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H&r Block My Block

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H&r block my block 28. H&r block my block   Miscellaneous Deductions Table of Contents What's New Introduction Useful Items - You may want to see: Deductions Subject to the 2% LimitUnreimbursed Employee Expenses (Line 21) Tax Preparation Fees (Line 22) Other Expenses (Line 23) Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses What's New Standard mileage rate. H&r block my block  The 2013 rate for business use of a vehicle is 56½ cents per mile. H&r block my block Introduction This chapter explains which expenses you can claim as miscellaneous itemized deductions on Schedule A (Form 1040). H&r block my block You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. H&r block my block This chapter covers the following topics. H&r block my block Deductions subject to the 2% limit. H&r block my block Deductions not subject to the 2% limit. H&r block my block Expenses you cannot deduct. H&r block my block You must keep records to verify your deductions. H&r block my block You should keep receipts, canceled checks, substitute checks, financial account statements, and other documentary evidence. H&r block my block For more information on recordkeeping, get Publication 552, Record- keeping for Individuals. H&r block my block Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) 946 How To Depreciate Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040). H&r block my block You can claim the amount of expenses that is more than 2% of your adjusted gross income. H&r block my block You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. H&r block my block Your adjusted gross income is the amount on Form 1040, line 38. H&r block my block Generally, you apply the 2% limit after you apply any other deduction limit. H&r block my block For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed in chapter 26) before you apply the 2% limit. H&r block my block Deductions subject to the 2% limit are discussed in the three categories in which you report them on Schedule A (Form 1040). H&r block my block Unreimbursed employee expenses (line 21). H&r block my block Tax preparation fees (line 22). H&r block my block Other expenses (line 23). H&r block my block Unreimbursed Employee Expenses (Line 21) Generally, you can deduct on Schedule A (Form 1040), line 21, unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. H&r block my block An expense is ordinary if it is common and accepted in your trade, business, or profession. H&r block my block An expense is necessary if it is appropriate and helpful to your business. H&r block my block An expense does not have to be required to be considered necessary. H&r block my block Examples of unreimbursed employee expenses are listed next. H&r block my block The list is followed by discussions of additional unreimbursed employee expenses. H&r block my block Business bad debt of an employee. H&r block my block Education that is work related. H&r block my block (See chapter 27. H&r block my block ) Legal fees related to your job. H&r block my block Licenses and regulatory fees. H&r block my block Malpractice insurance premiums. H&r block my block Medical examinations required by an employer. H&r block my block Occupational taxes. H&r block my block Passport for a business trip. H&r block my block Subscriptions to professional journals and trade magazines related to your work. H&r block my block Travel, transportation, entertainment, and gifts related to your work. H&r block my block (See chapter 26. H&r block my block ) Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. H&r block my block Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer that are attributable to the pay you received from that employer. H&r block my block Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. H&r block my block For more information about the rules and exceptions to the rules affecting the allowable deductions for a home computer, see Publication 529. H&r block my block Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. H&r block my block Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. H&r block my block Lobbying and political activities. H&r block my block   You may not be able to deduct that part of your dues that is for certain lobbying and political activities. H&r block my block See Dues used for lobbying under Nondeductible Expenses, later. H&r block my block Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. H&r block my block If you file Form 1040A, you can deduct these expenses on line 16. H&r block my block If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. H&r block my block However, neither spouse can deduct more than $250 of his or her qualified expenses. H&r block my block Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. H&r block my block You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. H&r block my block The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. H&r block my block See Publication 587 for more detailed information and a worksheet. H&r block my block Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. H&r block my block You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. H&r block my block Employment and outplacement agency fees. H&r block my block   You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. H&r block my block Employer pays you back. H&r block my block   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. H&r block my block (See Recoveries in chapter 12. H&r block my block ) Employer pays the employment agency. H&r block my block   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. H&r block my block Résumé. H&r block my block   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. H&r block my block Travel and transportation expenses. H&r block my block   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. H&r block my block You can deduct the travel expenses if the trip is primarily to look for a new job. H&r block my block The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. H&r block my block   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. H&r block my block   You can choose to use the standard mileage rate to figure your car expenses. H&r block my block The 2013 rate for business use of a vehicle is 56½ cents per mile. H&r block my block See chapter 26 for more information. H&r block my block Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. H&r block my block Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. H&r block my block If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. H&r block my block Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. H&r block my block If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. H&r block my block Research Expenses of a College Professor If you are a college professor, you can deduct research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. H&r block my block You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. H&r block my block However, you cannot deduct the cost of travel as a form of education. H&r block my block Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. H&r block my block You can depreciate the cost of tools that have a useful life substantially beyond the tax year. H&r block my block For more information about depreciation, see Publication 946. H&r block my block Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. H&r block my block You can also deduct assessments for benefit payments to unemployed union members. H&r block my block However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. H&r block my block Also, you cannot deduct contributions to a pension fund, even if the union requires you to make the contributions. H&r block my block You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. H&r block my block See Lobbying Expenses under Nondeductible Expenses, later. H&r block my block Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. H&r block my block You must wear them as a condition of your employment. H&r block my block The clothes are not suitable for everyday wear. H&r block my block It is not enough that you wear distinctive clothing. H&r block my block The clothing must be specifically required by your employer. H&r block my block Nor is it enough that you do not, in fact, wear your work clothes away from work. H&r block my block The clothing must not be suitable for taking the place of your regular clothing. H&r block my block Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. H&r block my block ). H&r block my block Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. H&r block my block However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. H&r block my block Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. H&r block my block Protective clothing. H&r block my block   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. H&r block my block   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. H&r block my block Military uniforms. H&r block my block   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. H&r block my block However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. H&r block my block In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. H&r block my block   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. H&r block my block   You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. H&r block my block Tax Preparation Fees (Line 22) You can usually deduct tax preparation fees in the year you pay them. H&r block my block Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. H&r block my block These fees include the cost of tax preparation software programs and tax publications. H&r block my block They also include any fee you paid for electronic filing of your return. H&r block my block Other Expenses (Line 23) You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2% limit. H&r block my block On Schedule A (Form 1040), line 23, you can deduct expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. H&r block my block You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonably and closely related to these purposes. H&r block my block Some of these other expenses are explained in the following discussions. H&r block my block If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses , later, under Nondeductible Expenses. H&r block my block Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. H&r block my block Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. H&r block my block First report the loss in Section B of Form 4684, Casualties and Thefts. H&r block my block You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. H&r block my block To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. H&r block my block For other casualty and theft losses, see chapter 25. H&r block my block Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. H&r block my block Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. H&r block my block The fees are deductible in the year paid. H&r block my block Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). H&r block my block You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. H&r block my block But if you work as an employee and also use the computer in that work, see Publication 946. H&r block my block Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. H&r block my block Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. H&r block my block The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. H&r block my block For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. H&r block my block Fees to Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. H&r block my block But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. H&r block my block You must add the fee to the cost of the property. H&r block my block You cannot deduct the fee you pay to a broker to sell securities. H&r block my block You can use the fee only to figure gain or loss from the sale. H&r block my block See the Instructions for Form 8949 for information on how to report the fee. H&r block my block Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. H&r block my block A hobby is not a business because it is not carried on to make a profit. H&r block my block See Activity not for profit in chapter 12 under Other Income. H&r block my block Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. H&r block my block Deductions of pass-through entities are passed through to the partners or shareholders. H&r block my block The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. H&r block my block Example. H&r block my block You are a member of an investment club that is formed solely to invest in securities. H&r block my block The club is treated as a partnership. H&r block my block The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. H&r block my block In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. H&r block my block However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. H&r block my block Publicly offered mutual funds. H&r block my block   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. H&r block my block A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. H&r block my block   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). H&r block my block This net figure is the amount you report on your return as income. H&r block my block You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. H&r block my block Information returns. H&r block my block   You should receive information returns from pass-through entities. H&r block my block Partnerships and S corporations. H&r block my block   These entities issue Schedule K-1, which lists the items and amounts you must report and identifies the tax return schedules and lines to use. H&r block my block Nonpublicly offered mutual funds. H&r block my block   These funds will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing your share of gross income and investment expenses. H&r block my block You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. H&r block my block Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. H&r block my block Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. H&r block my block You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce, if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. H&r block my block You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F), on the appropriate schedule. H&r block my block You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040). H&r block my block See Tax Preparation Fees , earlier. H&r block my block Loss on Deposits For information on whether, and if so, how, you may deduct a loss on your deposit in a qualified financial institution, see Loss on Deposits in chapter 25. H&r block my block Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. H&r block my block If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. H&r block my block If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. H&r block my block Repayments of Social Security Benefits For information on how to deduct your repayments of certain social security benefits, see Repayments More Than Gross Benefits in chapter 11. H&r block my block Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. H&r block my block You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. H&r block my block Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. H&r block my block These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. H&r block my block Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your individual retirement arrangement (IRA) are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. H&r block my block For more information about IRAs, see chapter 17. H&r block my block Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. H&r block my block They are not subject to the 2% limit. H&r block my block Report these items on Schedule A (Form 1040), line 28. H&r block my block List of Deductions Each of the following items is discussed in detail after the list (except where indicated). H&r block my block Amortizable premium on taxable bonds. H&r block my block Casualty and theft losses from income- producing property. H&r block my block Federal estate tax on income in respect of a decedent. H&r block my block Gambling losses up to the amount of gambling winnings. H&r block my block Impairment-related work expenses of persons with disabilities. H&r block my block Loss from other activities from Schedule K-1 (Form 1065-B), box 2. H&r block my block Losses from Ponzi-type investment schemes. H&r block my block See Losses from Ponzi-type investment schemes under Theft in chapter 25. H&r block my block Repayments of more than $3,000 under a claim of right. H&r block my block Unrecovered investment in an annuity. H&r block my block Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. H&r block my block You can elect to amortize the premium on taxable bonds. H&r block my block The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. H&r block my block Part of the premium on some bonds may be a miscellaneous deduction not subject to the 2% limit. H&r block my block For more information, see Amortizable Premium on Taxable Bonds in Publication 529, and Bond Premium Amortization in chapter 3 of Publication 550, Investment Income and Expenses. H&r block my block Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). H&r block my block First, report the loss in Form 4684, Section B. H&r block my block You may also have to include the loss on Form 4797, Sales of Business Property if you are otherwise required to file that form. H&r block my block To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. H&r block my block For more information on casualty and theft losses, see chapter 25. H&r block my block Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. H&r block my block Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. H&r block my block See Publication 559 for more information. H&r block my block Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. H&r block my block You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. H&r block my block You cannot deduct gambling losses that are more than your winnings. H&r block my block You cannot reduce your gambling winnings by your gambling losses and report the difference. H&r block my block You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. H&r block my block Therefore, your records should show your winnings separately from your losses. H&r block my block Diary of winnings and losses. H&r block my block You must keep an accurate diary or similar record of your losses and winnings. H&r block my block Your diary should contain at least the following information. H&r block my block The date and type of your specific wager or wagering activity. H&r block my block The name and address or location of the gambling establishment. H&r block my block The names of other persons present with you at the gambling establishment. H&r block my block The amount(s) you won or lost. H&r block my block See Publication 529 for more information. H&r block my block Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. H&r block my block Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and for other expenses in connection with your place of work that are necessary for you to be able to work. H&r block my block Self-employed. H&r block my block   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. H&r block my block Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28. H&r block my block It is not subject to the passive activity limitations. H&r block my block Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid or take a credit against your tax. H&r block my block See Repayments in chapter 12 for more information. H&r block my block Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. H&r block my block If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. H&r block my block See chapter 10 for more information about the tax treatment of pensions and annuities. H&r block my block Nondeductible Expenses Examples of nondeductible expenses are listed next. H&r block my block The list is followed by discussions of additional nondeductible expenses. H&r block my block List of Nondeductible Expenses Broker's commissions that you paid in connection with your IRA or other investment property. H&r block my block Burial or funeral expenses, including the cost of a cemetery lot. H&r block my block Capital expenses. H&r block my block Fees and licenses, such as car licenses, marriage licenses, and dog tags. H&r block my block Hobby losses, but see Hobby Expenses , earlier. H&r block my block Home repairs, insurance, and rent. H&r block my block Illegal bribes and kickbacks. H&r block my block See Bribes and kickbacks in chapter 11 of Publication 535. H&r block my block Losses from the sale of your home, furniture, personal car, etc. H&r block my block Personal disability insurance premiums. H&r block my block Personal, living, or family expenses. H&r block my block The value of wages never received or lost vacation time. H&r block my block Adoption Expenses You cannot deduct the expenses of adopting a child, but you may be able to take a credit for those expenses. H&r block my block See chapter 37. H&r block my block Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. H&r block my block These include qualification and registration fees for primary elections. H&r block my block Legal fees. H&r block my block   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. H&r block my block Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. H&r block my block Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. H&r block my block This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. H&r block my block You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. H&r block my block Dues paid to airline, hotel, and luncheon clubs are not deductible. H&r block my block Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). H&r block my block If you haul tools, instruments, or other items, in your car to and from work, you can deduct only the additional cost of hauling the items such as the rent on a trailer to carry the items. H&r block my block Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. H&r block my block This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). H&r block my block Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. H&r block my block Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. H&r block my block Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. H&r block my block However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. H&r block my block See Home Office under Unreimbursed Employee Expenses, earlier, and Security System under Deducting Expenses in Publication 587. H&r block my block Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. H&r block my block Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. H&r block my block You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. H&r block my block See chapter 18 for information on alimony. H&r block my block Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. H&r block my block These include expenses to: Influence legislation, Participate or intervene in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. H&r block my block Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. H&r block my block Dues used for lobbying. H&r block my block   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. H&r block my block See Lobbying Expenses in Publication 529 for information on exceptions. H&r block my block Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. H&r block my block However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. H&r block my block See chapter 25. H&r block my block Example. H&r block my block A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. H&r block my block The diamond falls from the ring and is never found. H&r block my block The loss of the diamond is a casualty. H&r block my block Lunches with Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. H&r block my block See chapter 26 for information on deductible expenses while traveling away from home. H&r block my block Meals While Working Late You cannot deduct the cost of meals while working late. H&r block my block However, you may be able to claim a deduction if the cost of meals is a deductible entertainment expense, or if you are traveling away from home. H&r block my block See chapter 26 for information on deductible entertainment expenses and expenses while traveling away from home. H&r block my block Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. H&r block my block Custody of children. H&r block my block Breach of promise to marry suit. H&r block my block Civil or criminal charges resulting from a personal relationship. H&r block my block Damages for personal injury, except for certain unlawful discrimination and whistleblower claims. H&r block my block Preparation of a title (or defense or perfection of a title). H&r block my block Preparation of a will. H&r block my block Property claims or property settlement in a divorce. H&r block my block You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. H&r block my block Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. H&r block my block Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. H&r block my block Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. H&r block my block Accounting certificate fees paid for the initial right to practice accounting. H&r block my block Bar exam fees and incidental expenses in securing initial admission to the bar. H&r block my block Medical and dental license fees paid to get initial licensing. H&r block my block Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. H&r block my block Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. H&r block my block Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. H&r block my block Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. H&r block my block You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. H&r block my block Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. H&r block my block You cannot deduct interest on a debt incurred or continued to buy or carry  tax-exempt securities. H&r block my block If you have expenses to produce both taxable and tax-exempt income, but you cannot identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct. H&r block my block Example. H&r block my block During the year, you received taxable interest of $4,800 and tax-exempt interest of $1,200. H&r block my block In earning this income, you had total expenses of $500 during the year. H&r block my block You cannot identify the amount of each expense item that is for each income item. H&r block my block Therefore, 80% ($4,800/$6,000) of the expense is for the taxable interest and 20% ($1,200/$6,000) is for the tax-exempt interest. H&r block my block You can deduct, subject to the 2% limit, expenses of $400 (80% of $500). H&r block my block Travel Expenses for Another Individual You generally cannot deduct travel expenses you pay or incur for a spouse, dependent, or other individual who accompanies you (or your employee) on business or personal travel unless the spouse, dependent, or other individual is an employee of the taxpayer, the travel is for a bona fide business purpose, and such expenses would otherwise be deductible by the spouse, dependent, or other individual. H&r block my block See chapter 26 for more information on deductible travel expenses. H&r block my block Voluntary Unemployment Benefit Fund Contributions You cannot deduct voluntary unemployment benefit fund contributions you make to a union fund or a private fund. H&r block my block However, you can deduct contributions as taxes if state law requires you to make them to a state unemployment fund that covers you for the loss of wages from unemployment caused by business conditions. H&r block my block Wristwatches You cannot deduct the cost of a wristwatch, even if there is a job requirement that you know the correct time to properly perform your duties. H&r block my block Prev  Up  Next   Home   More Online Publications
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IRS Opens Online FATCA Registration System

IR-2013-69, Aug. 19, 2013

WASHINGTON — The Internal Revenue Service today announced the opening of a new online registration system for financial institutions that need to register with the IRS under the Foreign Account Tax Compliance Act (FATCA).

Financial institutions that must register with the IRS to meet their FATCA obligations can now begin the process of registering by creating an account and providing required information. Financial institutions will also be able to provide required information for their branches of operation and other members of their expanded affiliate groups in which the financial institution is the lead organization.

The registration system, designed to enable secure account management, is a web-based application with around-the-clock availability.

Within a secure environment, the new registration system enables financial institutions to:

  • establish online accounts;
  • customize home pages to manage accounts;
  • designate points of contact to handle registrations;
  • oversee member and/or branch information; and
  • receive automatic notifications of status changes.

Financial institutions are encouraged to become familiar with the system, create their online accounts and begin submitting their information. Starting in January 2014, financial institutions will be expected to finalize their registration information by logging into their accounts, making any necessary changes and submitting the information as final.

As registrations are finalized and approved in 2014, registering financial institutions will receive a notice of registration acceptance and will be issued a global intermediary identification number.

The IRS will electronically post the first IRS Foreign Financial Institution (FFI) List in June 2014, and will update the list monthly. To ensure inclusion in the June 2014 IRS FFI List, financial institutions will need to finalize their registrations by April 25, 2014. 

Access to the FATCA registration system and related support information can be found on the FATCA page of IRS.gov.

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Page Last Reviewed or Updated: 04-Sep-2013

The H&r Block My Block

H&r block my block 31. H&r block my block   Tax on Unearned Income of Certain Children Table of Contents What's New Introduction Useful Items - You may want to see: Which Parent's Return To UseParents Who Do Not File a Joint Return Parent's Election To Report Child's Interest and DividendsEffect of Making the Election Figuring Child's Income Figuring Additional Tax Tax for Certain Children Who Have Unearned IncomeProviding Parental Information (Form 8615, lines A–C) Step 1. H&r block my block Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. H&r block my block Figuring Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. H&r block my block Figuring the Child's Tax (Form 8615, Part III) What's New Net Investment Income Tax. H&r block my block . H&r block my block  For tax years beginning after December 31, 2012, a child whose tax is figured on Form 8615 may be subject to the Net Investment Income Tax (NIIT). H&r block my block NIIT is a 3. H&r block my block 8% tax on the lesser of the net investment income or the excess of the child's modified adjusted gross income (MAGI) over the threshold amount. H&r block my block Use Form 8960, Net Investment Income Tax, to figure this tax. H&r block my block For more information on NIIT, go to www. H&r block my block irs. H&r block my block gov and enter “Net Investment Income Tax” in the search box. H&r block my block Introduction This chapter discusses the following two rules that may affect the tax on unearned income of certain children. H&r block my block If the child's interest and dividend income (including capital gain distributions) total less than $10,000, the child's parent may be able to choose to include that income on the parent's return rather than file a return for the child. H&r block my block (See Parent's Election To Report Child's Interest and Dividends , later. H&r block my block ) If the child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. H&r block my block (See Tax for Certain Children Who Have Unearned Income , later. H&r block my block ) For these rules, the term “child” includes a legally adopted child and a stepchild. H&r block my block These rules apply whether or not the child is a dependent. H&r block my block Useful Items - You may want to see: Publication 929 Tax Rules for Children and Dependents Form (and Instructions) 8615 Tax for Certain Children Who Have Unearned Income 8814 Parents' Election To Report Child's Interest and Dividends Which Parent's Return To Use If a child's parents are married to each other and file a joint return, use the joint return to figure the tax on the child's unearned income. H&r block my block The tax rate and other return information from that return are used to figure the child's tax as explained later under Tax for Certain Children Who Have Unearned Income . H&r block my block Parents Who Do Not File a Joint Return For parents who do not file a joint return, the following discussions explain which parent's tax return must be used to figure the tax. H&r block my block Only the parent whose tax return is used can make the election described under Parent's Election To Report Child's Interest and Dividends . H&r block my block Parents are married. H&r block my block   If the child's parents file separate returns, use the return of the parent with the greater taxable income. H&r block my block Parents not living together. H&r block my block   If the child's parents are married to each other but not living together, and the parent with whom the child lives (the custodial parent) is considered unmarried, use the return of the custodial parent. H&r block my block If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. H&r block my block   For an explanation of when a married person living apart from his or her spouse is considered unmarried, see Head of Household in chapter 2. H&r block my block Parents are divorced. H&r block my block   If the child's parents are divorced or legally separated, and the parent who had custody of the child for the greater part of the year (the custodial parent) has not remarried, use the return of the custodial parent. H&r block my block Custodial parent remarried. H&r block my block   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. H&r block my block Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. H&r block my block Do not use the return of the noncustodial parent. H&r block my block   If the custodial parent and the stepparent are married, but file separate returns, use the return of the one with the greater taxable income. H&r block my block If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. H&r block my block Parents never married. H&r block my block   If a child's parents have never been married to each other, but lived together all year, use the return of the parent with the greater taxable income. H&r block my block If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. H&r block my block Widowed parent remarried. H&r block my block   If a widow or widower remarries, the new spouse is treated as the child's other parent. H&r block my block The rules explained earlier under Custodial parent remarried apply. H&r block my block Parent's Election To Report Child's Interest and Dividends You may be able to elect to include your child's interest and dividend income (including capital gain distributions) on your tax return. H&r block my block If you do, your child will not have to file a return. H&r block my block You can make this election only if all the following conditions are met. H&r block my block Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. H&r block my block Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). H&r block my block The child's gross income was less than $10,000. H&r block my block The child is required to file a return unless you make this election. H&r block my block The child does not file a joint return for the year. H&r block my block No estimated tax payment was made for the year, and no overpayment from the previous year (or from any amended return) was applied to this year under your child's name and social security number. H&r block my block No federal income tax was taken out of your child's income under the backup withholding rules. H&r block my block You are the parent whose return must be used when applying the special tax rules for children. H&r block my block (See Which Parent's Return To Use , earlier. H&r block my block ) These conditions are also shown in Figure 31-A. H&r block my block Certain January 1 birthdays. H&r block my block   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. H&r block my block You cannot make this election for such a child unless the child was a full-time student. H&r block my block   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. H&r block my block You cannot make this election for such a child. H&r block my block Full-time student. H&r block my block   A full-time student is a child who during some part of each of any 5 calendar months of the year was enrolled as a full-time student at a school, or took a full-time on-farm training course given by a school or a state, county, or local government agency. H&r block my block A school includes a technical, trade, or mechanical school. H&r block my block It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. H&r block my block How to make the election. H&r block my block   Make the election by attaching Form 8814 to your Form 1040. H&r block my block (If you make this election, you cannot file Form 1040A or Form 1040EZ. H&r block my block ) Attach a separate Form 8814 for each child for whom you make the election. H&r block my block You can make the election for one or more children and not for others. H&r block my block Effect of Making the Election The federal income tax on your child's income may be more if you make the Form 8814 election. H&r block my block Rate may be higher. H&r block my block   If your child received qualified dividends or capital gain distributions, you may pay up to $100 more tax if you make this election instead of filing a separate tax return for the child. H&r block my block This is because the tax rate on the child's income between $1,000 and $2,000 is 10% if you make this election. H&r block my block However, if you file a separate return for the child, the tax rate may be as low as 0% (zero percent) because of the preferential tax rates for qualified dividends and capital gain distributions. H&r block my block Deductions you cannot take. H&r block my block   By making the Form 8814 election, you cannot take any of the following deductions that the child would be entitled to on his or her return. H&r block my block The additional standard deduction if the child is blind. H&r block my block The deduction for a penalty on an early withdrawal of your child's savings. H&r block my block Itemized deductions (such as your child's investment expenses or charitable contributions). H&r block my block Reduced deductions or credits. H&r block my block   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return including the following. H&r block my block Deduction for contributions to a traditional individual retirement arrangement (IRA). H&r block my block Deduction for student loan interest. H&r block my block Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. H&r block my block Credit for child and dependent care expenses. H&r block my block Child tax credit. H&r block my block Education tax credits. H&r block my block Earned income credit. H&r block my block Penalty for underpayment of estimated tax. H&r block my block   If you make this election for 2013 and did not have enough tax withheld or pay enough estimated tax to cover the tax you owe, you may be subject to a penalty. H&r block my block If you plan to make this election for 2014, you may need to increase your federal income tax withholding or your estimated tax payments to avoid the penalty. H&r block my block See chapter 4 for more information. H&r block my block Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. H&r block my block Only the amount over $2,000 is added to your income. H&r block my block The amount over $2,000 is shown on Form 8814, line 6. H&r block my block Unless the child's income includes qualified dividends or capital gain distributions (discussed next), the same amount is shown on Form 8814, line 12. H&r block my block Include the amount from Form 8814, line 12, on Form 1040, line 21. H&r block my block Enter “Form 8814” on the dotted line next to line 21. H&r block my block If you file more than one Form 8814, include the total amounts from line 12 of all your Forms 8814 on Form 1040, line 21. H&r block my block Capital gain distributions and qualified dividends. H&r block my block   If your child's dividend income included any capital gain distributions, see Capital gain distributions under Figuring Child's Income in Publication 929, Part 2. H&r block my block If your child's dividend income included any qualified dividends, see Qualified dividends under Figuring Child's Income in Publication 929, Part 2. H&r block my block Figuring Additional Tax Use Form 8814, Part II, to figure the tax on the $2,000 of your child's interest and dividends that you do not include in your income. H&r block my block This tax is added to the tax figured on your income. H&r block my block This additional tax is the smaller of: 10% × (your child's gross income − $1,000), or $100. H&r block my block Include the amount from line 15 of all your Forms 8814 in the total on Form 1040, line 44. H&r block my block Check box a on Form 1040, line 44. H&r block my block Figure 31-A. H&r block my block Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. H&r block my block Figure 31–A. H&r block my block Can You Include Your Child's Income On Your Tax Return? Tax for Certain Children Who Have Unearned Income If a child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. H&r block my block If the parent does not or cannot choose to include the child's income on the parent's return, use Form 8615 to figure the child's tax. H&r block my block Attach the completed form to the child's Form 1040 or Form 1040A. H&r block my block When Form 8615 must be filed. H&r block my block   Form 8615 must be filed for a child if all of the following statements are true. H&r block my block The child's investment income was more than $2,000. H&r block my block The child is required to file a return for 2013. H&r block my block The child either: Was under age 18 at the end of the year, Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or Was over age 18 and under age 24 at the end of the year, was a full-time student, and did not have earned income that was more than half of his or her support. H&r block my block At least one of the child's parents was alive at the end of 2013. H&r block my block The child does not file a joint return for 2013. H&r block my block These conditions are also shown in  Figure 31-B. H&r block my block Earned income. H&r block my block   Earned income includes salaries, wages, tips, and other payments received for personal services performed. H&r block my block It does not include unearned income as defined later in this chapter. H&r block my block Support. H&r block my block   Your child's support includes all amounts spent to provide the child with food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. H&r block my block To figure your child's support, count support provided by you, your child, and others. H&r block my block However, a scholarship received by your child is not considered support if your child is a full-time student. H&r block my block See chapter 3 for details about support. H&r block my block Certain January 1 birthdays. H&r block my block   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. H&r block my block Figure 31-B. H&r block my block Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. H&r block my block Figure 31-B. H&r block my block Do You Have To Use Form 8615 To Figure Your Child's Tax?    IF a child was born on. H&r block my block . H&r block my block . H&r block my block THEN, at the end of 2013, the child is considered to be. H&r block my block . H&r block my block . H&r block my block January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. H&r block my block The child meets condition 3 only if the child did not have earned income that was more than half of the child's support. H&r block my block  **This child meets condition 3 only if the child was a full-time student who did not have earned income that was more than half of the child's support. H&r block my block  ***Do not use Form 8615 for this child. H&r block my block Providing Parental Information (Form 8615, lines A–C) On Form 8615, lines A and B, enter the parent's name and social security number. H&r block my block (If the parents filed a joint return, enter the name and social security number listed first on the joint return. H&r block my block ) On line C, check the box for the parent's filing status. H&r block my block See Which Parent's Return To Use at the beginning of this chapter for information on which parent's return information must be used on Form 8615. H&r block my block Parent with different tax year. H&r block my block   If the parent and the child do not have the same tax year, complete Form 8615 using the information on the parent's return for the tax year that ends in the child's tax year. H&r block my block Parent's return information not known timely. H&r block my block   If the information needed from the parent's return is not known by the time the child's return is due (usually April 15), you can file the return using estimates. H&r block my block   You can use any reasonable estimate. H&r block my block This includes using information from last year's return. H&r block my block If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. H&r block my block    When you get the correct information, file an amended return on Form 1040X, Amended U. H&r block my block S. H&r block my block Individual Income Tax Return. H&r block my block   Instead of using estimates, you can get an automatic 6-month extension of time to file if, by the date your return is due, you file Form 4868, Application for Automatic Extension of Time To File U. H&r block my block S. H&r block my block Individual Income Tax Return. H&r block my block Extensions are discussed in chapter 1. H&r block my block Step 1. H&r block my block Figuring the Child's Net Unearned Income (Form 8615, Part I) The first step in figuring a child's tax using Form 8615 is to figure the child's net unearned income. H&r block my block To do that, use Form 8615, Part I. H&r block my block Line 1 (unearned income). H&r block my block   If the child had no earned income, enter on this line the adjusted gross income shown on the child's return. H&r block my block Adjusted gross income is shown on Form 1040, line 38, or Form 1040A, line 22. H&r block my block Form 1040EZ cannot be used if Form 8615 must be filed. H&r block my block   If the child had earned income, figure the amount to enter on Form 8615, line 1, by using the worksheet in the instructions for the form. H&r block my block   However, if the child has: excluded any foreign earned income, deducted either a loss from self-employment, or deducted a net operating loss from another year, then use the Alternate Worksheet for Form 8615, Line 1, in Publication 929 to figure the amount to enter on Form 8615, line 1. H&r block my block Unearned income defined. H&r block my block   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually done. H&r block my block It includes taxable interest, dividends (including capital gain distributions), capital gains, unemployment compensation, the taxable part of social security and pension payments, and certain distributions from trusts. H&r block my block Unearned income includes amounts produced by assets the child obtained with earned income (such as interest on a savings account into which the child deposited wages). H&r block my block Nontaxable income. H&r block my block   For this purpose, unearned income includes only amounts the child must include in total income. H&r block my block Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. H&r block my block Income from property received as a gift. H&r block my block   A child's unearned income includes all income produced by property belonging to the child. H&r block my block This is true even if the property was transferred to the child, regardless of when the property was transferred or purchased or who transferred it. H&r block my block   A child's unearned income includes income produced by property given as a gift to the child. H&r block my block This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. H&r block my block Example. H&r block my block Amanda Black, age 13, received the following income. H&r block my block Dividends — $800 Wages — $2,100 Taxable interest — $1,200 Tax-exempt interest — $100 Net capital gains — $100 The dividends were qualified dividends on stock given to her by her grandparents. H&r block my block Amanda's unearned income is $2,100. H&r block my block This is the total of the dividends ($800), taxable interest ($1,200), and net capital gains ($100). H&r block my block Her wages are earned (not unearned) income because they are received for work actually done. H&r block my block Her tax-exempt interest is not included because it is nontaxable. H&r block my block Trust income. H&r block my block   If a child is the beneficiary of a trust, distributions of taxable interest, dividends, capital gains, and other unearned income from the trust are unearned income to the child. H&r block my block   However, for purposes of completing Form 8615, a taxable distribution from a qualified disability trust is considered earned income, not unearned income. H&r block my block Line 2 (deductions). H&r block my block   If the child does not itemize deductions on Schedule A (Form 1040), enter $2,000 on line 2. H&r block my block   If the child does itemize deductions, enter on line 2 the larger of: $1,000 plus the portion of the child's itemized deductions on Schedule A (Form 1040), line 29, that are directly connected with the production of unearned income entered on line 1, or $2,000. H&r block my block Directly connected. H&r block my block   Itemized deductions are directly connected with the production of unearned income if they are for expenses paid to produce or collect taxable income or to manage, conserve, or maintain property held for producing income. H&r block my block These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. H&r block my block   These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). H&r block my block Only the amount greater than 2% of the child's adjusted gross income can be deducted. H&r block my block See chapter 28 for more information. H&r block my block Example 1. H&r block my block Roger, age 12, has unearned income of $8,000, no other income, no adjustments to income, and itemized deductions of $300 (net of the 2% limit) that are directly connected with his unearned income. H&r block my block His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. H&r block my block Roger enters $2,000 on line 2 because that is more than the total of $1,000 plus his directly connected itemized deductions of $300. H&r block my block Example 2. H&r block my block Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. H&r block my block She has no other income. H&r block my block She has itemized deductions of $1,050 (net of the 2% limit) that are directly connected with the production of her unearned income. H&r block my block Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). H&r block my block The amount on line 2 is $2,050. H&r block my block This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. H&r block my block Line 3. H&r block my block   Subtract line 2 from line 1 and enter the result on this line. H&r block my block If zero or less, do not complete the rest of the form. H&r block my block However, you must still attach Form 8615 to the child's tax return. H&r block my block Figure the tax on the child's taxable income in the normal manner. H&r block my block Line 4 (child's taxable income). H&r block my block   Enter on line 4 the child's taxable income from Form 1040, line 43, or Form 1040A, line 27. H&r block my block   However, if the child files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, see the Form 8615 instructions or Pub. H&r block my block 929. H&r block my block Line 5 (net unearned income). H&r block my block   A child's net unearned income cannot be more than his or her taxable income. H&r block my block Enter on Form 8615, line 5, the smaller of line 3 or line 4. H&r block my block This is the child's net unearned income. H&r block my block   If zero or less, do not complete the rest of the form. H&r block my block However, you must still attach Form 8615 to the child's tax return. H&r block my block Figure the tax on the child's taxable income in the normal manner. H&r block my block Step 2. H&r block my block Figuring Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) The next step in completing Form 8615 is to figure a tentative tax on the child's net unearned income at the parent's tax rate. H&r block my block The tentative tax at the parent's tax rate is the difference between the tax on the parent's taxable income figured with the child's net unearned income (plus the net unearned income of any other child whose Form 8615 includes the tax return information of that parent) and the tax figured without it. H&r block my block When figuring the tentative tax at the parent's tax rate on Form 8615, do not refigure any of the exclusions, deductions, or credits on the parent's return because of the child's net unearned income. H&r block my block For example, do not refigure the medical expense deduction. H&r block my block Figure the tentative tax on Form 8615, lines 6 through 13. H&r block my block Note. H&r block my block If the child or parent has any capital gains or losses, get Publication 929 for help in completing Form 8615, Part II. H&r block my block Line 6 (parent's taxable income). H&r block my block   Enter on line 6 the parent's taxable income from Form 1040, line 43, Form 1040A, line 27, or Form 1040EZ, line 6. H&r block my block   If the Foreign Earned Income Tax Worksheet (in the Form 1040 instructions) was used to figure the parent's tax, enter the amount from line 3 of that worksheet instead of the parent's taxable income. H&r block my block Line 7 (net unearned income of other children). H&r block my block   If the tax return information of the parent is also used on any other child's Form 8615, enter on line 7 the total of the amounts from line 5 of all the other children's Forms 8615. H&r block my block Do not include the amount from line 5 of the Form 8615 being completed. H&r block my block Example. H&r block my block Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. H&r block my block The children's net unearned income amounts on line 5 of their Forms 8615 are: Sharon — $800 Jerry — $600 Mike — $1,000 Line 7 of Sharon's Form 8615 will show $1,600, the total of the amounts on line 5 of Jerry's and Mike's Forms 8615. H&r block my block Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). H&r block my block Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). H&r block my block Other children's information not available. H&r block my block   If the net unearned income of the other children is not available when the return is due, either file the return using estimates or get an extension of time to file. H&r block my block See Parent's return information not known timely , earlier. H&r block my block Line 11 (tentative tax). H&r block my block   Subtract line 10 from line 9 and enter the result on this line. H&r block my block This is the tentative tax. H&r block my block   If line 7 is blank, skip lines 12a and 12b and enter the amount from line 11 on line 13. H&r block my block Also skip the discussion for lines 12a and 12b that follows. H&r block my block Lines 12a and 12b (dividing the tentative tax). H&r block my block   If an amount is entered on line 7, divide the tentative tax shown on line 11 among the children according to each child's share of the total net unearned income. H&r block my block This is done on lines 12a, 12b, and 13. H&r block my block Add the amount on line 7 to the amount on line 5 and enter the total on line 12a. H&r block my block Divide the amount on line 5 by the amount on line 12a and enter the result, as a decimal, on line 12b. H&r block my block Example. H&r block my block In the earlier example under Line 7 (net unearned income of other children), Sharon's Form 8615 shows $1,600 on line 7. H&r block my block The amount entered on line 12a is $2,400, the total of the amounts on lines 5 and 7 ($800 + $1,600). H&r block my block The decimal on line 12b is  . H&r block my block 333, figured as follows and rounded to three places. H&r block my block   $800 = . H&r block my block 333     $2,400   Step 3. H&r block my block Figuring the Child's Tax (Form 8615, Part III) The final step in figuring a child's tax using Form 8615 is to determine the larger of: The total of: The child's share of the tentative tax based on the parent's tax rate, plus The tax on the child's taxable income in excess of net unearned income, figured at the child's tax rate, or The tax on the child's taxable income, figured at the child's tax rate. H&r block my block This is the child's tax. H&r block my block It is figured on Form 8615, lines 14 through 18. H&r block my block Alternative minimum tax. H&r block my block   A child may be subject to alternative minimum tax (AMT) if he or she has certain items given preferential treatment under the tax law. H&r block my block See Alternative Minimum Tax (AMT) in chapter 30. H&r block my block    For more information on who is liable for AMT and how to figure it, see Form 6251, Alternative Minimum Tax—Individuals. H&r block my block For information on special limits that apply to a child who files Form 6251, see Certain Children Under Age 24 in the Instructions for Form 6251. H&r block my block Prev  Up  Next   Home   More Online Publications