Your Federal Income Tax

Table of Contents

For Individuals

For Use in Preparing 2001 Returns

All material in this publication may be reprinted freely. A citation to Your Federal Income Tax (2001) would be appropriate.

The explanations and examples in this publication reflect the interpretation by the Internal Revenue Service (IRS) of:

• Tax laws enacted by Congress
• Treasury regulations, and
• Court Decisions.

However, the information given does not cover every situation and is not intended to replace the law or change its meaning.

This publication covers some subjects on which a court may have made a decision more favorable to taxpayers than the interpretation by the IRS. Until these differing interpretations are resolved by higher court decisions or in some other way, this publication will continue to present the interpretations by the IRS.

All taxpayers have important rights when working with the IRS. These rights are described in Your Rights as a Taxpayer in the back of this publication.

• Important Changes for 2001
• Important Changes for 2002
• Important Reminders
• Introduction

Part 1 - The Income Tax Return

The five chapters in this part provide basic information on the tax system. They take you through the first steps of filling out a tax return-- such as deciding what your filing status is, how many exemptions you can take, and what form to file. They also discuss recordkeeping requirements, IRS e-file (electronic filing), certain penalties, and the two methods used to pay tax during the year: withholding and estimated tax.

• Chapter 1 - Filing Information
• Chapter 2 - Filing Status
• Chapter 3 - Personal Exemptions and Dependents
• Chapter 4 - Decedents
• Chapter 5 - Tax Withholding and Estimated Tax

Part 2 - Income

The eight chapters in this part discuss many kinds of income. They explain which income is and is not taxed. See Part Three for information on gains and losses you report on Schedule D (Form 1040) and for information on selling your home.

• Chapter 6 - Wages, Salaries, and Other Earnings
• Chapter 7 - Tip Income
• Chapter 8 - Interest Income
• Chapter 9 - Dividends and Other Corporate Distributions
• Chapter 10 - Rental Income and Expenses
• Chapter 11 - Retirement Plans, Pensions, and Annuities
• Chapter 12 - Social Security and Equivalent Railroad Retirement Benefits
• Chapter 13 - Other Income

Part 3 - Gains and Losses

The four chapters in this part discuss investment gains and losses, including how to figure your basis in property. A gain from selling or trading stocks, bonds, or other investment property may be taxed or it may be tax free, at least in part. A loss may or may not be deductible. These chapters also discuss gains from selling property you personally use -- including the special rules for selling your home. Nonbusiness casualty and theft losses are discussed in chapter 27 in Part Five.

• Chapter 14 - Basis of Property
• Chapter 15 - Sale of Property
• Chapter 16 - Selling Your Home
• Chapter 17 - Reporting Gains and Losses

Part 4 - Adjustments to Income

The three chapters in this part discuss three of the adjustments to income that you can deduct in figuring your adjusted gross income. These chapters cover:

• Contributions you make to traditional individual retirement arrangements (IRAs) -- chapter 18,
• Moving expenses you pay -- chapter 19, and
• Alimony you pay -- chapter 20.

Other adjustments to income are discussed in other parts of this publication or in other publications and instructions. They are deductions for:

• Interest paid on student loans -- instructions for Form 1040, line 24, or Form 1040A, line 17,
• Contributions to an Archer MSA-- chapter 23,
• Self-employment tax -- chapter 24,
• Self-employed health insurance -- chapter 23,
• Payments to self-employed SEP, SIMPLE, and qualified plans -- Publication 560, Retirement Plans for Small Business,
• Penalty on early withdrawal of savings -- chapter 8,
• Amortization of the costs of reforestation -- chapter 9 of Publication 535, Business Expenses,
• Contributions to Internal Revenue Code section 501(c)(18) pension plans -- Publication 525, Taxable and Nontaxable Income,
• Expenses from the rental of personal property -- chapter 13,
• Expenses of fee-basis officials or certain performing artists -- chapter 28,
• Certain required repayments of supplemental unemployment benefits (sub-pay) -- chapter 13,
• Foreign housing deduction -- chapter 4 of Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad,
• Jury duty pay given to your employer -- chapter 13,
• Part of the cost of qualified clean-fuel vehicle property -- chapter 12 of Publication 535, Business Expenses, and
• Contributions by certain chaplains to Internal Revenue Code section 403(b) plans-- Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers.

• Chapter 18 - Individual Retirement Arrangements (IRAs)
• Chapter 19 - Moving Expenses
• Chapter 20 - Alimony

Part 5 - Standard Deduction and Itemized Deductions

After you have figured your adjusted gross income, you are ready to subtract the deductions used to figure taxable income. You can subtract either the standard deduction or itemized deductions. Itemized deductions are deductions for certain expenses that are listed on Schedule A (Form 1040). The ten chapters in this part discuss the standard deduction, each itemized deduction, and the limit on some of your itemized deductions if your adjusted gross income exceeds certain amounts. See chapter 21 for the factors to consider when deciding whether to subtract the standard deduction or itemized deductions.

• Chapter 21 - Standard Deduction
• Chapter 22 - Limit on Itemized Deductions
• Chapter 23 - Medical and Dental Expenses
• Chapter 24 - Taxes
• Chapter 25 - Interest Expense
• Chapter 26 - Contributions
• Chapter 27 - Nonbusiness Casualty and Theft Losses
• Chapter 28 - Car Expenses and Other Employee Business Expenses
• Chapter 29 - Tax Benefits for Work-Related Education
• Chapter 30 - Miscellaneous Deductions

Part 6 - Figuring Your Taxes and Credits

The eight chapters in this part explain how to figure your tax and how to figure the tax of certain children who have more than $1,500 of investment income. They also discuss tax credits that, unlike deductions are subtracted directly from your tax and reduce your tax, dollar for dollar. Chapter 37 discusses the earned income credit and how you may be able to get part of the credit paid to you in advance throughout the year.

• Chapter 31 - How To Figure Your Tax
• Chapter 32 - Tax on Investment Income of Certain Minor Children
• Chapter 33 - Child and Dependent Care Credit
• Chapter 34 - Credit for the Elderly or the Disabled
• Chapter 35 - Child Tax Credit
• Chapter 36 - Education Credits
• Chapter 37 - Earned Income Credit
• Chapter 38 - Other Credits
• Your Rights as a Taxpayer
• How To Get Tax Help

2001 Tax Rate Schedules

• Tax Rate Schedules

• Use Schedule X if Your Filing Status is Single
• Use Schedule Y-1 if Your Filiing Status is Married Filing Jointly, or
  Qualifiying Widow(er)
• Use Schedule Y-2 if Your Filing Status is Married Filing Separately
• Use Schedule Z if Your Filing Status is Head of Household

2001 Tax Tables

• Tax Tables Main

• Taxable Income 1 - 5,000
• Taxable Income 5,000 - 14,000
• Taxable Income 14,000 - 23,000
• Taxable Income 23,000 - 32,000
• Taxable Income 32,000 - 41,000
• Taxable Income 41,000 - 50,000
• Taxable Income 50,000 - 59,000
• Taxable Income 59,000 - 68,000
• Taxable Income 68,000 - 77,000
• Taxable Income 77,000 - 86,000
• Taxable Income 86,000 - 95,000
• Taxable Income 95,000 - 100,000

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