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Irs Tax Form 1040

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Irs Tax Form 1040

Irs tax form 1040 Publication 561 - Main Contents Table of Contents What Is Fair Market Value (FMV)?Factors. Irs tax form 1040 Stock. Irs tax form 1040 Options. Irs tax form 1040 Determining Fair Market Value Problems in Determining Fair Market Value Valuation of Various Kinds of PropertyHousehold Goods Used Clothing Jewelry and Gems Paintings, Antiques, and Other Objects of Art Collections Cars, Boats, and Aircraft Inventory Patents Stocks and Bonds Real Estate Interest in a Business Annuities, Interests for Life or Terms of Years, Remainders, and Reversions Certain Life Insurance and Annuity Contracts Partial Interest in Property Not in Trust AppraisalsDeductions of More Than $5,000 Deductions of More Than $500,000 Qualified Appraisal Form 8283 Internal Revenue Service Review of Appraisals Penalty How To Get Tax HelpLow income tax clinics (LITCs). Irs tax form 1040 What Is Fair Market Value (FMV)? To figure how much you may deduct for property that you contribute, you must first determine its fair market value on the date of the contribution. Irs tax form 1040 Fair market value. Irs tax form 1040   Fair market value (FMV) is the price that property would sell for on the open market. Irs tax form 1040 It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. Irs tax form 1040 If you put a restriction on the use of property you donate, the FMV must reflect that restriction. Irs tax form 1040 Example 1. Irs tax form 1040 If you give used clothing to the Salvation Army, the FMV would be the price that typical buyers actually pay for clothing of this age, condition, style, and use. Irs tax form 1040 Usually, such items are worth far less than what you paid for them. Irs tax form 1040 Example 2. Irs tax form 1040 If you donate land and restrict its use to agricultural purposes, you must value the land at its value for agricultural purposes, even though it would have a higher FMV if it were not restricted. Irs tax form 1040 Factors. Irs tax form 1040   In making and supporting the valuation of property, all factors affecting value are relevant and must be considered. Irs tax form 1040 These include: The cost or selling price of the item, Sales of comparable properties, Replacement cost, and Opinions of experts. Irs tax form 1040   These factors are discussed later. Irs tax form 1040 Also, see Table 1 for a summary of questions to ask as you consider each factor. Irs tax form 1040 Date of contribution. Irs tax form 1040   Ordinarily, the date of a contribution is the date that the transfer of the property takes place. Irs tax form 1040 Stock. Irs tax form 1040   If you deliver, without any conditions, a properly endorsed stock certificate to a qualified organization or to an agent of the organization, the date of the contribution is the date of delivery. Irs tax form 1040 If the certificate is mailed and received through the regular mail, it is the date of mailing. Irs tax form 1040 If you deliver the certificate to a bank or broker acting as your agent or to the issuing corporation or its agent, for transfer into the name of the organization, the date of the contribution is the date the stock is transferred on the books of the corporation. Irs tax form 1040 Options. Irs tax form 1040   If you grant an option to a qualified organization to buy real property, you have not made a charitable contribution until the organization exercises the option. Irs tax form 1040 The amount of the contribution is the FMV of the property on the date the option is exercised minus the exercise price. Irs tax form 1040 Example. Irs tax form 1040 You grant an option to a local university, which is a qualified organization, to buy real property. Irs tax form 1040 Under the option, the university could buy the property at any time during a 2-year period for $40,000. Irs tax form 1040 The FMV of the property on the date the option is granted is $50,000. Irs tax form 1040 In the following tax year, the university exercises the option. Irs tax form 1040 The FMV of the property on the date the option is exercised is $55,000. Irs tax form 1040 Therefore, you have made a charitable contribution of $15,000 ($55,000, the FMV, minus $40,000, the exercise price) in the tax year the option is exercised. Irs tax form 1040 Determining Fair Market Value Determining the value of donated property would be a simple matter if you could rely only on fixed formulas, rules, or methods. Irs tax form 1040 Usually it is not that simple. Irs tax form 1040 Using such formulas, etc. Irs tax form 1040 , seldom results in an acceptable determination of FMV. Irs tax form 1040 There is no single formula that always applies when determining the value of property. Irs tax form 1040 This is not to say that a valuation is only guesswork. Irs tax form 1040 You must consider all the facts and circumstances connected with the property, such as its desirability, use, and scarcity. Irs tax form 1040 For example, donated furniture should not be evaluated at some fixed rate such as 15% of the cost of new replacement furniture. Irs tax form 1040 When the furniture is contributed, it may be out of style or in poor condition, therefore having little or no market value. Irs tax form 1040 On the other hand, it may be an antique, the value of which could not be determined by using any formula. Irs tax form 1040 Cost or Selling Price of the Donated Property The cost of the property to you or the actual selling price received by the qualified organization may be the best indication of its FMV. Irs tax form 1040 However, because conditions in the market change, the cost or selling price of property may have less weight if the property was not bought or sold reasonably close to the date of contribution. Irs tax form 1040 The cost or selling price is a good indication of the property's value if: The purchase or sale took place close to the valuation date in an open market, The purchase or sale was at “arm's-length,” The buyer and seller knew all relevant facts, The buyer and seller did not have to act, and The market did not change between the date of purchase or sale and the valuation date. Irs tax form 1040 Example. Irs tax form 1040 Tom Morgan, who is not a dealer in gems, bought an assortment of gems for $5,000 from a promoter. Irs tax form 1040 The promoter claimed that the price was “wholesale” even though he and other dealers made similar sales at similar prices to other persons who were not dealers. Irs tax form 1040 The promoter said that if Tom kept the gems for more than 1 year and then gave them to charity, Tom could claim a charitable deduction of $15,000, which, according to the promoter, would be the value of the gems at the time of contribution. Irs tax form 1040 Tom gave the gems to a qualified charity 13 months after buying them. Irs tax form 1040 The selling price for these gems had not changed from the date of purchase to the date he donated them to charity. Irs tax form 1040 The best evidence of FMV depends on actual transactions and not on some artificial estimate. Irs tax form 1040 The $5,000 charged Tom and others is, therefore, the best evidence of the maximum FMV of the gems. Irs tax form 1040 Terms of the purchase or sale. Irs tax form 1040   The terms of the purchase or sale should be considered in determining FMV if they influenced the price. Irs tax form 1040 These terms include any restrictions, understandings, or covenants limiting the use or disposition of the property. Irs tax form 1040 Rate of increase or decrease in value. Irs tax form 1040   Unless you can show that there were unusual circumstances, it is assumed that the increase or decrease in the value of your donated property from your cost has been at a reasonable rate. Irs tax form 1040 For time adjustments, an appraiser may consider published price indexes for information on general price trends, building costs, commodity costs, securities, and works of art sold at auction in arm's-length sales. Irs tax form 1040 Example. Irs tax form 1040 Bill Brown bought a painting for $10,000. Irs tax form 1040 Thirteen months later he gave it to an art museum, claiming a charitable deduction of $15,000 on his tax return. Irs tax form 1040 The appraisal of the painting should include information showing that there were unusual circumstances that justify a 50% increase in value for the 13 months Bill held the property. Irs tax form 1040 Arm's-length offer. Irs tax form 1040   An arm's-length offer to buy the property close to the valuation date may help to prove its value if the person making the offer was willing and able to complete the transaction. Irs tax form 1040 To rely on an offer, you should be able to show proof of the offer and the specific amount to be paid. Irs tax form 1040 Offers to buy property other than the donated item will help to determine value if the other property is reasonably similar to the donated property. Irs tax form 1040 Sales of Comparable Properties The sales prices of properties similar to the donated property are often important in determining the FMV. Irs tax form 1040 The weight to be given to each sale depends on the following. Irs tax form 1040 The degree of similarity between the property sold and the donated property. Irs tax form 1040 The time of the sale—whether it was close to the valuation date. Irs tax form 1040 The circumstances of the sale—whether it was at arm's-length with a knowledgeable buyer and seller, with neither having to act. Irs tax form 1040 The conditions of the market in which the sale was made—whether unusually inflated or deflated. Irs tax form 1040 The comparable sales method of valuing real estate is explained later under Valuation of Various Kinds of Property. Irs tax form 1040 Example 1. Irs tax form 1040 Mary Black, who is not a book dealer, paid a promoter $10,000 for 500 copies of a single edition of a modern translation of the Bible. Irs tax form 1040 The promoter had claimed that the price was considerably less than the “retail” price, and gave her a statement that the books had a total retail value of $30,000. Irs tax form 1040 The promoter advised her that if she kept the Bibles for more than 1 year and then gave them to a qualified organization, she could claim a charitable deduction for the “retail” price of $30,000. Irs tax form 1040 Thirteen months later she gave all the Bibles to a church that she selected from a list provided by the promoter. Irs tax form 1040 At the time of her donation, wholesale dealers were selling similar quantities of Bibles to the general public for $10,000. Irs tax form 1040 The FMV of the Bibles is $10,000, the price at which similar quantities of Bibles were being sold to others at the time of the contribution. Irs tax form 1040 Example 2. Irs tax form 1040 The facts are the same as in Example 1, except that the promoter gave Mary Black a second option. Irs tax form 1040 The promoter said that if Mary wanted a charitable deduction within 1 year of the purchase, she could buy the 500 Bibles at the “retail” price of $30,000, paying only $10,000 in cash and giving a promissory note for the remaining $20,000. Irs tax form 1040 The principal and interest on the note would not be due for 12 years. Irs tax form 1040 According to the promoter, Mary could then, within 1 year of the purchase, give the Bibles to a qualified organization and claim the full $30,000 retail price as a charitable contribution. Irs tax form 1040 She purchased the Bibles under the second option and, 3 months later, gave them to a church, which will use the books for church purposes. Irs tax form 1040 At the time of the gift, the promoter was selling similar lots of Bibles for either $10,000 or $30,000. Irs tax form 1040 The difference between the two prices was solely at the discretion of the buyer. Irs tax form 1040 The promoter was a willing seller for $10,000. Irs tax form 1040 Therefore, the value of Mary's contribution of the Bibles is $10,000, the amount at which similar lots of Bibles could be purchased from the promoter by members of the general public. Irs tax form 1040 Replacement Cost The cost of buying, building, or manufacturing property similar to the donated item should be considered in determining FMV. Irs tax form 1040 However, there must be a reasonable relationship between the replacement cost and the FMV. Irs tax form 1040 The replacement cost is the amount it would cost to replace the donated item on the valuation date. Irs tax form 1040 Often there is no relationship between the replacement cost and the FMV. Irs tax form 1040 If the supply of the donated property is more or less than the demand for it, the replacement cost becomes less important. Irs tax form 1040 To determine the replacement cost of the donated property, find the “estimated replacement cost new. Irs tax form 1040 ” Then subtract from this figure an amount for depreciation due to the physical condition and obsolescence of the donated property. Irs tax form 1040 You should be able to show the relationship between the depreciated replacement cost and the FMV, as well as how you arrived at the “estimated replacement cost new. Irs tax form 1040 ” Opinions of Experts Generally, the weight given to an expert's opinion on matters such as the authenticity of a coin or a work of art, or the most profitable and best use of a piece of real estate, depends on the knowledge and competence of the expert and the thoroughness with which the opinion is supported by experience and facts. Irs tax form 1040 For an expert's opinion to deserve much weight, the facts must support the opinion. Irs tax form 1040 For additional information, see Appraisals, later. Irs tax form 1040 Table 1. Irs tax form 1040 Factors That Affect FMV IF the factor you are considering is. Irs tax form 1040 . Irs tax form 1040 . Irs tax form 1040 THEN you should ask these questions. Irs tax form 1040 . Irs tax form 1040 . Irs tax form 1040     cost or selling price Was the purchase or sale of the property reasonably close to the date of contribution? Was any increase or decrease in value, as compared to your cost, at a reasonable rate? Do the terms of purchase or sale limit what can be done with the property? Was there an arm's-length offer to buy the property close to the valuation date?     sales of comparable properties How similar is the property sold to the property donated? How close is the date of sale to the valuation date? Was the sale at arm's-length? What was the condition of the market at the time of sale?     replacement cost What would it cost to replace the donated property? Is there a reasonable relationship between replacement cost and FMV? Is the supply of the donated property more or less than the demand for it?     opinions of experts Is the expert knowledgeable and competent? Is the opinion thorough and supported by facts and experience? Problems in Determining Fair Market Value There are a number of problems in determining the FMV of donated property. Irs tax form 1040 Unusual Market Conditions The sale price of the property itself in an arm's-length transaction in an open market is often the best evidence of its value. Irs tax form 1040 When you rely on sales of comparable property, the sales must have been made in an open market. Irs tax form 1040 If those sales were made in a market that was artificially supported or stimulated so as not to be truly representative, the prices at which the sales were made will not indicate the FMV. Irs tax form 1040 For example, liquidation sale prices usually do not indicate the FMV. Irs tax form 1040 Also, sales of stock under unusual circumstances, such as sales of small lots, forced sales, and sales in a restricted market, may not represent the FMV. Irs tax form 1040 Selection of Comparable Sales Using sales of comparable property is an important method for determining the FMV of donated property. Irs tax form 1040 However, the amount of weight given to a sale depends on the degree of similarity between the comparable and the donated properties. Irs tax form 1040 The degree of similarity must be close enough so that this selling price would have been given consideration by reasonably well-informed buyers or sellers of the property. Irs tax form 1040 Example. Irs tax form 1040 You give a rare, old book to your former college. Irs tax form 1040 The book is a third edition and is in poor condition because of a missing back cover. Irs tax form 1040 You discover that there was a sale for $300, near the valuation date, of a first edition of the book that was in good condition. Irs tax form 1040 Although the contents are the same, the books are not at all similar because of the different editions and their physical condition. Irs tax form 1040 Little consideration would be given to the selling price of the $300 property by knowledgeable buyers or sellers. Irs tax form 1040 Future Events You may not consider unexpected events happening after your donation of property in making the valuation. Irs tax form 1040 You may consider only the facts known at the time of the gift, and those that could be reasonably expected at the time of the gift. Irs tax form 1040 Example. Irs tax form 1040 You give farmland to a qualified charity. Irs tax form 1040 The transfer provides that your mother will have the right to all income and full use of the property for her life. Irs tax form 1040 Even though your mother dies 1 week after the transfer, the value of the property on the date it is given is its present value, subject to the life interest as estimated from actuarial tables. Irs tax form 1040 You may not take a higher deduction because the charity received full use and possession of the land only 1 week after the transfer. Irs tax form 1040 Using Past Events to Predict the Future A common error is to rely too much on past events that do not fairly reflect the probable future earnings and FMV. Irs tax form 1040 Example. Irs tax form 1040 You give all your rights in a successful patent to your favorite charity. Irs tax form 1040 Your records show that before the valuation date there were three stages in the patent's history of earnings. Irs tax form 1040 First, there was rapid growth in earnings when the invention was introduced. Irs tax form 1040 Then, there was a period of high earnings when the invention was being exploited. Irs tax form 1040 Finally, there was a decline in earnings when competing inventions were introduced. Irs tax form 1040 The entire history of earnings may be relevant in estimating the future earnings. Irs tax form 1040 However, the appraiser must not rely too much on the stage of rapid growth in earnings, or of high earnings. Irs tax form 1040 The market conditions at those times do not represent the condition of the market at the valuation date. Irs tax form 1040 What is most significant is the trend of decline in earnings up to the valuation date. Irs tax form 1040 For more information about donations of patents, see Patents, later. Irs tax form 1040 Valuation of Various Kinds of Property This section contains information on determining the FMV of ordinary kinds of donated property. Irs tax form 1040 For information on appraisals, see Appraisals, later. Irs tax form 1040 Household Goods The FMV of used household goods, such as furniture, appliances, and linens, is usually much lower than the price paid when new. Irs tax form 1040 Such used property may have little or no market value because of its worn condition. Irs tax form 1040 It may be out of style or no longer useful. Irs tax form 1040 You cannot take a deduction for household goods donated after August 17, 2006, unless they are in good used condition or better. Irs tax form 1040 A household good that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. Irs tax form 1040 See Deduction over $500 for certain clothing or household items, later. Irs tax form 1040 If the property is valuable because it is old or unique, see the discussion under Paintings, Antiques, and Other Objects of Art. Irs tax form 1040 Used Clothing Used clothing and other personal items are usually worth far less than the price you paid for them. Irs tax form 1040 Valuation of items of clothing does not lend itself to fixed formulas or methods. Irs tax form 1040 The price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops, is an indication of the value. Irs tax form 1040 You cannot take a deduction for clothing donated after August 17, 2006, unless it is in good used condition or better. Irs tax form 1040 An item of clothing that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. Irs tax form 1040 See Deduction over $500 for certain clothing or household items, later. Irs tax form 1040 For valuable furs or very expensive gowns, a Form 8283 may have to be sent with your tax return. Irs tax form 1040 Jewelry and Gems Jewelry and gems are of such a specialized nature that it is almost always necessary to get an appraisal by a specialized jewelry appraiser. Irs tax form 1040 The appraisal should describe, among other things, the style of the jewelry, the cut and setting of the gem, and whether it is now in fashion. Irs tax form 1040 If not in fashion, the possibility of having the property redesigned, recut, or reset should be reported in the appraisal. Irs tax form 1040 The stone's coloring, weight, cut, brilliance, and flaws should be reported and analyzed. Irs tax form 1040 Sentimental personal value has no effect on FMV. Irs tax form 1040 But if the jewelry was owned by a famous person, its value might increase. Irs tax form 1040 Paintings, Antiques, and Other Objects of Art Your deduction for contributions of paintings, antiques, and other objects of art, should be supported by a written appraisal from a qualified and reputable source, unless the deduction is $5,000 or less. Irs tax form 1040 Examples of information that should be included in appraisals of art objects—paintings in particular—are found later under Qualified Appraisal. Irs tax form 1040 Art valued at $20,000 or more. Irs tax form 1040   If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the signed appraisal to your return. Irs tax form 1040 For individual objects valued at $20,000 or more, a photograph of a size and quality fully showing the object, preferably an 8 x 10 inch color photograph or a color transparency no smaller than 4 x 5 inches, must be provided upon request. Irs tax form 1040 Art valued at $50,000 or more. Irs tax form 1040   If you donate an item of art that has been appraised at $50,000 or more, you can request a Statement of Value for that item from the IRS. Irs tax form 1040 You must request the statement before filing the tax return that reports the donation. Irs tax form 1040 Your request must include the following. Irs tax form 1040 A copy of a qualified appraisal of the item. Irs tax form 1040 See Qualified Appraisal, later. Irs tax form 1040 A $2,500 check or money order payable to the Internal Revenue Service for the user fee that applies to your request regarding one, two, or three items of art. Irs tax form 1040 Add $250 for each item in excess of three. Irs tax form 1040 A completed Form 8283, Section B. Irs tax form 1040 The location of the IRS territory that has examination responsibility for your return. Irs tax form 1040 If your request lacks essential information, you will be notified and given 30 days to provide the missing information. Irs tax form 1040   Send your request to: Internal Revenue Service Attention: Art Appraisal (C:AP:ART) P. Irs tax form 1040 O. Irs tax form 1040 Box 27720 McPherson Station Washington, DC 20038 Refunds. Irs tax form 1040   You can withdraw your request for a Statement of Value at any time before it is issued. Irs tax form 1040 However, the IRS will not refund the user fee if you do. Irs tax form 1040   If the IRS declines to issue a Statement of Value in the interest of efficient tax administration, the IRS will refund the user fee. Irs tax form 1040 Authenticity. Irs tax form 1040   The authenticity of the donated art must be determined by the appraiser. Irs tax form 1040 Physical condition. Irs tax form 1040   Important items in the valuation of antiques and art are physical condition and extent of restoration. Irs tax form 1040 These have a significant effect on the value and must be fully reported in an appraisal. Irs tax form 1040 An antique in damaged condition, or lacking the “original brasses,” may be worth much less than a similar piece in excellent condition. Irs tax form 1040 Art appraisers. Irs tax form 1040   More weight will usually be given to an appraisal prepared by an individual specializing in the kind and price range of the art being appraised. Irs tax form 1040 Certain art dealers or appraisers specialize, for example, in old masters, modern art, bronze sculpture, etc. Irs tax form 1040 Their opinions on the authenticity and desirability of such art would usually be given more weight than the opinions of more generalized art dealers or appraisers. Irs tax form 1040 They can report more recent comparable sales to support their opinion. Irs tax form 1040   To identify and locate experts on unique, specialized items or collections, you may wish to use the current Official Museum Directory of the American Association of Museums. Irs tax form 1040 It lists museums both by state and by category. Irs tax form 1040   To help you locate a qualified appraiser for your donation, you may wish to ask an art historian at a nearby college or the director or curator of a local museum. Irs tax form 1040 The Yellow Pages often list specialized art and antique dealers, auctioneers, and art appraisers. Irs tax form 1040 You may be able to find a qualified appraiser on the Internet. Irs tax form 1040 You may also contact associations of dealers for guidance. Irs tax form 1040 Collections Since many kinds of hobby collections may be the subject of a charitable donation, it is not possible to discuss all of the possible collectibles in this publication. Irs tax form 1040 Most common are rare books, autographs, sports memorabilia, dolls, manuscripts, stamps, coins, guns, phonograph records, and natural history items. Irs tax form 1040 Many of the elements of valuation that apply to paintings and other objects of art, discussed earlier, also apply to miscellaneous collections. Irs tax form 1040 Reference material. Irs tax form 1040   Publications available to help you determine the value of many kinds of collections include catalogs, dealers' price lists, and specialized hobby periodicals. Irs tax form 1040 When using one of these price guides, you must use the current edition at the date of contribution. Irs tax form 1040 However, these sources are not always reliable indicators of FMV and should be supported by other evidence. Irs tax form 1040   For example, a dealer may sell an item for much less than is shown on a price list, particularly after the item has remained unsold for a long time. Irs tax form 1040 The price an item sold for in an auction may have been the result of a rigged sale or a mere bidding duel. Irs tax form 1040 The appraiser must analyze the reference material, and recognize and make adjustments for misleading entries. Irs tax form 1040 If you are donating a valuable collection, you should get an appraisal. Irs tax form 1040 If your donation appears to be of little value, you may be able to make a satisfactory valuation using reference materials available at a state, city, college, or museum library. Irs tax form 1040 Stamp collections. Irs tax form 1040   Most libraries have catalogs or other books that report the publisher's estimate of values. Irs tax form 1040 Generally, two price levels are shown for each stamp: the price postmarked and the price not postmarked. Irs tax form 1040 Stamp dealers generally know the value of their merchandise and are able to prepare satisfactory appraisals of valuable collections. Irs tax form 1040 Coin collections. Irs tax form 1040   Many catalogs and other reference materials show the writer's or publisher's opinion of the value of coins on or near the date of the publication. Irs tax form 1040 Like many other collectors' items, the value of a coin depends on the demand for it, its age, and its rarity. Irs tax form 1040 Another important factor is the coin's condition. Irs tax form 1040 For example, there is a great difference in the value of a coin that is in mint condition and a similar coin that is only in good condition. Irs tax form 1040   Catalogs usually establish a category for coins, based on their physical condition—mint or uncirculated, extremely fine, very fine, fine, very good, good, fair, or poor—with a different valuation for each category. Irs tax form 1040 Books. Irs tax form 1040   The value of books is usually determined by selecting comparable sales and adjusting the prices according to the differences between the comparable sales and the item being evaluated. Irs tax form 1040 This is difficult to do and, except for a collection of little value, should be done by a specialized appraiser. Irs tax form 1040 Within the general category of literary property, there are dealers who specialize in certain areas, such as Americana, foreign imports, Bibles, and scientific books. Irs tax form 1040 Modest value of collection. Irs tax form 1040   If the collection you are donating is of modest value, not requiring a written appraisal, the following information may help you in determining the FMV. Irs tax form 1040   A book that is very old, or very rare, is not necessarily valuable. Irs tax form 1040 There are many books that are very old or rare, but that have little or no market value. Irs tax form 1040 Condition of book. Irs tax form 1040   The condition of a book may have a great influence on its value. Irs tax form 1040 Collectors are interested in items that are in fine, or at least good, condition. Irs tax form 1040 When a book has a missing page, a loose binding, tears, stains, or is otherwise in poor condition, its value is greatly lowered. Irs tax form 1040 Other factors. Irs tax form 1040   Some other factors in the valuation of a book are the kind of binding (leather, cloth, paper), page edges, and illustrations (drawings and photographs). Irs tax form 1040 Collectors usually want first editions of books. Irs tax form 1040 However, because of changes or additions, other editions are sometimes worth as much as, or more than, the first edition. Irs tax form 1040 Manuscripts, autographs, diaries, and similar items. Irs tax form 1040   When these items are handwritten, or at least signed by famous people, they are often in demand and are valuable. Irs tax form 1040 The writings of unknowns also may be of value if they are of unusual historical or literary importance. Irs tax form 1040 Determining the value of such material is difficult. Irs tax form 1040 For example, there may be a great difference in value between two diaries that were kept by a famous person—one kept during childhood and the other during a later period in his or her life. Irs tax form 1040 The appraiser determines a value in these cases by applying knowledge and judgment to such factors as comparable sales and conditions. Irs tax form 1040 Signatures. Irs tax form 1040   Signatures, or sets of signatures, that were cut from letters or other papers usually have little or no value. Irs tax form 1040 But complete sets of the signatures of U. Irs tax form 1040 S. Irs tax form 1040 presidents are in demand. Irs tax form 1040 Cars, Boats, and Aircraft If you donate a car, a boat, or an aircraft to a charitable organization, its FMV must be determined. Irs tax form 1040 Certain commercial firms and trade organizations publish monthly or seasonal guides for different regions of the country, containing complete dealer sale prices or dealer average prices for recent model years. Irs tax form 1040 Prices are reported for each make, model, and year. Irs tax form 1040 These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. Irs tax form 1040 The prices are not “official,” and these publications are not considered an appraisal of any specific donated property. Irs tax form 1040 But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. Irs tax form 1040 These publications are sometimes available from public libraries or at a bank, credit union, or finance company. Irs tax form 1040 You can also find pricing information about used cars on the Internet. Irs tax form 1040 An acceptable measure of the FMV of a donated car, boat, or airplane is an amount not in excess of the price listed in a used vehicle pricing guide for a private party sale, not the dealer retail value, of a similar vehicle. Irs tax form 1040 However, the FMV may be less than that amount if the vehicle has engine trouble, body damage, high mileage, or any type of excessive wear. Irs tax form 1040 The FMV of a donated vehicle is the same as the price listed in a used vehicle pricing guide for a private party sale only if the guide lists a sales price for a vehicle that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated vehicle. Irs tax form 1040 Example. Irs tax form 1040 You donate a used car in poor condition to a local high school for use by students studying car repair. Irs tax form 1040 A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. Irs tax form 1040 However, the guide shows the price for a private party sale of the car is only $750. Irs tax form 1040 The FMV of the car is considered to be no more than $750. Irs tax form 1040 Boats. Irs tax form 1040   Except for inexpensive small boats, the valuation of boats should be based on an appraisal by a marine surveyor because the physical condition is so critical to the value. Irs tax form 1040 More information. Irs tax form 1040   Your deduction for a donated car, boat, or airplane generally is limited to the gross proceeds from its sale by the qualified organization. Irs tax form 1040 This rule applies if the claimed value of the donated vehicle is more than $500. Irs tax form 1040 In certain cases, you can deduct the vehicle's FMV. Irs tax form 1040 For details, see Publication 526. Irs tax form 1040 Inventory If you donate any inventory item to a charitable organization, the amount of your deductible contribution generally is the FMV of the item, minus any gain you would have realized if you had sold the item at its FMV on the date of the gift. Irs tax form 1040 For more information, see Publication 526. Irs tax form 1040 Patents To determine the FMV of a patent, you must take into account, among other factors: Whether the patented technology has been made obsolete by other technology; Any restrictions on the donee's use of, or ability to transfer, the patented technology; and The length of time remaining before the patent expires. Irs tax form 1040 However, your deduction for a donation of a patent or other intellectual property is its FMV, minus any gain you would have realized if you had sold the property at its FMV on the date of the gift. Irs tax form 1040 Generally, this means your deduction is the lesser of the property's FMV or its basis. Irs tax form 1040 For details, see Publication 526. Irs tax form 1040 Stocks and Bonds The value of stocks and bonds is the FMV of a share or bond on the valuation date. Irs tax form 1040 See Date of contribution, earlier, under What Is Fair Market Value (FMV). Irs tax form 1040 Selling prices on valuation date. Irs tax form 1040   If there is an active market for the contributed stocks or bonds on a stock exchange, in an over-the-counter market, or elsewhere, the FMV of each share or bond is the average price between the highest and lowest quoted selling prices on the valuation date. Irs tax form 1040 For example, if the highest selling price for a share was $11, and the lowest $9, the average price is $10. Irs tax form 1040 You get the average price by adding $11 and $9 and dividing the sum by 2. Irs tax form 1040 No sales on valuation date. Irs tax form 1040   If there were no sales on the valuation date, but there were sales within a reasonable period before and after the valuation date, you determine FMV by taking the average price between the highest and lowest sales prices on the nearest date before and on the nearest date after the valuation date. Irs tax form 1040 Then you weight these averages in inverse order by the respective number of trading days between the selling dates and the valuation date. Irs tax form 1040 Example. Irs tax form 1040   On the day you gave stock to a qualified organization, there were no sales of the stock. Irs tax form 1040 Sales of the stock nearest the valuation date took place two trading days before the valuation date at an average selling price of $10 and three trading days after the valuation date at an average selling price of $15. Irs tax form 1040 The FMV on the valuation date was $12, figured as follows: [(3 x $10) + (2 x $15)] ÷ 5 = $12 Listings on more than one stock exchange. Irs tax form 1040   Stocks or bonds listed on more than one stock exchange are valued based on the prices of the exchange on which they are principally dealt. Irs tax form 1040 This applies if these prices are published in a generally available listing or publication of general circulation. Irs tax form 1040 If this is not applicable, and the stocks or bonds are reported on a composite listing of combined exchanges in a publication of general circulation, use the composite list. Irs tax form 1040 See also Unavailable prices or closely held corporation, later. Irs tax form 1040 Bid and asked prices on valuation date. Irs tax form 1040   If there were no sales within a reasonable period before and after the valuation date, the FMV is the average price between the bona fide bid and asked prices on the valuation date. Irs tax form 1040 Example. Irs tax form 1040 Although there were no sales of Blue Corporation stock on the valuation date, bona fide bid and asked prices were available on that date of $14 and $16, respectively. Irs tax form 1040 The FMV is $15, the average price between the bid and asked prices. Irs tax form 1040 No prices on valuation date. Irs tax form 1040   If there were no prices available on the valuation date, you determine FMV by taking the average prices between the bona fide bid and asked prices on the closest trading date before and after the valuation date. Irs tax form 1040 Both dates must be within a reasonable period. Irs tax form 1040 Then you weight these averages in inverse order by the respective number of trading days between the bid and asked dates and the valuation date. Irs tax form 1040 Example. Irs tax form 1040 On the day you gave stock to a qualified organization, no prices were available. Irs tax form 1040 Bona fide bid and asked prices 3 days before the valuation date were $10 and 2 days after the valuation date were $15. Irs tax form 1040 The FMV on the valuation date is $13, figured as follows: [(2 x $10) + (3 x $15)] ÷ 5 = $13 Prices only before or after valuation date, but not both. Irs tax form 1040   If no selling prices or bona fide bid and asked prices are available on a date within a reasonable period before the valuation date, but are available on a date within a reasonable period after the valuation date, or vice versa, then the average price between the highest and lowest of such available prices may be treated as the value. Irs tax form 1040 Large blocks of stock. Irs tax form 1040   When a large block of stock is put on the market, it may lower the selling price of the stock if the supply is greater than the demand. Irs tax form 1040 On the other hand, market forces may exist that will afford higher prices for large blocks of stock. Irs tax form 1040 Because of the many factors to be considered, determining the value of large blocks of stock usually requires the help of experts specializing in underwriting large quantities of securities, or in trading in the securities of the industry of which the particular company is a part. Irs tax form 1040 Unavailable prices or closely held corporation. Irs tax form 1040   If selling prices or bid and asked prices are not available, or if securities of a closely held corporation are involved, determine the FMV by considering the following factors. Irs tax form 1040 For bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors. Irs tax form 1040 For shares of stock, the company's net worth, prospective earning power and dividend-paying capacity, and other relevant factors. Irs tax form 1040 Other factors. Irs tax form 1040   Other relevant factors include: The nature and history of the business, especially its recent history, The goodwill of the business, The economic outlook in the particular industry, The company's position in the industry, its competitors, and its management, and The value of securities of corporations engaged in the same or similar business. Irs tax form 1040 For preferred stock, the most important factors are its yield, dividend coverage, and protection of its liquidation preference. Irs tax form 1040   You should keep complete financial and other information on which the valuation is based. Irs tax form 1040 This includes copies of reports of examinations of the company made by accountants, engineers, or any technical experts on or close to the valuation date. Irs tax form 1040 Restricted securities. Irs tax form 1040   Some classes of stock cannot be traded publicly because of restrictions imposed by the Securities and Exchange Commission, or by the corporate charter or a trust agreement. Irs tax form 1040 These restricted securities usually trade at a discount in relation to freely traded securities. Irs tax form 1040   To arrive at the FMV of restricted securities, factors that you must consider include the resale provisions found in the restriction agreements, the relative negotiating strengths of the buyer and seller, and the market experience of freely traded securities of the same class as the restricted securities. Irs tax form 1040 Real Estate Because each piece of real estate is unique and its valuation is complicated, a detailed appraisal by a professional appraiser is necessary. Irs tax form 1040 The appraiser must be thoroughly trained in the application of appraisal principles and theory. Irs tax form 1040 In some instances the opinions of equally qualified appraisers may carry unequal weight, such as when one appraiser has a better knowledge of local conditions. Irs tax form 1040 The appraisal report must contain a complete description of the property, such as street address, legal description, and lot and block number, as well as physical features, condition, and dimensions. Irs tax form 1040 The use to which the property is put, zoning and permitted uses, and its potential use for other higher and better uses are also relevant. Irs tax form 1040 In general, there are three main approaches to the valuation of real estate. Irs tax form 1040 An appraisal may require the combined use of two or three methods rather than one method only. Irs tax form 1040 1. Irs tax form 1040 Comparable Sales The comparable sales method compares the donated property with several similar properties that have been sold. Irs tax form 1040 The selling prices, after adjustments for differences in date of sale, size, condition, and location, would then indicate the estimated FMV of the donated property. Irs tax form 1040 If the comparable sales method is used to determine the value of unimproved real property (land without significant buildings, structures, or any other improvements that add to its value), the appraiser should consider the following factors when comparing the potential comparable property and the donated property: Location, size, and zoning or use restrictions, Accessibility and road frontage, and available utilities and water rights, Riparian rights (right of access to and use of the water by owners of land on the bank of a river) and existing easements, rights-of-way, leases, etc. Irs tax form 1040 , Soil characteristics, vegetative cover, and status of mineral rights, and Other factors affecting value. Irs tax form 1040 For each comparable sale, the appraisal must include the names of the buyer and seller, the deed book and page number, the date of sale and selling price, a property description, the amount and terms of mortgages, property surveys, the assessed value, the tax rate, and the assessor's appraised FMV. Irs tax form 1040 The comparable selling prices must be adjusted to account for differences between the sale property and the donated property. Irs tax form 1040 Because differences of opinion may arise between appraisers as to the degree of comparability and the amount of the adjustment considered necessary for comparison purposes, an appraiser should document each item of adjustment. Irs tax form 1040 Only comparable sales having the least adjustments in terms of items and/or total dollar adjustments should be considered as comparable to the donated property. Irs tax form 1040 2. Irs tax form 1040 Capitalization of Income This method capitalizes the net income from the property at a rate that represents a fair return on the particular investment at the particular time, considering the risks involved. Irs tax form 1040 The key elements are the determination of the income to be capitalized and the rate of capitalization. Irs tax form 1040 3. Irs tax form 1040 Replacement Cost New or Reproduction Cost Minus Observed Depreciation This method, used alone, usually does not result in a determination of FMV. Irs tax form 1040 Instead, it generally tends to set the upper limit of value, particularly in periods of rising costs, because it is reasonable to assume that an informed buyer will not pay more for the real estate than it would cost to reproduce a similar property. Irs tax form 1040 Of course, this reasoning does not apply if a similar property cannot be created because of location, unusual construction, or some other reason. Irs tax form 1040 Generally, this method serves to support the value determined from other methods. Irs tax form 1040 When the replacement cost method is applied to improved realty, the land and improvements are valued separately. Irs tax form 1040 The replacement cost of a building is figured by considering the materials, the quality of workmanship, and the number of square feet or cubic feet in the building. Irs tax form 1040 This cost represents the total cost of labor and material, overhead, and profit. Irs tax form 1040 After the replacement cost has been figured, consideration must be given to the following factors: Physical deterioration—the wear and tear on the building itself, Functional obsolescence—usually in older buildings with, for example, inadequate lighting, plumbing, or heating, small rooms, or a poor floor plan, and Economic obsolescence—outside forces causing the whole area to become less desirable. Irs tax form 1040 Interest in a Business The FMV of any interest in a business, whether a sole proprietorship or a partnership, is the amount that a willing buyer would pay for the interest to a willing seller after consideration of all relevant factors. Irs tax form 1040 The relevant factors to be considered in valuing the business are: The FMV of the assets of the business, The demonstrated earnings capacity of the business, based on a review of past and current earnings, and The other factors used in evaluating corporate stock, if they apply. Irs tax form 1040 The value of the goodwill of the business should also be taken into consideration. Irs tax form 1040 You should keep complete financial and other information on which you base the valuation. Irs tax form 1040 This includes copies of reports of examinations of the business made by accountants, engineers, or any technical experts on or close to the valuation date. Irs tax form 1040 Annuities, Interests for Life or Terms of Years, Remainders, and Reversions The value of these kinds of property is their present value, except in the case of annuities under contracts issued by companies regularly engaged in their sale. Irs tax form 1040 The valuation of these commercial annuity contracts and of insurance policies is discussed later under Certain Life Insurance and Annuity Contracts. Irs tax form 1040 To determine present value, you must know the applicable interest rate and use actuarial tables. Irs tax form 1040 Interest rate. Irs tax form 1040   The applicable interest rate varies. Irs tax form 1040 It is announced monthly in a news release and published in the Internal Revenue Bulletin as a Revenue Ruling. Irs tax form 1040 The interest rate to use is under the heading “Rate Under Section 7520” for a given month and year. Irs tax form 1040 You can call the IRS office at 1-800-829-1040 to obtain this rate. Irs tax form 1040 Actuarial tables. Irs tax form 1040   You need to refer to actuarial tables to determine a qualified interest in the form of an annuity, any interest for life or a term of years, or any remainder interest to a charitable organization. Irs tax form 1040   Use the valuation tables set forth in IRS Publications 1457, Actuarial Values (Book Aleph), and 1458, Actuarial Values (Book Beth). Irs tax form 1040 Both of these publications provide tables containing actuarial factors to be used in determining the present value of an annuity, an interest for life or for a term of years, or a remainder or reversionary interest. Irs tax form 1040 For qualified charitable transfers, you can use the factor for the month in which you made the contribution or for either of the 2 months preceding that month. Irs tax form 1040   Publication 1457 also contains actuarial factors for computing the value of a remainder interest in a charitable remainder annuity trust and a pooled income fund. Irs tax form 1040 Publication 1458 contains the factors for valuing the remainder interest in a charitable remainder unitrust. Irs tax form 1040 You can download Publications 1457 and 1458 from www. Irs tax form 1040 irs. Irs tax form 1040 gov. Irs tax form 1040 In addition, they are available for purchase via the website of the U. Irs tax form 1040 S. Irs tax form 1040 Government Printing Office, by phone at (202) 512-1800, or by mail from the: Superintendent of Documents P. Irs tax form 1040 O. Irs tax form 1040 Box 371954 Pittsburgh, PA 15250-7954 Tables containing actuarial factors for transfers to pooled income funds may also be found in Income Tax Regulation 1. Irs tax form 1040 642(c)-6(e)(6), transfers to charitable remainder unitrusts in Regulation 1. Irs tax form 1040 664-4(e), and other transfers in Regulation 20. Irs tax form 1040 2031-7(d)(6). Irs tax form 1040 Special factors. Irs tax form 1040   If you need a special factor for an actual transaction, you can request a letter ruling. Irs tax form 1040 Be sure to include the date of birth of each person the duration of whose life may affect the value of the interest. Irs tax form 1040 Also include copies of the relevant instruments. Irs tax form 1040 IRS charges a user fee for providing special factors. Irs tax form 1040   For more information about requesting a ruling, see Revenue Procedure 2006-1 (or annual update), 2006-1 I. Irs tax form 1040 R. Irs tax form 1040 B. Irs tax form 1040 1. Irs tax form 1040 Revenue Procedure 2006-1 is available at www. Irs tax form 1040 irs. Irs tax form 1040 gov/irb/2006-01_IRB/ar06. Irs tax form 1040 html. Irs tax form 1040   For information on the circumstances under which a charitable deduction may be allowed for the donation of a partial interest in property not in trust, see Partial Interest in Property Not in Trust, later. Irs tax form 1040 Certain Life Insurance and Annuity Contracts The value of an annuity contract or a life insurance policy issued by a company regularly engaged in the sale of such contracts or policies is the amount that company would charge for a comparable contract. Irs tax form 1040 But if the donee of a life insurance policy may reasonably be expected to cash the policy rather than hold it as an investment, then the FMV is the cash surrender value rather than the replacement cost. Irs tax form 1040 If an annuity is payable under a combination annuity contract and life insurance policy (for example, a retirement income policy with a death benefit) and there was no insurance element when it was transferred to the charity, the policy is treated as an annuity contract. Irs tax form 1040 Partial Interest in Property Not in Trust Generally, no deduction is allowed for a charitable contribution, not made in trust, of less than your entire interest in property. Irs tax form 1040 However, this does not apply to a transfer of less than your entire interest if it is a transfer of: A remainder interest in your personal residence or farm, An undivided part of your entire interest in property, or A qualified conservation contribution. Irs tax form 1040 Remainder Interest in Real Property The amount of the deduction for a donation of a remainder interest in real property is the FMV of the remainder interest at the time of the contribution. Irs tax form 1040 To determine this value, you must know the FMV of the property on the date of the contribution. Irs tax form 1040 Multiply this value by the appropriate factor. Irs tax form 1040 Publications 1457 and 1458 contain these factors. Irs tax form 1040 You must make an adjustment for depreciation or depletion using the factors shown in Publication 1459, Actuarial Values (Book Gimel). Irs tax form 1040 You can use the factors for the month in which you made the contribution or for either of the two months preceding that month. Irs tax form 1040 See the earlier discussion on Annuities, Interests for Life or Terms of Years, Remainders, and Reversions. Irs tax form 1040 You can download Publication 1459 from www. Irs tax form 1040 irs. Irs tax form 1040 gov. Irs tax form 1040 For this purpose, the term “depreciable property” means any property subject to wear and tear or obsolescence, even if not used in a trade or business or for the production of income. Irs tax form 1040 If the remainder interest includes both depreciable and nondepreciable property, for example a house and land, the FMV must be allocated between each kind of property at the time of the contribution. Irs tax form 1040 This rule also applies to a gift of a remainder interest that includes property that is part depletable and part not depletable. Irs tax form 1040 Take into account depreciation or depletion only for the property that is subject to depreciation or depletion. Irs tax form 1040 For more information, see section 1. Irs tax form 1040 170A-12 of the Income Tax Regulations. Irs tax form 1040 Undivided Part of Your Entire Interest A contribution of an undivided part of your entire interest in property must consist of a part of each and every substantial interest or right you own in the property. Irs tax form 1040 It must extend over the entire term of your interest in the property. Irs tax form 1040 For example, you are entitled to the income from certain property for your life (life estate) and you contribute 20% of that life estate to a qualified organization. Irs tax form 1040 You can claim a deduction for the contribution if you do not have any other interest in the property. Irs tax form 1040 To figure the value of a contribution involving a partial interest, see Publication 1457. Irs tax form 1040 If the only interest you own in real property is a remainder interest and you transfer part of that interest to a qualified organization, see the previous discussion on valuation of a remainder interest in real property. Irs tax form 1040 Qualified Conservation Contribution A qualified conservation contribution is a contribution of a qualified real property interest to a qualified organization to be used only for conservation purposes. Irs tax form 1040 Qualified organization. Irs tax form 1040   For purposes of a qualified conservation contribution, a qualified organization is: A governmental unit, A publicly supported charitable, religious, scientific, literary, educational, etc. Irs tax form 1040 , organization, or An organization that is controlled by, and operated for the exclusive benefit of, a governmental unit or a publicly supported charity. Irs tax form 1040 The organization also must have a commitment to protect the conservation purposes of the donation and must have the resources to enforce the restrictions. Irs tax form 1040 Conservation purposes. Irs tax form 1040   Your contribution must be made only for one of the following conservation purposes. Irs tax form 1040 Preserving land areas for outdoor recreation by, or for the education of, the general public. Irs tax form 1040 Protecting a relatively natural habitat of fish, wildlife, or plants, or a similar ecosystem. Irs tax form 1040 Preserving open space, including farmland and forest land, if it yields a significant public benefit. Irs tax form 1040 It must be either for the scenic enjoyment of the general public or under a clearly defined federal, state, or local governmental conservation policy. Irs tax form 1040 Preserving a historically important land area or a certified historic structure. Irs tax form 1040 There must be some visual public access to the property. Irs tax form 1040 Factors used in determining the type and amount of public access required include the historical significance of the property, the remoteness or accessibility of the site, and the extent to which intrusions on the privacy of individuals living on the property would be unreasonable. Irs tax form 1040 Building in registered historic district. Irs tax form 1040   A contribution after July 25, 2006, of a qualified real property interest that is an easement or other restriction on the exterior of a building in a registered historic district is deductible only if it meets all of the following three conditions. Irs tax form 1040 The restriction must preserve the entire exterior of the building and must prohibit any change to the exterior of the building that is inconsistent with its historical character. Irs tax form 1040 You and the organization receiving the contribution must enter into a written agreement certifying, that the organization is a qualified organization and that it has the resources and commitment to maintain the property as donated. Irs tax form 1040 If you make the contribution in a tax year beginning after August 17, 2006, you must include with your return: A qualified appraisal, Photographs of the building's entire exterior, and A description of all restrictions on development of the building, such as zoning laws and restrictive covenants. Irs tax form 1040   If you make this type of contribution after February 12, 2007, and claim a deduction of more than $10,000, your deduction will not be allowed unless you pay a $500 filing fee. Irs tax form 1040 See Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13), and its instructions. Irs tax form 1040 Qualified real property interest. Irs tax form 1040   This is any of the following interests in real property. Irs tax form 1040 Your entire interest in real estate other than a mineral interest (subsurface oil, gas, or other minerals, and the right of access to these minerals). Irs tax form 1040 A remainder interest. Irs tax form 1040 A restriction (granted in perpetuity) on the use that may be made of the real property. Irs tax form 1040 Valuation. Irs tax form 1040   A qualified real property interest described in (1) should be valued in a manner that is consistent with the type of interest transferred. Irs tax form 1040 If you transferred all the interest in the property, the FMV of the property is the amount of the contribution. Irs tax form 1040 If you do not transfer the mineral interest, the FMV of the surface rights in the property is the amount of the contribution. Irs tax form 1040   If you owned only a remainder interest or an income interest (life estate), see Undivided Part of Your Entire Interest, earlier. Irs tax form 1040 If you owned the entire property but transferred only a remainder interest (item (2)), see Remainder Interest in Real Property, earlier. Irs tax form 1040   In determining the value of restrictions, you should take into account the selling price in arm's-length transactions of other properties that have comparable restrictions. Irs tax form 1040 If there are no comparable sales, the restrictions are valued indirectly as the difference between the FMVs of the property involved before and after the grant of the restriction. Irs tax form 1040   The FMV of the property before contribution of the restriction should take into account not only current use but the likelihood that the property, without the restriction, would be developed. Irs tax form 1040 You should also consider any zoning, conservation, or historical preservation laws that would restrict development. Irs tax form 1040 Granting an easement may increase, rather than reduce, the value of property, and in such a situation no deduction would be allowed. Irs tax form 1040 Example. Irs tax form 1040   You own 10 acres of farmland. Irs tax form 1040 Similar land in the area has an FMV of $2,000 an acre. Irs tax form 1040 However, land in the general area that is restricted solely to farm use has an FMV of $1,500 an acre. Irs tax form 1040 Your county wants to preserve open space and prevent further development in your area. Irs tax form 1040   You grant to the county an enforceable open space easement in perpetuity on 8 of the 10 acres, restricting its use to farmland. Irs tax form 1040 The value of this easement is $4,000, determined as follows: FMV of the property before granting easement:   $2,000 × 10 acres $20,000 FMV of the property after granting easement:   $1,500 × 8 acres $12,000   $2,000 × 2 acres 4,000 16,000 Value of easement   $4,000   If you later transfer in fee your remaining interest in the 8 acres to another qualified organization, the FMV of your remaining interest is the FMV of the 8 acres reduced by the FMV of the easement granted to the first organization. Irs tax form 1040 More information. Irs tax form 1040   For more information about qualified conservation contributions, see Publication 526. Irs tax form 1040 Appraisals Appraisals are not necessary for items of property for which you claim a deduction of $5,000 or less. Irs tax form 1040 (There is one exception, described next, for certain clothing and household items. Irs tax form 1040 ) However, you generally will need an appraisal for donated property for which you claim a deduction of more than $5,000. Irs tax form 1040 There are exceptions. Irs tax form 1040 See Deductions of More Than $5,000, later. Irs tax form 1040 The weight given an appraisal depends on the completeness of the report, the qualifications of the appraiser, and the appraiser's demonstrated knowledge of the donated property. Irs tax form 1040 An appraisal must give all the facts on which to base an intelligent judgment of the value of the property. Irs tax form 1040 The appraisal will not be given much weight if: All the factors that apply are not considered, The opinion is not supported with facts, such as purchase price and comparable sales, or The opinion is not consistent with known facts. Irs tax form 1040 The appraiser's opinion is never more valid than the facts on which it is based; without these facts it is simply a guess. Irs tax form 1040 The opinion of a person claiming to be an expert is not binding on the Internal Revenue Service. Irs tax form 1040 All facts associated with the donation must be considered. Irs tax form 1040 Deduction over $500 for certain clothing or household items. Irs tax form 1040   You must include with your return a qualified appraisal of any single item of clothing or any household item that is not in good used condition or better, that you donated after August 17, 2006, and for which you deduct more than $500. Irs tax form 1040 See Household Goods and Used Clothing, earlier. Irs tax form 1040 Cost of appraisals. Irs tax form 1040   You may not take a charitable contribution deduction for fees you pay for appraisals of your donated property. Irs tax form 1040 However, these fees may qualify as a miscellaneous deduction, subject to the 2% limit, on Schedule A (Form 1040) if paid to determine the amount allowable as a charitable contribution. Irs tax form 1040 Deductions of More Than $5,000 Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser, and you must attach Section B of Form 8283 to your tax return. Irs tax form 1040 There are exceptions, discussed later. Irs tax form 1040 You should keep the appraiser's report with your written records. Irs tax form 1040 Records are discussed in Publication 526. Irs tax form 1040 The phrase “similar items” means property of the same generic category or type (whether or not donated to the same donee), such as stamp collections, coin collections, lithographs, paintings, photographs, books, nonpublicly traded stock, nonpublicly traded securities other than nonpublicly traded stock, land, buildings, clothing, jewelry, furniture, electronic equipment, household appliances, toys, everyday kitchenware, china, crystal, or silver. Irs tax form 1040 For example, if you give books to three schools and you deduct $2,000, $2,500, and $900, respectively, your claimed deduction is more than $5,000 for these books. Irs tax form 1040 You must get a qualified appraisal of the books and for each school you must attach a fully completed Form 8283, Section B, to your tax return. Irs tax form 1040 Exceptions. Irs tax form 1040   You do not need an appraisal if the property is: Nonpublicly traded stock of $10,000 or less, A vehicle (including a car, boat, or airplane) for which your deduction is limited to the gross proceeds from its sale, Qualified intellectual property, such as a patent, Certain publicly traded securities described next, Inventory and other property donated by a corporation that are “qualified contributions” for the care of the ill, the needy, or infants, within the meaning of section 170(e)(3)(A) of the Internal Revenue Code, or Stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business. Irs tax form 1040   Although an appraisal is not required for the types of property just listed, you must provide certain information about a donation of any of these types of property on Form 8283. Irs tax form 1040 Publicly traded securities. Irs tax form 1040   Even if your claimed deduction is more than $5,000, neither a qualified appraisal nor Section B of Form 8283 is required for publicly traded securities that are: Listed on a stock exchange in which quotations are published on a daily basis, Regularly traded in a national or regional over-the-counter market for which published quotations are available, or Shares of an open-end investment company (mutual fund) for which quotations are published on a daily basis in a newspaper of general circulation throughout the United States. Irs tax form 1040 Publicly traded securities that meet these requirements must be reported on Form 8283, Section A. Irs tax form 1040   A qualified appraisal is not required, but Form 8283, Section B, Parts I and IV, must be completed, for an issue of a security that does not meet the requirements just listed but does meet these requirements: The issue is regularly traded during the computation period (defined later) in a market for which there is an “interdealer quotation system” (defined later), The issuer or agent computes the “average trading price” (defined later) for the same issue for the computation period, The average trading price and total volume of the issue during the computation period are published in a newspaper of general circulation throughout the United States, not later than the last day of the month following the end of the calendar quarter in which the computation period ends, The issuer or agent keeps books and records that list for each transaction during the computation period the date of settlement of the transaction, the name and address of the broker or dealer making the market in which the transaction occurred, and the trading price and volume, and The issuer or agent permits the Internal Revenue Service to review the books and records described in item (4) with respect to transactions during the computation period upon receiving reasonable notice. Irs tax form 1040   An interdealer quotation system is any system of general circulation to brokers and dealers that regularly disseminates quotations of obligations by two or more identified brokers or dealers who are not related to either the issuer or agent who computes the average trading price of the security. Irs tax form 1040 A quotation sheet prepared and distributed by a broker or dealer in the regular course of business and containing only quotations of that broker or dealer is not an interdealer quotation system. Irs tax form 1040   The average trading price is the average price of all transactions (weighted by volume), other than original issue or redemption transactions, conducted through a United States office of a broker or dealer who maintains a market in the issue of the security during the computation period. Irs tax form 1040 Bid and asked quotations are not taken into account. Irs tax form 1040   The computation period is weekly during October through December and monthly during January through September. Irs tax form 1040 The weekly computation periods during October through December begin with the first Monday in October and end with the first Sunday following the last Monday in December. Irs tax form 1040 Nonpublicly traded stock. Irs tax form 1040   If you contribute nonpublicly traded stock, for which you claim a deduction of $10,000 or less, a qualified appraisal is not required. Irs tax form 1040 However, you must attach Form 8283 to your tax return, with Section B, Parts I and IV, completed. Irs tax form 1040 Deductions of More Than $500,000 If you claim a deduction of more than $500,000 for a donation of property, you must attach a qualified appraisal of the property to your return. Irs tax form 1040 This does not apply to contributions of cash, inventory, publicly traded stock, or intellectual property. Irs tax form 1040 If you do not attach the appraisal, you cannot deduct your contribution, unless your failure to attach the appraisal is due to reasonable cause and not to willful neglect. Irs tax form 1040 Qualified Appraisal Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser. Irs tax form 1040 You must also complete Form 8283, Section B, and attach it to your tax return. Irs tax form 1040 See Deductions of More Than $5,000, earlier. Irs tax form 1040 A qualified appraisal is an appraisal document that: Is made, signed, and dated by a qualified appraiser (defined later) in accordance with generally accepted appraisal standards, Meets the relevant requirements of Regulations section 1. Irs tax form 1040 170A-13(c)(3) and Notice 2006-96, 2006-46 I. Irs tax form 1040 R. Irs tax form 1040 B. Irs tax form 1040 902 (available at www. Irs tax form 1040 irs. Irs tax form 1040 gov/irb/2006-46_IRB/ar13. Irs tax form 1040 html), Relates to an appraisal made not earlier than 60 days before the date of contribution of the appraised property, Does not involve a prohibited appraisal fee, and Includes certain information (covered later). Irs tax form 1040 You must receive the qualified appraisal before the due date, including extensions, of the return on which a charitable contribution deduction is first claimed for the donated property. Irs tax form 1040 If the deduction is first claimed on an amended return, the qualified appraisal must be received before the date on which the amended return is filed. Irs tax form 1040 Form 8283, Section B, must be attached to your tax return. Irs tax form 1040 Generally, you do not need to attach the qualified appraisal itself, but you should keep a copy as long as it may be relevant under the tax law. Irs tax form 1040 There are four exceptions. Irs tax form 1040 If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the appraisal. Irs tax form 1040 See Paintings, Antiques, and Other Objects of Art, earlier. Irs tax form 1040 If you claim a deduction of more than $500,000 for a donation of property, you must attach the appraisal. Irs tax form 1040 See Deductions of More Than $500,000, earlier. Irs tax form 1040 If you claim a deduction of more than $500 for an article of clothing, or a household item, that is not in good used condition or better, that you donated after August 17, 2006, you must attach the appraisal. Irs tax form 1040 See Deduction over $500 for certain clothing or household items, earlier. Irs tax form 1040 If you claim a deduction in a tax year beginning after August 17, 2006, for an easement or other restriction on the exterior of a building in a historic district, you must attach the appraisal. Irs tax form 1040 See Building in registered historic district, earlier. Irs tax form 1040 Prohibited appraisal fee. Irs tax form 1040   Generally, no part of the fee arrangement for a qualified appraisal can be based on a percentage of the appraised value of the property. Irs tax form 1040 If a fee arrangement is based on what is allowed as a deduction, after Internal Revenue Service examination or otherwise, it is treated as a fee based on a percentage of appraised value. Irs tax form 1040 However, appraisals are not disqualified when an otherwise prohi
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Selective Service System (SSS)

The Selective Service System is charged with providing the Department of Defense trained and untrained personnel in the event of a national emergency. Almost all male citizens and immigrants between the agees of 18-26 must register with the Selective Service. The Selective Service also provides alternative service options for concientious objectors.

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Website: Selective Service System (SSS) Who Must Register with the Selective Service? What Happens in a Draft?

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Phone Number: (847) 688-6888

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The Irs Tax Form 1040

Irs tax form 1040 22. Irs tax form 1040   Taxes Table of Contents IntroductionIndian tribal government. Irs tax form 1040 Useful Items - You may want to see: Tests To Deduct Any Tax Income TaxesState and Local Income Taxes Foreign Income Taxes General Sales TaxesMotor vehicles. Irs tax form 1040 Real Estate TaxesReal estate taxes for prior years. Irs tax form 1040 Examples. Irs tax form 1040 Form 1099-S. Irs tax form 1040 Real Estate-Related Items You Cannot Deduct Personal Property Taxes Taxes and Fees You Cannot Deduct Where To Deduct Introduction This chapter discusses which taxes you can deduct if you itemize deductions on Schedule A (Form 1040). Irs tax form 1040 It also explains which taxes you can deduct on other schedules or forms and which taxes you cannot deduct. Irs tax form 1040 This chapter covers the following topics. Irs tax form 1040 Income taxes (federal, state, local, and foreign). Irs tax form 1040 General sales taxes (state and local). Irs tax form 1040 Real estate taxes (state, local, and foreign). Irs tax form 1040 Personal property taxes (state and local). Irs tax form 1040 Taxes and fees you cannot deduct. Irs tax form 1040 Use Table 22-1 as a guide to determine which taxes you can deduct. Irs tax form 1040 The end of the chapter contains a section that explains which forms you use to deduct different types of taxes. Irs tax form 1040 Business taxes. Irs tax form 1040   You can deduct certain taxes only if they are ordinary and necessary expenses of your trade or business or of producing income. Irs tax form 1040 For information on these taxes, see Publication 535, Business Expenses. Irs tax form 1040 State or local taxes. Irs tax form 1040   These are taxes imposed by the 50 states, U. Irs tax form 1040 S. Irs tax form 1040 possessions, or any of their political subdivisions (such as a county or city), or by the District of Columbia. Irs tax form 1040 Indian tribal government. Irs tax form 1040   An Indian tribal government recognized by the Secretary of the Treasury as performing substantial government functions will be treated as a state for purposes of claiming a deduction for taxes. Irs tax form 1040 Income taxes, real estate taxes, and personal property taxes imposed by that Indian tribal government (or by any of its subdivisions that are treated as political subdivisions of a state) are deductible. Irs tax form 1040 General sales taxes. Irs tax form 1040   These are taxes imposed at one rate on retail sales of a broad range of classes of items. Irs tax form 1040 Foreign taxes. Irs tax form 1040   These are taxes imposed by a foreign country or any of its political subdivisions. Irs tax form 1040 Useful Items - You may want to see: Publication 514 Foreign Tax Credit for Individuals 530 Tax Information for Homeowners Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule E (Form 1040) Supplemental Income and Loss 1116 Foreign Tax Credit Tests To Deduct Any Tax The following two tests must be met for you to deduct any tax. Irs tax form 1040 The tax must be imposed on you. Irs tax form 1040 You must pay the tax during your tax year. Irs tax form 1040 The tax must be imposed on you. Irs tax form 1040   In general, you can deduct only taxes imposed on you. Irs tax form 1040   Generally, you can deduct property taxes only if you are an owner of the property. Irs tax form 1040 If your spouse owns the property and pays the real estate taxes, the taxes are deductible on your spouse's separate return or on your joint return. Irs tax form 1040 You must pay the tax during your tax year. Irs tax form 1040   If you are a cash basis taxpayer, you can deduct only those taxes you actually paid during your tax year. Irs tax form 1040 If you pay your taxes by check, the day you mail or deliver the check is the date of payment, provided the check is honored by the financial institution. Irs tax form 1040 If you use a pay-by-phone account (such as a credit card or electronic funds withdrawal), the date reported on the statement of the financial institution showing when payment was made is the date of payment. Irs tax form 1040 If you contest a tax liability and are a cash basis taxpayer, you can deduct the tax only in the year you actually pay it (or transfer money or other property to provide for satisfaction of the contested liability). Irs tax form 1040 See Publication 538, Accounting Periods and Methods, for details. Irs tax form 1040    If you use an accrual method of accounting, see Publication 538 for more information. Irs tax form 1040 Income Taxes This section discusses the deductibility of state and local income taxes (including employee contributions to state benefit funds) and foreign income taxes. Irs tax form 1040 State and Local Income Taxes You can deduct state and local income taxes. Irs tax form 1040 However, you can elect to deduct state and local general sales taxes instead of state and local income taxes. Irs tax form 1040 See General Sales Taxes , later. Irs tax form 1040 Exception. Irs tax form 1040    You cannot deduct state and local income taxes you pay on income that is exempt from federal income tax, unless the exempt income is interest income. Irs tax form 1040 For example, you cannot deduct the part of a state's income tax that is on a cost-of-living allowance exempt from federal income tax. Irs tax form 1040 What To Deduct Your deduction may be for withheld taxes, estimated tax payments, or other tax payments as follows. Irs tax form 1040 Withheld taxes. Irs tax form 1040   You can deduct state and local income taxes withheld from your salary in the year they are withheld. Irs tax form 1040 Your Form(s) W-2 will show these amounts. Irs tax form 1040 Forms W-2G, 1099-G, 1099-R, and 1099-MISC may also show state and local income taxes withheld. Irs tax form 1040 Estimated tax payments. Irs tax form 1040   You can deduct estimated tax payments you made during the year to a state or local government. Irs tax form 1040 However, you must have a reasonable basis for making the estimated tax payments. Irs tax form 1040 Any estimated state or local tax payments that are not made in good faith at the time of payment are not deductible. Irs tax form 1040 For example, you made an estimated state income tax payment. Irs tax form 1040 However, the estimate of your state tax liability shows that you will get a refund of the full amount of your estimated payment. Irs tax form 1040 You had no reasonable basis to believe you had any additional liability for state income taxes and you cannot deduct the estimated tax payment. Irs tax form 1040 Refund applied to taxes. Irs tax form 1040   You can deduct any part of a refund of prior-year state or local income taxes that you chose to have credited to your 2013 estimated state or local income taxes. Irs tax form 1040    Do not reduce your deduction by either of the following items. Irs tax form 1040 Any state or local income tax refund (or credit) you expect to receive for 2013. Irs tax form 1040 Any refund of (or credit for) prior-year state and local income taxes you actually received in 2013. Irs tax form 1040   However, part or all of this refund (or credit) may be taxable. Irs tax form 1040 See Refund (or credit) of state or local income taxes , later. Irs tax form 1040 Separate federal returns. Irs tax form 1040   If you and your spouse file separate state, local, and federal income tax returns, you each can deduct on your federal return only the amount of your own state and local income tax that you paid during the tax year. Irs tax form 1040 Joint state and local returns. Irs tax form 1040   If you and your spouse file joint state and local returns and separate federal returns, each of you can deduct on your separate federal return a part of the total state and local income taxes paid during the tax year. Irs tax form 1040 You can deduct only the amount of the total taxes that is proportionate to your gross income compared to the combined gross income of you and your spouse. Irs tax form 1040 However, you cannot deduct more than the amount you actually paid during the year. Irs tax form 1040 You can avoid this calculation if you and your spouse are jointly and individually liable for the full amount of the state and local income taxes. Irs tax form 1040 If so, you and your spouse can deduct on your separate federal returns the amount you each actually paid. Irs tax form 1040 Joint federal return. Irs tax form 1040   If you file a joint federal return, you can deduct the total of the state and local income taxes both of you paid. Irs tax form 1040 Contributions to state benefit funds. Irs tax form 1040    As an employee, you can deduct mandatory contributions to state benefit funds withheld from your wages that provide protection against loss of wages. Irs tax form 1040 For example, certain states require employees to make contributions to state funds providing disability or unemployment insurance benefits. Irs tax form 1040 Mandatory payments made to the following state benefit funds are deductible as state income taxes on Schedule A (Form 1040), line 5. Irs tax form 1040 Alaska Unemployment Compensation Fund. Irs tax form 1040 California Nonoccupational Disability Benefit Fund. Irs tax form 1040 New Jersey Nonoccupational Disability Benefit Fund. Irs tax form 1040 New Jersey Unemployment Compensation Fund. Irs tax form 1040 New York Nonoccupational Disability Benefit Fund. Irs tax form 1040 Pennsylvania Unemployment Compensation Fund. Irs tax form 1040 Rhode Island Temporary Disability Benefit Fund. Irs tax form 1040 Washington State Supplemental Workmen's Compensation Fund. Irs tax form 1040    Employee contributions to private or voluntary disability plans are not deductible. Irs tax form 1040 Refund (or credit) of state or local income taxes. Irs tax form 1040   If you receive a refund of (or credit for) state or local income taxes in a year after the year in which you paid them, you may have to include the refund in income on Form 1040, line 10, in the year you receive it. Irs tax form 1040 This includes refunds resulting from taxes that were overwithheld, applied from a prior year return, not figured correctly, or figured again because of an amended return. Irs tax form 1040 If you did not itemize your deductions in the previous year, do not include the refund in income. Irs tax form 1040 If you deducted the taxes in the previous year, include all or part of the refund on Form 1040, line 10, in the year you receive the refund. Irs tax form 1040 For a discussion of how much to include, see Recoveries in chapter 12. Irs tax form 1040 Foreign Income Taxes Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. Irs tax form 1040 S. Irs tax form 1040 possession. Irs tax form 1040 However, you cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. Irs tax form 1040 S. Irs tax form 1040 tax under the foreign earned income exclusion or the foreign housing exclusion. Irs tax form 1040 For information on these exclusions, see Publication 54, Tax Guide for U. Irs tax form 1040 S. Irs tax form 1040 Citizens and Resident Aliens Abroad. Irs tax form 1040 For information on the foreign tax credit, see Publication 514. Irs tax form 1040 General Sales Taxes You can elect to deduct state and local general sales taxes, instead of state and local income taxes, as an itemized deduction on Schedule A (Form 1040), line 5b. Irs tax form 1040 You can use either your actual expenses or the state and local sales tax tables to figure your sales tax deduction. Irs tax form 1040 Actual expenses. Irs tax form 1040   Generally, you can deduct the actual state and local general sales taxes (including compensating use taxes) if the tax rate was the same as the general sales tax rate. Irs tax form 1040 However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. Irs tax form 1040 If you paid sales tax on a motor vehicle at a rate higher than the general sales tax rate, you can deduct only the amount of tax that you would have paid at the general sales tax rate on that vehicle. Irs tax form 1040 If you use the actual expenses method, you must have receipts to show the general sales taxes paid. Irs tax form 1040 Do not include sales taxes paid on items used in your trade or business. Irs tax form 1040 Motor vehicles. Irs tax form 1040   For purposes of this section, motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. Irs tax form 1040 This also includes sales taxes on a leased motor vehicle, but not on vehicles used in your trade or business. Irs tax form 1040 Optional sales tax tables. Irs tax form 1040   Instead of using your actual expenses, you can figure your state and local general sales tax deduction using the state and local sales tax tables in the Instructions for Schedule A (Form 1040). Irs tax form 1040 You may also be able to add the state and local general sales taxes paid on certain specified items. Irs tax form 1040   Your applicable table amount is based on the state where you live, your income, and the number of exemptions claimed on your tax return. Irs tax form 1040 Your income is your adjusted gross income plus any nontaxable items such as the following. Irs tax form 1040 Tax-exempt interest. Irs tax form 1040 Veterans' benefits. Irs tax form 1040 Nontaxable combat pay. Irs tax form 1040 Workers' compensation. Irs tax form 1040 Nontaxable part of social security and railroad retirement benefits. Irs tax form 1040 Nontaxable part of IRA, pension, or annuity distributions, excluding rollovers. Irs tax form 1040 Public assistance payments. Irs tax form 1040 If you lived in different states during the same tax year, you must prorate your applicable table amount for each state based on the days you lived in each state. Irs tax form 1040 See the Instructions for Schedule A (Form 1040), line 5, for details. Irs tax form 1040 Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real property levied for the general public welfare. Irs tax form 1040 You can deduct these taxes only if they are based on the assessed value of the real property and charged uniformly against all property under the jurisdiction of the taxing authority. Irs tax form 1040 Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. Irs tax form 1040 They also do not include itemized charges for services (such as trash collection) assessed against specific property or certain people, even if the charge is paid to the taxing authority. Irs tax form 1040 For more information about taxes and charges that are not deductible, see Real Estate-Related Items You Cannot Deduct , later. Irs tax form 1040 Tenant-shareholders in a cooperative housing corporation. Irs tax form 1040   Generally, if you are a tenant-stockholder in a cooperative housing corporation, you can deduct the amount paid to the corporation that represents your share of the real estate taxes the corporation paid or incurred for your dwelling unit. Irs tax form 1040 The corporation should provide you with a statement showing your share of the taxes. Irs tax form 1040 For more information, see Special Rules for Cooperatives in Publication 530. Irs tax form 1040 Division of real estate taxes between buyers and sellers. Irs tax form 1040   If you bought or sold real estate during the year, the real estate taxes must be divided between the buyer and the seller. Irs tax form 1040   The buyer and the seller must divide the real estate taxes according to the number of days in the real property tax year (the period to which the tax is imposed relates) that each owned the property. Irs tax form 1040 The seller is treated as paying the taxes up to, but not including, the date of sale. Irs tax form 1040 The buyer is treated as paying the taxes beginning with the date of sale. Irs tax form 1040 This applies regardless of the lien dates under local law. Irs tax form 1040 Generally, this information is included on the settlement statement provided at the closing. Irs tax form 1040    If you (the seller) cannot deduct taxes until they are paid because you use the cash method of accounting, and the buyer of your property is personally liable for the tax, you are considered to have paid your part of the tax at the time of the sale. Irs tax form 1040 This lets you deduct the part of the tax to the date of sale even though you did not actually pay it. Irs tax form 1040 However, you must also include the amount of that tax in the selling price of the property. Irs tax form 1040 The buyer must include the same amount in his or her cost of the property. Irs tax form 1040   You figure your deduction for taxes on each property bought or sold during the real property tax year as follows. Irs tax form 1040 Worksheet 22-1. Irs tax form 1040 Figuring Your Real Estate Tax Deduction 1. Irs tax form 1040 Enter the total real estate taxes for the real property tax year   2. Irs tax form 1040 Enter the number of days in the real property tax year that you owned the property   3. Irs tax form 1040 Divide line 2 by 365 (for leap years, divide line 2 by 366) . Irs tax form 1040 4. Irs tax form 1040 Multiply line 1 by line 3. Irs tax form 1040 This is your deduction. Irs tax form 1040 Enter it on Schedule A (Form 1040), line 6   Note. Irs tax form 1040 Repeat steps 1 through 4 for each property you bought or sold during the real property tax year. Irs tax form 1040 Your total deduction is the sum of the line 4 amounts for all of the properties. Irs tax form 1040 Real estate taxes for prior years. Irs tax form 1040   Do not divide delinquent taxes between the buyer and seller if the taxes are for any real property tax year before the one in which the property is sold. Irs tax form 1040 Even if the buyer agrees to pay the delinquent taxes, the buyer cannot deduct them. Irs tax form 1040 The buyer must add them to the cost of the property. Irs tax form 1040 The seller can deduct these taxes paid by the buyer. Irs tax form 1040 However, the seller must include them in the selling price. Irs tax form 1040 Examples. Irs tax form 1040   The following examples illustrate how real estate taxes are divided between buyer and seller. Irs tax form 1040 Example 1. Irs tax form 1040 Dennis and Beth White's real property tax year for both their old home and their new home is the calendar year, with payment due August 1. Irs tax form 1040 The tax on their old home, sold on May 7, was $620. Irs tax form 1040 The tax on their new home, bought on May 3, was $732. Irs tax form 1040 Dennis and Beth are considered to have paid a proportionate share of the real estate taxes on the old home even though they did not actually pay them to the taxing authority. Irs tax form 1040 On the other hand, they can claim only a proportionate share of the taxes they paid on their new property even though they paid the entire amount. Irs tax form 1040 Dennis and Beth owned their old home during the real property tax year for 126 days (January 1 to May 6, the day before the sale). Irs tax form 1040 They figure their deduction for taxes on their old home as follows. Irs tax form 1040 Worksheet 22-1. Irs tax form 1040 Figuring Your Real Estate Tax Deduction — Taxes on Old Home 1. Irs tax form 1040 Enter the total real estate taxes for the real property tax year $620 2. Irs tax form 1040 Enter the number of days in the real property tax year that you owned the property 126 3. Irs tax form 1040 Divide line 2 by 365 (for leap years, divide line 2 by 366) . Irs tax form 1040 3452 4. Irs tax form 1040 Multiply line 1 by line 3. Irs tax form 1040 This is your deduction. Irs tax form 1040 Enter it on Schedule A (Form 1040), line 6 $214 Since the buyers of their old home paid all of the taxes, Dennis and Beth also include the $214 in the selling price of the old home. Irs tax form 1040 (The buyers add the $214 to their cost of the home. Irs tax form 1040 ) Dennis and Beth owned their new home during the real property tax year for 243 days (May 3 to December 31, including their date of purchase). Irs tax form 1040 They figure their deduction for taxes on their new home as follows. Irs tax form 1040 Worksheet 22-1. Irs tax form 1040 Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. Irs tax form 1040 Enter the total real estate taxes for the real property tax year $732 2. Irs tax form 1040 Enter the number of days in the real property tax year that you owned the property 243 3. Irs tax form 1040 Divide line 2 by 365 (for leap years, divide line 2 by 366) . Irs tax form 1040 6658 4. Irs tax form 1040 Multiply line 1 by line 3. Irs tax form 1040 This is your deduction. Irs tax form 1040 Enter it on Schedule A (Form 1040), line 6 $487 Since Dennis and Beth paid all of the taxes on the new home, they add $245 ($732 paid less $487 deduction) to their cost of the new home. Irs tax form 1040 (The sellers add this $245 to their selling price and deduct the $245 as a real estate tax. Irs tax form 1040 ) Dennis and Beth's real estate tax deduction for their old and new homes is the sum of $214 and $487, or $701. Irs tax form 1040 They will enter this amount on Schedule A (Form 1040), line 6. Irs tax form 1040 Example 2. Irs tax form 1040 George and Helen Brown bought a new home on May 3, 2013. Irs tax form 1040 Their real property tax year for the new home is the calendar year. Irs tax form 1040 Real estate taxes for 2012 were assessed in their state on January 1, 2013. Irs tax form 1040 The taxes became due on May 31, 2013, and October 31, 2013. Irs tax form 1040 The Browns agreed to pay all taxes due after the date of purchase. Irs tax form 1040 Real estate taxes for 2012 were $680. Irs tax form 1040 They paid $340 on May 31, 2013, and $340 on October 31, 2013. Irs tax form 1040 These taxes were for the 2012 real property tax year. Irs tax form 1040 The Browns cannot deduct them since they did not own the property until 2013. Irs tax form 1040 Instead, they must add $680 to the cost of their new home. Irs tax form 1040 In January 2014, the Browns receive their 2013 property tax statement for $752, which they will pay in 2014. Irs tax form 1040 The Browns owned their new home during the 2013 real property tax year for 243 days (May 3 to December 31). Irs tax form 1040 They will figure their 2014 deduction for taxes as follows. Irs tax form 1040 Worksheet 22-1. Irs tax form 1040 Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. Irs tax form 1040 Enter the total real estate taxes for the real property tax year $752 2. Irs tax form 1040 Enter the number of days in the real property tax year that you owned the property 243 3. Irs tax form 1040 Divide line 2 by 365 (for leap years, divide line 2 by 366) . Irs tax form 1040 6658 4. Irs tax form 1040 Multiply line 1 by line 3. Irs tax form 1040 This is your deduction. Irs tax form 1040 Claim it on Schedule A (Form 1040), line 6 $501 The remaining $251 ($752 paid less $501 deduction) of taxes paid in 2014, along with the $680 paid in 2013, is added to the cost of their new home. Irs tax form 1040 Because the taxes up to the date of sale are considered paid by the seller on the date of sale, the seller is entitled to a 2013 tax deduction of $931. Irs tax form 1040 This is the sum of the $680 for 2012 and the $251 for the 122 days the seller owned the home in 2013. Irs tax form 1040 The seller must also include the $931 in the selling price when he or she figures the gain or loss on the sale. Irs tax form 1040 The seller should contact the Browns in January 2014 to find out how much real estate tax is due for 2013. Irs tax form 1040 Form 1099-S. Irs tax form 1040   For certain sales or exchanges of real estate, the person responsible for closing the sale (generally the settlement agent) prepares Form 1099-S, Proceeds From Real Estate Transactions, to report certain information to the IRS and to the seller of the property. Irs tax form 1040 Box 2 of Form 1099-S is for the gross proceeds from the sale and should include the portion of the seller's real estate tax liability that the buyer will pay after the date of sale. Irs tax form 1040 The buyer includes these taxes in the cost basis of the property, and the seller both deducts this amount as a tax paid and includes it in the sales price of the property. Irs tax form 1040   For a real estate transaction that involves a home, any real estate tax the seller paid in advance but that is the liability of the buyer appears on Form 1099-S, box 5. Irs tax form 1040 The buyer deducts this amount as a real estate tax, and the seller reduces his or her real estate tax deduction (or includes it in income) by the same amount. Irs tax form 1040 See Refund (or rebate) , later. Irs tax form 1040 Taxes placed in escrow. Irs tax form 1040   If your monthly mortgage payment includes an amount placed in escrow (put in the care of a third party) for real estate taxes, you may not be able to deduct the total amount placed in escrow. Irs tax form 1040 You can deduct only the real estate tax that the third party actually paid to the taxing authority. Irs tax form 1040 If the third party does not notify you of the amount of real estate tax that was paid for you, contact the third party or the taxing authority to find the proper amount to show on your return. Irs tax form 1040 Tenants by the entirety. Irs tax form 1040   If you and your spouse held property as tenants by the entirety and you file separate federal returns, each of you can deduct only the taxes each of you paid on the property. Irs tax form 1040 Divorced individuals. Irs tax form 1040   If your divorce or separation agreement states that you must pay the real estate taxes for a home owned by you and your spouse, part of your payments may be deductible as alimony and part as real estate taxes. Irs tax form 1040 See Taxes and insurance in chapter 18 for more information. Irs tax form 1040 Ministers' and military housing allowances. Irs tax form 1040   If you are a minister or a member of the uniformed services and receive a housing allowance that you can exclude from income, you still can deduct all of the real estate taxes you pay on your home. Irs tax form 1040 Refund (or rebate). Irs tax form 1040   If you received a refund or rebate in 2013 of real estate taxes you paid in 2013, you must reduce your deduction by the amount refunded to you. Irs tax form 1040 If you received a refund or rebate in 2013 of real estate taxes you deducted in an earlier year (either as an itemized deduction or an increase to your standard deduction), you generally must include the refund or rebate in income in the year you receive it. Irs tax form 1040 However, the amount you include in income is limited to the amount of the deduction that reduced your tax in the earlier year. Irs tax form 1040 For more information, see Recoveries in chapter 12. Irs tax form 1040 Table 22-1. Irs tax form 1040 Which Taxes Can You Deduct? Type of Tax You Can Deduct You Cannot Deduct Fees and Charges Fees and charges that are expenses of your trade or business or of producing income. Irs tax form 1040 Fees and charges that are not expenses of your trade or business or of producing income, such as fees for driver's licenses, car inspections, parking, or charges for water bills (see Taxes and Fees You Cannot Deduct ). Irs tax form 1040     Fines and penalties. Irs tax form 1040 Income Taxes State and local income taxes. Irs tax form 1040 Federal income taxes. Irs tax form 1040   Foreign income taxes. Irs tax form 1040     Employee contributions to state funds listed under Contributions to state benefit funds . Irs tax form 1040 Employee contributions to private or voluntary disability plans. Irs tax form 1040     State and local general sales taxes if you choose to deduct state and local income taxes. Irs tax form 1040 General Sales Taxes State and local general sales taxes, including compensating use taxes. Irs tax form 1040 State and local income taxes if you choose to deduct state and local general sales taxes. Irs tax form 1040 Other Taxes Taxes that are expenses of your trade or business. Irs tax form 1040 Federal excise taxes, such as tax on gasoline, that are not expenses of your trade or business or of producing income. Irs tax form 1040   Taxes on property producing rent or royalty income. Irs tax form 1040 Per capita taxes. Irs tax form 1040   Occupational taxes. Irs tax form 1040 See chapter 28. Irs tax form 1040     One-half of self-employment tax paid. Irs tax form 1040   Personal Property Taxes State and local personal property taxes. Irs tax form 1040 Customs duties that are not expenses of your trade or business or of producing income. Irs tax form 1040 Real Estate Taxes State and local real estate taxes. Irs tax form 1040 Real estate taxes that are treated as imposed on someone else (see Division of real estate taxes between buyers and sellers ). Irs tax form 1040   Foreign real estate taxes. Irs tax form 1040 Taxes for local benefits (with exceptions). Irs tax form 1040 See Real Estate-Related Items You Cannot Deduct . Irs tax form 1040   Tenant's share of real estate taxes paid by  cooperative housing corporation. Irs tax form 1040 Trash and garbage pickup fees (with exceptions). Irs tax form 1040 See Real Estate-Related Items You Cannot Deduct . Irs tax form 1040     Rent increase due to higher real estate taxes. Irs tax form 1040     Homeowners' association charges. Irs tax form 1040 Real Estate-Related Items You Cannot Deduct Payments for the following items generally are not deductible as real estate taxes. Irs tax form 1040 Taxes for local benefits. Irs tax form 1040 Itemized charges for services (such as trash and garbage pickup fees). Irs tax form 1040 Transfer taxes (or stamp taxes). Irs tax form 1040 Rent increases due to higher real estate taxes. Irs tax form 1040 Homeowners' association charges. Irs tax form 1040 Taxes for local benefits. Irs tax form 1040   Deductible real estate taxes generally do not include taxes charged for local benefits and improvements tending to increase the value of your property. Irs tax form 1040 These include assessments for streets, sidewalks, water mains, sewer lines, public parking facilities, and similar improvements. Irs tax form 1040 You should increase the basis of your property by the amount of the assessment. Irs tax form 1040   Local benefit taxes are deductible only if they are for maintenance, repair, or interest charges related to those benefits. Irs tax form 1040 If only a part of the taxes is for maintenance, repair, or interest, you must be able to show the amount of that part to claim the deduction. Irs tax form 1040 If you cannot determine what part of the tax is for maintenance, repair, or interest, none of it is deductible. Irs tax form 1040    Taxes for local benefits may be included in your real estate tax bill. Irs tax form 1040 If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. Irs tax form 1040 You should use the rules above to determine if the local benefit tax is deductible. Irs tax form 1040 Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. Irs tax form 1040 Itemized charges for services. Irs tax form 1040    An itemized charge for services assessed against specific property or certain people is not a tax, even if the charge is paid to the taxing authority. Irs tax form 1040 For example, you cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged to each homeowner for trash collection), or A flat fee charged for a single service provided by your government (such as a $30 charge for mowing your lawn because it was allowed to grow higher than permitted under your local ordinance). Irs tax form 1040    You must look at your real estate tax bill to determine if any nondeductible itemized charges, such as those listed above, are included in the bill. Irs tax form 1040 If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. Irs tax form 1040 Exception. Irs tax form 1040   Service charges used to maintain or improve services (such as trash collection or police and fire protection) are deductible as real estate taxes if: The fees or charges are imposed at a like rate against all property in the taxing jurisdiction, The funds collected are not earmarked; instead, they are commingled with general revenue funds, and Funds used to maintain or improve services are not limited to or determined by the amount of these fees or charges collected. Irs tax form 1040 Transfer taxes (or stamp taxes). Irs tax form 1040   Transfer taxes and similar taxes and charges on the sale of a personal home are not deductible. Irs tax form 1040 If they are paid by the seller, they are expenses of the sale and reduce the amount realized on the sale. Irs tax form 1040 If paid by the buyer, they are included in the cost basis of the property. Irs tax form 1040 Rent increase due to higher real estate taxes. Irs tax form 1040   If your landlord increases your rent in the form of a tax surcharge because of increased real estate taxes, you cannot deduct the increase as taxes. Irs tax form 1040 Homeowners' association charges. Irs tax form 1040   These charges are not deductible because they are imposed by the homeowners' association, rather than the state or local government. Irs tax form 1040 Personal Property Taxes Personal property tax is deductible if it is a state or local tax that is: Charged on personal property, Based only on the value of the personal property, and Charged on a yearly basis, even if it is collected more or less than once a year. Irs tax form 1040 A tax that meets the above requirements can be considered charged on personal property even if it is for the exercise of a privilege. Irs tax form 1040 For example, a yearly tax based on value qualifies as a personal property tax even if it is called a registration fee and is for the privilege of registering motor vehicles or using them on the highways. Irs tax form 1040 If the tax is partly based on value and partly based on other criteria, it may qualify in part. Irs tax form 1040 Example. Irs tax form 1040 Your state charges a yearly motor vehicle registration tax of 1% of value plus 50 cents per hundredweight. Irs tax form 1040 You paid $32 based on the value ($1,500) and weight (3,400 lbs. Irs tax form 1040 ) of your car. Irs tax form 1040 You can deduct $15 (1% × $1,500) as a personal property tax because it is based on the value. Irs tax form 1040 The remaining $17 ($. Irs tax form 1040 50 × 34), based on the weight, is not deductible. Irs tax form 1040 Taxes and Fees You Cannot Deduct Many federal, state, and local government taxes are not deductible because they do not fall within the categories discussed earlier. Irs tax form 1040 Other taxes and fees, such as federal income taxes, are not deductible because the tax law specifically prohibits a deduction for them. Irs tax form 1040 See Table 22-1. Irs tax form 1040 Taxes and fees that are generally not deductible include the following items. Irs tax form 1040 Employment taxes. Irs tax form 1040 This includes social security, Medicare, and railroad retirement taxes withheld from your pay. Irs tax form 1040 However, one-half of self-employment tax you pay is deductible. Irs tax form 1040 In addition, the social security and other employment taxes you pay on the wages of a household worker may be included in medical expenses that you can deduct or child care expenses that allow you to claim the child and dependent care credit. Irs tax form 1040 For more information, see chapters 21 and 32. Irs tax form 1040 Estate, inheritance, legacy, or succession taxes. Irs tax form 1040 However, you can deduct the estate tax attributable to income in respect of a decedent if you, as a beneficiary, must include that income in your gross income. Irs tax form 1040 In that case, deduct the estate tax as a miscellaneous deduction that is not subject to the 2%-of-adjusted-gross-income limit. Irs tax form 1040 For more information, see Publication 559, Survivors, Executors, and Administrators. Irs tax form 1040 Federal income taxes. Irs tax form 1040 This includes income taxes withheld from your pay. Irs tax form 1040 Fines and penalties. Irs tax form 1040 You cannot deduct fines and penalties paid to a government for violation of any law, including related amounts forfeited as collateral deposits. Irs tax form 1040 Gift taxes. Irs tax form 1040 License fees. Irs tax form 1040 You cannot deduct license fees for personal purposes (such as marriage, driver's, and dog license fees). Irs tax form 1040 Per capita taxes. Irs tax form 1040 You cannot deduct state or local per capita taxes. Irs tax form 1040 Many taxes and fees other than those listed above are also nondeductible, unless they are ordinary and necessary expenses of a business or income producing activity. Irs tax form 1040 For other nondeductible items, see Real Estate-Related Items You Cannot Deduct , earlier. Irs tax form 1040 Where To Deduct You deduct taxes on the following schedules. Irs tax form 1040 State and local income taxes. Irs tax form 1040    These taxes are deducted on Schedule A (Form 1040), line 5, even if your only source of income is from business, rents, or royalties. Irs tax form 1040 Check box a on line 5. Irs tax form 1040 General sales taxes. Irs tax form 1040   Sales taxes are deducted on Schedule A (Form 1040), line 5. Irs tax form 1040 You must check box b on line 5. Irs tax form 1040 If you elect to deduct sales taxes, you cannot deduct state and local income taxes on Schedule A (Form 1040), line 5, box a. Irs tax form 1040 Foreign income taxes. Irs tax form 1040   Generally, income taxes you pay to a foreign country or U. Irs tax form 1040 S. Irs tax form 1040 possession can be claimed as an itemized deduction on Schedule A (Form 1040), line 8, or as a credit against your U. Irs tax form 1040 S. Irs tax form 1040 income tax on Form 1040, line 47. Irs tax form 1040 To claim the credit, you may have to complete and attach Form 1116. Irs tax form 1040 For more information, see chapter 37, the Form 1040 instructions, or Publication 514. Irs tax form 1040 Real estate taxes and personal property taxes. Irs tax form 1040    Real estate and personal property taxes are deducted on Schedule A (Form 1040), lines 6 and 7, respectively, unless they are paid on property used in your business, in which case they are deducted on Schedule C, Schedule C-EZ, or Schedule F (Form 1040). Irs tax form 1040 Taxes on property that produces rent or royalty income are deducted on Schedule E (Form 1040). Irs tax form 1040 Self-employment tax. Irs tax form 1040    Deduct one-half of your self-employment tax on Form 1040, line 27. Irs tax form 1040 Other taxes. Irs tax form 1040    All other deductible taxes are deducted on Schedule A (Form 1040), line 8. Irs tax form 1040 Prev  Up  Next   Home   More Online Publications