Edward A. Lyon, JD
TaxTuneup.com, Inc.
3416 Shaw Ave #5
Cincinnati OH 45208
513.321.2821
elyon@taxtuneup.com
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Abandoned Property
Abandoned property that you've
used for your trade or business, or investment is deductible (at its adjusted
Basis) in the year you abandon it.
Abdominal Supports
Deductible
Medical Expense subject
to the 7.5% floor.
Account Fees
Account fees you pay to financial service providers are
deductible as follows:
Accounting Fees
Accounting, audit, and
bookkeeping fees you pay on behalf of your trade or business are a deductible
Business Expense on
Schedule C,
Form 1065, or
your corporate return..
Acupuncture
Deductible
Medical Expense subject
to the 7.5% floor.
Adjustments to Income
Adjustment to income are a category
of expenses you deduct directly on Form 1040, whether you itemize or not.
These are sometimes called "above the line" deductions, because you deduct
them before calculating adjusted gross income.
Depending on your income and certain other factors,
adjustments to income may
include:
Total income minus adjustments
to income equals adjusted gross income. This figure is important for two
reasons:
First, your
Personal Exemptions
and Itemized Deductions phase out as your adjusted gross income reaches
certain levels. Personal Exemptions shrink by 2% for each $2,500 or fraction
over the threshold. Itemized
Deductions (except for medical expenses,
investment interest, casualty and theft losses, and gambling losses) shrink
by 3% for each dollar over the threshold, up to a maximum of 80% of total
itemized deductions.
|
Personal Exemption
Phaseouts (2008) |
|
Single Filers |
Heads of Households |
Joint Filers |
Married Filing Separately |
|
$159,950 |
$199,950 |
$239,950 |
$119,975 |
|
Itemized Deduction
Phaseouts (2008) |
|
Single Filers |
Heads of Households |
Joint Filers |
Married Filing Separately |
|
$159,950 |
$159,950 |
$159,950 |
$79,975 |
Second, many
Itemized Deductions
are allowed only to the extent they
exceed certain percentages of adjusted gross income:
-
Medical Expenses are
deductible only to the extent they top 7.5% of adjusted gross income.
-
Casualty and theft losses are deductible only to the extent they exceed $100
plus 10% of adjusted gross income.
-
Miscellaneous Itemized
Deductions are allowed only to the extent they exceed 2% of adjusted
gross income.
These phaseouts can be
expensive! Let's say your adjusted gross income is
$50,000. That means you can deduct medical expenses only to the
extent they top $3,750. If you have just
$3,500 of medical expenses, you're out of luck financially as well as
medically.
Adoption Tax Credit
The adoption tax credit is a
credit against your tax for the cost of adopting a child:
-
You can claim a credit of up
to $11,650 (2008) for "qualified adoption expenses" including
"reasonable and necessary fees," court costs, attorney costs, and similar
expenses.
-
Generally, if you adopt a U.S.
citizen or resident, you can claim the credit the year the adoption
becomes final. If you pay expenses in any year before the adoption becomes
final, you can claim the credit in the year after the year you pay the
expenses. If you adopt a foreign child, you can't claim the credit until
the year the adoption becomes final.
Claim the credit on
Form
8839 and carry the balance to
Form 1040. For more information, see
IRS
Publication 968, "Tax Benefits for Adoptions."
Adoption Assistance
Adoption assistance benefits you
receive from your employer to help defray the cost of adopting a child are
nontaxable income up to $11,650 per year (2008).
Advertising
Advertising you buy for your trade or business are
deductible as a
Business Expense on
Schedule C,
Form 1065, or
your corporate return. This
include traditional print and electronic broadcast advertising, online
advertising, ad specialties (T-shirts, pens, and coffee mugs with your
business name), and even the cost of sponsoring an athletic team in the name
of your business.
Air Conditioner
Deductible
Medical Expense, subject
to the 7.5% floor, if prescribed by a physician to relieve a specific
condition.
Alcohol "Rehab"
Deductible Medical
Expense subject to the 7.5% floor (including meals and lodging
provided during treatment).
Alimony
Alimony you pay is generally a deductible
Adjustment to Income, with alimony you receive taxable
as ordinary income, unless you and your ex-spouse otherwise agree.
Do you know why divorce is so
expensive? Because it's worth it! Fortunately, the tax code offers you
help through the painful transition. Tax rules governing alimony, property
transfers, and qualified plans let you arrange you separation specifically
to pay less tax than if you had remained together. If you and your
soon-to-be ex- can agree to cooperate, you can unravel your financial
affairs with minimal tax consequence. And taxes are simply one more
headache you don't need to add to your burden.
If you and your spouse will be
in different tax brackets after the divorce, you can shift the tax burden
on the income you use used for alimony to the spouse with the lower tax
rate. Child support, in contrast, is not tax-deductible and not taxable
income to the payee. Here's how to qualify alimony payments for this
treatment:
-
The payments have to be
ordered by a decree of divorce, legal separation agreement, decree of
support, or decree of annulment.
For more information, see also Child Support
and
Qualified
Domestic Relations Order.
Deduct alimony you pay
directly on Page 1 of
Form 1040. For more information, see
IRS
Publication 504, "Divorced or Separated Individuals."
Allowance
"Allowance" you pay to your kids may be deductible as a
Business Expense on
Schedule C,
Form 1065, or
your corporate return if you pay
your kids to work in your business. Of course, you won't call it allowance.
You'll call it wages. (As a side benefit, your kids might learn not to treat
you like "The First National Bank of Mom and Dad.") But you might be
surprised to discover how much you can deduct:
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The tax court has approved
deductions for payments to a child as young as seven years old.
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You have to pay your child a
reasonable wage. You can't pay your 10-year-old the same amount for
cleaning your office that your 15-year-old earns for designing your web site.
-
You'll deduct the wages in the
same manner as for any other employee on
Schedule C,
Form 1065,
or your corporate return.
-
No Social Security tax is due
on wages you pay to a child under 18 if the business is unincorporated. No
FUTA (unemployment tax) is due if they're under 21.
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Your kids don't have to use
the money for their pizza and Nintendo fund. You can establish a custodial
Individual
Retirement Account or Roth IRA
to start saving for retirement. You can establish an
Education IRA or
Section 529 Plan for
college savings. Or you deposit the money in a custodial account that you
manage on your child's behalf. You can't use money from a custodial
account for your obligations of parental support. But private and
parochial school, summer camp, and cars at age 16 aren't obligations of
parental support.
Alternative Minimum Tax
Alternative minimum tax, or AMT,
is the tax system's answer to "the rich" who skate by with no significant
taxes on large incomes.
Congress imposed the AMT back in
1970 after to make
sure that high-income earners pay at least some tax. But it doesn't
work--the IRS reports that in 2002, 5,650 lucky winners with
incomes over $200,000 paid no federal income tax at all. And the tax is
creeping down to the middle class. In 1996, just 605,000 victims paid. But
the Treasury estimates that by 2010, nearly one in five taxpayers will pay.
The AMT works a bit like the
regular tax system in reverse. Tentative alternative minimum taxable income
(TAMTI) equals regular taxable income plus these add-backs and preferences:
Once you've figured TAMTI,
subtract an exemption of $45,000 for a joint return, $33,750 for a single
return, or $22,500 for a separate return. (These exemptions are phased out
by 25% of any amount by which TAMTI exceeds $150,000 on a joint return,
$112,500 on a single return, or $75,000 on a separate return.) TAMTI minus
the exemption equals alternative minimum taxable income (AMTI). The tax
itself is 26% of AMTI up to $175,000 plus 28% of AMTI above that amount.
If you're in danger of falling
into the trap, here are steps to take to ease the bite:
If your regular tax rate is
higher than the 26/28% AMT rate, accelerate income into a year when you
pay the AMT. You'll save as much as 13.6% if you can shift income that
would otherwise be taxed at 35% into an AMT year. Figure the tax on
Form
6251.
Ambulance
Deductible Medical
Expense subject to the 7.5% floor.
Animal Sacrifice
That's right, animal sacrifice
may actually be a deductible
Medical Expense, subject
to the 7.5% floor, if part of a religious ceremony for healing purposes.
Here's how the "logic" of our tax code leads to this conclusion:
-
There's no question that
medical expenses are deductible.
-
The IRS and the Tax Court have
approved medical deductions for religious healing ceremonies. These
include Christian Science Practitioner Fees and Native American Healing
Rituals
.
-
Under the same logic, voodoo
and Santeria animal sacrifice are deductible -- so long as the
ceremony is for healing purposes. Hey, do you want to tell the voodoo
queen she can't deduct her chickens? Presumably, deductible expenses would include the cost of the animals, plus the costs of food, cages,
veterinary care, and other related items.
Annuity
An annuity is a contract
with a life insurance company that lets you take a guaranteed income
for life. Annuities are designed as insurance against outliving your
income. You can invest a portion of your portfolio, without ever
having to worry to make it last. And you can defer tax until you take
your gains out of the contract.
Annuities are defined by three
main characteristics:
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Fixed annuities pay a fixed
interest rate over time. They resemble a bank CD in a tax-deferred
wrapper. Variable annuities offer a group of investment subaccounts that
fluctuate with market conditions. They resemble a mutual fund in a
tax-deferred wrapper. (Equity index annuities are a new hybrid that offer
a return tied to an equity index, usually the S&P 500 Price Index, or a
minimal guaranteed return if the index drops.)
Any annuity is a combination of
these three choices: a single-premium deferred fixed annuity, perhaps, or a
single premium immediate variable annuity. We'll discuss immediate annuities
first, then turn to more popular deferred annuities. (For general
information on each of these types, see
IRS Publication 575, Pension and Annuity Income."
Immediate Annuity
Immediate annuities offer
immediate income for a term as long as your life. The main attraction is an
income you can't outlive. That makes them tremendously powerful retirement
income choices. Payout periods can range from a period of years to a joint
lifetime, with optional period-certain guarantees to protect your heirs if
you drop dead after getting a single payment. Immediate annuities are a
surprisingly underappreciated choice for income investors. As life
expectancies rise and retirements lengthen, we should see more and more
investors choose to annuitize.
When you buy an immediate
annuity, the company takes your life expectancy (or the payout term) and its
own current interest rate to determine an income it can pay over the course
of your life. The process works like amortizing a mortgage in reverse. But
the company guarantees that it will pay the income no matter how long you
live. Immediate annuities are often described as a gamble -- with you betting
against the company that you'll outlive your life expectancy. In fact,
immediate annuities are the exact opposite of a gamble. They let you
shift the risk of outliving your money to the company.
Here are the basic tax rules for
immediate annuities:
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Income from an immediate
annuity is partially tax-free. That's because a portion of each payment is
a return of your own principal. To determine the exclusion ratio, or
tax-free portion of the payment, first determine your investment in the
contract. This will be your cost, minus the value of any refund feature.
Next, divide that investment into the total income you expect to earn from
the contract. Finally, multiply this percentage by the amount of each
payment. Your result will be the tax-free portion of each payment. Your
annuity provider will report the taxable part of each year's income on
Form 1099-R at the end of the year. When your original investment is
completely paid out, your remaining payments are fully taxable.
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If you die before you recover
your cost, you can deduct your unrecovered cost on your final tax return.
(Well, your executor can.) This is a
Miscellaneous Itemized Deduction
not subject to the 2% floor. It won't do much for you. But your
kids will sure be grateful.
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The longer you wait, the more
income you get for each dollar of original contribution. This is because
your life expectancy shrinks. The less time the insurance company has to
pay out your income, the more it can give you now with every payment.
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Depending on state law,
immediate annuities can also help protect your assets if you or your
spouse accept Medicaid for nursing home costs. Medicaid rules require you
to spend all but a specified portion of your assets on nursing home costs
before the state steps in to pick up the tab. Immediate annuities let you
convert a portion of those assets into an income stream that Medicaid
can't take. This is a tricky, constantly changing area. Consult a
qualified expert before making any specific moves.
Traditionally, immediate
annuities have offered fixed payments for life. These plain vanilla payouts
grow less valuable over time as inflation eats away at your purchasing
power. But a new breed of variable immediate annuity has expanded retirement
income options. These contracts pay out a fixed number of accumulation units
whose value will fluctuate with the value of the underlying investment.
Let's say that your contract includes 1,000 accumulation units worth $100
each. The insurance company might promise to pay out four units per month.
The first month, you'll get $400. If the value of the accumulation units
rises to $105 by the second month, you'll get $420. So, rather than
accepting the insurance company's own declared interest rate, your income
over time can rise or fall with the value of the underlying accumulation
units. Some contracts let you choose multiple settlement options, such as
putting 50% into a fixed payout and 50% into a variable payout. Others let
you borrow or withdraw any remaining unpaid principal.
"Impaired-risk" annuities may be
an attractive choice for investors with poor health. Immediate annuities
have traditionally been based on published life expectancies. This made them
a lousy choice for unhealthy and terminally ill prospects. Impaired risk
annuities use underwriting methods to more accurately determine a buyer's
true life expectancy. Shorter life expectancies make for larger payments.
This lets buyers guarantee a larger income, or buy the same income for less
money up front.
Immediate annuities are terrific
alternatives to bonds for investors seeking current income. Remember, most
money market funds, bonds, and bond funds are inefficient. That's because
the bulk of your total return comes in the form of immediately taxable
income. Buying an immediate annuity lets you take the bulk of your income in
the form of tax-free return of principal. You can then invest the rest of
your principal in more efficient investments, further cutting you tax bill.
Fixed Annuity
A fixed annuity resembles a bank
CD in a tax-deferred wrapper. The insurance company guarantees a fixed
interest rate for a specified period of time. At the end of that period, the
company renews the contract for a new period at a new rate. Fixed annuities
are a popular choice for older, conservative investors who don't need
current income. They're also popular estate-planning choices for investors
looking to bypass probate.
Fixed annuities carry no
up-front sales loads or commissions. Instead, the company levies a
contingent deferred sales charge on withdrawals within a specified period,
much like the familiar penalty for early withdrawal you'd face with a bank
CD. Surrender periods range from as low as four years to as long as 12.
Actual charges range from 4% to 12%. Most companies will let you withdraw
10% of the contract value or 100% of the annual earnings without penalty.
There may also be a market value adjustment on withdrawals within a
specified period to protect the company from the effect of interest rate
changes during the contract term.
Shop around before you buy a
fixed annuity. Most companies offer one-time interest bonuses and teaser
rates. These up-front incentives occasionally mask unreasonably high and
long surrender charges. The agent's commission can sometimes be more than
your first year's income. And make sure you buy from a strong company. Fixed
annuity assets are held as a part of the company's general asset account.
So, the company's credit rating is a crucial consideration.
If you like the thought of a
tax-deferred CD, but don't like the long surrender periods of some
contracts, consider a variable annuity instead. Variable annuities have
lower commissions, lower expenses, and shorter surrender periods than their
fixed counterparts. But variable annuities almost always offer a fixed
account option similar to a fixed annuity. And variable annuities let you
switch your money, tax-free, into other investments if rates drop. Variable
annuities also offer money market and bond subaccounts that may be
appropriate for fixed annuity investors.
Variable Annuity
A variable annuity is a one that
lets you choose where to invest your account balance from a family of investment subaccounts. It
resembles a Mutual Fund family in a tax-deferred wrapper. In fact, many
variable annuity investment subaccounts are clones of popular mutual funds.
(These are the contracts AXA Insurance markets with their clever "800 pound
gorilla" advertisements.)
Variable annuities offer anywhere from a dozen to more than 100 subaccounts,
sometimes from dozens of fund managers. You'll find a fixed account, a money
market account, and various stock and bond accounts. Your investment buys
accumulation units in one or more of these subaccounts. You can transfer
amounts from subaccount to subaccount, usually as often as you wish. During
this accumulation period, your money grows tax-deferred. When you're ready
to take your money, you can withdraw any number of accumulation units in
cash. Or, you can convert the entire contract to an income stream.
There are two main differences
between a variable annuity and a regular fund family. First, the variable
annuity guarantees a minimum death benefit to protect your heirs against
market downturns. (Some contracts guarantee you'll receive your original
contributions, minus any withdrawals. Others raise the death benefit by a
certain percentage each year, or reset it at each year's high water mark as
you account balance grows.) And second, you have the option to convert your
contract into a guaranteed income you can't outlive.
Before we look at the tax
advantages and disadvantages, let's discuss how these contracts work:
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There are no up-front
commissions with variable annuities.
-
Most contracts impose a
back-end surrender charge on early contract withdrawals. A typical
surrender charge begins at 7% for surrenders during the first contract
year, then declines 1% each year until reaching zero in the eighth year.
(Most companies will let you withdraw up to 10% of your account balance
each year without penalty.) Some contracts impose a "rolling" surrender
charge and begin a new surrender period with each deposit.
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The insurer levies an annual
"mortality & expense" charge that covers insurance expenses and
commissions, plus fund management fees that cover investment management
and operating expenses. Together, these fees make up the total expense
ratio. No-load annuities naturally sport lower expense ratios because
there's no commission to pay.
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When you contribute to the
contract and transfer money between subaccounts, you buy and sell
"accumulation units" priced according to the net asset value of the
particular subaccounts involved.
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Many contracts provide
optional riders such as nursing home and disability waivers, which let you
withdraw money without normal surrender charges. Some newer contracts even
offer "Chinese menus" that let you pick and choose the riders you want.
Your choices then determine the fees you pay for the contract.
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You can usually find tools
such as portfolio rebalancing and dollar-cost averaging.
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Annuity account balances and
income streams are generally protected from creditors under state law.
This can make annuities effective asset protection tools for doctors,
entrepreneurs, and other high-risk professionals.
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If you're not happy with an
annuity you own today, you're not necessarily stuck with it. You can use a
Tax-Deferred Exchange to
swap an old annuity contract for a new one with
better fund choices, lower fees, or more flexible terms. You have to
transfer money from the first contract directly to the second -- you can't
just surrender your first contract, take the cash, and dump it into the
second. There may be a cost to switch if you're still within your existing
contract's surrender period. And you'll start a new surrender period with
the new contract. Your current provider can quote your surrender charge.
It's up to you to decide if the benefits of the new contract outweigh the
costs of the switch.
Variable annuities offer several
tax advantages over comparable Mutual
Funds and even Qualified
Plans:
-
Your earnings grow
tax-deferred until you withdraw money from the contract.
-
You can transfer money from
one subaccount to another without paying tax on your gains.
-
You can invest as much as you
want no matter how much you make. There are no contribution limits or
income eligibility limits as there are with qualified plans or IRAs. This
makes them obvious places for supplemental retirement savings after you've
exhausted your qualified plan.
These advantages have made
variable annuities the insurance industry's biggest seller. In fact, in
1997, consumers contributed more to variable annuity contracts than
Life
Insurance policies. At the same time, annuities carry several tax
disadvantages. If you're not careful, these disadvantages can wipe out the
benefit of tax deferral:
-
Withdrawals are taxed as
income first until you've withdrawn your entire gain. By contrast, when
you sell mutual fund shares, part of your proceeds consist of your basis
in the shares. You can also borrow against taxable funds for tax-free
cash.
-
All gains are taxed as
ordinary income. There's no opportunity to profit from lower long-term
gain rates as there is with taxable funds.
-
There's usually a 10% penalty
for withdrawals before age 59½. The main exceptions are for payments to a
beneficiary, payments due to disability, and payments you take when you annuitize the contract.
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There's no stepped-up basis
for gains at your death as there is for taxable funds. Your beneficiaries
will owe ordinary income tax, at their rate, on any gain they take from
the contract. They have five years from the date of your death to withdraw
gains and pay tax. (They can take a deduction for any estate tax
attributable to the annuity account values included in your estate.)
We've seen that you have two
main strategies for cutting tax on your investments: paying less and paying
later. Variable annuities let you pay later, at the expense of paying less.
And variable annuities are more expensive than comparable mutual funds. The
question is, which is better for you? Does the tax deferral you get from an
annuity outweigh the lower fees and favorable long-term capital gains
treatment you get from a taxable fund? This question is particularly
important since the Taxpayer Relief Act of 1997 cut capital gains rates.
It's even more important if you're looking at a fund that's available as a
taxable mutual fund and an annuity subaccount. Here are five questions to
help you make this decision:
-
Do you need extra
retirement savings? Remember, variable annuity balances are included
in your taxable estate, and gains don't qualify for stepped-up basis. This
makes annuities best for savings you plan to spend during your retirement.
-
Are you maxing out
retirement plan and IRA options? These give you tax advantages, plus
possible employer contributions. Unless your plan is funded with
annuities, there's no insurance expense. So don't even think of making
ongoing annuity contributions with money you can put into your retirement
plan, IRA, or Roth IRA.
-
Do you need tax deferral?
Remember, some investments do better outside tax-deferred accounts. If
your asset allocation calls for stocks, you might do better buying a
tax-efficient index fund. If you're a more active investor, you might
appreciate being able to transfer funds between subaccounts without paying
tax on your gains.
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Is your tax bracket today
higher than your likely tax bracket tomorrow? This is the hardest
question to answer -- especially if you still have time until
retirement -- because you don't know what your tax bracket will be during
retirement. You can't assume that your rates will be lower. Plenty of
investors who've paid off their houses and packed off the kids find that
losing their deductions pushes them into higher brackets in retirement.
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How much will a variable
annuity cost? Annuities charge a "mortality & expense" charge that
pays for the guaranteed death benefit, annuitization option, and broker's
commission. This fee compares similarly to the 12b(1) fee you'll pay to
most back-end and level-load funds. But you can avoid it with a no-load
fund, index fund, or exchange-traded fund. And there may be other expenses
for nursing and disability waivers, stepped-up death benefits, and the
like. These extra fees naturally eat into returns. Don't pay them for
features you don't want or don't need.
Most financial journalists will
tell you not to buy a variable annuity inside an IRA. The IRA already gives
you tax deferral; they argue, so why pay extra fees for a variable annuity
when you can buy regular mutual funds? And unscrupulous salespeople
sometimes invest IRA rollovers in variable annuities because commissions are
higher and there are no commission breakpoints as there are with mutual
funds. But buying a variable annuity inside your IRA can make sense if you'
want the guaranteed death benefit or you plan to annuitize your contract.
Equity Index Annuity
Equity index annuities are a new
hybrid of fixed and variable annuities. They offer a return tied to an
equity index or a guaranteed return if the index loses money. There are
currently more than 100 contracts available today. The company might promise
you something like "90% of the price appreciation of the S&P 500" or
"3% per year of 90% of the initial investment." The company invests the bulk
of your money in its own general account to cover the minimum guaranteed
return, then puts the rest into options or futures to capture the index
return. These contracts promise no pain -- no chance of actually losing
money -- but offer little gain compared to what you can make in the market
yourself.
The main problem with most of these contracts is that your return
tracks the S&P 500 Composite Stock Price index, which omits
dividends. Losing that dividend income costs a tremendous amount over time,
as you'll soon see. (Some newer contracts include dividends; others let you
choose the index to track. This is a quickly changing area, so it's
important to shop around.) And different companies have different
"participation rates," which determine your gains. You may not get all of
the index's gain, and your participation rate may not be guaranteed.
Equity index annuities are taxed
like any other annuity. You can invest an unlimited amount; your money grows
tax-deferred until withdrawal; you'll pay tax at ordinary rates when you
take out your money; and your heirs will owe gain at their ordinary rate at
your death. You can make a 1035 exchange from one equity-index contract to
another, or from an equity-index contract to a fixed or variable annuity.
These contracts usually carry hefty surrender charges; if you withdraw your
money before the end of a specified period, such as five, seven, or nine
years, you may be limited to the fixed return floor, regardless of how the
index performs in the meantime. Equity index annuities give you some
of the index's growth (but not necessarily 100%, and no generally no
dividends) or some of the fixed guarantee (but not as much as you
could earn in a straight fixed annuity). The key here is how you use them.
Equity index annuities give you
a chance to juice your returns on "safe" money. But they're not a
substitute for true equity investments.
Appraisal Fees
Arson
Arson might seem more appropriate in a web site on criminal law, not tax breaks
(although you can deduct unreimbursed arson losses as
Casualty Losses). However,
several enterprising homeowners, who wished to demolish their existing homes
and rebuild on the same sight, have donated the old houses local fire
departments to use as practice -- and deducted the value of the house as a
Charitable Gift!
Artificial
Teeth/Eyes/Limbs
Deductible
Medical Expense subject to the 7.5% floor.
Attorney
(See Legal Fees)
Audit
(See Tax Preparation Fees)
Autoette
Deductible
Medical Expense subject to the 7.5% floor (except for travel to and
from work, which is treated as any other commuting cost).
Automobile (See Car and Truck Expenses)
Au Pair
(See Dependent Care Credit)
Awards and Prizes
Awards and prizes, from local
bass fishing tournaments all the way up to Al Gore's Nobel Peace prize, are
generally taxed as ordinary income. If your employer maintains a "qualified
plan" award program (a permanent, written program that doesn't discriminate
in favor of officers, shareholders, or highly compensated employees), you
may be able to exclude up to $1,600 of value you receive for achievements
such as safety or longevity. If there's no qualified program, you may be
able to exclude up to $400 of value received.
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