 year, that increase the value of the property, lengthen its life, or adapt it to a different use. Military star card For example, improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, or paving your driveway. Military star card Assessments for local improvements. Military star card   Add to the basis of property assessments for improvements such as streets and sidewalks if they increase the value of the property assessed. Military star card Do not deduct them as taxes. Military star card However, you can deduct as taxes assessments for maintenance or repairs, or for meeting interest charges related to the improvements. Military star card Example. Military star card Your city changes the street in front of your store into an enclosed pedestrian mall and assesses you and other affected property owners for the cost of the conversion. Military star card Add the assessment to your property's basis. Military star card In this example, the assessment is a depreciable asset. Military star card Decreases to Basis Decrease the basis of any property by all items that represent a return of capital for the period during which you held the property. Military star card Examples of items that decrease basis are shown in Table 13-1. Military star card These include the items discussed below. Military star card Table 13-1. Military star card Examples of Adjustments to Basis Increases to Basis Decreases to Basis • Capital improvements: • Exclusion from income of   Putting an addition on your home subsidies for energy conservation   Replacing an entire roof measures   Paving your driveway     Installing central air conditioning • Casualty or theft loss deductions   Rewiring your home and insurance reimbursements       • Assessments for local improvements:     Water connections     Extending utility service lines to the property • Postponed gain from the sale of a home   Sidewalks • Alternative motor vehicle credit  (Form 8910)   Roads       • Alternative fuel vehicle refueling     property credit (Form 8911)           • Residential energy credits (Form 5695)       • Casualty losses: • Depreciation and section 179 deduction   Restoring damaged property     • Nontaxable corporate distributions • Legal fees:     Cost of defending and perfecting a title • Certain canceled debt excluded from   Fees for getting a reduction of an assessment income     • Zoning costs • Easements           • Adoption tax benefits Casualty and theft losses. Military star card   If you have a casualty or theft loss, decrease the basis in your property by any insurance proceeds or other reimbursement and by any deductible loss not covered by insurance. Military star card    You must increase your basis in the property by the amount you spend on repairs that restore the property to its pre-casualty condition. Military star card   For more information on casualty and theft losses, see chapter 25. Military star card Depreciation and section 179 deduction. Military star card   Decrease the basis of your qualifying business property by any section 179 deduction you take and the depreciation you deducted, or could have deducted (including any special depreciation allowance), on your tax returns under the method of depreciation you selected. Military star card   For more information about depreciation and the section 179 deduction, see Publication 946 and the Instructions for Form 4562. Military star card Example. Military star card You owned a duplex used as rental property that cost you $40,000, of which $35,000 was allocated to the building and $5,000 to the land. Military star card You added an improvement to the duplex that cost $10,000. Military star card In February last year, the duplex was damaged by fire. Military star card Up to that time, you had been allowed depreciation of $23,000. Military star card You sold some salvaged material for $1,300 and collected $19,700 from your insurance company. Military star card You deducted a casualty loss of $1,000 on your income tax return for last year. Military star card You spent $19,000 of the insurance proceeds for restoration of the duplex, which was completed this year. Military star card You must use the duplex's adjusted basis after the restoration to determine depreciation for the rest of the property's recovery period. Military star card Figure the adjusted basis of the duplex as follows: Original cost of duplex $35,000 Addition to duplex 10,000 Total cost of duplex $45,000 Minus: Depreciation 23,000 Adjusted basis before casualty $22,000 Minus: Insurance proceeds $19,700     Deducted casualty loss 1,000     Salvage proceeds 1,300 22,000 Adjusted basis after casualty $-0- Add: Cost of restoring duplex 19,000 Adjusted basis after restoration $19,000 Note. Military star card Your basis in the land is its original cost of $5,000. Military star card Easements. Military star card   The amount you receive for granting an easement is generally considered to be proceeds from the sale of an interest in real property. Military star card It reduces the basis of the affected part of the property. Military star card If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. Military star card   If the gain is on a capital asset, see chapter 16 for information about how to report it. Military star card If the gain is on property used in a trade or business, see Publication 544 for information about how to report it. Military star card Exclusion of subsidies for energy conservation measures. Military star card   You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of an energy conservation measure for a dwelling unit. Military star card Reduce the basis of the property for which you received the subsidy by the excluded amount. Military star card For more information about this subsidy, see chapter 12. Military star card Postponed gain from sale of home. Military star card    If you postponed gain from the sale of your main home under rules in effect before May 7, 1997, you must reduce the basis of the home you acquired as a replacement by the amount of the postponed gain. Military star card For more information on the rules for the sale of a home, see chapter 15. Military star card Basis Other Than Cost There are many times when you cannot use cost as basis. Military star card In these cases, the fair market value or the adjusted basis of the property can be used. Military star card Fair market value (FMV) and adjusted basis were discussed earlier. Military star card Property Received for Services If you receive property for your services, include the FMV of the property in income. Military star card The amount you include in income becomes your basis. Military star card If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. Military star card Restricted property. Military star card   If you receive property for your services and the property is subject to certain restrictions, your basis in the property is its FMV when it becomes substantially vested. Military star card However, this rule does not apply if you make an election to include in income the FMV of the property at the time it is transferred to you, less any amount you paid for it. Military star card Property is substantially vested when it is transferable or when it is not subject to a substantial risk of forfeiture (you do not have a good chance of losing it). Military star card For more information, see Restricted Property in Publication 525. Military star card Bargain purchases. Military star card   A bargain purchase is a purchase of an item for less than its FMV. Military star card If, as compensation for services, you buy goods or other property at less than FMV, include the difference between the purchase price and the property's FMV in your income. Military star card Your basis in the property is its FMV (your purchase price plus the amount you include in income). Military star card   If the difference between your purchase price and the FMV is a qualified employee discount, do not include the difference in income. Military star card However, your basis in the property is still its FMV. Military star card See Employee Discounts in Publication 15-B. Military star card Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. Military star card A taxable gain or deductible loss also is known as a recognized gain or loss. Military star card If you receive property in exchange for other property in a taxable exchange, the basis of the property you receive is usually its FMV at the time of the exchange. Military star card Involuntary Conversions If you receive replacement property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, figure the basis of the replacement property using the basis of the converted property. Military star card Similar or related property. Military star card   If you receive replacement property similar or related in service or use to the converted property, the replacement property's basis is the same as the converted property's basis on the date of the conversion, with the following adjustments. Military star card Decrease the basis by the following. Military star card Any loss you recognize on the involuntary conversion. Military star card Any money you receive that you do not spend on similar property. Military star card Increase the basis by the following. Military star card Any gain you recognize on the involuntary conversion. Military star card Any cost of acquiring the replacement property. Military star card Money or property not similar or related. Military star card    If you receive money or property not similar or related in service or use to the converted property, and you buy replacement property similar or related in service or use to the converted property, the basis of the replacement property is its cost decreased by the gain not recognized on the conversion. Military star card Example. Military star card The state condemned your property. Military star card The adjusted basis of the property was $26,000 and the state paid you $31,000 for it. Military star card You realized a gain of $5,000 ($31,000 − $26,000). Military star card You bought replacement property similar in use to the converted property for $29,000. Military star card You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. Military star card Your unrecognized gain is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. Military star card The basis of the replacement property is figured as follows: Cost of replacement property $29,000 Minus: Gain not recognized 3,000 Basis of replacement property $26,000 Allocating the basis. Military star card   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Military star card Basis for depreciation. Military star card   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. Military star card For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. Military star card Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Military star card If you receive property in a nontaxable exchange, its basis is generally the same as the basis of the property you transferred. Military star card See Nontaxable Trades in chapter 14. Military star card Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Military star card To qualify as a like-kind exchange, the property traded and the property received must be both of the following. Military star card Qualifying property. Military star card Like-kind property. Military star card The basis of the property you receive is generally the same as the adjusted basis of the property you gave up. Military star card If you trade property in a like-kind exchange and also pay money, the basis of the property received is the adjusted basis of the property you gave up increased by the money you paid. Military star card Qualifying property. Military star card   In a like-kind exchange, you must hold for investment or for productive use in your trade or business both the property you give up and the property you receive. Military star card Like-kind property. Military star card   There must be an exchange of like-kind property. Military star card Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. Military star card The exchange of real estate for real estate and personal property for similar personal property are exchanges of like-kind property. Military star card Example. Military star card You trade in an old truck used in your business with an adjusted basis of $1,700 for a new one costing $6,800. Military star card The dealer allows you $2,000 on the old truck, and you pay $4,800. Military star card This is a like-kind exchange. Military star card The basis of the new truck is $6,500 (the adjusted basis of the old one, $1,700, plus the amount you paid, $4,800). Military star card If you sell your old truck to a third party for $2,000 instead of trading it in and then buy a new one from the dealer, you have a taxable gain of $300 on the sale (the $2,000 sale price minus the $1,700 adjusted basis). Military star card The basis of the new truck is the price you pay the dealer. Military star card Partially nontaxable exchanges. Military star card   A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. Military star card The basis of the property you receive is the same as the adjusted basis of the property you gave up, with the following adjustments. Military star card Decrease the basis by the following amounts. Military star card Any money you receive. Military star card Any loss you recognize on the exchange. Military star card Increase the basis by the following amounts. Military star card Any additional costs you incur. Military star card Any gain you recognize on the exchange. Military star card If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Military star card Allocation of basis. Military star card   If you receive like-kind and unlike properties in the exchange, allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. Military star card The rest is the basis of the like-kind property. Military star card More information. Military star card   See Like-Kind Exchanges in chapter 1 of Publication 544 for more information. Military star card Basis for depreciation. Military star card   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind exchange. Military star card For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. Military star card Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse is the same as your spouse's adjusted basis. Military star card The same rule applies to a transfer by your former spouse that is incident to divorce. Military star card However, for property transferred in trust, adjust your basis for any gain recognized by your spouse or former spouse if the liabilities assumed, plus the liabilities to which the property is subject, are more than the adjusted basis of the property transferred. Military star card If the property transferred to you is a series E, series EE, or series I U. Military star card S. Military star card savings bond, the transferor must include in income the interest accrued to the date of transfer. Military star card Your basis in the bond immediately after the transfer is equal to the transferor's basis increased by the interest income includible in the transferor's income. Military star card For more information on these bonds, see chapter 7. Military star card At the time of the transfer, the transferor must give you the records needed to determine the adjusted basis and holding period of the property as of the date of the transfer. Military star card For more information about the transfer of property from a spouse, see chapter 14. Military star card Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis to the donor just before it was given to you, its FMV at the time it was given to you, and any gift tax paid on it. Military star card FMV less than donor's adjusted basis. Military star card   If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Military star card Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. Military star card Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property. Military star card See Adjusted Basis , earlier. Military star card Example. Military star card You received an acre of land as a gift. Military star card At the time of the gift, the land had an FMV of $8,000. Military star card The donor's adjusted basis was $10,000. Military star card After you received the property, no events occurred to increase or decrease your basis. Military star card If you later sell the property for $12,000, you will have a $2,000 gain because you must use the donor's adjusted basis at the time of the gift ($10,000) as your basis to figure gain. Military star card If you sell the property for $7,000, you will have a $1,000 loss because you must use the FMV at the time of the gift ($8,000) as your basis to figure loss. Military star card If the sales price is between $8,000 and $10,000, you have neither gain nor loss. Military star card Business property. Military star card   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deductions is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. Military star card FMV equal to or greater than donor's adjusted basis. Military star card   If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. Military star card Increase your basis by all or part of any gift tax paid, depending on the date of the gift, explained later. Military star card   Also, for figuring gain or loss from a sale or other disposition or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis (the donor's adjusted basis) by any required adjustments to basis while you held the property. Military star card See Adjusted Basis , earlier. Military star card   If you received a gift during the tax year, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it due to the net increase in value of the gift. Military star card Figure the increase by multiplying the gift tax paid by a fraction. Military star card The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. Military star card   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. Military star card The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Military star card Example. Military star card In 2013, you received a gift of property from your mother that had an FMV of $50,000. Military star card Her adjusted basis was $20,000. Military star card The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). Military star card She paid a gift tax of $7,320 on the property. Military star card Your basis is $26,076, figured as follows: Fair market value $50,000 Minus: Adjusted basis −20,000 Net increase in value $30,000     Gift tax paid $7,320 Multiplied by ($30,000 ÷ $36,000) × . Military star card 83 Gift tax due to net increase in value $6,076 Adjusted basis of property to your mother +20,000 Your basis in the property $26,076 Note. Military star card If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. Military star card However, your basis cannot exceed the FMV of the gift at the time it was given to you. Military star card Inherited Property Your basis in property you inherited from a decedent, who died before January 1, 2010, or after December 31, 2010, is generally one of the following: The FMV of the property at the date of the decedent's death. Military star card The FMV on the alternate valuation date if the personal representative for the estate elects to use alternate valuation. Military star card The value under the special-use valuation method for real property used in farming or a closely held business if elected for estate tax purposes. Military star card The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement. Military star card If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. Military star card For more information, see the instructions to Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. Military star card Property inherited from a decedent who died in 2010. Military star card   If you inherited property from a decedent who died in 2010, special rules may apply. Military star card For more information, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Military star card Community property. Military star card   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), husband and wife are each usually considered to own half the community property. Military star card When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. Military star card For this rule to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. Military star card Example. Military star card You and your spouse owned community property that had a basis of $80,000. Military star card When your spouse died, half the FMV of the community interest was includible in your spouse's estate. Military star card The FMV of the community interest was $100,000. Military star card The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). Military star card The basis of the other half to your spouse's heirs is also $50,000. Military star card For more information about community property, see Publication 555, Community Property. Military star card Property Changed From Personal to Business or Rental Use If you hold property for personal use and then change it to business use or use it to produce rent, you can begin to depreciate the property at the time of the change. Military star card To do so, you must figure its basis for depreciation at the time of the change. Military star card An example of changing property held for personal use to business or rental use would be renting out your former personal residence. Military star card Basis for depreciation. Military star card   The basis for depreciation is the lesser of the following amounts. Military star card The FMV of the property on the date of the change. Military star card Your adjusted basis on the date of the change. Military star card Example. Military star card Several years ago, you paid $160,000 to have your house built on a lot that cost $25,000. Military star card You paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house before changing the property to rental use last year. Military star card Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. Military star card Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). Military star card On the same date, your property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. Military star card The basis for figuring depreciation on the house is its FMV on the date of the change ($165,000) because it is less than your adjusted basis ($178,000). Military star card Sale of property. Military star card   If you later sell or dispose of property changed to business or rental use, the basis you use will depend on whether you are figuring gain or loss. Military star card Gain. Military star card   The basis for figuring a gain is your adjusted basis in the property when you sell the property. Military star card Example. Military star card Assume the same facts as in the previous example except that you sell the property at a gain after being allowed depreciation deductions of $37,500. Military star card Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). Military star card Loss. Military star card   Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. Military star card Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . Military star card Example. Military star card Assume the same facts as in the previous example, except that you sell the property at a loss after being allowed depreciation deductions of $37,500. Military star card In this case, you would start with the FMV on the date of the change to rental use ($180,000), because it is less than the adjusted basis of $203,000 ($178,000 + $25,000 (land)) on that date. Military star card Reduce that amount ($180,000) by the depreciation deductions ($37,500). Military star card The basis for loss is $142,500 ($180,000 − $37,500). Military star card Stocks and Bonds The basis of stocks or bonds you buy generally is the purchase price plus any costs of purchase, such as commissions and recording or transfer fees. Military star card If you get stocks or bonds other than by purchase, your basis is usually determined by the FMV or the previous owner's adjusted basis, as discussed earlier. Military star card You must adjust the basis of stocks for certain events that occur after purchase. Military star card For example, if you receive additional stock from nontaxable stock dividends or stock splits, reduce your basis for each share of stock by dividing the adjusted basis of the old stock by the number of shares of old and new stock. Military star card This rule applies only when the additional stock received is identical to the stock held. Military star card Also reduce your basis when you receive nontaxable distributions. Military star card They are a return of capital. Military star card Example. Military star card In 2011 you bought 100 shares of XYZ stock for $1,000 or $10 a share. Military star card In 2012 you bought 100 shares of XYZ stock for $1,600 or $16 a share. Military star card In 2013 XYZ declared a 2-for-1 stock split. Military star card You now have 200 shares of stock with a basis of $5 a share and 200 shares with a basis of $8 a share. Military star card Other basis. Military star card   There are other ways to figure the basis of stocks or bonds depending on how you acquired them. Military star card For detailed information, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Military star card Identifying stocks or bonds sold. Military star card   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stocks or bonds. Military star card If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. Military star card For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. Military star card Mutual fund shares. Military star card   If you sell mutual fund shares you acquired at various times and prices and left on deposit in an account kept by a custodian or agent, you can elect to use an average basis. Military star card For more information, see Publication 550. Military star card Bond premium. Military star card   If you buy a taxable bond at a premium and elect to amortize the premium, reduce the basis of the bond by the amortized premium you deduct each year. Military star card See Bond Premium Amortization in chapter 3 of Publication 550 for more information. Military star card Although you cannot deduct the premium on a tax-exempt bond, you must amortize the premium each year and reduce your basis in the bond by the amortized amount. Military star card Original issue discount (OID) on debt instruments. Military star card   You must increase your basis in an OID debt instrument by the OID you include in income for that instrument. Military star card See Original Issue Discount (OID) in chapter 7 and Publication 1212, Guide To Original Issue Discount (OID) Instruments. Military star card Tax-exempt obligations. Military star card    OID on tax-exempt obligations is generally not taxable. Military star card However, when you dispose of a tax-exempt obligation issued after September 3, 1982, and acquired after March 1, 1984, you must accrue OID on the obligation to determine its adjusted basis. Military star card The accrued OID is added to the basis of the obligation to determine your gain or loss. Military star card See chapter 4 of Publication 550. Military star card Prev  Up  Next   Home   More Online Publications