Form 1040 - p. 1, line 7
[Print]Wages, Salaries, Tips, etc.
Jun 20, 2018
You must include all wages, salaries and tips you receive as an employee of an employer as income on your tax return.
The new tax law didn’t change the treatment of wages, salaries, or tips.
Line 7 of the IRS Form 1040, U.S. Individual Income Tax Return, generally must include:
- all wages you receive;
- all tips that you did not report to your employer;
- dependent care benefits you received;
- employer-provided adoption benefits you received;
- excess elective deferrals;
- disability pensions you received before the minimum retirement age set by your employer;
- and certain scholarship and fellowship income you received.
There are exceptions to the above examples. For full rules, see IRS Publication 17.
If you’re an employee, your employer should have sent you a IRS Form W-2, Wage and Tax Statement.
You can find your total wages in box one (1) of your IRS Form W-2, Wage and Tax Statement. You must separately add and report tip income you didn’t report to your employer.
For procedural information on reporting other forms of income under Line 7 of the IRS Form 1040, see IRS Form 1040 Instructions – [Line 7].
The new tax law didn’t change the treatment of wages, salaries, or tips.
How will this affect me?
Wages, Salaries, Tips, etc.: Scenario 1
Scott is a salaried accountant who makes $75,000 a year. On weekend nights, Scott performs as a country singer at a local restaurant. Scott isn’t officially employed by the local restaurant, but is occasionally given tips by its patrons. This year, Scott received $1,500 in tips. Scott has $76,500 income to report on Line 7 of his IRS Form 1040.
Wages, Salaries, Tips, etc.: Scenario 2
Scott paid $10,000 in qualified adoption expenses for an eligible child. His employer reimburses him for $4,000 of those expenses pursuant to the employer’s adoption assistance program. The $4,000 is reported in Box 12 (Code T) of Scott’s IRS Form W-2. After reviewing the instructions for IRS Form 8839, Qualified Adoption Expenses, Scott determines he can exclude all the adoption benefits from income. He doesn’t include the $4,000 on Line 7 of his IRS Form 1040.
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 8a and 8b
[Print]Interest Income (Taxable & Tax-Exempt Interest)
Jun 20, 2018
Most interest that you receive or that’s credited to an account that you can withdraw without penalty is taxable income in the year it becomes available to you.
The new tax law didn’t change the treatment of taxable or tax-exempt interest income.
Most interest received by you or credited to your account that you can withdraw without penalty is income.
Taxable interest includes: interest on bank accounts, money market accounts, certificates of deposit, corporate bonds, and deposited insurance dividends. Taxable interest also includes interest income from Treasury bills, notes, and bonds.
Some interest received by you isn’t counted as income for tax purposes. Tax-exempt interest is commonly earned from qualifying municipal and state bonds, which are issued to finance public improvements.
Other less common sources of tax-exempt interest income include interest on insurance dividends left on deposit with the U.S. Department of Veteran Affairs, and interest redeemed from Series EE and Series I bonds issued after 1989 when used to pay for qualified higher educational expenses during the year. See IRS Publication 970 – Educational Savings Bond Program.
Each payor of interest should’ve sent you an IRS Form 1099-INT, Interest Income or IRS Form 1099-OID, Original Issue Discount, which will indicate your total taxable interest income.
If you earn more than $1,500 in interest income, you must fill in and attach an IRS Form Schedule B, Interest and Ordinary Dividends.
For other than very large taxpayers, the new tax law didn’t change the treatment of taxable or tax-exempt interest income.
How will this affect me?
Interest Income: Scenario 1
Shirley opens a savings account with Money Bank and deposits $10,000. Money Bank provides its customers with an annual percentage yield (APY) of 1.5 percent.
At the end of the year, Shirley receives a check for $150 from Money Bank. The $150 is taxable interest income to Shirley and should be reported on line 8a of Shirley’s Form 1040 tax return.
Interest Income: Scenario 2
The city of Birmingham issues qualifying tax-exempt bonds to generate revenue to pay for new roads. Shirley, a resident of Birmingham, purchases five bonds for $50,000. The bonds have a coupon rate of 4.8 percent and mature in three years.
At the end of the first year, Shirley is paid $2,400 of tax-exempt interest, and it is reported in Box 8 on Form 1099-INT, Interest Income. Shirley must declare this as tax-exempt interest on Line 8b of her Form 1040 tax return, but she won’t be taxed on this income.
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 9a and 9b
[Print]Dividend Income (Ordinary dividends & qualified dividends)
Jun 20, 2018
Dividends are distributions of money, stock, or other property paid to you by a corporation or by a mutual fund. You also may receive dividends through a partnership, an estate, a trust, or an association that is taxed as a corporation.
Most distributions are made in cash (check). However, distributions can consist of more stock, stock rights, other property, or services. Note that distributions of a company’s own stock or rights to this stock may not qualify as dividends.
The new tax law didn’t change the treatment of dividend income.
Dividends are a form of investment income a corporation may pay you if you own stock in that corporation. Dividends may additionally be received from ownership interest in a trust/estate, a partnership, or an S-corporation.
Dividends are usually paid in cash.
Dividends are taxed at either ordinary income rates or at lower long-term capital gains rate. Dividends taxed at ordinary income rates are called ordinary dividends. Dividends taxed at the lower long-term capital gains rate are called qualified dividends.
Qualified dividends are paid from stock held for more than a statutorily-mandated period. For more information, see Publication 550, Investment Income and Expenses.
If you own stock in a corporation which pays dividends over $10 annually, the corporation will send you an IRS Form 1099-DIV, Dividends and Distributions. This form should indicate whether the dividends are ordinary or qualified. See IRS Form1040 Instructions.
If you earn more than $1,500 in dividend income, you must fill in and attach an IRS Form Schedule B, Interest and Ordinary Dividends. Not all distributions are taxable. Some distributions are a return of your cost or basis. You won’t be taxed on those distributions until you recover your cost. For more information, see IRS Publication 550, Investment Income and Expenses.
The new tax law didn’t change the treatment of dividend income.
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 10
[Print]Taxable Refunds, Credits, or Offsets of State and Local Income Taxes
Jun 20, 2018
If you received a refund, credit, or offset of state or local income taxes in 2017, you may be required to report this amount as income on your tax return.
The new tax law didn’t change the treatment of taxable refunds, credits, or offsets of state and local income taxes.
If you received a refund, credit, or offset from either state or local income taxes, you must include that amount as income if you deducted the tax in an earlier year.
Exception: You won’t be taxed on the refund, credit, or offset if you didn’t itemize deductions or elected to deduct state and local general sales taxes instead of state and local income taxes. For more information, see IRS Publication 525 or IRS Form 1040 Instructions – Line 10.
The government agency which provided you with the benefit should have provided you with an IRS Form 1099-G, Certain Government Payments, with Box 2 listing the amount of the benefit.
The new tax law didn’t change the treatment of taxable refunds, credits, or offsets of state and local income taxes.
How will this affect me?
Taxable Refunds: Scenario 1
In 2017, Yang overpaid his state income taxes. Yang receives a refund check from the state of Maryland in 2018. Yang itemized deductions and didn’t elect to deduct state and local general sales taxes instead of state and local income taxes. Yang will be taxed on the amount refunded in the 2018 tax year.
Taxable Refunds: Scenario 2
In 2017, Yang overpaid his state income taxes. Yang chose to apply the overpaid amount of his 2017 taxes to his 2018 state income tax liability. Yang itemized deductions and didn’t elect to deduct state and local general sales taxes instead of state and local income taxes. Yang will be taxed on the amount credited in the 2018 tax year.
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 11
[Print]Alimony Received
Jun 20, 2018
Currently, amounts paid to a spouse or a former spouse under a divorce or separation instrument (including a divorce decree, a separate maintenance decree, or a written separation agreement) may be alimony for federal tax purposes. Alimony is income to the receiving spouse.
There is no change in tax treatment for divorces signed through December 31, 2018. However, in general, for divorces signed after December 31, 2018, the spouse or former spouse receiving alimony will no longer include the alimony in income.
The spouse receiving the alimony must include the amount received in income.
Note: To qualify as alimony, payments must meet certain requirements.
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Alimony and separate maintenance payments aren’t included in income of the receiving spouse. |
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The repeal of including alimony and separate maintenance payments into income applies to any divorce or separation instrument signed after December 31, 2018, or for any divorce or separation instrument signed on or before December 31, 2018, and changed after that date, if the change clearly includes the new tax rule.
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How will this affect me?
Alimony Received: Scenario 1
Emma pays Noah $1,500 of alimony per month based on their divorce decree signed in 2016. Noah will continue to include $18,000 in income and in future tax years.
Alimony Received: Scenario 2
Noah and Emma signed their divorce decree in 2018 and Noah was awarded alimony. Since they signed the divorce decree in 2018, the alimony that Emma pays Noah will be included in Noah’s 2018 income.
Note: If Noah and Emma had divorced after 2018, Noah wouldn’t include any alimony received in income.
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 12
[Print]Business Income: Home Office Deduction
Jun 20, 2018
If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters, and applies to all types of homes.
The new tax law didn’t change the rules for the home office deduction for IRS Form 1040, Schedule C (self-employed) taxpayers. The simplified method to determine the deduction is also the same.
If you use part of your home exclusively and regularly for conducting business, you may be able to deduct expenses such as mortgage interest, insurance, utilities, repairs, and depreciation for that area. You need to figure out the part of your home, utilities, repairs, and depreciation that you use only for your business activities. There are two methods to help you determine the part of your home used only for your business activities.
Regular Method: You compute the business use of home deduction by dividing expenses of operating the home between personal and business use. You may deduct direct business expenses in full, and may allocate the indirect total expenses of the home to the percentage of the home floor space used for business.
A qualified daycare provider who doesn’t use his or her home exclusively for business purposes, however, must figure the percentage based on the amount of time the applicable portion of the home is used for business. Self-employed taxpayers filing IRS Form 1040, Schedule C, Profit or Loss From Business (Sole Proprietorship), first compute this deduction on IRS Form 8829, Expenses for Business Use of Your Home.
Simplified Option: You may find the simplified option less burdensome than the regular method. If you meet the requirements, you can use a prescribed rate of $5 per square foot of the portion of the home used for business (up to a maximum of 300 square feet) to compute the business use of home deduction. Under this safe harbor method, depreciation is treated as zero and you claim the deduction directly on IRS Form 1040, Schedule C. Instead of using IRS Form 8829, you indicate your election to use the safe harbor option by making two entries directly on the IRS Form 1040, Schedule C for the square footage of the home and the square footage of the office.
This simplified option doesn’t change the criteria for who may claim a home office deduction. It simply makes the calculation and recordkeeping requirements of the allowable deduction easier.
The new tax law didn’t change the rules for the home office deduction for IRS Schedule C (self-employed) taxpayers.
The simplified method to determine the deduction is also the same.
How will this affect me?
Business Income: Scenario 1
Jackson is self-employed and sells woodwork on an online craft platform. He conducts his woodworking, including the packaging, shipping, and related books and records in his basement. The section of his basement used for his business is separate from the section used for personal use.
Business Income: Scenario 2
Jackson’s home office meets the exclusive use requirement and he must figure out the percentage of his home used for the business to allocate expenses. For his 2018 tax return, he can choose to calculate the home office deduction by using the regular method or the simplified option based on square footage. He chooses the simplified option because his home office deduction calculation and recordkeeping requirements are easier. Because the area Jackson uses for business is 150 square feet, he can deduct $750 ($5 times 150 square feet) for the deduction on Schedule C.
Business Income: Scenario 3
The same as above, except that the basement area Jackson uses to woodwork is also shared with his wife’s personal craft area. He can’t claim the home office deduction at all, because the home office area is not exclusively (only) used for his business.
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 13
[Print]Ganancia de Capital o Pérdidas
Jun 20, 2018
Casi todo lo que es de su propiedad y usado para propósitos personales o propósitos de inversiones es un bien de capital. Ejemplos incluyen: una casa, artículos de uso personal como los muebles y enseres domésticos, acciones o bonos de inversión. Cuando usted dispone de un bien de capital, la diferencia entre la base ajustada en el activo y la cantidad que usted obtiene de la venta es una ganancia de capital o una pérdida de capital.
La nueva ley de impuestos no hace cambio alguno a la manera que se aplica la ganancia o pérdida de capital. Nota: La nueva ley de impuestos proporciona ajustes por razones de inflación para la escala de ingreso usada para determinar la tasa de ganancia de capital a largo plazo.
Usted tiene ganancia de capital si la cantidad recibida de la venta o el intercambio del bien de capital excede (es más que) su ingreso base del bien de capital.
Usted tiene una pérdida de capital si la cantidad recibida de la venta o intercambio de su bien de capital es menor que su base ajustada del bien de capital.
Los bienes de capital incluyen casi todo lo que es de su propiedad, ya sea personal o con propósitos de inversión.
Algunos ejemplos incluyen: su casa, artículos de uso personal como mobiliario doméstico (muebles, enseres) y acciones y bonos de inversión. Su base ajustada es generalmente el costo que usted pagó de ese bien más cualquier costo por mejoras, menos la deducción de depreciación tomada.
Las ganancias de venta o intercambio de bienes de capital son calculadas para propósitos de impuestos en diferentes tasas dependiendo de la cantidad de tiempo que usted haya tenido ese bien, generalmente:
- La Ganancia por la venta o intercambio de bienes de capital que son retenidos por más de un año, se le adjudica un impuesto a base de una tasa favorable de ganancia de capital.
- La Ganancia por la venta o intercambio de bienes de capital que son retenidos por no más de un año se le adjudica un impuesto a base de una tasa de ingreso ordinario.
Para calcular ganancia o pérdida de capital a corto y a largo plazo, refiérase al Formulario 8949, Ventas y otras Disposiciones de Bienes de Capital (Form 8649, Sales and other Dispositions of Capital Assests, en inglés) y el Anexo D, Ganancias y Pérdidas de Capital (Schedule D, Capital Gains and Losses, en inglés).
Nota: La ley impone un límite en la deducción de la pérdida de capital y permite que usted pueda aplicar su deducción no usada de pérdidas para años posteriores. Para más detalles vea, instrucciones de las ganancias y pérdidas de capital (en inglés).
La nueva ley de impuestos no hace cambio alguno a la manera que se aplica la ganancia o pérdida de capital.
Nota: La nueva ley de impuestos proporciona ajustes por razones de inflación para la escala de ingreso usada para determinar la tarifa de ganancia de capital a largo plazo.
How will this affect me?
Ganancia de Capital o pérdidas: Escenario 1
En el 2018, Alabama vendió una pintura a una galería de arte por $2,000. En el 2014, ella le compró la pintura a su amigo en intercambio por $1,500 en efectivo.
Ganancia de Capital o pérdidas: Escenario 2
La ganancia de capital de Alabama es de $500 porque ella recibió $2,000 por la pintura y el precio base de la pintura es de $1,500. La ganancia capital es a largo plazo porque ella retuvo el bien capital por más de un año.
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 14; Form 4797
[Print]Other gains or (losses)
Jun 20, 2018
A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. An exchange is a transfer of property for other property or services.
You usually realize gain or loss when property is sold or exchanged. A gain is the amount you realize from a sale or exchange of property that is more than its adjusted basis. A loss occurs when the adjusted basis of the property is more than the amount you realize on the sale or exchange.
The new tax law didn’t make any changes to the types of income reported on IRS Form 1040, Line 14, Other gains or losses.
Note: The new law created new deduction limits and expensing rules under Internal Revenue Code (IRC) § 179.
Line 14 on the IRS Form 1040 tax return is used to report gains or losses from the sale of property used in a trade or business that you didn’t report elsewhere on your return or other schedules.
Examples of other gains or losses include:
- Gain or loss resulting from the sale or exchange of property used in the trade or business;
- Certain involuntary conversions of property used in the trade or business;
- Certain disposition of noncapital assets;
- Disposition of capital assets not reported on IRS Form Schedule D, Capital Gains and Losses;
- Dispositions of certain depreciable business property (IRC § 167 or § 179 property);
- Certain computation of recapture amounts (under IRC §§ 179 and 280F(b)(2)); and
- The gain or loss from deemed sales of securities or commodities with a mark-to-market election.
If you have a net gain or loss from these types of sales, report them on IRS Form 4797, Sales of Business Property, and report the ordinary gain or loss from these types of sales on IRS Form 1040, Line 14.
The new tax law didn’t generally change the types of taxable income reported on Line 14, Other gains or losses, and Form 4797.
Note: The new law created new deduction limits and expensing rules under Internal Revenue Code (IRC) § 179 and expanded the definition of § 179 property.
How will this affect me?
Other gains or (losses): Scenario 1
Dean purchased business property, which is section 1245 property, for $50,000. He made no permanent improvements to the property and claimed depreciation totaling $10,000. His adjusted basis in the property is $40,000 ($50,000 – $10,000 depreciation).
Other gains or (losses): Scenario 2
He sold the business property on the market for $60,000. Dean reports a gain on the sale of $20,000 ($60,000-$40,000) on IRS Form 4797, Sales of Business Property, as $10,000 ordinary gain and $10,000 long-term capital gain. The ordinary gain of $10,000 is reported on IRS Form 1040, Line 14, and the long-term capital gain of $10,000 is reported on IRS Form 1040, Line 13.
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 15a and 15b
[Print]Distribuciones de IRA
Jun 20, 2018
Si recibe distribuciones de cuentas individuales de jubilación (IRA, por sus siglas en inglés), puede tener ingresos tributables total o parcialmente según el tipo de IRA y si sus aportaciones al IRA fueron en dólares antes de impuestos o después de impuestos.
La nueva ley de impuestos por lo general no modificó la tributación de las distribuciones de IRA, pero añadió una nueva estipulación de exención de impuesto por desastre. Ver notas a continuación.
Si recibe distribuciones IRA, puede tener un ingreso total o parcialmente tributable según el tipo de IRA y si sus aportaciones a la cuenta IRA fueron en dólares antes de impuestos o después de impuestos. Las distribuciones de IRA incluyen distribuciones de cuentas IRA tradicionales, IRA Roth, plan IRA de Ahorro para Empleados (SIMPLE) y cuentas individuales IRA simplificadas para empleados (SEP).
Hay dos tipos básicos de IRA:
- IRA tradicional; y
- Roth IRA.
La tributación difiere para estos dos tipos de IRA.
- Las aportaciones de IRA tradicionales pueden ser deducibles de impuestos para el año en que realice la aportación; los retiros en el retiro de las aportaciones antes de impuestos y las ganancias se tributan a las tasas ordinarias del impuesto sobre la renta.
- Las aportaciones Roth IRA se realizan en dólares después de impuestos; los retiros en retiro de aportaciones y ganancias generalmente son libres de impuestos. Sin embargo, las aportaciones están sujetas a limitaciones de ingresos.
Para obtener más información vea; Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs). (Distribuciones de arreglos individuales de jubilación-IRA), en inglés.
La nueva ley de impuestos por lo general no modificó la tributación de aportaciones y distribuciones de IRA.
Nota: La nueva ley de impuestos dio un alivio de impuestos a los contribuyentes afectados por desastres que ocurrieron en el 2016 declarados por el gobierno federal. Los contribuyentes elegibles están exentos del impuesto adicional del 10 por ciento para retiros anticipados de IRA y pueden incluir distribuciones por desastre en ingresos brutos por los próximos tres años. Vea la Publicación 976, Alivio en caso de desastres.
Nota: La nueva ley de impuestos eliminó la regla que permite la recaracterización (acto de reversar) de las aportaciones de conversión de IRA tradicionales a Roth IRA y de reinversiones de otros tipos de planes a Roth IRA. Otras recaracterizaciones aún están permitidas.
How will this affect me?
Distribuciones de IRA: Escenario 1
Antes de jubilarse, Austin solo realizó aportaciones antes de impuestos a su IRA tradicional. Después de jubilarse a los 65 años, Austin recibió una distribución de $10,000 de IRA durante el año. Austin debe incluir la cantidad total de su distribución IRA como ingreso tributable en su declaración de impuestos.
Distribuciones de IRA: Escenario 2
Antes de jubilarse, Austin realizó aportaciones después de impuestos a su Roth IRA por más de cinco años. Después de jubilarse a los 65 años, Austin recibió una distribución Roth IRA de $10,000 durante el año. La distribución Roth IRA de Austin no está sujeta a impuestos.
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 16a and 16b
[Print]Pensions and Annuities
Jun 20, 2018
The new tax law generally didn’t change the taxation of pension and annuities, but added a new disaster tax relief provision.
Pension and annuity payments include amounts received from 401(k), 403(b), and governmental 457(b) plans.
If you have a pension or annuity, then you are fully taxed on the amounts received which exceed your cost in the pension or annuity. Your cost is your net investment in the plan as of the annuity starting date (or the date of the distribution, if earlier).
If you haven’t recovered your cost, then depending on your circumstance, you’ll be partially taxed or not taxed at all on the amounts received. For full rules, see IRS Publication 575: Pension and Annuity Income; 1040 Instructions: Line 16.
Certain types of pensions and annuities aren’t subject to taxation upon distribution. For instance, qualified distributions received under a Roth 401(k) plan aren’t taxable.
If you received a payment from a pension or annuity, then you should’ve received an IRS Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., with Box 1 indicating the total amount of your pension/annuity payments before income tax or other deductions were withheld.
The new tax law generally didn’t change the taxation of pension and annuities.
However, it did provide tax relief to taxpayers affected by federally declared disasters that occurred in 2016. Eligible taxpayers are exempt from the 10 percent additional tax imposed on early withdrawals from an eligible retirement plan if the withdrawal qualifies as a disaster distribution, and can include disaster distributions in gross income over three years.
How will this affect me?
Pensions and Annuities: Scenario 1
Bedford purchases a 10-year annuity in 2016 for $12,000. The annuity plan pays $120 a month (or $1,200 a year). Bedford excludes a portion of the $120 every month. His annuity payments become fully taxable when he has recovered the cost of his investment, that is, $12,000. Bedford reports on lines 16a and 16b the total amount of the annuity payment as well as the taxable amount shown on IRS Form 1099-R,
Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc..
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 19
[Print]Unemployment Compensation
Jun 20, 2018
Unemployment compensation you receive during the year is income.
The new tax law didn’t make any changes to unemployment compensation.
Unemployment compensation or insurance benefits that you receive from the United States or a state government is income in the year you receive it.
The new tax didn’t make any changes to unemployment compensation.
How will this affect me?
Unemployment Compensation: Scenario 1
In 2018, Wendell received $10,480 in unemployment compensation from the State of Texas. He reports the full amount as income on his tax return.
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 20a and 20b
[Print]Social Security Benefits
Jun 20, 2018
If you receive social security benefits, you may have to pay taxes on part of those benefits.
The new tax law didn’t make any changes to how your social security benefits are taxed.
If you receive social security benefits, you may have to pay taxes on part of those benefits. Social security benefits include monthly retirement, survivor and disability benefits. They don’t include Supplemental Security Income (SSI) payments, which are not taxable.
The net amount of social security benefits that you received during the year is reported in Box 5 of IRS Form SSA-1099, Social Security Benefit Statement. You report that amount on your IRS Form 1040, line 20a. The taxable portion of those benefits, if any, is reported on line 20b.
To determine whether you must pay taxes on your benefits, compare the following amounts:
1. 50 percent of your social security benefits, plus modified gross adjusted income (including tax-exempt income), against
2. The “base amount” associated with your filing status:
- $25,000 for single, head of household, qualifying widow(er), and married filing separately and lived apart from your spouse for all the tax year; or
- $32,000 for married filing jointly; or
- $0 for married filing separately and lived with your spouse at any time during the tax year.
- If the base amount equals or is greater than the amount in (1), then you don’t have to pay taxes on any of the benefits. But if the base amount is less than the amount in (1), then generally up to 50 percent (or up to 85 percent under certain situations) of your benefits are taxable.
Use this interactive online test or Worksheet 1 on Publication 915, Social Security and Equivalent Railroad Retirement Benefits to find out what portion of your benefits are taxable.
The new tax law didn’t change how your social security benefits are taxed.
How will this affect me?
Social Security Benefits: Scenario 1
Bob received $5,800 in social security benefits during 2018. Social security was the only source of Bob’s income this year. Bob is single, so his base amount is $25,000. His social security benefits aren’t taxable because one-half of his benefits is less than his base amount of $25,000.
Social Security Benefits: Scenario 2
Bob and Ivy filed a joint return in 2018. Bob is retired and received $6,000 in social security benefits and a fully taxable pension of $16,000. Ivy received $3,000 in social security benefits and $25,000 in wages.
One-half of Bob and Ivy’s benefits plus their other income equals $45,500 (one-half of $9,000 plus $41,000 other income), which is more than the base amount of $32,000. Bob and Ivy must therefore pay taxes on some of their social security benefits.
Using the IRS interactive online test, they determined that $5,775 or approximately 64.17 percent of their $9,000 social security benefits should be reported as taxable income.
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 21
[Print]La nueva ley tributaria hizo cambios menores en los tipos de ingresos reportados en la línea 21.
La línea 21 se usa para informar el ingreso sujeto a impuestos que usted no reportó en otro lugar en su declaración u otros anexos. Ejemplos de otros ingresos incluyen:
- La mayoría de los premios y recompensas;
- Ganancias de juego, incluyendo loterías y sorteos;
- Pago por servicio en un jurado;
- Ingreso por pasatiempo;
- Deudas canceladas;
- Distribuciones tributables de una cuenta de ahorros para educación Coverdell o un programa de matrícula calificado;
- Distribuciones de la Cuenta de Ahorros para la Salud (HSA) que no se usan para pagarle o reembolsarle los gastos médicos calificados;
- Reembolsos por artículos deducidos erróneamente en un año anterior (como gastos médicos e impuestos de bienes raíces);
- Dividendos del Fondo Permanente de Alaska;
- Deducción por pérdida neta de operación (NOL) prorrogada de un año anterior; y
- Porciónes tributables de pagos por alivio y ayuda relacionados a un desastre.
No debe declarar lo siguiente como Otros ingresos:
- Ingresos de trabajo por cuenta propia; o
- Ingresos no sujetos a impuestos (pensión alimenticia, ingresos del seguro de vida, obsequios).
La nueva ley de impuestos generalmente no modificó los tipos de ingresos tributables reportados en la Línea 21, Otros ingresos.
Sin embargo, hizo los siguientes cambios diversos:
- Descarga de la deuda de los estudiantes debido a la muerte o discapacidad: para los años tributarios que comienzan después del 31 de diciembre de 2017, una descarga de la deuda de los estudiantes debido a la muerte o discapacidad total y permanente (TPD) ya no se incluye en los ingresos.
- Traspasos de Deducción por pérdida neta de operación (NOL): para los contribuyentes no corporativos, cualquier pérdida operativa neta (NOL) que surja en un año tributario que finalice después del 31 de diciembre de 2017, la nueva ley tributaria generalmente no permite el traspaso de las pérdidas operativas netas (NOLs) a años anteriores, pero sí permite el traspaso indefinido de NOLs a años posteriors.
How will this affect me?
Otro Ingreso: Escenario 1
En 2018, Dylan construye aviones modelo como un hobby y algunas veces vende los modelos completados en Craigslist. Durante el año, Dylan también recibió una compensación por servir en un jurado. Dylan reporta los ingresos de estas actividades como Otros Ingresos en el Formulario 1040, línea 21.
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 23
[Print]Educator Expenses
Jun 20, 2018
An eligible educator can deduct up to $250 of any unreimbursed business expenses for certain classroom materials, computers including related software and services or other equipment used in the classroom. Supplies for courses on health and physical education qualify only if they are related to athletics.
The new tax law didn’t change how you can deduct educator expenses. However, the amount of the deduction is annually adjusted for inflation.
If you’re an eligible educator, you can deduct up to $250 ($500 if you’re filing a married filing joint tax return and both you and your spouse are eligible educators, but not more than $250 each) of unreimbursed trade or business expenses.
Qualified expenses are amounts you paid or incurred for participation in professional development courses, books, supplies, computer equipment (including related software and services), other equipment, and supplementary materials that you use in the classroom. For courses in health or physical education, the expenses for supplies must be for athletic supplies.
You’re an eligible educator, if you’re a kindergarten through grade 12 teacher, instructor, counselor, principal or aide for at least 900 hours during a school year in a school that provides elementary or secondary education as determined under state law.
The new tax law didn’t change how you can deduct educator expenses. However, the amount of the deduction is annually adjusted for inflation.
How will this affect me?
Educator Expenses: Scenario 1
Jacob is a full-time 6th grade homeroom and math teacher. In 2018, Jacob spent $300 on books and supplies used in the 6th grade classroom. Jacob didn’t receive reimbursement for his expenses. Jacob is married to Sophia, who is an attorney. Jacob and Sophia can only deduct $250 of educator expenses on their joint tax return.
Educator Expenses: Scenario 2
Same as above, but Sophia is a full-time middle school physical education teacher. In addition to Jacob’s educator expenses, Sophia spent $200, of which only $150 was for athletic supplies. Jacob and Sophia will be able to deduct educator expenses in the amount of $400 ($250 for Jacob and $150 for Sophia) on their joint tax return.
Note: Sophia can’t take a deduction for the $50 she spent on supplies not related to her athletics class.
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 25; Form 8889
[Print]Health Savings Account (HSA) Deduction
Jun 20, 2018
You may qualify to claim a tax deduction for contributions you, or someone other than your employer, make to your HSA.
The new tax law didn’t change the treatment of the HSA deduction. Note: There are annual inflationary adjustments to the deductibility limitations.
An HSA may receive contributions from an eligible individual or any other person, including an employer or a family member, on behalf of an eligible individual.
Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. Employer contributions aren’t included in income. Distributions from an HSA that are used to pay qualified medical expenses aren’t taxed.
The amount you or any other person can contribute to your HSA depends on the type of high deductible health plan (HDHP) coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual.
For 2017, if you have self-only HDHP coverage, you can contribute up to $3,400. If you have family HDHP coverage, you can contribute up to $6,750.
For 2018, if you have self-only HDHP coverage, you can contribute up to $3,450. If you have family HDHP coverage, you can contribute up to $6,900.
The new tax law didn’t change the treatment of the HSA deduction.
Note: There are annual inflationary adjustments to the deductibility limitations.
How will this affect me?
Health Savings Account (HSA) Deduction: Scenario 1
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 26; Form 3903
[Print]Moving Expenses
Jun 20, 2018
The new tax law eliminated the moving expense deduction for tax years 2018 through 2025. However, during that period, it retains the deduction for members of the Armed Forces (or their spouse or dependents) on active duty that move because of a military order and incident to a permanent change of station.
For tax years beginning before 2018, if you moved due to a change in your job or business location, or because you started a new job or business, you could deduct your reasonable unreimbursed moving expenses but not any expenses for meals. You could deduct your moving expenses, if you met all three of the following requirements:
- Your move closely relates to the start of work;
- You meet the distance test; and
- You meet the time test.
If you’re a member of the Armed Forces who is on active duty and moved because of a military order, and incident to a permanent change of station, you didn’t need to satisfy the distance and time tests.
If you were working abroad or are a survivor of a decedent who was working abroad and, upon permanent retirement (or in the case of a survivor, death of the taxpayer working abroad), you move to the United States or one of its possessions, you don’t have to meet the time test.
For a detailed description of each of these requirements, see IRS Publication 521, Moving Expenses.
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For tax years beginning after December 31, 2017, you can’t deduct any moving expenses incurred in a work-related move. |
However, the law doesn’t change for members of the Armed Forces (including their spouse or dependents) on active duty that move because of a military order and incident to a permanent change of station.
How will this affect me?
Moving Expenses: Scenario 1
Mason and Olivia moved in 2018 because Olivia started a new job in a location 100 miles farther away from home than her former job location. They incurred $5,000 in reasonable moving expenses, excluding meals, in 2018. Neither Mason nor Olivia are active members of the military. They can’t deduct their moving expenses on their 2018 tax return.
Moving Expenses: Scenario 2
Same as above, except Olivia is on active duty in the Navy and moved pursuant an order that requires her to permanently change her station to a location 40 miles farther away from home than her former station. They are permitted to deduct their reasonable moving expenses, $5,000, on their 2018 tax return.
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 31a
[Print]Currently, amounts paid to a spouse or a former spouse under a divorce or separation instrument (including a divorce decree, a separate maintenance decree, or a written separation agreement) may be alimony for federal tax purposes. Alimony is deductible by the paying spouse.
There is no change in tax treatment for divorces signed through December 31, 2018. However, in general, for divorces signed after December 31, 2018, the spouse or former spouse paying the alimony will no longer be able to take a deduction for alimony paid.
The spouse paying the alimony gets a deduction for the amount paid.
Note: To qualify as alimony, payments must meet certain requirements.
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Alimony and separate maintenance payments aren’t deductible by the paying spouse.
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The repeal of the deduction for alimony and separate maintenance payments applies to any divorce or separation instrument signed after December 31, 2018, or for any divorce or separation instrument signed on or before December 31, 2018, and changed after that date, if the change clearly includes the new tax rule.
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How will this affect me?
Alimony Paid: Scenario 1
Emma pays Noah $1,500 of alimony per month based on their divorce decree signed in 2016. Emma will continue to take a deduction of the same amount in tax year 2018 and in future tax years.
Alimony Paid: Scenario 2
Noah and Emma signed their divorce decree in 2018 and Noah was awarded alimony. Since they signed the divorce decree in 2018, Emma will get a deduction for the amount paid in 2018.
Note: If Noah and Emma had divorced after 2018, Emma wouldn’t get a deduction for the alimony she paid to Noah.
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 32
[Print]Deducción de Arreglos de Ahorro para la Jubilación (IRA, por sus siglas en inglés)
Jun 20, 2018
Es posible que usted pueda deducir su aportación a una cuenta tradicional IRA; esto dependerá de su ingreso, estado civil y sin importar si ya está cubierto por un plan de retiro en el empleo o esté recibiendo beneficios de seguro social.
Una IRA tradicional es cualquier IRA que no está clasificada como “Roth IRA” o una “SIMPLE IRA”. Usted no puede deducir aportaciones de una IRA Roth.
La nueva ley de impuestos no cambia la manera de deducir la aportación hecha a una IRA. Sin embargo, la aportación (deducción) y las limitaciones de ingreso bruto ajustado modificado son ajustadas anualmente debido a la inflación.
La nueva ley de impuestos no cambia la manera de deducir la aportación hecha a una IRA. Sin embargo, la aportación (deducción) y las limitaciones de ingreso bruto ajustado modificado son ajustadas anualmente debido a la inflación.
How will this affect me?
Deducción de Arreglos de Ahorro para la Jubilación (IRA por sus siglas en inglés): Escenario 1
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 33
[Print]Deducción de Intereses sobre Préstamos de Estudios
Jun 20, 2018
Los intereses de préstamos de estudios son intereses pagados durante el año a un préstamo de estudios calificado. Esto incluye ambos; pagos obligatorios y pagos voluntarios de intereses prepagados. Usted puede reclamar la deducción por el interés que usted pagó si cumple con ciertas condiciones.
La nueva ley de impuestos no cambia la deducción de intereses de préstamos de estudios. Usted aún podría tomar la deducción por los intereses que usted pagó a un préstamo de estudios hasta un máximo de $2,500. Nota: Las limitaciones de ingreso son ajustadas anualmente por razones de inflación.
Nota: La nueva ley de impuestos sí cambia la exclusión de ingreso por la exoneración de la deuda de un préstamo de estudios, para incluir dentro de la exclusión ciertas exoneraciones por razón de fallecimiento o incapacidad.
Si su ingreso bruto ajustado modificado (MAGI por sus siglas en inglés) es menor de $80,000 ($165,000 si son casados y presentan una declaración en conjunto), usted puede tomar una deducción de intereses pagados durante el año a un préstamo calificado de estudios (también conocido como préstamo educativo).
Los beneficios del préstamo solo pueden usarse para gastos calificados de estudios para usted, cónyuge o dependiente que asiste a una institución educativa elegible. La deducción está limitada a $2,500 y se reducirá gradualmente una vez su MAGI exceda $65,000(o $135,000 si está casado y presenta una declaración en conjunto).
Para una explicación más detallada de los requisitos necesarios para tomar esta deducción vea,
Publicación 970 del IRS, Tax Benefits for Education (Beneficios Tributarios de estudios) en inglés.
La nueva ley de impuestos no cambia la deducción de intereses de préstamos de estudios. Usted aún podría tomar la deducción por los intereses que usted pago a un préstamo de estudios hasta un máximo de $2,500.
Nota: Las limitaciones de ingreso son ajustadas anualmente por razones de inflación.
How will this affect me?
Deducción de Intereses sobre Préstamos de Estudios: Escenario 1
En el 2018, Isabella pagó $3,000 en intereses de préstamos de estudios. Isabella está legalmente obligada a hacer pagos a su préstamo de estudios. Ella utilizó su préstamo para pagar los costos de matrícula, hospedaje, alimentos y materiales para poder asistir a su institución educativa a tiempo completo entre los años 2013 y 2017. Ella se graduó con un título de bachillerato en economía en el 2017. Isabella está casada y presenta una declaración de impuestos en conjunto con su cónyuge. Su MAGI en conjunto para 2018 es de $130,000. Isabella puede deducir $2,500 de intereses de préstamos de estudios en su declaración de impuestos de casados para el año 2018.
Para los ejemplos de la reducción gradual por fases de esta deducción basado en el MAGI, vea la Publicación 970 del IRS, Tax Benefits for Education (Beneficios Tributarios de Estudios) en inglés.
Additional information and resources:
Where to find it on the tax return:
Form 1040 - p. 1, line 34; Formulario 8917
[Print]Deducción por Gastos de Matrículas y Cuotas Escolares
Jun 20, 2018
La deducción por gastos de matrículas y cuotas escolares reduce la cantidad de los ingresos sujetos a pagar impuestos del contribuyente hasta un máximo de $4,000.
La deducción expiró temporalmente después del año tributario 2016, pero luego se extendió al año tributario 2017. Esta deducción actualmente no está disponible para el año tributario 2018.
Para el año tributario 2017, podías deducir los gastos calificados de educación pagados durante el año para usted, su cónyuge o su dependiente. Los gastos de educación calificados fueron pagados para matrícula y los costos requeridos de matrícula o asistencia del estudiante en una institución educativa elegible. Los gastos requeridos incluyen cantidades para libros, materiales y equipos utilizados en un curso educativo.
Los gastos de educación calificados incluyen honorarios no académicos, como honorarios por actividad estudiantil, gastos atléticos u otros gastos no relacionados con el curso académico de enseñanza, solo si los gastos se pagaron a la institución como condición de matrícula o asistencia.
La deducción no estaba disponible si su estado civil para efectos de la declaración era casado que presentaba por separado o si otra persona podría reclamar una exención para usted como dependiente en su declaración de impuestos. Los gastos calificados tenían que haberse pagado para la educación superior y la deducción estaba limitada a $4,000.
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Esta deducción actualmente no está disponible para las declaraciones del año tributario 2018. |
How will this affect me?
Deducción por gastos de matrículas y cuotas escolares.: Escenario 1
Ariel reclamó una deducción de $4,000 por el pago de matrícula universitaria realizada durante el año de impuestos contributivo 2017. A menos que el Congreso extienda la disposición al año contributivo 2018, no se le permitirá tomar esta deducción en su declaración de impuestos del año contributivo 2018.
Additional information and resources:
Form 1040 - p. 1, line 40
[Print]Mortgage Interest
Jun 20, 2018
If you got a mortgage on or before December 15, 2017, the new tax law doesn’t change the amount of your deductible mortgage interest.
However, if you got a mortgage (for a first or second home) after that date, effective for tax years 2018 through 2025, you can only deduct the interest you paid on the first $750,000 of the debt (amount you owe the mortgage company).
In addition, the new tax law also eliminates the deduction for interest on home equity debt.
You could deduct as an itemized deduction any interest paid on a mortgage to buy, build, or improve your principal home and a second home, if the debt totaled $1 million or less ($500,000 or less if you were married, but filed a separate tax return).
You were also allowed to deduct interest paid on home equity debt (not used to buy, build, or improve a first or second home) if the debt totaled $100,000 or less ($50,000 or less if you were married, but filed a separate tax return) and totaled no more than the fair market value of your home (reduced by the debt). Debt is the amount you owed on the home.
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For mortgages entered into after December 15, 2017, the new tax law reduced the amount of interest you can deduct as an itemized deduction to the amount accruing on no more than $750,000 of debt used to buy, build, or improve your principal home and a second home ($375,000 in the case of married taxpayers filing separate tax returns) for tax years 2018 through 2025.
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The debt must be secured by the specific home the debt was used to buy, build, or improve and may not exceed the value of the home. If you acquired the debt on or before December 15, 2017, the home acquisition debt limit remains at $1,000,000 ($500,000 in the case of married taxpayers filing separate tax returns).
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The new tax law also removes the deduction for interest on home equity debt for tax years 2018 through 2025. A home equity loan, home equity line of credit, or second mortgage is not home equity debt if you use the proceeds to buy, build, or improve a first or second home. |
How will this affect me?
Mortgage Interest: Scenario 1
James and Madison are married and file a joint tax return. They got a mortgage totaling $900,000 in 2016 to buy their first home. They also took out a home equity loan of $50,000 in June 2017 to build a deck and do other home improvements for their home. For their 2018 tax return, they can still claim all their interest payments for both loans as itemized deductions provided both loans are secured by the home and the total loan balance doesn’t exceed the value of the home. The new $750,000 limit doesn’t apply because both loans were taken out before December 15, 2017.
Mortgage Interest: Scenario 2
Same as above, but James and Madison use the proceeds of the $50,000 home equity loan to pay off their credit cards, student loans, and other personal expenses. The home equity loan is now home equity debt because the proceeds were not used to buy, build, or improve their home. The interest is not deductible on their 2018 tax return under the new law.
Mortgage Interest: Scenario 3
Same as above, but James and Madison got their mortgage on December 31, 2017. They’ll only be able to deduct the interest that accrues on the first $750,000 of their mortgage on their 2018 tax return.
Additional information and resources:
Where to find it on the tax return:
