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H&r Block E File

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H&r Block E File

H&r block e file Publication 504 - Main Content Table of Contents Filing StatusUnmarried persons. H&r block e file Married persons. H&r block e file Same-sex marriage. H&r block e file Exception. H&r block e file Married Filing Jointly Married Filing Separately Head of Household ExemptionsPersonal Exemptions Exemptions for Dependents Phaseout of Exemptions AlimonyInvalid decree. H&r block e file Amended instrument. H&r block e file General Rules Instruments Executed After 1984 Instruments Executed Before 1985 Qualified Domestic Relations OrderRollovers. H&r block e file Individual Retirement Arrangements Property SettlementsTransfer Between Spouses Gift Tax on Property Settlements Sale of Jointly-Owned Property Costs of Getting a Divorce Tax Withholding and Estimated Tax Community PropertyCommunity Income Alimony (Community Income) How To Get Tax Help Filing Status Your filing status is used in determining whether you must file a return, your standard deduction, and the correct tax. H&r block e file It may also be used in determining whether you can claim certain other deductions and credits. H&r block e file The filing status you can choose depends partly on your marital status on the last day of your tax year. H&r block e file Marital status. H&r block e file   If you are unmarried, your filing status is single or, if you meet certain requirements, head of household or qualifying widow(er). H&r block e file If you are married, your filing status is either married filing a joint return or married filing a separate return. H&r block e file For information about the single and qualifying widow(er) filing statuses, see Publication 501. H&r block e file Unmarried persons. H&r block e file   You are unmarried for the whole year if either of the following applies. H&r block e file You have obtained a final decree of divorce or separate maintenance by the last day of your tax year. H&r block e file You must follow your state law to determine if you are divorced or legally separated. H&r block e file Exception. H&r block e file If you and your spouse obtain a divorce in one year for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intend to remarry each other and do so in the next tax year, you and your spouse must file as married individuals. H&r block e file You have obtained a decree of annulment, which holds that no valid marriage ever existed. H&r block e file You must file amended returns (Form 1040X, Amended U. H&r block e file S. H&r block e file Individual Income Tax Return) for all tax years affected by the annulment that are not closed by the statute of limitations. H&r block e file The statute of limitations generally does not end until 3 years (including extensions) after the date you file your original return or within 2 years after the date you pay the tax. H&r block e file On the amended return you will change your filing status to single or, if you meet certain requirements, head of household. H&r block e file Married persons. H&r block e file   You are married for the whole year if you are separated but you have not obtained a final decree of divorce or separate maintenance by the last day of your tax year. H&r block e file An interlocutory decree is not a final decree. H&r block e file Same-sex marriage. H&r block e file   For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. H&r block e file The term "spouse" includes an individual married to a person of the same sex if the couple is lawfully married under state (or foreign) law. H&r block e file However, individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that is not considered a marriage under state (or foreign) law are not considered married for federal tax purposes. H&r block e file For more details, see Publication 501. H&r block e file Exception. H&r block e file   If you live apart from your spouse, under certain circumstances, you may be considered unmarried and can file as head of household. H&r block e file See Head of Household , later. H&r block e file Married Filing Jointly If you are married, you and your spouse can choose to file a joint return. H&r block e file If you file jointly, you both must include all your income, exemptions, deductions, and credits on that return. H&r block e file You can file a joint return even if one of you had no income or deductions. H&r block e file If both you and your spouse have income, you should usually figure your tax on both a joint return and separate returns (using the filing status of married filing separately) to see which gives the two of you the lower combined tax. H&r block e file Nonresident alien. H&r block e file   To file a joint return, at least one of you must be a U. H&r block e file S. H&r block e file citizen or resident alien at the end of the tax year. H&r block e file If either of you was a nonresident alien at any time during the tax year, you can file a joint return only if you agree to treat the nonresident spouse as a resident of the United States. H&r block e file This means that your combined worldwide incomes are subject to U. H&r block e file S. H&r block e file income tax. H&r block e file These rules are explained in Publication 519, U. H&r block e file S. H&r block e file Tax Guide for Aliens. H&r block e file Signing a joint return. H&r block e file   Both you and your spouse generally must sign the return, or it will not be considered a joint return. H&r block e file Joint and individual liability. H&r block e file   Both you and your spouse may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. H&r block e file This means that one spouse may be held liable for all the tax due even if all the income was earned by the other spouse. H&r block e file Divorced taxpayers. H&r block e file   If you are divorced, you are jointly and individually responsible for any tax, interest, and penalties due on a joint return for a tax year ending before your divorce. H&r block e file This responsibility applies even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns. H&r block e file Relief from joint liability. H&r block e file   In some cases, a spouse may be relieved of the tax, interest, and penalties on a joint return. H&r block e file You can ask for relief no matter how small the liability. H&r block e file   There are three types of relief available. H&r block e file Innocent spouse relief. H&r block e file Separation of liability, which applies to joint filers who are divorced, widowed, legally separated, or who have not lived together for the 12 months ending on the date election of this relief is filed. H&r block e file Equitable relief. H&r block e file   Married persons who live in community property states, but who did not file joint returns, may also qualify for relief from liability arising from community property law or for equitable relief. H&r block e file See Relief from liability arising from community property law , later, under Community Property. H&r block e file    Each kind of relief has different requirements. H&r block e file You must file Form 8857 to request relief under any of these categories. H&r block e file Publication 971 explains these kinds of relief and who may qualify for them. H&r block e file You can also find information on our website at IRS. H&r block e file gov. H&r block e file Tax refund applied to spouse's debts. H&r block e file   The overpayment shown on your joint return may be used to pay the past-due amount of your spouse's debts. H&r block e file This includes your spouse's federal tax, state income tax, child or spousal support payments, or a federal nontax debt, such as a student loan. H&r block e file You can get a refund of your share of the overpayment if you qualify as an injured spouse. H&r block e file Injured spouse. H&r block e file   You are an injured spouse if you file a joint return and all or part of your share of the overpayment was, or is expected to be, applied against your spouse's past-due debts. H&r block e file An injured spouse can get a refund for his or her share of the overpayment that would otherwise be used to pay the past-due amount. H&r block e file   To be considered an injured spouse, you must: Have made and reported tax payments (such as federal income tax withheld from wages or estimated tax payments), or claimed a refundable tax credit, such as the earned income credit or additional child tax credit on the joint return, and Not be legally obligated to pay the past-due amount. H&r block e file Note. H&r block e file If the injured spouse's permanent home is in a community property state, then the injured spouse must only meet (2). H&r block e file For more information, see Publication 555. H&r block e file    Refunds that involve community property states must be divided according to local law. H&r block e file If you live in a community property state in which all community property is subject to the debts of either spouse, your entire refund is generally used to pay those debts. H&r block e file   If you are an injured spouse, you must file Form 8379 to have your portion of the overpayment refunded to you. H&r block e file Follow the instructions for the form. H&r block e file   If you have not filed your joint return and you know that your joint refund will be offset, file Form 8379 with your return. H&r block e file You should receive your refund within 14 weeks from the date the paper return is filed or within 11 weeks from the date the return is filed electronically. H&r block e file   If you filed your joint return and your joint refund was offset, file Form 8379 by itself. H&r block e file When filed after offset, it can take up to 8 weeks to receive your refund. H&r block e file Do not attach the previously filed tax return, but do include copies of all Forms W-2, Wage and Tax Statement, and W-2G, Certain Gambling Winnings, for both spouses and any Forms 1099 that show income tax withheld. H&r block e file    An injured spouse claim is different from an innocent spouse relief request. H&r block e file An injured spouse uses Form 8379 to request an allocation of the tax overpayment attributed to each spouse. H&r block e file An innocent spouse uses Form 8857 to request relief from joint liability for tax, interest, and penalties on a joint return for items of the other spouse (or former spouse) that were incorrectly reported on or omitted from the joint return. H&r block e file For information on innocent spouses, see Relief from joint liability, earlier. H&r block e file Married Filing Separately If you and your spouse file separate returns, you should each report only your own income, exemptions, deductions, and credits on your individual return. H&r block e file You can file a separate return even if only one of you had income. H&r block e file For information on exemptions you can claim on your separate return, see Exemptions , later. H&r block e file Community or separate income. H&r block e file   If you live in a community property state and file a separate return, your income may be separate income or community income for income tax purposes. H&r block e file For more information, see Community Income under Community Property, later. H&r block e file Separate liability. H&r block e file   If you and your spouse file separately, you each are responsible only for the tax due on your own return. H&r block e file Itemized deductions. H&r block e file   If you and your spouse file separate returns and one of you itemizes deductions, the other spouse cannot use the standard deduction and should also itemize deductions. H&r block e file Table 1. H&r block e file Itemized Deductions on Separate Returns This table shows itemized deductions you can claim on your married filing separate return whether you paid the expenses separately with your own funds or jointly with your spouse. H&r block e file  Caution: If you live in a community property state, these rules do not apply. H&r block e file See Community Property. H&r block e file IF you paid . H&r block e file . H&r block e file . H&r block e file AND you . H&r block e file . H&r block e file . H&r block e file THEN you can deduct on your separate federal return. H&r block e file . H&r block e file . H&r block e file   medical expenses   paid with funds deposited in a joint checking account in which you and your spouse have an equal interest     half of the total medical expenses, subject to certain limits, unless you can show that you alone paid the expenses. H&r block e file     state income tax   file a separate state income tax return     the state income tax you alone paid during the year. H&r block e file         file a joint state income tax return and you and your spouse are jointly and individually liable for the full amount of the state income tax     the state income tax you alone paid during the year. H&r block e file         file a joint state income tax return and you  are liable for only your own share of state  income tax     the smaller of: the state income tax you alone paid during the year, or the total state income tax you and your spouse paid during the year multiplied by the following fraction. H&r block e file The numerator is your gross income and the denominator  is your combined gross income. H&r block e file     property tax   paid the tax on property held as tenants by the entirety     the property tax you alone paid. H&r block e file     mortgage interest   paid the interest on a qualified home1 held  as tenants by the entirety     the mortgage interest you alone paid. H&r block e file     casualty loss   have a casualty loss on a home you own  as tenants by the entirety     half of the loss, subject to the deduction limits. H&r block e file Neither spouse may report the total casualty loss. H&r block e file 1 For more information on a qualified home and deductible mortgage interest, see Publication 936, Home Mortgage Interest Deduction. H&r block e file Dividing itemized deductions. H&r block e file   You may be able to claim itemized deductions on a separate return for certain expenses that you paid separately or jointly with your spouse. H&r block e file See Table 1, later. H&r block e file Separate returns may give you a higher tax. H&r block e file   Some married couples file separate returns because each wants to be responsible only for his or her own tax. H&r block e file There is no joint liability. H&r block e file But in almost all instances, if you file separate returns, you will pay more combined federal tax than you would with a joint return. H&r block e file This is because the following special rules apply if you file a separate return. H&r block e file Your tax rate generally will be higher than it would be on a joint return. H&r block e file Your exemption amount for figuring the alternative minimum tax will be half of that allowed a joint return filer. H&r block e file You cannot take the credit for child and dependent care expenses in most cases. H&r block e file You cannot take the earned income credit. H&r block e file You cannot take the exclusion or credit for adoption expenses in most cases. H&r block e file You cannot take the credit for higher education expenses (American opportunity and lifetime learning credits), the deduction for student loan interest, or the tuition and fees deduction. H&r block e file You cannot exclude the interest from qualified savings bonds that you used for higher education expenses. H&r block e file If you lived with your spouse at any time during the tax year: You cannot claim the credit for the elderly or the disabled, and You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received. H&r block e file Your income limits that reduce the child tax credit, the retirement savings contributions credit, itemized deductions, and the deduction for personal exemptions are half of the limits for a joint return filer. H&r block e file Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return). H&r block e file Your basic standard deduction, if allowable, is half of that allowed a joint return filer. H&r block e file See Itemized deductions , earlier. H&r block e file Joint return after separate returns. H&r block e file   If either you or your spouse (or both of you) file a separate return, you generally can change to a joint return within 3 years from the due date (not including extensions) of the separate return or returns. H&r block e file This applies to a return either of you filed claiming married filing separately, single, or head of household filing status. H&r block e file Use Form 1040X to change your filing status. H&r block e file Separate returns after joint return. H&r block e file   After the due date of your return, you and your spouse cannot file separate returns if you previously filed a joint return. H&r block e file Exception. H&r block e file   A personal representative for a decedent can change from a joint return elected by the surviving spouse to a separate return for the decedent. H&r block e file The personal representative has 1 year from the due date (including extensions) of the joint return to make the change. H&r block e file Head of Household Filing as head of household has the following advantages. H&r block e file You can claim the standard deduction even if your spouse files a separate return and itemizes deductions. H&r block e file Your standard deduction is higher than is allowed if you claim a filing status of single or married filing separately. H&r block e file Your tax rate usually will be lower than it is if you claim a filing status of single or married filing separately. H&r block e file You may be able to claim certain credits (such as the dependent care credit and the earned income credit) you cannot claim if your filing status is married filing separately. H&r block e file Income limits that reduce your child tax credit, retirement savings contributions credit, itemized deductions, and the deduction for personal exemptions are higher than the income limits if you claim a filing status of married filing separately. H&r block e file Requirements. H&r block e file   You may be able to file as head of household if you meet all the following requirements. H&r block e file You are unmarried or “considered unmarried” on the last day of the year. H&r block e file You paid more than half the cost of keeping up a home for the year. H&r block e file A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). H&r block e file However, if the “qualifying person” is your dependent parent, he or she does not have to live with you. H&r block e file See Special rule for parent , later, under Qualifying person. H&r block e file Considered unmarried. H&r block e file   You are considered unmarried on the last day of the tax year if you meet all the following tests. H&r block e file You file a separate return. H&r block e file A separate return includes a return claiming married filing separately, single, or head of household filing status. H&r block e file You paid more than half the cost of keeping up your home for the tax year. H&r block e file Your spouse did not live in your home during the last 6 months of the tax year. H&r block e file Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. H&r block e file See Temporary absences , later. H&r block e file Your home was the main home of your child, stepchild, or foster child for more than half the year. H&r block e file (See Qualifying person , later, for rules applying to a child's birth, death, or temporary absence during the year. H&r block e file ) You must be able to claim an exemption for the child. H&r block e file However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child using the rule described later in Special rule for divorced or separated parents (or parents who live apart) under Exemptions for Dependents. H&r block e file The general rules for claiming an exemption for a dependent are shown later in Table 3. H&r block e file    If you were considered married for part of the year and lived in a community property state (one of the states listed later under Community Property), special rules may apply in determining your income and expenses. H&r block e file See Publication 555 for more information. H&r block e file Nonresident alien spouse. H&r block e file   If your spouse was a nonresident alien at any time during the tax year, and you have not chosen to treat your spouse as a resident alien, you are considered unmarried for head of household purposes. H&r block e file However, your spouse is not a qualifying person for head of household purposes. H&r block e file You must have another qualifying person and meet the other requirements to file as head of household. H&r block e file Keeping up a home. H&r block e file   You are keeping up a home only if you pay more than half the cost of its upkeep for the year. H&r block e file This includes rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home. H&r block e file This does not include the cost of clothing, education, medical treatment, vacations, life insurance, or transportation for any member of the household. H&r block e file Qualifying person. H&r block e file    Table 2, later, shows who can be a qualifying person. H&r block e file Any person not described in Table 2 is not a qualifying person. H&r block e file   Generally, the qualifying person must live with you for more than half of the year. H&r block e file Table 2. H&r block e file Who Is a Qualifying Person Qualifying You To File as Head of Household?1 Caution. H&r block e file See the text of this publication for the other requirements you must meet to claim head of household filing status. H&r block e file IF the person is your . H&r block e file . H&r block e file . H&r block e file AND . H&r block e file . H&r block e file . H&r block e file THEN that person is . H&r block e file . H&r block e file . H&r block e file   qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests)2 he or she is single a qualifying person, whether or not you can claim an exemption for the person. H&r block e file     he or she is married and you can claim an exemption for him or her a qualifying person. H&r block e file     he or she is married and you cannot claim an exemption for him or her not a qualifying person. H&r block e file 3     qualifying relative4 who is your father or mother you can claim an exemption for him or her5 a qualifying person. H&r block e file 6     you cannot claim an exemption for him or her not a qualifying person. H&r block e file     qualifying relative4 other than your father or mother (such as a grandparent, brother, or sister who meets certain tests) he or she lived with you more than half the year, and he or she is related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 and you can claim an exemption for him or her5 a qualifying person. H&r block e file     he or she did not live with you more than half the year not a qualifying person. H&r block e file     he or she is not related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 and is your qualifying relative only because he or she lived with you all year as a member of your household not a qualifying person. H&r block e file     you cannot claim an exemption for him or her not a qualifying person. H&r block e file   1 A person cannot qualify more than one taxpayer to use the head of household filing status for the year. H&r block e file 2 See Table 3, later, for the tests that must be met to be a qualifying child. H&r block e file Note. H&r block e file If you are a noncustodial parent, the term “qualifying child” for head of household filing status does not include a child who is your qualifying child for exemption purposes only because of the rules described under Children of Divorced or Separated Parents (or Parents Who Live Apart) under Exemptions for Dependents, later. H&r block e file If you are the custodial parent and those rules apply, the child is generally your qualifying child for head of household filing status even though the child is not a qualifying child for whom you can claim an exemption. H&r block e file 3 This person is a qualifying person if the only reason you cannot claim the exemption is that you can be claimed as a dependent on someone else's return. H&r block e file 4 See Table 3, later, for the tests that must be met to be a qualifying relative. H&r block e file 5 If you can claim an exemption for a person only because of a multiple support agreement, that person is not a qualifying person. H&r block e file See Multiple Support Agreement in Publication 501. H&r block e file 6 See Special rule for parent . H&r block e file Special rule for parent. H&r block e file   If your qualifying person is your father or mother, you may be eligible to file as head of household even if your father or mother does not live with you. H&r block e file However, you must be able to claim an exemption for your father or mother. H&r block e file Also, you must pay more than half the cost of keeping up a home that was the main home for the entire year for your father or mother. H&r block e file You are keeping up a main home for your father or mother if you pay more than half the cost of keeping your parent in a rest home or home for the elderly. H&r block e file Death or birth. H&r block e file   If the person for whom you kept up a home was born or died in 2013, you still may be able to file as head of household. H&r block e file If the person is your qualifying child, the child must have lived with you for more than half the part of the year he or she was alive. H&r block e file If the person is anyone else, see Publication 501. H&r block e file Temporary absences. H&r block e file   You and your qualifying person are considered to live together even if one or both of you are temporarily absent from your home due to special circumstances such as illness, education, business, vacation, or military service. H&r block e file It must be reasonable to assume that the absent person will return to the home after the temporary absence. H&r block e file You must continue to keep up the home during the absence. H&r block e file Kidnapped child. H&r block e file   You may be eligible to file as head of household even if the child who is your qualifying person has been kidnapped. H&r block e file You can claim head of household filing status if all the following statements are true. H&r block e file The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family. H&r block e file In the year of the kidnapping, the child lived with you for more than half the part of the year before the kidnapping. H&r block e file You would have qualified for head of household filing status if the child had not been kidnapped. H&r block e file   This treatment applies for all years until the earlier of: The year the child is returned, The year there is a determination that the child is dead, or The year the child would have reached age 18. H&r block e file More information. H&r block e file   For more information on filing as head of household, see Publication 501. H&r block e file Exemptions You can deduct $3,900 for each exemption you claim in 2013. H&r block e file However, if your adjusted gross income is more than $150,000, see Phaseout of Exemptions , later. H&r block e file There are two types of exemptions: personal exemptions and exemptions for dependents. H&r block e file If you are entitled to claim an exemption for a dependent (such as your child), that dependent cannot claim his or her personal exemption on his or her own tax return. H&r block e file Personal Exemptions You can claim your own exemption unless someone else can claim it. H&r block e file If you are married, you may be able to take an exemption for your spouse. H&r block e file These are called personal exemptions. H&r block e file Exemption for Your Spouse Your spouse is never considered your dependent. H&r block e file Joint return. H&r block e file   On a joint return, you can claim one exemption for yourself and one for your spouse. H&r block e file   If your spouse had any gross income, you can claim his or her exemption only if you file a joint return. H&r block e file Separate return. H&r block e file   If you file a separate return, you can take an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer. H&r block e file If your spouse is the dependent of another taxpayer, you cannot claim an exemption for your spouse even if the other taxpayer does not actually claim your spouse's exemption. H&r block e file Alimony paid. H&r block e file   If you paid alimony to your spouse, you cannot take an exemption for your spouse. H&r block e file This is because alimony is gross income to the spouse who received it. H&r block e file Divorced or separated spouse. H&r block e file   If you obtained a final decree of divorce or separate maintenance during the year, you cannot take your former spouse's exemption. H&r block e file This rule applies even if you provided all of your former spouse's support. H&r block e file Exemptions for Dependents You are allowed one exemption for each person you can claim as a dependent. H&r block e file You can claim an exemption for a dependent even if your dependent files a return. H&r block e file The term “dependent” means: A qualifying child, or A qualifying relative. H&r block e file Table 3 shows the tests that must be met to be either a qualifying child or qualifying relative, plus the additional requirements for claiming an exemption for a dependent. H&r block e file For detailed information, see Publication 501. H&r block e file   Dependent not allowed a personal exemption. H&r block e file If you can claim an exemption for your dependent, the dependent cannot claim his or her own exemption on his or her own tax return. H&r block e file This is true even if you do not claim the dependent's exemption on your return. H&r block e file It is also true if the decedent's exemption on your return is reduced or eliminated under the phaseout rule described under Phaseout of Exemptions, later. H&r block e file Table 3. H&r block e file Overview of the Rules for Claiming an Exemption for a Dependent Caution. H&r block e file This table is only an overview of the rules. H&r block e file For details, see Publication 501. H&r block e file • You cannot claim any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer. H&r block e file • You cannot claim a married person who files a joint return as a dependent unless that joint return is only a claim for refund and there would be no tax liability for either spouse on separate returns. H&r block e file • You cannot claim a person as a dependent unless that person is a U. H&r block e file S. H&r block e file citizen, U. H&r block e file S. H&r block e file resident alien, U. H&r block e file S. H&r block e file national, or a resident of Canada or Mexico. H&r block e file 1 • You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative. H&r block e file   Tests To Be a Qualifying Child   Tests To Be a Qualifying Relative 1. H&r block e file     2. H&r block e file       3. H&r block e file    4. H&r block e file    5. H&r block e file    The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. H&r block e file   The child must be (a) under age 19 at the end of the year and younger than you (or your spouse if filing jointly), (b) under age 24 at the end of the year, a student, and younger than you (or your spouse if filing jointly), or (c) any age if permanently and totally disabled. H&r block e file   The child must have lived with you for more than half of the year. H&r block e file 2   The child must not have provided more than half of his or her own support for the year. H&r block e file   The child is not filing a joint return for the year (unless that joint return is filed only as a claim for refund of withheld income tax or estimated tax paid). H&r block e file   1. H&r block e file    2. H&r block e file       3. H&r block e file    4. H&r block e file The person cannot be your qualifying child or the qualifying child of anyone else. H&r block e file   The person either (a) must be related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 or (b) must live with you all year as a member of your household 2 (and your relationship must not violate local law). H&r block e file   The person's gross income for the year must be less than $3,900. H&r block e file 3   You must provide more than half of the person's total support for the year. H&r block e file 4 If the child meets the rules to be a qualifying child of more than one person, only one person can actually treat the child as a qualifying child. H&r block e file See Special Rule for Qualifying Child of More Than One Person , later, to find out which person is the person entitled to claim the child as a qualifying child. H&r block e file     1 Exception exists for certain adopted children. H&r block e file 2 Exceptions exist for temporary absences, children who were born or died during the year, children of divorced or separated parents (or parents who live apart), and kidnapped children. H&r block e file 3 Exception exists for persons who are disabled and have income from a sheltered workshop. H&r block e file 4 Exceptions exist for multiple support agreements, children of divorced or separated parents (or parents who live apart), and kidnapped children. H&r block e file See Publication 501. H&r block e file You may be entitled to a child tax credit for each qualifying child who was under age 17 at the end of the year if you claimed an exemption for that child. H&r block e file For more information, see the instructions for your tax return if you file Form 1040A or 1040. H&r block e file Children of Divorced or Separated Parents (or Parents Who Live Apart) In most cases, because of the residency test (see item 3 under Tests To Be a Qualifying Child in Table 3), a child of divorced or separated parents is the qualifying child of the custodial parent. H&r block e file However, the child will be treated as the qualifying child of the noncustodial parent if the special rule (discussed next) applies. H&r block e file Special rule for divorced or separated parents (or parents who live apart). H&r block e file   A child will be treated as the qualifying child of his or her noncustodial parent if all four of the following statements are true. H&r block e file The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all times during the last 6 months of the year, whether or not they are or were married. H&r block e file The child received over half of his or her support for the year from the parents. H&r block e file The child is in the custody of one or both parents for more than half of the year. H&r block e file Either of the following applies. H&r block e file The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. H&r block e file (If the decree or agreement went into effect after 1984, see Divorce decree or separation agreement that went into effect after 1984 and before 2009 , later. H&r block e file A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child's support during 2013. H&r block e file See Child support under pre-1985 agreement , later. H&r block e file Custodial parent and noncustodial parent. H&r block e file   The custodial parent is the parent with whom the child lived for the greater number of nights during the year. H&r block e file The other parent is the noncustodial parent. H&r block e file   If the parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater number of nights during the rest of the year. H&r block e file   A child is treated as living with a parent for a night if the child sleeps: At that parent's home, whether or not the parent is present, or In the company of the parent, when the child does not sleep at a parent's home (for example, the parent and child are on vacation together). H&r block e file Equal number of nights. H&r block e file   If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income. H&r block e file December 31. H&r block e file   The night of December 31 is treated as part of the year in which it begins. H&r block e file For example, December 31, 2013, is treated as part of 2013. H&r block e file Emancipated child. H&r block e file   If a child is emancipated under state law, the child is treated as not living with either parent. H&r block e file See Examples 5 and 6 . H&r block e file Absences. H&r block e file    If a child was not with either parent on a particular night (because, for example, the child was staying at a friend's house), the child is treated as living with the parent with whom the child normally would have lived for that night, except for the absence. H&r block e file But if it cannot be determined with which parent the child normally would have lived or if the child would not have lived with either parent that night, the child is treated as not living with either parent that night. H&r block e file Parent works at night. H&r block e file   If, due to a parent's nighttime work schedule, a child lives for a greater number of days but not nights with the parent who works at night, that parent is treated as the custodial parent. H&r block e file On a school day, the child is treated as living at the primary residence registered with the school. H&r block e file Example 1 – child lived with one parent greater number of nights. H&r block e file You and your child’s other parent are divorced. H&r block e file In 2013, your child lived with you 210 nights and with the other parent 156 nights. H&r block e file You are the custodial parent. H&r block e file Example 2 – child is away at camp. H&r block e file In 2013, your daughter lives with each parent for alternate weeks. H&r block e file In the summer, she spends 6 weeks at summer camp. H&r block e file During the time she is at camp, she is treated as living with you for 3 weeks and with her other parent, your ex-spouse, for 3 weeks because this is how long she would have lived with each parent if she had not attended summer camp. H&r block e file Example 3 – child lived same number of days with each parent. H&r block e file Your son lived with you 180 nights during the year and lived the same number of nights with his other parent, your ex-spouse. H&r block e file Your adjusted gross income is $40,000. H&r block e file Your ex-spouse's adjusted gross income is $25,000. H&r block e file You are treated as your son's custodial parent because you have the higher adjusted gross income. H&r block e file Example 4 – child is at parent’s home but with other parent. H&r block e file Your son normally lives with you during the week and with his other parent, your ex-spouse, every other weekend. H&r block e file You become ill and are hospitalized. H&r block e file The other parent lives in your home with your son for 10 consecutive days while you are in the hospital. H&r block e file Your son is treated as living with you during this 10-day period because he was living in your home. H&r block e file Example 5 – child emancipated in May. H&r block e file When your son turned age 18 in May 2013, he became emancipated under the law of the state where he lives. H&r block e file As a result, he is not considered in the custody of his parents for more than half of the year. H&r block e file The special rule for children of divorced or separated parents (or parents who live apart) does not apply. H&r block e file Example 6 – child emancipated in August. H&r block e file Your daughter lives with you from January 1, 2013, until May 31, 2013, and lives with her other parent, your ex-spouse, from June 1, 2013, through the end of the year. H&r block e file She turns 18 and is emancipated under state law on August 1, 2013. H&r block e file Because she is treated as not living with either parent beginning on August 1, she is treated as living with you the greater number of nights in 2013. H&r block e file You are the custodial parent. H&r block e file Written declaration. H&r block e file    The custodial parent must use either Form 8332 or a similar statement (containing the same information required by the form) to make the written declaration to release the exemption to the noncustodial parent. H&r block e file The noncustodial parent must attach a copy of the form or statement to his or her tax return. H&r block e file   The exemption can be released for 1 year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration. H&r block e file Divorce decree or separation agreement that went into effect after 1984 and before 2009. H&r block e file   If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. H&r block e file To be able to do this, the decree or agreement must state all three of the following. H&r block e file The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support. H&r block e file The custodial parent will not claim the child as a dependent for the year. H&r block e file The years for which the noncustodial parent, rather than the custodial parent, can claim the child as a dependent. H&r block e file   The noncustodial parent must attach all of the following pages of the decree or agreement to his or her return. H&r block e file The cover page (write the other parent's social security number on this page). H&r block e file The pages that include all of the information identified in items (1) through (3) above. H&r block e file The signature page with the other parent's signature and the date of the agreement. H&r block e file Post-2008 divorce decree or separation agreement. H&r block e file   If the decree or agreement went into effect after 2008, a noncustodial parent claiming an exemption for a child cannot attach pages from a divorce decree or separation agreement instead of Form 8332. H&r block e file The custodial parent must sign either a Form 8332 or a similar statement. H&r block e file The only purpose of this statement must be to release the custodial parent's claim to the child's exemption. H&r block e file The noncustodial parent must attach a copy to his or her return. H&r block e file The form or statement must release the custodial parent's claim to the child without any conditions. H&r block e file For example, the release must not depend on the noncustodial parent paying support. H&r block e file    The noncustodial parent must attach the required information even if it was filed with a return in an earlier year. H&r block e file Revocation of release of claim to an exemption. H&r block e file   The custodial parent can revoke a release of claim to exemption that he or she previously released to the noncustodial parent on Form 8332 or a similar statement. H&r block e file In order for the revocation to be effective for 2013, the custodial parent must have given (or made reasonable efforts to give) written notice of the revocation to the noncustodial parent in 2012 or earlier. H&r block e file The custodial parent can use Part III of Form 8332 for this purpose and must attach a copy of the revocation to his or her return for each tax year he or she claims the child as a dependent as a result of the revocation. H&r block e file Remarried parent. H&r block e file   If you remarry, the support provided by your new spouse is treated as provided by you. H&r block e file Child support under pre-1985 agreement. H&r block e file   All child support payments actually received from the noncustodial parent under a pre-1985 agreement are considered used for the support of the child, even if such amounts are not actually spent for child support. H&r block e file Example. H&r block e file Under a pre-1985 agreement, the noncustodial parent provides $1,200 for the child's support. H&r block e file This amount is considered support provided by the noncustodial parent even if the $1,200 was actually spent on things other than support. H&r block e file Parents who never married. H&r block e file   The special rule for divorced or separated parents also applies to parents who never married and lived apart at all times during the last 6 months of the year. H&r block e file Alimony. H&r block e file   Payments to your spouse that are includible in his or her gross income as either alimony, separate maintenance payments, or similar payments from an estate or trust, are not treated as a payment for the support of a dependent. H&r block e file Special Rule for Qualifying Child of More Than One Person If your qualifying child is not a qualifying child of anyone else, this special rule does not apply to you and you do not need to read about it. H&r block e file This is also true if your qualifying child is not a qualifying child of anyone else except your spouse with whom you file a joint return. H&r block e file If a child is treated as the qualifying child of the noncustodial parent under the Special rule for divorced or separated parents (or parents who live apart), earlier, see Applying this special rule to divorced or separated parents (or parents who live apart), later. H&r block e file Sometimes, a child meets the relationship, age, residency, support, and joint return tests to be a qualifying child of more than one person. H&r block e file (For a description of these tests, see list items 1 through 5 under Tests To Be a Qualifying Child in Table 3). H&r block e file Although the child meets the conditions to be a qualifying child of each of these persons, only one person can actually use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). H&r block e file The exemption for the child. H&r block e file The child tax credit. H&r block e file Head of household filing status. H&r block e file The credit for child and dependent care expenses. H&r block e file The exclusion from income for dependent care benefits. H&r block e file The earned income credit. H&r block e file The other person cannot take any of these benefits based on this qualifying child. H&r block e file In other words, you and the other person cannot agree to divide these tax benefits between you. H&r block e file The other person cannot take any of these tax benefits unless he or she has a different qualifying child. H&r block e file Tiebreaker rules. H&r block e file   To determine which person can treat the child as a qualifying child to claim these six tax benefits, the following tiebreaker rules apply. H&r block e file If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. H&r block e file If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. H&r block e file If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. H&r block e file If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. H&r block e file If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. H&r block e file If the child's parents file a joint return with each other, this rule can be applied by dividing the parents' total AGI evenly between them; see Publication 501 for details. H&r block e file   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. H&r block e file Example 1—separated parents. H&r block e file You, your husband, and your 10-year-old son lived together until August 1, 2013, when your husband moved out of the household. H&r block e file In August and September, your son lived with you. H&r block e file For the rest of the year, your son lived with your husband, the boy's father. H&r block e file Your son is a qualifying child of both you and your husband because your son lived with each of you for more than half the year and because he met the relationship, age, support, and joint return tests for both of you. H&r block e file At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the special rule for divorced or separated parents (or parents who live apart) does not apply. H&r block e file You and your husband will file separate returns. H&r block e file Your husband agrees to let you treat your son as a qualifying child. H&r block e file This means, if your husband does not claim your son as a qualifying child, you can claim your son as a dependent and treat him as a qualifying child for the child tax credit and exclusion for dependent care benefits, if you qualify for each of those tax benefits. H&r block e file However, you cannot claim head of household filing status because you and your husband did not live apart the last 6 months of the year. H&r block e file And, as a result of your filing status being married filing separately, you cannot claim the earned income credit or the credit for child and dependent care expenses. H&r block e file Example 2—separated parents claim same child. H&r block e file The facts are the same as in Example 1 except that you and your husband both claim your son as a qualifying child. H&r block e file In this case, only your husband will be allowed to treat your son as a qualifying child. H&r block e file This is because, during 2013, the boy lived with him longer than with you. H&r block e file If you claimed an exemption, the child tax credit, or the exclusion for dependent care benefits for your son, the IRS will disallow your claim to all these tax benefits, unless you have another qualifying child. H&r block e file In addition, because you and your husband did not live apart the last 6 months of the year, your husband cannot claim head of household filing status. H&r block e file And, as a result of his filing status being married filing separately, he cannot claim the earned income credit or the credit for child and dependent care expenses. H&r block e file Applying this special rule to divorced or separated parents (or parents who live apart). H&r block e file   If a child is treated as the qualifying child of the noncustodial parent under the special rule for divorced or separated parents (or parents who live apart) described earlier, only the noncustodial parent can claim an exemption and the child tax credit for the child. H&r block e file However, the noncustodial parent cannot claim the child as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, and the earned income credit. H&r block e file Only the custodial parent, if eligible, or another eligible taxpayer can claim the child as a qualifying child for those four tax benefits. H&r block e file If the child is the qualifying child of more than one person for those tax benefits, the tiebreaker rules determine which person can treat the child as a qualifying child. H&r block e file Example 1. H&r block e file You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. H&r block e file Your AGI is $10,000. H&r block e file Your mother's AGI is $25,000. H&r block e file Your son's father does not live with you or your son. H&r block e file Under the rules for children of divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for the child if he meets all the requirements to do so. H&r block e file Because of this, you cannot claim an exemption or the child tax credit for your son. H&r block e file However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the earned income credit. H&r block e file You and your mother did not have any child care expenses or dependent care benefits, but the boy is a qualifying child of both you and your mother for head of household filing status and the earned income credit because he meets the relationship, age, residency, support, and joint return tests for both you and your mother. H&r block e file (Note: The support test does not apply for the earned income credit. H&r block e file ) However, you agree to let your mother claim your son. H&r block e file This means she can claim him for head of household filing status and the earned income credit if she qualifies for each and if you do not claim him as a qualifying child for the earned income credit. H&r block e file (You cannot claim head of household filing status because your mother paid the entire cost of keeping up the home. H&r block e file ) Example 2. H&r block e file The facts are the same as in Example 1 except that your AGI is $25,000 and your mother's AGI is $21,000. H&r block e file Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. H&r block e file Example 3. H&r block e file The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the earned income credit. H&r block e file Your mother also claims him as a qualifying child for head of household filing status. H&r block e file You, as the child's parent, will be the only one allowed to claim your son as a qualifying child for the earned income credit. H&r block e file The IRS will disallow your mother's claim to the earned income credit and head of household filing status unless she has another qualifying child. H&r block e file Phaseout of Exemptions The amount you can claim as a deduction for exemptions is reduced once your adjusted gross income (AGI) goes above a certain level for your filing status. H&r block e file These levels are as follows:    Filing Status AGI Level That Reduces Exemption Amount Married filing separately $150,000 Single 250,000 Head of household 275,000 Married filing jointly 300,000 Qualifying widow(er) 300,000 You must reduce the dollar amount of your exemptions by 2% for each $2,500, or part of $2,500 ($1,250 if you are married filing separately), that your AGI exceeds the amount shown above for your filing status. H&r block e file If your AGI exceeds the amount shown above by more than $122,500 ($61,250 if married filing separately), the amount of your deduction for exemptions is reduced to zero. H&r block e file If your AGI exceeds the level for your filing status, use the Deduction for Exemptions Worksheet found in the instructions for Form 1040 or Form 1040NR to figure the amount of your deduction for exemptions. H&r block e file Alimony Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. H&r block e file It does not include voluntary payments that are not made under a divorce or separation instrument. H&r block e file Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. H&r block e file Although this discussion is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony. H&r block e file To be alimony, a payment must meet certain requirements. H&r block e file There are some differences between the requirements that apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. H&r block e file The general requirements that apply to payments regardless of when the divorce or separation instrument was executed and the specific requirements that apply to post-1984 instruments (and, in certain cases, some pre-1985 instruments) are discussed in this publication. H&r block e file See, Instruments Executed Before 1985 , later, if you are looking for information on where to find the specific requirements that apply to pre-1985 instruments. H&r block e file Spouse or former spouse. H&r block e file   Unless otherwise stated, the term “spouse” includes former spouse. H&r block e file Divorce or separation instrument. H&r block e file   The term “divorce or separation instrument” means: A decree of divorce or separate maintenance or a written instrument incident to that decree, A written separation agreement, or A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. H&r block e file This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement). H&r block e file Invalid decree. H&r block e file   Payments under a divorce decree can be alimony even if the decree's validity is in question. H&r block e file A divorce decree is valid for tax purposes until a court having proper jurisdiction holds it invalid. H&r block e file Amended instrument. H&r block e file   An amendment to a divorce decree may change the nature of your payments. H&r block e file Amendments are not ordinarily retroactive for federal tax purposes. H&r block e file However, a retroactive amendment to a divorce decree correcting a clerical error to reflect the original intent of the court will generally be effective retroactively for federal tax purposes. H&r block e file Example 1. H&r block e file A court order retroactively corrected a mathematical error under your divorce decree to express the original intent to spread the payments over more than 10 years. H&r block e file This change also is effective retroactively for federal tax purposes. H&r block e file Example 2. H&r block e file Your original divorce decree did not fix any part of the payment as child support. H&r block e file To reflect the true intention of the court, a court order retroactively corrected the error by designating a part of the payment as child support. H&r block e file The amended order is effective retroactively for federal tax purposes. H&r block e file Deducting alimony paid. H&r block e file   You can deduct alimony you paid, whether or not you itemize deductions on your return. H&r block e file You must file Form 1040. H&r block e file You cannot use Form 1040A, 1040EZ, or 1040NR. H&r block e file Enter the amount of alimony you paid on Form 1040, line 31a. H&r block e file In the space provided on line 31b, enter your spouse's social security number (SSN) or IRS individual taxpayer identification number (ITIN). H&r block e file If you paid alimony to more than one person, enter the SSN or ITIN of one of the recipients. H&r block e file Show the SSN or ITIN and amount paid to each other recipient on an attached statement. H&r block e file Enter your total payments on line 31a. H&r block e file If you do not provide your spouse's SSN or ITIN, you may have to pay a $50 penalty and your deduction may be disallowed. H&r block e file Reporting alimony received. H&r block e file   Report alimony you received as income on Form 1040, line 11, or on Schedule NEC (Form 1040NR), line 12. H&r block e file You cannot use Form 1040A, 1040EZ, or 1040NR-EZ. H&r block e file    You must give the person who paid the alimony your SSN or ITIN. H&r block e file If you do not, you may have to pay a $50 penalty. H&r block e file Withholding on nonresident aliens. H&r block e file   If you are a U. H&r block e file S. H&r block e file citizen or resident alien and you pay alimony to a nonresident alien spouse, you may have to withhold income tax at a rate of 30% on each payment. H&r block e file However, many tax treaties provide for an exemption from withholding for alimony payments. H&r block e file For more information, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. H&r block e file General Rules The following rules apply to alimony regardless of when the divorce or separation instrument was executed. H&r block e file Payments not alimony. H&r block e file   Not all payments under a divorce or separation instrument are alimony. H&r block e file Alimony does not include: Child support, Noncash property settlements, Payments that are your spouse's part of community income, as explained later under Community Property , Payments to keep up the payer's property, or Use of the payer's property. H&r block e file Example. H&r block e file Under your written separation agreement, your spouse lives rent-free in a home you own and you must pay the mortgage, real estate taxes, insurance, repairs, and utilities for the home. H&r block e file Because you own the home and the debts are yours, your payments for the mortgage, real estate taxes, insurance, and repairs are not alimony. H&r block e file Neither is the value of your spouse's use of the home. H&r block e file If they otherwise qualify, you can deduct the payments for utilities as alimony. H&r block e file Your spouse must report them as income. H&r block e file If you itemize deductions, you can deduct the real estate taxes and, if the home is a qualified home, you can also include the interest on the mortgage in figuring your deductible interest. H&r block e file However, if your spouse owned the home, see Example 2 under Payments to a third party, later. H&r block e file If you owned the home jointly with your spouse, see Table 4. H&r block e file For more information on a qualified home and deductible mortgage interest, see Publication 936, Home Mortgage Interest Deduction. H&r block e file Child support. H&r block e file   To determine whether a payment is child support, see the discussion under Instruments Executed After 1984 , later. H&r block e file If your divorce or separation agreement was executed before 1985, see the 2004 revision of Publication 504 available at www. H&r block e file irs. H&r block e file gov/formspubs. H&r block e file Underpayment. H&r block e file   If both alimony and child support payments are called for by your divorce or separation instrument, and you pay less than the total required, the payments apply first to child support and then to alimony. H&r block e file Example. H&r block e file Your divorce decree calls for you to pay your former spouse $200 a month ($2,400 ($200 x 12) a year) as child support and $150 a month ($1,800 ($150 x 12) a year) as alimony. H&r block e file If you pay the full amount of $4,200 ($2,400 + $1,800) during the year, you can deduct $1,800 as alimony and your former spouse must report $1,800 as alimony received. H&r block e file If you pay only $3,600 during the year, $2,400 is child support. H&r block e file You can deduct only $1,200 ($3,600 – $2,400) as alimony and your former spouse must report $1,200 as alimony received. H&r block e file Payments to a third party. H&r block e file   Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify. H&r block e file These include payments for your spouse's medical expenses, housing costs (rent, utilities, etc. H&r block e file ), taxes, tuition, etc. H&r block e file The payments are treated as received by your spouse and then paid to the third party. H&r block e file Example 1. H&r block e file Under your divorce decree, you must pay your former spouse's medical and dental expenses. H&r block e file If the payments otherwise qualify, you can deduct them as alimony on your return. H&r block e file Your former spouse must report them as alimony received and can include them in figuring deductible medical expenses. H&r block e file Example 2. H&r block e file Under your separation agreement, you must pay the real estate taxes, mortgage payments, and insurance premiums on a home owned by your spouse. H&r block e file If they otherwise qualify, you can deduct the payments as alimony on your return, and your spouse must report them as alimony received. H&r block e file If itemizing deductions, your spouse can deduct the real estate taxes and, if the home is a qualified home, also include the interest on the mortgage in figuring deductible interest. H&r block e file However, if you owned the home, see the example under Payments not alimony , earlier. H&r block e file If you owned the home jointly with your spouse, see Table 4. H&r block e file Life insurance premiums. H&r block e file   Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy. H&r block e file Payments for jointly-owned home. H&r block e file   If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse or former spouse, some of your payments may be alimony. H&r block e file See Table 4. H&r block e file   However, if your spouse owned the home, see Example 2 under Payments to a third party, earlier. H&r block e file If you owned the home, see the example under Payments not alimony , earlier. H&r block e file Table 4. H&r block e file Expenses for a Jointly-Owned Home Use the table below to find how much of your payment is alimony and how much you can claim as an itemized deduction. H&r block e file IF you must pay all of the . H&r block e file . H&r block e file . H&r block e file AND your home is . H&r block e file . H&r block e file . H&r block e file THEN you can deduct and your spouse (or former spouse) must include as alimony . H&r block e file . H&r block e file . H&r block e file AND you can claim as an itemized deduction . H&r block e file . H&r block e file . H&r block e file   mortgage payments (principal and interest) jointly owned half of the total payments half of the interest as interest expense (if the home is a qualified home). H&r block e file 1   real estate taxes and home insurance held as tenants in common half of the total payments half of the real estate taxes2 and none of the home insurance. H&r block e file     held as tenants by the entirety or in joint tenancy none of the payments all of the real estate taxes and none of the home insurance. H&r block e file 1 Your spouse (or former spouse) can deduct the other half of the interest if the home is a qualified home. H&r block e file  2 Your spouse (or former spouse) can deduct the other half of the real estate taxes. H&r block e file Instruments Executed After 1984 The following rules for alimony apply to payments under divorce or separation instruments executed after 1984. H&r block e file Exception for instruments executed before 1985. H&r block e file   There are two situations where the rules for instruments executed after 1984 apply to instruments executed before 1985. H&r block e file A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply. H&r block e file A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that: Changes the amount or period of payment, or Adds or deletes any contingency or condition. H&r block e file   For the rules for alimony payments under pre-1985 instruments not meeting these exceptions, see the 2004 revision of Publication 504 available at www. H&r block e file irs. H&r block e file gov/formspubs. H&r block e file Example 1. H&r block e file In November 1984, you and your former spouse executed a written separation agreement. H&r block e file In February 1985, a decree of divorce was substituted for the written separation agreement. H&r block e file The decree of divorce did not change the terms for the alimony you pay your former spouse. H&r block e file The decree of divorce is treated as executed before 1985. H&r block e file Alimony payments under this decree are not subject to the rules for payments under instruments executed after 1984. H&r block e file Example 2. H&r block e file The facts are the same as in Example 1 except that the decree of divorce changed the amount of the alimony. H&r block e file In this example, the decree of divorce is not treated as executed before 1985. H&r block e file The alimony payments are subject to the rules for payments under instruments executed after 1984. H&r block e file Alimony Requirements A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met. H&r block e file The payment is in cash. H&r block e file The instrument does not designate the payment as not alimony. H&r block e file The spouses are not members of the same household at the time the payments are made. H&r block e file This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance. H&r block e file There is no liability to make any payment (in cash or property) after the death of the recipient spouse. H&r block e file The payment is not treated as child support. H&r block e file Each of these requirements is discussed next. H&r block e file Cash payment requirement. H&r block e file   Only cash payments, including checks and money orders, qualify as alimony. H&r block e file The following do not qualify as alimony. H&r block e file Transfers of services or property (including a debt instrument of a third party or an annuity contract). H&r block e file Execution of a debt instrument by the payer. H&r block e file The use of the payer's property. H&r block e file Payments to a third party. H&r block e file   Cash payments to a third party under the terms of your divorce or separation instrument can qualify as cash payments to your spouse. H&r block e file See Payments to a third party under General Rules, earlier. H&r block e file   Also, cash payments made to a third party at the written request of your spouse may qualify as alimony if all the following requirements are met. H&r block e file The payments are in lieu of payments of alimony directly to your spouse. H&r block e file The written request states that both spouses intend the payments to be treated as alimony. H&r block e file You receive the written request from your spouse before you file your return for the year you made the payments. H&r block e file Payments designated as not alimony. H&r block e file   You and your spouse can designate that otherwise qualifying payments are not alimony. H&r block e file You do this by including a provision in your divorce or separation instrument that states the payments are not deductible as alimony by you and are excludable from your spouse's income. H&r block e file For this purpose, any instrument (written statement) signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement (and therefore a divorce or separation instrument). H&r block e file If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order. H&r block e file   Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. H&r block e file The copy must be attached each year the designation applies. H&r block e file Spouses cannot be members of the same household. H&r block e file   Payments to your spouse while you are members of the same household are not alimony if you are legally separated under a decree of divorce or separate maintenance. H&r block e file A home you formerly shared is considered one household, even if you physically separate yourselves in the home. H&r block e file   You are not treated as members of the same household if one of you is preparing to leave the household and does leave no later than 1 month after the date of the payment. H&r block e file Exception. H&r block e file   If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree, or other court order may qualify as alimony even if you are members of the same household when the payment is made. H&r block e file Liability for payments after death of recipient spouse. H&r block e file   If any part of payments you make must continue to be made for any period after your spouse's death, that part of your payments is not alimony whether made before or after the death. H&r block e file If all of the payments would continue, then none of the payments made before or after the death are alimony. H&r block e file   The divorce or separation instrument does not have to expressly state that the payments cease upon the
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The H&r Block E File

H&r block e file 7. H&r block e file   Interest Income Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationSSN for joint account. H&r block e file Custodian account for your child. H&r block e file Penalty for failure to supply SSN. H&r block e file Reporting backup withholding. H&r block e file Savings account with parent as trustee. H&r block e file Interest not reported on Form 1099-INT. H&r block e file Nominees. H&r block e file Incorrect amount. H&r block e file Information reporting requirement. H&r block e file Taxable InterestInterest subject to penalty for early withdrawal. H&r block e file Money borrowed to invest in certificate of deposit. H&r block e file U. H&r block e file S. H&r block e file Savings Bonds Education Savings Bond Program U. H&r block e file S. H&r block e file Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Original Issue Discount (OID) When To Report Interest IncomeConstructive receipt. H&r block e file How To Report Interest IncomeSchedule B (Form 1040A or 1040). H&r block e file Reporting tax-exempt interest. H&r block e file U. H&r block e file S. H&r block e file savings bond interest previously reported. H&r block e file Reminder Foreign-source income. H&r block e file  If you are a U. H&r block e file S. H&r block e file citizen with interest income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt by U. H&r block e file S. H&r block e file law. H&r block e file This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. H&r block e file Introduction This chapter discusses the following topics. H&r block e file Different types of interest income. H&r block e file What interest is taxable and what interest is nontaxable. H&r block e file When to report interest income. H&r block e file How to report interest income on your tax return. H&r block e file In general, any interest you receive or that is credited to your account and can be withdrawn is taxable income. H&r block e file Exceptions to this rule are discussed later in this chapter. H&r block e file You may be able to deduct expenses you have in earning this income on Schedule A (Form 1040) if you itemize your deductions. H&r block e file See Money borrowed to invest in certificate of deposit , later, and chapter 28. H&r block e file Useful Items - You may want to see: Publication 537 Installment Sales 550 Investment Income and Expenses 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends 8815 Exclusion of Interest From Series EE and I U. H&r block e file S. H&r block e file Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. H&r block e file S. H&r block e file Savings Bonds Issued After 1989 General Information A few items of general interest are covered here. H&r block e file Recordkeeping. H&r block e file You should keep a list showing sources and interest amounts received during the year. H&r block e file Also, keep the forms you receive showing your interest income (Forms 1099-INT, for example) as an important part of your records. H&r block e file Tax on unearned income of certain children. H&r block e file    Part of a child's 2013 unearned income may be taxed at the parent's tax rate. H&r block e file If so, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. H&r block e file If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. H&r block e file   Some parents can choose to include the child's interest and dividends on the parent's return. H&r block e file If you can, use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. H&r block e file   For more information about the tax on unearned income of children and the parents' election, see chapter 31. H&r block e file Beneficiary of an estate or trust. H&r block e file   Interest you receive as a beneficiary of an estate or trust is generally taxable income. H&r block e file You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. H&r block e file , from the fiduciary. H&r block e file Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. H&r block e file Social security number (SSN). H&r block e file   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. H&r block e file This includes payers of interest. H&r block e file If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. H&r block e file SSN for joint account. H&r block e file   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. H&r block e file (For information on who owns the funds in a joint account, see Joint accounts , later. H&r block e file ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. H&r block e file This is because only one name and SSN can be shown on Form 1099. H&r block e file   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. H&r block e file For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. H&r block e file Custodian account for your child. H&r block e file   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. H&r block e file For example, you must give your child's SSN to the payer of interest on an account owned by your child, even though the interest is paid to you as custodian. H&r block e file Penalty for failure to supply SSN. H&r block e file   If you do not give your SSN to the payer of interest, you may have to pay a penalty. H&r block e file See Failure to supply SSN under Penalties in chapter 1. H&r block e file Backup withholding also may apply. H&r block e file Backup withholding. H&r block e file   Your interest income is generally not subject to regular withholding. H&r block e file However, it may be subject to backup withholding to ensure that income tax is collected on the income. H&r block e file Under backup withholding, the payer of interest must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. H&r block e file   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. H&r block e file For more information, see Backup Withholding in chapter 4. H&r block e file Reporting backup withholding. H&r block e file   If backup withholding is deducted from your interest income, the payer must give you a Form 1099-INT for the year indicating the amount withheld. H&r block e file The Form 1099-INT will show any backup withholding as “Federal income tax withheld. H&r block e file ” Joint accounts. H&r block e file   If two or more persons hold property (such as a savings account or bond) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest from the property is determined by local law. H&r block e file Income from property given to a child. H&r block e file   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. H&r block e file   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. H&r block e file Savings account with parent as trustee. H&r block e file   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. H&r block e file The savings account legally belongs to the child. H&r block e file The parents are not legally permitted to use any of the funds to support the child. H&r block e file Form 1099-INT. H&r block e file   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. H&r block e file This form shows you the interest you received during the year. H&r block e file Keep this form for your records. H&r block e file You do not have to attach it to your tax return. H&r block e file   Report on your tax return the total interest income you receive for the tax year. H&r block e file Interest not reported on Form 1099-INT. H&r block e file   Even if you do not receive Form 1099-INT, you must still report all of your interest income. H&r block e file For example, you may receive distributive shares of interest from partnerships or S corporations. H&r block e file This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deduction, Credits, etc. H&r block e file , or Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. H&r block e file Nominees. H&r block e file   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. H&r block e file   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on nominee distributions under How To Report Interest Income in chapter 1 of Publication 550, or Schedule B (Form 1040A or 1040) instructions. H&r block e file Incorrect amount. H&r block e file   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. H&r block e file The new Form 1099-INT you receive will be marked “Corrected. H&r block e file ” Form 1099-OID. H&r block e file   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. H&r block e file For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. H&r block e file Exempt-interest dividends. H&r block e file   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. H&r block e file (However, see Information reporting requirement , next. H&r block e file ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. H&r block e file You do not reduce your basis for distributions that are exempt-interest dividends. H&r block e file Information reporting requirement. H&r block e file   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. H&r block e file This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. H&r block e file Note. H&r block e file Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. H&r block e file See Alternative Minimum Tax (AMT) in chapter 30 for more information. H&r block e file Chapter 1 of Publication 550 contains a discussion on private activity bonds under State or Local Government Obligations. H&r block e file Interest on VA dividends. H&r block e file   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. H&r block e file This includes interest paid on dividends on converted United States Government Life Insurance and on National Service Life Insurance policies. H&r block e file Individual retirement arrangements (IRAs). H&r block e file   Interest on a Roth IRA generally is not taxable. H&r block e file Interest on a traditional IRA is tax deferred. H&r block e file You generally do not include it in your income until you make withdrawals from the IRA. H&r block e file See chapter 17. H&r block e file Taxable Interest Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. H&r block e file The following are some sources of taxable interest. H&r block e file Dividends that are actually interest. H&r block e file   Certain distributions commonly called dividends are actually interest. H&r block e file You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. H&r block e file  The “dividends” will be shown as interest income on Form 1099-INT. H&r block e file Money market funds. H&r block e file   Money market funds pay dividends and are offered by nonbank financial institutions, such as mutual funds and stock brokerage houses. H&r block e file Generally, amounts you receive from money market funds should be reported as dividends, not as interest. H&r block e file Certificates of deposit and other deferred interest accounts. H&r block e file   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. H&r block e file You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. H&r block e file The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. H&r block e file If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. H&r block e file Interest subject to penalty for early withdrawal. H&r block e file   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. H&r block e file You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. H&r block e file See Penalty on early withdrawal of savings in chapter 1 of Publication 550 for more information on how to report the interest and deduct the penalty. H&r block e file Money borrowed to invest in certificate of deposit. H&r block e file   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. H&r block e file You must report the total interest you earn on the certificate in your income. H&r block e file If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. H&r block e file See Interest Expenses in chapter 3 of Publication 550. H&r block e file Example. H&r block e file You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. H&r block e file The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. H&r block e file The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. H&r block e file The bank also gives you a statement showing that you paid $310 interest for 2013. H&r block e file You must include the $575 in your income. H&r block e file If you itemize your deductions on Schedule A (Form 1040), you can deduct $310, subject to the net investment income limit. H&r block e file Gift for opening account. H&r block e file   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. H&r block e file   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. H&r block e file For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. H&r block e file The value is determined by the cost to the financial institution. H&r block e file Example. H&r block e file You open a savings account at your local bank and deposit $800. H&r block e file The account earns $20 interest. H&r block e file You also receive a $15 calculator. H&r block e file If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. H&r block e file You must report $35 interest income on your tax return. H&r block e file Interest on insurance dividends. H&r block e file   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. H&r block e file However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. H&r block e file Prepaid insurance premiums. H&r block e file   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. H&r block e file U. H&r block e file S. H&r block e file obligations. H&r block e file   Interest on U. H&r block e file S. H&r block e file obligations, such as U. H&r block e file S. H&r block e file Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. H&r block e file Interest on tax refunds. H&r block e file   Interest you receive on tax refunds is taxable income. H&r block e file Interest on condemnation award. H&r block e file   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. H&r block e file Installment sale payments. H&r block e file   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. H&r block e file That interest is taxable when you receive it. H&r block e file If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. H&r block e file See Unstated Interest and Original Issue Discount in Publication 537, Installment Sales. H&r block e file Interest on annuity contract. H&r block e file   Accumulated interest on an annuity contract you sell before its maturity date is taxable. H&r block e file Usurious interest. H&r block e file   Usurious interest is interest charged at an illegal rate. H&r block e file This is taxable as interest unless state law automatically changes it to a payment on the principal. H&r block e file Interest income on frozen deposits. H&r block e file   Exclude from your gross income interest on frozen deposits. H&r block e file A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state where the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. H&r block e file   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). H&r block e file If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income in chapter 1 of Publication 550, for information about reporting this interest income exclusion on your tax return. H&r block e file   The interest you exclude is treated as credited to your account in the following year. H&r block e file You must include it in income in the year you can withdraw it. H&r block e file Example. H&r block e file $100 of interest was credited on your frozen deposit during the year. H&r block e file You withdrew $80 but could not withdraw any more as of the end of the year. H&r block e file You must include $80 in your income and exclude $20 from your income for the year. H&r block e file You must include the $20 in your income for the year you can withdraw it. H&r block e file Bonds traded flat. H&r block e file   If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. H&r block e file The defaulted or unpaid interest is not income and is not taxable as interest if paid later. H&r block e file When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. H&r block e file Interest that accrues after the date of purchase, however, is taxable interest income for the year it is received or accrued. H&r block e file See Bonds Sold Between Interest Dates , later, for more information. H&r block e file Below-market loans. H&r block e file   In general, a below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. H&r block e file See Below-Market Loans in chapter 1 of Publication 550 for more information. H&r block e file U. H&r block e file S. H&r block e file Savings Bonds This section provides tax information on U. H&r block e file S. H&r block e file savings bonds. H&r block e file It explains how to report the interest income on these bonds and how to treat transfers of these bonds. H&r block e file For other information on U. H&r block e file S. H&r block e file savings bonds, write to:  For series EE and I paper savings bonds: Bureau of the Public Debt Division of Customer Assistance P. H&r block e file O. H&r block e file Box 7012 Parkersburg, WV 26106-7012  For series EE and I electronic bonds: Bureau of the Public Debt Division of Customer Assistance P. H&r block e file O. H&r block e file Box 7015 Parkersburg, WV 26106–7015  For series HH/H: Bureau of the Public Debt Division of Customer Assistance P. H&r block e file O. H&r block e file Box 2186 Parkersburg, WV 26106-2186 Or, on the Internet, visit: www. H&r block e file treasurydirect. H&r block e file gov/indiv/indiv. H&r block e file htm. H&r block e file Accrual method taxpayers. H&r block e file   If you use an accrual method of accounting, you must report interest on U. H&r block e file S. H&r block e file savings bonds each year as it accrues. H&r block e file You cannot postpone reporting interest until you receive it or until the bonds mature. H&r block e file Accrual methods of accounting are explained in chapter 1 under Accounting Methods . H&r block e file Cash method taxpayers. H&r block e file   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. H&r block e file S. H&r block e file savings bonds when you receive it. H&r block e file The cash method of accounting is explained in chapter 1 under Accounting Methods. H&r block e file But see Reporting options for cash method taxpayers , later. H&r block e file Series HH bonds. H&r block e file    These bonds were issued at face value. H&r block e file Interest is paid twice a year by direct deposit to your bank account. H&r block e file If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. H&r block e file   Series HH bonds were first offered in 1980 and last offered in August 2004. H&r block e file Before 1980, series H bonds were issued. H&r block e file Series H bonds are treated the same as series HH bonds. H&r block e file If you are a cash method taxpayer, you must report the interest when you receive it. H&r block e file   Series H bonds have a maturity period of 30 years. H&r block e file Series HH bonds mature in 20 years. H&r block e file The last series H bonds matured in 2009. H&r block e file Series EE and series I bonds. H&r block e file   Interest on these bonds is payable when you redeem the bonds. H&r block e file The difference between the purchase price and the redemption value is taxable interest. H&r block e file Series EE bonds. H&r block e file   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. H&r block e file   Before July 1980, series E bonds were issued. H&r block e file The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. H&r block e file Paper series EE and series E bonds are issued at a discount. H&r block e file The face value is payable to you at maturity. H&r block e file Electronic series EE bonds are issued at their face value. H&r block e file The face value plus accrued interest is payable to you at maturity. H&r block e file As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. H&r block e file   Owners of paper series EE bonds can convert them to electronic bonds. H&r block e file These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). H&r block e file Series I bonds. H&r block e file   Series I bonds were first offered in 1998. H&r block e file These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. H&r block e file The face value plus all accrued interest is payable to you at maturity. H&r block e file Reporting options for cash method taxpayers. H&r block e file   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. H&r block e file Method 1. H&r block e file Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year they mature. H&r block e file (However, see Savings bonds traded , later. H&r block e file )  Note. H&r block e file Series EE bonds issued in 1983 matured in 2013. H&r block e file If you have used method 1, you generally must report the interest on these bonds on your 2013 return. H&r block e file The last series E bonds were issued in 1980 and matured in 2010. H&r block e file If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. H&r block e file Method 2. H&r block e file Choose to report the increase in redemption value as interest each year. H&r block e file You must use the same method for all series EE, series E, and series I bonds you own. H&r block e file If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. H&r block e file    If you plan to cash your bonds in the same year you will pay for higher education expenses, you may want to use method 1 because you may be able to exclude the interest from your income. H&r block e file To learn how, see Education Savings Bond Program, later. H&r block e file Change from method 1. H&r block e file   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. H&r block e file In the year of change you must report all interest accrued to date and not previously reported for all your bonds. H&r block e file   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. H&r block e file Change from method 2. H&r block e file   To change from method 2 to method 1, you must request permission from the IRS. H&r block e file Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. H&r block e file You have typed or printed the following number at the top: “131. H&r block e file ” It includes your name and social security number under “131. H&r block e file ” It includes the year of change (both the beginning and ending dates). H&r block e file It identifies the savings bonds for which you are requesting this change. H&r block e file It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. H&r block e file   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). H&r block e file   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. H&r block e file On the statement, type or print “Filed pursuant to section 301. H&r block e file 9100-2. H&r block e file ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). H&r block e file    By the date you file the original statement with your return, you must also send a signed copy to the address below. H&r block e file   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. H&r block e file O. H&r block e file Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. H&r block e file   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW  Washington, DC 20224   Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115, Application for Change in Accounting Method. H&r block e file In that case, follow the form instructions for an automatic change. H&r block e file No user fee is required. H&r block e file Co-owners. H&r block e file   If a U. H&r block e file S. H&r block e file savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. H&r block e file One co-owner's funds used. H&r block e file    If you used your funds to buy the bond, you must pay the tax on the interest. H&r block e file This is true even if you let the other co-owner redeem the bond and keep all the proceeds. H&r block e file Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. H&r block e file The co-owner who redeemed the bond is a “nominee. H&r block e file ” See Nominee distributions under How To Report Interest Income in chapter 1 of Publication 550 for more information about how a person who is a nominee reports interest income belonging to another person. H&r block e file Both co-owners' funds used. H&r block e file   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. H&r block e file Community property. H&r block e file   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. H&r block e file If you file separate returns, each of you generally must report one-half of the bond interest. H&r block e file For more information about community property, see Publication 555. H&r block e file Table 7-1. H&r block e file   These rules are also shown in Table 7-1. H&r block e file Ownership transferred. H&r block e file   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. H&r block e file But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. H&r block e file   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. H&r block e file Purchased jointly. H&r block e file   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. H&r block e file The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. H&r block e file This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. H&r block e file   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. H&r block e file But the new co-owner will report only his or her share of the interest earned after the transfer. H&r block e file   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. H&r block e file    Table 7-1. H&r block e file Who Pays the Tax on U. H&r block e file S. H&r block e file Savings Bond Interest IF . H&r block e file . H&r block e file . H&r block e file THEN the interest must be reported by . H&r block e file . H&r block e file . H&r block e file you buy a bond in your name and the name of another person as co-owners, using only your own funds you. H&r block e file you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. H&r block e file you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. H&r block e file you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. H&r block e file If you file separate returns, both you and your spouse generally report one-half of the interest. H&r block e file Example 1. H&r block e file You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. H&r block e file The bond was issued to you and your spouse as co-owners. H&r block e file You both postpone reporting interest on the bond. H&r block e file You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. H&r block e file At that time neither you nor your spouse has to report the interest earned to the date of reissue. H&r block e file Example 2. H&r block e file You bought a $1,000 series EE savings bond entirely with your own funds. H&r block e file The bond was issued to you and your spouse as co-owners. H&r block e file You both postpone reporting interest on the bond. H&r block e file You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. H&r block e file You must report half the interest earned to the date of reissue. H&r block e file Transfer to a trust. H&r block e file   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. H&r block e file However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. H&r block e file You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. H&r block e file   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. H&r block e file See Savings bonds traded , later. H&r block e file Decedents. H&r block e file   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. H&r block e file This is explained in chapter 1 of Publication 550. H&r block e file Savings bonds traded. H&r block e file   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. H&r block e file (You cannot trade series I bonds for series HH bonds. H&r block e file After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. H&r block e file ) Any cash you received is income up to the amount of the interest earned on the bonds traded. H&r block e file When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. H&r block e file Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. H&r block e file Example. H&r block e file You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. H&r block e file You reported the $223 as taxable income on your tax return. H&r block e file At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. H&r block e file You hold the series HH bonds until maturity, when you receive $2,500. H&r block e file You must report $300 as interest income in the year of maturity. H&r block e file This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). H&r block e file (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. H&r block e file ) Choice to report interest in year of trade. H&r block e file   You could have chosen to treat all of the previously unreported accrued interest on the series EE or series E bonds traded for series HH bonds as income in the year of the trade. H&r block e file If you made this choice, it is treated as a change from method 1. H&r block e file See Change from method 1 under Series EE and series I bonds, earlier. H&r block e file Form 1099-INT for U. H&r block e file S. H&r block e file savings bonds interest. H&r block e file   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. H&r block e file Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. H&r block e file However, your Form 1099-INT may show more interest than you have to include on your income tax return. H&r block e file For example, this may happen if any of the following are true. H&r block e file You chose to report the increase in the redemption value of the bond each year. H&r block e file The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. H&r block e file You received the bond from a decedent. H&r block e file The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. H&r block e file Ownership of the bond was transferred. H&r block e file The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. H&r block e file You were named as a co-owner, and the other co-owner contributed funds to buy the bond. H&r block e file The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. H&r block e file (See Co-owners , earlier in this chapter, for more information about the reporting requirements. H&r block e file ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. H&r block e file The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. H&r block e file (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. H&r block e file , for the year of distribution. H&r block e file )   For more information on including the correct amount of interest on your return, see How To Report Interest Income , later. H&r block e file Publication 550 includes examples showing how to report these amounts. H&r block e file    Interest on U. H&r block e file S. H&r block e file savings bonds is exempt from state and local taxes. H&r block e file The Form 1099-INT you receive will indicate the amount that is for U. H&r block e file S. H&r block e file savings bond interest in box 3. H&r block e file Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. H&r block e file S. H&r block e file savings bonds during the year if you pay qualified higher educational expenses during the same year. H&r block e file This exclusion is known as the Education Savings Bond Program. H&r block e file You do not qualify for this exclusion if your filing status is married filing separately. H&r block e file Form 8815. H&r block e file   Use Form 8815 to figure your exclusion. H&r block e file Attach the form to your Form 1040 or Form 1040A. H&r block e file Qualified U. H&r block e file S. H&r block e file savings bonds. H&r block e file   A qualified U. H&r block e file S. H&r block e file savings bond is a series EE bond issued after 1989 or a series I bond. H&r block e file The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). H&r block e file You must be at least 24 years old before the bond's issue date. H&r block e file For example, a bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child. H&r block e file    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. H&r block e file Beneficiary. H&r block e file   You can designate any individual (including a child) as a beneficiary of the bond. H&r block e file Verification by IRS. H&r block e file   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of the Treasury. H&r block e file Qualified expenses. H&r block e file   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. H&r block e file   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. H&r block e file   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. H&r block e file Eligible educational institutions. H&r block e file   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the U. H&r block e file S. H&r block e file Department of Education. H&r block e file Reduction for certain benefits. H&r block e file   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. H&r block e file Tax-free part of scholarships and fellowships (see Scholarships and fellowships in chapter 12). H&r block e file Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. H&r block e file Expenses used to figure the tax-free portion of distributions from a qualified tuition program. H&r block e file Any tax-free payments (other than gifts or inheritances) received for educational expenses, such as Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. H&r block e file Any expense used in figuring the American Opportunity and lifetime learning credits. H&r block e file Amount excludable. H&r block e file   If the total proceeds (interest and principal) from the qualified U. H&r block e file S. H&r block e file savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. H&r block e file If the proceeds are more than the expenses, you may be able to exclude only part of the interest. H&r block e file   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. H&r block e file The numerator of the fraction is the qualified higher educational expenses you paid during the year. H&r block e file The denominator of the fraction is the total proceeds you received during the year. H&r block e file Example. H&r block e file In February 2013, Mark and Joan, a married couple, cashed a qualified series EE U. H&r block e file S. H&r block e file savings bond they bought in April 1997. H&r block e file They received proceeds of $8,372 representing principal of $5,000 and interest of $3,372. H&r block e file In 2013, they paid $4,000 of their daughter's college tuition. H&r block e file They are not claiming an education credit for that amount, and their daughter does not have any tax-free educational assistance. H&r block e file They can exclude $1,611 ($3,372 × ($4,000 ÷ $8,372)) of interest in 2013. H&r block e file They must pay tax on the remaining $1,761 ($3,372 − $1,611) interest. H&r block e file Modified adjusted gross income limit. H&r block e file   The interest exclusion is limited if your modified adjusted gross income (modified AGI) is: $74,700 to $89,700 for taxpayers filing single or head of household, and $112,050 to $142,050 for married taxpayers filing jointly or for a qualifying widow(er) with dependent child. H&r block e file You do not qualify for the interest exclusion if your modified AGI is equal to or more than the upper limit for your filing status. H&r block e file   Modified AGI, for purposes of this exclusion, is adjusted gross income (Form 1040, line 37, or Form 1040A, line 21) figured before the interest exclusion, and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion and deduction, Exclusion of income for bona fide residents of American Samoa, Exclusion for income from Puerto Rico, Exclusion for adoption benefits received under an employer's adoption assistance program, Deduction for tuition and fees, Deduction for student loan interest, and Deduction for domestic production activities. H&r block e file   Use the Line 9 Worksheet in the Form 8815 instructions to figure your modified AGI. H&r block e file If you claim any of the exclusion or deduction items listed above (except items 6, 7, and 8), add the amount of the exclusion or deduction (except items 6, 7, and 8) to the amount on line 5 of the worksheet, and enter the total on Form 8815, line 9, as your modified AGI. H&r block e file   If you have investment interest expense incurred to earn royalties and other investment income, see Education Savings Bond Program in chapter 1 of Publication 550. H&r block e file Recordkeeping. H&r block e file If you claim the interest exclusion, you must keep a written record of the qualified U. H&r block e file S. H&r block e file savings bonds you redeem. H&r block e file Your record must include the serial number, issue date, face value, and total redemption proceeds (principal and interest) of each bond. H&r block e file You can use Form 8818 to record this information. H&r block e file You should also keep bills, receipts, canceled checks, or other documentation that shows you paid qualified higher educational expenses during the year. H&r block e file U. H&r block e file S. H&r block e file Treasury Bills, Notes, and Bonds Treasury bills, notes, and bonds are direct debts (obligations) of the U. H&r block e file S. H&r block e file Government. H&r block e file Taxation of interest. H&r block e file   Interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. H&r block e file You should receive Form 1099-INT showing the interest (in box 3) paid to you for the year. H&r block e file   Payments of principal and interest generally will be credited to your designated checking or savings account by direct deposit through the TreasuryDirect® system. H&r block e file Treasury bills. H&r block e file   These bills generally have a 4-week, 13-week, 26-week, or 52-week maturity period. H&r block e file They are generally issued at a discount in the amount of $100 and multiples of $100. H&r block e file The difference between the discounted price you pay for the bills and the face value you receive at maturity is interest income. H&r block e file Generally, you report this interest income when the bill is paid at maturity. H&r block e file If you paid a premium for a bill (more than the face value), you generally report the premium as a section 171 deduction when the bill is paid at maturity. H&r block e file Treasury notes and bonds. H&r block e file   Treasury notes have maturity periods of more than 1 year, ranging up to 10 years. H&r block e file Maturity periods for Treasury bonds are longer than 10 years. H&r block e file Both generally are issued in denominations of $100 to $1 million and generally pay interest every 6 months. H&r block e file Generally, you report this interest for the year paid. H&r block e file For more information, see U. H&r block e file S. H&r block e file Treasury Bills, Notes, and Bonds in chapter 1 of Publication 550. H&r block e file For other information on Treasury notes or bonds, write to:  Bureau of the Public Debt P. H&r block e file O. H&r block e file Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. H&r block e file treasurydirect. H&r block e file gov/indiv/indiv. H&r block e file htm. H&r block e file For information on series EE, series I, and series HH savings bonds, see U. H&r block e file S. H&r block e file Savings Bonds , earlier. H&r block e file Treasury inflation-protected securities (TIPS). H&r block e file   These securities pay interest twice a year at a fixed rate, based on a principal amount adjusted to take into account inflation and deflation. H&r block e file For the tax treatment of these securities, see Inflation-Indexed Debt Instruments under Original Issue Discount (OID), in Publication 550. H&r block e file Bonds Sold Between Interest Dates If you sell a bond between interest payment dates, part of the sales price represents interest accrued to the date of sale. H&r block e file You must report that part of the sales price as interest income for the year of sale. H&r block e file If you buy a bond between interest payment dates, part of the purchase price represents interest accrued before the date of purchase. H&r block e file When that interest is paid to you, treat it as a return of your capital investment, rather than interest income, by reducing your basis in the bond. H&r block e file See Accrued interest on bonds under How To Report Interest Income in chapter 1 of Publication 550 for information on reporting the payment. H&r block e file Insurance Life insurance proceeds paid to you as beneficiary of the insured person are usually not taxable. H&r block e file But if you receive the proceeds in installments, you must usually report a part of each installment payment as interest income. H&r block e file For more information about insurance proceeds received in installments, see Publication 525, Taxable and Nontaxable Income. H&r block e file Annuity. H&r block e file   If you buy an annuity with life insurance proceeds, the annuity payments you receive are taxed as pension and annuity income from a nonqualified plan, not as interest income. H&r block e file See chapter 10 for information on pension and annuity income from nonqualified plans. H&r block e file State or Local Government Obligations Interest on a bond used to finance government operations generally is not taxable if the bond is issued by a state, the District of Columbia, a possession of the United States, or any of their political subdivisions. H&r block e file Bonds issued after 1982 (including tribal economic development bonds issued after February 17, 2009) by an Indian tribal government are treated as issued by a state. H&r block e file Interest on these bonds is generally tax exempt if the bonds are part of an issue of which substantially all proceeds are to be used in the exercise of any essential government function. H&r block e file For information on federally guaranteed bonds, mortgage revenue bonds, arbitrage bonds, private activity bonds, qualified tax credit bonds, and Build America bonds, see State or Local Government Obligations in chapter 1 of Publication 550. H&r block e file Information reporting requirement. H&r block e file   If you must file a tax return, you are required to show any tax-exempt interest you received on your return. H&r block e file This is an information reporting requirement only. H&r block e file It does not change tax-exempt interest to taxable interest. H&r block e file Original Issue Discount (OID) Original issue discount (OID) is a form of interest. H&r block e file You generally include OID in your income as it accrues over the term of the debt instrument, whether or not you receive any payments from the issuer. H&r block e file A debt instrument generally has OID when the instrument is issued for a price that is less than its stated redemption price at maturity. H&r block e file OID is the difference between the stated redemption price at maturity and the issue price. H&r block e file All debt instruments that pay no interest before maturity are presumed to be issued at a discount. H&r block e file Zero coupon bonds are one example of these instruments. H&r block e file The OID accrual rules generally do not apply to short-term obligations (those with a fixed maturity date of 1 year or less from date of issue). H&r block e file See Discount on Short-Term Obligations in chapter 1 of Publication 550. H&r block e file De minimis OID. H&r block e file   You can treat the discount as zero if it is less than one-fourth of 1% (. H&r block e file 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. H&r block e file This small discount is known as “de minimis” OID. H&r block e file Example 1. H&r block e file You bought a 10-year bond with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. H&r block e file One-fourth of 1% of $1,000 (stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. H&r block e file Because the $20 discount is less than $25, the OID is treated as zero. H&r block e file (If you hold the bond at maturity, you will recognize $20 ($1,000 − $980) of capital gain. H&r block e file ) Example 2. H&r block e file The facts are the same as in Example 1, except that the bond was issued at $950. H&r block e file The OID is $50. H&r block e file Because the $50 discount is more than the $25 figured in Example 1, you must include the OID in income as it accrues over the term of the bond. H&r block e file Debt instrument bought after original issue. H&r block e file   If you buy a debt instrument with de minimis OID at a premium, the discount is not includible in income. H&r block e file If you buy a debt instrument with de minimis OID at a discount, the discount is reported under the market discount rules. H&r block e file See Market Discount Bonds in chapter 1 of Publication 550. H&r block e file Exceptions to reporting OID. H&r block e file   The OID rules discussed in this chapter do not apply to the following debt instruments. H&r block e file Tax-exempt obligations. H&r block e file (However, see Stripped tax-exempt obligations under Stripped Bonds and Coupons in chapter 1 of Publication 550). H&r block e file U. H&r block e file S. H&r block e file savings bonds. H&r block e file Short-term debt instruments (those with a fixed maturity date of not more than 1 year from the date of issue). H&r block e file Obligations issued by an individual before March 2, 1984. H&r block e file Loans between individuals if all the following are true. H&r block e file The lender is not in the business of lending money. H&r block e file The amount of the loan, plus the amount of any outstanding prior loans between the same individuals, is $10,000 or less. H&r block e file Avoiding any federal tax is not one of the principal purposes of the loan. H&r block e file Form 1099-OID. H&r block e file   The issuer of the debt instrument (or your broker if you held the instrument through a broker) should give you Form 1099-OID, or a similar statement, if the total OID for the calendar year is $10 or more. H&r block e file Form 1099-OID will show, in box 1, the amount of OID for the part of the year that you held the bond. H&r block e file It also will show, in box 2, the stated interest you must include in your income. H&r block e file A copy of Form 1099-OID will be sent to the IRS. H&r block e file Do not file your copy with your return. H&r block e file Keep it for your records. H&r block e file   In most cases, you must report the entire amount in boxes 1 and 2 of Form 1099-OID as interest income. H&r block e file But see Refiguring OID shown on Form 1099-OID, later in this discussion, for more information. H&r block e file Form 1099-OID not received. H&r block e file   If you had OID for the year but did not receive a Form 1099-OID, you can find tables on IRS. H&r block e file gov that list total OID on certain debt instruments and have information that will help you figure OID. H&r block e file For the latest OID tables, go to www. H&r block e file irs. H&r block e file gov and enter “OID tables” in the Search box. H&r block e file If your debt instrument is not listed, consult the issuer for further information about the accrued OID for the year. H&r block e file Nominee. H&r block e file   If someone else is the holder of record (the registered owner) of an OID instrument belonging to you and receives a Form 1099-OID on your behalf, that person must give you a Form 1099-OID. H&r block e file Refiguring OID shown on Form 1099-OID. H&r block e file   You must refigure the OID shown in box 1 or box 8 of Form 1099-OID if either of the following apply. H&r block e file You bought the debt instrument after its original issue and paid a premium or an acquisition premium. H&r block e file The debt instrument is a stripped bond or a stripped coupon (including certain zero coupon instruments). H&r block e file For information about figuring the correct amount of OID to include in your income, see Figuring OID on Long-Term Debt Instruments in Publication 1212. H&r block e file Refiguring periodic interest shown on Form 1099-OID. H&r block e file   If you disposed of a debt instrument or acquired it from another holder during the year, see Bonds Sold Between Interest Dates , earlier, for information about the treatment of periodic interest that may be shown in box 2 of Form 1099-OID for that instrument. H&r block e file Certificates of deposit (CDs). H&r block e file   If you buy a CD with a maturity of more than 1 year, you must include in income each year a part of the total interest due and report it in the same manner as other OID. H&r block e file   This also applies to similar deposit arrangements with banks, building and loan associations, etc. H&r block e file , including: Time deposits, Bonus plans, Savings certificates, Deferred income certificates, Bonus savings certificates, and Growth savings certificates. H&r block e file Bearer CDs. H&r block e file   CDs issued after 1982 generally must be in registered form. H&r block e file Bearer CDs are CDs not in registered form. H&r block e file They are not issued in the depositor's name and are transferable from one individual to another. H&r block e file   Banks must provide the IRS and the person redeeming a bearer CD with a Form 1099-INT. H&r block e file More information. H&r block e file   See chapter 1 of Publication 550 for more information about OID and related topics, such as market discount bonds. H&r block e file When To Report Interest Income When to report your interest income depends on whether you use the cash method or an accrual method to report income. H&r block e file Cash method. H&r block e file   Most individual taxpayers use the cash method. H&r block e file If you use this method, you generally report your interest income in the year in which you actually or constructively receive it. H&r block e file However, there are special rules for reporting the discount on certain debt instruments. H&r block e file See U. H&r block e file S. H&r block e file Savings Bonds and Original Issue Discount (OID) , earlier. H&r block e file Example. H&r block e file On September 1, 2011, you loaned another individual $2,000 at 12%, compounded annually. H&r block e file You are not in the business of lending money. H&r block e file The note stated that principal and interest would be due on August 31, 2013. H&r block e file In 2013, you received $2,508. H&r block e file 80 ($2,000 principal and $508. H&r block e file 80 interest). H&r block e file If you use the cash method, you must include in income on your 2013 return the $508. H&r block e file 80 interest you received in that year. H&r block e file Constructive receipt. H&r block e file   You constructively receive income when it is credited to your account or made available to you. H&r block e file You do not need to have physical possession of it. H&r block e file For example, you are considered to receive interest, dividends, or other earnings on any deposit or account in a bank, savings and loan, or similar financial institution, or interest on life insurance policy dividends left to accumulate, when they are credited to your account and subject to your withdrawal. H&r block e file This is true even if they are not yet entered in your passbook. H&r block e file   You constructively receive income on the deposit or account even if you must: Make withdrawals in multiples of even amounts, Give a notice to withdraw before making the withdrawal, Withdraw all or part of the account to withdraw the earnings, or Pay a penalty on early withdrawals, unless the interest you are to receive on an early withdrawal or redemption is substantially less than the interest payable at maturity. H&r block e file Accrual method. H&r block e file   If you use an accrual method, you report your interest income when you earn it, whether or not you have received it. H&r block e file Interest is earned over the term of the debt instrument. H&r block e file Example. H&r block e file If, in the previous example, you use an accrual method, you must include the interest in your income as you earn it. H&r block e file You would report the interest as follows: 2011, $80; 2012, $249. H&r block e file 60; and 2013, $179. H&r block e file 20. H&r block e file Coupon bonds. H&r block e file   Interest on coupon bonds is taxable in the year the coupon becomes due and payable. H&r block e file It does not matter when you mail the coupon for payment. H&r block e file How To Report Interest Income Generally, you report all your taxable interest income on Form 1040, line 8a; Form 1040A, line 8a; or Form 1040EZ, line 2. H&r block e file You cannot use Form 1040EZ if your taxable interest income is more than $1,500. H&r block e file Instead, you must use Form 1040A or Form 1040. H&r block e file Form 1040A. H&r block e file   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040A and any of the following are true. H&r block e file Your taxable interest income is more than $1,500. H&r block e file You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). H&r block e file You received interest from a seller-financed mortgage, and the buyer used the property as a home. H&r block e file You received a Form 1099-INT for U. H&r block e file S. H&r block e file savings bond interest that includes amounts you reported before 2013. H&r block e file You received, as a nominee, interest that actually belongs to someone else. H&r block e file You received a Form 1099-INT for interest on frozen deposits. H&r block e file You are reporting OID in an amount less than the amount shown on Form 1099-OID. H&r block e file You received a Form 1099-INT for interest on a bond you bought between interest payment dates. H&r block e file You acquired taxable bonds after 1987 and choose to reduce interest income from the bonds by any amortizable bond premium (see Bond Premium Amortization in chapter 3 of Publication 550). H&r block e file List each payer's name and the amount of interest income received from each payer on line 1. H&r block e file If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. H&r block e file   You cannot use Form 1040A if you must use Form 1040, as described next. H&r block e file Form 1040. H&r block e file   You must use Form 1040 instead of Form 1040A or Form 1040EZ if: You forfeited interest income because of the early withdrawal of a time deposit; You acquired taxable bonds after 1987, you choose to reduce interest income from the bonds by any amortizable bond premium, and you are deducting the excess of bond premium amortization for the accrual period over the qualified stated interest for the period (see Bond Premium Amortization in chapter 3 of Publication 550); or You received tax-exempt interest from private activity bonds issued after August 7, 1986. H&r block e file Schedule B (Form 1040A or 1040). H&r block e file   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040 and any of the following apply. H&r block e file Your taxable interest income is more than $1,500. H&r block e file You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). H&r block e file You received interest from a seller-financed mortgage, and the buyer used the property as a home. H&r block e file You received a Form 1099-INT for U. H&r block e file S. H&r block e file savings bond interest that includes amounts you reported before 2013. H&r block e file You received, as a nominee, interest that actually belongs to someone else. H&r block e file You received a Form 1099-INT for interest on frozen deposits. H&r block e file You received a Form 1099-INT for interest on a bond you bought between interest payment dates. H&r block e file You are reporting OID in an amount less than the amount shown on Form 1099-OID. H&r block e file Statement (2) in the preceding list under Form 1040 is true. H&r block e file In Part I, line 1, list each payer's name and the amount received from each. H&r block e file If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. H&r block e file Reporting tax-exempt interest. H&r block e file   Total your tax-exempt interest (such as interest or accrued OID on certain state and municipal bonds, including tax-exempt interest on zero coupon municipal bonds) and exempt-interest dividends from a mutual fund as shown on Form 1099-INT, box 8, and on Form 1099-DIV, box 10. H&r block e file Add these amounts to any other tax-exempt interest you received. H&r block e file Report the total on line 8b of Form 1040A or 1040. H&r block e file   If you file Form 1040EZ, enter “TEI” and the amount in the space to the left of line 2. H&r block e file Do not add tax-exempt interest in the total on Form 1040EZ, line 2. H&r block e file   Form 1099-INT, box 9, and Form 1099-DIV, box 11, show the tax-exempt interest subject to the alternative minimum tax on Form 6251. H&r block e file These amounts are already included in the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. H&r block e file Do not add the amounts in Form 1099-INT, box 9 and Form 1099-DIV, box 11 to, or subtract them from, the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. H&r block e file    Do not report interest from an individual retirement account (IRA) as tax-exempt interest. H&r block e file Form 1099-INT. H&r block e file   Your taxable interest income, except for interest from U. H&r block e file S. H&r block e file savings bonds and Treasury obligations, is shown in box 1 of Form 1099-INT. H&r block e file Add this amount to any other taxable interest income you received. H&r block e file You must report all of your taxable interest income even if you do not receive a Form 1099-INT. H&r block e file Generally, contact your financial institution if you do not receive a Form 1099-INT by February 15. H&r block e file Your identifying number may be truncated on any paper Form 1099-INT you receive. H&r block e file   If you forfeited interest income because of the early withdrawal of a time deposit, the deductible amount will be shown on Form 1099-INT in box 2. H&r block e file See Penalty on early withdrawal of savings in chapter 1 of Publication 550. H&r block e file   Box 3 of Form 1099-INT shows the interest income you received from U. H&r block e file S. H&r block e file savings bonds, Treasury bills, Treasury notes, and Treasury bonds. H&r block e file Add the amount shown in box 3 to any other taxable interest income you received, unless part of the amount in box 3 was previously included in your interest income. H&r block e file If part of the amount shown in box 3 was previously included in your interest income, see U. H&r block e file S. H&r block e file savings bond interest previously reported , later. H&r block e file   Box 4 of Form 1099-INT will contain an amount if you were subject to backup withholding. H&r block e file Report the amount from box 4 on Form 1040EZ, line 7; on Form 1040A, line 36; or Form 1040, line 62 (federal income tax withheld). H&r block e file   Box 5 of Form 1099-INT shows investment expenses you may be able to deduct as an itemized deduction. H&r block e file See chapter 28 for more information about investment expenses. H&r block e file   If there are entries in boxes 6 and 7 of Form 1099-INT, you must file Form 1040. H&r block e file You may be able to take a credit for the amount shown in box 6 unless you deduct this amount on line 8 of Schedule A (Form 1040). H&r block e file To take the credit, you may have to file Form 1116, Foreign Tax Credit. H&r block e file For more information, see Publication 514, Foreign Tax Credit for Individuals. H&r block e file U. H&r block e file S. H&r block e file savings bond interest previously reported. H&r block e file   If you received a Form 1099-INT for U. H&r block e file S. H&r block e file savings bond interest, the form may show interest you do not have to report. H&r block e file See Form 1099-INT for U. H&r block e file S. H&r block e file savings bonds interest , earlier, under U. H&r block e file S. H&r block e file Savings Bonds. H&r block e file   On Schedule B (Form 1040A or 1040), Part I, line 1, report all the interest shown on your Form 1099-INT. H&r block e file Then follow these steps. H&r block e file Several lines above line 2, enter a subtotal of all interest listed on line 1. H&r block e file Below the subtotal enter “U. H&r block e file S. H&r block e file Savings Bond Interest Previously Reported” and enter amounts previously reported or interest accrued before you received the bond. H&r block e file Subtract these amounts from the subtotal and enter the result on line 2. H&r block e file More information. H&r block e file   For more information about how to report interest income, see chapter 1 of Publication 550 or the instructions for the form you must file. H&r block e file Prev  Up  Next   Home   More Online Publications