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Amended Tax Form

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Amended Tax Form

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

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Statistics of Income Working Papers

The Statistics of Income (SOI) working papers present new and exciting research on the U.S. Federal tax system and the methods used to produce tax statistics. Papers are presented at professional conferences, such as the Joint Statistical Meeting of the American Statistical Association and the National Tax Association’s annual conference on taxation, and are often published in professional journals. Below you will find a selection of papers organized by presentation year.

Papers in this series generally do not undergo the extensive review and editorial process accorded official SOI publications. Instead, these working papers are intended to make results of research available to others and to encourage discussion on a variety of topics. As a result, papers may be occasionally revised or updated.

Jump to a year:

1997  1998  1999  2000  2001  2002  2003  2004  2005  2006  2007  2008  2009  2011  2013  2014


2014

Older Taxpayers’ Response to Taxation of Social Security Benefits
Leonard Burman, Syracuse University and the Tax Policy Center, Norma B. Coe, University of Washington and the National Bureau of Economic Research, Kevin Pierce, Internal Revenue Service, Liu Tian, Syracuse University

Over the Top: How Tax Returns Show that the Very Rich Are Different from You and Me
Jenny Bourne and Lisa Rosenmerkel

The Economic Impact of Tax Expenditures: Evidence from Spatial Variation Across the U.S.
Associated Tables (.xls format)
Raj Chetty and Nathaniel Hendren, Harvard University and the National Bureau of Economic Research, and, Patrick Kline and Emmanuel Saez, University of California, Berkeley and the National Bureau of Economic Research

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2013

The Home Mortgage Interest Deduction and Migratory Insurance Over the Great Recession
Danny Yagan, University of California, Berkeley

Do Financial Frictions Amplify Fiscal Policy? Evidence from Business Investment Stimulus
Eric Zwick and James Mahon, Harvard University

A New Look at the Income-Wealth Connection for America’s Wealthiest Decedents
Barry Johnson, Brian Raub, and Joseph Newcomb, Statistics of Income, IRS

A Comparison of Wealth Estimates For America’s Wealthiest Decedents Using Tax Data and Data From The Forbes 400
Barry Johnson, Brian Raub, and Joseph Newcomb, Statistics of Income, IRS

Capital Tax Reform and the Real Economy: The Effects of the 2003 Dividend Tax Cut
Danny Yagan, University of California, Berkeley

Do Tax Credits for Parents Affect Child College Enrollment?
Nathaniel G. Hilger, Brown University

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2011

New Evidence on the Long-Term Impacts of Tax Credits
Raj Chetty and JohnFriedman, Harvard University and the National Bureau of Economic Research, and Jonah Rockoff, Columbia University and the National Bureau of Economic Research

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2009

Variance Estimation for Estimators of Between-Year Change in Totals from Two Stratified Bernoulli Samples
Henry, Kimberly; Testa, Valerie; Valliant, Richard

The Effect of Late-Filed Returns on Population Estimates: A Comparative Analysis
Raub, Brian; Belmonte, Cynthia; Arnsberger, Paul; Ludlum, Melissa

Variance Estimation for Estimators of Between-Year Change in Totals from Two Stratified Bernoulli Samples
Kimberly Henry and Valerie Testa, Internal Revenue Service and Richard Valliant, University of Michigan

The Effect of Late-Filed Returns on Population Estimates: A Comparative Analysis
Brian Raub, Cynthia Belmonte, Paul Arnsberger, and Melissa Ludlum, Internal Revenue Service

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2008

Dissemination Of Statistical Products: The IRS’s Journey
Gangi, Martha Eller

Attrition in the Individual Income Tax Return Panel, Tax Years 1999–2005
Bryant, Victoria

Statistics of Income Sales of Capital Assets Sample Redesign for Tax Year 2007
Liu, Yan; Scali, Jana; Strudler, Michael; Wilson, Janette

90 Years of SOI: A Collection of Historical Articles
Multiple Authors

Using Audit Data To Estimate Taxpayer Reporting Error in the Statistics of Income Division's Individual Tax Return Sample
Henry, Kimberly

Differences in Income Estimates Derived from Survey and Tax Data
Johnson, Barry; Moore, Kevin

Old Tabulations, Old Files, and a Brief History of Individual Tax Return Sampling
Weber, Michael; Paris, David; Sailer, Peter

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2007

Measuring Disclosure Risk and an Examination of the Possibilities of Using Synthetic Data in the Individual Income Tax Return Public Use File
Vartivarian, Sonya; Czajka, John; Weber, Michael

Measuring the Quality of Service to Taxpayers in Volunteer Sites
Cecco, Kevin; Walsh, Ronald; Hooker, Rachael

SOI Develops Better Survey Questions Through Pretesting
Milleville, Diane; Wells, Tara

Using the Statistics of Income Division's Sample Data To Reduce Measurement and Processing Error in Small-Area Estimates Produced from Administrative Tax Records
Henry, Kimberly; Lahiri, Partha; Fisher, Robin

An Empirical Evaluation of Various Direct, Synthetic, and Traditional Composite Small-Area Estimators
Henry, Kimberly; Strudler, Michael; Chen, William

Evaluating Alternative One-Sided Coverage Intervals for an Extreme Binomial Proportion
Liu, Yan; Kott, Phillip

Improving the Quality of U.S. Tax Statistics: Recent Innovations in Editing and Imputation Techniques at the Statistics of Income Division of the U.S. Internal Revenue Service
Scott M. Hollenbeck, Melissa Ludlum, and Barry W. Johnson, Internal Revenue Service

Using an Individual Income Tax Panel File To Measure Changes in Marginal Tax Rates: Opportunities
Diamond, John; Rector, Ralph; Weber, Michael

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2006

Social Security Taxes, Social Security Benefits, and Social Security Benefits Taxation, 2003
Sailer, Peter; Pierce, Kevin; Lomize, Evgenia

Analysis of the Distributions of Income, Taxes, and Payroll Taxes via Cross Section and Panel Data, 1979–2004
Strudler, Michael; Hentz, Lori; Petska, Tom; Petska, Ryan

Performance Measurement within the Statistics of Income Division
Cecco, Kevin

Customer Satisfaction Initiatives at IRS’s Statistics of Income: Using Surveys to Improve Customer Service
Schwartz, Ruth; Kilss, Beth

Tying Website Performance to Mission Achievement in the Federal Government
Milleville, Diane

The Tax Year 1999–2003 Individual Income Tax Return Panel: A First Look at the Data
Weber, Michael

Application of an Evolutionary Algorithm to Multivariate Optimal Allocation in Stratified Sample Designs
Day, Charles

Factors in Estates’ Utilization of Special Tax Provisions for Family-Owned Farms and Closely Held Businesses
Gangi, Martha Eller; Henry, Kimberly; Raub, Brian

Corporation Life Cycles: Examining Attrition Trends and Return Characteristics in Statistics of Income Cross-Sectional 1120 Samples
Matthew L. Scoffic

An Analysis of the Free File Program
Chu, Michelle; Kovalick, Melissa

Comparing Strategies To Estimate a Measure of Heteroscedasticity
Henry, Kimberly; Valliant, Richard

Creativity and Compromise: Constructing a Panel of Income and Estate Tax Data for Wealthy Individuals
Johnson, Barry; Schreiber, Lisa

Monitoring Statistics of Income (SOI) Samples
Koshansky, Joseph

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2005

Trends in 401(k) and IRA Contribution Activity, 1999–2002—Results from a Panel of Matched Tax Returns and Information Documents
Sailer, Peter; Bryant, Victoria Holden, Sarah

The 1999 Individual Income Tax Return Edited Panel
Weber, Michael; Bryant, Victoria

A Cluster Analysis Approach To Describing Tax Data
Raub, Brian; Chen, William

Origins of the Estate and Personal Wealth Sample Design
McMahon, Paul

Corporation Supercritical Cases: How Do Imputed Returns on the Corporate File Compare to the Actual Returns?
Davitian, Lucy

Internal Revenue Service Area-To-Area Migration Data: Strengths, Limitations, and Current Trends
Gross, Emily

A Comparison of Income Concepts: IRS Statistics of Income, Census Current Population Survey, and BLS Consumer Expenditure Survey
Henry, Eric; Day, Charles

Measuring Nonsampling Error in the Statistics of Income Individual Tax Return Study
Scali, Jana; Testa, Valerie; Kahr, Maureen; Strudler, Michael

The Impact of the Followup Process on the 2002 Foreign Tax Credit Study Data
Singmaster, Rob; Redmiles, Lissa

Prelude to Schedule M–3: Schedule M–1 Corporate Book-Tax Difference Data, 1990–2003
Boynton, Charles; DeFilippes, Portia; Legel, Ellen

An Essay on the Effects of Taxation on the Corporate Financial Policy
Contos, George

An Analysis of Business Organizational Structure and Activity from Tax Data
Petska, Tom; Parisi, Michael; Luttrell, Kelly; Davitian, Lucy; Scoffic, Matt

Geographic Variation in Schedule H Filing Rates: Why Should Location Influence the Decision To Report Nanny Taxes?
Bloomquist, Kim; An, Zhiyong

Current Research in the Nonprofit Sector
Arnsberger, Paul; Ludlum, Melissa; Riley, Margaret

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2004

Use of Individual Retirement Arrangements to Save for Retirement—Results From a Matched File of Tax Returns and Information Documents for Tax Year 2001
Sailer, Peter; Holden, Sarah

Further Analysis of the Distribution of Income and Taxes, 1979–2003
Strudler, Michael; Petska, Tom; Petska, Ryan

The Statistics of Income 1979–2002 Continuous Work History Sample Individual Income Tax Return Panel
Weber, Michael

Assessing Industry Codes on the IRS Business Master File
McMahon, Paul

Customer Satisfaction Initiatives within the Statistics of Income Division of the Internal Revenue Service
Cecco, Kevin

The Evolution of IRS Telephone Quality Measures
Rosage, Laura

Some New Tables for Upper Probability Points of the Largest Root of a Determinantal Equation
Chen, William

Editor Judgment Effect: Modeling a Key Component of Nonsampling Error in Administrative Data
Henry, Kimberly; Ahmed, Yahia; Legel, Ellen

The Effect of Content Errors on Bias and Nonsampling Variance in Estimates Derived From Samples
Johnson, Barry; Jacobson,Darien B.

Data Interpretation across Sources: A Study of Form 990–PF Information Collected from Multiple Databases
Ludlum, Melissa

Recent Research on Small Business Compliance Burden
Guyton, John; Kindlon, Audrey; Zhou, Jian

The Mismeasure of Man’s Well-Being: Refining Realized Income Measures with Wealth, Portfolio, and Mortality Information
Johnson, Barry; Wahl, Jenny

Tax Evasion and Entrepreneurship: The Effect of Income Reporting Policies on Evasion. An Experimental Approach
Alm, James; Deskins, John; McKee, Michael

Audit Information Dissemination, Taxpayer Communication and Tax Compliance: An Experimental Investigation of Indirect Audit Effects
Alm, James; Jackson, Betty; McKee, Michael

Multi-Agent Based Simulation of the Deterrent Effects of Taxpayer Audits
Bloomquist, Kim

Developing Adoptable Disclosure Protection Techniques: Lessons Learned From a U.S. Experience
Greenia, Nicholas

Consider the Source: Differences in Income Estimates Derived from Survey and Tax Data
Johnson, Barry; Moore, Kevin

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2003

The Effects of Tax Reform on the Structure of U.S. Business
Legel, Ellen; Bennett, Kelly; Parisi, Michael

Accumulation and Distributions of Retirement Assets, 1996–2000—Results from a Matched File of Tax Returns and Information Returns
Sailer, Peter; Gurka, Kurt; Holden, Sarah

An Analysis of the Distribution of Individual Income and Taxes, 1979–2001
Strudler, Michael; Petska, Tom; Petska, Ryan

IRS Seeks to Develop New Web-Based Measurement Indicators for IRS.gov
Dixon, Diane

Statistical Information Services at IRS: Improving Dissemination of Data and Satisfying the Customer
Kilss, Beth; Jordan, David

Recent Efforts to Maximize Benefits from the Statistics of Income Advisory Panel
Petska, Tom; Kilss, Beth

Regulatory Exemptions and Item Nonresponse
McMahon, Paul

Comparing Scoring Systems From Cluster Analysis and Discriminant Analysis Using Random Samples
Wong, William; Ho, Chih-Chin

Estimating the Compliance Cost of the U.S. Individual Income Tax
Toder, Eric J.; Guyton, John; O'Hare, John; Stavrianos, Michael

Tax Evasion, Income Inequality and Opportunity Costs of Compliance
Bloomquist, Kim

IRS's Comprehensive Approach to Compliance Measurement
Brown, Robert; Mazur, Mark

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2002

Salaries and Wages and Deferred Income, 1989–1999
Sailer, Peter; Yau, Ellen; Gurka, Kurt; Weber, Michael

Proxies in Administrative Records Surveys
McMahon, Paul

Assessing Disclosure Protection for a SOI Public Use File
Winglee, Marianne; Valliant, Richard; Clark, Jay; Lim, Yunhee; Weber, Michael; Strudler, Michael

Electronic Dissemination of Internal Revenue Service Locality Data
Gross, Emily; Kilss, Beth

Analysis of the 1998 Gift Tax Panel Study
Eller, Martha Britton; Rib, Tamara

Evaluating the Effect of Sample Size Changes on Scoring System Performance Using Bootstraps and Random Samples
Wong, William; Ho, Chih-Chin

Using Auxiliary Information to Adjust for Non-Response in Weighting a Linked Sample of Administrative Records
Johnson, Barry: McMahon, Paul

Developing an Econometric Model for Measuring Tax Noncompliance Using Operational Audit Data
Erard, Brian; Ho, Chih-Chin

Some New Tables of the Largest Root of a Matrix in Multivariate Analysis: A Computer Approach from 2 to 6
Chen, William

Are Taxpayers Increasing the Buildup of Retirement Assets? Preliminary Results from a Matched File of Tax Year 1999 Tax Returns and Information Returns
Sailer, Peter; Weber, Michael; Gurka, Kurt

New Estimates of the Distribution of Individual Income and Taxes
Strudler, Michael; Petska, Tom; Petska, Ryan

How the Quality of Responses the IRS Provides to Taxpayer Inquiries is Measured
Cecco, Kevin; Hoopengardner, Rachael

The Impact of the IRS on Voluntary Tax Compliance: Preliminary Empirical Results
Plumley, Alan

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2001

Taxing Charity: Linking Income Tax Returns to Samples of Nonexempt Charitable and Charitable Remainder
Belvedere, Melissa; Mikow, Jacob; Whitten, Melissa

The 1998 Gift Tax Panel Study: Using The IRS Returns Transaction File as a Sample Frame
Eller, Martha Britton; Rib, Tamara

Sample Design Revisions in the Wake of NAICS and Regulatory Changes
McMahon, Paul

Statistical Information from Administrative Records in the Federal Tax System
Petska, Tom

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2000

Exporting a Statistical System: Towards Establishing a Tax Statistics Function in South Africa
Petska, Tom

Beyond Andrew Carnegie: Using a Linked Sample of Federal Income and Estate Tax Returns to Examine the Effects of Bequests on Beneficiary Behavior
Mikow, Jacob; Berkowitz, Darien

Statistical Consulting Within the Internal Revenue Service
Cecco, Kevin; Walsh, Ronald

Attrition in a Panel of Individual Income Tax Returns, 1992–1997
Sailer, Peter; Weber, Michael; Wong, William

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1999

The Distribution of Individual Income and Taxes: A New Look at an Old Issue
Petska, Tom; Strudler, Mike

Personal Wealth, 1995
Johnson, Barry

Further Examination of the Distribution of Individual Income and Taxes Using a Consistent and Comprehensive Measure of Income
Petska, Tom; Strudler, Mike; Petska, Ryan

Customer Service Satisfaction Survey: Cognitive and Prototype Test
Cecco, Kevin; Young, Anthony

On Computing Gaussian Curvature of Some Well Known Distributions
Chen, William

The Feasiblity of State Corporate Data
Francis, Brian

Using a Sample of Federal Estate Tax Returns to Examine the Effects of Audit Revaluation on Pre-Audit Estimates
Eller, Martha Britton; Johnson, Barry

Occupation and Industry Data from Tax Year 1993 Individual Tax Returns
Sailer, Peter; Nuriddin, Terry

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1998

Income, Tax, and Tax Progressivity: An Examination of Recent Trends in the Distribution of Individual Income and Taxes
Petska, Tom; Strudler, Mike

Updating Techniques for Estimating Wealth from Federal Estate Tax Returns
Johnson, Barry

The IRS Population Count: An Update
Sailer, Peter; Weber, Michael

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1997

Taxes and Business Organizational Choice: Deja Vu All Over Again?
Petska, Tom

Partnerships in Data Sharing: The Internal Revenue Service and the Bureau of Economic Analysis
Petska, Tom

Federal Taxation of Inheritance and Wealth Transfers
Johnson, Barry; Eller, Martha Britton

Household and Individual Income Data from Tax Returns
Sailer, Peter; Weber, Michael

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Page Last Reviewed or Updated: 10-Mar-2014

The Amended Tax Form

Amended tax form 5. Amended tax form   Ministers and Church Employees Table of Contents Alternative Limit for Church Employees Changes to Includible Compensation for Most Recent Year of ServiceChanges to Includible Compensation Changes to Years of Service Self-employed ministers and church employees who participate in 403(b) plans generally follow the same rules as other 403(b) plan participants. Amended tax form This means that if you are a self-employed minister or a church employee, your MAC generally is the lesser of: Your limit on annual additions, or Your limit on elective deferrals. Amended tax form For most ministers and church employees, the limit on annual additions is figured without any changes. Amended tax form This means that if you are a minister or church employee, your limit on annual additions generally is the lesser of: $51,000 for 2013 and $52,000 for 2014, or Your includible compensation for your most recent year of service. Amended tax form Although, in general, the same limit applies, church employees can choose an alternative limit and there are changes in how church employees, foreign missionaries, and self-employed ministers figure includible compensation for the most recent year of service. Amended tax form This chapter will explain the alternative limit and the changes. Amended tax form Who is a church employee?   A church employee is anyone who is an employee of a church or a convention or association of churches, including an employee of a tax-exempt organization controlled by or associated with a church or a convention or association of churches. Amended tax form Alternative Limit for Church Employees If you are a church employee, you can choose to use $10,000 a year as your limit on annual additions, even if your annual additions computed under the general rule is less. Amended tax form Total contributions over your lifetime under this choice cannot be more than $40,000. Amended tax form Changes to Includible Compensation for Most Recent Year of Service There are two types of changes in determining includible compensation for the most recent year of service. Amended tax form They are: Changes in how the includible compensation of foreign missionaries and self-employed ministers is figured, and A change to the years that are counted when figuring the most recent year of service for church employees and self-employed ministers. Amended tax form Changes to Includible Compensation Includible compensation is figured differently for foreign missionaries and self-employed ministers. Amended tax form Foreign missionary. Amended tax form   If you are a foreign missionary, your includible compensation includes foreign earned income that may otherwise be excludable from your gross income under section 911. Amended tax form   If you are a foreign missionary, and your adjusted gross income is $17,000 or less, contributions to your 403(b) account will not be treated as exceeding the limit on annual additions if the contributions are not in excess of $3,000. Amended tax form   You are a foreign missionary if you are either a layperson or a duly ordained, commissioned, or licensed minister of a church and you meet both of the following requirements. Amended tax form You are an employee of a church or convention or association of churches. Amended tax form You are performing services for the church outside the United States. Amended tax form Self-employed minister. Amended tax form   If you are a self-employed minister, you are treated as an employee of a tax-exempt organization that is a qualified employer. Amended tax form Your includible compensation is your net earnings from your ministry minus the contributions made to the retirement plan on your behalf and the deductible portion of your self-employment tax. Amended tax form Changes to Years of Service Generally, only service with the employer who maintains your 403(b) account can be counted when figuring your limit on annual additions. Amended tax form Church employees. Amended tax form   If you are a church employee, treat all of your years of service as an employee of a church or a convention or association of churches as years of service with one employer. Amended tax form Self-employed minister. Amended tax form   If you are a self-employed minister, your years of service include full and part years during which you were self-employed. Amended tax form Prev  Up  Next   Home   More Online Publications