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1040ez Form Instructions

Income TaxesTax Forms 1040ez 2014File 1040ez OnlineHow To File A 2011 Tax Return For FreeFreefile2005 Tax FormsFile 1040nr Online Free2012 TaxHow To File Taxes As A College Student1040ez Instructions2014 Federal Tax Forms 1040ez2013 1040ez Form InstructionsAmending 2009 Tax Return20131040ezFree Online Federal Tax Filing 20122010 Income TaxHow Do I Amend A 2009 Tax Return2012 Tax Forms 1040ezFile 2011 Tax Return FreeEz File Tax ReturnFreestatetaxE File 1040x FreeState Income Tax By StateWhere's My Amended ReturnFederal Tax Form 1040aAmend 2011 Tax Return OnlineTax Filing TipsIncome Tax Software 2012Tax EzFile 1040x Online Free2010 Tax Return FormHow Can I Efile My State Taxes For Free1040exCheap State Taxes Online2011 Free Tax UsaFree E Filing For State TaxesPrintable 1040ez Tax FormCan I File 2010 Taxes OnlineH&r Blaock1040 Forms

1040ez Form Instructions

1040ez form instructions Publication 936 - Introductory Material Table of Contents Reminders IntroductionOrdering forms and publications. 1040ez form instructions Tax questions. 1040ez form instructions Useful Items - You may want to see: Reminders Future developments. 1040ez form instructions  For the latest information about developments related to Publication 936, Home Mortgage Interest Deduction, such as legislation enacted after it was published, go to www. 1040ez form instructions irs. 1040ez form instructions gov/pub936. 1040ez form instructions Photographs of missing children. 1040ez form instructions  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. 1040ez form instructions Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 1040ez form instructions You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. 1040ez form instructions Introduction This publication discusses the rules for deducting home mortgage interest. 1040ez form instructions Part I contains general information on home mortgage interest, including points and mortgage insurance premiums. 1040ez form instructions It also explains how to report deductible interest on your tax return. 1040ez form instructions Part II explains how your deduction for home mortgage interest may be limited. 1040ez form instructions It contains Table 1, which is a worksheet you can use to figure the limit on your deduction. 1040ez form instructions Comments and suggestions. 1040ez form instructions   We welcome your comments about this publication and your suggestions for future editions. 1040ez form instructions   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 1040ez form instructions NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 1040ez form instructions Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 1040ez form instructions   You can send your comments from www. 1040ez form instructions irs. 1040ez form instructions gov/formspubs. 1040ez form instructions Click on “More Information” and then on “Comment on Tax Forms and Publications. 1040ez form instructions ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. 1040ez form instructions Ordering forms and publications. 1040ez form instructions   Visit www. 1040ez form instructions irs. 1040ez form instructions gov/formspubs to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. 1040ez form instructions Internal Revenue Service 1201 N. 1040ez form instructions Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. 1040ez form instructions   If you have a tax question, check the information available on IRS. 1040ez form instructions gov or call 1-800-829-1040. 1040ez form instructions We cannot answer tax questions sent to either of the above addresses. 1040ez form instructions Useful Items - You may want to see: Publication 523 Selling Your Home 527 Residential Rental Property 530 Tax Information for Homeowners 535 Business Expenses   See How To Get Tax Help near the end of this publication, for information about getting these publications. 1040ez form instructions Prev  Up  Next   Home   More Online Publications
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e-file for Large Business and International (LB&I)

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A QuickAlert outlining the exact timeframes to Send Submissions or retrieve federal/state Acknowledgements will be issued in early December and the times will be posted on the MeF Status Page.
    
Please monitor the MeF Status Page for any updates.  We apologize for any inconveniences and thank you for your cooperation.

 

2014 M3 M1 Changes: The IRS will be making changes to the Schedule M-3 filing requirement for taxpayers with assets between $10M-$50M for Forms 1120, 1120-C, 1120-F, 1120S, 1065 and 1065-B. These taxpayers will be permitted to file Schedule M-1 in place of the Schedule M-3 Parts II and III.  These changes will be effective for tax years ending on December 31, 2014, and later. No changes are currently planned to the Schedule M-3 requirements for Forms 1120-L, or 1120-PC, nor for Form 1120 taxpayers filing as a mixed group.

 

The Modernized e-File Status Page provides information about the availability of the MeF system for external use. For information about the most current MeF system status, please refer to the Modernized e-File (MeF) Status Page.


Table of Contents:

Introduction

Treasury Decision (T.D.) 9363 requires corporations that have assets of $10 million or more and file at least 250 returns annually to electronically file their Forms 1120 and 1120S for tax years ending on or after December 31, 2007. This requirement extends to foreign corporations filing Form 1120-F who have tax years ending on or after December 31, 2008, have assets of $10 million or more and who file at least 250 returns annually.

Although electronic filing is required of certain corporations, many corporations voluntarily file their returns electronically.

This web site provides an overview of electronic filing and more detailed information for those corporations required to e-file. There is information for taxpayers who prepare and transmit their own income tax returns as well as for taxpayers who rely upon third party tax professionals to prepare and transmit their tax returns.


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If you do not find the electronic filing information you need in the material provided on this web site, IRS provides e-mail addresses where interested parties can submit questions concerning e-file requirements.

  • Corporate taxpayers (Forms 1120, 1120S, 1120-F) may contact the e-help Desk at 1-866-255-0654.
  • Partnerships (Forms 1065, 1065-B) can find further e-file information for partnerships using the MeF platform on IRS.gov at Modernized e-File (MeF) for Partnerships  or they may contact the e-help Desk at 1-866-255-0654.
  • Tax-exempt organizations can find further e-file information on IRS.gov at e-file for Charities and Non-Profits.
  • Taxpayers with account or tax law questions may call 1-800-829-4933.
  • Tax practitioners with account or tax law questions may call 1-800-829-8374.
  • Software developers and vendors may contact the e-help Desk at 1-866-255-0654 with questions about e-filing.
Page Last Reviewed or Updated: 03-Feb-2014

The 1040ez Form Instructions

1040ez form instructions Publication 523 - Main Content Table of Contents Main HomeVacant land. 1040ez form instructions Factors used to determine main home. 1040ez form instructions Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining BasisCost As Basis Basis Other Than Cost Adjusted Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Nonqualified Use Business Use or Rental of HomeUnrecaptured section 1250 gain. 1040ez form instructions Property Used Partly for Business or Rental Reporting the SaleSeller-financed mortgage. 1040ez form instructions Individual taxpayer identification number (ITIN). 1040ez form instructions More information. 1040ez form instructions Comprehensive Examples Special SituationsException for sales to related persons. 1040ez form instructions Deducting Taxes in the Year of SaleForm 1099-S. 1040ez form instructions More information. 1040ez form instructions Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of First-Time Homebuyer CreditExample. 1040ez form instructions Worksheets How To Get Tax HelpLow Income Taxpayer Clinics Main Home This section explains the term “main home. 1040ez form instructions ” Usually, the home you live in most of the time is your main home and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. 1040ez form instructions To exclude gain under the rules in this publication, you in most cases must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. 1040ez form instructions Land. 1040ez form instructions   If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land. 1040ez form instructions Example. 1040ez form instructions You buy a piece of land and move your main home to it. 1040ez form instructions Then, you sell the land on which your main home was located. 1040ez form instructions This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. 1040ez form instructions Vacant land. 1040ez form instructions   The sale of vacant land is not a sale of your main home unless: The vacant land is adjacent to land containing your home, You owned and used the vacant land as part of your main home, The separate sale of your home satisfies the requirements for exclusion and occurs within 2 years before or 2 years after the date of the sale of the vacant land, and The other requirements for excluding gain from the sale of a main home have been satisfied with respect to the vacant land. 1040ez form instructions If these requirements are met, the sale of the home and the sale of the vacant land are treated as one sale and only one maximum exclusion can be applied to any gain. 1040ez form instructions See Excluding the Gain , later. 1040ez form instructions The destruction of your home is treated as a sale of your home. 1040ez form instructions As a result, you may be able to meet these requirements if you sell vacant land used as a part of your main home within 2 years from the date of the destruction of your main home. 1040ez form instructions For information, see Publication 547. 1040ez form instructions More than one home. 1040ez form instructions   If you have more than one home, you can exclude gain only from the sale of your main home. 1040ez form instructions You must include in income the gain from the sale of any other home. 1040ez form instructions If you have two homes and live in each of them, your main home is ordinarily the one you live in most of the time during the year. 1040ez form instructions Example 1. 1040ez form instructions You own two homes, one in New York and one in Florida. 1040ez form instructions From 2009 through 2013, you live in the New York home for 7 months and in the Florida residence for 5 months of each year. 1040ez form instructions In the absence of facts and circumstances indicating otherwise, the New York home is your main home. 1040ez form instructions You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. 1040ez form instructions Example 2. 1040ez form instructions You own a house, but you live in another house that you rent. 1040ez form instructions The rented house is your main home. 1040ez form instructions Example 3. 1040ez form instructions You own two homes, one in Virginia and one in New Hampshire. 1040ez form instructions In 2009 and 2010, you lived in the Virginia home. 1040ez form instructions In 2011 and 2012, you lived in the New Hampshire home. 1040ez form instructions In 2013, you lived again in the Virginia home. 1040ez form instructions Your main home in 2009, 2010, and 2013 is the Virginia home. 1040ez form instructions Your main home in 2011 and 2012 is the New Hampshire home. 1040ez form instructions You would be eligible to exclude gain from the sale of either home (but not both) in 2013. 1040ez form instructions Factors used to determine main home. 1040ez form instructions   In addition to the amount of time you live in each home, other factors are relevant in determining which home is your main home. 1040ez form instructions Those factors include the following. 1040ez form instructions Your place of employment. 1040ez form instructions The location of your family members' main home. 1040ez form instructions Your mailing address for bills and correspondence. 1040ez form instructions The address listed on your: Federal and state tax returns, Driver's license, Car registration, and Voter registration card. 1040ez form instructions The location of the banks you use. 1040ez form instructions The location of recreational clubs and religious organizations of which you are a member. 1040ez form instructions Property used partly as your main home. 1040ez form instructions   If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. 1040ez form instructions For details, see Business Use or Rental of Home , later. 1040ez form instructions Figuring Gain or Loss To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. 1040ez form instructions Subtract the adjusted basis from the amount realized to get your gain or loss. 1040ez form instructions     Selling price     − Selling expenses       Amount realized     − Adjusted basis       Gain or loss   Gain. 1040ez form instructions   Gain is the excess of the amount realized over the adjusted basis of the property. 1040ez form instructions Loss. 1040ez form instructions   Loss is the excess of the adjusted basis over the amount realized for the property. 1040ez form instructions Selling Price The selling price is the total amount you receive for your home. 1040ez form instructions It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale. 1040ez form instructions Personal property. 1040ez form instructions   The selling price of your home does not include amounts you received for personal property sold with your home. 1040ez form instructions Personal property is property that is not a permanent part of the home. 1040ez form instructions Examples are furniture, draperies, rugs, a washer and dryer, and lawn equipment. 1040ez form instructions Separately stated amounts you received for these items should not be shown on Form 1099-S (discussed later). 1040ez form instructions Any gains from sales of personal property must be included in your income, but not as part of the sale of your home. 1040ez form instructions Payment by employer. 1040ez form instructions   You may have to sell your home because of a job transfer. 1040ez form instructions If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. 1040ez form instructions Your employer will include it as wages in box 1 of your Form W-2 and you will include it in your income on Form 1040, line 7, or on Form 1040NR, line 8. 1040ez form instructions Option to buy. 1040ez form instructions   If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. 1040ez form instructions If the option is not exercised, you must report the amount as ordinary income in the year the option expires. 1040ez form instructions Report this amount on Form 1040, line 21, or on Form 1040NR, line 21. 1040ez form instructions Form 1099-S. 1040ez form instructions   If you received Form 1099-S, box 2 (gross proceeds) should show the total amount you received for your home. 1040ez form instructions   However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. 1040ez form instructions Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. 1040ez form instructions Amount Realized The amount realized is the selling price minus selling expenses. 1040ez form instructions Selling expenses. 1040ez form instructions   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. 1040ez form instructions ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. 1040ez form instructions This adjusted basis must be determined before you can figure gain or loss on the sale of your home. 1040ez form instructions For information on how to figure your home's adjusted basis, see Determining Basis , later. 1040ez form instructions Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. 1040ez form instructions Gain on sale. 1040ez form instructions   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, generally is taxable. 1040ez form instructions Loss on sale. 1040ez form instructions   If the amount realized is less than the adjusted basis, the difference is a loss. 1040ez form instructions Generally, a loss on the sale of your main home cannot be deducted. 1040ez form instructions Jointly owned home. 1040ez form instructions   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. 1040ez form instructions Separate returns. 1040ez form instructions   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. 1040ez form instructions Your ownership interest is generally determined by state law. 1040ez form instructions Joint owners not married. 1040ez form instructions   If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. 1040ez form instructions Each of you applies the rules discussed in this publication on an individual basis. 1040ez form instructions Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. 1040ez form instructions Foreclosure or repossession. 1040ez form instructions   If your home was foreclosed on or repossessed, you have a disposition. 1040ez form instructions See Publication 4681 to determine if you have ordinary income, gain, or loss. 1040ez form instructions More information. 1040ez form instructions   If part of a home is used for business or rental purposes, see Foreclosures and Repossessions in chapter 1 of Publication 544 for more information. 1040ez form instructions Publication 544 has examples of how to figure gain or loss on a foreclosure or repossession. 1040ez form instructions Abandonment. 1040ez form instructions   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. 1040ez form instructions Trading (exchanging) homes. 1040ez form instructions   If you trade your home for another home, treat the trade as a sale and a purchase. 1040ez form instructions Example. 1040ez form instructions You owned and lived in a home with an adjusted basis of $41,000. 1040ez form instructions A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. 1040ez form instructions This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 − $41,000). 1040ez form instructions If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed). 1040ez form instructions Transfer to spouse. 1040ez form instructions   If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss (unless the Exception, discussed next, applies). 1040ez form instructions This is true even if you receive cash or other consideration for the home. 1040ez form instructions As a result, the rules explained in this publication do not apply. 1040ez form instructions   If you owned your home jointly with your spouse and transfer your interest in the home to your spouse, or to your former spouse incident to your divorce, the same rule applies. 1040ez form instructions You have no gain or loss. 1040ez form instructions Exception. 1040ez form instructions   These transfer rules do not apply if your spouse or former spouse is a nonresident alien. 1040ez form instructions In that case, you generally will have a gain or loss. 1040ez form instructions More information. 1040ez form instructions    See Property Settlements in Publication 504, Divorced or Separated Individuals, for more information. 1040ez form instructions Involuntary conversion. 1040ez form instructions   You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. 1040ez form instructions This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations (see Home destroyed or condemned ). 1040ez form instructions Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. 1040ez form instructions Your basis in your home is determined by how you got the home. 1040ez form instructions Generally, your basis is its cost if you bought it or built it. 1040ez form instructions If you got it in some other way (inheritance, gift, etc. 1040ez form instructions ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. 1040ez form instructions While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. 1040ez form instructions The result of these adjustments is your home's adjusted basis, which is used to figure gain or loss on the sale of your home. 1040ez form instructions To figure your adjusted basis, you can use Worksheet 1, near the end of this publication. 1040ez form instructions Filled-in examples of that worksheet are included in the Comprehensive Examples , later. 1040ez form instructions Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. 1040ez form instructions Purchase. 1040ez form instructions   If you bought your home, your basis is its cost to you. 1040ez form instructions This includes the purchase price and certain settlement or closing costs. 1040ez form instructions In most cases, your purchase price includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home. 1040ez form instructions If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed later. 1040ez form instructions Seller-paid points. 1040ez form instructions   If the person who sold you your home paid points on your loan, you may have to reduce your home's basis by the amount of the points, as shown in the following chart. 1040ez form instructions    IF you bought your home. 1040ez form instructions . 1040ez form instructions . 1040ez form instructions THEN reduce your home's basis by the seller-paid points. 1040ez form instructions . 1040ez form instructions . 1040ez form instructions after 1990 but before April 4, 1994 only if you deducted them as home mortgage interest in the year paid. 1040ez form instructions after April 3, 1994 even if you did not deduct them. 1040ez form instructions Settlement fees or closing costs. 1040ez form instructions   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. 1040ez form instructions You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. 1040ez form instructions A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing). 1040ez form instructions   Settlement fees do not include amounts placed in escrow for the future payment of items such as taxes and insurance. 1040ez form instructions   Some of the settlement fees or closing costs that you can include in your basis are: Abstract fees (abstract of title fees), Charges for installing utility services, Legal fees (including fees for the title search and preparing the sales contract and deed), Recording fees, Survey fees, Transfer or stamp taxes, Owner's title insurance, and Any amounts the seller owes that you agree to pay, such as: Certain real estate taxes (discussed later), Back interest, Recording or mortgage fees, Charges for improvements or repairs, and Sales commissions. 1040ez form instructions   Some settlement fees and closing costs you cannot include in your basis are: Fire insurance premiums, Rent for occupancy of the house before closing, Charges for utilities or other services related to occupancy of the house before closing, Any fee or cost that you deducted as a moving expense (allowed for certain fees and costs before 1994), Charges connected with getting a mortgage loan, such as: Mortgage insurance premiums (including funding fees connected with loans guaranteed by the Department of Veterans Affairs), Loan assumption fees, Cost of a credit report, Fee for an appraisal required by a lender, and Fees for refinancing a mortgage. 1040ez form instructions Real estate taxes. 1040ez form instructions   Real estate taxes for the year you bought your home may affect your basis, as shown in the following chart. 1040ez form instructions    IF. 1040ez form instructions . 1040ez form instructions . 1040ez form instructions AND. 1040ez form instructions . 1040ez form instructions . 1040ez form instructions THEN the taxes. 1040ez form instructions . 1040ez form instructions . 1040ez form instructions you pay taxes that the seller owed on the home up to the date of sale the seller does not reimburse you are added to the basis of your home. 1040ez form instructions the seller reimburses you do not affect the basis of your home. 1040ez form instructions the seller pays taxes for you (taxes owed beginning on the date of sale) you do not reimburse the seller are subtracted from the basis of your home. 1040ez form instructions you reimburse the seller do not affect the basis of your home. 1040ez form instructions Construction. 1040ez form instructions   If you contracted to have your house built on land you own, your basis is: The cost of the land, plus The amount it cost you to complete the house, including: The cost of labor and materials, Any amounts paid to a contractor, Any architect's fees, Building permit charges, Utility meter and connection charges, and Legal fees directly connected with building the house. 1040ez form instructions   Your cost includes your down payment and any debt such as a first or second mortgage or notes you gave the seller or builder. 1040ez form instructions It also includes certain settlement or closing costs. 1040ez form instructions You may have to reduce your basis by points the seller paid for you. 1040ez form instructions For more information, see Seller-paid points and Settlement fees or closing costs , earlier. 1040ez form instructions Built by you. 1040ez form instructions   If you built all or part of your house yourself, its basis is the total amount it cost you to complete it. 1040ez form instructions Do not include in the cost of the house: The value of your own labor, or The value of any other labor you did not pay for. 1040ez form instructions Temporary housing. 1040ez form instructions   If a builder gave you temporary housing while your home was being finished, you must reduce your basis by the part of the contract price that was for the temporary housing. 1040ez form instructions To figure the amount of the reduction, multiply the contract price by a fraction. 1040ez form instructions The numerator is the value of the temporary housing, and the denominator is the sum of the value of the temporary housing plus the value of the new home. 1040ez form instructions Cooperative apartment. 1040ez form instructions   If you are a tenant-stockholder in a cooperative housing corporation, your basis in the cooperative apartment used as your home is usually the cost of your stock in the corporation. 1040ez form instructions This may include your share of a mortgage on the apartment building. 1040ez form instructions Condominium. 1040ez form instructions   To determine your basis in a condominium apartment used as your home, use the same rules as for any other home. 1040ez form instructions Basis Other Than Cost You must use a basis other than cost, such as adjusted basis or fair market value, if you received your home as a gift, inheritance, a trade, or from your spouse. 1040ez form instructions These situations are discussed in the following pages. 1040ez form instructions Also, the instructions for Worksheet 1 (near the end of the publication) address each of these issues. 1040ez form instructions Other special rules may apply in certain situations. 1040ez form instructions If you converted the property, or some part of it, to business or rental use, see Property Changed to Business or Rental Use, in Publication 551. 1040ez form instructions Home received as gift. 1040ez form instructions   Use the following chart to find the basis of a home you received as a gift. 1040ez form instructions IF the donor's adjusted basis at the time of the gift was. 1040ez form instructions . 1040ez form instructions . 1040ez form instructions THEN your basis is. 1040ez form instructions . 1040ez form instructions . 1040ez form instructions more than the fair market value of the home at that time the same as the donor's adjusted basis at the time of the gift. 1040ez form instructions   Exception: If using the donor's adjusted basis results in a loss when you sell the home, you must use the fair market value of the home at the time of the gift as your basis. 1040ez form instructions If using the fair market value results in a gain, you have neither gain nor loss. 1040ez form instructions equal to or less than the fair market value at that time, and you received the gift before 1977 the smaller of the: • donor's adjusted basis, plus  any federal gift tax paid on  the gift, or • the home's fair market value  at the time of the gift. 1040ez form instructions equal to or less than the fair market value at that time, and you received the gift after 1976 the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home (explained next). 1040ez form instructions Fair market value. 1040ez form instructions   The fair market value of property at the time of the gift is the value of the property as appraised for purposes of the federal gift tax. 1040ez form instructions If the gift was not subject to the federal gift tax, the fair market value is the value as appraised for the purposes of a state gift tax. 1040ez form instructions Part of federal gift tax due to net increase in value. 1040ez form instructions   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. 1040ez form instructions The numerator of the fraction is the net increase in the value of the home, and the denominator is the value of the home for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. 1040ez form instructions The net increase in the value of the home is its fair market value minus the donor's adjusted basis immediately before the gift. 1040ez form instructions Home acquired from a decedent who died before or after 2010. 1040ez form instructions   If you inherited your home from a decedent who died before or after 2010, your basis is the fair market value of the property on the date of the decedent's death (or the later alternate valuation date chosen by the personal representative of the estate). 1040ez form instructions If an estate tax return was filed or required to be filed, the value of the property listed on the estate tax return is your basis. 1040ez form instructions If a federal estate tax return did not have to be filed, your basis in the home is the same as its appraised value at the date of death, for purposes of state inheritance or transmission taxes. 1040ez form instructions Surviving spouse. 1040ez form instructions   If you are a surviving spouse and you owned your home jointly, your basis in the home will change. 1040ez form instructions The new basis for the interest your spouse owned will be its fair market value on the date of death (or alternate valuation date). 1040ez form instructions The basis in your interest will remain the same. 1040ez form instructions Your new basis in the home is the total of these two amounts. 1040ez form instructions   If you and your spouse owned the home either as tenants by the entirety or as joint tenants with right of survivorship, you will each be considered to have owned one-half of the home. 1040ez form instructions Example. 1040ez form instructions Your jointly owned home (owned as joint tenants with right of survivorship) had an adjusted basis of $50,000 on the date of your spouse's death, and the fair market value on that date was $100,000. 1040ez form instructions Your new basis in the home is $75,000 ($25,000 for one-half of the adjusted basis plus $50,000 for one-half of the fair market value). 1040ez form instructions Community property. 1040ez form instructions   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), each spouse is usually considered to own half of the community property. 1040ez form instructions When either spouse dies, the total fair market value of the community property becomes the basis of the entire property, including the part belonging to the surviving spouse. 1040ez form instructions For this to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. 1040ez form instructions   For more information about community property, see Publication 555, Community Property. 1040ez form instructions    If you are selling a home in which you acquired an interest from a decedent who died in 2010, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your basis. 1040ez form instructions Home received as trade. 1040ez form instructions   If you acquired your home as a trade for other property, in most cases, the basis of your home is the fair market value (at the time of the trade) of the property you gave up. 1040ez form instructions If you traded one home for another, you have made a sale and purchase. 1040ez form instructions In that case, you may have a gain. 1040ez form instructions See Trading (exchanging) homes under Dispositions Other Than Sales, earlier, for an example of figuring the gain. 1040ez form instructions Home received from spouse. 1040ez form instructions   If you received your home from your spouse or from your former spouse incident to your divorce, your basis in the home depends on the date of the transfer. 1040ez form instructions Transfers after July 18, 1984. 1040ez form instructions   If you received the home after July 18, 1984, there was no gain or loss on the transfer. 1040ez form instructions In most cases, your basis in this home is the same as your spouse's (or former spouse's) adjusted basis just before you received it. 1040ez form instructions This rule applies even if you received the home in exchange for cash, the release of marital rights, the assumption of liabilities, or other considerations. 1040ez form instructions   If you owned a home jointly with your spouse and your spouse transferred his or her interest in the home to you, in most cases, your basis in the half interest received from your spouse is the same as your spouse's adjusted basis just before the transfer. 1040ez form instructions This also applies if your former spouse transferred his or her interest in the home to you incident to your divorce. 1040ez form instructions Your basis in the half interest you already owned does not change. 1040ez form instructions Your new basis in the home is the total of these two amounts. 1040ez form instructions Transfers before July 19, 1984. 1040ez form instructions   If you received your home before July 19, 1984, in exchange for your release of marital rights, in most cases, your basis in the home is generally its fair market value at the time you received it. 1040ez form instructions More information. 1040ez form instructions   For more information on property received from a spouse or former spouse, see Property Settlements in Publication 504. 1040ez form instructions Involuntary conversion. 1040ez form instructions   If your home is destroyed or condemned, you may receive insurance proceeds or a condemnation award. 1040ez form instructions If you acquired a replacement home with these proceeds, the basis is its cost decreased by any gain not recognized on the conversion under the rules explained in: Publication 547, in the case of a home that was destroyed, or Chapter 1 of Publication 544, in the case of a home that was condemned. 1040ez form instructions Example. 1040ez form instructions A fire destroyed your home that you owned and used for only 6 months. 1040ez form instructions The home had an adjusted basis of $80,000 and the insurance company paid you $130,000 for the loss. 1040ez form instructions Your gain is $50,000 ($130,000 − $80,000). 1040ez form instructions You bought a replacement home for $100,000. 1040ez form instructions The part of your gain that is taxable is $30,000 ($130,000 − $100,000), the unspent part of the payment from the insurance company. 1040ez form instructions The rest of the gain ($20,000) is not taxable, so that amount reduces your basis in the new home. 1040ez form instructions The basis of the new home is figured as follows. 1040ez form instructions Cost of replacement home $100,000 Minus: Gain not recognized 20,000 Basis of the replacement home $80,000 More information. 1040ez form instructions   For more information about basis, see Publication 551. 1040ez form instructions Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. 1040ez form instructions To figure your adjusted basis, you can use Worksheet 1, found toward the end of this publication. 1040ez form instructions Filled-in examples of that worksheet are included in Comprehensive Examples , later. 1040ez form instructions Recordkeeping. 1040ez form instructions You should keep records to prove your home's adjusted basis. 1040ez form instructions Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. 1040ez form instructions But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. 1040ez form instructions Keep records proving the basis of both homes as long as they are needed for tax purposes. 1040ez form instructions The records you should keep include: Proof of the home's purchase price and purchase expenses; Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis; Any worksheets or other computations you used to figure the adjusted basis of the home you sold, the gain or loss on the sale, the exclusion, and the taxable gain; Any Form 982 you filed to exclude any discharge of qualified principal residence indebtedness; Any Form 2119, Sale of Your Home, you filed to postpone gain from the sale of a previous home before May 7, 1997; and Any worksheets you used to prepare Form 2119, such as the Adjusted Basis of Home Sold Worksheet or the Capital Improvements Worksheet from the Form 2119 instructions, or other source of computations. 1040ez form instructions Increases to Basis These include the following. 1040ez form instructions Additions and other improvements that have a useful life of more than 1 year. 1040ez form instructions Special assessments for local improvements. 1040ez form instructions Amounts you spent after a casualty to restore damaged property. 1040ez form instructions Improvements. 1040ez form instructions   These add to the value of your home, prolong its useful life, or adapt it to new uses. 1040ez form instructions You add the cost of additions and other improvements to the basis of your property. 1040ez form instructions   The following chart lists some other examples of improvements. 1040ez form instructions Examples of Improvements That Increase Basis Additions Bedroom Bathroom Deck Garage Porch Patio Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Lawn & Grounds Landscaping Driveway Walkway Fence  Retaining wall Sprinkler system Swimming pool  Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system  Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances  Kitchen modernization  Flooring Wall-to-wall carpeting  Insulation Attic Walls Floors Pipes and duct work Improvements no longer part of home. 1040ez form instructions   Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. 1040ez form instructions Example. 1040ez form instructions You put wall-to-wall carpeting in your home 15 years ago. 1040ez form instructions Later, you replaced that carpeting with new wall-to-wall carpeting. 1040ez form instructions The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. 1040ez form instructions Repairs. 1040ez form instructions   These maintain your home in good condition but do not add to its value or prolong its life. 1040ez form instructions You do not add their cost to the basis of your property. 1040ez form instructions Examples. 1040ez form instructions Repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes are examples of repairs. 1040ez form instructions Exception. 1040ez form instructions   The entire job is considered an improvement if items that would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home. 1040ez form instructions For example, if you have a casualty and your home is damaged, increase your basis by the amount you spend on repairs that restore the property to its pre-casualty condition. 1040ez form instructions Decreases to Basis These include the following. 1040ez form instructions Discharge of qualified principal residence indebtedness that was excluded from income (but not below zero). 1040ez form instructions For details, see Publication 4681. 1040ez form instructions Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. 1040ez form instructions For details, see Publication 4681. 1040ez form instructions Gain you postponed from the sale of a previous home before May 7, 1997. 1040ez form instructions Deductible casualty losses. 1040ez form instructions Insurance payments you received or expect to receive for casualty losses. 1040ez form instructions Payments you received for granting an easement or right-of-way. 1040ez form instructions Depreciation allowed or allowable if you used your home for business or rental purposes. 1040ez form instructions Energy-related credits allowed for expenditures made on the residence. 1040ez form instructions (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. 1040ez form instructions ) Adoption credit you claimed for improvements added to the basis of your home. 1040ez form instructions Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. 1040ez form instructions Energy conservation subsidy excluded from your gross income because you received it (directly or indirectly) from a public utility after 1992 to buy or install any energy conservation measure. 1040ez form instructions An energy conservation measure is an installation or modification primarily designed either to reduce consumption of electricity or natural gas or to improve the management of energy demand for a home. 1040ez form instructions District of Columbia first-time homebuyer credit allowed on the purchase of a principal residence in the District of Columbia. 1040ez form instructions General sales taxes claimed as an itemized deduction on Schedule A (Form 1040) that were imposed on the purchase of personal property, such as a houseboat used as your home or a mobile home. 1040ez form instructions Discharges of qualified principal residence indebtedness. 1040ez form instructions   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. 1040ez form instructions This exclusion applies to discharges made after 2006 and before 2014. 1040ez form instructions If you choose to exclude this income, you must reduce (but not below zero) the basis of your principal residence by the amount excluded from gross income. 1040ez form instructions   File Form 982 with your tax return. 1040ez form instructions See the form's instructions for detailed information. 1040ez form instructions    A decrease in basis due to a discharge of qualified principal residence indebtedness that is excluded from income occurs only if you retain ownership of the principal residence after a discharge. 1040ez form instructions In most cases, this would occur in a refinancing or a restructuring of the mortgage. 1040ez form instructions Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. 1040ez form instructions This means that, if you qualify, you will not have to pay tax on the gain up to the limit described under Maximum Exclusion , next. 1040ez form instructions To qualify, you must meet the ownership and use tests described later. 1040ez form instructions You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. 1040ez form instructions This choice can be made (or revoked) at any time before the expiration of a 3-year period beginning on the due date of your return (not including extensions) for the year of the sale. 1040ez form instructions You can use Worksheet 2 (near the end of this publication) to figure the amount of your exclusion and your taxable gain, if any. 1040ez form instructions If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. 1040ez form instructions See Publication 505, Tax Withholding and Estimated Tax. 1040ez form instructions Maximum Exclusion You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. 1040ez form instructions You meet the ownership test. 1040ez form instructions You meet the use test. 1040ez form instructions During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. 1040ez form instructions For details on gain allocated to periods of nonqualified use, see Nonqualified Use , later. 1040ez form instructions If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed. 1040ez form instructions You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . 1040ez form instructions Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. 1040ez form instructions This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). 1040ez form instructions Exception. 1040ez form instructions   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. 1040ez form instructions However, the maximum amount you may be able to exclude will be reduced. 1040ez form instructions See Reduced Maximum Exclusion , later. 1040ez form instructions Example 1—home owned and occupied for at least 2 years. 1040ez form instructions Mya bought and moved into her main home in September 2011. 1040ez form instructions She sold the home at a gain in October 2013. 1040ez form instructions During the 5-year period ending on the date of sale in October 2013, she owned and lived in the home for more than 2 years. 1040ez form instructions She meets the ownership and use tests. 1040ez form instructions Example 2—ownership test met but use test not met. 1040ez form instructions Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. 1040ez form instructions He later sold the home for a gain in June 2013. 1040ez form instructions He owned the home during the entire 5-year period ending on the date of sale. 1040ez form instructions He meets the ownership test but not the use test. 1040ez form instructions He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). 1040ez form instructions Period of Ownership and Use The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time. 1040ez form instructions You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale. 1040ez form instructions Example. 1040ez form instructions Naomi bought and moved into a house in July 2009. 1040ez form instructions She lived there for 13 months and then moved in with a friend. 1040ez form instructions She later moved back into her house and lived there for 12 months until she sold it in August 2013. 1040ez form instructions Naomi meets the ownership and use tests because, during the 5-year period ending on the date of sale, she owned the house for more than 2 years and lived in it for a total of 25 (13 + 12) months. 1040ez form instructions Temporary absence. 1040ez form instructions   Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. 1040ez form instructions The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. 1040ez form instructions Example 1. 1040ez form instructions David Johnson, who is single, bought and moved into his home on February 1, 2011. 1040ez form instructions Each year during 2011 and 2012, David left his home for a 2-month summer vacation. 1040ez form instructions David sold the house on March 1, 2013. 1040ez form instructions Although the total time David lived in his home is less than 2 years (21 months), he meets the use requirement and may exclude gain. 1040ez form instructions The 2-month vacations are short temporary absences and are counted as periods of use in determining whether David used the home for the required 2 years. 1040ez form instructions Example 2. 1040ez form instructions Professor Paul Beard, who is single, bought and moved into a house in December 2010, went abroad for a 1-year sabbatical leave in January 2012, returned to the house in January 2013, and sold it at a gain in February 2013. 1040ez form instructions Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. 1040ez form instructions He cannot exclude any part of his gain because he did not use the residence for the required 2 years. 1040ez form instructions Ownership and use tests met at different times. 1040ez form instructions   You can meet the ownership and use tests during different 2-year periods. 1040ez form instructions However, you must meet both tests during the 5-year period ending on the date of the sale. 1040ez form instructions Example. 1040ez form instructions Beginning in 2002, Helen Jones lived in a rented apartment. 1040ez form instructions The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. 1040ez form instructions In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. 1040ez form instructions On July 12, 2013, while still living in her daughter's home, she sold her condominium. 1040ez form instructions Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 13, 2008, to July 12, 2013, the date she sold the condominium. 1040ez form instructions She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). 1040ez form instructions She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). 1040ez form instructions The time Helen lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use. 1040ez form instructions Cooperative apartment. 1040ez form instructions   If you sold stock as a tenant-shareholder in a cooperative housing corporation, the ownership and use tests are met if, during the 5-year period ending on the date of sale, you: Owned the stock for at least 2 years, and Lived in the house or apartment that the stock entitled you to occupy as your main home for at least 2 years. 1040ez form instructions Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. 1040ez form instructions Exception for individuals with a disability. 1040ez form instructions   There is an exception to the use test if: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home. 1040ez form instructions Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. 1040ez form instructions   If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. 1040ez form instructions Previous home destroyed or condemned. 1040ez form instructions   For the ownership and use tests, you add the time you owned and lived in a previous home that was destroyed or condemned to the time you owned and lived in the replacement home on whose sale you wish to exclude gain. 1040ez form instructions This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home (see Involuntary Conversions in Publication 551). 1040ez form instructions Otherwise, you must have owned and lived in the same home for 2 of the 5 years before the sale to qualify for the exclusion. 1040ez form instructions Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. 1040ez form instructions   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty (defined later) as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. 1040ez form instructions You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve outside the United States either as an employee of the Peace Corps on qualified official extended duty (defined later) or as an enrolled volunteer or volunteer leader of the Peace Corps. 1040ez form instructions This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. 1040ez form instructions   If this helps you qualify to exclude gain, you can choose to have the 5-year test period suspended by filing a return for the year of sale that does not include the gain. 1040ez form instructions Example. 1040ez form instructions John bought and moved into a home in 2005. 1040ez form instructions He lived in it as his main home for 2½ years. 1040ez form instructions For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. 1040ez form instructions He then sold the home at a gain in 2013. 1040ez form instructions To meet the use test, John chooses to suspend the 5-year test period for the 6 years he was on qualified official extended duty. 1040ez form instructions This means he can disregard those 6 years. 1040ez form instructions Therefore, John's 5-year test period consists of the 5 years before he went on qualified official extended duty. 1040ez form instructions He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. 1040ez form instructions Period of suspension. 1040ez form instructions   The period of suspension cannot last more than 10 years. 1040ez form instructions Together, the 10-year suspension period and the 5-year test period can be as long as, but no more than, 15 years. 1040ez form instructions You cannot suspend the 5-year period for more than one property at a time. 1040ez form instructions You can revoke your choice to suspend the 5-year period at any time. 1040ez form instructions Example. 1040ez form instructions Mary bought a home on April 1, 1997. 1040ez form instructions She used it as her main home until August 31, 2000. 1040ez form instructions On September 1, 2000, she went on qualified official extended duty with the Navy. 1040ez form instructions She did not live in the house again before selling it on July 31, 2013. 1040ez form instructions Mary chooses to use the entire 10-year suspension period. 1040ez form instructions Therefore, the suspension period would extend back from July 31, 2013, to August 1, 2003, and the 5-year test period would extend back to August 1, 1998. 1040ez form instructions During that period, Mary owned the house all 5 years and lived in it as her main home from August 1, 1998, until August 31, 2000, a period of more than 24 months. 1040ez form instructions She meets the ownership and use tests because she owned and lived in the home for at least 2 years during this test period. 1040ez form instructions Uniformed services. 1040ez form instructions   The uniformed services are: The Armed Forces (the Army, Navy, Air Force, Marine Corps, and Coast Guard), The commissioned corps of the National Oceanic and Atmospheric Administration, and The commissioned corps of the Public Health Service. 1040ez form instructions Foreign Service member. 1040ez form instructions   For purposes of the choice to suspend the 5-year test period for ownership and use, you are a member of the Foreign Service if you are any of the following. 1040ez form instructions A Chief of mission. 1040ez form instructions An Ambassador at large. 1040ez form instructions A member of the Senior Foreign Service. 1040ez form instructions A Foreign Service officer. 1040ez form instructions Part of the Foreign Service personnel. 1040ez form instructions Employee of the intelligence community. 1040ez form instructions   For purposes of the choice to suspend the 5-year test period for ownership and use, you are an employee of the intelligence community if you are an employee of any of the following. 1040ez form instructions The Office of the Director of National Intelligence. 1040ez form instructions The Central Intelligence Agency. 1040ez form instructions The National Security Agency. 1040ez form instructions The Defense Intelligence Agency. 1040ez form instructions The National Geospatial-Intelligence Agency. 1040ez form instructions The National Reconnaissance Office and any other office within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs. 1040ez form instructions Any of the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, the Department of Treasury, the Department of Energy, and the Coast Guard. 1040ez form instructions The Bureau of Intelligence and Research of the Department of State. 1040ez form instructions Any of the elements of the Department of Homeland Security concerned with the analyses of foreign intelligence information. 1040ez form instructions Qualified official extended duty. 1040ez form instructions   You are on qualified official extended duty if you are on extended duty while: Serving at a duty station at least 50 miles from your main home, or Living in Government quarters under Government orders. 1040ez form instructions   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. 1040ez form instructions Married Persons If you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use tests, you can exclude up to $250,000 of the gain. 1040ez form instructions (But see Special rules for joint returns, next. 1040ez form instructions ) Special rules for joint returns. 1040ez form instructions   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. 1040ez form instructions You are married and file a joint return for the year. 1040ez form instructions Either you or your spouse meets the ownership test. 1040ez form instructions Both you and your spouse meet the use test. 1040ez form instructions During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. 1040ez form instructions If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. 1040ez form instructions For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. 1040ez form instructions Example 1—one spouse sells a home. 1040ez form instructions Emily sells her home in June 2013 for a gain of $300,000. 1040ez form instructions She marries Jamie later in the year. 1040ez form instructions She meets the ownership and use tests, but Jamie does not. 1040ez form instructions Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. 1040ez form instructions The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. 1040ez form instructions Example 2—each spouse sells a home. 1040ez form instructions The facts are the same as in Example 1 except that Jamie also sells a home in 2013 for a gain of $200,000 before he marries Emily. 1040ez form instructions He meets the ownership and use tests on his home, but Emily does not. 1040ez form instructions Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. 1040ez form instructions However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. 1040ez form instructions Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. 1040ez form instructions The $500,000 maximum exclusion for certain joint returns does not apply because Emily and Jamie do not both meet the use test for the same home. 1040ez form instructions Sale of main home by surviving spouse. 1040ez form instructions   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. 1040ez form instructions   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. 1040ez form instructions The sale or exchange took place after 2008. 1040ez form instructions The sale or exchange took place no more than 2 years after the date of death of your spouse. 1040ez form instructions You have not remarried. 1040ez form instructions You and your spouse met the use test at the time of your spouse's death. 1040ez form instructions You or your spouse met the ownership test at the time of your spouse's death. 1040ez form instructions Neither you nor your spouse excluded gain from the sale of another home during the last 2 years before the date of death. 1040ez form instructions The ownership and use tests were described earlier. 1040ez form instructions Example. 1040ez form instructions Harry owned and used a house as his main home since 2009. 1040ez form instructions Harry and Wilma married on July 1, 2013, and from that date they used Harry's house as their main home. 1040ez form instructions Harry died on August 15, 2013, and Wilma inherited the property. 1040ez form instructions Wilma sold the property on September 1, 2013, at which time she had not remarried. 1040ez form instructions Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Harry owned and used the property before death. 1040ez form instructions Home transferred from spouse. 1040ez form instructions   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. 1040ez form instructions Use of home after divorce. 1040ez form instructions   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. 1040ez form instructions Reduced Maximum Exclusion If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. 1040ez form instructions This applies to those who: Fail to meet the ownership and use tests, or Have used the exclusion within 2 years of selling their current home. 1040ez form instructions In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. 1040ez form instructions A change in place of employment. 1040ez form instructions Health. 1040ez form instructions Unforeseen circumstances. 1040ez form instructions Qualified individual. 1040ez form instructions   For purposes of the reduced maximum exclusion, a qualified individual is any of the following. 1040ez form instructions You. 1040ez form instructions Your spouse. 1040ez form instructions A co-owner of the home. 1040ez form instructions A person whose main home is the same as yours. 1040ez form instructions Primary reason for sale. 1040ez form instructions   One of the three reasons above will be considered to be the primary reason you sold your home if either (1) or (2) is true. 1040ez form instructions You qualify under a “safe harbor. 1040ez form instructions ” This is a specific set of facts and circumstances that, if applicable, qualifies you to claim a reduced maximum exclusion. 1040ez form instructions Safe harbors corresponding to the reasons listed above are described later. 1040ez form instructions A safe harbor does not apply, but you can establish, based on facts and circumstances, that the primary reason for the sale is a change in place of employment, health, or unforeseen circumstances. 1040ez form instructions  Factors that may be relevant in determining your primary reason for sale include whether: Your sale and the circumstances causing it were close in time, The circumstances causing your sale occurred during the time you owned and used the property as your main home, The circumstances causing your sale were not reasonably foreseeable when you began using the property as your main home, Your financial ability to maintain the property became materially impaired, The suitability of the property as your main home materially changed, and During the time you owned the property, you used it as your home. 1040ez form instructions Change in Place of Employment You may qualify for a reduced exclusion if the primary reason for the sale of your main home is a change in the location of employment of a qualified individual. 1040ez form instructions Employment. 1040ez form instructions   For this purpose, employment includes the start of work with a new employer or continuation of work with the same employer. 1040ez form instructions It also includes the start or continuation of self-employment. 1040ez form instructions Distance safe harbor. 1040ez form instructions   A change in place of employment is considered to be the reason you sold your home if: The change occurred during the period you owned and used the property as your main home, and The new place of employment is at least 50 miles farther from the home you sold than was the former place of employment (or, if there was no former place of employment, the distance between your new place of employment and the home sold is at least 50 miles). 1040ez form instructions Example. 1040ez form instructions Justin was unemployed and living in a townhouse in Florida he had owned and used as his main home since 2012. 1040ez form instructions He got a job in North Carolina and sold his townhouse in 2013. 1040ez form instructions Because the distance between Justin's new place of employment and the home he sold is at least 50 miles, the sale satisfies the conditions of the distance safe harbor. 1040ez form instructions Justin's sale of his home is considered to be because of a change in place of employment, and he is entitled to claim a reduced maximum exclusion of gain from the sale. 1040ez form instructions Health The sale of your main home is because of health if your primary reason for the sale is: To obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual, or To obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury. 1040ez form instructions The sale of your home is not because of health if the sale merely benefits a qualified individual's general health or well-being. 1040ez form instructions For purposes of this reason, a qualified individual includes, in addition to the individuals listed earlier under Qualified individual , any of the following family members of these individuals. 1040ez form instructions Parent, grandparent, stepmother, stepfather. 1040ez form instructions Child, grandchild, stepchild, adopted child, eligible foster child. 1040ez form instructions Brother, sister, stepbrother, stepsister, half-brother, half-sister. 1040ez form instructions Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law. 1040ez form instructions Uncle, aunt, nephew, niece, or cousin. 1040ez form instructions Example. 1040ez form instructions In 2012, Chase and Lauren, spouses, bought a house that they used as their main home. 1040ez form instructions Lauren's father has a chronic disease and is unable to care for himself. 1040ez form instructions In 2013, Chase and Lauren sold their home in order to move into Lauren's father's house to provide care for him. 1040ez form instructions Because the primary reason for the sale of their home was to provide care for Lauren's father, Chase and Lauren are entitled to a reduced maximum exclusion. 1040ez form instructions Doctor's recommendation safe harbor. 1040ez form instructions   Health is considered to be the reason you sold your home if, for one or more of the reasons listed at the beginning of this discussion, a doctor recommends a change of residence. 1040ez form instructions Unforeseen Circumstances The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying that home. 1040ez form instructions You are not considered to have an unforeseen circumstance if the primary reason you sold your home was that you preferred to get a different home or because your finances improved. 1040ez form instructions Specific event safe harbors. 1040ez form instructions   Unforeseen circumstances are considered to be the reason for selling your home if any of the following events occurred while you owned and used the property as your main home. 1040ez form instructions An involuntary conversion of your home, such as when your home is destroyed or condemned. 1040ez form instructions Natural or man-made disasters or acts of war or terrorism resulting in a casualty to your home, whether or not your loss is deductible. 1040ez form instructions In the case of qualified individuals (listed earlier under Qualified individual ): Death, Unemployment (if the individual is eligible for unemployment compensation), A change in employment or self-employment status that results in the individual's inability to pay reasonable basic living expenses (listed under Reasonable basic living expenses , later) for his or her household, Divorce or legal separation under a decree of divorce or separate maintenance, or Multiple births resulting from the same pregnancy. 1040ez form instructions An event the IRS determined to be an unforeseen circumstance in published guidance of general applicability. 1040ez form instructions For example, the IRS determined the September 11, 2001, terrorist attacks to be an unforeseen circumstance. 1040ez form instructions Reasonable basic living expenses. 1040ez form instructions   Reasonable basic living expenses for your household include the following. 1040ez form instructions Amounts spent for food. 1040ez form instructions Amounts spent for clothing. 1040ez form instructions Housing and related expenses. 1040ez form instructions Medical expenses. 1040ez form instructions Transportation expenses. 1040ez form instructions Tax payments. 1040ez form instructions Court-ordered payments. 1040ez form instructions Expenses reasonably necessary to produce income. 1040ez form instructions   Any of these amounts spent to maintain an affluent or luxurious standard of living are not reasonable basic living expenses. 1040ez form instructions Nonqualified Use Gain from the sale or exchange of the main home is not excludable from income if it is allocable to periods of nonqualified use. 1040ez form instructions Nonqualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions (see next). 1040ez form instructions Exceptions. 1040ez form instructions   A period of nonqualified use does not include: Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home; Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty: As a member of the uniformed services; As a member of the Foreign Service of the United States; or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. 1040ez form instructions Calculation. 1040ez form instructions   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain (net of any depreciation allowed or allowable on the property for periods after May 6, 1997) by the following fraction:   Total nonqualified use during the period of ownership after 2008     Total period of ownership     This calculation can be found in Worksheet 2, line 10, later in this publication. 1040ez form instructions   For examples of this calculation, see Business Use or Rental of Home , next. 1040ez form instructions Business Use or Rental of Home You may be able to exclude gain from the sale of a home you have used for business or to produce rental income if you meet the ownership and use tests. 1040ez form instructions Example 1. 1040ez form instructions On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. 1040ez form instructions She moved in on that date and lived in it until May 31, 2009, when she moved out of the house and put it up for rent. 1040ez form instructions The house was rented from June 1, 2009, to March 31, 2011. 1040ez form instructions Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. 1040ez form instructions Amy moved back into the house on April 1, 2011, and lived there until she sold it on January 31, 2013, for a gain of $200,000. 1040ez form instructions During the 5-year period ending on the date of the sale (January 31, 2008–January 31, 2013), Amy owned and lived in the house for more than 2 years as shown in the following table. 1040ez form instructions Five-Year Period Used as Home Used as Rental 1/31/08 – 5/31/09 16 months   6/01/09 – 3/31/11   22 months 4/01/11 – 1/31/13 22 months     38 months 22 months       During the period Amy owned the house (2,080 days), her period of nonqualified use was 668 days. 1040ez form instructions Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain, as shown on Worksheet 2. 1040ez form instructions Example 2. 1040ez form instructions William owned and used a house as his main home from 2007 through 2010. 1040ez form instructions On January 1, 2011, he moved to another state. 1040ez form instructions He rented his house from that date until April 30, 2013, when he sold it. 1040ez form instructions During the 5-year period ending on the date of sale (May 1, 2008-April 30, 2013), William owned and lived in the house for more than 2 years. 1040ez form instructions Because it was rental property at the time of the sale, he must report the sale on Form 4797. 1040ez form instructions Because the period of nonqualified use does not include any part of the 5-year period after the last date William lived in the house, he has no period of nonqualified use. 1040ez form instructions Because he met the ownership and use tests, he can exclude gain up to $250,000. 1040ez form instructions However, he cannot exclude the part of the gain equal to the depreciation he claimed or could have claimed for renting the house, as explained next. 1040ez form instructions Depreciation after May 6, 1997. 1040ez form instructions   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. 1040ez form instructions If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed. 1040ez form instructions Unrecaptured section 1250 gain. 1040ez form instructions   This is the part of any long-term capital gain from the sale of your home that is due to depreciation and cannot be excluded. 1040ez form instructions To figure the amount of unrecaptured section 1250 gain to be reported on Schedule D (Form 1040), you must also take into account certain gains or losses from the sale of property other than your home. 1040ez form instructions Use the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions for this purpose. 1040ez form instructions Worksheet 2. 1040ez form instructions Taxable Gain on Sale of Home—Completed Example 1 for Amy Part 1. 1040ez form instructions Gain or (Loss) on Sale       1. 1040ez form instructions   Selling price of home 1. 1040ez form instructions     2. 1040ez form instructions   Selling expenses (including commissions, advertising and legal fees, and seller-paid loan charges) 2. 1040ez form instructions     3. 1040ez form instructions   Subtract line 2 from line 1. 1040ez form instructions This is the amount realized 3. 1040ez form instructions     4. 1040ez form instructions   Adjusted basis of home sold (from Worksheet 1, line 13) 4. 1040ez form instructions     5. 1040ez form instructions   Gain or (loss) on the sale. 1040ez form instructions Subtract line 4 from line 3. 1040ez form instructions If this is a loss, stop here 5. 1040ez form instructions 200,000   Part 2. 1040ez form instructions Exclusion and Taxable Gain       6. 1040ez form instructions   Enter any depreciation allowed or allowable on the property for periods after May 6, 1997. 1040ez form instructions If none, enter -0- 6. 1040ez form instructions 10,000   7. 1040ez form instructions   Subtract line 6 from line 5. 1040ez form instructions If the result is less than zero, enter -0- 7. 1040ez form instructions 190,000   8. 1040ez form instructions   Aggregate number of days of nonqualified use after 2008. 1040ez form instructions If none, enter -0-. 1040ez form instructions  If line 8 is equal to zero, skip to line 12 and enter the amount from line 7 on line 12 8. 1040ez form instructions 668   9. 1040ez form instructions   Number of days taxpayer owned the property 9. 1040ez form instructions 2,080   10. 1040ez form instructions   Divide the amount on line 8 by the amount on line 9. 1040ez form instructions Enter the result as a decimal (rounded to at least 3 places). 1040ez form instructions But do not enter an amount greater than 1. 1040ez form instructions 00 10. 1040ez form instructions 0. 1040ez form instructions 321   11. 1040ez form instructions   Gain allocated to nonqualified use. 1040ez form instructions (Line 7 multiplied by line 10) 11. 1040ez form instructions 60,990   12. 1040ez form instructions   Gain eligible for exclusion. 1040ez form instructions Subtract line 11 from line 7 12. 1040ez form instructions 129,010   13. 1040ez form instructions   If you qualify to exclude gain on the sale, enter your maximum exclusion (see Maximum Exclusion ). 1040ez form instructions  If you qualify for a reduced maximum exclusion, enter the amount from Worksheet 3, line 7. 1040ez form instructions If you do  not qualify to exclude gain, enter -0- 13. 1040ez form instructions 250,000   14. 1040ez form instructions   Exclusion. 1040ez form instructions Enter the smaller of line 12 or line 13 14. 1040ez form instructions 129,010   15. 1040ez form instructions   Taxable gain. 1040ez form instructions Subtract line 14 from line 5. 1040ez form instructions Report your taxable gain as described under Reporting the Sale . 1040ez form instructions If the amount on line 6 is more than zero, complete line 16 15. 1040ez form instructions 70,990   16. 1040ez form instructions   Enter the smaller of line 6 or line 15. 1040ez form instructions Enter this amount on line 12 of the Unrecaptured Section 1250 Gain  Worksheet in the instructions for Schedule D (Form 1040) 16. 1040ez form instructions 10,000 Property Used Partly for Business or Rental If you use property partly as a home and partly for business or to produce rental income, the treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. 1040ez form instructions Part of Home Used for Business or Rental If the part of your property used for business or to produce rental income is within your home, such as a room used as a home office for a business, you do not need to allocate gain on the sale of the property between the business part of the property and the part used as a home. 1040ez form instructions In addition, you do not need to report the sale of the business or rental part on Form 4797. 1040ez form instructions This is true whether or not you were entitled to claim any depreciation. 1040ez form instructions However, you cannot exclude the part of any gain equal to any depreciation allowed or allowable after May 6, 1997. 1040ez form instructions See Depreciation after May 6, 1997, earlier. 1040ez form instructions Example 1. 1040ez form instructions Ray sold his main home in 2013 at a $30,000 gain. 1040ez form instructions He has no gains or losses from the sale of property other than the gain from the sale of his home. 1040ez form instructions He meets the ownership and use tests to exclude the gain from his income. 1040ez form instructions However, he used part of the home as a business office in 2012 and claimed $500 depreciation. 1040ez form instructions Because the business office was part of his home (not separate from it), he does not have to allocate the gain on the sale between the business part of the property and the part used as a home. 1040ez form instructions In addition, he does not have to report any part of the gain on Form 4797. 1040ez form instructions Because Ray was entitled to take a depreciation deduction, he must recognize $500 of the gain as unrecaptured section 1250 gain. 1040ez form instructions He reports his gain, exclusion, and the taxable gain of $500 on Form 8949 and Schedule D (Form 1040). 1040ez form instructions Example 2. 1040ez form instructions The facts are the same as in Example 1 except that Ray was not entitled to claim depreciation for the business use of his home. 1040ez form instructions Since Ray did not claim any depreciation, he can exclude the entire $30,000 gain. 1040ez form instructions Separate Part of Property Used for Business or Rental You may have used part of your property as your home and a separate part of it for business or to produce rental income. 1040ez form instructions Examples are: A working farm on which your house was located, A duplex in w