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Free E File For State Taxes

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Free E File For State Taxes

Free e file for state taxes 35. Free e file for state taxes   Education Credits Table of Contents Introduction Useful Items - You may want to see: Who Can Claim an Education Credit Qualified Education ExpensesNo Double Benefit Allowed Adjustments to Qualified Education Expenses Introduction For 2013, there are two tax credits available to persons who pay expenses for higher (postsecondary) education. Free e file for state taxes They are: The American opportunity credit, and The lifetime learning credit. Free e file for state taxes The chapter will present an overview of these education credits. Free e file for state taxes To get the detailed information you will need to claim either of the credits, and for examples illustrating that information, see chapters 2 and 3 of Publication 970. Free e file for state taxes Can you claim more than one education credit this year?   For each student, you can choose for any year only one of the credits. Free e file for state taxes For example, if you choose to take the American opportunity credit for a child on your 2013 tax return, you cannot, for that same child, also claim the lifetime learning credit for 2013. Free e file for state taxes   If you are eligible to claim the American opportunity credit and you are also eligible to claim the lifetime learning credit for the same student in the same year, you can choose to claim either credit, but not both. Free e file for state taxes   If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity and the lifetime learning credits on a per-student, per-year basis. Free e file for state taxes This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year. Free e file for state taxes Table 35-1. Free e file for state taxes Comparison of Education Credits Caution. Free e file for state taxes You can claim both the American opportunity credit and the lifetime learning credit on the same return—but not for the same student. Free e file for state taxes   American Opportunity Credit Lifetime Learning Credit Maximum credit Up to $2,500 credit per eligible student Up to $2,000 credit per return Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly;  $90,000 if single, head of household, or qualifying widow(er) $127,000 if married filing jointly;  $63,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable 40% of credit may be refundable Credit limited to the amount of tax you must pay on your taxable income Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2013 Available for all years of postsecondary education and for courses to acquire or improve job skills Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) the Hope credit was claimed) Available for an unlimited number of years Type of program required Student must be pursuing a program leading to a degree or other recognized education credential Student does not need to be pursuing a program leading to a degree or other recognized education credential Number of courses Student must be enrolled at least half time for at least one academic period beginning during the tax year Available for one or more courses Felony drug conviction At the end of 2013, the student had not been convicted of a felony for possessing or distributing a controlled substance Felony drug convictions do not make the student ineligible Qualified expenses Tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment) Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Differences between the American opportunity and lifetime learning credits. Free e file for state taxes   There are several differences between these two credits. Free e file for state taxes These differences are summarized in Table 35-1, later. Free e file for state taxes Useful Items - You may want to see: Publication 970 Tax Benefits for Education Form (and Instructions) 8863 Education Credits (American Opportunity and Lifetime Learning Credits) Who Can Claim an Education Credit You may be able to claim an education credit if you, your spouse, or a dependent you claim on your tax return was a student enrolled at or attending an eligible educational institution. Free e file for state taxes The credits are based on the amount of qualified education expenses paid for the student in 2013 for academic periods beginning in 2013 and in the first 3 months of 2014. Free e file for state taxes For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning in January 2014, you may be able to use that $1,500 in figuring your 2013 education credit(s). Free e file for state taxes Academic period. Free e file for state taxes   An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. Free e file for state taxes In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. Free e file for state taxes Eligible educational institution. Free e file for state taxes   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Free e file for state taxes S. Free e file for state taxes Department of Education. Free e file for state taxes It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Free e file for state taxes The educational institution should be able to tell you if it is an eligible educational institution. Free e file for state taxes   Certain educational institutions located outside the United States also participate in the U. Free e file for state taxes S. Free e file for state taxes Department of Education's Federal Student Aid (FSA) programs. Free e file for state taxes Who can claim a dependent's expenses. Free e file for state taxes   If an exemption is allowed as a deduction for any person who claims the student as a dependent, all qualified education expenses of the student are treated as having been paid by that person. Free e file for state taxes Therefore, only that person can claim an education credit for the student. Free e file for state taxes If a student is not claimed as a dependent on another person's tax return, only the student can claim a credit. Free e file for state taxes Expenses paid by a third party. Free e file for state taxes   Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. Free e file for state taxes However, qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Free e file for state taxes Therefore, you are treated as having paid expenses that were paid by the third party. Free e file for state taxes For more information and an example see Who Can Claim a Dependent's Expenses in Pub. Free e file for state taxes 970, chapter 2 or 3. Free e file for state taxes Who cannot claim a credit. Free e file for state taxes   You cannot take an education credit if any of the following apply. Free e file for state taxes You are claimed as a dependent on another person's tax return, such as your parent's return. Free e file for state taxes Your filing status is married filing separately. Free e file for state taxes You (or your spouse) were a nonresident alien for any part of 2013 and did not elect to be treated as a resident alien for tax purposes. Free e file for state taxes Your MAGI is one of the following. Free e file for state taxes American opportunity credit: $180,000 or more if married filing jointly, or $90,000 or more if single, head of household, or qualifying widow(er). Free e file for state taxes Lifetime learning credit: $127,000 or more if married filing jointly, or $63,000 or more if single, head of household, or qualifying widow(er) . Free e file for state taxes   Generally, your MAGI is the amount on your Form 1040, line 38, or Form 1040A, line 22. Free e file for state taxes However, if you are filing Form 2555, Form 2555–EZ, or Form 4563, or are excluding income from Puerto RIco, add to the amount on your Form 1040, line 38, or Form 1040A, line 22, the amount of income you excluded. Free e file for state taxes For details, see Pub. Free e file for state taxes 970. Free e file for state taxes    Figure 35-A may be helpful in determining if you can claim an education credit on your tax return. Free e file for state taxes The American opportunity credit will always be greater than or equal to the lifetime learning credit for any student who is eligible for both credits. Free e file for state taxes However, if any of the conditions for the American opportunity credit, listed in Table 35-1 earlier, are not met for any student, you cannot take the American opportunity credit for that student. Free e file for state taxes You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. Free e file for state taxes See Pub. Free e file for state taxes 970 for information on other education benefits. Free e file for state taxes Qualified Education Expenses Generally, qualified education expenses are amounts paid in 2013 for tuition and fees required for the student's enrollment or attendance at an eligible educational institution. Free e file for state taxes It does not matter whether the expenses were paid in cash, by check, by credit or debit card, or with borrowed funds. Free e file for state taxes For course-related books, supplies, and equipment, only certain expenses qualify. Free e file for state taxes American opportunity credit: Qualified education expenses include amounts spent on books, supplies, and equipment needed for a course of study, whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance. Free e file for state taxes Lifetime learning credit: Qualified education expenses include amounts for books, supplies, and equipment only if required to be paid to the institution as a condition of enrollment or attendance. Free e file for state taxes Qualified education expenses include nonacademic fees, such as student activity fees, athletic fees, or other expenses unrelated to the academic course of instruction, only if the fee must be paid to the institution as a condition of enrollment or attendance. Free e file for state taxes However, fees for personal expenses (described below) are never qualified education expenses. Free e file for state taxes Qualified education expenses for either credit do not include amounts paid for: Personal expenses. Free e file for state taxes This means room and board, insurance, medical expenses (including student health fees), transportation, and other similar personal, living, or family expenses. Free e file for state taxes Any course or other education involving sports, games, or hobbies, or any noncredit course, unless such course or other education is part of the student's degree program or (for the lifetime learning credit only) helps the student acquire or improve job skills. Free e file for state taxes You should receive Form 1098–T, Tuition Statement, from the institution reporting either payments received in 2013 (box 1) or amounts billed in 2013 (box 2). Free e file for state taxes However, the amount in box 1 or 2 of Form 1098–T may be different from the amount you paid (or are treated as having paid). Free e file for state taxes In completing Form 8863, use only the amounts you actually paid (plus any amounts you are treated as having paid) in 2013, reduced as necessary, as described in Adjustments to Qualified Education Expenses , later. Free e file for state taxes Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. Free e file for state taxes Qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. Free e file for state taxes If you or the student takes a deduction for higher education expenses, such as on Schedule A or C (Form 1040), you cannot use those expenses in your qualified education expenses when figuring your education credits. Free e file for state taxes Qualified education expenses for any academic period must be reduced by any tax-free educational assistance allocable to that academic period. Free e file for state taxes See Adjustments to Qualified Education Expenses, later. Free e file for state taxes Prepaid Expenses. Free e file for state taxes   Qualified education expenses paid in 2013 for an academic period that begins in the first 3 months of 2014 can be used in figuring an education credit for 2013 only. Free e file for state taxes See Academic period , earlier. Free e file for state taxes For example, if you pay $2,000 in December 2013 for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring an education credit for 2013 only (if you meet all the other requirements). Free e file for state taxes    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 education credit(s). Free e file for state taxes Paid with borrowed funds. Free e file for state taxes   You can claim an education credit for qualified education expenses paid with the proceeds of a loan. Free e file for state taxes Use the expenses to figure the credit for the year in which the expenses are paid, not the year in which the loan is repaid. Free e file for state taxes Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. Free e file for state taxes Student withdraws from class(es). Free e file for state taxes   You can claim an education credit for qualified education expenses not refunded when a student withdraws. Free e file for state taxes No Double Benefit Allowed You cannot do any of the following. Free e file for state taxes Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim an education credit based on those same expenses. Free e file for state taxes Claim more than one education credit based on the same qualified education expenses. Free e file for state taxes Claim an education credit based on the same expenses used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP). Free e file for state taxes Claim an education credit based on qualified education expenses paid with educational assistance, such as a tax-free scholarship, grant, or employer-provided educational assistance. Free e file for state taxes See Adjustments to Qualified Education Expenses, next. Free e file for state taxes Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid in 2013 by or on behalf of that student under the following rules. Free e file for state taxes The result is the amount of adjusted qualified education expenses for each student. Free e file for state taxes Tax-free educational assistance. Free e file for state taxes   For tax-free educational assistance received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. Free e file for state taxes See Academic period , earlier. Free e file for state taxes      Tax-free educational assistance includes:    Tax-free parts of scholarships and fellowships (see chapter 12 of this publication and chapter 1 of Pub. Free e file for state taxes 970), The tax-free part of Pell grants (see chapter 1 of Pub. Free e file for state taxes 970), The tax-free part of employer-provided educational assistance (see Pub. Free e file for state taxes 970), Veterans' educational assistance (see chapter 1 of Pub. Free e file for state taxes 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Free e file for state taxes Generally, any scholarship or fellowship is treated as tax-free educational assistance. Free e file for state taxes However, a scholarship or fellowship is not treated as tax-free educational assistance to the extent the student includes it in gross income (if the student is required to file a tax return) for the year the scholarship or fellowship is received and either: The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. Free e file for state taxes 970, chapter 1; or The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. Free e file for state taxes 970, chapter 1. Free e file for state taxes You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year received. Free e file for state taxes For details, see Adjustments of Qualified Education Expenses, in chapters 2 and 3 of Pub. Free e file for state taxes 970. Free e file for state taxes Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Free e file for state taxes This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). Free e file for state taxes If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed, later. Free e file for state taxes If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed, later. Free e file for state taxes Refunds. Free e file for state taxes   A refund of qualified education expenses may reduce qualified education expenses for the tax year or may require you to repay (recapture) the credit that you claimed in an earlier year. Free e file for state taxes Some tax-free educational assistance received after 2013 may be treated as a refund. Free e file for state taxes See Tax-free educational assistance, earlier. Free e file for state taxes Refunds received in 2013. Free e file for state taxes   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses paid in 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. Free e file for state taxes Refunds received after 2013 but before your income tax return is filed. Free e file for state taxes   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is received before you file your 2013 income tax return, reduce the amount of qualified education expenses for 2013 by the amount of the refund. Free e file for state taxes Refunds received after 2013 and after your income tax return is filed. Free e file for state taxes   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is received after you file your 2013 income tax return, you may need to repay some or all of the credit that you claimed. Free e file for state taxes See Credit recapture, next. Free e file for state taxes Credit recapture. Free e file for state taxes    If any tax-free educational assistance for the qualified education expenses paid in 2013, or any refund of your qualified education expenses paid in 2013, is received after you file your 2013 income tax return, you must recapture (repay) any excess credit. Free e file for state taxes You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing the expenses by the amount of the refund or tax-free educational assistance. Free e file for state taxes You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you had claimed the refigured credit(s). Free e file for state taxes Include that amount as an additional tax for the year the refund or tax-free assistance was received. Free e file for state taxes Example. Free e file for state taxes    You paid $8,000 tuition and fees in December 2013 for your child's Spring semester beginning in January 2014. Free e file for state taxes You filed your 2013 tax return on February 3, 2014, and claimed a lifetime learning credit of $1,600 ($8,000 qualified education expense paid x . Free e file for state taxes 20). Free e file for state taxes You claimed no other tax credits. Free e file for state taxes After you filed your return, your child withdrew from two courses and you received a refund of $1,400. Free e file for state taxes You must refigure your 2013 lifetime learning credit using $6,600 ($8,000 qualified education expenses − $1,400 refund). Free e file for state taxes The refigured credit is $1,320 and your tax liability increased by $280. Free e file for state taxes You must include the difference of $280 ($1,600 credit originally claimed − $1,320 refigured credit) as additional tax on your 2014 income tax return. Free e file for state taxes See the instructions for your 2014 income tax return to determine where to include this tax. Free e file for state taxes If you also pay qualified education expenses in 2014 for an academic period that begins in the first 3 months of 2014 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2014 instead of reducing your expenses for 2013. Free e file for state taxes Amounts that do not reduce qualified education expenses. Free e file for state taxes   Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. Free e file for state taxes   Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. Free e file for state taxes The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses, as defined in Chapter 1 of Pub. Free e file for state taxes 970. Free e file for state taxes The use of the money is not restricted. Free e file for state taxes   For examples, see chapter 2 in Pub. Free e file for state taxes 970. Free e file for state taxes Figure 35-A. Free e file for state taxes Can You Claim an Education Credit for 2013? This image is too large to be displayed in the current screen. Free e file for state taxes Please click the link to view the image. Free e file for state taxes Figure 35-A. Free e file for state taxes Can You Claim an Education Credit for 2013? Prev  Up  Next   Home   More Online Publications
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The Free E File For State Taxes

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