Personal flotation devices, often known as PFDs or life jackets, are not deductible on federal income taxes. They are considered personal safety items and are not eligible for medical or charitable deductions. However, if you are using your PFD for work-related activities, such as fishing or boating, you may be able to deduct the cost as a business expense. In this case, you should itemize your deductions on Schedule C (Form 1040) and report the expense in the “Supplies” or “Other expenses” section. It is important to keep receipts or other documentation to support your deduction.
PFD Income Eligibility
The Permanent Fund Dividend (PFD) is an annual payment made to eligible Alaska residents from the Alaska Permanent Fund. To be eligible for the PFD, you must meet the following requirements:
- Be a resident of Alaska for the entire calendar year preceding the application deadline.
- Have been a resident of Alaska for at least one full calendar year immediately preceding the calendar year in which you apply.
- Have received a dividend from the Alaska Permanent Fund in the past.
- Not have been convicted of a felony involving theft or fraud in the past 10 years.
- Not have been incarcerated for more than 90 days in the past year.
If you meet all of these requirements, you can apply for the PFD online or by mail. The application deadline is typically in March.
The PFD is taxable income. You must report the amount of your PFD on your federal and state income tax returns. The PFD is reported on line 1, the “Wages, salaries, tips, etc.” line, of the federal income tax return. On the state income tax return, the PFD is reported on line 12, the “Alaska Permanent Fund dividend” line.
You can find more information about the PFD on the Alaska Department of Revenue website.
| Tax Return | Reporting Line |
|---|---|
| Federal Income Tax | Line 1, “Wages, salaries, tips, etc.” |
| State Income Tax | Line 12, “Alaska Permanent Fund dividend” |
Reporting PFD on Federal Tax Returns
The Permanent Fund Dividend (PFD) is an annual payment made to eligible Alaska residents from the state’s earnings on the Alaska Permanent Fund. The PFD is not taxable by the state of Alaska, but it is considered taxable income by the federal government.
To report your PFD on your federal tax return, you will need to include it on line 10 of the 1040 form, under “Other income.” You will also need to complete Schedule 1 (Form 1040), line 8a, and enter the amount of your PFD. If you are filing jointly with a spouse who also received a PFD, you will need to combine the amounts of your PFDs and report the total on line 10 of your 1040 form.
The PFD is not subject to federal income tax withholding, so you will not receive a Form W-2 or 1099-G for this income. However, the IRS may send you a notice (CP2000) if they believe that you have underreported your PFD income. If you receive a CP2000 notice, you will need to respond to the IRS and provide documentation to support your PFD income.
Example
Mary is a resident of Alaska and received a PFD of $1,000 in 2023. Mary is filing her federal income tax return using the 1040 form. Mary will report her PFD on line 10 of her 1040 form, under “Other income.” Mary will also need to complete Schedule 1 (Form 1040), line 8a, and enter the amount of her PFD. Mary’s federal income tax liability will be calculated based on her total income, which includes her PFD.
Table: Reporting PFD on Federal Tax Returns
| Form | Line | Information |
|---|---|---|
| 1040 | 10 | Enter the amount of your PFD under “Other income.” |
| Schedule 1 (Form 1040) | 8a | Enter the amount of your PFD. |
PFD Taxation for Permanent Fund Dividends
Permanent Fund Dividends (PFDs) are paid to eligible Alaska residents from the state’s mineral wealth fund. These dividends need to be reported on your taxes.
Taxation of PFDs
PFDs are considered taxable income by the federal government. They are not exempt or deductible.
- Federal Taxes: You will need to report your PFD on your federal income tax return. You can do this on Form 1040, line 11.
- State Taxes: PFDs are not subject to state income tax in Alaska.
Where to Report PFDs on Taxes
The following table shows where to report your PFD on your taxes:
| Form | Line |
|---|---|
| Form 1040 | 11 |
:
Hey there! I hope this article helped you figure out where to park that personal flotation device on your taxes. Remember, it’s always best to consult with a tax professional if you have any specific questions or concerns. Thanks for hanging out with us today. Be sure to check back again for more tips and tricks to make tax time a breeze.