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Amend 2009 Tax Return

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Amend 2009 Tax Return

Amend 2009 tax return Publication 523 - Main Content Table of Contents Main HomeVacant land. Amend 2009 tax return Factors used to determine main home. Amend 2009 tax return 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. Amend 2009 tax return Property Used Partly for Business or Rental Reporting the SaleSeller-financed mortgage. Amend 2009 tax return Individual taxpayer identification number (ITIN). Amend 2009 tax return More information. Amend 2009 tax return Comprehensive Examples Special SituationsException for sales to related persons. Amend 2009 tax return Deducting Taxes in the Year of SaleForm 1099-S. Amend 2009 tax return More information. Amend 2009 tax return Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of First-Time Homebuyer CreditExample. Amend 2009 tax return Worksheets How To Get Tax HelpLow Income Taxpayer Clinics Main Home This section explains the term “main home. Amend 2009 tax return ” 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. Amend 2009 tax return 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. Amend 2009 tax return Land. Amend 2009 tax return   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. Amend 2009 tax return Example. Amend 2009 tax return You buy a piece of land and move your main home to it. Amend 2009 tax return Then, you sell the land on which your main home was located. Amend 2009 tax return This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. Amend 2009 tax return Vacant land. Amend 2009 tax return   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. Amend 2009 tax return 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. Amend 2009 tax return See Excluding the Gain , later. Amend 2009 tax return The destruction of your home is treated as a sale of your home. Amend 2009 tax return 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. Amend 2009 tax return For information, see Publication 547. Amend 2009 tax return More than one home. Amend 2009 tax return   If you have more than one home, you can exclude gain only from the sale of your main home. Amend 2009 tax return You must include in income the gain from the sale of any other home. Amend 2009 tax return 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. Amend 2009 tax return Example 1. Amend 2009 tax return You own two homes, one in New York and one in Florida. Amend 2009 tax return 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. Amend 2009 tax return In the absence of facts and circumstances indicating otherwise, the New York home is your main home. Amend 2009 tax return You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. Amend 2009 tax return Example 2. Amend 2009 tax return You own a house, but you live in another house that you rent. Amend 2009 tax return The rented house is your main home. Amend 2009 tax return Example 3. Amend 2009 tax return You own two homes, one in Virginia and one in New Hampshire. Amend 2009 tax return In 2009 and 2010, you lived in the Virginia home. Amend 2009 tax return In 2011 and 2012, you lived in the New Hampshire home. Amend 2009 tax return In 2013, you lived again in the Virginia home. Amend 2009 tax return Your main home in 2009, 2010, and 2013 is the Virginia home. Amend 2009 tax return Your main home in 2011 and 2012 is the New Hampshire home. Amend 2009 tax return You would be eligible to exclude gain from the sale of either home (but not both) in 2013. Amend 2009 tax return Factors used to determine main home. Amend 2009 tax return   In addition to the amount of time you live in each home, other factors are relevant in determining which home is your main home. Amend 2009 tax return Those factors include the following. Amend 2009 tax return Your place of employment. Amend 2009 tax return The location of your family members' main home. Amend 2009 tax return Your mailing address for bills and correspondence. Amend 2009 tax return The address listed on your: Federal and state tax returns, Driver's license, Car registration, and Voter registration card. Amend 2009 tax return The location of the banks you use. Amend 2009 tax return The location of recreational clubs and religious organizations of which you are a member. Amend 2009 tax return Property used partly as your main home. Amend 2009 tax return   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. Amend 2009 tax return For details, see Business Use or Rental of Home , later. Amend 2009 tax return 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. Amend 2009 tax return Subtract the adjusted basis from the amount realized to get your gain or loss. Amend 2009 tax return     Selling price     − Selling expenses       Amount realized     − Adjusted basis       Gain or loss   Gain. Amend 2009 tax return   Gain is the excess of the amount realized over the adjusted basis of the property. Amend 2009 tax return Loss. Amend 2009 tax return   Loss is the excess of the adjusted basis over the amount realized for the property. Amend 2009 tax return Selling Price The selling price is the total amount you receive for your home. Amend 2009 tax return 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. Amend 2009 tax return Personal property. Amend 2009 tax return   The selling price of your home does not include amounts you received for personal property sold with your home. Amend 2009 tax return Personal property is property that is not a permanent part of the home. Amend 2009 tax return Examples are furniture, draperies, rugs, a washer and dryer, and lawn equipment. Amend 2009 tax return Separately stated amounts you received for these items should not be shown on Form 1099-S (discussed later). Amend 2009 tax return Any gains from sales of personal property must be included in your income, but not as part of the sale of your home. Amend 2009 tax return Payment by employer. Amend 2009 tax return   You may have to sell your home because of a job transfer. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return Option to buy. Amend 2009 tax return   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. Amend 2009 tax return If the option is not exercised, you must report the amount as ordinary income in the year the option expires. Amend 2009 tax return Report this amount on Form 1040, line 21, or on Form 1040NR, line 21. Amend 2009 tax return Form 1099-S. Amend 2009 tax return   If you received Form 1099-S, box 2 (gross proceeds) should show the total amount you received for your home. Amend 2009 tax return   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. Amend 2009 tax return Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. Amend 2009 tax return Amount Realized The amount realized is the selling price minus selling expenses. Amend 2009 tax return Selling expenses. Amend 2009 tax return   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. Amend 2009 tax return ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. Amend 2009 tax return This adjusted basis must be determined before you can figure gain or loss on the sale of your home. Amend 2009 tax return For information on how to figure your home's adjusted basis, see Determining Basis , later. Amend 2009 tax return Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. Amend 2009 tax return Gain on sale. Amend 2009 tax return   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. Amend 2009 tax return Loss on sale. Amend 2009 tax return   If the amount realized is less than the adjusted basis, the difference is a loss. Amend 2009 tax return Generally, a loss on the sale of your main home cannot be deducted. Amend 2009 tax return Jointly owned home. Amend 2009 tax return   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. Amend 2009 tax return Separate returns. Amend 2009 tax return   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. Amend 2009 tax return Your ownership interest is generally determined by state law. Amend 2009 tax return Joint owners not married. Amend 2009 tax return   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. Amend 2009 tax return Each of you applies the rules discussed in this publication on an individual basis. Amend 2009 tax return Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. Amend 2009 tax return Foreclosure or repossession. Amend 2009 tax return   If your home was foreclosed on or repossessed, you have a disposition. Amend 2009 tax return See Publication 4681 to determine if you have ordinary income, gain, or loss. Amend 2009 tax return More information. Amend 2009 tax return   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. Amend 2009 tax return Publication 544 has examples of how to figure gain or loss on a foreclosure or repossession. Amend 2009 tax return Abandonment. Amend 2009 tax return   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. Amend 2009 tax return Trading (exchanging) homes. Amend 2009 tax return   If you trade your home for another home, treat the trade as a sale and a purchase. Amend 2009 tax return Example. Amend 2009 tax return You owned and lived in a home with an adjusted basis of $41,000. Amend 2009 tax return 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. Amend 2009 tax return This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 − $41,000). Amend 2009 tax return 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). Amend 2009 tax return Transfer to spouse. Amend 2009 tax return   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). Amend 2009 tax return This is true even if you receive cash or other consideration for the home. Amend 2009 tax return As a result, the rules explained in this publication do not apply. Amend 2009 tax return   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. Amend 2009 tax return You have no gain or loss. Amend 2009 tax return Exception. Amend 2009 tax return   These transfer rules do not apply if your spouse or former spouse is a nonresident alien. Amend 2009 tax return In that case, you generally will have a gain or loss. Amend 2009 tax return More information. Amend 2009 tax return    See Property Settlements in Publication 504, Divorced or Separated Individuals, for more information. Amend 2009 tax return Involuntary conversion. Amend 2009 tax return   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. Amend 2009 tax return 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 ). Amend 2009 tax return Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. Amend 2009 tax return Your basis in your home is determined by how you got the home. Amend 2009 tax return Generally, your basis is its cost if you bought it or built it. Amend 2009 tax return If you got it in some other way (inheritance, gift, etc. Amend 2009 tax return ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. Amend 2009 tax return While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. Amend 2009 tax return 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. Amend 2009 tax return To figure your adjusted basis, you can use Worksheet 1, near the end of this publication. Amend 2009 tax return Filled-in examples of that worksheet are included in the Comprehensive Examples , later. Amend 2009 tax return Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. Amend 2009 tax return Purchase. Amend 2009 tax return   If you bought your home, your basis is its cost to you. Amend 2009 tax return This includes the purchase price and certain settlement or closing costs. Amend 2009 tax return 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. Amend 2009 tax return If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed later. Amend 2009 tax return Seller-paid points. Amend 2009 tax return   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. Amend 2009 tax return    IF you bought your home. Amend 2009 tax return . Amend 2009 tax return . Amend 2009 tax return THEN reduce your home's basis by the seller-paid points. Amend 2009 tax return . Amend 2009 tax return . Amend 2009 tax return after 1990 but before April 4, 1994 only if you deducted them as home mortgage interest in the year paid. Amend 2009 tax return after April 3, 1994 even if you did not deduct them. Amend 2009 tax return Settlement fees or closing costs. Amend 2009 tax return   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. Amend 2009 tax return 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. Amend 2009 tax return 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). Amend 2009 tax return   Settlement fees do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Amend 2009 tax return   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. Amend 2009 tax return   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. Amend 2009 tax return Real estate taxes. Amend 2009 tax return   Real estate taxes for the year you bought your home may affect your basis, as shown in the following chart. Amend 2009 tax return    IF. Amend 2009 tax return . Amend 2009 tax return . Amend 2009 tax return AND. Amend 2009 tax return . Amend 2009 tax return . Amend 2009 tax return THEN the taxes. Amend 2009 tax return . Amend 2009 tax return . Amend 2009 tax return 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. Amend 2009 tax return the seller reimburses you do not affect the basis of your home. Amend 2009 tax return 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. Amend 2009 tax return you reimburse the seller do not affect the basis of your home. Amend 2009 tax return Construction. Amend 2009 tax return   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. Amend 2009 tax return   Your cost includes your down payment and any debt such as a first or second mortgage or notes you gave the seller or builder. Amend 2009 tax return It also includes certain settlement or closing costs. Amend 2009 tax return You may have to reduce your basis by points the seller paid for you. Amend 2009 tax return For more information, see Seller-paid points and Settlement fees or closing costs , earlier. Amend 2009 tax return Built by you. Amend 2009 tax return   If you built all or part of your house yourself, its basis is the total amount it cost you to complete it. Amend 2009 tax return 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. Amend 2009 tax return Temporary housing. Amend 2009 tax return   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. Amend 2009 tax return To figure the amount of the reduction, multiply the contract price by a fraction. Amend 2009 tax return 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. Amend 2009 tax return Cooperative apartment. Amend 2009 tax return   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. Amend 2009 tax return This may include your share of a mortgage on the apartment building. Amend 2009 tax return Condominium. Amend 2009 tax return   To determine your basis in a condominium apartment used as your home, use the same rules as for any other home. Amend 2009 tax return 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. Amend 2009 tax return These situations are discussed in the following pages. Amend 2009 tax return Also, the instructions for Worksheet 1 (near the end of the publication) address each of these issues. Amend 2009 tax return Other special rules may apply in certain situations. Amend 2009 tax return 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. Amend 2009 tax return Home received as gift. Amend 2009 tax return   Use the following chart to find the basis of a home you received as a gift. Amend 2009 tax return IF the donor's adjusted basis at the time of the gift was. Amend 2009 tax return . Amend 2009 tax return . Amend 2009 tax return THEN your basis is. Amend 2009 tax return . Amend 2009 tax return . Amend 2009 tax return 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. Amend 2009 tax return   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. Amend 2009 tax return If using the fair market value results in a gain, you have neither gain nor loss. Amend 2009 tax return 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. Amend 2009 tax return 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). Amend 2009 tax return Fair market value. Amend 2009 tax return   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. Amend 2009 tax return 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. Amend 2009 tax return Part of federal gift tax due to net increase in value. Amend 2009 tax return   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. Amend 2009 tax return 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. Amend 2009 tax return The net increase in the value of the home is its fair market value minus the donor's adjusted basis immediately before the gift. Amend 2009 tax return Home acquired from a decedent who died before or after 2010. Amend 2009 tax return   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). Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return Surviving spouse. Amend 2009 tax return   If you are a surviving spouse and you owned your home jointly, your basis in the home will change. Amend 2009 tax return The new basis for the interest your spouse owned will be its fair market value on the date of death (or alternate valuation date). Amend 2009 tax return The basis in your interest will remain the same. Amend 2009 tax return Your new basis in the home is the total of these two amounts. Amend 2009 tax return   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. Amend 2009 tax return Example. Amend 2009 tax return 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. Amend 2009 tax return 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). Amend 2009 tax return Community property. Amend 2009 tax return   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. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return   For more information about community property, see Publication 555, Community Property. Amend 2009 tax return    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. Amend 2009 tax return Home received as trade. Amend 2009 tax return   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. Amend 2009 tax return If you traded one home for another, you have made a sale and purchase. Amend 2009 tax return In that case, you may have a gain. Amend 2009 tax return See Trading (exchanging) homes under Dispositions Other Than Sales, earlier, for an example of figuring the gain. Amend 2009 tax return Home received from spouse. Amend 2009 tax return   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. Amend 2009 tax return Transfers after July 18, 1984. Amend 2009 tax return   If you received the home after July 18, 1984, there was no gain or loss on the transfer. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return   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. Amend 2009 tax return This also applies if your former spouse transferred his or her interest in the home to you incident to your divorce. Amend 2009 tax return Your basis in the half interest you already owned does not change. Amend 2009 tax return Your new basis in the home is the total of these two amounts. Amend 2009 tax return Transfers before July 19, 1984. Amend 2009 tax return   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. Amend 2009 tax return More information. Amend 2009 tax return   For more information on property received from a spouse or former spouse, see Property Settlements in Publication 504. Amend 2009 tax return Involuntary conversion. Amend 2009 tax return   If your home is destroyed or condemned, you may receive insurance proceeds or a condemnation award. Amend 2009 tax return 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. Amend 2009 tax return Example. Amend 2009 tax return A fire destroyed your home that you owned and used for only 6 months. Amend 2009 tax return The home had an adjusted basis of $80,000 and the insurance company paid you $130,000 for the loss. Amend 2009 tax return Your gain is $50,000 ($130,000 − $80,000). Amend 2009 tax return You bought a replacement home for $100,000. Amend 2009 tax return 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. Amend 2009 tax return The rest of the gain ($20,000) is not taxable, so that amount reduces your basis in the new home. Amend 2009 tax return The basis of the new home is figured as follows. Amend 2009 tax return Cost of replacement home $100,000 Minus: Gain not recognized 20,000 Basis of the replacement home $80,000 More information. Amend 2009 tax return   For more information about basis, see Publication 551. Amend 2009 tax return Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. Amend 2009 tax return To figure your adjusted basis, you can use Worksheet 1, found toward the end of this publication. Amend 2009 tax return Filled-in examples of that worksheet are included in Comprehensive Examples , later. Amend 2009 tax return Recordkeeping. Amend 2009 tax return You should keep records to prove your home's adjusted basis. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return Keep records proving the basis of both homes as long as they are needed for tax purposes. Amend 2009 tax return 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. Amend 2009 tax return Increases to Basis These include the following. Amend 2009 tax return Additions and other improvements that have a useful life of more than 1 year. Amend 2009 tax return Special assessments for local improvements. Amend 2009 tax return Amounts you spent after a casualty to restore damaged property. Amend 2009 tax return Improvements. Amend 2009 tax return   These add to the value of your home, prolong its useful life, or adapt it to new uses. Amend 2009 tax return You add the cost of additions and other improvements to the basis of your property. Amend 2009 tax return   The following chart lists some other examples of improvements. Amend 2009 tax return 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. Amend 2009 tax return   Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. Amend 2009 tax return Example. Amend 2009 tax return You put wall-to-wall carpeting in your home 15 years ago. Amend 2009 tax return Later, you replaced that carpeting with new wall-to-wall carpeting. Amend 2009 tax return The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. Amend 2009 tax return Repairs. Amend 2009 tax return   These maintain your home in good condition but do not add to its value or prolong its life. Amend 2009 tax return You do not add their cost to the basis of your property. Amend 2009 tax return Examples. Amend 2009 tax return Repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes are examples of repairs. Amend 2009 tax return Exception. Amend 2009 tax return   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. Amend 2009 tax return 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. Amend 2009 tax return Decreases to Basis These include the following. Amend 2009 tax return Discharge of qualified principal residence indebtedness that was excluded from income (but not below zero). Amend 2009 tax return For details, see Publication 4681. Amend 2009 tax return Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. Amend 2009 tax return For details, see Publication 4681. Amend 2009 tax return Gain you postponed from the sale of a previous home before May 7, 1997. Amend 2009 tax return Deductible casualty losses. Amend 2009 tax return Insurance payments you received or expect to receive for casualty losses. Amend 2009 tax return Payments you received for granting an easement or right-of-way. Amend 2009 tax return Depreciation allowed or allowable if you used your home for business or rental purposes. Amend 2009 tax return Energy-related credits allowed for expenditures made on the residence. Amend 2009 tax return (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. Amend 2009 tax return ) Adoption credit you claimed for improvements added to the basis of your home. Amend 2009 tax return Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return District of Columbia first-time homebuyer credit allowed on the purchase of a principal residence in the District of Columbia. Amend 2009 tax return 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. Amend 2009 tax return Discharges of qualified principal residence indebtedness. Amend 2009 tax return   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. Amend 2009 tax return This exclusion applies to discharges made after 2006 and before 2014. Amend 2009 tax return 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. Amend 2009 tax return   File Form 982 with your tax return. Amend 2009 tax return See the form's instructions for detailed information. Amend 2009 tax return    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. Amend 2009 tax return In most cases, this would occur in a refinancing or a restructuring of the mortgage. Amend 2009 tax return Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. Amend 2009 tax return 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. Amend 2009 tax return To qualify, you must meet the ownership and use tests described later. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return You can use Worksheet 2 (near the end of this publication) to figure the amount of your exclusion and your taxable gain, if any. Amend 2009 tax return If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. Amend 2009 tax return See Publication 505, Tax Withholding and Estimated Tax. Amend 2009 tax return 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. Amend 2009 tax return You meet the ownership test. Amend 2009 tax return You meet the use test. Amend 2009 tax return During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. Amend 2009 tax return For details on gain allocated to periods of nonqualified use, see Nonqualified Use , later. Amend 2009 tax return 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. Amend 2009 tax return 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 . Amend 2009 tax return Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. Amend 2009 tax return 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). Amend 2009 tax return Exception. Amend 2009 tax return   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. Amend 2009 tax return However, the maximum amount you may be able to exclude will be reduced. Amend 2009 tax return See Reduced Maximum Exclusion , later. Amend 2009 tax return Example 1—home owned and occupied for at least 2 years. Amend 2009 tax return Mya bought and moved into her main home in September 2011. Amend 2009 tax return She sold the home at a gain in October 2013. Amend 2009 tax return 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. Amend 2009 tax return She meets the ownership and use tests. Amend 2009 tax return Example 2—ownership test met but use test not met. Amend 2009 tax return Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. Amend 2009 tax return He later sold the home for a gain in June 2013. Amend 2009 tax return He owned the home during the entire 5-year period ending on the date of sale. Amend 2009 tax return He meets the ownership test but not the use test. Amend 2009 tax return He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return Example. Amend 2009 tax return Naomi bought and moved into a house in July 2009. Amend 2009 tax return She lived there for 13 months and then moved in with a friend. Amend 2009 tax return She later moved back into her house and lived there for 12 months until she sold it in August 2013. Amend 2009 tax return 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. Amend 2009 tax return Temporary absence. Amend 2009 tax return   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. Amend 2009 tax return The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. Amend 2009 tax return Example 1. Amend 2009 tax return David Johnson, who is single, bought and moved into his home on February 1, 2011. Amend 2009 tax return Each year during 2011 and 2012, David left his home for a 2-month summer vacation. Amend 2009 tax return David sold the house on March 1, 2013. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return Example 2. Amend 2009 tax return 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. Amend 2009 tax return Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. Amend 2009 tax return He cannot exclude any part of his gain because he did not use the residence for the required 2 years. Amend 2009 tax return Ownership and use tests met at different times. Amend 2009 tax return   You can meet the ownership and use tests during different 2-year periods. Amend 2009 tax return However, you must meet both tests during the 5-year period ending on the date of the sale. Amend 2009 tax return Example. Amend 2009 tax return Beginning in 2002, Helen Jones lived in a rented apartment. Amend 2009 tax return The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. Amend 2009 tax return In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. Amend 2009 tax return On July 12, 2013, while still living in her daughter's home, she sold her condominium. Amend 2009 tax return 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. Amend 2009 tax return She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). Amend 2009 tax return She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). Amend 2009 tax return 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. Amend 2009 tax return Cooperative apartment. Amend 2009 tax return   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. Amend 2009 tax return Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. Amend 2009 tax return Exception for individuals with a disability. Amend 2009 tax return   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. Amend 2009 tax return 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. Amend 2009 tax return   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. Amend 2009 tax return Previous home destroyed or condemned. Amend 2009 tax return   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. Amend 2009 tax return 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). Amend 2009 tax return 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. Amend 2009 tax return Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Amend 2009 tax return   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. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return   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. Amend 2009 tax return Example. Amend 2009 tax return John bought and moved into a home in 2005. Amend 2009 tax return He lived in it as his main home for 2½ years. Amend 2009 tax return For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. Amend 2009 tax return He then sold the home at a gain in 2013. Amend 2009 tax return 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. Amend 2009 tax return This means he can disregard those 6 years. Amend 2009 tax return Therefore, John's 5-year test period consists of the 5 years before he went on qualified official extended duty. Amend 2009 tax return He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. Amend 2009 tax return Period of suspension. Amend 2009 tax return   The period of suspension cannot last more than 10 years. Amend 2009 tax return Together, the 10-year suspension period and the 5-year test period can be as long as, but no more than, 15 years. Amend 2009 tax return You cannot suspend the 5-year period for more than one property at a time. Amend 2009 tax return You can revoke your choice to suspend the 5-year period at any time. Amend 2009 tax return Example. Amend 2009 tax return Mary bought a home on April 1, 1997. Amend 2009 tax return She used it as her main home until August 31, 2000. Amend 2009 tax return On September 1, 2000, she went on qualified official extended duty with the Navy. Amend 2009 tax return She did not live in the house again before selling it on July 31, 2013. Amend 2009 tax return Mary chooses to use the entire 10-year suspension period. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return She meets the ownership and use tests because she owned and lived in the home for at least 2 years during this test period. Amend 2009 tax return Uniformed services. Amend 2009 tax return   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. Amend 2009 tax return Foreign Service member. Amend 2009 tax return   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. Amend 2009 tax return A Chief of mission. Amend 2009 tax return An Ambassador at large. Amend 2009 tax return A member of the Senior Foreign Service. Amend 2009 tax return A Foreign Service officer. Amend 2009 tax return Part of the Foreign Service personnel. Amend 2009 tax return Employee of the intelligence community. Amend 2009 tax return   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. Amend 2009 tax return The Office of the Director of National Intelligence. Amend 2009 tax return The Central Intelligence Agency. Amend 2009 tax return The National Security Agency. Amend 2009 tax return The Defense Intelligence Agency. Amend 2009 tax return The National Geospatial-Intelligence Agency. Amend 2009 tax return The National Reconnaissance Office and any other office within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs. Amend 2009 tax return 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. Amend 2009 tax return The Bureau of Intelligence and Research of the Department of State. Amend 2009 tax return Any of the elements of the Department of Homeland Security concerned with the analyses of foreign intelligence information. Amend 2009 tax return Qualified official extended duty. Amend 2009 tax return   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. Amend 2009 tax return   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. Amend 2009 tax return 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. Amend 2009 tax return (But see Special rules for joint returns, next. Amend 2009 tax return ) Special rules for joint returns. Amend 2009 tax return   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. Amend 2009 tax return You are married and file a joint return for the year. Amend 2009 tax return Either you or your spouse meets the ownership test. Amend 2009 tax return Both you and your spouse meet the use test. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. Amend 2009 tax return Example 1—one spouse sells a home. Amend 2009 tax return Emily sells her home in June 2013 for a gain of $300,000. Amend 2009 tax return She marries Jamie later in the year. Amend 2009 tax return She meets the ownership and use tests, but Jamie does not. Amend 2009 tax return Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. Amend 2009 tax return The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. Amend 2009 tax return Example 2—each spouse sells a home. Amend 2009 tax return 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. Amend 2009 tax return He meets the ownership and use tests on his home, but Emily does not. Amend 2009 tax return Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. Amend 2009 tax return However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. Amend 2009 tax return Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. Amend 2009 tax return 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. Amend 2009 tax return Sale of main home by surviving spouse. Amend 2009 tax return   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. Amend 2009 tax return   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. Amend 2009 tax return The sale or exchange took place after 2008. Amend 2009 tax return The sale or exchange took place no more than 2 years after the date of death of your spouse. Amend 2009 tax return You have not remarried. Amend 2009 tax return You and your spouse met the use test at the time of your spouse's death. Amend 2009 tax return You or your spouse met the ownership test at the time of your spouse's death. Amend 2009 tax return Neither you nor your spouse excluded gain from the sale of another home during the last 2 years before the date of death. Amend 2009 tax return The ownership and use tests were described earlier. Amend 2009 tax return Example. Amend 2009 tax return Harry owned and used a house as his main home since 2009. Amend 2009 tax return Harry and Wilma married on July 1, 2013, and from that date they used Harry's house as their main home. Amend 2009 tax return Harry died on August 15, 2013, and Wilma inherited the property. Amend 2009 tax return Wilma sold the property on September 1, 2013, at which time she had not remarried. Amend 2009 tax return 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. Amend 2009 tax return Home transferred from spouse. Amend 2009 tax return   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. Amend 2009 tax return Use of home after divorce. Amend 2009 tax return   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. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. Amend 2009 tax return A change in place of employment. Amend 2009 tax return Health. Amend 2009 tax return Unforeseen circumstances. Amend 2009 tax return Qualified individual. Amend 2009 tax return   For purposes of the reduced maximum exclusion, a qualified individual is any of the following. Amend 2009 tax return You. Amend 2009 tax return Your spouse. Amend 2009 tax return A co-owner of the home. Amend 2009 tax return A person whose main home is the same as yours. Amend 2009 tax return Primary reason for sale. Amend 2009 tax return   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. Amend 2009 tax return You qualify under a “safe harbor. Amend 2009 tax return ” This is a specific set of facts and circumstances that, if applicable, qualifies you to claim a reduced maximum exclusion. Amend 2009 tax return Safe harbors corresponding to the reasons listed above are described later. Amend 2009 tax return 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. Amend 2009 tax return  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. Amend 2009 tax return 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. Amend 2009 tax return Employment. Amend 2009 tax return   For this purpose, employment includes the start of work with a new employer or continuation of work with the same employer. Amend 2009 tax return It also includes the start or continuation of self-employment. Amend 2009 tax return Distance safe harbor. Amend 2009 tax return   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). Amend 2009 tax return Example. Amend 2009 tax return Justin was unemployed and living in a townhouse in Florida he had owned and used as his main home since 2012. Amend 2009 tax return He got a job in North Carolina and sold his townhouse in 2013. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return The sale of your home is not because of health if the sale merely benefits a qualified individual's general health or well-being. Amend 2009 tax return 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. Amend 2009 tax return Parent, grandparent, stepmother, stepfather. Amend 2009 tax return Child, grandchild, stepchild, adopted child, eligible foster child. Amend 2009 tax return Brother, sister, stepbrother, stepsister, half-brother, half-sister. Amend 2009 tax return Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law. Amend 2009 tax return Uncle, aunt, nephew, niece, or cousin. Amend 2009 tax return Example. Amend 2009 tax return In 2012, Chase and Lauren, spouses, bought a house that they used as their main home. Amend 2009 tax return Lauren's father has a chronic disease and is unable to care for himself. Amend 2009 tax return In 2013, Chase and Lauren sold their home in order to move into Lauren's father's house to provide care for him. Amend 2009 tax return 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. Amend 2009 tax return Doctor's recommendation safe harbor. Amend 2009 tax return   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. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return Specific event safe harbors. Amend 2009 tax return   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. Amend 2009 tax return An involuntary conversion of your home, such as when your home is destroyed or condemned. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return An event the IRS determined to be an unforeseen circumstance in published guidance of general applicability. Amend 2009 tax return For example, the IRS determined the September 11, 2001, terrorist attacks to be an unforeseen circumstance. Amend 2009 tax return Reasonable basic living expenses. Amend 2009 tax return   Reasonable basic living expenses for your household include the following. Amend 2009 tax return Amounts spent for food. Amend 2009 tax return Amounts spent for clothing. Amend 2009 tax return Housing and related expenses. Amend 2009 tax return Medical expenses. Amend 2009 tax return Transportation expenses. Amend 2009 tax return Tax payments. Amend 2009 tax return Court-ordered payments. Amend 2009 tax return Expenses reasonably necessary to produce income. Amend 2009 tax return   Any of these amounts spent to maintain an affluent or luxurious standard of living are not reasonable basic living expenses. Amend 2009 tax return 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. Amend 2009 tax return 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). Amend 2009 tax return Exceptions. Amend 2009 tax return   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. Amend 2009 tax return Calculation. Amend 2009 tax return   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. Amend 2009 tax return   For examples of this calculation, see Business Use or Rental of Home , next. Amend 2009 tax return 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. Amend 2009 tax return Example 1. Amend 2009 tax return On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. Amend 2009 tax return 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. Amend 2009 tax return The house was rented from June 1, 2009, to March 31, 2011. Amend 2009 tax return Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return Example 2. Amend 2009 tax return William owned and used a house as his main home from 2007 through 2010. Amend 2009 tax return On January 1, 2011, he moved to another state. Amend 2009 tax return He rented his house from that date until April 30, 2013, when he sold it. Amend 2009 tax return 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. Amend 2009 tax return Because it was rental property at the time of the sale, he must report the sale on Form 4797. Amend 2009 tax return 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. Amend 2009 tax return Because he met the ownership and use tests, he can exclude gain up to $250,000. Amend 2009 tax return 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. Amend 2009 tax return Depreciation after May 6, 1997. Amend 2009 tax return   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. Amend 2009 tax return 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. Amend 2009 tax return Unrecaptured section 1250 gain. Amend 2009 tax return   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. Amend 2009 tax return 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. Amend 2009 tax return Use the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions for this purpose. Amend 2009 tax return Worksheet 2. Amend 2009 tax return Taxable Gain on Sale of Home—Completed Example 1 for Amy Part 1. Amend 2009 tax return Gain or (Loss) on Sale       1. Amend 2009 tax return   Selling price of home 1. Amend 2009 tax return     2. Amend 2009 tax return   Selling expenses (including commissions, advertising and legal fees, and seller-paid loan charges) 2. Amend 2009 tax return     3. Amend 2009 tax return   Subtract line 2 from line 1. Amend 2009 tax return This is the amount realized 3. Amend 2009 tax return     4. Amend 2009 tax return   Adjusted basis of home sold (from Worksheet 1, line 13) 4. Amend 2009 tax return     5. Amend 2009 tax return   Gain or (loss) on the sale. Amend 2009 tax return Subtract line 4 from line 3. Amend 2009 tax return If this is a loss, stop here 5. Amend 2009 tax return 200,000   Part 2. Amend 2009 tax return Exclusion and Taxable Gain       6. Amend 2009 tax return   Enter any depreciation allowed or allowable on the property for periods after May 6, 1997. Amend 2009 tax return If none, enter -0- 6. Amend 2009 tax return 10,000   7. Amend 2009 tax return   Subtract line 6 from line 5. Amend 2009 tax return If the result is less than zero, enter -0- 7. Amend 2009 tax return 190,000   8. Amend 2009 tax return   Aggregate number of days of nonqualified use after 2008. Amend 2009 tax return If none, enter -0-. Amend 2009 tax return  If line 8 is equal to zero, skip to line 12 and enter the amount from line 7 on line 12 8. Amend 2009 tax return 668   9. Amend 2009 tax return   Number of days taxpayer owned the property 9. Amend 2009 tax return 2,080   10. Amend 2009 tax return   Divide the amount on line 8 by the amount on line 9. Amend 2009 tax return Enter the result as a decimal (rounded to at least 3 places). Amend 2009 tax return But do not enter an amount greater than 1. Amend 2009 tax return 00 10. Amend 2009 tax return 0. Amend 2009 tax return 321   11. Amend 2009 tax return   Gain allocated to nonqualified use. Amend 2009 tax return (Line 7 multiplied by line 10) 11. Amend 2009 tax return 60,990   12. Amend 2009 tax return   Gain eligible for exclusion. Amend 2009 tax return Subtract line 11 from line 7 12. Amend 2009 tax return 129,010   13. Amend 2009 tax return   If you qualify to exclude gain on the sale, enter your maximum exclusion (see Maximum Exclusion ). Amend 2009 tax return  If you qualify for a reduced maximum exclusion, enter the amount from Worksheet 3, line 7. Amend 2009 tax return If you do  not qualify to exclude gain, enter -0- 13. Amend 2009 tax return 250,000   14. Amend 2009 tax return   Exclusion. Amend 2009 tax return Enter the smaller of line 12 or line 13 14. Amend 2009 tax return 129,010   15. Amend 2009 tax return   Taxable gain. Amend 2009 tax return Subtract line 14 from line 5. Amend 2009 tax return Report your taxable gain as described under Reporting the Sale . Amend 2009 tax return If the amount on line 6 is more than zero, complete line 16 15. Amend 2009 tax return 70,990   16. Amend 2009 tax return   Enter the smaller of line 6 or line 15. Amend 2009 tax return Enter this amount on line 12 of the Unrecaptured Section 1250 Gain  Worksheet in the instructions for Schedule D (Form 1040) 16. Amend 2009 tax return 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. Amend 2009 tax return 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. Amend 2009 tax return In addition, you do not need to report the sale of the business or rental part on Form 4797. Amend 2009 tax return This is true whether or not you were entitled to claim any depreciation. Amend 2009 tax return However, you cannot exclude the part of any gain equal to any depreciation allowed or allowable after May 6, 1997. Amend 2009 tax return See Depreciation after May 6, 1997, earlier. Amend 2009 tax return Example 1. Amend 2009 tax return Ray sold his main home in 2013 at a $30,000 gain. Amend 2009 tax return He has no gains or losses from the sale of property other than the gain from the sale of his home. Amend 2009 tax return He meets the ownership and use tests to exclude the gain from his income. Amend 2009 tax return However, he used part of the home as a business office in 2012 and claimed $500 depreciation. Amend 2009 tax return 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. Amend 2009 tax return In addition, he does not have to report any part of the gain on Form 4797. Amend 2009 tax return Because Ray was entitled to take a depreciation deduction, he must recognize $500 of the gain as unrecaptured section 1250 gain. Amend 2009 tax return He reports his gain, exclusion, and the taxable gain of $500 on Form 8949 and Schedule D (Form 1040). Amend 2009 tax return Example 2. Amend 2009 tax return 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. Amend 2009 tax return Since Ray did not claim any depreciation, he can exclude the entire $30,000 gain. Amend 2009 tax return 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. Amend 2009 tax return Examples are: A working farm on which your house was located, A duplex in w
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The Commissioner's Section

Commissioner John Koskinen
John Koskinen is the 48th Commissioner of the Internal Revenue Service.

Commissioner's Comments, Statements and Remarks
IRS Commissioner discusses a range of tax administration issues.

Previous IRS Commissioners
There have been 47 previous commissioners of Internal Revenue and 26 acting commissioners since the agency was created in 1862.

Longest- and Shortest-Serving Commissioners of Internal Revenue
Before RRA-98 set a five-year term of office, the average length of a Commissioner's tenure was about three years. These were anything but average.

Page Last Reviewed or Updated: 27-Mar-2014

The Amend 2009 Tax Return

Amend 2009 tax return Publication 970 - Additional Material Table of Contents AppendicesAppendix A. Amend 2009 tax return Illustrated Example of Education Credits Glossary Appendices The following appendices are provided to help you claim the education benefits that will give you the lowest tax. Amend 2009 tax return Appendix A—An illustrated example of education credits, including a filled-in Form 8863 showing how to claim both the American opportunity credit and lifetime learning credit for 2013. Amend 2009 tax return Appendix B—A chart summarizing some of the major differences between the education tax benefits discussed in this publication. Amend 2009 tax return It is intended only as a guide. Amend 2009 tax return Look in this publication for more complete information. Amend 2009 tax return   Appendix A. Amend 2009 tax return Illustrated Example of Education Credits Dave and Valerie Jones are married and on their 2013 joint tax return they claim exemptions for their two dependent children, Sean (age 21, social security number: 000-00-0001) and Carey (age 18, social security number: 000–00–0002). Amend 2009 tax return Their modified adjusted gross income (MAGI) on Form 1040, line 38 is $110,000. Amend 2009 tax return Because Dave and Valerie have unusually high itemized deductions, their taxable income is $10,000 and their tax before credits is $1,000. Amend 2009 tax return Sean enrolled as a full-time graduate student in August 2013 at California State College. Amend 2009 tax return He graduated with his bachelor's degree in 2012 and did not attend school from January 2013 through July 2013. Amend 2009 tax return His parents claimed the Hope Scholarship Credit for Sean for 2008 and the American opportunity credit for Sean for 2010, 2011, and 2012. Amend 2009 tax return Carey enrolled full time as a freshman at the same college in January 2013 to begin working on her bachelor's degree. Amend 2009 tax return In 2013, Dave and Valerie paid $7,000 in tuition for Sean and $8,500 in tuition for Carey. Amend 2009 tax return California State College issued two Forms 1098-T, one for Sean and one for Carey, and sent them to the Joneses' residence. Amend 2009 tax return California State College reports amounts billed in 2013 instead of amounts paid during 2013. Amend 2009 tax return In completing Form 8863, the Joneses use the amounts they paid. Amend 2009 tax return Neither Sean nor Carey has been convicted of a felony for possession or distribution of a controlled substance before the end of 2013. Amend 2009 tax return Dave and Valerie figure their education credits by completing Form 8863. Amend 2009 tax return They begin Form 8863 on page 2 before completing Part I on page 1. Amend 2009 tax return Because the Joneses have two eligible students, they will complete page 2 twice, once for their son, Sean, and once for their daughter, Carey. Amend 2009 tax return The Joneses decide to complete Part III for Carey first, as shown later. Amend 2009 tax return They carry over the amount of $2,500 entered on Part III, line 30, to Part I, line 1. Amend 2009 tax return The Joneses complete a separate Part III for their son Sean. Amend 2009 tax return They check the “Yes” box on line 23, determine that Sean is not eligible for the American opportunity credit, and go to line 31 as instructed. Amend 2009 tax return They figure their line 31 adjusted qualified education expenses for Sean to be $7,000. Amend 2009 tax return Once they have completed Part III for each student, they figure their credits. Amend 2009 tax return The Joneses figure their refundable American opportunity credit of $1,000 by completing Form 8863, Part I, lines 1 through 8. Amend 2009 tax return They enter the amount from line 8, $1,000, on line 66 of their Form 1040. Amend 2009 tax return The Joneses enter $7,000 on Part II, line 10, of Form 8863 and figure their tentative lifetime learning credit for 2013 to be $1,400 (line 12). Amend 2009 tax return They cannot claim the full amount because their MAGI of $110,000 is greater than $107,000. Amend 2009 tax return They enter the reduced amount of $1,190 (figured on Part II, line 18) on the Credit Limit Worksheet, line 1. Amend 2009 tax return The $1,190 is added to their nonrefundable American opportunity credit ($1,500 on line 2 of the Credit Limit Worksheet) for a total nonrefundable credit of $2,690. Amend 2009 tax return The Joneses enter $1,000 on line 7 of the Credit Limit Worksheet, which is the smaller of their tax from line 46 of their Form 1040 (which is $1,000) or the $2,690 on line 3 of the Credit Limit Worksheet. Amend 2009 tax return They enter $1,000 on line 19, Part II of Form 8863 and on line 49 of Form 1040. Amend 2009 tax return This image is too large to be displayed in the current screen. Amend 2009 tax return Please click the link to view the image. Amend 2009 tax return Form 1098-T Adjusted Qualified Education Expenses Worksheet (Form 8863 instructions) 1. Amend 2009 tax return Total qualified education expenses paid for or on behalf of the student in 2013 for the academic period 8,500 2. Amend 2009 tax return Less adjustments:     a. Amend 2009 tax return Tax-free educational assistance received in 2013 allocable to the academic period   0     b. Amend 2009 tax return Tax-free educational assistance received in 2014 (and before you file your 2013 tax return) allocable to the academic period   0     c. Amend 2009 tax return Refunds of qualified education expenses paid in 2013 if the refund is received in 2013 or in 2014 before you file your 2013 tax return   0   3. Amend 2009 tax return Total adjustments (add lines 2a, 2b, and 2c) 0 4. Amend 2009 tax return Adjusted qualified education expenses. Amend 2009 tax return Subtract line 3 from line 1. Amend 2009 tax return If zero or less, enter -0- 8,500 This image is too large to be displayed in the current screen. Amend 2009 tax return Please click the link to view the image. Amend 2009 tax return Form 1098-T Adjusted Qualified Education Expenses Worksheet (Form 8863 instructions) 1. Amend 2009 tax return Total qualified education expenses paid for or on behalf of the student in 2013 for the academic period 7,000 2. Amend 2009 tax return Less adjustments:     a. Amend 2009 tax return Tax-free educational assistance received in 2013 allocable to the academic period   0     b. Amend 2009 tax return Tax-free educational assistance received in 2014 (and before you file your 2013 tax return) allocable to the academic period   0     c. Amend 2009 tax return Refunds of qualified education expenses paid in 2013 if the refund is received in 2013 or in 2014 before you file your 2013 tax return   0   3. Amend 2009 tax return Total adjustments (add lines 2a, 2b, and 2c) 0 4. Amend 2009 tax return Adjusted qualified education expenses. Amend 2009 tax return Subtract line 3 from line 1. Amend 2009 tax return If zero or less, enter -0- 7,000 Credit Limit Worksheet (Form 8863 instructions) Nonrefundable Credit Worksheet 1. Amend 2009 tax return Enter the amount from Form 8863, line 18 1. Amend 2009 tax return 1,190 2. Amend 2009 tax return Enter the amount from Form 8863, line 9 2. Amend 2009 tax return 1,500 3. Amend 2009 tax return Add lines 1 and 2 3. Amend 2009 tax return 2,690 4. Amend 2009 tax return Enter the amount from: Form 1040, line 46; or Form 1040A, line 28 4. Amend 2009 tax return 1,000 5. Amend 2009 tax return Enter the amount from either: Form 1040, lines 47 and 48, and the amount from Schedule R included on Form 1040, line 53; or Form 1040A, lines 29 and 30 5. Amend 2009 tax return 0 6. Amend 2009 tax return Subtract line 5 from line 4 6. Amend 2009 tax return 1,000 7. Amend 2009 tax return   Enter the smaller of line 3 or line 6 here and on Form 8863, line 19 7. Amend 2009 tax return 1,000 This image is too large to be displayed in the current screen. Amend 2009 tax return Please click the link to view the image. Amend 2009 tax return Form 8863 for Dave and Valerie Jones This image is too large to be displayed in the current screen. Amend 2009 tax return Please click the link to view the image. Amend 2009 tax return Carey Jones page 2 This image is too large to be displayed in the current screen. Amend 2009 tax return Please click the link to view the image. Amend 2009 tax return Filled-in Form 8863 Jones page 2 Appendix B. Amend 2009 tax return Highlights of Education Tax Benefits for Tax Year 2013 This chart highlights some differences among the benefits discussed in this publication. Amend 2009 tax return See the text for definitions and details. Amend 2009 tax return Do not rely on this chart alone. Amend 2009 tax return    Caution:You generally cannot claim more than one benefit for the same education expense. Amend 2009 tax return   Scholarships,  Fellowships, Grants, and  Tuition  Reductions American Opportunity Credit Lifetime Learning Credit Student Loan Interest Deduction Tuition and Fees Deduction Coverdell ESA† Qualified Tuition Program (QTP)† Education Exception to Additional Tax on Early IRA Distributions† Education Savings Bond Program† Employer- Provided Educational Assistance† Business Deduction for Work-Related Education What is your  benefit? Amounts received may not be taxable   Credits can reduce the amount of tax you have to pay. Amend 2009 tax return    40% of the credit may be refundable (limited to $1,000 per student). Amend 2009 tax return Credits can reduce amount of tax you must pay Can deduct interest paid Can deduct expenses Earnings not  taxed Earnings not taxed No 10%  additional tax on early distribution Interest not taxed Employer benefits not taxed Can deduct expenses What is the annual limit? None $2,500 credit per student $2,000 credit per tax return     $2,500 deduction $4,000 deduction $2,000 contribution per beneficiary None Amount of qualified  education expenses Amount of qualified  education expenses $5,250 exclusion Amount of qualifying work-related education expenses What expenses  qualify besides  tuition and required enrollment fees? Course-related expenses such as fees, books, supplies, and equipment Course-related books, supplies, and equipment Amounts paid for required books, etc. Amend 2009 tax return , that must be paid to the educational institution, etc. Amend 2009 tax return , are required fees Books Supplies Equipment  Room & board  Transportation  Other necessary expenses  None Books Supplies Equipment  Expenses for special needs services  Payments to QTP  Higher education: Room & board if  at least half-time  student  Elem/sec (K–12) education: Tutoring Room & board Uniforms Transportation Computer  access Supplementary expenses Books Supplies Equipment  Room & board if  at least half-time student  Expenses for special needs services Books Supplies Equipment  Room & board if  at least half-time student  Expenses for special needs services Payments to Coverdell ESA  Payments to QTP Books Supplies Equipment Transportation  Travel  Other necessary expenses   Scholarships,  Fellowships, Grants, and  Tuition  Reductions American Opportunity Credit Lifetime Learning Credit Student Loan Interest Deduction Tuition and Fees Deduction Coverdell ESA† Qualified Tuition Program (QTP)† Education Exception to Additional Tax on Early IRA Distributions† Education Savings Bond Program† Employer- Provided Educational Assistance† Business Deduction for Work-Related Education What education qualifies? Undergraduate & graduate  K–12 Undergraduate & graduate Undergraduate & graduate  Courses to acquire or improve job skills    Undergraduate & graduate Undergraduate & graduate Undergraduate & graduate  K–12 Undergraduate & graduate Undergraduate & graduate Undergraduate & graduate Undergraduate & graduate Required by employer or law to keep present job, salary, status  Maintain or improve job skills What are some of the other  conditions that  apply? Must be in degree or vocational program  Payment of tuition and required fees must be allowed under the grant Can be claimed for only 4 tax years (which includes years Hope Scholarship Credit claimed)  Must be enrolled at least half-time in degree program  No felony drug conviction(s)  Must not have completed first 4 years of postsecondary education before end of preceding tax year. Amend 2009 tax return   No other conditions Must have been at least half-time  student in degree program Cannot claim both deduction & education credit for same student in same year Assets must be distributed at age 30 unless special  needs beneficiary No other conditions No other conditions Applies only to qualified series  EE bonds issued after 1989 or series I bonds No other conditions Cannot be to  meet minimum educational requirements of present trade/business  Cannot qualify  you for new trade/business   In what income  range do benefits  phase out? No phaseout $80,000 – $90,000  $160,000 – $180,000 for joint returns $53,000 – $63,000  $107,000 – $127,000 for joint returns $60,000 – $75,000  $125,000 –  $155,000 for  joint returns  $60,000 – $80,000  $130,000 –  $160,000 for  joint returns  $95,000 – $110,000  $190,000 – $220,000 for  joint returns No phaseout No phaseout   No phaseout No phaseout † Any nontaxable distribution is limited to the amount that does not exceed qualified education expenses. Amend 2009 tax return Glossary The education benefits included in this publication were enacted over many years, leading to a number of common terms being defined differently from one benefit to the next. Amend 2009 tax return For example, an eligible educational institution means one thing when determining if earnings from a Coverdell education savings account are not taxable and something else when determining if a scholarship or fellowship is not taxable. Amend 2009 tax return For each term listed below that has more than one definition, the definition for each education benefit is listed. Amend 2009 tax return Academic period:   A semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. Amend 2009 tax return If an educational institution uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. Amend 2009 tax return Adjusted qualified education expenses (AQEE):    Qualified education expenses (defined later) reduced by any tax-free educational assistance, such as a tax-free scholarship or employer-provided educational assistance. Amend 2009 tax return They must also be reduced by any qualified education expenses deducted elsewhere on your return, used to determine an education credit or other benefit, or used to determine a tax-free distribution. Amend 2009 tax return For information on a specific benefit, see the appropriate chapter in this publication. Amend 2009 tax return Candidate for a degree:   A student who meets either of the following requirements. Amend 2009 tax return Attends a primary or secondary school or pursues a degree at a college or university, or Attends an accredited educational institution that is authorized to provide: A program that is acceptable for full credit toward a bachelor's or higher degree, or A program of training to prepare students for gainful employment in a recognized occupation. Amend 2009 tax return Designated beneficiary:   The individual named in the document creating the account/plan who is to receive the benefit of the funds in the account/plan. Amend 2009 tax return Eligible educational institution:    American opportunity credit. Amend 2009 tax return Any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. Amend 2009 tax return It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Amend 2009 tax return Coverdell education savings account (ESA). Amend 2009 tax return Any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. Amend 2009 tax return It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Amend 2009 tax return Also included is any public, private, or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law. Amend 2009 tax return Education savings bond program. Amend 2009 tax return Same as American opportunity credit in this category. Amend 2009 tax return IRA, early distributions from. Amend 2009 tax return Same as American opportunity credit in this category. Amend 2009 tax return Lifetime learning credit. Amend 2009 tax return Same as American opportunity credit in this category. Amend 2009 tax return Qualified tuition program (QTP). Amend 2009 tax return Same as American opportunity credit in this category. Amend 2009 tax return Scholarships and fellowships. Amend 2009 tax return An institution that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities. Amend 2009 tax return Student loan, cancellation of. Amend 2009 tax return Same as Scholarships and fellowships in this category. Amend 2009 tax return Student loan interest deduction. Amend 2009 tax return Any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. Amend 2009 tax return It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Amend 2009 tax return Also included is an institution that conducts an internship or residency program leading to a degree or certificate from an institution of higher education, a hospital, or a health care facility that offers postgraduate training. Amend 2009 tax return Tuition and fees deduction. Amend 2009 tax return Same as American opportunity credit in this category. Amend 2009 tax return Eligible student:    American opportunity credit. Amend 2009 tax return A student who meets all of the following requirements for the tax year for which the credit is being determined. Amend 2009 tax return Did not have expenses that were used to figure an American opportunity or Hope Scholarship Credit in any 4 earlier tax years. Amend 2009 tax return Had not completed the first 4 years of postsecondary education (generally the freshman through senior years). Amend 2009 tax return For at least one academic period beginning in the tax year, was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential at an eligible educational institution. Amend 2009 tax return Was free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of the tax year. Amend 2009 tax return Lifetime learning credit. Amend 2009 tax return A student who is enrolled in one or more courses at an eligible educational institution. Amend 2009 tax return Student loan interest deduction. Amend 2009 tax return A student who was enrolled at least half-time in a program leading to a postsecondary degree, certificate, or other recognized educational credential at an eligible educational institution. Amend 2009 tax return Tuition and fees deduction. Amend 2009 tax return A student who is enrolled in one or more courses at an eligible educational institution. Amend 2009 tax return Half-time student:   A student who is enrolled for at least half the full-time academic work load for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. Amend 2009 tax return Modified adjusted gross income (MAGI):    American opportunity credit. Amend 2009 tax return Adjusted gross income (AGI) as figured on the federal income tax return, modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Amend 2009 tax return Coverdell education savings account (ESA). Amend 2009 tax return Same as American opportunity credit in this category. Amend 2009 tax return Education savings bond program. Amend 2009 tax return Adjusted gross income (AGI) as figured on the federal income tax return without taking into account any savings bond interest exclusion and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, Exclusion of income by bona fide residents of Puerto Rico, Exclusion for adoption benefits received under an employer's adoption assistance program, Deduction for student loan interest, Deduction for tuition and fees, and Deduction for domestic production activities. Amend 2009 tax return Lifetime learning credit. Amend 2009 tax return Same as American opportunity credit in this category. Amend 2009 tax return Student loan interest deduction. Amend 2009 tax return Adjusted gross income (AGI) as figured on the federal income tax return without taking into account any student loan interest deduction, tuition and fees deduction, or domestic production activities deduction, and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Amend 2009 tax return Tuition and fees deduction. Amend 2009 tax return Adjusted gross income (AGI) as figured on the federal income tax return without taking into account any tuition and fees deduction, or domestic production activities deduction, and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Amend 2009 tax return Phaseout:   The amount of credit or deduction allowed is reduced when modified adjusted gross income (MAGI) is greater than a specified amount of income. Amend 2009 tax return Qualified education expenses:   See pertinent chapter for specific items. Amend 2009 tax return    American opportunity credit. Amend 2009 tax return Tuition and certain related expenses (including student activity fees) required for enrollment or attendance at an eligible educational institution. Amend 2009 tax return Books, supplies, and equipment needed for a course of study are included even if not purchased from the educational institution. Amend 2009 tax return Does not include expenses for room and board. Amend 2009 tax return Does not include expenses for courses involving sports, games, or hobbies (including noncredit courses) that are not part of the student's postsecondary degree program. Amend 2009 tax return Coverdell education savings account (ESA). Amend 2009 tax return Expenses related to or required for enrollment or attendance of the designated beneficiary at an eligible elementary, secondary, or postsecondary school. Amend 2009 tax return Many specialized expenses included for K–12. Amend 2009 tax return Also includes expenses for special needs services and contribution to qualified tuition program (QTP). Amend 2009 tax return Education savings bond program. Amend 2009 tax return Tuition and fees required to enroll at or attend an eligible educational institution. Amend 2009 tax return Also includes contributions to a qualified tuition program (QTP) or Coverdell education savings account (ESA). Amend 2009 tax return Does not include expenses for room and board. Amend 2009 tax return Does not include expenses for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. Amend 2009 tax return IRA, early distributions from. Amend 2009 tax return Tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution, plus certain limited costs of room and board for students who are enrolled at least half-time. Amend 2009 tax return Also includes expenses for special needs services incurred by or for special needs students in connection with their enrollment or attendance. Amend 2009 tax return Lifetime learning credit. Amend 2009 tax return Tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Amend 2009 tax return Student-activity fees and expenses for course-related books, supplies, and equipment are included only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance. Amend 2009 tax return Does not include expenses for room and board. Amend 2009 tax return Does not include expenses for courses involving sports, games, or hobbies (including noncredit courses) that are not part of the student's postsecondary degree program, unless taken by the student to acquire or improve job skills. Amend 2009 tax return Qualified tuition program (QTP). Amend 2009 tax return Tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution, plus certain limited costs of room and board for students who are enrolled at least half-time. Amend 2009 tax return Includes expenses for special needs services and computer access. Amend 2009 tax return Scholarships and fellowships. Amend 2009 tax return Expenses for tuition and fees required to enroll at or attend an eligible educational institution, and course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. Amend 2009 tax return Course-related items must be required of all students in the course of instruction. Amend 2009 tax return Student loan interest deduction. Amend 2009 tax return Total costs of attending an eligible educational institution, including graduate school (however, limitations may apply to the cost of room and board allowed). Amend 2009 tax return Tuition and fees deduction. Amend 2009 tax return Tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. Amend 2009 tax return Student-activity fees and expenses for course-related books, supplies, and equipment are included only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance. Amend 2009 tax return Recapture:   To include as income on your current year's return an amount allowed as a deduction in a prior year. Amend 2009 tax return To include as tax on your current year's return an amount allowed as a credit in a prior year. Amend 2009 tax return Rollover:   A tax-free distribution to you of cash or other assets from a tax-favored plan that you contribute to another tax-favored plan. Amend 2009 tax return Transfer:   A movement of funds in a tax-favored plan from one trustee directly to another, either at your request or at the trustee's request. Amend 2009 tax return Prev  Up  Next   Home   More Online Publications