Topic 407 – Business Income
Business income may include income received from the sale of products or services. For example, fees received by a person from the regular practice of a profession are business income. Rents received by a person in the real estate business are business income. A business must include in income payments received in the…[Read more]

Topic 409 – Capital Gains and Losses
Almost everything you own and use for personal or investment purposes is a capital asset. Examples include a home, personal-use items like household furnishings, and stocks or bonds held as investments. When you sell a capital asset, the difference between the adjusted basis in the asset and the amount you…[Read more]

Topic 410 – Pensions and Annuities
If you receive retirement benefits in the form of pension or annuity payments from a qualified employer retirement plan, all or some portion of the amounts you receive may be taxable.

This topic doesn’t cover the taxation of social security and equivalent railroad retirement benefits. For information about tax…[Read more]

Topic 411 – Pensions – the General Rule and the Simplified Method
If some contributions to your pension or annuity plan were previously included in gross income, you can exclude part of the distributions from income. You must figure the tax-free part when the payments first begin. The tax-free part generally remains the same each year, even if t…[Read more]

Topic 412 – Lump-Sum Distributions
If you receive a lump-sum distribution from a qualified retirement plan or a qualified retirement annuity and you were born before January 2, 1936, you may be able to elect optional methods of figuring the tax on the distribution. These optional methods can be elected only once after 1986 for any eligible plan…[Read more]

Topic 413 – Rollovers from Retirement Plans
A rollover occurs when you withdraw cash or other assets from one eligible retirement plan and contribute all or part of it, within 60 days, to another eligible retirement plan. This rollover transaction isn’t taxable, unless the rollover is to a Roth IRA, but it is reportable on your federal tax return.…[Read more]

Topic 414 – Rental Income and Expenses
Cash or the fair market value of property or services you receive for the use of real estate or personal property is taxable to you as rental income. In general, you can deduct expenses of renting property from your rental income.

Real Estate Rentals
You can generally use Form 1040, Schedule E (PDF),…[Read more]

Topic 415 – Renting Residential and Vacation Property
If you receive rental income for the use of a dwelling unit, such as a house or an apartment, you may deduct certain expenses. These expenses, which may include mortgage interest, real estate taxes, casualty losses, maintenance, utilities, insurance, and depreciation, will reduce the amount of…[Read more]

Topic 416 – Farming and Fishing Income
If you have income from your farming or fishing business, you may be able to avoid making any estimated tax payments by filing your return and paying your entire tax due on or before March 1 of the year your return is due. This rule generally applies if farming or fishing income was at least two-thirds of…[Read more]

Topic 417 – Earnings for Clergy
A licensed, commissioned or ordained minister is generally the common law employee of the church, denomination, sect, or organization that employs him or her to provide ministerial services. However, there are some exceptions, such as traveling evangelists who are independent contractors (self-employed) under the…[Read more]

Topic 418 – Unemployment Compensation
The tax treatment of unemployment benefits you receive depends on the type of program paying the benefits. Unemployment compensation includes amounts received under the laws of the United States or of a state, such as:

State unemployment insurance benefits
Benefits paid to you by a state or the District of…[Read more]

Topic 419 – Gambling Income and Losses
The following rules apply to casual gamblers who aren’t in the trade or business of gambling. Gambling winnings are fully taxable and you must report the income on your tax return. Gambling income includes but isn’t limited to winnings from lotteries, raffles, horse races, and casinos. It includes cash…[Read more]

Topic 420 – Bartering Income
Bartering is the exchange of goods or services. A barter exchange is an organization whose members contract with each other (or with the barter exchange) to exchange property or services. The term doesn’t include arrangements that provide solely for the informal exchange of similar services on a noncommercial basis.…[Read more]

Topic 421 – Scholarships, Fellowship Grants, and Other Grants
A scholarship is generally an amount paid or allowed to a student at an educational institution for the purpose of study. A fellowship grant is generally an amount paid or allowed to an individual for the purpose of study or research. Other types of grants include need-based grants…[Read more]

Topic 423 – Social Security and Equivalent Railroad Retirement Benefits
If the only income you received during the tax year was your social security or equivalent railroad retirement benefits, your benefits may not be taxable and you may not have to file a tax return.

Nontaxable Benefits
If you also received other income, your benefits won’t be…[Read more]

Topic 424 – 401(k) Plans
A 401(k) plan is a qualified deferred compensation plan. If you’re eligible under the plan, you generally can elect to have your employer contribute a portion of your compensation to the plan on a pre-tax basis. Generally, your deferred compensation (commonly referred to as elective contributions) isn’t subject to income…[Read more]

Topic 425 – Passive Activities – Losses and Credits
Generally, losses from passive activities that exceed the income from passive activities are disallowed for the current year. You can carry forward disallowed passive losses to the next taxable year. A similar rule applies to credits from passive activities.

Material and Active P…[Read more]

Topic 427 – Stock Options
If you receive an option to buy stock as payment for your services, you may have income when you receive the option, when you exercise the option, or when you dispose of the option or stock received when you exercise the option. There are two types of stock options:

Options granted under an employee stock purchase plan…[Read more]

Topic 429 – Traders in Securities (Information for Form 1040 Filers)
This topic explains if an individual who buys and sells securities qualifies as a trader in securities for tax purposes and how traders must report the income and expenses resulting from the trading business. The term security is defined in Internal Revenue Code section…[Read more]

Topic 430 – Receipt of Stock in a Demutualization
A mutual insurance company is owned by its policyholders whose ownership interests don’t exist in the form of stock. The insurance policy sets the terms of the policyholder’s ownership. When a mutual insurance company demutualizes and becomes a stock company, an eligible policyholder generally…[Read more]