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Tax Form 1040ez 2011

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Tax Form 1040ez 2011

Tax form 1040ez 2011 15. Tax form 1040ez 2011   Selling Your Home Table of Contents Reminder Introduction Useful Items - You may want to see: Main Home Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Business Use or Rental of Home Reporting the SaleSeller-financed mortgage. Tax form 1040ez 2011 More information. Tax form 1040ez 2011 Special SituationsException for sales to related persons. Tax form 1040ez 2011 Recapturing (Paying Back) a Federal Mortgage Subsidy Reminder Home sold with undeducted points. Tax form 1040ez 2011  If you have not deducted all the points you paid to secure a mortgage on your old home, you may be able to deduct the remaining points in the year of the sale. Tax form 1040ez 2011 See Mortgage ending early under Points in chapter 23. Tax form 1040ez 2011 Introduction This chapter explains the tax rules that apply when you sell your main home. Tax form 1040ez 2011 In most cases, your main home is the one in which you live most of the time. Tax form 1040ez 2011 If you sold your main home in 2013, you may be able to exclude from income any gain up to a limit of $250,000 ($500,000 on a joint return in most cases). Tax form 1040ez 2011 See Excluding the Gain , later. Tax form 1040ez 2011 Generally, if you can exclude all the gain, you do not need to report the sale on your tax return. Tax form 1040ez 2011 If you have gain that cannot be excluded, it is taxable. Tax form 1040ez 2011 Report it on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D (Form 1040). Tax form 1040ez 2011 You may also have to complete Form 4797, Sales of Business Property. Tax form 1040ez 2011 See Reporting the Sale , later. Tax form 1040ez 2011 If you have a loss on the sale, you generally cannot deduct it on your return. Tax form 1040ez 2011 However, you may need to report it. Tax form 1040ez 2011 See Reporting the Sale , later. Tax form 1040ez 2011 The following are main topics in this chapter. Tax form 1040ez 2011 Figuring gain or loss. Tax form 1040ez 2011 Basis. Tax form 1040ez 2011 Excluding the gain. Tax form 1040ez 2011 Ownership and use tests. Tax form 1040ez 2011 Reporting the sale. Tax form 1040ez 2011 Other topics include the following. Tax form 1040ez 2011 Business use or rental of home. Tax form 1040ez 2011 Recapturing a federal mortgage subsidy. Tax form 1040ez 2011 Useful Items - You may want to see: Publication 523 Selling Your Home 530 Tax Information for Homeowners 547 Casualties, Disasters, and Thefts Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 982 Reduction of Tax Attributes Due to Discharge of Indebtedness 8828 Recapture of Federal Mortgage Subsidy 8949 Sales and Other Dispositions of Capital Assets Main Home This section explains the term “main home. Tax form 1040ez 2011 ” Usually, the home you live in most of the time is your main home and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Tax form 1040ez 2011 To exclude gain under the rules of this chapter, you in most cases must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. Tax form 1040ez 2011 Land. Tax form 1040ez 2011   If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land. Tax form 1040ez 2011 However, if you sell vacant land used as part of your main home and that is adjacent to it, you may be able to exclude the gain from the sale under certain circumstances. Tax form 1040ez 2011 See Vacant land under Main Home in Publication 523 for more information. Tax form 1040ez 2011 Example. Tax form 1040ez 2011 You buy a piece of land and move your main home to it. Tax form 1040ez 2011 Then you sell the land on which your main home was located. Tax form 1040ez 2011 This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. Tax form 1040ez 2011 More than one home. Tax form 1040ez 2011   If you have more than one home, you can exclude gain only from the sale of your main home. Tax form 1040ez 2011 You must include in income gain from the sale of any other home. Tax form 1040ez 2011 If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time during the year. Tax form 1040ez 2011 Example 1. Tax form 1040ez 2011 You own two homes, one in New York and one in Florida. Tax form 1040ez 2011 From 2009 through 2013, you live in the New York home for 7 months and in the Florida residence for 5 months of each year. Tax form 1040ez 2011 In the absence of facts and circumstances indicating otherwise, the New York home is your main home. Tax form 1040ez 2011 You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. Tax form 1040ez 2011 Example 2. Tax form 1040ez 2011 You own a house, but you live in another house that you rent. Tax form 1040ez 2011 The rented house is your main home. Tax form 1040ez 2011 Example 3. Tax form 1040ez 2011 You own two homes, one in Virginia and one in New Hampshire. Tax form 1040ez 2011 In 2009 and 2010, you lived in the Virginia home. Tax form 1040ez 2011 In 2011 and 2012, you lived in the New Hampshire home. Tax form 1040ez 2011 In 2013, you lived again in the Virginia home. Tax form 1040ez 2011 Your main home in 2009, 2010, and 2013 is the Virginia home. Tax form 1040ez 2011 Your main home in 2011 and 2012 is the New Hampshire home. Tax form 1040ez 2011 You would be eligible to exclude gain from the sale of either home (but not both) in 2013. Tax form 1040ez 2011 Property used partly as your main home. Tax form 1040ez 2011   If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. Tax form 1040ez 2011 For details, see Business Use or Rental of Home , later. Tax form 1040ez 2011 Figuring Gain or Loss To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. Tax form 1040ez 2011 Subtract the adjusted basis from the amount realized to get your gain or loss. Tax form 1040ez 2011     Selling price     − Selling expenses       Amount realized       Amount realized     − Adjusted basis       Gain or loss   Selling Price The selling price is the total amount you receive for your home. Tax form 1040ez 2011 It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale. Tax form 1040ez 2011 Payment by employer. Tax form 1040ez 2011   You may have to sell your home because of a job transfer. Tax form 1040ez 2011 If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. Tax form 1040ez 2011 Your employer will include it as wages in box 1 of your Form W-2, and you will include it in your income on Form 1040, line 7. Tax form 1040ez 2011 Option to buy. Tax form 1040ez 2011   If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. Tax form 1040ez 2011 If the option is not exercised, you must report the amount as ordinary income in the year the option expires. Tax form 1040ez 2011 Report this amount on Form 1040, line 21. Tax form 1040ez 2011 Form 1099-S. Tax form 1040ez 2011   If you received Form 1099-S, Proceeds From Real Estate Transactions, box 2 (Gross proceeds) should show the total amount you received for your home. Tax form 1040ez 2011   However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. Tax form 1040ez 2011 Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. Tax form 1040ez 2011 Amount Realized The amount realized is the selling price minus selling expenses. Tax form 1040ez 2011 Selling expenses. Tax form 1040ez 2011   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. Tax form 1040ez 2011 ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. Tax form 1040ez 2011 This adjusted basis must be determined before you can figure gain or loss on the sale of your home. Tax form 1040ez 2011 For information on how to figure your home's adjusted basis, see Determining Basis , later. Tax form 1040ez 2011 Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. Tax form 1040ez 2011 Gain on sale. Tax form 1040ez 2011   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, in most cases is taxable. Tax form 1040ez 2011 Loss on sale. Tax form 1040ez 2011   If the amount realized is less than the adjusted basis, the difference is a loss. Tax form 1040ez 2011 A loss on the sale of your main home cannot be deducted. Tax form 1040ez 2011 Jointly owned home. Tax form 1040ez 2011   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. Tax form 1040ez 2011 Separate returns. Tax form 1040ez 2011   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. Tax form 1040ez 2011 Your ownership interest is generally determined by state law. Tax form 1040ez 2011 Joint owners not married. Tax form 1040ez 2011   If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. Tax form 1040ez 2011 Each of you applies the rules discussed in this chapter on an individual basis. Tax form 1040ez 2011 Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. Tax form 1040ez 2011 Foreclosure or repossession. Tax form 1040ez 2011   If your home was foreclosed on or repossessed, you have a disposition. Tax form 1040ez 2011 See Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments, to determine if you have ordinary income, gain, or loss. Tax form 1040ez 2011 Abandonment. Tax form 1040ez 2011   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. Tax form 1040ez 2011 Trading (exchanging) homes. Tax form 1040ez 2011   If you trade your old home for another home, treat the trade as a sale and a purchase. Tax form 1040ez 2011 Example. Tax form 1040ez 2011 You owned and lived in a home with an adjusted basis of $41,000. Tax form 1040ez 2011 A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. Tax form 1040ez 2011 This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 – $41,000). Tax form 1040ez 2011 If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed). Tax form 1040ez 2011 Transfer to spouse. Tax form 1040ez 2011   If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss. Tax form 1040ez 2011 This is true even if you receive cash or other consideration for the home. Tax form 1040ez 2011 As a result, the rules in this chapter do not apply. Tax form 1040ez 2011 More information. Tax form 1040ez 2011   If you need more information, see Transfer to spouse in Publication 523 and Property Settlements in Publication 504, Divorced or Separated Individuals. Tax form 1040ez 2011 Involuntary conversion. Tax form 1040ez 2011   You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. Tax form 1040ez 2011 This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations . Tax form 1040ez 2011 Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. Tax form 1040ez 2011 Your basis in your home is determined by how you got the home. Tax form 1040ez 2011 Generally, your basis is its cost if you bought it or built it. Tax form 1040ez 2011 If you got it in some other way (inheritance, gift, etc. Tax form 1040ez 2011 ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. Tax form 1040ez 2011 While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. Tax form 1040ez 2011 The result of these adjustments is your home's adjusted basis, which is used to figure gain or loss on the sale of your home. Tax form 1040ez 2011 See Adjusted Basis , later. Tax form 1040ez 2011 You can find more information on basis and adjusted basis in chapter 13 of this publication and in Publication 523. Tax form 1040ez 2011 Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. Tax form 1040ez 2011 Purchase. Tax form 1040ez 2011   If you bought your home, your basis is its cost to you. Tax form 1040ez 2011 This includes the purchase price and certain settlement or closing costs. Tax form 1040ez 2011 In most cases, your purchase price includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home. Tax form 1040ez 2011 If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed in Publication 523. Tax form 1040ez 2011 Settlement fees or closing costs. Tax form 1040ez 2011   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. Tax form 1040ez 2011 You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. Tax form 1040ez 2011 A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing). Tax form 1040ez 2011    Chapter 13 lists some of the settlement fees and closing costs that you can include in the basis of property, including your home. Tax form 1040ez 2011 It also lists some settlement costs that cannot be included in basis. Tax form 1040ez 2011   Also see Publication 523 for additional items and a discussion of basis other than cost. Tax form 1040ez 2011 Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. Tax form 1040ez 2011 To figure your adjusted basis, you can use Worksheet 1 in Publication 523. Tax form 1040ez 2011 Do not use Worksheet 1 if you acquired an interest in your home from a decedent who died in 2010 and whose executor filed Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent. Tax form 1040ez 2011 Increases to basis. Tax form 1040ez 2011   These include the following. Tax form 1040ez 2011 Additions and other improvements that have a useful life of more than 1 year. Tax form 1040ez 2011 Special assessments for local improvements. Tax form 1040ez 2011 Amounts you spent after a casualty to restore damaged property. Tax form 1040ez 2011 Improvements. Tax form 1040ez 2011   These add to the value of your home, prolong its useful life, or adapt it to new uses. Tax form 1040ez 2011 You add the cost of additions and other improvements to the basis of your property. Tax form 1040ez 2011   For example, putting a recreation room or another bathroom in your unfinished basement, putting up a new fence, putting in new plumbing or wiring, putting on a new roof, or paving your unpaved driveway are improvements. Tax form 1040ez 2011 An addition to your house, such as a new deck, a sunroom, or a new garage, is also an improvement. Tax form 1040ez 2011 Repairs. Tax form 1040ez 2011   These maintain your home in good condition but do not add to its value or prolong its life. Tax form 1040ez 2011 You do not add their cost to the basis of your property. Tax form 1040ez 2011   Examples of repairs include repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes. Tax form 1040ez 2011 Decreases to basis. Tax form 1040ez 2011   These include the following. Tax form 1040ez 2011 Discharge of qualified principal residence indebtedness that was excluded from income. Tax form 1040ez 2011 Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. Tax form 1040ez 2011 For details, see Publication 4681. Tax form 1040ez 2011 Gain you postponed from the sale of a previous home before May 7, 1997. Tax form 1040ez 2011 Deductible casualty losses. Tax form 1040ez 2011 Insurance payments you received or expect to receive for casualty losses. Tax form 1040ez 2011 Payments you received for granting an easement or right-of-way. Tax form 1040ez 2011 Depreciation allowed or allowable if you used your home for business or rental purposes. Tax form 1040ez 2011 Energy-related credits allowed for expenditures made on the residence. Tax form 1040ez 2011 (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. Tax form 1040ez 2011 ) Adoption credit you claimed for improvements added to the basis of your home. Tax form 1040ez 2011 Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. Tax form 1040ez 2011 Energy conservation subsidy excluded from your gross income because you received it (directly or indirectly) from a public utility after 1992 to buy or install any energy conservation measure. Tax form 1040ez 2011 An energy conservation measure is an installation or modification primarily designed either to reduce consumption of electricity or natural gas or to improve the management of energy demand for a home. Tax form 1040ez 2011 District of Columbia first-time homebuyer credit (allowed on the purchase of a principal residence in the District of Columbia beginning on August 5, 1997 and before January 1, 2012). Tax form 1040ez 2011 General sales taxes (allowed beginning 2004 and ending before 2014) claimed as an itemized deduction on Schedule A (Form 1040) that were imposed on the purchase of personal property, such as a houseboat used as your home or a mobile home. Tax form 1040ez 2011 Discharges of qualified principal residence indebtedness. Tax form 1040ez 2011   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. Tax form 1040ez 2011 This exclusion applies to discharges made after 2006 and before 2014. Tax form 1040ez 2011 If you choose to exclude this income, you must reduce (but not below zero) the basis of the principal residence by the amount excluded from your gross income. Tax form 1040ez 2011   File Form 982 with your tax return. Tax form 1040ez 2011 See the form's instructions for detailed information. Tax form 1040ez 2011 Recordkeeping. Tax form 1040ez 2011 You should keep records to prove your home's adjusted basis. Tax form 1040ez 2011 Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. Tax form 1040ez 2011 But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. Tax form 1040ez 2011 Keep records proving the basis of both homes as long as they are needed for tax purposes. Tax form 1040ez 2011 The records you should keep include: Proof of the home's purchase price and purchase expenses, Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis, Any worksheets or other computations you used to figure the adjusted basis of the home you sold, the gain or loss on the sale, the exclusion, and the taxable gain, Any Form 982 you filed to report any discharge of qualified principal residence indebtedness, Any Form 2119, Sale of Your Home, you filed to postpone gain from the sale of a previous home before May 7, 1997, and Any worksheets you used to prepare Form 2119, such as the Adjusted Basis of Home Sold Worksheet or the Capital Improvements Worksheet from the Form 2119 instructions, or other source of computations. Tax form 1040ez 2011 Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. Tax form 1040ez 2011 This means that, if you qualify, you will not have to pay tax on the gain up to the limit described under Maximum Exclusion , next. Tax form 1040ez 2011 To qualify, you must meet the ownership and use tests described later. Tax form 1040ez 2011 You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. Tax form 1040ez 2011 You can use Worksheet 2 in Publication 523 to figure the amount of your exclusion and your taxable gain, if any. Tax form 1040ez 2011 If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. Tax form 1040ez 2011 See Publication 505, Tax Withholding and Estimated Tax. Tax form 1040ez 2011 Maximum Exclusion You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. Tax form 1040ez 2011 You meet the ownership test. Tax form 1040ez 2011 You meet the use test. Tax form 1040ez 2011 During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. Tax form 1040ez 2011 For details on gain allocated to periods of nonqualified use, see Periods of nonqualified use , later. Tax form 1040ez 2011 You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . Tax form 1040ez 2011 Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. Tax form 1040ez 2011 This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). Tax form 1040ez 2011 Exception. Tax form 1040ez 2011   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. Tax form 1040ez 2011 However, the maximum amount you may be able to exclude will be reduced. Tax form 1040ez 2011 See Reduced Maximum Exclusion , later. Tax form 1040ez 2011 Example 1—home owned and occupied for at least 2 years. Tax form 1040ez 2011 Mya bought and moved into her main home in September 2011. Tax form 1040ez 2011 She sold the home at a gain in October 2013. Tax form 1040ez 2011 During the 5-year period ending on the date of sale in October 2013, she owned and lived in the home for more than 2 years. Tax form 1040ez 2011 She meets the ownership and use tests. Tax form 1040ez 2011 Example 2—ownership test met but use test not met. Tax form 1040ez 2011 Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. Tax form 1040ez 2011 He later sold the home for a gain. Tax form 1040ez 2011 He owned the home during the entire 5-year period ending on the date of sale. Tax form 1040ez 2011 He meets the ownership test but not the use test. Tax form 1040ez 2011 He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). Tax form 1040ez 2011 Period of Ownership and Use The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time. Tax form 1040ez 2011 You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale. Tax form 1040ez 2011 Temporary absence. Tax form 1040ez 2011   Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. Tax form 1040ez 2011 The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. Tax form 1040ez 2011 Example 1. Tax form 1040ez 2011 David Johnson, who is single, bought and moved into his home on February 1, 2011. Tax form 1040ez 2011 Each year during 2011 and 2012, David left his home for a 2-month summer vacation. Tax form 1040ez 2011 David sold the house on March 1, 2013. Tax form 1040ez 2011 Although the total time David used his home is less than 2 years (21 months), he meets the requirement and may exclude gain. Tax form 1040ez 2011 The 2-month vacations are short temporary absences and are counted as periods of use in determining whether David used the home for the required 2 years. Tax form 1040ez 2011 Example 2. Tax form 1040ez 2011 Professor Paul Beard, who is single, bought and moved into a house on August 18, 2010. Tax form 1040ez 2011 He lived in it as his main home continuously until January 5, 2012, when he went abroad for a 1-year sabbatical leave. Tax form 1040ez 2011 On February 6, 2013, 1 month after returning from the leave, Paul sold the house at a gain. Tax form 1040ez 2011 Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. Tax form 1040ez 2011 He cannot exclude any part of his gain, because he did not use the residence for the required 2 years. Tax form 1040ez 2011 Ownership and use tests met at different times. Tax form 1040ez 2011   You can meet the ownership and use tests during different 2-year periods. Tax form 1040ez 2011 However, you must meet both tests during the 5-year period ending on the date of the sale. Tax form 1040ez 2011 Example. Tax form 1040ez 2011 Beginning in 2002, Helen Jones lived in a rented apartment. Tax form 1040ez 2011 The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. Tax form 1040ez 2011 In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. Tax form 1040ez 2011 On July 12, 2013, while still living in her daughter's home, she sold her condominium. Tax form 1040ez 2011 Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 13, 2008, to July 12, 2013, the date she sold the condominium. Tax form 1040ez 2011 She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). Tax form 1040ez 2011 She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). Tax form 1040ez 2011 The time Helen lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use. Tax form 1040ez 2011 Cooperative apartment. Tax form 1040ez 2011   If you sold stock as a tenant-stockholder in a cooperative housing corporation, the ownership and use tests are met if, during the 5-year period ending on the date of sale, you: Owned the stock for at least 2 years, and Lived in the house or apartment that the stock entitles you to occupy as your main home for at least 2 years. Tax form 1040ez 2011 Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. Tax form 1040ez 2011 Exception for individuals with a disability. Tax form 1040ez 2011   There is an exception to the use test if: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home. Tax form 1040ez 2011 Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. Tax form 1040ez 2011 If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. Tax form 1040ez 2011 Previous home destroyed or condemned. Tax form 1040ez 2011   For the ownership and use tests, you add the time you owned and lived in a previous home that was destroyed or condemned to the time you owned and lived in the replacement home on whose sale you wish to exclude gain. Tax form 1040ez 2011 This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home. Tax form 1040ez 2011 Otherwise, you must have owned and lived in the same home for 2 of the 5 years before the sale to qualify for the exclusion. Tax form 1040ez 2011 Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Tax form 1040ez 2011   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on “qualified official extended duty” as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. Tax form 1040ez 2011 You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve outside the United States either as an employee of the Peace Corps on "qualified official extended duty" or as an enrolled volunteer or volunteer leader of the Peace Corps. Tax form 1040ez 2011 This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. Tax form 1040ez 2011   If this helps you qualify to exclude gain, you can choose to have the 5-year test period suspended by filing a return for the year of sale that does not include the gain. Tax form 1040ez 2011 For more information about the suspension of the 5-year test period, see Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps in Publication 523. Tax form 1040ez 2011 Married Persons If you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use tests, you can exclude up to $250,000 of the gain. Tax form 1040ez 2011 (But see Special rules for joint returns , next. Tax form 1040ez 2011 ) Special rules for joint returns. Tax form 1040ez 2011   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. Tax form 1040ez 2011 You are married and file a joint return for the year. Tax form 1040ez 2011 Either you or your spouse meets the ownership test. Tax form 1040ez 2011 Both you and your spouse meet the use test. Tax form 1040ez 2011 During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. Tax form 1040ez 2011 If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. Tax form 1040ez 2011 For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. Tax form 1040ez 2011 Example 1—one spouse sells a home. Tax form 1040ez 2011 Emily sells her home in June 2013 for a gain of $300,000. Tax form 1040ez 2011 She marries Jamie later in the year. Tax form 1040ez 2011 She meets the ownership and use tests, but Jamie does not. Tax form 1040ez 2011 Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. Tax form 1040ez 2011 The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. Tax form 1040ez 2011 Example 2—each spouse sells a home. Tax form 1040ez 2011 The facts are the same as in Example 1 except that Jamie also sells a home in 2013 for a gain of $200,000 before he marries Emily. Tax form 1040ez 2011 He meets the ownership and use tests on his home, but Emily does not. Tax form 1040ez 2011 Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. Tax form 1040ez 2011 However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. Tax form 1040ez 2011 Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. Tax form 1040ez 2011 The $500,000 maximum exclusion for certain joint returns does not apply because Emily and Jamie do not both meet the use test for the same home. Tax form 1040ez 2011 Sale of main home by surviving spouse. Tax form 1040ez 2011   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. Tax form 1040ez 2011   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. Tax form 1040ez 2011 The sale or exchange took place after 2008. Tax form 1040ez 2011 The sale or exchange took place no more than 2 years after the date of death of your spouse. Tax form 1040ez 2011 You have not remarried. Tax form 1040ez 2011 You and your spouse met the use test at the time of your spouse's death. Tax form 1040ez 2011 You or your spouse met the ownership test at the time of your spouse's death. Tax form 1040ez 2011 Neither you nor your spouse excluded gain from the sale of another home during the last 2 years. Tax form 1040ez 2011 Example. Tax form 1040ez 2011   Harry owned and used a house as his main home since 2009. Tax form 1040ez 2011 Harry and Wilma married on July 1, 2013, and from that date they use Harry's house as their main home. Tax form 1040ez 2011 Harry died on August 15, 2013, and Wilma inherited the property. Tax form 1040ez 2011 Wilma sold the property on September 3, 2013, at which time she had not remarried. Tax form 1040ez 2011 Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Harry owned and used the property before death. Tax form 1040ez 2011 Home transferred from spouse. Tax form 1040ez 2011   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. Tax form 1040ez 2011 Use of home after divorce. Tax form 1040ez 2011   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. Tax form 1040ez 2011 Reduced Maximum Exclusion If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. Tax form 1040ez 2011 This applies to those who: Fail to meet the ownership and use tests, or Have used the exclusion within 2 years of selling their current home. Tax form 1040ez 2011 In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. Tax form 1040ez 2011 A change in place of employment. Tax form 1040ez 2011 Health. Tax form 1040ez 2011 Unforeseen circumstances. Tax form 1040ez 2011 Unforeseen circumstances. Tax form 1040ez 2011   The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying your main home. Tax form 1040ez 2011   See Publication 523 for more information and to use Worksheet 3 to figure your reduced maximum exclusion. Tax form 1040ez 2011 Business Use or Rental of Home You may be able to exclude gain from the sale of a home you have used for business or to produce rental income. Tax form 1040ez 2011 But you must meet the ownership and use tests. Tax form 1040ez 2011 Periods of nonqualified use. Tax form 1040ez 2011   In most cases, gain from the sale or exchange of your main home will not qualify for the exclusion to the extent that the gains are allocated to periods of nonqualified use. Tax form 1040ez 2011 Nonqualified use is any period after 2008 during which neither you nor your spouse (or your former spouse) used the property as a main home with the following exceptions. Tax form 1040ez 2011 Exceptions. Tax form 1040ez 2011   A period of nonqualified use does not include: Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home; Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty: As a member of the uniformed services; As a member of the Foreign Service of the United States; or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. Tax form 1040ez 2011 The gain resulting from the sale of the property is allocated between qualified and nonqualified use periods based on the amount of time the property was held for qualified and nonqualified use. Tax form 1040ez 2011 Gain from the sale or exchange of a main home allocable to periods of qualified use will continue to qualify for the exclusion for the sale of your main home. Tax form 1040ez 2011 Gain from the sale or exchange of property allocable to nonqualified use will not qualify for the exclusion. Tax form 1040ez 2011 Calculation. Tax form 1040ez 2011   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain by the following fraction:   Total nonqualified use during the period of ownership after 2008      Total period of ownership     This calculation can be found in Worksheet 2, line 10, in Publication 523. Tax form 1040ez 2011 Example 1. Tax form 1040ez 2011 On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. Tax form 1040ez 2011 She moved in on that date and lived in it until May 31, 2009, when she moved out of the house and put it up for rent. Tax form 1040ez 2011 The house was rented from June 1, 2009, to March 31, 2011. Tax form 1040ez 2011 Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. Tax form 1040ez 2011 Amy moved back into the house on April 1, 2011, and lived there until she sold it on January 31, 2013, for a gain of $200,000. Tax form 1040ez 2011 During the 5-year period ending on the date of the sale (January 31, 2008-January 31, 2013), Amy owned and lived in the house for more than 2 years as shown in the following table. Tax form 1040ez 2011 Five Year Period Used as  Home Used as  Rental 1/31/08 – 5/31/09 16 months       6/1/09 – 3/31/11   22 months 4/1/11 – 1/31/13 22 months         38 months 22 months During the period Amy owned the house (2,080 days), her period of nonqualified use was 668 days. Tax form 1040ez 2011 Amy divides 668 by 2,080 and obtains a decimal (rounded to at least three decimal places) of 0. Tax form 1040ez 2011 321. Tax form 1040ez 2011 To figure her gain attributable to the period of nonqualified use, she multiplies $190,000 (the gain not attributable to the $10,000 depreciation deduction) by 0. Tax form 1040ez 2011 321. Tax form 1040ez 2011 Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain. Tax form 1040ez 2011 Example 2. Tax form 1040ez 2011 William owned and used a house as his main home from 2007 through 2010. Tax form 1040ez 2011 On January 1, 2011, he moved to another state. Tax form 1040ez 2011 He rented his house from that date until April 30, 2013, when he sold it. Tax form 1040ez 2011 During the 5-year period ending on the date of sale (May 1, 2008-April 30, 2013), William owned and lived in the house for more than 2 years. Tax form 1040ez 2011 He must report the sale on Form 4797 because it was rental property at the time of sale. Tax form 1040ez 2011 Because the period of nonqualified use does not include any part of the 5-year period after the last date William lived in the house, he has no period of nonqualified use. Tax form 1040ez 2011 Because he met the ownership and use tests, he can exclude gain up to $250,000. Tax form 1040ez 2011 However, he cannot exclude the part of the gain equal to the depreciation he claimed or could have claimed for renting the house, as explained next. Tax form 1040ez 2011 Depreciation after May 6, 1997. Tax form 1040ez 2011   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. Tax form 1040ez 2011 If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed. Tax form 1040ez 2011 See Publication 544 for more information. Tax form 1040ez 2011 Property used partly for business or rental. Tax form 1040ez 2011   If you used property partly as a home and partly for business or to produce rental income, see Publication 523. Tax form 1040ez 2011 Reporting the Sale Do not report the 2013 sale of your main home on your tax return unless: You have a gain and do not qualify to exclude all of it, You have a gain and choose not to exclude it, or You received Form 1099-S. Tax form 1040ez 2011 If any of these conditions apply, report the entire gain or loss. Tax form 1040ez 2011 For details on how to report the gain or loss, see the Instructions for Schedule D (Form 1040) and the Instructions for Form 8949. Tax form 1040ez 2011 If you used the home for business or to produce rental income, you may have to use Form 4797 to report the sale of the business or rental part (or the sale of the entire property if used entirely for business or rental). Tax form 1040ez 2011 See Business Use or Rental of Home in Publication 523 and the Instructions for Form 4797. Tax form 1040ez 2011 Installment sale. Tax form 1040ez 2011    Some sales are made under arrangements that provide for part or all of the selling price to be paid in a later year. Tax form 1040ez 2011 These sales are called “installment sales. Tax form 1040ez 2011 ” If you finance the buyer's purchase of your home yourself instead of having the buyer get a loan or mortgage from a bank, you probably have an installment sale. Tax form 1040ez 2011 You may be able to report the part of the gain you cannot exclude on the installment basis. Tax form 1040ez 2011    Use Form 6252, Installment Sale Income, to report the sale. Tax form 1040ez 2011 Enter your exclusion on line 15 of Form 6252. Tax form 1040ez 2011 Seller-financed mortgage. Tax form 1040ez 2011   If you sell your home and hold a note, mortgage, or other financial agreement, the payments you receive in most cases consist of both interest and principal. Tax form 1040ez 2011 You must separately report as interest income the interest you receive as part of each payment. Tax form 1040ez 2011 If the buyer of your home uses the property as a main or second home, you must also report the name, address, and social security number (SSN) of the buyer on line 1 of Schedule B (Form 1040A or 1040). Tax form 1040ez 2011 The buyer must give you his or her SSN, and you must give the buyer your SSN. Tax form 1040ez 2011 Failure to meet these requirements may result in a $50 penalty for each failure. Tax form 1040ez 2011 If either you or the buyer does not have and is not eligible to get an SSN, see Social Security Number in chapter 1. Tax form 1040ez 2011 More information. Tax form 1040ez 2011   For more information on installment sales, see Publication 537, Installment Sales. Tax form 1040ez 2011 Special Situations The situations that follow may affect your exclusion. Tax form 1040ez 2011 Sale of home acquired in a like-kind exchange. Tax form 1040ez 2011   You cannot claim the exclusion if: You acquired your home in a like-kind exchange (also known as a section 1031 exchange), or your basis in your home is determined by reference to the basis of the home in the hands of the person who acquired the property in a like-kind exchange (for example, you received the home from that person as a gift), and You sold the home during the 5-year period beginning with the date your home was acquired in the like-kind exchange. Tax form 1040ez 2011 Gain from a like-kind exchange is not taxable at the time of the exchange. Tax form 1040ez 2011 This means that gain will not be taxed until you sell or otherwise dispose of the property you receive. Tax form 1040ez 2011 To defer gain from a like-kind exchange, you must have exchanged business or investment property for business or investment property of a like kind. Tax form 1040ez 2011 For more information about like-kind exchanges, see Publication 544, Sales and Other Dispositions of Assets. Tax form 1040ez 2011 Home relinquished in a like-kind exchange. Tax form 1040ez 2011   If you use your main home partly for business or rental purposes and then exchange the home for another property, see Publication 523. Tax form 1040ez 2011 Expatriates. Tax form 1040ez 2011   You cannot claim the exclusion if the expatriation tax applies to you. Tax form 1040ez 2011 The expatriation tax applies to certain U. Tax form 1040ez 2011 S. Tax form 1040ez 2011 citizens who have renounced their citizenship (and to certain long-term residents who have ended their residency). Tax form 1040ez 2011 For more information about the expatriation tax, see Expatriation Tax in chapter 4 of Publication 519, U. Tax form 1040ez 2011 S. Tax form 1040ez 2011 Tax Guide for Aliens. Tax form 1040ez 2011 Home destroyed or condemned. Tax form 1040ez 2011   If your home was destroyed or condemned, any gain (for example, because of insurance proceeds you received) qualifies for the exclusion. Tax form 1040ez 2011   Any part of the gain that cannot be excluded (because it is more than the maximum exclusion) can be postponed under the rules explained in: Publication 547, in the case of a home that was destroyed, or Publication 544, chapter 1, in the case of a home that was condemned. Tax form 1040ez 2011 Sale of remainder interest. Tax form 1040ez 2011   Subject to the other rules in this chapter, you can choose to exclude gain from the sale of a remainder interest in your home. Tax form 1040ez 2011 If you make this choice, you cannot choose to exclude gain from your sale of any other interest in the home that you sell separately. Tax form 1040ez 2011 Exception for sales to related persons. Tax form 1040ez 2011   You cannot exclude gain from the sale of a remainder interest in your home to a related person. Tax form 1040ez 2011 Related persons include your brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. Tax form 1040ez 2011 ), and lineal descendants (children, grandchildren, etc. Tax form 1040ez 2011 ). Tax form 1040ez 2011 Related persons also include certain corporations, partnerships, trusts, and exempt organizations. Tax form 1040ez 2011 Recapturing (Paying Back) a Federal Mortgage Subsidy If you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. Tax form 1040ez 2011 You recapture the benefit by increasing your federal income tax for the year of the sale. Tax form 1040ez 2011 You may have to pay this recapture tax even if you can exclude your gain from income under the rules discussed earlier; that exclusion does not affect the recapture tax. Tax form 1040ez 2011 Loans subject to recapture rules. Tax form 1040ez 2011   The recapture applies to loans that: Came from the proceeds of qualified mortgage bonds, or Were based on mortgage credit certificates. Tax form 1040ez 2011 The recapture also applies to assumptions of these loans. Tax form 1040ez 2011 When recapture applies. Tax form 1040ez 2011   Recapture of the federal mortgage subsidy applies only if you meet both of the following conditions. Tax form 1040ez 2011 You sell or otherwise dispose of your home at a gain within the first 9 years after the date you close your mortgage loan. Tax form 1040ez 2011 Your income for the year of disposition is more than that year's adjusted qualifying income for your family size for that year (related to the income requirements a person must meet to qualify for the federally subsidized program). Tax form 1040ez 2011 When recapture does not apply. Tax form 1040ez 2011   Recapture does not apply in any of the following situations. Tax form 1040ez 2011 Your mortgage loan was a qualified home improvement loan (QHIL) of not more than $15,000 used for alterations, repairs, and improvements that protect or improve the basic livability or energy efficiency of your home. Tax form 1040ez 2011 Your mortgage loan was a QHIL of not more than $150,000 in the case of a QHIL used to repair damage from Hurricane Katrina to homes in the hurricane disaster area; a QHIL funded by a qualified mortgage bond that is a qualified Gulf Opportunity Zone Bond; or a QHIL for an owner-occupied home in the Gulf Opportunity Zone (GO Zone), Rita GO Zone, or Wilma GO Zone. Tax form 1040ez 2011 For more information, see Publication 4492, Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma. Tax form 1040ez 2011 Also see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. Tax form 1040ez 2011 The home is disposed of as a result of your death. Tax form 1040ez 2011 You dispose of the home more than 9 years after the date you closed your mortgage loan. Tax form 1040ez 2011 You transfer the home to your spouse, or to your former spouse incident to a divorce, where no gain is included in your income. Tax form 1040ez 2011 You dispose of the home at a loss. Tax form 1040ez 2011 Your home is destroyed by a casualty, and you replace it on its original site within 2 years after the end of the tax year when the destruction happened. Tax form 1040ez 2011 The replacement period is extended for main homes destroyed in a federally declared disaster area, a Midwestern disaster area, the Kansas disaster area, and the Hurricane Katrina disaster area. Tax form 1040ez 2011 For more information, see Replacement Period in Publication 547. Tax form 1040ez 2011 You refinance your mortgage loan (unless you later meet the conditions listed previously under When recapture applies ). Tax form 1040ez 2011 Notice of amounts. Tax form 1040ez 2011   At or near the time of settlement of your mortgage loan, you should receive a notice that provides the federally subsidized amount and other information you will need to figure your recapture tax. Tax form 1040ez 2011 How to figure and report the recapture. Tax form 1040ez 2011    The recapture tax is figured on Form 8828. Tax form 1040ez 2011 If you sell your home and your mortgage is subject to recapture rules, you must file Form 8828 even if you do not owe a recapture tax. Tax form 1040ez 2011 Attach Form 8828 to your Form 1040. Tax form 1040ez 2011 For more information, see Form 8828 and its instructions. Tax form 1040ez 2011 Prev  Up  Next   Home   More Online Publications
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The Tax Form 1040ez 2011

Tax form 1040ez 2011 32. Tax form 1040ez 2011   Child and Dependent Care Credit Table of Contents Reminders Introduction Useful Items - You may want to see: Tests To Claim the CreditQualifying Person Test Earned Income Test Work-Related Expense Test Joint Return Test Provider Identification Test How To Figure the CreditFiguring Total Work-Related Expenses Earned Income Limit Dollar Limit Amount of Credit How To Claim the CreditTax credit not refundable. Tax form 1040ez 2011 Employment Taxes for Household Employers Reminders Taxpayer identification number needed for each qualifying person. Tax form 1040ez 2011  You must include on line 2 of Form 2441 the name and taxpayer identification number (generally the social security number) of each qualifying person. Tax form 1040ez 2011 See Taxpayer identification number under Qualifying Person Test, later. Tax form 1040ez 2011 You may have to pay employment taxes. Tax form 1040ez 2011  If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer who has to pay employment taxes. Tax form 1040ez 2011 Usually, you are not a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business. Tax form 1040ez 2011 See Employment Taxes for Household Employers , later. Tax form 1040ez 2011 Introduction This chapter discusses the credit for child and dependent care expenses and covers the following topics. Tax form 1040ez 2011 Tests you must meet to claim the credit. Tax form 1040ez 2011 How to figure the credit. Tax form 1040ez 2011 How to claim the credit. Tax form 1040ez 2011 Employment taxes you may have to pay as a household employer. Tax form 1040ez 2011 You may be able to claim the credit if you pay someone to care for your dependent who is under age 13 or for your spouse or dependent who is not able to care for himself or herself. Tax form 1040ez 2011 The credit can be up to 35% of your expenses. Tax form 1040ez 2011 To qualify, you must pay these expenses so you can work or look for work. Tax form 1040ez 2011 This credit should not be confused with the child tax credit discussed in chapter 34. Tax form 1040ez 2011 Dependent care benefits. Tax form 1040ez 2011   If you received any dependent care benefits from your employer during the year, you may be able to exclude from your income all or part of them. Tax form 1040ez 2011 You must complete Form 2441, Part III, before you can figure the amount of your credit. Tax form 1040ez 2011 See Dependent Care Benefits under How To Figure the Credit, later. Tax form 1040ez 2011 Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information 503 Child and Dependent Care Expenses 926 Household Employer's Tax Guide Form (and Instructions) 2441 Child and Dependent Care Expenses Schedule H (Form 1040) Household Employment Taxes W-7 Application for IRS Individual Taxpayer Identification Number W-10 Dependent Care Provider's Identification and Certification Tests To Claim the Credit To be able to claim the credit for child and dependent care expenses, you must file Form 1040 or Form 1040A, not Form 1040EZ, and meet all the following tests. Tax form 1040ez 2011 The care must be for one or more qualifying persons who are identified on Form 2441. Tax form 1040ez 2011 (See Qualifying Person Test . Tax form 1040ez 2011 ) You (and your spouse if filing jointly) must have earned income during the year. Tax form 1040ez 2011 (However, see Rule for student-spouse or spouse not able to care for self under Earned Income Test, later. Tax form 1040ez 2011 ) You must pay child and dependent care expenses so you (and your spouse if filing jointly) can work or look for work. Tax form 1040ez 2011 (See Work-Related Expense Test , later. Tax form 1040ez 2011 ) You must make payments for child and dependent care to someone you (and your spouse) cannot claim as a dependent. Tax form 1040ez 2011 If you make payments to your child, he or she cannot be your dependent and must be age 19 or older by the end of the year. Tax form 1040ez 2011 You cannot make payments to: Your spouse, or The parent of your qualifying person if your qualifying person is your child and under age 13. Tax form 1040ez 2011 (See Payments to Relatives or Dependents under Work-Related Expense Test, later. Tax form 1040ez 2011 ) Your filing status may be single, head of household, or qualifying widow(er) with dependent child. Tax form 1040ez 2011 If you are married, you must file a joint return, unless an exception applies to you. Tax form 1040ez 2011 (See Joint Return Test , later. Tax form 1040ez 2011 ) You must identify the care provider on your tax return. Tax form 1040ez 2011 (See Provider Identification Test , later. Tax form 1040ez 2011 ) If you exclude or deduct dependent care benefits provided by a dependent care benefits plan, the total amount you exclude or deduct must be less than the dollar limit for qualifying expenses (generally, $3,000 if one qualifying person was cared for or $6,000 if two or more qualifying persons were cared for). Tax form 1040ez 2011 (If two or more qualifying persons were cared for, the amount you exclude or deduct will always be less than the dollar limit, since the total amount you can exclude or deduct is limited to $5,000. Tax form 1040ez 2011 See Reduced Dollar Limit under How To Figure the Credit, later. Tax form 1040ez 2011 ) These tests are presented in Figure 32-A and are also explained in detail in this chapter. Tax form 1040ez 2011 Figure 32-A. Tax form 1040ez 2011 Can You Claim the Credit? Please click here for the text description of the image. Tax form 1040ez 2011 Figure 32-A Can You Claim the Credit? Qualifying Person Test Your child and dependent care expenses must be for the care of one or more qualifying persons. Tax form 1040ez 2011 A qualifying person is: Your qualifying child who is your dependent and who was under age 13 when the care was provided (but see Child of divorced or separated parents or parents living apart, later), Your spouse who was not physically or mentally able to care for himself or herself and lived with you for more than half the year, or A person who was not physically or mentally able to care for himself or herself, lived with you for more than half the year, and either: Was your dependent, or Would have been your dependent except that: He or she received gross income of $3,900 or more, He or she filed a joint return, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Tax form 1040ez 2011 Dependent defined. Tax form 1040ez 2011   A dependent is a person, other than you or your spouse, for whom you can claim an exemption. Tax form 1040ez 2011 To be your dependent, a person must be your qualifying child (or your qualifying relative). Tax form 1040ez 2011 Qualifying child. Tax form 1040ez 2011   To be your qualifying child, a child must live with you for more than half the year and meet other requirements. Tax form 1040ez 2011 More information. Tax form 1040ez 2011   For more information about who is a dependent or a qualifying child, see chapter 3. Tax form 1040ez 2011 Physically or mentally not able to care for oneself. Tax form 1040ez 2011   Persons who cannot dress, clean, or feed themselves because of physical or mental problems are considered not able to care for themselves. Tax form 1040ez 2011 Also, persons who must have constant attention to prevent them from injuring themselves or others are considered not able to care for themselves. Tax form 1040ez 2011 Person qualifying for part of year. Tax form 1040ez 2011   You determine a person's qualifying status each day. Tax form 1040ez 2011 For example, if the person for whom you pay child and dependent care expenses no longer qualifies on September 16, count only those expenses through September 15. Tax form 1040ez 2011 Also see Yearly limit under Dollar Limit, later. Tax form 1040ez 2011 Birth or death of otherwise qualifying person. Tax form 1040ez 2011   In determining whether a person is a qualifying person, a person who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the person's home for more than half the time he or she was alive in 2013. Tax form 1040ez 2011 Taxpayer identification number. Tax form 1040ez 2011   You must include on your return the name and taxpayer identification number (generally the social security number) of the qualifying person(s). Tax form 1040ez 2011 If the correct information is not shown, the credit may be reduced or disallowed. Tax form 1040ez 2011 Individual taxpayer identification number (ITIN) for aliens. Tax form 1040ez 2011   If your qualifying person is a nonresident or resident alien who does not have and cannot get a social security number (SSN), use that person's ITIN. Tax form 1040ez 2011 The ITIN is entered wherever an SSN is requested on a tax return. Tax form 1040ez 2011 To apply for an ITIN, see Form W-7. Tax form 1040ez 2011   An ITIN is for tax use only. Tax form 1040ez 2011 It does not entitle the holder to social security benefits or change the holder's employment or immigration status under U. Tax form 1040ez 2011 S. Tax form 1040ez 2011 law. Tax form 1040ez 2011 Adoption taxpayer identification number (ATIN). Tax form 1040ez 2011   If your qualifying person is a child who was placed in your home for adoption and for whom you do not have an SSN, you must get an ATIN for the child. Tax form 1040ez 2011 File Form W-7A, Application for Taxpayer Identification Number for Pending U. Tax form 1040ez 2011 S. Tax form 1040ez 2011 Adoptions. Tax form 1040ez 2011 Child of divorced or separated parents or parents living apart. Tax form 1040ez 2011   Even if you cannot claim your child as a dependent, he or she is treated as your qualifying person if: The child was under age 13 or was not physically or mentally able to care for himself or herself, The child received over half of his or her support during the calendar year from one or both parents who are divorced or legally separated under a decree of divorce or separate maintenance, are separated under a written separation agreement, or lived apart at all times during the last 6 months of the calendar year, The child was in the custody of one or both parents for more than half the year, and You were the child's custodial parent. Tax form 1040ez 2011   The custodial parent is the parent with whom the child lived for the greater number of nights in 2013. Tax form 1040ez 2011 If the child was with each parent for an equal number of nights, the custodial parent is the parent with the higher adjusted gross income. Tax form 1040ez 2011 For details and an exception for a parent who works at night, see Pub. Tax form 1040ez 2011 501. Tax form 1040ez 2011   The noncustodial parent cannot treat the child as a qualifying person even if that parent is entitled to claim the child as a dependent under the special rules for a child of divorced or separated parents. Tax form 1040ez 2011 Earned Income Test To claim the credit, you (and your spouse if filing jointly) must have earned income during the year. Tax form 1040ez 2011 Earned income. Tax form 1040ez 2011   Earned income includes wages, salaries, tips, other taxable employee compensation, and net earnings from self-employment. Tax form 1040ez 2011 A net loss from self-employment reduces earned income. Tax form 1040ez 2011 Earned income also includes strike benefits and any disability pay you report as wages. Tax form 1040ez 2011   Generally, only taxable compensation is included. Tax form 1040ez 2011 However, you can elect to include nontaxable combat pay in earned income. Tax form 1040ez 2011 If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election. Tax form 1040ez 2011 (In other words, if one of you makes the election, the other one can also make it but does not have to. Tax form 1040ez 2011 ) You should figure your credit both ways and make the election if it gives you a greater tax benefit. Tax form 1040ez 2011 Members of certain religious faiths opposed to social security. Tax form 1040ez 2011   Certain income earned by persons who are members of certain religious faiths that are opposed to participation in Social Security Act programs and have an IRS-approved form that exempts certain income from social security and Medicare taxes may not be considered earned income for this purpose. Tax form 1040ez 2011 See Earned Income Test in Publication 503. Tax form 1040ez 2011 Not earned income. Tax form 1040ez 2011   Earned income does not include: Pensions and annuities, Social security and railroad retirement benefits, Workers' compensation, Interest and dividends, Unemployment compensation, Scholarship or fellowship grants, except for those reported on a Form W-2 and paid to you for teaching or other services, Nontaxable workfare payments, Child support payments received by you, Income of nonresident aliens that is not effectively connected with a U. Tax form 1040ez 2011 S. Tax form 1040ez 2011 trade or business, or Any amount received for work while an inmate in a penal institution. Tax form 1040ez 2011 Rule for student-spouse or spouse not able to care for self. Tax form 1040ez 2011   Your spouse is treated as having earned income for any month that he or she is: A full-time student, or Physically or mentally not able to care for himself or herself. Tax form 1040ez 2011 (Your spouse also must live with you for more than half the year. Tax form 1040ez 2011 )   If you are filing a joint return, this rule also applies to you. Tax form 1040ez 2011 You can be treated as having earned income for any month you are a full-time student or not able to care for yourself. Tax form 1040ez 2011   Figure the earned income of the nonworking spouse described under (1) or (2) above as explained under Earned Income Limit , later. Tax form 1040ez 2011   This rule applies to only one spouse for any one month. Tax form 1040ez 2011 If, in the same month, both you and your spouse do not work and are either full-time students or not physically or mentally able to care for yourselves, only one of you can be treated as having earned income in that month. Tax form 1040ez 2011 Full-time student. Tax form 1040ez 2011   You are a full-time student if you are enrolled at a school for the number of hours or classes that the school considers full time. Tax form 1040ez 2011 You must have been a full-time student for some part of each of 5 calendar months during the year. Tax form 1040ez 2011 (The months need not be consecutive. Tax form 1040ez 2011 ) School. Tax form 1040ez 2011   The term “school” includes high schools, colleges, universities, and technical, trade, and mechanical schools. Tax form 1040ez 2011 A school does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Tax form 1040ez 2011 Work-Related Expense Test Child and dependent care expenses must be work-related to qualify for the credit. Tax form 1040ez 2011 Expenses are considered work-related only if both of the following are true. Tax form 1040ez 2011 They allow you (and your spouse if filing jointly) to work or look for work. Tax form 1040ez 2011 They are for a qualifying person's care. Tax form 1040ez 2011 Working or Looking for Work To be work-related, your expenses must allow you to work or look for work. Tax form 1040ez 2011 If you are married, generally both you and your spouse must work or look for work. Tax form 1040ez 2011 One spouse is treated as working during any month he or she is a full-time student or is not physically or mentally able to care for himself or herself. Tax form 1040ez 2011 Your work can be for others or in your own business or partnership. Tax form 1040ez 2011 It can be either full time or part time. Tax form 1040ez 2011 Work also includes actively looking for work. Tax form 1040ez 2011 However, if you do not find a job and have no earned income for the year, you cannot take this credit. Tax form 1040ez 2011 See Earned Income Test , earlier. Tax form 1040ez 2011 An expense is not considered work-related merely because you had it while you were working. Tax form 1040ez 2011 The purpose of the expense must be to allow you to work. Tax form 1040ez 2011 Whether your expenses allow you to work or look for work depends on the facts. Tax form 1040ez 2011 Example 1. Tax form 1040ez 2011 The cost of a babysitter while you and your spouse go out to eat is not normally a work-related expense. Tax form 1040ez 2011 Example 2. Tax form 1040ez 2011 You work during the day. Tax form 1040ez 2011 Your spouse works at night and sleeps during the day. Tax form 1040ez 2011 You pay for care of your 5-year-old child during the hours when you are working and your spouse is sleeping. Tax form 1040ez 2011 Your expenses are considered work-related. Tax form 1040ez 2011 Volunteer work. Tax form 1040ez 2011    For this purpose, you are not considered to be working if you do unpaid volunteer work or volunteer work for a nominal salary. Tax form 1040ez 2011 Work for part of year. Tax form 1040ez 2011   If you work or actively look for work during only part of the period covered by the expenses, then you must figure your expenses for each day. Tax form 1040ez 2011 For example, if you work all year and pay care expenses of $250 a month ($3,000 for the year), all the expenses are work-related. Tax form 1040ez 2011 However, if you work or look for work for only 2 months and 15 days during the year and pay expenses of $250 a month, your work-related expenses are limited to $625 (2½ months × $250). Tax form 1040ez 2011 Temporary absence from work. Tax form 1040ez 2011   You do not have to figure your expenses for each day during a short, temporary absence from work, such as for vacation or a minor illness, if you have to pay for care anyway. Tax form 1040ez 2011 Instead, you can figure your credit including the expenses you paid for the period of absence. Tax form 1040ez 2011   An absence of 2 weeks or less is a short, temporary absence. Tax form 1040ez 2011 An absence of more than 2 weeks may be considered a short, temporary absence, depending on the circumstances. Tax form 1040ez 2011 Example. Tax form 1040ez 2011 You pay a nanny to care for your 2-year-old son and 4-year-old daughter so you can work. Tax form 1040ez 2011 You become ill and miss 4 months of work but receive sick pay. Tax form 1040ez 2011 You continue to pay the nanny to care for the children while you are ill. Tax form 1040ez 2011 Your absence is not a short, temporary absence, and your expenses are not considered work-related. Tax form 1040ez 2011 Part-time work. Tax form 1040ez 2011   If you work part-time, you generally must figure your expenses for each day. Tax form 1040ez 2011 However, if you have to pay for care weekly, monthly, or in another way that includes both days worked and days not worked, you can figure your credit including the expenses you paid for days you did not work. Tax form 1040ez 2011 Any day when you work at least 1 hour is a day of work. Tax form 1040ez 2011 Example 1. Tax form 1040ez 2011 You work 3 days a week. Tax form 1040ez 2011 While you work, your 6-year-old child attends a dependent care center, which complies with all state and local regulations. Tax form 1040ez 2011 You can pay the center $150 for any 3 days a week or $250 for 5 days a week. Tax form 1040ez 2011 Your child attends the center 5 days a week. Tax form 1040ez 2011 Your work-related expenses are limited to $150 a week. Tax form 1040ez 2011 Example 2. Tax form 1040ez 2011 The facts are the same as in Example 1 except the center does not offer a 3-day option. Tax form 1040ez 2011 The entire $250 weekly fee may be a work-related expense. Tax form 1040ez 2011 Care of a Qualifying Person To be work-related, your expenses must be to provide care for a qualifying person. Tax form 1040ez 2011 You do not have to choose the least expensive way of providing care. Tax form 1040ez 2011 The cost of a paid care provider may be an expense for the care of a qualifying person even if another care provider is available at no cost. Tax form 1040ez 2011 Expenses are for the care of a qualifying person only if their main purpose is the person's well-being and protection. Tax form 1040ez 2011 Expenses for household services qualify if part of the services is for the care of qualifying persons. Tax form 1040ez 2011 See Household services , later. Tax form 1040ez 2011 Expenses not for care. Tax form 1040ez 2011   Expenses for care do not include amounts you pay for food, lodging, clothing, education, and entertainment. Tax form 1040ez 2011 However, you can include small amounts paid for these items if they are incidental to and cannot be separated from the cost of caring for the qualifying person. Tax form 1040ez 2011   Child support payments are not for care and do not qualify for the credit. Tax form 1040ez 2011 Education. Tax form 1040ez 2011   Expenses for a child in nursery school, preschool, or similar programs for children below the level of kindergarten are expenses for care. Tax form 1040ez 2011 Expenses to attend kindergarten or a higher grade are not expenses for care. Tax form 1040ez 2011 Do not use these expenses to figure your credit. Tax form 1040ez 2011   However, expenses for before- or after-school care of a child in kindergarten or a higher grade may be expenses for care. Tax form 1040ez 2011   Summer school and tutoring programs are not for care. Tax form 1040ez 2011 Example 1. Tax form 1040ez 2011 You take your 3-year-old child to a nursery school that provides lunch and educational activities as a part of its preschool childcare service. Tax form 1040ez 2011 The lunch and educational activities are incidental to the childcare, and their cost cannot be separated from the cost of care. Tax form 1040ez 2011 You can count the total cost when you figure the credit. Tax form 1040ez 2011 Example 2. Tax form 1040ez 2011 You place your 10-year-old child in a boarding school so you can work full time. Tax form 1040ez 2011 Only the part of the boarding school expense that is for the care of your child is a work-related expense. Tax form 1040ez 2011 You can count that part of the expense in figuring your credit if it can be separated from the cost of education. Tax form 1040ez 2011 You cannot count any part of the amount you pay the school for your child's education. Tax form 1040ez 2011 Care outside your home. Tax form 1040ez 2011   You can count the cost of care provided outside your home if the care is for your dependent under age 13 or any other qualifying person who regularly spends at least 8 hours each day in your home. Tax form 1040ez 2011 Dependent care center. Tax form 1040ez 2011   You can count care provided outside your home by a dependent care center only if the center complies with all state and local regulations that apply to these centers. Tax form 1040ez 2011   A dependent care center is a place that provides care for more than six persons (other than persons who live there) and receives a fee, payment, or grant for providing services for any of those persons, even if the center is not run for profit. Tax form 1040ez 2011 Camp. Tax form 1040ez 2011   The cost of sending your child to an overnight camp is not considered a work-related expense. Tax form 1040ez 2011 The cost of sending your child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers or soccer. Tax form 1040ez 2011 Transportation. Tax form 1040ez 2011   If a care provider takes a qualifying person to or from a place where care is provided, that transportation is for the care of the qualifying person. Tax form 1040ez 2011 This includes transportation by bus, subway, taxi, or private car. Tax form 1040ez 2011 However, transportation not provided by a care provider is not for the care of a qualifying person. Tax form 1040ez 2011 Also, if you pay the transportation cost for the care provider to come to your home, that expense is not for care of a qualifying person. Tax form 1040ez 2011 Fees and deposits. Tax form 1040ez 2011   Fees you paid to an agency to get the services of a care provider, deposits you paid to an agency or preschool, application fees, and other indirect expenses are work-related expenses if you have to pay them to get care, even though they are not directly for care. Tax form 1040ez 2011 However, a forfeited deposit is not for the care of a qualifying person if care is not provided. Tax form 1040ez 2011 Example 1. Tax form 1040ez 2011 You paid a fee to an agency to get the services of the nanny who cares for your 2-year-old daughter while you work. Tax form 1040ez 2011 The fee you paid is a work-related expense. Tax form 1040ez 2011 Example 2. Tax form 1040ez 2011 You placed a deposit with a preschool to reserve a place for your 3-year-old child. Tax form 1040ez 2011 You later sent your child to a different preschool and forfeited the deposit. Tax form 1040ez 2011 The forfeited deposit is not for care and so is not a work-related expense. Tax form 1040ez 2011 Household services. Tax form 1040ez 2011   Expenses you pay for household services meet the work-related expense test if they are at least partly for the well-being and protection of a qualifying person. Tax form 1040ez 2011   Household services are ordinary and usual services done in and around your home that are necessary to run your home. Tax form 1040ez 2011 They include the services of a housekeeper, maid, or cook. Tax form 1040ez 2011 However, they do not include the services of a chauffeur, bartender, or gardener. Tax form 1040ez 2011 See Household Services in Publication 503 for more information. Tax form 1040ez 2011   In this chapter, the term housekeeper refers to any household employee whose services include the care of a qualifying person. Tax form 1040ez 2011 Taxes paid on wages. Tax form 1040ez 2011   The taxes you pay on wages for qualifying child and dependent care services are work-related expenses. Tax form 1040ez 2011 See Employment Taxes for Household Employers , later. Tax form 1040ez 2011 Payments to Relatives or Dependents You can count work-related payments you make to relatives who are not your dependents, even if they live in your home. Tax form 1040ez 2011 However, do not count any amounts you pay to: A dependent for whom you (or your spouse if filing jointly) can claim an exemption, Your child who was under age 19 at the end of the year, even if he or she is not your dependent, A person who was your spouse any time during the year, or The parent of your qualifying person if your qualifying person is your child and under age 13. Tax form 1040ez 2011 Joint Return Test Generally, married couples must file a joint return to take the credit. Tax form 1040ez 2011 However, if you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. Tax form 1040ez 2011 Legally separated. Tax form 1040ez 2011   You are not considered married if you are legally separated from your spouse under a decree of divorce or separate maintenance. Tax form 1040ez 2011 You may be eligible to take the credit on your return using head of household filing status. Tax form 1040ez 2011 Married and living apart. Tax form 1040ez 2011   You are not considered married and are eligible to take the credit if all the following apply. Tax form 1040ez 2011 You file a return apart from your spouse. Tax form 1040ez 2011 Your home is the home of a qualifying person for more than half the year. Tax form 1040ez 2011 You pay more than half the cost of keeping up your home for the year. Tax form 1040ez 2011 Your spouse does not live in your home for the last 6 months of the year. Tax form 1040ez 2011 Costs of keeping up a home. Tax form 1040ez 2011   The costs of keeping up a home normally include property taxes, mortgage interest, rent, utility charges, home repairs, insurance on the home, and food eaten at home. Tax form 1040ez 2011   The costs of keeping up a home do not include payments for clothing, education, medical treatment, vacations, life insurance, transportation, or mortgage principal. Tax form 1040ez 2011   They also do not include the purchase, permanent improvement, or replacement of property. Tax form 1040ez 2011 For example, you cannot include the cost of replacing a water heater. Tax form 1040ez 2011 However, you can include the cost of repairing a water heater. Tax form 1040ez 2011 Death of spouse. Tax form 1040ez 2011   If your spouse died during the year and you do not remarry before the end of the year, you generally must file a joint return to take the credit. Tax form 1040ez 2011 If you do remarry before the end of the year, the credit can be claimed on your deceased spouse's return. Tax form 1040ez 2011 Provider Identification Test You must identify all persons or organizations that provide care for your child or dependent. Tax form 1040ez 2011 Use Form 2441, Part I, to show the information. Tax form 1040ez 2011 If you do not have any care providers and you are filing Form 2441 only to report taxable income in Part III, enter “none” in line 1, column (a). Tax form 1040ez 2011 Information needed. Tax form 1040ez 2011   To identify the care provider, you must give the provider's: Name, Address, and Taxpayer identification number. Tax form 1040ez 2011   If the care provider is an individual, the taxpayer identification number is his or her social security number or individual taxpayer identification number. Tax form 1040ez 2011 If the care provider is an organization, then it is the employer identification number (EIN). Tax form 1040ez 2011   You do not have to show the taxpayer identification number if the care provider is a tax-exempt organization (such as a church or school). Tax form 1040ez 2011 In this case, enter “Tax-Exempt” in the space where Form 2441 asks for the number. Tax form 1040ez 2011   If you cannot provide all of the information or if the information is incorrect, you must be able to show that you used due diligence (discussed later) in trying to furnish the necessary information. Tax form 1040ez 2011 Getting the information. Tax form 1040ez 2011   You can use Form W-10 to request the required information from the care provider. Tax form 1040ez 2011 If you do not use Form W-10, you can get the information from one of the other sources listed in the instructions for Form W-10 including: A copy of the provider's social security card, A copy of the provider's completed Form W-4 if he or she is your household employee, A copy of the statement furnished by your employer if the provider is your employer's dependent care plan, or A letter or invoice from the provider if it shows the information. Tax form 1040ez 2011    You should keep this information with your tax records. Tax form 1040ez 2011 Do not send Form W-10 (or other document containing this information) to the Internal Revenue Service. Tax form 1040ez 2011 Due diligence. Tax form 1040ez 2011   If the care provider information you give is incorrect or incomplete, your credit may not be allowed. Tax form 1040ez 2011 However, if you can show that you used due diligence in trying to supply the information, you can still claim the credit. Tax form 1040ez 2011   You can show due diligence by getting and keeping the provider's completed Form W-10 or one of the other sources of information just listed. Tax form 1040ez 2011 Care providers can be penalized if they do not provide this information to you or if they provide incorrect information. Tax form 1040ez 2011 Provider refusal. Tax form 1040ez 2011   If the provider refuses to give you their identifying information, you should report on Form 2441 whatever information you have (such as the name and address). Tax form 1040ez 2011 Enter “See Attached Statement” in the columns calling for the information you do not have. Tax form 1040ez 2011 Then attach a statement explaining that you requested the information from the care provider, but the provider did not give you the information. Tax form 1040ez 2011 Be sure to write your name and social security number on this statement. Tax form 1040ez 2011 The statement will show that you used due diligence in trying to furnish the necessary information. Tax form 1040ez 2011 U. Tax form 1040ez 2011 S. Tax form 1040ez 2011 citizens and resident aliens living abroad. Tax form 1040ez 2011   If you are living abroad, your care provider may not have, and may not be required to get, a U. Tax form 1040ez 2011 S. Tax form 1040ez 2011 taxpayer identification number (for example, an SSN or EIN). Tax form 1040ez 2011 If so, enter “LAFCP” (Living Abroad Foreign Care Provider) in the space for the care provider's taxpayer identification number. Tax form 1040ez 2011 How To Figure the Credit Your credit is a percentage of your work-related expenses. Tax form 1040ez 2011 Your expenses are subject to the earned income limit and the dollar limit. Tax form 1040ez 2011 The percentage is based on your adjusted gross income. Tax form 1040ez 2011 Figuring Total Work-Related Expenses To figure the credit for 2013 work-related expenses, count only those you paid by December 31, 2013. Tax form 1040ez 2011 Expenses prepaid in an earlier year. Tax form 1040ez 2011   If you pay for services before they are provided, you can count the prepaid expenses only in the year the care is received. Tax form 1040ez 2011 Claim the expenses for the later year as if they were actually paid in that later year. Tax form 1040ez 2011 Expenses not paid until the following year. Tax form 1040ez 2011   Do not count 2012 expenses that you paid in 2013 as work-related expenses for 2013. Tax form 1040ez 2011 You may be able to claim an additional credit for them on your 2013 return, but you must figure it separately. Tax form 1040ez 2011 See Payments for prior year's expenses under Amount of Credit in Publication 503. Tax form 1040ez 2011    If you had expenses in 2013 that you did not pay until 2014, you cannot count them when figuring your 2013 credit. Tax form 1040ez 2011 You may be able to claim a credit for them on your 2014 return. Tax form 1040ez 2011 Expenses reimbursed. Tax form 1040ez 2011   If a state social services agency pays you a nontaxable amount to reimburse you for some of your child and dependent care expenses, you cannot count the expenses that are reimbursed as work-related expenses. Tax form 1040ez 2011 Example. Tax form 1040ez 2011 You paid work-related expenses of $3,000. Tax form 1040ez 2011 You are reimbursed $2,000 by a state social services agency. Tax form 1040ez 2011 You can use only $1,000 to figure your credit. Tax form 1040ez 2011 Medical expenses. Tax form 1040ez 2011   Some expenses for the care of qualifying persons who are not able to care for themselves may qualify as work-related expenses and also as medical expenses. Tax form 1040ez 2011 You can use them either way, but you cannot use the same expenses to claim both a credit and a medical expense deduction. Tax form 1040ez 2011   If you use these expenses to figure the credit and they are more than the earned income limit or the dollar limit, discussed later, you can add the excess to your medical expenses. Tax form 1040ez 2011 However, if you use your total expenses to figure your medical expense deduction, you cannot use any part of them to figure your credit. Tax form 1040ez 2011    Amounts excluded from your income under your employer's dependent care benefits plan cannot be used to claim a medical expense deduction. Tax form 1040ez 2011 Dependent Care Benefits If you receive dependent care benefits, your dollar limit for purposes of the credit may be reduced. Tax form 1040ez 2011 See Reduced Dollar Limit , later. Tax form 1040ez 2011 But, even if you cannot take the credit, you may be able to take an exclusion or deduction for the dependent care benefits. Tax form 1040ez 2011 Dependent care benefits. Tax form 1040ez 2011   Dependent care benefits include: Amounts your employer paid directly to either you or your care provider for the care of your qualifying person while you work, The fair market value of care in a daycare facility provided or sponsored by your employer, and Pre-tax contributions you made under a dependent care flexible spending arrangement. Tax form 1040ez 2011 Your salary may have been reduced to pay for these benefits. Tax form 1040ez 2011 If you received benefits as an employee, they should be shown in box 10 of your Form W-2. Tax form 1040ez 2011 See Statement for employee , later. Tax form 1040ez 2011 Benefits you received as a partner should be shown in box 13 of your Schedule K-1 (Form 1065) with code O. Tax form 1040ez 2011 Enter the amount of these benefits on Form 2441, Part III, line 12. Tax form 1040ez 2011 Exclusion or deduction. Tax form 1040ez 2011   If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Tax form 1040ez 2011 Your employer can tell you whether your benefit plan qualifies. Tax form 1040ez 2011 To claim the exclusion, you must complete Part III of Form 2441. Tax form 1040ez 2011 You cannot use Form 1040EZ. Tax form 1040ez 2011   If you are self-employed and receive benefits from a qualified dependent care benefit plan, you are treated as both employer and employee. Tax form 1040ez 2011 Therefore, you would not get an exclusion from wages. Tax form 1040ez 2011 Instead, you would get a deduction on Form 1040, Schedule C, line 14; Schedule E, line 19 or 28; or Schedule F, line 15. Tax form 1040ez 2011 To claim the deduction, you must use Form 2441. Tax form 1040ez 2011   The amount you can exclude or deduct is limited to the smallest of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). Tax form 1040ez 2011 The definition of earned income for the exclusion or deduction is the same as the definition used when figuring the credit except that earned income for the exclusion or deduction does not include any dependent care benefits you receive. Tax form 1040ez 2011 See Earned Income Limit, later. Tax form 1040ez 2011    You can choose to include your nontaxable combat pay in earned income when figuring your exclusion or deduction, even if you choose not to include it in earned income for the earned income credit or the credit for child and dependent care expenses. Tax form 1040ez 2011 Statement for employee. Tax form 1040ez 2011   Your employer must give you a Form W-2 (or similar statement) showing in box 10 the total amount of dependent care benefits provided to you during the year under a qualified plan. Tax form 1040ez 2011 Your employer will also include any dependent care benefits over $5,000 in your wages shown on your Form W-2 in box 1. Tax form 1040ez 2011 Effect of exclusion on credit. Tax form 1040ez 2011   If you exclude dependent care benefits from your income, the amount of the excluded benefits: Is not included in your work-related expenses, and Reduces the dollar limit, discussed later. Tax form 1040ez 2011 Earned Income Limit The amount of work-related expenses you use to figure your credit cannot be more than: Your earned income for the year if you are single at the end of the year, or The smaller of your or your spouse's earned income for the year if you are married at the end of the year. Tax form 1040ez 2011 Earned income is defined under Earned Income Test , earlier. Tax form 1040ez 2011 For purposes of item (2), use your spouse's earned income for the entire year, even if you were married for only part of the year. Tax form 1040ez 2011 Separated spouse. Tax form 1040ez 2011   If you are legally separated or married and living apart from your spouse (as described under Joint Return Test , earlier), you are not considered married for purposes of the earned income limit. Tax form 1040ez 2011 Use only your income in figuring the earned income limit. Tax form 1040ez 2011 Surviving spouse. Tax form 1040ez 2011   If your spouse died during the year and you file a joint return as a surviving spouse, you may, but are not required to, take into account the earned income of your spouse who died during the year. Tax form 1040ez 2011 Community property laws. Tax form 1040ez 2011   You should disregard community property laws when you figure earned income for this credit. Tax form 1040ez 2011 You or your spouse is a student or not able to care for self. Tax form 1040ez 2011   Your spouse who is either a full-time student or not able to care for himself or herself is treated as having earned income. Tax form 1040ez 2011 His or her earned income for each month is considered to be at least $250 if there is one qualifying person in your home, or at least $500 if there are two or more. Tax form 1040ez 2011 Spouse works. Tax form 1040ez 2011   If your spouse works during that month, use the higher of $250 (or $500) or his or her actual earned income for that month. Tax form 1040ez 2011 Spouse qualifies for part of month. Tax form 1040ez 2011    If your spouse is a full-time student or not able to care for himself or herself for only part of a month, the full $250 (or $500) still applies for that month. Tax form 1040ez 2011 You are a student or not able to care for self. Tax form 1040ez 2011   These rules also apply if you are a student or not able to care for yourself and you are filing a joint return. Tax form 1040ez 2011 For each month or part of a month you are a student or not able to care for yourself, your earned income is considered to be at least $250 (or $500). Tax form 1040ez 2011 If you also work during that month, use the higher of $250 (or $500) or your actual earned income for that month. Tax form 1040ez 2011 Both spouses qualify. Tax form 1040ez 2011   If, in the same month, both you and your spouse are either full-time students or not able to care for yourselves, only one spouse can be considered to have this earned income of $250 (or $500) for that month. Tax form 1040ez 2011 Dollar Limit There is a dollar limit on the amount of your work-related expenses you can use to figure the credit. Tax form 1040ez 2011 This limit is $3,000 for one qualifying person, or $6,000 for two or more qualifying persons. Tax form 1040ez 2011 If you paid work-related expenses for the care of two or more qualifying persons, the applicable dollar limit is $6,000. Tax form 1040ez 2011 This $6,000 limit does not need to be divided equally among them. Tax form 1040ez 2011 For example, if your work-related expenses for the care of one qualifying person are $3,200 and your work-related expenses for another qualifying person are $2,800, you can use the total, $6,000, when figuring the credit. Tax form 1040ez 2011 Yearly limit. Tax form 1040ez 2011   The dollar limit is a yearly limit. Tax form 1040ez 2011 The amount of the dollar limit remains the same no matter how long, during the year, you have a qualifying person in your household. Tax form 1040ez 2011 Use the $3,000 limit if you paid work-related expenses for the care of one qualifying person at any time during the year. Tax form 1040ez 2011 Use $6,000 if you paid work-related expenses for the care of more than one qualifying person at any time during the year. Tax form 1040ez 2011 Reduced Dollar Limit If you received dependent care benefits that you exclude or deduct from your income, you must subtract that amount from the dollar limit that applies to you. Tax form 1040ez 2011 Your reduced dollar limit is figured on Form 2441, Part III. Tax form 1040ez 2011 See Dependent Care Benefits , earlier, for information on excluding or deducting these benefits. Tax form 1040ez 2011 Example 1. Tax form 1040ez 2011 George is a widower with one child and earns $24,000 a year. Tax form 1040ez 2011 He pays work-related expenses of $2,900 for the care of his 4-year-old child and qualifies to claim the credit for child and dependent care expenses. Tax form 1040ez 2011 His employer pays an additional $1,000 under a dependent care benefit plan. Tax form 1040ez 2011 This $1,000 is excluded from George's income. Tax form 1040ez 2011 Although the dollar limit for his work-related expenses is $3,000 (one qualifying person), George figures his credit on only $2,000 of the $2,900 work-related expenses he paid. Tax form 1040ez 2011 This is because his dollar limit is reduced as shown next. Tax form 1040ez 2011   George's Reduced Dollar Limit 1) Maximum allowable expenses for one qualifying person $3,000 2) Minus: Dependent care benefits George excludes from income −1,000 3) Reduced dollar limit on expenses George can use for the credit $2,000 Example 2. Tax form 1040ez 2011 Randall is married and both he and his wife are employed. Tax form 1040ez 2011 Each has earned income in excess of $6,000. Tax form 1040ez 2011 They have two children, Anne and Andy, ages 2 and 4, who attend a daycare facility licensed and regulated by the state. Tax form 1040ez 2011 Randall's work-related expenses are $6,000 for the year. Tax form 1040ez 2011 Randall's employer has a dependent care assistance program as part of its cafeteria plan, which allows employees to make pre-tax contributions to a dependent care flexible spending arrangement. Tax form 1040ez 2011 Randall has elected to take the maximum $5,000 exclusion from his salary to cover dependent care expenses through this program. Tax form 1040ez 2011 Although the dollar limit for his work- related expenses is $6,000 (two or more qualifying persons), Randall figures his credit on only $1,000 of the $6,000 work-related expense paid. Tax form 1040ez 2011 This is because his dollar limit is reduced as shown next. Tax form 1040ez 2011   Randall's Reduced Dollar Limit 1) Maximum allowable expenses for two qualifying persons $6,000 2) Minus: Dependent care benefits Randall selects from employer's cafeteria plan and excludes from income −5,000 3) Reduced dollar limit on expenses Randall can use for the credit $1,000 Amount of Credit To determine the amount of your credit, multiply your work-related expenses (after applying the earned income and dollar limits) by a percentage. Tax form 1040ez 2011 This percentage depends on your adjusted gross income shown on Form 1040, line 38, or Form 1040A, line 22. Tax form 1040ez 2011 The following table shows the percentage to use based on adjusted gross income. Tax form 1040ez 2011   IF your adjusted gross income is: THEN the percentage is:       Over   But not over         $0   $15,000   35%       15,000   17,000   34%       17,000   19,000   33%       19,000   21,000   32%       21,000   23,000   31%       23,000   25,000   30%       25,000   27,000   29%       27,000   29,000   28%       29,000   31,000   27%       31,000   33,000   26%       33,000   35,000   25%       35,000   37,000   24%       37,000   39,000   23%       39,000   41,000   22%       41,000   43,000   21%       43,000   No limit   20%   How To Claim the Credit To claim the credit, you can file Form 1040 or Form 1040A. Tax form 1040ez 2011 You cannot claim the credit on Form 1040EZ. Tax form 1040ez 2011 Form 1040 or 1040A. Tax form 1040ez 2011   You must complete Form 2441 and attach it to your Form 1040 or 1040A. Tax form 1040ez 2011 Enter the credit on Form 1040, line 48, or Form 1040A, line 29. Tax form 1040ez 2011 Limit on credit. Tax form 1040ez 2011   The amount of credit you can claim is generally limited to the amount of your tax. Tax form 1040ez 2011 For more information, see the Instructions for Form 2441. Tax form 1040ez 2011 Tax credit not refundable. Tax form 1040ez 2011   You cannot get a refund for any part of the credit that is more than this limit. Tax form 1040ez 2011 Recordkeeping. Tax form 1040ez 2011 You should keep records of your work-related expenses. Tax form 1040ez 2011 Also, if your dependent or spouse is not able to care for himself or herself, your records should show both the nature and the length of the disability. Tax form 1040ez 2011 Other records you should keep to support your claim for the credit are described earlier under Provider Identification Test . Tax form 1040ez 2011 Employment Taxes for Household Employers If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer. Tax form 1040ez 2011 If you are a household employer, you will need an employer identification number (EIN) and you may have to pay employment taxes. Tax form 1040ez 2011 If the individuals who work in your home are self-employed, you are not liable for any of the taxes discussed in this section. Tax form 1040ez 2011 Self-employed persons who are in business for themselves are not household employees. Tax form 1040ez 2011 Usually, you are not a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business. Tax form 1040ez 2011 If you use a placement agency that exercises control over what work is done and how it will be done by a babysitter or companion who works in your home, the worker is not your employee. Tax form 1040ez 2011 This control could include providing rules of conduct and appearance and requiring regular reports. Tax form 1040ez 2011 In this case, you do not have to pay employment taxes. Tax form 1040ez 2011 But, if an agency merely gives you a list of sitters and you hire one from that list, and pay the sitter directly, the sitter may be your employee. Tax form 1040ez 2011 If you have a household employee, you may be subject to: Social security and Medicare taxes, Federal unemployment tax, and Federal income tax withholding. Tax form 1040ez 2011 Social security and Medicare taxes are generally withheld from the employee's pay and matched by the employer. Tax form 1040ez 2011 Federal unemployment (FUTA) tax is paid by the employer only and provides for payments of unemployment compensation to workers who have lost their jobs. Tax form 1040ez 2011 Federal income tax is withheld from the employee's total pay if the employee asks you to do so and you agree. Tax form 1040ez 2011 For more information on a household employer's tax responsibilities, see Publication 926 and Schedule H (Form 1040) and its instructions. Tax form 1040ez 2011 State employment tax. Tax form 1040ez 2011   You may also have to pay state unemployment tax. Tax form 1040ez 2011 Contact your state unemployment tax office for information. Tax form 1040ez 2011 You should also find out whether you need to pay or collect other state employment taxes or carry workers' compensation insurance. Tax form 1040ez 2011 For a list of state unemployment tax agencies, visit the U. Tax form 1040ez 2011 S. Tax form 1040ez 2011 Department of Labor's website. Tax form 1040ez 2011 A link to that website is in Publication 926, or you can find it with an online search. Tax form 1040ez 2011 Prev  Up  Next   Home   More Online Publications