J.K. Lasser’s Your Income Tax 2018 | 971 INDEX Symbols 0% capital gain rate, 105 2% AGI floor, 422, 423, 424 14-day/10% test, 251 15% capital gain rate, 105 28% capital gain rate, 106 28% Rate Gain Worksheet, 106, 110 39-week test for employees, 319–320 50% limit contributions to organizations with, 351 on entertainment costs, 451–452 on meal costs, 451–452 on T&E expense deductions, 448 60-day rollover deadline, 213 60% exclusion for empowerment zone business stock, 110 78-week test for self-employed persons and partners, 320 90% current year test, 526 90-day letter. See Notice of Deficiency 120-day rollover period, 214 183-day substantial presence test, 29 401(k) plans, 787 corrective distributions from, 179 one-person, 694 Roth contributions to, 183–185 salary deferrals to, 38, 182 saver’s credit and, 508 Section 457(b) plans vs., 186 SIMPLE, 231 tax benefits, 181–182 withdrawals from, 182–183 withholdings for, 36 403(b) plans, 183–185, 185–186, 186, 508 457 plans, 183–185, 508 2016 Standard Deduction, 294 A Abandonments, 577–578, 716 ABLE Account Contribution Information. See Form 5498-QA ABLE accounts. See Achieving a Better Life Experience accounts Abode test, 464 Absences, 25 ownership/use tests and, 539 Accelerated cost recovery system (ACRS), 785. See also Modified ACRS (MACRS) depreciation Accelerated depreciation, 785 Accountable reimbursement plans, 785 about, 456–457 mileage allowance, 459–460 non-accountable plans and, 460 per diem allowance, 457–459 Accounting methods, 668–670, 785, 786 Accrual-basis accounting, 669, 785 Achievement awards, 66–67, 289 Achieving a Better Life Experience (ABLE) accounts, 595, 620, 655, 785 Acknowledgment, of charitable contributions, 347 Acquisition debt, 785 Acquisition discounts, 90 Acquisition premiums, 87 Acquisitions, 680, 707. See also Home acquisition ACRS. See Accelerated cost recovery system (ACRS) Active participation in employer IRA plans, 202–205, 205–206 rental real estate loss and, 263 test of, 785 Actual knowledge test, 18 Additional Medicare taxes on earnings, 530–531 on higher-income taxpayers, 740 and net investment income tax, 480, 531–534 Additional taxes, IRS assessment of, 765–766 Additions, MACRS depreciation for, 716 Address, 5–8, 757 Adjusted base amount, 611 Adjusted Basis of Home Sold, 551 Adjusted basis of property, 130–131, 400, 487, 546, 547–548, 785 Adjusted gross income (AGI), 313–321, 379, 785 2% AGI floor, 422, 423, 424 claiming deductions from gross income, 314–317 deductible moving expenses, 317–319, 319–320, 321 elderly or disabled tax credit and, 617 figuring, 314 mortgage insurance premium deduction and, 361 Adjusted qualified expenses (AQHEE), 600 Administrative tasks, home office for, 680 Administrators of wills, 23, 26 Adopted children, medical expenses of, 387 Adoption benefits, 37, 62 Adoption credit, 62, 495, 506–507 Adoption taxpayer identification number (ATIN), 496 ADS. See Alternative depreciation system Advance payments, 513, 668 Advance rentals, 244 Advances, against commissions, 40 Advance valuation of art, 343, 350 Affordable Care Act, 54, 379, 652, 653 AFR. See Applicable federal rate AFSP. See Annual Filing Season Program After-tax retirement contributions, direct rollover of, 170 Age 30 duration rule, 601 Age 59½ (persons under), 177–179, 183, 215–219 Age 65 (persons over), 3, 324, 326, 327 Age 70½ (persons over), 169, 200, 202, 209, 229, 698 Age test, 464 Aggregate treatment of activities, 266, 268–270, 679 AGI. See Adjusted gross income Agreements. See specific types Aides (school), 424 Air Force Academy, 600 Airline Deregulation Act (1978), 41 Airline pilots, 442 Airplanes, 64, 65, 341 Aliens. See Nonresident aliens; See Resident aliens Alimony, 785 3rd year recapture for drops in, 644–645 cash payments of, 642 child support payments vs., 643 death of payee-spouse and, 642–643 deduction for, 316 minimum payment period for, 644 payments, 642 taxable, as compensation, 200 Allowable Dependent Care Credit, 502–515 Alternative depreciation system (ADS), 712 Alternative minimum tax (AMT), 481–488, 647 adjustments and preferences for, 484–487 avoiding, 488 depreciation, 712 for farmers and fishermen, 480 on Form 6251, 483–484 and intangible drilling costs, 258 interest on tax-exempt securities and, 562 ISOs and, 48 kiddie tax and, 490–491 miscellaneous deductions, 422 for private activity bonds, 92 recovered deductions and, 296 state tax refunds and, 293 tax credit from regular tax, 488 COPYRIGHTED MATERIAL
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J.K. Lasser’s Your Income Tax 2018 | 971
INDEX
Symbols0% capital gain rate, 1052% AGI fl oor, 422, 423, 42414-day/10% test, 25115% capital gain rate, 10528% capital gain rate, 10628% Rate Gain Worksheet, 106, 11039-week test for employees, 319–32050% limit
contributions to organizations with, 351on entertainment costs, 451–452on meal costs, 451–452on T&E expense deductions, 448
60-day rollover deadline, 21360% exclusion for empowerment zone business
stock, 11078-week test for self-employed persons and
partners, 32090% current year test, 52690-day letter. See Notice of Defi ciency120-day rollover period, 214183-day substantial presence test, 29401(k) plans, 787
corrective distributions from, 179one-person, 694Roth contributions to, 183–185salary deferrals to, 38, 182saver’s credit and, 508Section 457(b) plans vs., 186SIMPLE, 231tax benefi ts, 181–182withdrawals from, 182–183withholdings for, 36
and, 361Adjusted qualifi ed expenses (AQHEE), 600Administrative tasks, home offi ce for, 680Administrators of wills, 23, 26Adopted children, medical expenses of, 387Adoption benefi ts, 37, 62Adoption credit, 62, 495, 506–507Adoption taxpayer identifi cation number
(ATIN), 496ADS. See Alternative depreciation system
Advance payments, 513, 668Advance rentals, 244Advances, against commissions, 40Advance valuation of art, 343, 350Aff ordable Care Act, 54, 379, 652, 653AFR. See Applicable federal rateAFSP. See Annual Filing Season ProgramAfter-tax retirement contributions, direct
229, 698Age test, 464Aggregate treatment of activities, 266,
268–270, 679AGI. See Adjusted gross incomeAgreements. See specifi c typesAides (school), 424Air Force Academy, 600Airline Deregulation Act (1978), 41Airline pilots, 442Airplanes, 64, 65, 341Aliens. See Nonresident aliens; See Resident
aliensAlimony, 785
3rd year recapture for drops in, 644–645cash payments of, 642child support payments vs., 643death of payee-spouse and, 642–643deduction for, 316minimum payment period for, 644payments, 642taxable, as compensation, 200
Allowable Dependent Care Credit, 502–515Alternative depreciation system (ADS), 712Alternative minimum tax (AMT), 481–488,
647adjustments and preferences for, 484–487avoiding, 488depreciation, 712for farmers and fi shermen, 480on Form 6251, 483–484and intangible drilling costs, 258interest on tax-exempt securities and, 562ISOs and, 48kiddie tax and, 490–491miscellaneous deductions, 422for private activity bonds, 92recovered deductions and, 296state tax refunds and, 293tax credit from regular tax, 488
COPYRIG
HTED M
ATERIAL
972 | J.K. Lasser’s Your Income Tax 2018
Index
tax credits against, 488and tax rate, 12
Alternative trade adjustment assistance (ATAA) program, 513
Amended returns, 760, 762, 765, 785Amended U.S. Individual Income Tax Return.
See Form 1040XAmerican Opportunity credit, 594, 597, 600,
602Amortization
of bond premium, 85–86, 785of computer software, 719of intangible assets, 704, 717–718, 785of loans from retirement plans, 180of research and experimentation costs, 719of start-up costs, 679
AMT. See Alternative minimum taxAnnual contributions, to Roth IRAs, 232–235Annual Filing Season Program (AFSP), 767Annualized Estimated Tax Worksheet, 526Annualized income method, 526Annualized rate, 785Annuities, 785
employee cost of, 196for employees of tax-exempt organizations
and schools, 185–186endorsement of annuity check for another
annuity, 159from endowment policies, 193life expectancy tables for, 192–193partial exchanges of contracts, 160pre-age 59½ penalty, 216, 217–219reporting, 193–194for surviving spouses, 175taxable part of, 187–192, 194–196tax-sheltered, 790withdrawals from retirement plans before
start date of, 196withholdings and, 38, 522
Annulments, 641Anti-churning restriction, 717Apartment, cooperative. See Cooperative
apartmentsAppeals, 771Appliances, depreciation for, 245Applicable federal rate (AFR), 97, 99, 785Appraisals
deductions for, 432for disaster relief, 410of donated property, 343, 348–350fees for, 337reasonable cause exception for relying
on, 350of rental property, 249
Appreciated fi nancial positions, 560Appreciated property, 337, 341–342, 353,
655, 785
Apps, mileage tracking, 733AQHEE. See Adjusted qualifi ed expensesArbitrage transactions, 560Archer Medical Savings Accounts (MSAs), 37,
56, 59–60, 317, 702, 785Are Your Fringe Benefi ts Tax Free?, 53–74Are Your Meals and Lodging Tax Free?, 69–74Armed Forces Health Professions Scholarship
and Financial Assistance Program, 62, 591
Armed Forces personnel, 621–627“away from home” test, 442in combat zones, 624–625, 626in contingency operations, 625–626deductions for, 624as dependents, 468diff erential wages of, 517extensions for tax payment by new, 626–627moving costs of, 318overnight travel costs, 315ownership and use test for, 540refund claims by, 761Reservists, 627taxable pay and benefi ts, 622
Artists, expenses of, 678Art objects, 342–344Assessment (term), 785Assets. See also specifi c types
estimating value of, 658–659in service before 1987, 714transfers of, 20
Assignments, 443–444, 785ATAA program. See Alternative trade
discussions, 766Authors, expenses of, 678Automatic fi ling extensions, 753Automobiles. See also Car and truck expenses
charitable donations of, 341damage to, 405inclusion amount for leased, 787license fees, 376mileage allowance, 459–460recapture of fi rst-year expensing for, 736tax credits for plug-in electric, 514–515
BBA. See Bipartisan Budget Act of 2015Beginning date, retirement income, 176–177Below-market-interest loans, 97–99Benefi ciaries
basis of property for, 124death of, 227estates as, 224income from estates/trusts for, 306individual and non-individual as, 227IRA, 219, 225–227life insurance proceeds for, 307–308pre-age 59½ penalty and, 216qualifi ed tuition program, 595retirement income payments for, 177retirement plan distributions for, 165,
corporate liquidation and, 739–740depreciable property, 736–737depreciation recaptured as ordinary
income, 735–736disaster grants for losses on, 401involuntary conversions/tax-free exchanges
and, 737property with personal and business
use, 738–739proprietorships, 737recapture of fi rst-year expensing for, 736Section 1231 assets, 737–738and trading in business equipment, 739
Business tax credits, 691Business trips
“away from home” test for, 441–442business-vacation trips, 445–446local lodging costs for, 441spouse and dependents on, 447–448types of, 440–441
Business useallocating car and truck expenses to, 722allocating home offi ce expenses to, 684personal use and, 412, 706, 727, 738–739sale of property with, 538in separate area of dwelling, 549of vehicles, 732, 733
Business-vacation trips, 445–446Business vehicles, 732, 733Buyers. See also First-time home-buyers
for business vehicles, 732–733, 733depreciation of cars, trucks, and vans
annual ceilings, 724–725MACRS rates, 725–729after recovery period ends, 731restrictions on, 723–724straight-line method, 729–730in year vehicle is disposed of, 730–731
as educational expenses, 607expense allocations for, 722–723standard mileage rate, 721–722trade-ins of business vehicles, 732of volunteer workers, 335
Care providers, 499Carryback, 786
of foreign tax credit, 638of net operating losses, 689
Carryforward, 786Carryover, 107, 296
of basis, 123, 126–127of business expenses, 684of capital loss, 786of foreign tax credit, 638of losses over at-risk limits, 287of net operating losses, 687, 689of excess contributions, 352of excess donations, 353of fl exible spending account funds, 72–74of mortgage interest credit, 513
Cashas boot, 149–151charitable contributions of, 347gifts of, 351meal and lodging allowances, 69small transactions in, 671tax payments in, 755wellness program rewards, 71
Cash-basis accounting, 668, 786Cash-basis investors, 90Cash call, 287Cashing out of annuities, 175Casualty losses, 786
bank deposit losses, 403–404damage to car, 405damage to trees and shrubs, 404–405disaster losses, 401–403excess living costs paid by insurance, 413–
414in excess of income, 415fl oors for personal-use property losses, 409–
410on Form 4864, 410–412insurance reimbursements for, 413nondeductible, 408–409by property owners, 403
974 | J.K. Lasser’s Your Income Tax 2018
Index
for property with personal and business use, 412
proving, 405–420repairs and, 413Section 1231 assets and, 738sudden event test for, 397–399timing of deduction for, 399–400
Cell phones, 65, 429Cemeteries, 332Certifi cate of tax compliance, 31Certifi ed historic structures, 574, 574–575Character, of gains, 578Charitable contribution deductions, 330–353,
619. See also Donated propertybenefi ts from contributions and, 333–335business inventory and, 346carryover for excess donations, 353ceiling on contributions, 350–353deductible contributions, 331–332for donations through trusts, 346election to reduce fair market value by
appreciation, 353for life insurance policies, 346nondeductible contributions, 332–333records for substantiating
contributions, 347–348for support of students in your home, 336for unreimbursed expenses of volunteer
acknowledgment from, 347disclosure statement from, 348IRAs and, 227transfer of U.S. savings bonds to, 96
Chauff eur services, 63Checking account fees, 432Checklist of Taxes, 372–377Child and dependent care credit, 786
credit percentage, 502–503for disabled individuals, 619fi guring, 500–503limits on eligible expenses, 500–503qualifying for, 498–500
Childbirth classes, 381Childless earned income credit, 505Children
alimony reductions and ages of, 643claiming of American Opportunity credit
by, 596
dependent care credit and age of, 499–500educational benefi ts for employees’, 44–45educational expenses paid by, 596EIC for married, 504, 798fi ling returns for, 25–26, 490–491kiddie tax for multiple, 493net investment income of, 95QDRO distributions to, 176Social Security benefi ts for, 610U.S. savings bonds registered in names of, 94wages paid by parents to, 26withholdings on wages paid to, 521
depreciation on, 249gain/loss on sales of, 547home mortgage interest on, 358, 365offi ces in, 686ownership/use tests for, 540“points” on, 365real estate tax deduction for, 374
Co-owners, 95Copiers, 429Copyright costs, 257Corporate bonds, 91Corporate dividends, 77–78Corporate mergers, 89Corporations. See also S corporations
C, 109closely-held, 158–159, 282–283organizational costs for, 679personal service, 282–283
60-day rollover, 213Archer MSA contributions, 702for combat zone personnel, 625–626Coverdell ESA contribution, 599disaster loss claim, 401donation acknowledgment, 347, 350for fi ling returns, 6–8for fi rst required minimum distribution, 219foreign earned income exclusion, 635–636FSAs, 72IRA contribution, 232, 233–235IRA recharacterizion, 236, 238IRA rollover, 212, 214–215qualifi ed retirement plan set-up, 694, 695realized securities gains/losses, 553separate liability relief, 18SEP plan set-up, 695SIMPLE IRA set-up, 231
Dealers, 132, 564–565Death
of benefi ciary, 227in combat zone, 626fi ling returns for decedents, 26–27of IRA owner, 228of passive interest owner, 281of spouse, 16, 22–23, 108, 128, 129–130,
542, 642–643transfers at, 96, 139–140
Death benefi ts, 623
Debt(s). See also specifi c typescancellation of. See Cancellation, of debtas deductible contributions, 331home equity loan to pay, 359property over $150,000 plus $5 million in
debt, 141–145restructuring of, 576–577for tax-exempt obligations, 367withholding of refunds to cover, 762
Decedent(s), 23, 26–27, 126–127, 387, 761, 787. See also Income in respect of a decedent (IRD)
Declining balance method, 726, 786Decrees of support, 642Deductible Medical Expenses, 382Deductible Travel and Transportation
Expenses, 438–460Deducting Car and Truck Expenses, 722–733Deduction phaseout rules
for adoption credit, 507for American Opportunity credit, 597for mortgage insurance premiums, 361IRA deductions and, 203–205itemized deductions, 328for Lifetime Learning credit, 599and MAGI for Roth IRAs, 233for married persons fi ling separately, 202for maximum loss allowances, 264for nonparticipant spouses, 201for spouses fi ling jointly, 201for student loan interest deduction, 604for U.S. savings bond tuition
programs, 592–593Deductions, 786. See also specifi c deductions;
See also specifi c typesof decedents, 27erroneous, 20for expenses of looking for a new
business, 679–680for Armed Forces personnel, 624foreign earned income and, 635from gross income, 314–317of IRA contributions, 199MAGI and limits on, 203in net operating losses, 688–689for professionals, 676–677for qualifi ed retirement plans, 698for rental real estate income, 245–246for returned wages, 43for SEP plans, 698
Deduction Worksheet for Self-Employed, 695, 696
Default, 153, 578–579Defense Department (DOD), 47Defense of Marriage Act (DOMA), 10Deferred compensation, 36, 41–42, 786Deferred exchanges of property, 152–154
Deferred interest, 82Deferred payment sales, 139Deferred pay plans, 186–187Defi ciency, 675, 786. See also Notice of
Defi ciencyDefi ned-benefi t plans, 206, 786Defi ned-contribution plans, 206, 695, 786Deliquent child support, 643De minimis safe harbor, 247De minimus foreign taxes, 638De minimus fringe benefi ts, 66Demolition, 539, 716Demonstration cars, 63Departure permits, 31Dependency exemption, 643Dependency status, 327Dependent care assistance, 61Dependent care benefi ts, 36Dependent care credit, 73Dependent care, employer-fi nanced, 501Dependent care expenses, allocating, 501Dependent care FSAs, 73Dependents, 786
blind, 327citizen and resident tests for, 472disabled, 381fi ling tests for, 4–8group-term life insurance for, 60joint returns by, 472medical expenses of, 386–387parents as, 25QDRO distributions to, 176Social Security numbers for, 473standard deduction for, 324, 327student loan interest deduction for, 603as survivors of workers abroad, 635T&E expenses of, 447–448tuition/fees deduction and, 602
accelerated, 785and allowance for standard mileage rate, 721,
722and business use of home, 548of cars, trucks, and vans, 723–724, 725–729,
730–731, 731and conversion of home to rental
property, 249–250fi rst-year expensing and, 706of home offi ce expenses, 683like-kind exchange of property and, 147of offi ces in cooperative apartments, 686of property received as a gift, 125–127recapture of, 133, 735–736, 786
976 | J.K. Lasser’s Your Income Tax 2018
Index
Depreciation and Amortization. See Form 4562
Depreciation deductions, 703–719150% rate election for, 711and amortization, 717–718, 719for assets in service before 1987, 714bonus depreciation, 719computer software and, 718–719demolition of buildings, 716fi rst-year expensing deduction, 705–707for leasehold and retail improvements, 716for listed property, 712–714MACRS depreciation, 707–708, 708–709,
710, 714, 717mid-quarter convention for, 710–711property for, 704–705real estate, 714, 717for straight-line depreciation, 711–712on tax returns, 705
ABLE accounts for, 620combat vets, 47earned income credit for, 504elderly or disabled tax credit for, 616estimated tax penalty for, 525impairment-related work expenses, 424lifetime care of, 381pre-age 59½ penalty for, 216refund claims by, 761schooling for, 390–391special tax rules for, 619
Disregard of IRS rules/regulations, 768Distance test, 319Distributions from ABLE Accounts. See Form
1099-QADividends, 786
capital gains rates for, 77–78distribution not out of earnings, 81–82of earnings, 78–79from estates, 78from ETFs, 589as interest, 76, 78–79mutual-fund distributions and, 76–77ordinary income and, 12parents’ reporting of child’s, 493–494from partnerships, 78of profi ts, 78–79in property, 79–80real estate investment trust, 78regular income tax liability and, 479–480reinvestment of, 79responsibility for reporting, 80–81from S corporations, 78from trusts, 78
Divorce. See also Former spouses (ex-spouses)alimony and, 641amended returns and, 760and child and dependent care credit, 499community property rules and, 15–16dependents’ medical costs, 386and fi ling separate returns, 325IRAs and, 215, 217and residence sales, 543rollover of distribution received under, 173stock redemptions and, 156
Doctors, malpractice insurance for, 676DOD. See Defense DepartmentDOMA. See Defense of Marriage ActDomestic partners, 16Domestic production activities deduction, 690Domiciles, 633Donated property, 334
art objects, 342–344bargain sales of appreciated property, 341–
342cars, motor vehicles, boats, and
airplanes, 341clothing, 340easements as, 574Form 8283 and, 348–350free use of, 333interests in real estate, 344–345mortgaged realty, 580penalty for substantial overvaluation of, 350types, 336–340
Educator expenses, 315, 424EFTPS. See Electronic Federal Tax Payment
SystemEIC. See Earned income credit
J.K. Lasser’s Your Income Tax 2018 | 977
Index
Elderly or disabled tax credit, 616Electing out of installment sales, 135–136Electronically-tracked slot machine play, 291Electronic Federal Tax Payment System
Estimated Tax Worksheet for 2015, 526ETFs, distributions from, 752
Excess contributions, 207–208, 208, 235, 352, 698
Excessive refund claims, 755penalty for, 762, 770
Exchange accommodation titleholders (EATs), 154
Exchange rates, 637Exchanges of property. See Tax-free exchanges
of propertyExchange-traded funds, 589Exchange-traded stock, 119Exclusive and regular use test, 680, 681Ex-dividend date, 80Executives, discriminatory plans for, 58–60Executors, 23, 26, 43, 126–127Exemptions, 27, 787Exempt-person exception, 29Exercise, of stock rights, 555Exercise programs, 380Expatriates, 31–32, 539Expenses for Business Use of Your Home.
See Form 8829Expiration, stock rights, 555Ex-spouses. See Former spousesExtensions, 626–627, 635, 753–754, 765–766
787Fake injury claims, 383–385False Claims Act, 298Family and Medical Leave Act (FMLA), 73Family income riders, 308Family members, as equitable owners in
home, 357Farmers
debt cancellation, 301depreciation of property, 704estimated tax payments for, 527estimated tax penalty for, 525installment method for, 131installment payments by, 527involuntary conversions, 415regular income tax liability for, 480remainder interest for, 344retired, and material participation, 272Schedule F for, 666self-employment tax for, 743
Farm optional method (self-employment tax), 746
FAVR. See Fixed and variable rate allowanceFax machines, 429Federal crime investigators, 443Federal False Claims Act, 434
Federally guaranteed obligations, 92Federal public safety offi cers, 47Federal subsidy, residence sales and, 539Federal tax withholdings, on Form W-2, 36Federal unemployment (FUTA) taxes, 500,
651–653Fiduciary(-ies), 787FIFO method. See First-in, fi rst-out methodFiguring Your Taxable Social Security Benefi ts
Worksheet, 611, 612Filing returns, 751–758
address for, 5–8applying for extensions, 753–754basics, 1–8for children, 490–491deadlines for, 6–8getting refunds, 754–755for gift tax, 656identity theft and, 756–757interest on underpayments, 757notifying IRS of address changes, 757paying taxes due, 755–756penalties for late fi ling and payments, 758preparation for, 752–753recordkeeping for, 752situations requiring, 4
Filing status, 9–32determining, 10and expatriation tax, 31–32and fi ling returns for children, 25–26and fi ling returns for decedents, 26–27and fi ling returns for an incompetent
person, 28head of household, 24–25joint returns
community property rules, 15–16and death of spouse in 2017, 22–23equitable relief on, 21–22fi ling, 14–15fi ling separate returns vs., 12–13innocent spouse rules, 17nonresident alien spouse election, 15separate liability relief for former
spouses, 18–21nonresident aliens, 28, 31qualifying widow or widower, 23resident aliens, 29–31separate returns, 12–13tax rates based on, 11–12
409A plan deferrals on, 42accrued interest on, 83adjusted gross income on, 350adoption credit on, 506AGI fl oor and, 424alimony deduction on, 639, 640, 644amortized premium on, 86AMT liability on, 481annuity payments on, 193Archer MSAs on, 56at-risk losses on, 688
bank deposit losses on, 403bond redemption or retirement on, 91capital losses and carryovers, 107charitable contributions on, 330child and dependent care credit on, 498child tax credit on, 496community property on, 15compensation on, 38dealer sales on, 132death in combat zone and, 626deductions on, 314, 331, 422dividends on, 77, 80domestic production activities deduction
on, 690dual tax status on, 30, 31early withdrawal of CD on, 85education expense deduction on, 315EIC on, 503, 505employer stock/securities distributions
on, 174excess withholdings on, 521farm/fi shing income on, 480FICA taxes on, 648fi ling, 5–8, 753fi rst-time homebuyer credit on, 515foreclosures and voluntary conveyances
on, 575foreign earned income on, 629, 633, 638forfeited interest on, 85Form 2439 and, 585Form 4797 and, 733Form 8889 and, 56, 59, 700, 701gain or loss from residence sales on, 546gambling winnings, 289general business credit on, 691health coverage credit on, 513health insurance premium deduction
on, 388household employment on, 649income from hobbies on, 678income on, 478for incompetent person, 28intangible drilling costs on, 257interest on, 82, 83IRA loss on, 211itemizing on, 322, 325“kiddie tax” on, 490, 493, 494loss deductions on, 254lottery and sweepstakes winnings, 289mandatory IRA dsitributions on, 219medical expenses and, 379, 384mortgage interest credit on, 356, 513mutual-fund distributions on, 584net capital gains on, 105net operating losses on, 686, 689nondeductible IRA contributions on, 198penalty for early withdrawal on, 216
for performing artists, 315property donations on, 337, 348qualifi ed charitable distribution on, 209recapture tax on, 539refunds and, 27, 754rental real estate and, 243, 245, 248, 266,
274for reservists, 627retirement plans and, 163, 694, 695, 698return processing problems on, 766royalty income on, 256self-employed income on, 666, 672self-employment tax and, 377, 741, 744Social Security and Medicare taxes on, 37,
60, 530standard deduction on, 324student loan interest deduction on, 603substitute payments on, 78tax-exempt bond funds on, 583tax-exempt interest on, 82tips on, 519, 520tuition and fees deduction on, 602unemployment benefi ts on, 40, 41wage repayments on, 43
Form 1040Aallocated tips and, 36AMT on, 481annuity payments on, 193child and dependent care credit on, 498child tax credit on, 496compensation on, 38death in combat zone and, 626deductions on, 314dividends on, 77, 80EIC on, 503employer stock/securities distributions
on, 174excess withholdings on, 521fi ling, 5, 753interest on, 82, 83IRA contributions on, 198“kiddie tax” on, 490, 493mutual-fund distributions on, 584, 585qualifi ed charitable distribution on, 209refunds and, 27, 754retirement plans and, 163return processing problems on, 766standard deduction on, 324student loan interest deduction on, 603taxable income on, 478tax-exempt bond funds on, 583tips on, 520tuition and fees deduction on, 602unemployment benefi ts on, 40
Form 1040-C, 31Form 1040-ES, 518, 525, 526Form 1040EZ, 490
J.K. Lasser’s Your Income Tax 2018 | 979
Index
allocated tips and, 36child’s dividends/interest on, 478compensation on, 38death in combat zone, 626excess withholdings and, 521fi ling, 5, 753interest on, 82mutual fund distributions and, 585refunds and, 27, 754reporting tips on, 520return processing problems on, 766standard deduction on, 324unemployment benefi ts on, 40
409A plan deferrals on, 42active particpation status on, 206adoption benefi ts on, 62Archer MSA contributions on, 56automobile benefi ts on, 63combat pay on, 625and death in combat zone, 626dependent care assistance on, 61
disability coverage premiums on, 54domestic production activities deduction
and, 690employee achievement awards, 289employer reimbursements for dependent care
on, 501FICA taxes on, 648fi ling returns, 753foreign earned income on, 635Form 1099 and, 35FSA contributions on, 71gain or loss from residence sales on, 546grants on, 591health insurance premiums on, 305for household employees, 650life insurance premiums on, 60lodging on, 68name and SSN on, 648non-accountable plans reimbursements
on, 460nonstatutory stock options on, 50payroll deduction contributions on, 347, 348per diem allowance on, 458retirement plan box on, 202salary or wage income (compensation) on, 38salary-reduction contributions on, 231SEP contributions on, 229of statutory employees, 672transcripts of, 752Understanding Your Form W-2 for 2017
character of, 578deadlines for realizing, 553on foreclosures, 575on futures contracts, 561on ISOs, 48nonqualifi ed use of residences and, 541–542on property sales, 109–110, 121–122, 125,
550recognized, 789on repossessions, 575, 578on residence sales, 538, 546–547on short sales of real estate, 575on stock, 109–110, 556traders’ reporting of, 565unrecaptured Section 1250, 790
Gambling winnings, 289–291, 520Gasoline taxes, 373Gas percentage depletion, 259Gas wells, 277GDS. See General Depreciation System
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General business credit, 691General Depreciation System (GDS), 711Generally related test, 449General sales taxes, 373–374Generation-skipping transfer (GST) tax, 661Gift loans, 98Gifts
annual exclusion on, 655of appreciated value, 655as income, 292basis for property received as, 655of depreciable business property, 736–737from employers, 39of income interests in trust, 346of installment notes, 139losses on residence sales acquired as, 550–
551mutual fund shares as, 587of passive interests, 281sponsorship, 619strike benefi ts as, 41taxable, 655unadjusted basis of property recieved
as, 124–126U.S. savings bonds as, 94
Gift tax, 124, 593, 655, 656–657, 657–658, 787
Going-concern value, 718Golden parachute arrangements, 39Goodwill, 149, 717Goodwill entertainment, 450Governmental 457(b) plans, 187Government employees, 186–187, 315, 630Government payments, withholdings on, 519Government services, assessments for, 375Grace period, for FSA fund use, 72Graduate assistants, 591Graduated payment mortgages, 362Grantor trusts, 658, 787Grants, 591Green card, 29Groceries, employer-furnished, 68Gross income, 3, 314–317, 467, 787Gross profi t, 133, 134Gross receipts, 672–676, 787Ground rents, 362Group-term life insurance, 36, 43, 60–61, 787GST tax. See Generation-skipping transfer taxGuam, 636Guaranteed salaries, 302Guardians, returns by, 28Gulf Opportunity Zone, 562
Hardest Hit Fund, 355, 374Hardship distributions, 183, 187Hardship waiver, of penalty, 525, 653HCTC. See Health coverage tax creditHCTC Monthly Registration and Update
Form. See Form 13441-AHDHPs. See High deductible health plansHead of household, 24–25, 326, 787Health and accident plans, 54, 55, 56, 57,
59–60Health care premium tax credit, 316, 509–512Health Coverage Exemptions. See Form 8965Health coverage tax credit (HCTC), 513Health fl exible spending arrangements
242, 559, 585, 787Holidays, business-vacation trips over, 446Holocaust restitution payments, 298Home. See also Tax home; See also Vacation
homesadjusted basis for, 547–548converting, to rental property, 249–250,
549–550distributions for acquisition of, 179donation of, 334gain on sale of, 532maintenance of home test, 24–25
remainder interest in, 344support of students in, 336
Home acquisition loans, 356–359Home construction loans, 359–361Home entertaining, 450Home equity debt, 359, 787Home improvement loans, 361Home improvements, 392–393Home mortgage interest, 788. See
also Mortgage interest deductionfor condominiums, 365for cooperative apartments, 365as expense, 253home acquisition loans, 356–359home construction loans, 359–361home equity loans, 359home improvement loans, 361interest on refi nanced loans, 362–363payment rules, 361–362records of, 752from retirement plan loans, 181
Home offi ceallocation of expenses, 684business income and, 684–685deduction for, 436, 680–682depreciation of, 686incidental personal use of, 680of investors, 431job expenses for, 429in principal residence, 548sideline business, 685–686
arrangementsHSAs. See Health savings accountsHUD-1 (Uniform Settlement Statement)
form, 376Hunting trips, 449
IIdentity Protection Personal Identifi cation
Number (IP PIN), 756Identity theft, 756–757Identity Th eft Affi davit. See Form 14039Illnesses, job-related, 46Immediate relative (IR) visas, 507
982 | J.K. Lasser’s Your Income Tax 2018
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Impairment-related work expenses, 424Improvements
adjusted basis and, 547allocation of basis and, 130to business vehicles, 725home improvement loans, 361leasehold, 716MACRS depreciation for, 714, 716, 719to principal residence, 364on real estate after 1986, 717to rental property, 121repair vs., 246–248by tenants, 244to restaurants, 716to retail property, 716
Imputed interest, 98, 787Imputed interest rules, 154Inaccurate returns, 768–770Incapacitated homeowners, 541Incentive stock options (ISOs), 48, 486, 787Income, 288–310. See also specifi c types, e.g.:
Partnership incomecasualty/theft losses and, 415debt cancellation and, 299–302, 575from estates, 302, 306fi rst-year expensing and, 706foster care payments, 309–310gambling winnings and losses, 289–291gifts and inheritances, 292household, 651, 652, 787jury duty fees, 309legal damages, 296–298from life insurance policies, 307–308,
308–309lottery and sweepstakes winnings, 289on market discount bonds, 88–89prizes and awards as, 289recovered tax deductions and, 295–296refunds of state and local income tax, 292–
293regular income tax liability and, 478for S corporations, 302, 305taxable, 790from trusts, 302, 306, 658tuition and fees deduction and, 602
Income in respect of a decedent (IRD), 23, 27, 306–307, 787
basis of redeemed shares, 586depreciable business properties, 736–737holding periods for, 120HSAs in, 701income from, 292residences acquired as, 550–551traditional IRAs as, 223–229unadjusted basis of property, 126–127
depreciable property, 737dispositions of notes, 139–140electing out of, 135–136fi rst-year expensing and, 736for investors in real estate, 570passive interests, 281to relatives, 136–137repossessions and, 140–141Section 1231 assets, 738tax advantage of, 131–132
Instructors, 424Insurance. See also specifi c types
chronically/terminally ill persons use of, 395excess living costs paid by, 413–414premiums for, 81, 245proceeds from, as rental income, 244reimbursements from, 402–403, 413tax-free exchanges of, 159–160
Intangible assets, 704, 717–718, 785, 788Intangible drilling costs, 257–258Intangible property, 149, 277, 337Intellectual property, 340Intelligence offi cers, 540Interest. See also specifi c types
abatement of, 772on back taxes, 627on bonds, 83on business tax defi ciency, 675
on deferred payment sales, 139dividends and, 76, 78–79on escrow accounts, 154estate tax paid on, 96on frozen accounts, 83for late payments, 754on marital property settlements, 156on penalties, 770premature withdrawal and, 84–85on refunds, 755rental property and, 254–255on savings bonds, 563on seller-fi nanced sales, 99–100state and city interest on bonds, 92on taxes owed by reservists, 627on tax-exempt securities, 562on tax returns, 82–83on tax underpayments, 757timing of reporting of, 99on U.S. savings bonds, 94–95, 95–96for U.S. savings bond tuition
programs, 592–593on vehicle loans, 721, 723
Interest expense deductions, 354–370. See also Home mortgage interest; See also Investment interest
deferral of, 88home construction loans, 359–361limitation on, 90, 94passive activity and, 274“points”, 364, 365prepaid interest, 369–370for sales of subdivided land, 570time period for claiming, 369
526, 531–534. See also “Kiddie tax”Investment interest, 365–366, 367–369, 485Investment in the contract, 788Investment losses, 404Investors
cash-basis, 90computers used by, 713overcoming status of, 270
Investors in mutual funds, 581–589Investors in real estate, 568–580
abandonments, 577–578cancellation of leases for, 572–573
J.K. Lasser’s Your Income Tax 2018 | 983
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foreclosure on non-purchase money mortgages, 579–580
foreclosure sales to third parties, 580granting of easements for, 573–574mortgage debt restructuring by, 576–577property returned to creditors by, 575–576sales of options for, 573sales of subdivided land by, 570–571self-employment income of, 742seller’s repossession after buyer’s default
and, 578–579tax credits for, 574–575tax-free exchanges by, 571–572timing of real property sales by, 572transfers of mortgaged real estate by, 580types of ventures for, 569–570
Investors in securities, 552–567, 553bonds, 561–562, 563–564, 564constructive sales of appreciated fi nancial
positions by, 560home offi ce use by, 685–686options, 557–559stock, 553–554, 555–557, 557–559, 562tax treatment of dealers vs., 564–565traders, 564–565, 566–567
Involuntary conversions, 788basis of property acquired with proceeds
of, 124of business property, 737casualties as cause of, 420deferring gain from, 415election to defer gain for, 416holding periods for, 121qualifying types of, 415–420recapture for, 735replacement property for, 416–418,
418–419special assessments and severance damages
for, 420IP PIN. See Identity Protection Personal
Identifi cation NumberIRAs. See Individual retirement accountsIRD. See Income in respect of a decedentIRS
advance valuation of art from, 343, 350audit extensions for, 765–766denial of earned income credit by, 504fi guring of estimated tax penalty by, 525levies by, 217meal allowance of, 439–440notifying, of address changes, 757notifying, of related party transfers, 136questioning of self-certifi cation by, 213regrouping of activities by, 269release of lien by, 774reporting of basis for redeemed shares
to, 586
reporting payments and receipts of self-employed persons, 670–671
review of Form W-4 by, 519seizure of IRA by, 209–210unauthorized collection lawsuits against, 774waiver of estimated tax penalty by, 525withholding of refunds by, 762
764, 788. See also specifi c deductionsItemized Deductions and the Standard
Deduction for 2017, 323–329ITIN. See Individual taxpayer identifi cation
number
JJanuary 1, 1936 (persons born after), 166–168January 2, 1936 (persons born before), 168Job changes, 544, 605, 606Job expenses
cell phones, calculators, copiers, and fax machines, 429
computers bought for work, 428–429
dues and subscriptions, 424–425employee’s home offi ce, 429expenses of looking for a new job, 426–427impairment-related, 619local transportation costs, 427not subject to 2% AGI fl oor, 424small tools, 429subject to 2% AGI fl oor, 423telephone costs, 430uniforms and work clothes, 425–426unusual, 427–428
Job-hunting costs, 680Job placement assistance, 65Job-related illnesses, 46Job-related injuries, 46Job searches, 426–427Job skills, 605Job transfers, 320Joint accounts, 77, 82Joint and Last Survivor Expectancy Table, 222Joint Life and Last Survivor Life
and 39-week test for moving costs, 320carryovers from, 108community property rules, 15–16and death of spouse, 22–23by dependents, 472direct deposit of refunds on, 754elderly or disabled tax credit on, 617–618equitable relief on, 21–22fi ling, 14–15innocent spouse rules, 17“kiddie tax” and, 491nonresident alien spouse election, 15relief from liability on, 16Schedule C for, 666, 672separate liability relief and, 18–21separate vs., 12–13, 14signing, 14–15, 23Social Security numbers for, 463
Leave-sharing plans, 39Legal costs, 245, 296, 298, 432–434, 645Legal damages, 296–298Legal form of business, 666Legal guardians, returns by, 28Legally required educational courses, 606–607Legal representative, of decedents, 26Legal separation, 16, 325, 386, 499, 641, 788Lenders, interest in activities by, 286Length of service awards, 453License fees, automobile, 376Liens, release of, 774Life-care fee, 381Life expectancy rule, 242Life expectancy tables, 192–193Life income plans, 346Life insurance policies, 60–61, 787
benefi ts from, 43–44, 395, 658charitable contribution deductions for, 346dividends on, 77, 81with family income riders, 308selling or surrendering, 308–309taxes on proceeds from, 307–308
Lifetime Learning credit, 594, 597, 600, 602, 604
Lifetime trusts, 788Light trucks, depreciation on, 724. See
also Car and truck expenses“Like-class” test, 148Like-kind exchanges of property, 104,
141, 147–148, 540, 788, 789. See also Tax-free exchanges of property
Limited entrepreneurs, 270Limited liability, for oil or gas wells, 277Limited partners, 268, 270, 278, 287Line-of-credit mortgages, 358Lines of business, companies with multiple, 74Liquidation, 240, 739–740Listed property, 712–714, 736Livestock sales due to drought, 692Living costs, 413–414, 443–444, 607LLC members, 278, 743
LLP members, 278Load charges, 585Loan Repayment Assistance program, 299Loans. See also specifi c types
Local lodging costs, 65, 441Local offi cials, business expenses of, 315Local taxes, 37, 292–293, 373Local transportation costs, 427Lockout benefi ts, 41Lodging, 67–69, 389, 441, 636Lodging as condition of employment test, 68Long-term care insurance policies, 54,
394–395Long-term care services, 394–395Long-term contracts, 670Loss deduction, 254Losses
deadlines for realizing, 553on exchanges of property, 149fi rst-year expensing and, 706on foreclosures, 575on gambling, 289–291on like-kind exchange of property, 147on liquidation of Roth IRAs, 240in partnerships, 302–303, 303–304on QTP investment, 595on regulated futures contracts, 561on repossessions, 575on residence sales, 546–547, 549, 549–550on sale of ISOs, 48and sales of property, 121–122, 125of S corporation stockholders, 305on Section 197 intangibles, 718securities investors’ planning for, 553self-employment tax and, 746on short sales of stock, 556, 559on temporary rental of residence, 255–256traders’ reporting of, 565on wash sales, 107, 558
Lost deposits, 83Lotteries, 289, 333Low earners, 201, 233, 518Low-income housing credit, 574Low-income years, self-employment tax
for, 746Lump-sum distributions from retirement
plans, 165, 166–168, 168–169, 173, 193, 788
Lump-sum payment election, Social Security, 614–615
Lunches, business, 677
MMACRS. See Modifi ed ACRSMACRS Deduction: Half-Year
Convention, 729MACRS Deduction: Mid-Quarter
Convention, 729–733MACRS Depreciation Rates, 709–719MAGI. See Modifi ed adjusted gross incomeMailing returns, 753Maintenance of home test, 24–25Maintenance, on residence, 245Malpractice insurance, 676Management expenses, 245Management fees, 274Managers (sports), 442Managing executives, business-vacation trips
of, 445–446Manufacturer sales, plug-in electric motor
vehicle, 515Marital deduction, 788Marital property settlements, 156, 645Marital status, 687Market discount, 89, 93, 788Market discount bonds, 86, 88–89Mark-to-market election, 31, 566–567Marriage penalty, 10Married couples. See also Joint returns; See
also Spouse(s)amended returns by, 760capital losses on property sales for, 107–108earned income rule for, 500elderly or disabled tax credit for, 616estimated tax payments for, 527–528itemized deductions on separate
returns, 325–326joint returns, 12–13marriage penalty for, 10principal residence exclusion for, 542–543self-employment income for, 742tax home for couples in diff erent cities, 443traditional IRA contributions by, 200–202
Married dependents, 472, 504Material participation, 266, 270–272, 282,
788Material participation tests, 270–272Maturity, savings bond, 563Maximum Depreciation Deduction for
Cars, 728Maximum Depreciation Deduction for Trucks
and Vans, 728–733MBA courses, 606Meal allowance, 439–440
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Meal charges, 68Meal costs
50% limitation on, 451–452directly related test, 449IRS meal allowance, 439–440at nursing homes, 391overnight-sleep test for, 437–439restrictive test for, 448–449while traveling for medical treatment, 389
711, 726–729Midwestern disaster area bonds, 562Mileage rate, 721–722, 790Mileage-tracking apps, 733Military action, 47, 626Military service. See also Armed Forces
personnelMinimum Interest Rate for Seller
Financing, 100Minimum interest rules, 96Minimum standards for job, educational
courses required for, 605Mining, 487Ministers, housing or housing allowance
for, 70Minors, custodial accounts for, 83, 656–657Miscellaneous expenses, 421–434. See
also Job expenses2% AGI fl oor on, 422, 423, 424contingent fees paid out of awards, 434investment expenses, 430–431legal costs, 432–434tax preparation and audit costs, 431–432
Miscellaneous itemized deductions, 788Missing status (Armed Forces personnel), 626Mobile offi ces, 682Model custodial account agreement. See Form
5305-AModel trust. See Form 5305Modifi ed ACRS (MACRS) depreciation, 788
accelerated, 723, 725and AMT, 486anti-churning restriction, 717half-year convention, 710rates for, 708–709, 725–729for real estate placed in service after
1986, 714recovery periods, 707–708
Modifi ed adjusted gross income (MAGI), 203, 233, 235, 264–265, 532, 597, 788
531–534, 569Net investment income tax (NIIT), 269, 480,
526, 531–534, 538Net operating losses (NOLs), 788
about, 686–687and AMT, 486carryback of, 689carryover of, 689farm-related, 692losses and deductions in, 688–689
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and real estate allowance, 265recapture of, 738reporting, 688–689for self-employed persons, 666, 743
News Release IR-2017-63, 219New York Liberty bonds, 562NIIT. See Net investment income taxNOLs. See Net operating lossesNominee distributions, 77, 88Nominees, dividends received by, 80Non-accountable plans, 460Non-accrual experience (NAE) method, 670Nonbusiness bad debts, 144Noncare services, child and dependent credit
78-week test for, 320as at-risk, 285distributions from partnerships to, 737fi rst-year expensing for, 706meals and lodging for, 69passive activities for, 278reporting of income and losses by, 303self-employment tax for, 743
Partnership income, 27
reporting of partnership profi t and loss, 302–303
tax audits for, 304Partnerships, 789
debt cancellation, 301disposition of, 283distributions to partners from, 737dividends from, 78domestic production activities deduction
for, 690elections made by, 302, 416foreign earned income from, 630grouping of business activities by, 270holding periods for property of, 120like-kind exchanges of interests, 148loss limitations for, 303–304organizational costs for, 679and partners’ income and loss, 303profi t and loss of, 302–303rental real estate interests held by, 267retirement plans, 182on Schedule K-1, 302tax audits for, 304transfers of interest, 303
Part-year employees, 501, 518Passenger cars, depreciation on, 724. See
also Car and truck expensesPassive activities
aggregate vs. separate treatment of, 268–270for closely-held corporations, 282–283on Form 8582, 278–279interest expense and, 365for LLC and LLP members, 278material participation tests for
businesses, 270–272net operating losses and, 687for partners, 278passive loss restrictions and, 268for personal service corporations, 282–283and property loss reimbursements, 413rental activities, 261–263, 263–265,
266–268sales of property and business interests, 283–
284sales of subdivided land and, 570–571suspended losses on business interest
PayNearMe option, 755PBGC. See Pension Benefi t Guaranty
CorporationPeace Corps workers, 69, 540Pell grants, 591Penalty(-ies)
for 2017 payments, 524–525deductible, 677for excess IRA contributions, 208for excessive refund claims, 755, 762, 770for failure to report tips, 520for frivolous court action, 772, 774for frivolous tax returns, 770interest on, 770for IRA withdrawals, 215–219for late fi ling and late payments, 671, 754,
758marriage, 10for not reporting foreign fi nancial
accounts, 770–771for reportable transactions, 769single, 10for substantial overvaluation of donated
property, 350for understating tax on inherited
property, 127Pension Benefi t Guaranty Corporation
(PBGC), 513Pension plans, 38. See also Simplifi ed
employee pension (SEP) plans
Pensionsdisability, 46–47, 193nontaxable, 617self-employed income and, 671
Percentage depletion, 258, 789Per diem travel allowance, 457–459Performing artists, 315, 424Periodic interest, 88Periodic payments, retirement plan, 521Permanent life insurance, 61Permanently and totally disabled person, 504,
539–542, 542–543, 543–546Principal residence indebtedness, 300Principals (school), 424Prior law deferral rules, 124Prior law rollover rules, 547Private activity bonds, 92, 486Private letter ruling, 789Private non-operating foundations, 339Private schools, 390Prizes, as income, 289, 317Probate estate, 789Production activities, 690Production costs, 257Products, discounts on, 74Product testing, 65Professional gamblers, 290Professionals, deductions for, 676–677Professional sports players, 442Profi t presumption, 679Profi ts. See also Gross profi t
dividends of, 78–79in partnerships, 302–303
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of property sales, 108–109, 550from sole proprietorships and
partnerships, 630Profi t-sharing plans, 59–60, 789Promissory notes, 130Property. See also specifi c types, e.g.:
Community property; See also Tax-free exchanges of property
adjusted basis of, 130–131alimony and transfer of, 640basis of, 122cost of, 122for depreciation deductions, 704–705dividends paid as, 79–80free use of, 333listed, 712–714overvaluing, 769ownership of separate, 15pay received as, 39–40pledges of other, as at-risk investment, 285repossession of, 578–579returns of, to creditors, 575–576
Property management, 430Property sales, 101–145. See also Business
property sales; See also Residence salesadjusted basis of property, 130–131amount realized for, 122boot for like-kind exchanges of property, 141capital losses on, 107, 108–109carryovers, 107classifi cation and taxation of, 102–104contingent payment sales, 137–138cost of property, 122deferred payment sales, 139and escrow, 138–139Form 8949 and Schedule D entries for, 111–
136–137, 139–140, 140–141losses on, 121–122over $150,000 plus $5 million in debt, 141–
145as passive activities, 273, 283–284real estate sales, 375–376of real property, 572restricted, 51and rollovers of retirement plans, 173of subdivided land, 570–571to third parties, 580unadjusted basis of property, 122–124,
124–126, 127–130, 130Proprietorships, 630, 737
Protecting Americans from Tax Hikes Act of 2015 (PATH Act), 232, 373
Proving a Casualty Loss, 406–420Provisional income, 611, 789PTPs. See Publicly traded partnershipsPublic Health Service, 540, 617, 623Public Health Service Act, 300Publicly traded partnerships (PTPs), 277Publicly traded securities, 110, 131Public safety employees, 47Puerto Rico, 332, 636, 742Punitive damages, 298Purchased stock rights, 555Purchase money mortgages, 579–580Purchase price adjustment, 301Puts, 560
QQCD. See Qualifi ed charitable distributionQDRO. See Qualifi ed domestic relations orderQEAAs. See Qualifi ed exchange
accommodation arrangementsQJV. See Qualifi ed joint ventureQSB stock. See Qualifi ed small business stockQSEHRAs. See Qualifi ed small employer
health reimbursement arrangementsQTPs. See Qualifi ed tuition programsQualifi ed charitable distribution (QCD), 208,
209Qualifi ed charitable organizations, 789Qualifi ed conservation contributions, 344Qualifi ed disability expenses, 620Qualifi ed disclaimer, 226Qualifi ed distributions, IRA, 184, 239Qualifi ed dividends, 479–480, 582, 789Qualifi ed Dividends and Capital Gain Tax
Qualifying testsfor adoption credit, 506and care of qualifying persons, 499–500for Armed Forces personnel in combat
zones, 624for child and dependent care credit, 498–500for EIC, 503–505for head of household, 24–25for innocent spouse relief, 17for reduced maximum exclusion, 544for resident aliens, 29for U.S. savings bond tuition
programs, 592–593for work-related costs of education, 605–607
business, 301, 576charitable donations of, 344–345donation limit for, 351exchanges of U.S. and foreign country’s, 148fair market value deduction for, 337holding periods for, 120losses, 575. See also Losses, on residence
salesrecaputure of depreciation for, 735–736Section 1250 gain on, 107in service after 1986, 714in service between 1980 and 1987, 717tax credits for real estate activities, 272types of ventures, 569–570
Real estate investment trusts (REITs), 78, 569, 583, 789
Real estate mortgage investment companies (REMICs), 88, 569–570
of American Opportunity credit, 597of business vehicle deductions, 732–733for computers/listed property, 713of deduction for appreciated tangible personal
property, 338of deductions for fractional interests, 344of depreciation, 133, 147, 735–736, 786for drops in alimony, 644–645for exchanges/involuntary conversions, 735of federal subsidies, 539fi rst-year expensing and, 133, 707, 736of Lifetime Learning credit, 597of MACRS depreciation, 724of mortgage subsidies, 513of net ordinary losses, 738of tuition and fees deduction, 603
Receipts, 670–671, 672–676. See also Constructive receipts; See also Gross receipts
Recertifi cation, for EIC, 503Recharacterizations, of IRAs, 214, 236,
237–239Recklessness, denial of EIC due to, 504Recognized gain, 789Recognized loss, 789Record date, dividend, 80Recording, of audit examination, 768Recordkeeping
on adjusted basis for property, 548of business use for business vehicles, 733of deductible losses, 413on fair market value of property, 580for fi ling returns, 752for substantiating contributions, 347–348of rental property improvements, 121for Section 1244 stock, 562on self-employed income, 666standard mileage rate and, 721for T&E expense deductions, 454
Recourse debt, 575–576Recovered tax deductions, 295–296Recovery, of tax dispute costs, 773–774Recovery period
for cars, trucks, and vans after, 731for home offi ce, 683MACRS, 707–708, 726straight-line depreciation over, 711
Recovery property, 789Recreational purposes, travel for, 336Recreational vehicles, 682Red Cross personnel, 625Redeemed shares (mutual fund), 585–587Redemptions, interest received from, 84Reduced Maximum Exclusion, 546
interest paid on, 761penalty for excessive, 755, 762quick, 761stating reasons for, 761time limits for, 619, 760–761withholding of refunds by IRS, 762
Refundsdeliquent child support and, 643estimated tax and, 373, 526fi ling to obtain, 4on fi nal returns, 27for disabled combat vets, 47getting, 754–755income and, 292–293
Registration, U.S. savings bond, 96Regular business employees, of self-employed
persons, 649Regular income tax liability. See Tax liabilityRegular tax, 488Regulated futures contracts, 561Rehabilitation of buildings, 574, 716Reimbursements
for casualty/theft losses, 413dependent care credit and, 73, 501foreign earned income as, 630from health and accident plans, 57medical expense deductions and, 383–385moving expense deductions and, 321of moving expenses, 630standard mileage rate and, 721for T&E expenses, 451, 455–456, 456–457,
457–459, 459–460wellness program, 71
Reinvestment plans, 582REITs. See Real estate invesment trustsRelated businesses, daily exemption rate
for, 259Related parties
acquisitions from, 707business expenses owed to, 669capital losses on sales to, 108resale of property by, 108–109tax-free exchanges of property between, 155
Relationship test, 464, 465–467Relatives. See also specifi c types, e.g.: Children
capital losses on sales of property to, 108–109
and daily exemption rate, 259installment sales of property to, 136–137renting residences to, 250–251
Religious beliefs, 473Remainder interest, 344, 538REMICs. See Real estate mortgage investment
companiesRental activities
about, 261–263grouped with business activities, 269loss allowance for, 263–265nonqualifi ying, and rental loss
allowance, 267for real estate professionals, 266–268
Rental days (for residence), 252–253, 253–255Rental losses, 244, 273–274Rental property
14-day/10% test, 251depreciation on, 245, 249home offi ce in, 682improvements to, 121with insubstantial depreciable basis, 276personal use of, 251–252, 252–253,
253–255, 263as rental income, 244residence converted to, 249–250, 263,
549–550safe harbor for like-kind exchange of, 147short-term vacation home rentals, 261
Rental real estate income, 569, 630deductions for, 245–246, 430depreciation on rental property and, 249–
250from multi-unit residences, 248–249personal use and rental of residence, 251–
252, 252–253, 253–255renting residences to relatives, 250–251repair vs. improvements and, 246–248reporting expenses and, 244
Rental use of property, 538, 548, 549Rent, below fair market, 245Rented rooms, 248Reorganizations, 84, 89Repairs, 246–248, 413, 547Repayments, 41, 200, 515Replacement property, identifying, 152Replacement shares, 558Reportable transactions, 768Reporting Mutual Fund Distributions for
2017, 584–589Repossession, 140–141, 299, 575, 578–579Request for Appeals Review. See Form 12203
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Index
Request for Taxpayer Advocate Service Assistance. See Form 911
Resale of property, 108–109, 550, 670Research and experimentation costs, 719Research assistants, 591Reservists, 200, 217, 623, 627Residence interest, 788, 789Residence(s). See also Home; See
also Principal residenceconverting, to rental property, 249–250,
549–550depreciation on rented, 249domiciles vs., 633insurance proceeds for damaged/
destroyed, 402–403personal use of, 251–252, 252–253,
Residence sales, 537–551adjusted basis for home, 547–548gains on, 546–547losses on, 546–547, 549, 549–550loss on temporary rental before, 255–256personal use of home, 548–549, 549principal residence exclusion, 538–539,
168–169from partnerships, 743payouts to benefi ciaries of, 177QDRO distributions of, 175–176required beginning date for, 176–177restrictions on loans from company
plans, 179–181rollovers of retirement plans, 169–170,
170–171, 172–173survivor annuities for spouses, 175withholdings on, 521–522
Retirement plan rolloversby benefi ciaries, 172–173direct rollover, 170–171from employer plan to Roth IRA, 237by nonspouse benefi ciaries, 223once-a-year rollover rule, 214personal rollover, 171–172proceeds from sale of property and, 173from Roth account to Roth IRA, 169, 185by surviving spouses, 229tax-free rollover, 169–170and transfers between traditional IRAs, 212–
215Retirement plans, 181. See also specifi c types
advantages of, 232as alternative to traditional IRAs, 207annual contributions to, 232–235contributions to, after age 70½, 200contributions to traditional and, 233converting traditional IRAs and, 163,
236–237deductible IRA vs., 204direct rollover to, 170distributions to benefi ciaries from, 241–242myRA accounts, 242and once-a-year rollover rule, 214penalty for excess contributions to, 208qualifi ed distributions from, 239–241recharacterizations, 236, 237–239rollovers from 403(b) plan to, 186rollovers from Roth accounts to, 169, 185
Royalty income, 257, 258, 258–259, 259, 430, 630
RRTA. See Railroad Retirement Tax ActRTAA program. See Reemployment trade
de minimis, 247for estimated tax payments, 526for Ponzi scheme investors, 407for slot machine players, 291for small taxpayers, 247
Safety awards, 453
J.K. Lasser’s Your Income Tax 2018 | 991
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Sailing permits, 31Salary or wage income (compensation), 35–51
assignment of pay, 38for children and spouse(s), 521commissions, 40constructive receipt rule, 39deferred, 181, 182, 786diff erential wages, 517, 622disability pensions, 46–47and domestic production activities
deduction, 690educational benefi ts for employees’
children, 44–45employee leave-sharing plans, 39on Form W-2, 36–51fringe benefi ts excluded from taxable, 650gifts from employers, 39golden parachute arrangements, 39guaranteed salaries, 302life insurance benefi ts, 43–44nonqualifi ed deferred compensation
plans, 41–42nurses’ wages as medical expense, 391–392paid by parents to children, 26pay received in property, 39–40for personal services, 273as rental deductions, 245restricted stock, 50–51self-employed income and, 671self-employment tax and, 745sick pay, 45stock appreciation rights, 47–48stock options, 48–50strike and lockout benefi ts, 41taxable alimony as, 200taxable, IRA contributions based on, 199unemployment compensation, 40–41and waiver of executors’/trustees’
commissions, 43withholdings for retirement plans, 38withholdings on, 517–518, 518–519,
530–531workers’ compensation, 45–46
Salary-reduction SEPs, 36, 230Sales. See also specifi c types of sales
of appreciated fi nancial positions, 560of business interests, 283–284of ISOs, 48of bonds, 83–84, 91of life insurance policies, 308–309of options, 573on Schedule C, 672–676short sales of stock, 555–557of stock dividends, 554
735, 790Section 1274, 99–100Section 1341, 43Section 2005(d)(3), 600Securities. See also specifi c types
as deductible contributions, 331donation limit for appreciated, 351holding periods for, 119–120purchase of, with custodial accounts, 657Treasury infl ation-indexed, 87worthless, 142–143year-end sales of, 131
Self-employed income, 665–692. See also Home offi ce
accounting methods for, 668–670business tax credits and, 691deductions, 676–677, 679–680defi ned, 742–743domestic production activities
deduction, 690earned income credit and, 505expenses, 677–678, 679–680legal form of business and, 666Medicare tax on, 530and net operating losses, 686–687reporting, 666–667and reporting of payments/receipts to
IRS, 670–671on Schedule C, 671–676tax reporting year for, 670
Self-Employed or Employee?, 747–748Self-employed persons, 693–702, 790
78-week test for, 320additional Medicare taxes, 740Archer MSA premiums for, 702business-vacation trips by, 445–446determination of employees vs., 747–748health insurance premium deduction
for, 316, 388housing costs of, 633medical plans
Archer MSAs, 702deductible contributions, 700distributions from, 701health savings accounts, 699–700overview of, 694small business health tax credit and, 702with coverage for spouses, 58–60
regular business and household employees of, 649
reporting of payments and receipts by, 670–671
reporting of T&E expenses by, 455retirement plans, 230, 694–695, 695–698,
699Self-employment tax, , 741–748, 647
above-the-line deduction for, 316, 377defi nition of self-employment income, 742–
743determination of employees vs. self-employed
persons for, 747–748for low-income/loss years, 746for partners, 743Schedule E and, 744wages and, 745
Seller-paid points, 546Sellers, repossession of property by, 578–579Selling expenses, 122–145Selling price, 132, 134, 137, 546Senior citizens, 609–620. See also Social
Security benefi tselderly or disabled tax credit, 616Medicare Part B and Part D premiums, 619tax eff ects of continuing care facilities
American Opportunity credit and, 595carryovers from, 108community property rules and, 15fi rst-year expensing on, 706itemized deductions for married couples
Separate structure, home offi ce in, 682Separation. See Legal separationSEPs. See Simplifi ed employee pension plansSeries E bonds, 95, 563Series EE bonds, 94, 563–564, 591–593Series H bonds, 95Series HH bonds, 95, 563–564Series I bonds, 94, 564Service Academy appointees, 600Service income, NAE for, 670Services
discounts on, 74donation of, 332for no additional cost, 74property obtained for, 123as rental income, 244
converting to Roth IRAs, 237distributions from, 232elective salary deferrals to, 36eligibility for, 230–231employer contributions, 231rollovers to, 232setting up, 199withholdings for, 38
Simplifi ed employee pension (SEP) plans, 790basics of, 229–230claiming deductions for, 698converting to Roth IRAs, 237deductible contributions to, 695–698elective salary deferrals to, 36qualifying for, 698salary-reduction, 230self-employed persons, 695
Singles penalty, 10Skybox rentals, 452Slot machine players, 291Small business health care tax credit, 691, 702Small business stock, 104, 106, 109–110, 486,
562Small cash transactions, 671Small employer credit for retirement plan
Software, computer, 713, 718–719Sole benefi ciary(-ies), 229Source income, expatriation tax on, 32Special allocations, 303Special foods, 380Special needs adoption, 507Special needs benefi ciaries, 600Specifi c identifi cation method, 588Split-dollar insurance arrangements, 44, 346Sponsorship gifts, 619Sports managers, 442Sports players, 442Spouse(s). See also Former spouses (ex-
spouses)as active plan participant, 202allocating tax liability between, 20Archer MSA contributions for, 702of Armed Forces personnel, 625as students, 500basis of property received from, 123in combat zone, 14death of, 16, 22–23, 128, 129–130, 542,
642–643disabled, 500elderly or disabled tax credit for, 617–618failure to fi le by, 14gifts to, 655health plan coverage for, 58–60innocent spouse rules, 14, 15, 17IRAs for, 200legal fees of, 645and lump-sum averaging, 166, 168lump-sum retirement distributions for, 165medical expenses of, 385–386noncitizen, 661nonresident alien spouse election, 15nonworking or low-earning, 201, 233personal exemptions for, 463, 472QJV fi led by, 244and RMD, 220
Social Security numbers for, 463surviving, 23, 175, 229, 318, 635suspicious tax reporting by, 12tax-free exchanges of property between, 155–
157T&E expenses of, 447–448, 450, 456transfer of U.S. savings bonds to, 96transfers of IRAs to, 215withholdings on wages paid to, 521
SSBIC, rollover to, 110Standard deduction, 790
and state tax refunds, 293basic, 324for blind persons, 324, 326claiming, 324–325for dependents, 327itemized deduction vs., 322for persons over 65, 324, 326rules and limitations, 323–329on separate returns, 12
Standard Deduction for Dependents in 2017, 327–329
Standard Deduction of 65 or Older or Blind, 326–329
Standard mileage rate, 721–722, 790Startup costs, 679, 694State bonuses, for Armed Forces
personnel, 623State government, donations to, 332State Housing Finance Agency (State
HFA), 355, 374State law, treatment of home mortgage debt as
nonrecourse fi nancing under, 299Statement of Person Claiming Refund Due a
Deceased Taxpayer. See Form 1310State offi cials, expenses of, 315State public safety offi cers, fallen, 45State short-term disability payments, 46State taxes
for Armed Forces personnel, 622deductions for, 373on Form W-2, 37income and refunds of, 292–293refund off set for, 762unemployment, 650
State unemployment tax, 650Statute of limitations
for additional taxes, 765for disability determinations, 623for gift valuation, 656
Statutory employees, 37, 672, 743, 790Stephen Beck Jr. Achieving a Better Life
Experience Act, 620Stock. See also specifi c types
devaluation due to corporate misconduct, 407
divorce-related redemptions of, 156
donation of, 339earmarking of stock lots, 553–554held by broker in street name, 80redemption of, 104sales of stock dividends, 554short sales, 555–557stock rights of investors, 554–555stripped coupon bonds and, 90–91tax-free exchanges of, 158theft losses, 406–408wash sales for, 557–559worthless securities, 142–143
relief, 22Strike benefi ts, 41Stripped coupon bonds, 88, 90–91Stripped coupons, reporting OID for, 88Stripped tax-exempt obligations, 93Student loan cancellation, 299Student loan interest, 603–604Students, 29, 467, 500, 596Student test, 464Subdivided land, 130, 570–571Subscriptions, 65, 424–425Substantially equal payments, 178“Substantially identical” securities, 558Substantial risk of forfeiture, 50Sudden event test, 397–399Supplemental unemployment benefi ts, 41, 43Supplements, nutritional, 380Supplier-based intangibles, 718Support, 333, 336, 387, 642Support personnel (Armed Forces), 625Support test for qualifying relatives, 467–470Surrender, of life insurance policies, 308–309Surviving spouses, 23, 128, 172, 175, 177,
318, 635
994 | J.K. Lasser’s Your Income Tax 2018
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Surviving tenants, 127–130Survivor annuities for spouses, 175Suspended losses, 279–281, 283Suspended tax credits, 272, 281–282SUVs, depreciation on, 724–725. See also Car
and truck expensesSweepstakes winnings, 289Swimming pools, 393Syndicated conservation easement
promotions, 344
TTAA benefi ts. See Trade Adjustment Assistance
benefi tsTable of MACRS Depreciation Rates, 710Tangible personal property, 337, 338, 704,
790Taxable income, 790. See also Salary or wage
income (compensation)Taxable Income Brackets for 2017, 12Taxable income limit, 258, 259Taxable interest, 92Taxable Premiums for Group-Term Insurance
actual knowledge test in, 18appeals to, 17, 21, 22
Tax credits. See also Personal tax credits; See also specifi c credits; See also specifi c types
against AMT, 488erroneous, 20for gift tax, 656for investors in mutual funds, 583–585for investors in real estate, 574–575for passive activities, 272real estate allowance for, 265refundable, 789regular income tax liability and, 480from regular tax, 488for returned wages, 43
Tax deferral, 790Taxes paid, allocating vehicle expenses for, 723Tax-exempt bond funds, 583Tax-exempt bonds, 86Tax-exempt income, mutual fund, 367Tax-exempt interest, 82, 92, 486Tax-exempt obligations, debts for, 367
Tax-exempt organizations, 185–186, 561–562Tax-free distributions, 184Tax-free exchanges of property, 146–160
basis of property received in, 123between related parties, 155between spouses and ex-spouses, 155–157boot, 149–151business property in, 737closely-held corporations and, 158–159exchanges of coins and bullion, 159exchanges of insurance policies, 159–160exchanges of stock in same corporation, 158by investors in real estate, 571–572joint ownership interests and, 158like-kind property, 147–148personal property held for investment, 148–
149QEAAs for reverse exchanges, 154–155time limits and security arrangement for
deferred exchanges, 152–154Tax-free pay, 624–625Tax-free rollovers (retirement plan), 169–170Tax-free rule of common stock, 79Tax-free stock rights, 119Tax Guide for Individuals With Income From
allocating, between spouses, 20of children, 490–491and child tax credit, 497elderly or disabled tax credit and, 618equitable relief for, 21–22for farmers and fi shermen, 480from Foreign Earned Income Tax
Worksheet, 480from Tax Computation Worksheet, 479and innocent spouse rules, 14, 16Lifetime Learning credit and, 599mortgage interest credit and, 513with net capital gain or qualifi ed
Reauthorization, and Job Creation Act of 2010, 126
Tax return preparation costs, 245Tax returns
children’s investment income on parents’, 493–494
copies of, 752corrections to prior, 704depreciation deductions on, 705fi ling basics, 1–8identifying care provider on, 499inaccurate, 768–770mailing, 753name and social security number of spouse
on, 472recapture for alimony on, 644reporting foreign income on, 638
Th ird homes, mortgage interest on, 355Th ird parties, 157, 580, 596, 642Th reshold conditions for divorced/separated
parents, 471Th reshold conditions for equitable relief, 21Th rift Savings Plan (TSP), 186Tickets
athletic, 334, 347, 451benefi t, 333
Tie-breaker rules, 465Time limits, 152–154, 752Time test for foreign earned income, 633TIN. See See Taxpayer identifi cation numberTips, 36, 37, 38, 519–520TIPS. See Treasury infl ation-protected
securitiesTitle issues/disputes, 433TMP. See Tax matters partnerToken items, 334“Too good to be true” test, 769Top Hat plans. See Section 457(b) plansTotal blindness, 326Town government, donations to, 332Trade Act (1974), 41Trade Adjustment Assistance (TAA)
(TIPS), 93Trees, damage to, 398, 404–405Trustees, waiver of commissions by, 43Trusts, 306, 790. See also specifi c types
additional Medicare taxes on, 534basis of property received by, 124charitable donations through, 346
deductible donations to, 331dividends from, 78gifts of income interests in, 346gift tax and, 657–658as IRA benefi ciaries, 227on Schedule K-1, 302transfer of U.S. savings bonds to, 96transfers of mortgaged property to, 156
657Union costs, 425United States Estate and Generation-Skipping
Transfer Tax Return. See Form 706Unmarried co-owners of home, 357Unmarried head of household, 12–13, 24Unmarried joint tenants, 129Unrecaptured Section 1250 gain, 790Unrecaptured Section 1250 Gain
VVA. See Veterans AdministrationVacant land, 538Vacant residences, 249Vacation homes, 251–252, 344, 549Vacations, 445–446Vans, depreciation on, 724–725. See also Car
and truck expensesVan transportation, 64Vehicle loans, 721, 723Vehicles. See also Automobiles
business, 732, 733. See also Car and truck expenses
WW-2G, 520Wage and Tax Statement. See Form W-2Wage income. See Salary or wage income
(compensation)Waiver of Restrictions on Assessment and
Collection of Defi ciency in Tax and Acceptance of Overassessment. See Form 870
Waivers, 525
Warrants, 558Wash sales, 107, 120, 557–559, 566, 585, 790Weekends, business-vacation trips on, 446Weight-reduction programs, 380Wellness programs, 71What’s New for 2018, xxv–xxviiWhat You Need To Substantiate Your
Donations, 349–353Whistleblower awards, 317Who Claims the Deduction for Real Estate
Taxes?, 374–377Widows or widowers. See Qualifying widows
or widowersWills, contesting, 433Winnings, 289, 289–291, 520Withdrawals
from 401(k) plans, 182–183of nondeductible IRA contributions, 207premature, 84–85by reservists, 627from Roth IRAs, penalties on, 241saver’s credit and, 508