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Amended Tax Return

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Amended Tax Return

Amended tax return Publication 530 - Main Content Table of Contents What You Can and Cannot DeductHardest Hit Fund and Emergency Homeowners' Loan Programs Real Estate Taxes Sales Taxes Home Mortgage Interest Mortgage Insurance Premiums Mortgage Interest CreditFiguring the Credit BasisFiguring Your Basis Adjusted Basis Keeping Records How To Get Tax HelpLow Income Taxpayer Clinics What You Can and Cannot Deduct To deduct expenses of owning a home, you must file Form 1040, U. Amended tax return S. Amended tax return Individual Income Tax Return, and itemize your deductions on Schedule A (Form 1040). Amended tax return If you itemize, you cannot take the standard deduction. Amended tax return This section explains what expenses you can deduct as a homeowner. Amended tax return It also points out expenses that you cannot deduct. Amended tax return There are four primary discussions: real estate taxes, sales taxes, home mortgage interest, and mortgage insurance premiums. Amended tax return Generally, your real estate taxes, home mortgage interest, and mortgage insurance premiums are included in your house payment. Amended tax return Your house payment. Amended tax return   If you took out a mortgage (loan) to finance the purchase of your home, you probably have to make monthly house payments. Amended tax return Your house payment may include several costs of owning a home. Amended tax return The only costs you can deduct are real estate taxes actually paid to the taxing authority, interest that qualifies as home mortgage interest, and mortgage insurance premiums. Amended tax return These are discussed in more detail later. Amended tax return   Some nondeductible expenses that may be included in your house payment include: Fire or homeowner's insurance premiums, and The amount applied to reduce the principal of the mortgage. Amended tax return Minister's or military housing allowance. Amended tax return   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you still can deduct your real estate taxes and your home mortgage interest. Amended tax return You do not have to reduce your deductions by your nontaxable allowance. Amended tax return For more information see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers, and Publication 3, Armed Forces' Tax Guide. Amended tax return Nondeductible payments. Amended tax return   You cannot deduct any of the following items. Amended tax return Insurance (other than mortgage insurance premiums), including fire and comprehensive coverage, and title insurance. Amended tax return Wages you pay for domestic help. Amended tax return Depreciation. Amended tax return The cost of utilities, such as gas, electricity, or water. Amended tax return Most settlement costs. Amended tax return See Settlement or closing costs under Cost as Basis, later, for more information. Amended tax return Forfeited deposits, down payments, or earnest money. Amended tax return Hardest Hit Fund and Emergency Homeowners' Loan Programs You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. Amended tax return You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. Amended tax return You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. Amended tax return If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098-MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received), box 4 (mortgage insurance premiums) and box 5 (real property taxes). Amended tax return However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. Amended tax return Real Estate Taxes Most state and local governments charge an annual tax on the value of real property. Amended tax return This is called a real estate tax. Amended tax return You can deduct the tax if it is assessed uniformly at a like rate on all real property throughout the community. Amended tax return The proceeds must be for general community or governmental purposes and not be a payment for a special privilege granted or service rendered to you. Amended tax return Deductible Real Estate Taxes You can deduct real estate taxes imposed on you. Amended tax return You must have paid them either at settlement or closing, or to a taxing authority (either directly or through an escrow account) during the year. Amended tax return If you own a cooperative apartment, see Special Rules for Cooperatives , later. Amended tax return Where to deduct real estate taxes. Amended tax return   Enter the amount of your deductible real estate taxes on Schedule A (Form 1040), line 6. Amended tax return Real estate taxes paid at settlement or closing. Amended tax return   Real estate taxes are generally divided so that you and the seller each pay taxes for the part of the property tax year you owned the home. Amended tax return Your share of these taxes is fully deductible if you itemize your deductions. Amended tax return Division of real estate taxes. Amended tax return   For federal income tax purposes, the seller is treated as paying the property taxes up to, but not including, the date of sale. Amended tax return You (the buyer) are treated as paying the taxes beginning with the date of sale. Amended tax return This applies regardless of the lien dates under local law. Amended tax return Generally, this information is included on the settlement statement you get at closing. Amended tax return   You and the seller each are considered to have paid your own share of the taxes, even if one or the other paid the entire amount. Amended tax return You each can deduct your own share, if you itemize deductions, for the year the property is sold. Amended tax return Example. Amended tax return You bought your home on September 1. Amended tax return The property tax year (the period to which the tax relates) in your area is the calendar year. Amended tax return The tax for the year was $730 and was due and paid by the seller on August 15. Amended tax return You owned your new home during the property tax year for 122 days (September 1 to December 31, including your date of purchase). Amended tax return You figure your deduction for real estate taxes on your home as follows. Amended tax return 1. Amended tax return Enter the total real estate taxes for the real property tax year $730 2. Amended tax return Enter the number of days in the property tax year that you owned the property 122 3. Amended tax return Divide line 2 by 365 . Amended tax return 3342 4. Amended tax return Multiply line 1 by line 3. Amended tax return This is your deduction. Amended tax return Enter it on Schedule A (Form 1040), line 6 $244   You can deduct $244 on your return for the year if you itemize your deductions. Amended tax return You are considered to have paid this amount and can deduct it on your return even if, under the contract, you did not have to reimburse the seller. Amended tax return Delinquent taxes. Amended tax return   Delinquent taxes are unpaid taxes that were imposed on the seller for an earlier tax year. Amended tax return If you agree to pay delinquent taxes when you buy your home, you cannot deduct them. Amended tax return You treat them as part of the cost of your home. Amended tax return See Real estate taxes , later, under Basis. Amended tax return Escrow accounts. Amended tax return   Many monthly house payments include an amount placed in escrow (put in the care of a third party) for real estate taxes. Amended tax return You may not be able to deduct the total you pay into the escrow account. Amended tax return You can deduct only the real estate taxes that the lender actually paid from escrow to the taxing authority. Amended tax return Your real estate tax bill will show this amount. Amended tax return Refund or rebate of real estate taxes. Amended tax return   If you receive a refund or rebate of real estate taxes this year for amounts you paid this year, you must reduce your real estate tax deduction by the amount refunded to you. Amended tax return If the refund or rebate was for real estate taxes paid for a prior year, you may have to include some or all of the refund in your income. Amended tax return For more information, see Recoveries in Publication 525, Taxable and Nontaxable Income. Amended tax return Items You Cannot Deduct as Real Estate Taxes The following items are not deductible as real estate taxes. Amended tax return Charges for services. Amended tax return   An itemized charge for services to specific property or people is not a tax, even if the charge is paid to the taxing authority. Amended tax return You cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged for trash collection), or A flat fee charged for a single service provided by your local government (such as a $30 charge for mowing your lawn because it had grown higher than permitted under a local ordinance). Amended tax return    You must look at your real estate tax bill to decide if any nondeductible itemized charges, such as those listed above, are included in the bill. Amended tax return If your taxing authority (or lender) does not furnish you a copy of your real estate tax bill, ask for it. Amended tax return Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. Amended tax return Assessments for local benefits. Amended tax return   You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. Amended tax return Local benefits include the construction of streets, sidewalks, or water and sewer systems. Amended tax return You must add these amounts to the basis of your property. Amended tax return   You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. Amended tax return An example is a charge to repair an existing sidewalk and any interest included in that charge. Amended tax return   If only a part of the assessment is for maintenance, repair, or interest charges, you must be able to show the amount of that part to claim the deduction. Amended tax return If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. Amended tax return   An assessment for a local benefit may be listed as an item in your real estate tax bill. Amended tax return If so, use the rules in this section to find how much of it, if any, you can deduct. Amended tax return Transfer taxes (or stamp taxes). Amended tax return   You cannot deduct transfer taxes and similar taxes and charges on the sale of a personal home. Amended tax return If you are the buyer and you pay them, include them in the cost basis of the property. Amended tax return If you are the seller and you pay them, they are expenses of the sale and reduce the amount realized on the sale. Amended tax return Homeowners association assessments. Amended tax return   You cannot deduct these assessments because the homeowners association, rather than a state or local government, imposes them. Amended tax return Special Rules for Cooperatives If you own a cooperative apartment, some special rules apply to you, though you generally receive the same tax treatment as other homeowners. Amended tax return As an owner of a cooperative apartment, you own shares of stock in a corporation that owns or leases housing facilities. Amended tax return You can deduct your share of the corporation's deductible real estate taxes if the cooperative housing corporation meets the following conditions: The corporation has only one class of stock outstanding, Each stockholder, solely because of ownership of the stock, can live in a house, apartment, or house trailer owned or leased by the corporation, No stockholder can receive any distribution out of capital, except on a partial or complete liquidation of the corporation, and At least one of the following: At least 80% of the corporation's gross income for the tax year was paid by the tenant-stockholders. Amended tax return For this purpose, gross income means all income received during the entire tax year, including any received before the corporation changed to cooperative ownership. Amended tax return At least 80% of the total square footage of the corporation's property must be available for use by the tenant-stockholders during the entire tax year. Amended tax return At least 90% of the expenditures paid or incurred by the corporation were used for the acquisition, construction, management, maintenance, or care of the property for the benefit of the tenant-shareholders during the entire tax year. Amended tax return Tenant-stockholders. Amended tax return   A tenant-stockholder can be any entity (such as a corporation, trust, estate, partnership, or association) as well as an individual. Amended tax return The tenant-stockholder does not have to live in any of the cooperative's dwelling units. Amended tax return The units that the tenant-stockholder has the right to occupy can be rented to others. Amended tax return Deductible taxes. Amended tax return   You figure your share of real estate taxes in the following way. Amended tax return Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. Amended tax return Multiply the corporation's deductible real estate taxes by the number you figured in (1). Amended tax return This is your share of the real estate taxes. Amended tax return   Generally, the corporation will tell you your share of its real estate tax. Amended tax return This is the amount you can deduct if it reasonably reflects the cost of real estate taxes for your dwelling unit. Amended tax return Refund of real estate taxes. Amended tax return   If the corporation receives a refund of real estate taxes it paid in an earlier year, it must reduce the amount of real estate taxes paid this year when it allocates the tax expense to you. Amended tax return Your deduction for real estate taxes the corporation paid this year is reduced by your share of the refund the corporation received. Amended tax return Sales Taxes Generally, you can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040). Amended tax return Deductible sales taxes may include sales taxes paid on your home (including mobile and prefabricated), or home building materials if the tax rate was the same as the general sales tax rate. Amended tax return For information on figuring your deduction, see the Instructions for Schedule A (Form 1040). Amended tax return If you elect to deduct the sales taxes paid on your home, or home building materials, you cannot include them as part of your cost basis in the home. Amended tax return Home Mortgage Interest This section of the publication gives you basic information about home mortgage interest, including information on interest paid at settlement, points, and Form 1098, Mortgage Interest Statement. Amended tax return Most home buyers take out a mortgage (loan) to buy their home. Amended tax return They then make monthly payments to either the mortgage holder or someone collecting the payments for the mortgage holder. Amended tax return Usually, you can deduct the entire part of your payment that is for mortgage interest, if you itemize your deductions on Schedule A (Form 1040). Amended tax return However, your deduction may be limited if: Your total mortgage balance is more than $1 million ($500,000 if married filing separately), or You took out a mortgage for reasons other than to buy, build, or improve your home. Amended tax return If either of these situations applies to you, see Publication 936 for more information. Amended tax return Also see Publication 936 if you later refinance your mortgage or buy a second home. Amended tax return Refund of home mortgage interest. Amended tax return   If you receive a refund of home mortgage interest that you deducted in an earlier year and that reduced your tax, you generally must include the refund in income in the year you receive it. Amended tax return For more information, see Recoveries in Publication 525. Amended tax return The amount of the refund will usually be shown on the mortgage interest statement you receive from your mortgage lender. Amended tax return See Mortgage Interest Statement , later. Amended tax return Deductible Mortgage Interest To be deductible, the interest you pay must be on a loan secured by your main home or a second home. Amended tax return The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. Amended tax return Prepaid interest. Amended tax return   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. Amended tax return Generally, you can deduct in each year only the interest that qualifies as home mortgage interest for that year. Amended tax return An exception (discussed later) applies to points. Amended tax return Late payment charge on mortgage payment. Amended tax return   You can deduct as home mortgage interest a late payment charge if it was not for a specific service in connection with your mortgage loan. Amended tax return Mortgage prepayment penalty. Amended tax return   If you pay off your home mortgage early, you may have to pay a penalty. Amended tax return You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. Amended tax return Ground rent. Amended tax return   In some states (such as Maryland), you may buy your home subject to a ground rent. Amended tax return A ground rent is an obligation you assume to pay a fixed amount per year on the property. Amended tax return Under this arrangement, you are leasing (rather than buying) the land on which your home is located. Amended tax return Redeemable ground rents. Amended tax return   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. Amended tax return The ground rent is a redeemable ground rent only if all of the following are true. Amended tax return Your lease, including renewal periods, is for more than 15 years. Amended tax return You can freely assign the lease. Amended tax return You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specified amount. Amended tax return The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. Amended tax return   Payments made to end the lease and buy the lessor's entire interest in the land are not redeemable ground rents. Amended tax return You cannot deduct them. Amended tax return Nonredeemable ground rents. Amended tax return   Payments on a nonredeemable ground rent are not mortgage interest. Amended tax return You can deduct them as rent only if they are a business expense or if they are for rental property. Amended tax return Cooperative apartment. Amended tax return   You can usually treat the interest on a loan you took out to buy stock in a cooperative housing corporation as home mortgage interest if you own a cooperative apartment, and the cooperative housing corporation meets the conditions described earlier under Special Rules for Cooperatives . Amended tax return In addition, you can treat as home mortgage interest your share of the corporation's deductible mortgage interest. Amended tax return Figure your share of mortgage interest the same way that is shown for figuring your share of real estate taxes in the Example under Division of real estate taxes, earlier. Amended tax return For more information on cooperatives, see Special Rule for Tenant-Stockholders in Cooperative Housing Corporations in Publication 936. Amended tax return Refund of cooperative's mortgage interest. Amended tax return   You must reduce your mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. Amended tax return The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. Amended tax return   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. Amended tax return Mortgage Interest Paid at Settlement One item that normally appears on a settlement or closing statement is home mortgage interest. Amended tax return You can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). Amended tax return This amount should be included in the mortgage interest statement provided by your lender. Amended tax return See the discussion under Mortgage Interest Statement , later. Amended tax return Also, if you pay interest in advance, see Prepaid interest , earlier, and Points , next. Amended tax return Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Amended tax return Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points. Amended tax return A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Amended tax return See Points paid by the seller , later. Amended tax return General rule. Amended tax return   You cannot deduct the full amount of points in the year paid. Amended tax return They are prepaid interest, so you generally must deduct them over the life (term) of the mortgage. Amended tax return Exception. Amended tax return   You can deduct the full amount of points in the year paid if you meet all the following tests. Amended tax return Your loan is secured by your main home. Amended tax return (Generally, your main home is the one you live in most of the time. Amended tax return ) Paying points is an established business practice in the area where the loan was made. Amended tax return The points paid were not more than the points generally charged in that area. Amended tax return You use the cash method of accounting. Amended tax return This means you report income in the year you receive it and deduct expenses in the year you pay them. Amended tax return Most individuals use this method. Amended tax return The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. Amended tax return The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Amended tax return The funds you provided are not required to have been applied to the points. Amended tax return They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Amended tax return You cannot have borrowed these funds. Amended tax return You use your loan to buy or build your main home. Amended tax return The points were computed as a percentage of the principal amount of the mortgage. Amended tax return The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. Amended tax return The points may be shown as paid from either your funds or the seller's. Amended tax return Note. Amended tax return If you meet all of the tests listed above and you itemize your deductions in the year you get the loan, you can either deduct the full amount of points in the year paid or deduct them over the life of the loan, beginning in the year you get the loan. Amended tax return If you do not itemize your deductions in the year you get the loan, you can spread the points over the life of the loan and deduct the appropriate amount in each future year, if any, when you do itemize your deductions. Amended tax return Home improvement loan. Amended tax return   You can also fully deduct in the year paid points paid on a loan to improve your main home, if you meet the first six tests listed earlier. Amended tax return Refinanced loan. Amended tax return   If you use part of the refinanced mortgage proceeds to improve your main home and you meet the first six tests listed earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Amended tax return You can deduct the rest of the points over the life of the loan. Amended tax return Points not fully deductible in year paid. Amended tax return    If you do not qualify under the exception to deduct the full amount of points in the year paid (or choose not to do so), see Points in Publication 936 for the rules on when and how much you can deduct. Amended tax return Figure A. Amended tax return   You can use Figure A, next, as a quick guide to see whether your points are fully deductible in the year paid. Amended tax return    Please click here for the text description of the image. Amended tax return Figure A. Amended tax return Are my points fully deductible this year? Amounts charged for services. Amended tax return   Amounts charged by the lender for specific services connected to the loan are not interest. Amended tax return Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Amended tax return You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Amended tax return For information about the tax treatment of these amounts and other settlement fees and closing costs, see Basis , later. Amended tax return Points paid by the seller. Amended tax return   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Amended tax return Treatment by seller. Amended tax return   The seller cannot deduct these fees as interest. Amended tax return However, they are a selling expense that reduces the seller's amount realized. Amended tax return See Publication 523 for more information. Amended tax return Treatment by buyer. Amended tax return   The buyer treats seller-paid points as if he or she had paid them. Amended tax return If all the tests listed earlier under Exception are met, the buyer can deduct the points in the year paid. Amended tax return If any of those tests are not met, the buyer must deduct the points over the life of the loan. Amended tax return   The buyer must also reduce the basis of the home by the amount of the seller-paid points. Amended tax return For more information about the basis of your home, see Basis , later. Amended tax return Funds provided are less than points. Amended tax return   If you meet all the tests listed earlier under Exception except that the funds you provided were less than the points charged to you (test 6), you can deduct the points in the year paid up to the amount of funds you provided. Amended tax return In addition, you can deduct any points paid by the seller. Amended tax return Example 1. Amended tax return When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Amended tax return You meet all the tests for deducting points in the year paid (see Exception , earlier), except the only funds you provided were a $750 down payment. Amended tax return Of the $1,000 you were charged for points, you can deduct $750 in the year paid. Amended tax return You spread the remaining $250 over the life of the mortgage. Amended tax return Example 2. Amended tax return The facts are the same as in Example 1 , except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. Amended tax return In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Amended tax return You spread the remaining $250 over the life of the mortgage. Amended tax return You must reduce the basis of your home by the $1,000 paid by the seller. Amended tax return Excess points. Amended tax return   If you meet all the tests under Exception , earlier, except that the points paid were more than are generally charged in your area (test 3), you can deduct in the year paid only the points that are generally charged. Amended tax return You must spread any additional points over the life of the mortgage. Amended tax return Mortgage ending early. Amended tax return   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. Amended tax return A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Amended tax return Example. Amended tax return Dan paid $3,000 in points in 2006 that he had to spread out over the 15-year life of the mortgage. Amended tax return He had deducted $1,400 of these points through 2012. Amended tax return Dan prepaid his mortgage in full in 2013. Amended tax return He can deduct the remaining $1,600 of points in 2013. Amended tax return Exception. Amended tax return   If you refinance the mortgage with the same lender, you cannot deduct any remaining points for the year. Amended tax return Instead, deduct them over the term of the new loan. Amended tax return Form 1098. Amended tax return   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your deductible points paid during the year. Amended tax return See Mortgage Interest Statement , later. Amended tax return Where To Deduct Home Mortgage Interest Enter on Schedule A (Form 1040), line 10, the home mortgage interest and points reported to you on Form 1098 (discussed next). Amended tax return If you did not receive a Form 1098, enter your deductible interest on line 11, and any deductible points on line 12. Amended tax return See Table 1 below for a summary of where to deduct home mortgage interest and real estate taxes. Amended tax return If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and social security number (SSN) or employer identification number (EIN) on the dotted lines next to line 11. Amended tax return The seller must give you this number and you must give the seller your SSN. Amended tax return Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Amended tax return Failure to meet either of these requirements may result in a $50 penalty for each failure. Amended tax return Table 1. Amended tax return Where To Deduct Interest and Taxes Paid on Your Home See the text for information on what expenses are eligible. Amended tax return IF you are eligible to deduct . Amended tax return . Amended tax return . Amended tax return THEN report the amount  on Schedule A (Form 1040) . Amended tax return . Amended tax return . Amended tax return real estate taxes line 6. Amended tax return home mortgage interest and points reported on Form 1098 line 10. Amended tax return home mortgage interest not reported on  Form 1098 line 11. Amended tax return points not reported on Form 1098 line 12. Amended tax return qualified mortgage insurance premiums line 13. Amended tax return Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage to a mortgage holder in the course of that holder's trade or business, you should receive a Form 1098 or similar statement from the mortgage holder. Amended tax return The statement will show the total interest paid on your mortgage during the year. Amended tax return If you bought a main home during the year, it also will show the deductible points you paid and any points you can deduct that were paid by the person who sold you your home. Amended tax return See Points , earlier. Amended tax return The interest you paid at settlement should be included on the statement. Amended tax return If it is not, add the interest from the settlement sheet that qualifies as home mortgage interest to the total shown on Form 1098 or similar statement. Amended tax return Put the total on Schedule A (Form 1040), line 10, and attach a statement to your return explaining the difference. Amended tax return Write “See attached” to the right of line 10. Amended tax return A mortgage holder can be a financial institution, a governmental unit, or a cooperative housing corporation. Amended tax return If a statement comes from a cooperative housing corporation, it generally will show your share of interest. Amended tax return Your mortgage interest statement for 2013 should be provided or sent to you by January 31, 2014. Amended tax return If it is mailed, you should allow adequate time to receive it before contacting the mortgage holder. Amended tax return A copy of this form will be sent to the IRS also. Amended tax return Example. Amended tax return You bought a new home on May 3. Amended tax return You paid no points on the purchase. Amended tax return During the year, you made mortgage payments which included $4,480 deductible interest on your new home. Amended tax return The settlement sheet for the purchase of the home included interest of $620 for 29 days in May. Amended tax return The mortgage statement you receive from the lender includes total interest of $5,100 ($4,480 + $620). Amended tax return You can deduct the $5,100 if you itemize your deductions. Amended tax return Refund of overpaid interest. Amended tax return   If you receive a refund of mortgage interest you overpaid in a prior year, you generally will receive a Form 1098 showing the refund in box 3. Amended tax return Generally, you must include the refund in income in the year you receive it. Amended tax return See Refund of home mortgage interest , earlier, under Home Mortgage Interest. Amended tax return More than one borrower. Amended tax return   If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Amended tax return Show how much of the interest each of you paid, and give the name and address of the person who received the form. Amended tax return Deduct your share of the interest on Schedule A (Form 1040), line 11, and write “See attached” to the right of that line. Amended tax return Mortgage Insurance Premiums You may be able to take an itemized deduction on Schedule A (Form 1040), line 13, for premiums you pay or accrue during 2013 for qualified mortgage insurance in connection with home acquisition debt on your qualified home. Amended tax return Mortgage insurance premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as an itemized deduction. Amended tax return Qualified Mortgage Insurance Qualified mortgage insurance is mortgage insurance provided by the Veterans Administration, the Federal Housing Administration, or the Rural Housing Administration, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). Amended tax return Prepaid mortgage insurance premiums. Amended tax return   If you paid premiums that are allocable to periods after 2013, you must allocate them over the shorter of: The stated term of the mortgage, or 84 months, beginning with the month the insurance was obtained. Amended tax return The premiums are treated as paid in the year to which they were allocated. Amended tax return If the mortgage is satisfied before its term, no deduction is allowed for the unamortized balance. Amended tax return See Publication 936 for details. Amended tax return Exception for certain mortgage insurance. Amended tax return   The allocation rules, explained above, do not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Service. Amended tax return Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home. Amended tax return It also must be secured by that home. Amended tax return If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. Amended tax return Home acquisition debt limit. Amended tax return   The total amount you can treat as home acquisition debt at any time on your home cannot be more than $1 million ($500,000 if married filing separately). Amended tax return Discharges of qualified principal residence indebtedness. Amended tax return   You can exclude from gross income any discharges of qualified principal residence indebtedness made after 2006 and before 2014. Amended tax return You must reduce the basis of your principal residence (but not below zero) by the amount you exclude. Amended tax return Principal residence. Amended tax return   Your principal residence is the home where you ordinarily live most of the time. Amended tax return You can have only one principal residence at any one time. Amended tax return Qualified principal residence indebtedness. Amended tax return   This is a mortgage that you took out to buy, build, or substantially improve your principal residence and that is secured by that residence. Amended tax return If the amount of your original mortgage is more than the cost of your principal residence plus the cost of substantial improvements, qualified principal residence indebtedness cannot be more than the cost of your principal residence plus improvements. Amended tax return   Any debt secured by your principal residence that you use to refinance qualified principal residence indebtedness is qualified principal residence indebtedness up to the amount of your old mortgage principal just before the refinancing. Amended tax return Additional debt incurred to substantially improve your principal residence is also qualified principal residence indebtedness. Amended tax return Amount you can exclude. Amended tax return   You can only exclude debt discharged after 2006 and before 2014. Amended tax return The most you can exclude is $2 million ($1 million if married filing separately). Amended tax return You cannot exclude any amount that was discharged because of services performed for the lender or on account of any other factor not directly related either to a decline in the value of your residence or to your financial condition. Amended tax return Ordering rule. Amended tax return   If only a part of a loan is qualified principal residence indebtedness, you can exclude only the amount of the discharge that is more than the amount of the loan (immediately before the discharge) that is not qualified principal residence indebtedness. Amended tax return Qualified Home This means your main home or your second home. Amended tax return A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. Amended tax return Main home. Amended tax return   You can have only one main home at any one time. Amended tax return This is the home where you ordinarily live most of the time. Amended tax return Second home and other special situations. Amended tax return   If you have a second home, use part of your home for other than residential living (such as a home office), rent out part of your home, or are having your home constructed, see Qualified Home in Publication 936. Amended tax return Limit on Deduction If your adjusted gross income (AGI) on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are deductible is reduced and may be eliminated. Amended tax return See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. Amended tax return If your AGI is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Amended tax return Form 1098. Amended tax return   The amount of mortgage insurance premiums you paid during 2013 should be reported in box 4. Amended tax return See Form 1098, Mortgage Interest Statement in Publication 936. Amended tax return Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals afford home ownership. Amended tax return If you qualify, you can claim the credit on Form 8396 each year for part of the home mortgage interest you pay. Amended tax return Who qualifies. Amended tax return   You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate (MCC) from your state or local government. Amended tax return Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. Amended tax return The MCC will show the certificate credit rate you will use to figure your credit. Amended tax return It also will show the certified indebtedness amount. Amended tax return Only the interest on that amount qualifies for the credit. Amended tax return See Figuring the Credit , later. Amended tax return You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home. Amended tax return Contact your state or local housing finance agency for information about the availability of MCCs in your area. Amended tax return How to claim the credit. Amended tax return   To claim the credit, complete Form 8396 and attach it to your Form 1040 or Form 1040NR, U. Amended tax return S. Amended tax return Nonresident Alien Income Tax Return. Amended tax return Include the credit in your total for Form 1040, line 53, or Form 1040NR, line 50; be sure to check box c and write “Form 8396” on that line. Amended tax return Reducing your home mortgage interest deduction. Amended tax return   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. Amended tax return You must do this even if part of that amount is to be carried forward to 2014. Amended tax return Selling your home. Amended tax return   If you purchase a home after 1990 using an MCC, and you sell that home within 9 years, you may have to recapture (repay) all or part of the benefit you received from the MCC program. Amended tax return For additional information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, in Publication 523. Amended tax return Figuring the Credit Figure your credit on Form 8396. Amended tax return Mortgage not more than certified indebtedness. Amended tax return   If your mortgage loan amount is equal to (or smaller than) the certified indebtedness amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. Amended tax return Mortgage more than certified indebtedness. Amended tax return   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. Amended tax return To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. Amended tax return Certified indebtedness amount on your MCC Original amount of your mortgage   The fraction will not change as long as you are entitled to take the mortgage interest credit. Amended tax return Example. Amended tax return Emily bought a home this year. Amended tax return Her mortgage loan is $125,000. Amended tax return The certified indebtedness amount on her MCC is $100,000. Amended tax return She paid $7,500 interest this year. Amended tax return Emily figures the interest to enter on Form 8396, line 1, as follows:   $100,000 = 80% (. Amended tax return 80)       $125,000       $7,500 x . Amended tax return 80 = $6,000   Emily enters $6,000 on Form 8396, line 1. Amended tax return In each later year, she will figure her credit using only 80% of the interest she pays for that year. Amended tax return Limits Two limits may apply to your credit. Amended tax return A limit based on the credit rate, and A limit based on your tax. Amended tax return Limit based on credit rate. Amended tax return   If the certificate credit rate is higher than 20%, the credit you are allowed cannot be more than $2,000. Amended tax return Limit based on tax. Amended tax return   After applying the limit based on the credit rate, your credit generally cannot be more than your tax liability. Amended tax return See the Credit Limit Worksheet in the Form 8396 instructions to calculate the limit based on tax. Amended tax return Dividing the Credit If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, the credit must be divided based on the interest held by each person. Amended tax return Example. Amended tax return John and his brother, George, were issued an MCC. Amended tax return They used it to get a mortgage on their main home. Amended tax return John has a 60% ownership interest in the home, and George has a 40% ownership interest in the home. Amended tax return John paid $5,400 mortgage interest this year and George paid $3,600. Amended tax return The MCC shows a credit rate of 25% and a certified indebtedness amount of $130,000. Amended tax return The loan amount (mortgage) on their home is $120,000. Amended tax return The credit is limited to $2,000 because the credit rate is more than 20%. Amended tax return John figures the credit by multiplying the mortgage interest he paid this year ($5,400) by the certificate credit rate (25%) for a total of $1,350. Amended tax return His credit is limited to $1,200 ($2,000 × 60%). Amended tax return George figures the credit by multiplying the mortgage interest he paid this year ($3,600) by the certificate credit rate (25%) for a total of $900. Amended tax return His credit is limited to $800 ($2,000 × 40%). Amended tax return Carryforward If your allowable credit is reduced because of the limit based on your tax, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. Amended tax return Example. Amended tax return You receive a mortgage credit certificate from State X. Amended tax return This year, your regular tax liability is $1,100, you owe no alternative minimum tax, and your mortgage interest credit is $1,700. Amended tax return You claim no other credits. Amended tax return Your unused mortgage interest credit for this year is $600 ($1,700 − $1,100). Amended tax return You can carry forward this amount to the next 3 years or until used, whichever comes first. Amended tax return Credit rate more than 20%. Amended tax return   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). Amended tax return Example. Amended tax return In the earlier example under Dividing the Credit , John and George used the entire $2,000 credit. Amended tax return The excess   John $1,350 − $1,200 = $150     George $900 − $800 = $100   $150 for John ($1,350 − $1,200) and $100 for George ($900 − $800) cannot be carried forward to future years, despite the respective tax liabilities for John and George. Amended tax return Refinancing If you refinance your original mortgage loan on which you had been given an MCC, you must get a new MCC to be able to claim the credit on the new loan. Amended tax return The amount of credit you can claim on the new loan may change. Amended tax return Table 2 below summarizes how to figure your credit if you refinance your original mortgage loan. Amended tax return Table 2. Amended tax return Effect of Refinancing on Your Credit IF you get a new (reissued) MCC and the amount of your new mortgage is . Amended tax return . Amended tax return . Amended tax return THEN the interest you claim on Form 8396, line 1, is* . Amended tax return . Amended tax return . Amended tax return smaller than or equal to the certified indebtedness amount on the new MCC all the interest paid during the year on your new mortgage. Amended tax return larger than the certified indebtedness amount on the new MCC interest paid during the year on your new mortgage multiplied by the following fraction. Amended tax return         certified indebtedness  amount on your new MCC       original amount of your  mortgage   *The credit using the new MCC cannot be more than the credit using the old MCC. Amended tax return  See New MCC cannot increase your credit above. Amended tax return An issuer may reissue an MCC after you refinance your mortgage. Amended tax return If you did not get a new MCC, you may want to contact the state or local housing finance agency that issued your original MCC for information about whether you can get a reissued MCC. Amended tax return Year of refinancing. Amended tax return   In the year of refinancing, add the applicable amount of interest paid on the old mortgage and the applicable amount of interest paid on the new mortgage, and enter the total on Form 8396, line 1. Amended tax return   If your new MCC has a credit rate different from the rate on the old MCC, you must attach a statement to Form 8396. Amended tax return The statement must show the calculation for lines 1, 2, and 3 for the part of the year when the old MCC was in effect. Amended tax return It must show a separate calculation for the part of the year when the new MCC was in effect. Amended tax return Combine the amounts from both calculations for line 3, enter the total on line 3 of the form, and write “See attached” on the dotted line next to line 2. Amended tax return New MCC cannot increase your credit. Amended tax return   The credit that you claim with your new MCC cannot be more than the credit that you could have claimed with your old MCC. Amended tax return   In most cases, the agency that issues your new MCC will make sure that it does not increase your credit. Amended tax return However, if either your old loan or your new loan has a variable (adjustable) interest rate, you will need to check this yourself. Amended tax return In that case, you will need to know the amount of the credit you could have claimed using the old MCC. Amended tax return   There are two methods for figuring the credit you could have claimed. Amended tax return Under one method, you figure the actual credit that would have been allowed. Amended tax return This means you use the credit rate on the old MCC and the interest you would have paid on the old loan. Amended tax return   If your old loan was a variable rate mortgage, you can use another method to determine the credit that you could have claimed. Amended tax return Under this method, you figure the credit using a payment schedule of a hypothetical self-amortizing mortgage with level payments projected to the final maturity date of the old mortgage. Amended tax return The interest rate of the hypothetical mortgage is the annual percentage rate (APR) of the new mortgage for purposes of the Federal Truth in Lending Act. Amended tax return The principal of the hypothetical mortgage is the remaining outstanding balance of the certified mortgage indebtedness shown on the old MCC. Amended tax return    You must choose one method and use it consistently beginning with the first tax year for which you claim the credit based on the new MCC. Amended tax return    As part of your tax records, you should keep your old MCC and the schedule of payments for your old mortgage. Amended tax return Basis Basis is your starting point for figuring a gain or loss if you later sell your home, or for figuring depreciation if you later use part of your home for business purposes or for rent. Amended tax return While you own your home, you may add certain items to your basis. Amended tax return You may subtract certain other items from your basis. Amended tax return These items are called adjustments to basis and are explained later under Adjusted Basis . Amended tax return It is important that you understand these terms when you first acquire your home because you must keep track of your basis and adjusted basis during the period you own your home. Amended tax return You also must keep records of the events that affect basis or adjusted basis. Amended tax return See Keeping Records , below. Amended tax return Figuring Your Basis How you figure your basis depends on how you acquire your home. Amended tax return If you buy or build your home, your cost is your basis. Amended tax return If you receive your home as a gift, your basis is usually the same as the adjusted basis of the person who gave you the property. Amended tax return If you inherit your home from a decedent, different rules apply depending on the date of the decedent's death. Amended tax return Each of these topics is discussed later. Amended tax return Property transferred from a spouse. Amended tax return   If your home is transferred to you from your spouse, or from your former spouse as a result of a divorce, your basis is the same as your spouse's (or former spouse's) adjusted basis just before the transfer. Amended tax return Publication 504, Divorced or Separated Individuals, fully discusses transfers between spouses. Amended tax return Cost as Basis The cost of your home, whether you purchased it or constructed it, is the amount you paid for it, including any debt you assumed. Amended tax return The cost of your home includes most settlement or closing costs you paid when you bought the home. Amended tax return If you built your home, your cost includes most closing costs paid when you bought the land or settled on your mortgage. Amended tax return See Settlement or closing costs , later. Amended tax return If you elect to deduct the sales taxes on the purchase or construction of your home as an itemized deduction on Schedule A (Form 1040), you cannot include the sales taxes as part of your cost basis in the home. Amended tax return Purchase. Amended tax return   The basis of a home you bought is the amount you paid for it. Amended tax return This usually includes your down payment and any debt you assumed. Amended tax return The basis of a cooperative apartment is the amount you paid for your shares in the corporation that owns or controls the property. Amended tax return This amount includes any purchase commissions or other costs of acquiring the shares. Amended tax return Construction. Amended tax return   If you contracted to have your home built on land that you own, your basis in the home is your basis in the land plus the amount you paid to have the home built. Amended tax return This includes the cost of labor and materials, the amount you paid the contractor, any architect's fees, building permit charges, utility meter and connection charges, and legal fees that are directly connected with building your home. Amended tax return If you built all or part of your home yourself, your basis is the total amount it cost you to build it. Amended tax return You cannot include in basis the value of your own labor or any other labor for which you did not pay. Amended tax return Real estate taxes. Amended tax return   Real estate taxes are usually divided so that you and the seller each pay taxes for the part of the property tax year that each owned the home. Amended tax return See the earlier discussion of Real estate taxes paid at settlement or closing , under Real Estate Taxes, earlier, to figure the real estate taxes you paid or are considered to have paid. Amended tax return   If you pay any part of the seller's share of the real estate taxes (the taxes up to the date of sale), and the seller did not reimburse you, add those taxes to your basis in the home. Amended tax return You cannot deduct them as taxes paid. Amended tax return   If the seller paid any of your share of the real estate taxes (the taxes beginning with the date of sale), you can still deduct those taxes. Amended tax return Do not include those taxes in your basis. Amended tax return If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Amended tax return Example 1. Amended tax return You bought your home on September 1. Amended tax return The property tax year in your area is the calendar year, and the tax is due on August 15. Amended tax return The real estate taxes on the home you bought were $1,275 for the year and had been paid by the seller on August 15. Amended tax return You did not reimburse the seller for your share of the real estate taxes from September 1 through December 31. Amended tax return You must reduce the basis of your home by the $426 [(122 ÷ 365) × $1,275] the seller paid for you. Amended tax return You can deduct your $426 share of real estate taxes on your return for the year you purchased your home. Amended tax return Example 2. Amended tax return You bought your home on May 3, 2013. Amended tax return The property tax year in your area is the calendar year. Amended tax return The taxes for the previous year are assessed on January 2 and are due on May 31 and November 30. Amended tax return Under state law, the taxes become a lien on May 31. Amended tax return You agreed to pay all taxes due after the date of sale. Amended tax return The taxes due in 2013 for 2012 were $1,375. Amended tax return The taxes due in 2014 for 2013 will be $1,425. Amended tax return You cannot deduct any of the taxes paid in 2013 because they relate to the 2012 property tax year and you did not own the home until 2013. Amended tax return Instead, you add the $1,375 to the cost (basis) of your home. Amended tax return You owned the home in 2013 for 243 days (May 3 to December 31), so you can take a tax deduction on your 2014 return of $949 [(243 ÷ 365) × $1,425] paid in 2014 for 2013. Amended tax return You add the remaining $476 ($1,425 − $949) of taxes paid in 2014 to the cost (basis) of your home. Amended tax return Settlement or closing costs. Amended tax return   If you bought your home, you probably paid settlement or closing costs in addition to the contract price. Amended tax return These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. Amended tax return If you built your home, you probably paid these costs when you bought the land or settled on your mortgage. Amended tax return   The only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. Amended tax return You deduct them in the year you buy your home if you itemize your deductions. Amended tax return You can add certain other settlement or closing costs to the basis of your home. Amended tax return Items added to basis. Amended tax return   You can include in your basis the settlement fees and closing costs you paid for buying your home. Amended tax return A fee is for buying the home if you would have had to pay it even if you paid cash for the home. Amended tax return   The following are some of the settlement fees and closing costs that you can include in the original basis of your home. Amended tax return Abstract fees (abstract of title fees). Amended tax return Charges for installing utility services. Amended tax return Legal fees (including fees for the title search and preparation of the sales contract and deed). Amended tax return Recording fees. Amended tax return Surveys. Amended tax return Transfer or stamp taxes. Amended tax return Owner's title insurance. Amended tax return Any amount the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, cost for improvements or repairs, and sales commissions. Amended tax return   If the seller actually paid for any item for which you are liable and for which you can take a deduction (such as your share of the real estate taxes for the year of sale), you must reduce your basis by that amount unless you are charged for it in the settlement. Amended tax return Items not added to basis and not deductible. Amended tax return   Here are some settlement and closing costs that you cannot deduct or add to your basis. Amended tax return Fire insurance premiums. Amended tax return Charges for using utilities or other services related to occupancy of the home before closing. Amended tax return Rent for occupying the home before closing. Amended tax return Charges connected with getting or refinancing a mortgage loan, such as: Loan assumption fees, Cost of a credit report, and Fee for an appraisal required by a lender. Amended tax return Points paid by seller. Amended tax return   If you bought your home after April 3, 1994, you must reduce your basis by any points paid for your mortgage by the person who sold you your home. Amended tax return   If you bought your home after 1990 but before April 4, 1994, you must reduce your basis by seller-paid points only if you deducted them. Amended tax return See Points , earlier, for the rules on deducting points. Amended tax return Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined later) to the donor just before it was given to you, its fair market value (FMV) at the time it was given to you, and any gift tax paid on it. Amended tax return Fair market value. Amended tax return   Fair market value (FMV) is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and who both have a reasonable knowledge of all the necessary facts. Amended tax return Donor's adjusted basis is more than FMV. Amended tax return   If someone gave you your home and the donor's adjusted basis, when it was given to you, was more than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis. Amended tax return Disposition basis. Amended tax return   If the donor's adjusted basis at the time of the gift is more than the FMV, your basis (plus or minus any required adjustments, see Adjusted Basis , later) when you dispose of the property will depend on whether you have a gain or a loss. Amended tax return Your basis for figuring a gain is the same as the donor's adjusted basis. Amended tax return Your basis for figuring a loss is the FMV when you received the gift. Amended tax return If you use the donor's adjusted basis to figure a gain and it results in a loss, then you must use the FMV (at the time of the gift) to refigure the loss. Amended tax return However, if using the FMV results in a gain, then you neither have a gain nor a loss. Amended tax return Example 1. Amended tax return Andrew received a house as a gift from Ishmael (the donor). Amended tax return At the time of the gift, the home had an FMV of $80,000. Amended tax return Ishmael's adjusted basis was $100,000. Amended tax return After he received the house, no events occurred to increase or decrease the basis. Amended tax return If Andrew sells the house for $120,000, he will have a $20,000 gain because he must use the donor's adjusted basis ($100,000) at the time of the gift as his basis to figure the gain. Amended tax return Example 2. Amended tax return Same facts as Example 1 , except this time Andrew sells the house for $70,000. Amended tax return He will have a loss of $10,000 because he must use the FMV ($80,000) at the time of the gift as his basis to figure the loss. Amended tax return Example 3. Amended tax return Same facts as Example 1 , except this time Andrew sells the house for $90,000. Amended tax return Initially, he figures the gain using Ishmael's adjusted basis ($100,000), which results in a loss of $10,000. Amended tax return Since it is a loss, Andrew must now recalculate the loss using the FMV ($80,000), which results in a gain of $10,000. Amended tax return So in this situation, Andrew will neither have a gain nor a loss. Amended tax return Donor's adjusted basis equal to or less than the FMV. Amended tax return   If someone gave you your home after 1976 and the donor's adjusted basis, when it was given to you, was equal to or less than the FMV, your basis at the time of receipt is 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. Amended tax return Part of federal gift tax due to net increase in value. Amended tax return   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. Amended tax return The numerator (top part) of the fraction is the net increase in the value of the home, and the denominator (bottom part) is the value of the home for gift tax purposes after reduction for any annual exclusion and marital or charitable deduction that applies to the gift. Amended tax return The net increase in the value of the home is its FMV minus the adjusted basis of the donor. Amended tax return Publication 551 gives more information, including examples, on figuring your basis when you receive property as a gift. Amended tax return Inheritance Your basis in a home you inherited is generally the fair market value of the home on the date of the decedent's death or on the alternative valuation date if the personal representative for the estate chooses to use alternative valuation. Amended tax return If an estate tax return was filed, your basis is generally the value of the home listed on the estate tax return. Amended tax return If an estate tax return was not filed, your basis is the appraised value of the home at the decedent's date of death for state inheritance or transmission taxes. Amended tax return Publication 551 and Publication 559, Survivors, Executors, and Administrators, have more information on the basis of inherited property. Amended tax return If you inherited your home from someone who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Amended tax return Adjusted Basis While you own your home, various events may take place that can change the original basis of your home. Amended tax return These events can increase or decrease your original basis. Amended tax return The result is called adjusted basis. Amended tax return See Table 3, on this page, for a list of some of the items that can adjust your basis. Amended tax return Table 3. Amended tax return Adjusted Basis This table lists examples of some items that generally will increase or decrease your basis in your home. Amended tax return It is not intended to be all-inclusive. Amended tax return Increases to Basis Decreases to Basis Improvements: Putting an addition on your home Replacing an entire roof Paving your driveway Installing central air conditioning Rewiring your home Assessments for local improvements (see Assessments for local benefits , under What You Can and Cannot Deduct, earlier) Amounts spent to restore damaged property Insurance or other reimbursement for casualty losses Deductible casualty loss not covered by insurance Payments received for easement or right-of-way granted Depreciation allowed or allowable if home is used for business or rental purposes Value of subsidy for energy conservation measure excluded from income Improvements. Amended tax return   An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. Amended tax return You must add the cost of any improvements to the basis of your home. Amended tax return You cannot deduct these costs. Amended tax return   Improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, and paving your driveway. Amended tax return Amount added to basis. Amended tax return   The amount you add to your basis for improvements is your actual cost. Amended tax return This includes all costs for material and labor, except your own labor, and all expenses related to the improvement. Amended tax return For example, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. Amended tax return   You also must add to your basis state and local assessments for improvements such as streets and sidewalks if they increase the value of the property. Amended tax return These assessments are discussed earlier under Real Estate Taxes . Amended tax return Improvements no longer part of home. Amended tax return    Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. Amended tax return Example. Amended tax return You put wall-to-wall carpeting in your home 15 years ago. Amended tax return Later, you replaced that carpeting with new wall-to-wall carpeting. Amended tax return The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. Amended tax return Repairs versus improvements. Amended tax return   A repair keeps your home in an ordinary, efficient operating condition. Amended tax return It does not add to the value of your home or prolong its life. Amended tax return Repairs include repainting your home inside or outside, fixing your gutters or floors, fixing leaks or plastering, and replacing broken window panes. Amended tax return You cannot deduct repair costs and generally cannot add them to the basis of your home. Amended tax return   However, repairs that are done as part of an extensive remodeling or restoration of your home are considered improvements. Amended tax return You add them to the basis of your home. Amended tax return Records to keep. Amended tax return   You can use Table 4 (at the end of the publication) as a guide to help you keep track of improvements to your home. Amended tax return Also see Keeping Records , below. Amended tax return Energy conservation subsidy. Amended tax return   If a public utility gives you (directly or indirectly) a subsidy for the purchase or installation of an energy conservation measure for your home, do not include the value of that subsidy in your income. Amended tax return You must reduce the basis of your home by that value. Amended tax return   An energy conservation measure is an installation or modification primarily designed to reduce consumption of electricity or natural gas or to improve the management of energy demand. Amended tax return Keeping Records Keeping full and accurate records is vital to properly report your income and expenses, to support your deductions and credits, and to know the basis or adjusted basis of your home. Amended tax return These records include your purchase contract and settlement papers if you bought the property, or other objective evidence if you acquired it by gift, inheritance, or similar means. Amended tax return You should keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. Amended tax return In addition, you should keep track of any decreases to the basis such as those listed in Table 3, earlier. Amended tax return How to keep records. Amended tax return   How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. Amended tax return How long to keep records. Amended tax return   You must keep your records for as long as they are important for meeting any provision of the federal tax law. Amended tax return   Keep records that support an item of income, a deduction, or a credit appearing on a return until the period of limitations for the return runs out. Amended tax return (A period of limitations is the period of time after which no legal action can be brought. Amended tax return ) For assessment of tax you owe, this is generally 3 years from the date you filed the return. Amended tax return For filing a claim for credit or refund, this is generally 3 years from the date you filed the original return, or 2 years from the date you paid the tax, whichever is later. Amended tax return Returns filed before the due date are treated as filed on the due date. Amended tax return   You may need to keep records relating to the basis of property (discussed earlier) for longer than the period of limitations. Amended tax return Keep those records as long as they are important in figuring the basis of the original or replacement property. Amended tax return Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. Amended tax return Table 4. Amended tax return Record of Home Improvements Keep this for your records. Amended tax return Also, keep receipts or other proof of improvements. Amended tax return Remove from this record any improvements that are no longer part of your main home. Amended tax return For example, if you put wall-to-wall carpeting in your home and later replace it with new wall-to-wall carpeting, remove the cost of the first carpeting. Amended tax return (a) Type of Improvement (b) Date (c) Amount   (a) Type of Improvement (b) Date (c) Amount Additions:       Heating & Air  Conditioning:     Bedroom       Heating system     Bathroom       Central air conditioning     Deck       Furnace     Garage       Duct work     Porch       Central humidifier     Patio       Filtration system     Storage shed       Other     Fireplace       Electrical:     Other           Lawn & Grounds:       Lighting fixtures           Wiring upgrades     Landscaping       Other     Driveway       Plumbing:     Walkway           Fences       Water heater     Retaining wall       Soft water system     Sprinkler system       Filtration system     Swimming pool       Other     Exterior lighting       Insulation:     Other           Communications:       Attic           Walls     Satellite dish       Floors     Intercom       Pipes and duct work     Security system       Other     Other             Miscellaneous:       Interior  Improvements:     Storm windows and doors       Built-in appliances     Roof       Kitchen modernization     Central vacuum       Bathroom modernization     Other       Flooring             Wall-to-wall carpeting             Other     How To
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SOI Tax Stats - S Corporation Statistics

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Certain corporations elect to be treated as S corporations for Federal tax purposes. Electing to be treated as an S corporation allows income to flow through the corporation without being taxed until it is claimed as income by the shareholders. This avoids double taxation of corporate income. Here you will find data tables and SOI Bulletin articles concerning 1120S corporations.

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Integrated Business Data: Tables and articles that combine the annual SOI cross-sectional studies of corporation (C and S corporations), partnership, and nonfarm sole proprietorship data.

S Corporation Returns
Article by Kelly Luttrel, SOI
S corporations continue to be the most prevalent type of corporation. For Tax Year 2003, about 61.9 percent of all corporations filed a Form 1120S. The total number of returns filed by S corporations for Tax Year 2003 increased 5.9 percent to nearly 3.3 million, from nearly 3.2 million reported in Tax Year 2002. S corporations became the most common corporate entity type in 1997.

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The following are available as Microsoft Excel® files. A free Excel viewer is available for download, if needed.

Table 1: Returns of Active Corporations, Form 1120S
Data Presented: Total receipts and deductions, portfolio income, rental income, and total net income
Classified By:

Major industry


Table 2: Returns with Net Income, Form 1120S

Data Presented: Total receipts and deductions, portfolio income, rental income, and total net income
Classified By: Major industry

Table 3: Returns of Active Corporations, Form 1120S
Data Presented: Balance sheet items
Classified By: Major industry
  Note: Table 7 is presented in lieu of Table 3; Table 7 provides both balance sheet and income statement items

Table 4: Returns of Active Corporations, Form 1120S
Data Presented: Total receipts and deductions, portfolio income, rental income, and total net income
Classified By: Size of business receipts and industrial sector

Table 5: Returns of Active Corporations, Form 1120S
Data Presented: Rental real estate income.
Classified By: Selected industrial sector and major industry

Table 6: Returns of Active Corporations, Form 1120S
Data Presented: Total receipts and deductions, portfolio income, rental income, and total net income
Classified By: Number of shareholders

Table 7: Returns of Active Corporations, Form 1120S
Data Presented: Balance sheet and income statement items
Classified By: Major industry

Table 8: Returns With Net Income from a Trade or Business, Form 1120S
Data Presented: Balance sheet and income statement items

 Classified By:

Major industry


S Corporations, Selected Figures

Figures:

 


Figure A: S Corporation Total Net Income (Less Deficit)

Tax Years: 2007  2006  2005  2004


Figure B: Number of Form 1120 Series Returns, by Type of Corporation

Tax Years: 2007  2006  2005  2004


Figure C: S Corporation Annual Percentage Increase/Decrease

Tax Years:             2006  2005  2004
  Note: Figure C will no longer be produced. An alternative calculation is being evaluated and results will be posted as the review process dictates.


Figure D: S Corporation Total Assets, Receipts, Net Income, by Industrial Sector

Tax Years: 2007  2006  2005  2004


Figure E: Shares of S Corporation Total Receipts, by Industrial Sector

Tax Years: 2007  2006  2005  2004


Figure F: Shares of S Corporation Total Assets, by Industrial Sector

Tax Years: 2007  2006  2005  2004


Figure G: S Corporation Number of Returns, by Number of Shareholders and Industrial Sector

Tax Years: 2007  2006  2005  2004


Figure H: S Corporation Taxes

Tax Years: 2007  2006  2005  2004

 

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Page Last Reviewed or Updated: 22-Jan-2013

The Amended Tax Return

Amended tax return Publication 559 - Main Content Table of Contents Personal RepresentativeDuties Fees Received by Personal Representatives Final Income Tax Return for Decedent—Form 1040Name, Address, and Signature When and Where To File Filing Requirements Income To Include Exemptions and Deductions Credits, Other Taxes, and Payments Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Filing Reminders Other Tax InformationTax Benefits for Survivors Income in Respect of a Decedent Deductions in Respect of a Decedent Estate Tax Deduction Gifts, Insurance, and Inheritances Other Items of Income Income Tax Return of an Estate— Form 1041Filing Requirements Income To Include Exemption and Deductions Credits, Tax, and Payments Name, Address, and Signature When and Where To File Distributions to BeneficiariesIncome That Must Be Distributed Currently Other Amounts Distributed Discharge of a Legal Obligation Character of Distributions How and When To Report Bequest Termination of Estate Estate and Gift TaxesApplicable Credit Amount Gift Tax Estate Tax Generation-Skipping Transfer Tax Comprehensive ExampleFinal Return for Decedent—Form 1040 Income Tax Return of an Estate—Form 1041 How To Get Tax HelpLow Income Taxpayer Clinics Personal Representative A personal representative of an estate is an executor, administrator, or anyone who is in charge of the decedent's property. Amended tax return Generally, an executor (or executrix) is named in a decedent's will to administer the estate and distribute properties as the decedent has directed. Amended tax return An administrator (or administratrix) is usually appointed by the court if no will exists, if no executor was named in the will, or if the named executor cannot or will not serve. Amended tax return In general, an executor and an administrator perform the same duties and have the same responsibilities. Amended tax return For estate tax purposes, if there is no executor or administrator appointed, qualified, and acting within the United States, the term “executor” includes anyone in actual or constructive possession of any property of the decedent. Amended tax return It includes, among others, the decedent's agents and representatives; safe-deposit companies, warehouse companies, and other custodians of property in this country; brokers holding securities of the decedent as collateral; and the debtors of the decedent who are in this country. Amended tax return Duties The primary duties of a personal representative are to collect all the decedent's assets, pay his or her creditors, and distribute the remaining assets to the heirs or other beneficiaries. Amended tax return The personal representative also must perform the following duties. Amended tax return Apply for an employer identification number (EIN) for the estate. Amended tax return File all tax returns, including income, estate and gift tax returns, when due. Amended tax return Pay the tax determined up to the date of discharge from duties. Amended tax return Other duties of the personal representative in federal tax matters are discussed in other sections of this publication. Amended tax return If any beneficiary is a nonresident alien, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for information on the personal representative's duties as a withholding agent. Amended tax return Penalty. Amended tax return   There is a penalty for failure to file a tax return when due unless the failure is due to reasonable cause. Amended tax return Reliance on an agent (attorney, accountant, etc. Amended tax return ) is not reasonable cause for late filing. Amended tax return It is the personal representative's duty to file the returns for the decedent and the estate when due. Amended tax return Identification number. Amended tax return   The first action you should take if you are the personal representative for the decedent is to apply for an EIN for the estate. Amended tax return You should apply for this number as soon as possible because you need to enter it on returns, statements, and other documents you file concerning the estate. Amended tax return You also must give the number to payers of interest and dividends and other payers who must file a return concerning the estate. Amended tax return   You can get an EIN by applying online at www. Amended tax return irs. Amended tax return gov (click on "Apply for an EIN Online" under the Tools heading). Amended tax return Generally, if you apply online, you will receive your EIN immediately upon completing the application. Amended tax return You can also apply using Form SS-4, Application for Employer Identification Number. Amended tax return Generally, if you apply by mail, it takes about 4 weeks to get your EIN. Amended tax return See the form instructions for other ways to apply. Amended tax return   Payers of interest and dividends report amounts on Forms 1099 using the identification number of the person to whom the account is payable. Amended tax return After a decedent's death, Forms 1099 must reflect the identification number of the estate or beneficiary to whom the amounts are payable. Amended tax return As the personal representative handling the estate, you must furnish this identification number to the payer. Amended tax return For example, if interest is payable to the estate, the estate's EIN must be provided to the payer and used to report the interest on Form 1099-INT, Interest Income. Amended tax return If the interest is payable to a surviving joint owner, the survivor's identification number, such as an SSN or ITIN, must be provided to the payer and used to report the interest. Amended tax return   If the estate or a survivor may receive interest or dividends after you inform the payer of the decedent's death, the payer should give you (or the survivor) a Form W-9, Request for Taxpayer Identification Number and Certification (or a similar substitute form). Amended tax return Complete this form to inform the payer of the estate's (or if completed by the survivor, the survivor's) identification number and return it to the payer. Amended tax return    Do not use the deceased individual's identifying number to file an individual income tax return after the decedent's final tax return. Amended tax return Also do not use it to make estimated tax payments for a tax year after the year of death. Amended tax return Penalty. Amended tax return   If you do not include the EIN or the taxpayer identification number of another person where it is required on a return, statement, or other document, you are liable for a penalty for each failure, unless you can show reasonable cause. Amended tax return You also are liable for a penalty if you do not give the taxpayer identification number of another person when required on a return, statement, or other document. Amended tax return Notice of fiduciary relationship. Amended tax return   The term fiduciary means any person acting for another person. Amended tax return It applies to persons who have positions of trust on behalf of others. Amended tax return A personal representative for a decedent's estate is a fiduciary. Amended tax return Form 56. Amended tax return   If you are appointed to act in a fiduciary capacity for another, you must file a written notice with the IRS stating this. Amended tax return Form 56, Notice Concerning Fiduciary Relationship, is used for this purpose. Amended tax return See the Instructions for Form 56 for filing requirements and other information. Amended tax return   File Form 56 as soon as all the necessary information (including the EIN) is available. Amended tax return It notifies the IRS that you, as the fiduciary, are assuming the powers, rights, duties, and privileges of the decedent. Amended tax return The notice remains in effect until you notify the IRS (by filing another Form 56) that your fiduciary relationship with the estate has terminated. Amended tax return Termination of fiduciary relationship. Amended tax return   Form 56 should also be filed to notify the IRS if your fiduciary relationship is terminated or when a successor fiduciary is appointed if the estate has not been terminated. Amended tax return See Form 56 and its instructions for more information. Amended tax return   At the time of termination of the fiduciary relationship, you may want to file Form 4810, Request for Prompt Assessment Under Internal Revenue Code Section 6501(d), and Form 5495, Request for Discharge From Personal Liability Under Internal Revenue Code Section 2204 or 6905, to wind up your duties as fiduciary. Amended tax return See below for a discussion of these forms. Amended tax return Request for prompt assessment (charge) of tax. Amended tax return   The IRS ordinarily has 3 years from the date an income tax return is filed, or its due date, whichever is later, to charge any additional tax due. Amended tax return However, as a personal representative, you may request a prompt assessment of tax after the return has been filed. Amended tax return This reduces the time for making the assessment to 18 months from the date the written request for prompt assessment was received. Amended tax return This request can be made for any tax return (except the estate tax return) of the decedent or the decedent's estate. Amended tax return This may permit a quicker settlement of the tax liability of the estate and an earlier final distribution of the assets to the beneficiaries. Amended tax return Form 4810. Amended tax return   Form 4810 can be used for making this request. Amended tax return It must be filed separately from any other document. Amended tax return   As the personal representative for the decedent's estate, you are responsible for any additional taxes that may be due. Amended tax return You can request prompt assessment of any of the decedent's taxes (other than federal estate taxes) for any years for which the statutory period for assessment is open. Amended tax return This applies even though the returns were filed before the decedent's death. Amended tax return Failure to report income. Amended tax return   If you or the decedent failed to report substantial amounts of gross income (more than 25% of the gross income reported on the return) or filed a false or fraudulent return, your request for prompt assessment will not shorten the period during which the IRS may assess the additional tax. Amended tax return However, such a request may relieve you of personal liability for the tax if you did not have knowledge of the unpaid tax. Amended tax return Request for discharge from personal liability for tax. Amended tax return   An executor can make a request for discharge from personal liability for a decedent's income, gift, and estate taxes. Amended tax return The request must be made after the returns for those taxes are filed. Amended tax return To make the request, file Form 5495. Amended tax return For this purpose, an executor is an executor or administrator that is appointed, qualified, and acting within the United States. Amended tax return   Within 9 months after receipt of the request, the IRS will notify the executor of the amount of taxes due. Amended tax return If this amount is paid, the executor will be discharged from personal liability for any future deficiencies. Amended tax return If the IRS has not notified the executor, he or she will be discharged from personal liability at the end of the 9-month period. Amended tax return    Even if the executor is discharged from personal liability, the IRS will still be able to assess tax deficiencies against the executor to the extent he or she still has any of the decedent's property. Amended tax return Insolvent estate. Amended tax return   Generally, if a decedent's estate is insufficient to pay all the decedent's debts, the debts due to the United States must be paid first. Amended tax return Both the decedent's federal income tax liabilities at the time of death and the estate's income tax liability are debts due to the United States. Amended tax return The personal representative of an insolvent estate is personally responsible for any tax liability of the decedent or of the estate if he or she had notice of such tax obligations or failed to exercise due care in determining if such obligations existed before distribution of the estate's assets and before being discharged from duties. Amended tax return The extent of such personal responsibility is the amount of any other payments made before paying the debts due to the United States, except where such other debt paid has priority over the debts due to the United States. Amended tax return Income tax liabilities need not be formally assessed for the personal representative to be liable if he or she was aware or should have been aware of their existence. Amended tax return Fees Received by Personal Representatives All personal representatives must include fees paid to them from an estate in their gross income. Amended tax return If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on your Form 1040, line 21. Amended tax return If you are in the trade or business of being an executor, report fees received from the estate as self-employment income on Schedule C or Schedule C-EZ of your Form 1040. Amended tax return If the estate operates a trade or business and you, as executor, actively participate in the trade or business while fulfilling your duties, any fees you receive related to the operation of the trade or business must be reported as self-employment income on Schedule C (or Schedule C-EZ) of your Form 1040. Amended tax return Final Income Tax Return for Decedent—Form 1040 The personal representative (defined earlier) must file the final income tax return (Form 1040) of the decedent for the year of death and any returns not filed for preceding years. Amended tax return A surviving spouse, under certain circumstances, may have to file the returns for the decedent. Amended tax return See Joint Return, later. Amended tax return Return for preceding year. Amended tax return   If an individual died after the close of the tax year, but before the return for that year was filed, the return for the year just closed will not be the final return. Amended tax return The return for that year will be a regular return and the personal representative must file it. Amended tax return Example. Amended tax return Samantha Smith died on March 21, 2013, before filing her 2012 tax return. Amended tax return Her personal representative must file her 2012 return by April 15, 2013. Amended tax return Her final tax return covering the period from January 1, 2013, to March 20, 2013, is due April 15, 2014. Amended tax return Name, Address, and Signature Write the word “DECEASED,” the decedent's name, and the date of death across the top of the tax return. Amended tax return If filing a joint return, write the name and address of the decedent and the surviving spouse in the name and address fields. Amended tax return If a joint return is not being filed, write the decedent's name in the name field and the personal representative's name and address in the address field. Amended tax return Third party designee. Amended tax return   You can check the “Yes” box in the Third Party Designee area on page 2 of the return to authorize the IRS to discuss the return with a friend, family member, or any other person you choose. Amended tax return This allows the IRS to call the person you identified as the designee to answer any questions that may arise during the processing of the return. Amended tax return It also allows the designee to perform certain actions. Amended tax return See the Instructions for Form 1040 for details. Amended tax return Signature. Amended tax return   If a personal representative has been appointed, that person must sign the return. Amended tax return If it is a joint return, the surviving spouse must also sign it. Amended tax return If no personal representative has been appointed, the surviving spouse (on a joint return) signs the return and writes in the signature area “Filing as surviving spouse. Amended tax return ” If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative. Amended tax return ” Paid preparer. Amended tax return   If you pay someone to prepare, assist in preparing, or review the tax return, that person must sign the return and fill in the other blanks in the Paid Preparer Use Only area of the return. Amended tax return See the Form 1040 instructions for details. Amended tax return When and Where To File The final income tax return is due at the same time the decedent's return would have been due had death not occurred. Amended tax return A final return for a decedent who was a calendar year taxpayer is generally due on April 15 following the year of death, regardless of when during that year death occurred. Amended tax return However, when the due date falls on a Saturday, Sunday, or legal holiday, the return is filed timely if filed by the next business day. Amended tax return The tax return must be prepared for the year of death regardless of when during the year death occurred. Amended tax return Generally, you must file the final income tax return of the decedent with the Internal Revenue Service Center for the place where you live. Amended tax return A tax return for a decedent can be electronically filed. Amended tax return A personal representative may also obtain an income tax filing extension on behalf of a decedent. Amended tax return Filing Requirements The gross income, age, and filing status of a decedent generally determine whether a return must be filed. Amended tax return Gross income is all income received by an individual from any source in the form of money, goods, property, and services that is not tax-exempt. Amended tax return It includes gross receipts from self-employment, but if the business involves manufacturing, merchandising, or mining, subtract any cost of goods sold. Amended tax return In general, filing status depends on whether the decedent was considered single or married at the time of death. Amended tax return See the income tax return instructions or Publication 501, Exemptions, Standard Deduction, and Filing Information. Amended tax return Refund A return must be filed to obtain a refund if tax was withheld from salaries, wages, pensions, or annuities, or if estimated tax was paid, even if a return is not otherwise required to be filed. Amended tax return Also, the decedent may be entitled to other credits that result in a refund. Amended tax return These advance payments of tax and credits are discussed later under Credits, Other Taxes, and Payments. Amended tax return Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer. Amended tax return   Form 1310 does not have to be filed if you are claiming a refund and you are: A surviving spouse filing an original or amended joint return with the decedent, or A court-appointed or certified personal representative filing the decedent’s original return and a copy of the court certificate showing your appointment is attached to the return. Amended tax return   If the personal representative is filing a claim for refund on Form 1040X, Amended U. Amended tax return S. Amended tax return Individual Income Tax Return, or Form 843, Claim for Refund and Request for Abatement, and the court certificate has already been filed with the IRS, attach Form 1310 and write “Certificate Previously Filed” at the bottom of the form. Amended tax return Example. Amended tax return Edward Green died before filing his tax return. Amended tax return You were appointed the personal representative for Edward's estate, and you file his Form 1040 showing a refund due. Amended tax return You do not need Form 1310 to claim the refund if you attach a copy of the court certificate showing you were appointed the personal representative. Amended tax return    If you are a surviving spouse and you receive a tax refund check in both your name and your deceased spouse's name, you can have the check reissued in your name alone. Amended tax return Return the joint-name check marked “VOID” to your local IRS office or the service center where you mailed your return, along with a written request for reissuance of the refund check. Amended tax return A new check will be issued in your name and mailed to you. Amended tax return Death certificate. Amended tax return   When filing the decedent's final income tax return, do not attach the death certificate or other proof of death to the final return. Amended tax return Instead, keep it for your records and provide it if requested. Amended tax return Nonresident Alien If the decedent was a nonresident alien who would have had to file Form 1040NR, U. Amended tax return S. Amended tax return Nonresident Alien Income Tax Return, you must file that form for the decedent's final tax year. Amended tax return See the Instructions for Form 1040NR for the filing requirements, due date, and where to file. Amended tax return Joint Return Generally, the personal representative and the surviving spouse can file a joint return for the decedent and the surviving spouse. Amended tax return However, the surviving spouse alone can file the joint return if no personal representative has been appointed before the due date for filing the final joint return for the year of death. Amended tax return This also applies to the return for the preceding year if the decedent died after the close of the preceding tax year and before filing the return for that year. Amended tax return The income of the decedent that was includible on his or her return for the year up to the date of death (see Income To Include, later) and the income of the surviving spouse for the entire year must be included in the final joint return. Amended tax return A final joint return with the decedent cannot be filed if the surviving spouse remarried before the end of the year of the decedent's death. Amended tax return The filing status of the decedent in this instance is married filing a separate return. Amended tax return For information about tax benefits to which a surviving spouse may be entitled, see Tax Benefits for Survivors, later, under Other Tax Information. Amended tax return Personal representative may revoke joint return election. Amended tax return   A court-appointed personal representative may revoke an election to file a joint return previously made by the surviving spouse alone. Amended tax return This is done by filing a separate return for the decedent within one year from the due date of the return (including any extensions). Amended tax return The joint return made by the surviving spouse will then be regarded as the separate return of that spouse by excluding the decedent's items and refiguring the tax liability. Amended tax return Relief from joint liability. Amended tax return   In some cases, one spouse may be relieved of joint liability for tax, interest, and penalties on a joint return for items of the other spouse that were incorrectly reported on the joint return. Amended tax return If the decedent qualified for this relief while alive, the personal representative can pursue an existing request, or file a request, for relief from joint liability. Amended tax return For information on requesting this relief, see Publication 971, Innocent Spouse Relief. Amended tax return Income To Include The decedent's income includible on the final return is generally determined as if the person were still alive except that the taxable period is usually shorter because it ends on the date of death. Amended tax return The method of accounting regularly used by the decedent before death also determines the income includible on the final return. Amended tax return This section explains how some types of income are reported on the final return. Amended tax return For more information about accounting methods, see Publication 538, Accounting Periods and Methods. Amended tax return Cash Method If the decedent accounted for income under the cash method, only those items actually or constructively received before death are included on the final return. Amended tax return Constructive receipt of income. Amended tax return   Interest from coupons on the decedent's bonds is constructively received by the decedent if the coupons matured in the decedent's final tax year, but had not been cashed. Amended tax return Include the interest income on the final return. Amended tax return   Generally, a dividend is considered constructively received if it was available for use by the decedent without restriction. Amended tax return If the corporation customarily mailed its dividend checks, the dividend was includible when received. Amended tax return If the individual died between the time the dividend was declared and the time it was received in the mail, the decedent did not constructively receive it before death. Amended tax return Do not include the dividend in the final return. Amended tax return Accrual Method Generally, under an accrual method of accounting, income is reported when earned. Amended tax return If the decedent used an accrual method, only the income items normally accrued before death are included on the final return. Amended tax return Interest and Dividend Income (Forms 1099) Form(s) 1099 reporting interest and dividends earned by the decedent before death should be received and the amounts included on the decedent's final return. Amended tax return A separate Form 1099 should show the interest and dividends earned after the date of the decedent's death and paid to the estate or other recipient that must include those amounts on its return. Amended tax return You can request corrected Forms 1099 if these forms do not properly reflect the right recipient or amounts. Amended tax return For example, a Form 1099-INT, reporting interest payable to the decedent, may include income that should be reported on the final income tax return of the decedent, as well as income that the estate or other recipient should report, either as income earned after death or as income in respect of the decedent (discussed later). Amended tax return For income earned after death, you should ask the payer for a Form 1099 that properly identifies the recipient (by name and identification number) and the proper amount. Amended tax return If that is not possible, or if the form includes an amount that represents income in respect of the decedent, report the interest as shown next under How to report. Amended tax return See U. Amended tax return S. Amended tax return savings bonds acquired from decedent under Income in Respect of a Decedent, later, for information on savings bond interest that may have to be reported on the final return. Amended tax return How to report. Amended tax return   If you are preparing the decedent's final return and you have received a Form 1099-INT for the decedent that includes amounts belonging to the decedent and to another recipient (the decedent's estate or another beneficiary), report the total interest shown on Form 1099-INT on Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends. Amended tax return Next, enter a subtotal of the interest shown on Forms 1099, and the interest reportable from other sources for which you did not receive Forms 1099. Amended tax return Then, show any interest (including any interest you receive as a nominee) belonging to another recipient separately and subtract it from the subtotal. Amended tax return Identify the amount of this adjustment as “Nominee Distribution” or other appropriate designation. Amended tax return   Report dividend income for which you received a Form 1099-DIV, Dividends and Distributions, on the appropriate schedule using the same procedure. Amended tax return    Note. Amended tax return If the decedent received amounts as a nominee, you must give the actual owner a Form 1099, unless the owner is the decedent's spouse. Amended tax return See General Instructions for Certain Information Returns (Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G) for more information on filing Forms 1099. Amended tax return Partnership Income The death of a partner closes the partnership's tax year for that partner. Amended tax return Generally, it does not close the partnership's tax year for the remaining partners. Amended tax return The decedent's distributive share of partnership items must be figured as if the partnership's tax year ended on the date the partner died. Amended tax return To avoid an interim closing of the partnership books, the partners can agree to estimate the decedent's distributive share by prorating the amounts the partner would have included for the entire partnership tax year. Amended tax return On the decedent's final return, include the decedent's distributive share of partnership items for the following periods. Amended tax return The partnership's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). Amended tax return The period, if any, from the end of the partnership's tax year in (1) to the decedent's date of death. Amended tax return Example. Amended tax return Mary Smith was a partner in XYZ partnership and reported her income on a tax year ending December 31. Amended tax return The partnership uses a tax year ending June 30. Amended tax return Mary died August 31, 2013, and her estate established its tax year through August 31. Amended tax return The distributive share of partnership items based on the decedent's partnership interest is reported as follows. Amended tax return Final Return for the Decedent—January 1 through August 31, 2013, includes XYZ partnership items from (a) the partnership tax year ending June 30, 2013, and (b) the partnership tax year beginning July 1, 2013, and ending August 31, 2013 (the date of death). Amended tax return Income Tax Return of the Estate—September 1, 2013, through August 31, 2014, includes XYZ partnership items for the period September 1, 2013, through June 30, 2014. Amended tax return S Corporation Income If the decedent was a shareholder in an S corporation, include on the final return the decedent's share of the S corporation's items of income, loss, deduction, and credit for the following periods. Amended tax return The corporation's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). Amended tax return The period, if any, from the end of the corporation's tax year in (1) to the decedent's date of death. Amended tax return Self-Employment Income Include self-employment income actually or constructively received or accrued, depending on the decedent's accounting method. Amended tax return For self-employment tax purposes only, the decedent's self-employment income will include the decedent's distributive share of a partnership's income or loss through the end of the month in which death occurred. Amended tax return For this purpose, the partnership's income or loss is considered to be earned ratably over the partnership's tax year. Amended tax return Community Income If the decedent was married and domiciled in a community property state, half of the income received and half of the expenses paid during the decedent's tax year by either the decedent or spouse may be considered to be the income and expenses of the other. Amended tax return For more information, see Publication 555, Community Property. Amended tax return HSA, Archer MSA, or Medicare Advantage MSA The treatment of an HSA (health savings account), an Archer MSA (medical savings account), or a Medicare Advantage MSA at the death of the account holder, depends on who acquires the interest in the account. Amended tax return If the decedent's estate acquires the interest, the fair market value (FMV) of the assets in the account on the date of death is included in income on the decedent's final return. Amended tax return The estate tax deduction, discussed later, does not apply to this amount. Amended tax return If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. Amended tax return For other information on HSAs, Archer MSAs, or Medicare Advantage MSAs, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. Amended tax return Coverdell Education Savings Account (ESA) Generally, the balance in a Coverdell ESA must be distributed within 30 days after the individual for whom the account was established reaches age 30, or dies, whichever is earlier. Amended tax return The treatment of the Coverdell ESA at the death of an individual under age 30 depends on who acquires the interest in the account. Amended tax return If the decedent's estate acquires the interest, the earnings on the account must be included on the final income tax return of the decedent. Amended tax return The estate tax deduction, discussed later, does not apply to this amount. Amended tax return If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. Amended tax return The age 30 limitation does not apply if the individual for whom the account was established or the beneficiary that acquires the account is an individual with special needs. Amended tax return This includes an individual who, because of a physical, mental, or emotional condition (including a learning disability), requires additional time to complete his or her education. Amended tax return For more information on Coverdell ESAs, see Publication 970, Tax Benefits for Education. Amended tax return Accelerated Death Benefits Accelerated death benefits are amounts received under a life insurance contract before the death of the insured individual. Amended tax return These benefits also include amounts received on the sale or assignment of the contract to a viatical settlement provider. Amended tax return Generally, if the decedent received accelerated death benefits on the life of a terminally or chronically ill individual, whether on his or her own life or on the life of another person, those benefits are not included in the decedent's income. Amended tax return For more information, see the discussion under Gifts, Insurance, and Inheritances under Other Tax Information, later. Amended tax return Exemptions and Deductions Generally, the rules for exemptions and deductions allowed to an individual also apply to the decedent's final income tax return. Amended tax return Show on the final return deductible items the decedent paid (or accrued, if the decedent reported deductions on an accrual method) before death. Amended tax return This section contains a detailed discussion of medical expenses because the tax treatment of the decedent's medical expenses can be different. Amended tax return See Medical Expenses, later. Amended tax return Exemptions You can claim the decedent's personal exemption on the final income tax return. Amended tax return If the decedent was another person's dependent (for example, a parent's), you cannot claim the personal exemption on the decedent's final return. Amended tax return Standard Deduction If you do not itemize deductions on the final return, the full amount of the appropriate standard deduction is allowed regardless of the date of death. Amended tax return For information on the appropriate standard deduction, see the Form 1040 income tax return instructions or Publication 501. Amended tax return Medical Expenses Medical expenses paid before death by the decedent are deductible, subject to limits, on the final income tax return if deductions are itemized. Amended tax return This includes expenses for the decedent, as well as for the decedent's spouse and dependents. Amended tax return Beginning in 2013, medical expenses exceeding 10% of adjusted gross income (AGI) may be deducted, unless the decedent or their spouse is age 65 or older. Amended tax return In that case medical expenses exceeding 7. Amended tax return 5% of AGI may be deducted. Amended tax return Qualified medical expenses are not deductible if paid with a tax-free distribution from an HSA or an Archer MSA. Amended tax return Election for decedent's expenses. Amended tax return   Medical expenses not paid before death are liabilities of the estate and are shown on the federal estate tax return (Form 706). Amended tax return However, if medical expenses for the decedent are paid out of the estate during the 1-year period beginning with the day after death, you can elect to treat all or part of the expenses as paid by the decedent at the time they were incurred. Amended tax return   If you make the election, you can claim all or part of the expenses on the decedent's income tax return (if deductions are itemized) rather than on the federal estate tax return (Form 706). Amended tax return You can deduct expenses incurred in the year of death on the final income tax return. Amended tax return You should file an amended return (Form 1040X) for medical expenses incurred in an earlier year, unless the statutory period for filing a claim for that year has expired. Amended tax return   The amount you can deduct on the income tax return is the amount above 10% of adjusted gross income (or 7. Amended tax return 5% of adjusted gross income if the decedent or the decedent's spouse was born before January 2, 1949). Amended tax return Amounts not deductible because of this percentage cannot be claimed on the federal estate tax return. Amended tax return Making the election. Amended tax return   You make the election by attaching a statement, in duplicate, to the decedent's income tax return or amended return. Amended tax return The statement must state that you have not claimed the amount as an estate tax deduction, and that the estate waives the right to claim the amount as a deduction. Amended tax return This election applies only to expenses incurred for the decedent, not to expenses incurred to provide medical care for dependents. Amended tax return Example. Amended tax return Richard Brown used the cash method of accounting and filed his income tax return on a calendar year basis. Amended tax return Richard died on June 1, 2013, at the age of 78, after incurring $800 in medical expenses. Amended tax return Of that amount, $500 was incurred in 2012 and $300 was incurred in 2013. Amended tax return Richard itemized his deductions when he filed his 2012 income tax return. Amended tax return The personal representative of the estate paid the entire $800 liability in August 2013. Amended tax return The personal representative may file an amended return (Form 1040X) for 2012 claiming the $500 medical expense as a deduction, subject to the 7. Amended tax return 5% limit. Amended tax return The $300 of expenses incurred in 2013 can be deducted on the final income tax return if deductions are itemized, subject to the 7. Amended tax return 5% limit. Amended tax return The personal representative must file a statement in duplicate with each return stating that these amounts have not been claimed on the federal estate tax return (Form 706), and waiving the right to claim such a deduction on Form 706 in the future. Amended tax return Medical expenses not paid by estate. Amended tax return   If you paid medical expenses for your deceased spouse or dependent, claim the expenses on your tax return for the year in which you paid them, whether they are paid before or after the decedent's death. Amended tax return If the decedent was a child of divorced or separated parents, the medical expenses can usually be claimed by both the custodial and noncustodial parent to the extent paid by that parent during the year. Amended tax return Insurance reimbursements. Amended tax return   Insurance reimbursements of previously deducted medical expenses due a decedent at the time of death and later received by the decedent's estate are includible in the income tax return of the estate (Form 1041) for the year the reimbursements are received. Amended tax return The reimbursements are also includible in the decedent's gross estate. Amended tax return No deduction for funeral expenses can be taken on the final Form 1040 of a decedent. Amended tax return These expenses may be deductible for estate tax purposes on Form 706. Amended tax return Deduction for Losses A decedent's net operating loss deduction from a prior year and any capital losses (including capital loss carryovers) can be deducted only on the decedent's final income tax return. Amended tax return A net operating loss on the decedent's final income tax return can be carried back to prior years. Amended tax return (See Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. Amended tax return ) You cannot deduct any unused net operating loss or capital loss on the estate's income tax return. Amended tax return At-risk loss limits. Amended tax return   Special at-risk rules apply to most activities that are engaged in as a trade or business or for the production of income. Amended tax return   These rules limit the deductible loss to the amount which the individual was considered at-risk in the activity. Amended tax return An individual generally will be considered at-risk to the extent of the money and the adjusted basis of property that he or she contributed to the activity and certain amounts the individual borrowed for use in the activity. Amended tax return An individual will be considered at-risk for amounts borrowed only if he or she was personally liable for the repayment or if the amounts borrowed were secured by property other than that used in the activity. Amended tax return The individual is not considered at-risk for borrowed amounts if the lender has an interest in the activity or if the lender is related to a person who has an interest in the activity. Amended tax return For more information, see Publication 925, Passive Activity and At-Risk Rules. Amended tax return Passive activity rules. Amended tax return   A passive activity is any trade or business activity in which the taxpayer does not materially participate. Amended tax return To determine material participation, see Publication 925. Amended tax return Rental activities are passive activities regardless of the taxpayer's participation, unless the taxpayer meets certain eligibility requirements. Amended tax return   Individuals, estates, and trusts can offset passive activity losses only against passive activity income. Amended tax return Passive activity losses or credits not allowed in one tax year can be carried forward to the next year. Amended tax return   If a passive activity interest is transferred because a taxpayer dies, the accumulated unused passive activity losses are allowed as a deduction against the decedent's income in the year of death. Amended tax return Losses are allowed only to the extent they are greater than the excess of the transferee's (recipient of the interest transferred) basis in the property over the decedent's adjusted basis in the property immediately before death. Amended tax return The part of the accumulated losses equal to the excess is not allowed as a deduction for any tax year. Amended tax return   Use Form 8582, Passive Activity Loss Limitations, to summarize losses and income from passive activities and to figure the amounts allowed. Amended tax return For more information, see Publication 925. Amended tax return Credits, Other Taxes, and Payments Discussed below are some of the tax credits, types of taxes that may be owed, income tax withheld, and estimated tax payments reported on the final return of a decedent. Amended tax return Credits On the final income tax return, you can claim any tax credits that applied to the decedent before death. Amended tax return Some of these credits are discussed next. Amended tax return Earned income credit. Amended tax return   If the decedent was an eligible individual, you can claim the earned income credit on the decedent's final return even though the return covers less than 12 months. Amended tax return If the allowable credit is more than the tax liability for the year, the excess is refunded. Amended tax return   For more information, see Publication 596, Earned Income Credit (EIC). Amended tax return Credit for the elderly or the disabled. Amended tax return   This credit is allowable on a decedent's final income tax return if the decedent met both of the following requirements in the year of death. Amended tax return The decedent: Was a “qualified individual,” and Had income (adjusted gross income (AGI) and nontaxable social security and pensions) less than certain limits. Amended tax return   For details on qualifying for or figuring the credit, see Publication 524, Credit for the Elderly or the Disabled. Amended tax return Child tax credit. Amended tax return   If the decedent had a qualifying child, you may be able to claim the child tax credit on the decedent's final return even though the return covers less than 12 months. Amended tax return You may be able to claim the additional child tax credit and get a refund if the credit is more than the decedent's liability. Amended tax return For more information, see the Instructions for Form 1040. Amended tax return Adoption credit. Amended tax return   Depending upon when the adoption was finalized, this credit may be taken on a decedent's final income tax return if the decedent: Adopted an eligible child and paid qualified adoption expenses, or Has a carryforward of an adoption credit from a prior year. Amended tax return   Also, if the decedent is survived by a spouse who meets the filing status of qualifying widow(er), unused adoption credit may be carried forward and used following the death of the decedent. Amended tax return See Form 8839, Qualified Adoption Expenses, and its instructions for more details. Amended tax return General business tax credit. Amended tax return   The general business credit available to a taxpayer is limited. Amended tax return Any credit arising in a tax year beginning before 1998 that has not been used up can be carried forward for up to 15 years. Amended tax return Any unused credit arising in a tax year beginning after 1997 has a 1-year carryback and a 20-year carryforward period. Amended tax return   After the carryforward period, a deduction may be allowed for any unused business credit. Amended tax return If the taxpayer dies before the end of the carryforward period, the deduction generally is allowed in the year of death. Amended tax return   For more information on the general business credit, see Publication 334, Tax Guide for Small Business. Amended tax return Other Taxes Taxes other than income tax that may be owed on the final return of a decedent include self-employment tax and alternative minimum tax, which are reported on Form 1040. Amended tax return Self-employment tax. Amended tax return   Self-employment tax may be owed on the final return if either of the following applied to the decedent in the year of death: Net earnings from self-employment (excluding income described in (2)) were $400 or more; or Wages from services performed as a church employee were $108. Amended tax return 28 or more. Amended tax return Alternative minimum tax (AMT). Amended tax return   The tax laws give special treatment to certain types of income and allow special deductions and credits for certain types of expenses. Amended tax return The alternative minimum tax (AMT) was enacted so taxpayers who benefit from these laws still pay at least a minimum amount of tax. Amended tax return In general, the AMT is the excess of the tentative minimum tax over the regular tax shown on the return. Amended tax return Form 6251. Amended tax return    Use Form 6251, Alternative Minimum Tax—Individuals, to determine if this tax applies to the decedent. Amended tax return See the form instructions for information on when you must attach Form 6251 to Form 1040. Amended tax return Form 8801. Amended tax return   If the decedent paid AMT in a previous year or had a credit carryforward, the decedent may be eligible for a minimum tax credit. Amended tax return See Form 8801, Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts. Amended tax return Payments of Tax The income tax withheld from the decedent's salary, wages, pensions, or annuities, and the amount paid as estimated tax are credits (advance payments of tax) that must be claimed on the final return. Amended tax return Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Income tax liability may be forgiven for a decedent who dies due to service in a combat zone, due to military or terrorist actions, as a result of a terrorist attack, or while serving in the line of duty as an astronaut. Amended tax return Combat Zone If a member of the Armed Forces of the United States dies while in active service in a combat zone or from wounds, disease, or injury incurred in a combat zone, the decedent's income tax liability is abated (forgiven) for the entire year in which death occurred and for any prior tax year ending on or after the first day the person served in a combat zone in active service. Amended tax return For this purpose, a qualified hazardous duty area is treated as a combat zone. Amended tax return If the tax (including interest, additions to the tax, and additional amounts) for these years has been assessed, the assessment will be forgiven. Amended tax return If the tax has been collected (regardless of the date of collection), that tax will be credited or refunded. Amended tax return Any of the decedent's income tax for tax years before those mentioned above that remains unpaid as of the actual (or presumptive) date of death will not be assessed. Amended tax return If any unpaid tax (including interest, additions to the tax, and additional amounts) has been assessed, this assessment will be forgiven. Amended tax return Also, if any tax was collected after the date of death, that amount will be credited or refunded. Amended tax return The date of death of a member of the Armed Forces reported as missing in action or as a prisoner of war is the date his or her name is removed from missing status for military pay purposes. Amended tax return This is true even if death actually occurred earlier. Amended tax return For other tax information for members of the Armed Forces, see Publication 3, Armed Forces' Tax Guide. Amended tax return Military or Terrorist Actions The decedent's income tax liability is forgiven if, at death, he or she was a military or civilian employee of the United States who died because of wounds or injury incurred: While a U. Amended tax return S. Amended tax return employee, and In a military or terrorist action. Amended tax return The forgiveness applies to the tax year in which death occurred and for any earlier tax year, beginning with the year before the year in which the wounds or injury occurred. Amended tax return Example. Amended tax return The income tax liability of a civilian employee of the United States who died in 2013 because of wounds incurred while a U. Amended tax return S. Amended tax return employee in a terrorist attack that occurred in 2008 will be forgiven for 2013 and for all prior tax years in the period 2007 through 2012. Amended tax return Refunds are allowed for the tax years for which the period for filing a claim for refund has not ended, as discussed later. Amended tax return Military or terrorist action defined. Amended tax return   A military or terrorist action means the following. Amended tax return Any terrorist activity that most of the evidence indicates was directed against the United States or any of its allies. Amended tax return Any military action involving the U. Amended tax return S. Amended tax return Armed Forces and resulting from violence or aggression against the United States or any of its allies, or the threat of such violence or aggression. Amended tax return   Terrorist activity includes criminal offenses intended to coerce, intimidate, or retaliate against the government or civilian population. Amended tax return Military action does not include training exercises. Amended tax return Any multinational force in which the United States is participating is treated as an ally of the United States. Amended tax return Determining if a terrorist activity or military action has occurred. Amended tax return   You may rely on published guidance from the IRS to determine if a particular event is considered a terrorist activity or military action. Amended tax return Specified Terrorist Victim The Victims of Terrorism Tax Relief Act of 2001 (the Act) provides tax relief for those injured or killed as a result of terrorist attacks, certain survivors of those killed as a result of terrorist attacks, and others who were affected by terrorist attacks. Amended tax return Under the Act, the federal income tax liability of those killed in the following attacks (specified terrorist victim) is forgiven for certain tax years. Amended tax return The April 19, 1995, terrorist attack on the Alfred P. Amended tax return Murrah Federal Building (Oklahoma City). Amended tax return The September 11, 2001, terrorist attacks. Amended tax return The terrorist attacks involving anthrax occurring after September 10, 2001, and before January 1, 2002. Amended tax return The Act also exempts from federal income tax the following types of income. Amended tax return Qualified disaster relief payments made after September 10, 2001, to cover personal, family, living, or funeral expenses incurred because of a terrorist attack. Amended tax return Certain disability payments received in tax years ending after September 10, 2001, for injuries sustained in a terrorist attack. Amended tax return Certain death benefits paid by an employer to the survivor of an employee because the employee died as a result of a terrorist attack. Amended tax return Payments from the September 11th Victim Compensation Fund 2001. Amended tax return The Act also reduces the estate tax of individuals who die as a result of a terrorist attack. Amended tax return See Publication 3920, Tax Relief for Victims of Terrorist Attacks, for more information. Amended tax return Astronauts Legislation extended the tax relief available under the Victims of Terrorism Tax Relief Act of 2001 (the Act) to astronauts who died in the line of duty after December 31, 2002. Amended tax return The decedent's income tax liability is forgiven for the tax year in which death occurs, and for the tax year prior to death. Amended tax return For information on death benefit payments and the reduction of federal estate taxes, see Publication 3920. Amended tax return However, the discussions in that publication under Death Benefits and Estate Tax Reduction should be modified for astronauts (for example, by using the date of death of the astronaut instead of September 11, 2001). Amended tax return For more information on the Act, see Publication 3920. Amended tax return Claim for Credit or Refund If any of these tax-forgiveness situations applies to a prior year tax, any tax paid for which the period for filing a claim has not ended will be credited or refunded. Amended tax return If any tax is still due, it will be canceled. Amended tax return The normal period for filing a claim for credit or refund is 3 years after the return was filed or 2 years after the tax was paid, whichever is later. Amended tax return If death occurred in a combat zone or from wounds, disease, or injury incurred in a combat zone, the period for filing the claim is extended by: The amount of time served in the combat zone (including any period in which the individual was in missing status), plus The period of continuous qualified hospitalization for injury from service in the combat zone, if any, plus The next 180 days. Amended tax return Qualified hospitalization means any hospitalization outside the United States and any hospitalization in the United States of not more than 5 years. Amended tax return This extended period for filing the claim also applies to a member of the Armed Forces who was deployed outside the United States in a designated contingency operation. Amended tax return Filing a claim. Amended tax return   Use the following procedures to file a claim. Amended tax return If a U. Amended tax return S. Amended tax return individual income tax return (Form 1040, 1040A, or 1040EZ) has not been filed, you should make a claim for refund of any withheld income tax or estimated tax payments by filing Form 1040. Amended tax return Form W-2, Wage and Tax Statement, must accompany all returns. Amended tax return If a U. Amended tax return S. Amended tax return individual income tax return has been filed, you should make a claim for refund by filing Form 1040X. Amended tax return You must file a separate Form 1040X for each year in question. Amended tax return   You must file these returns and claims at the following address for regular mail (U. Amended tax return S. Amended tax return Postal Service). Amended tax return    Internal Revenue Service 333 W. Amended tax return Pershing, P5–6503 Kansas City, MO 64108   Identify all returns and claims for refund by writing “Iraq—KIA,” “Enduring Freedom—KIA,” “Kosovo Operation—KIA,” “Desert Storm—KIA,” or “Former Yugoslavia—KIA” in bold letters on the top of page 1 of the return or claim. Amended tax return On the applicable return, write the same phrase on the line for total tax. Amended tax return If the individual was killed in a terrorist or military action, put “KITA” on the front of the return and on the line for total tax. Amended tax return   Include an attachment showing the computation of the decedent's tax liability and a computation of the amount to be forgiven. Amended tax return On joint returns, make an allocation of the tax as described below under Joint returns. Amended tax return If you cannot make a proper allocation, attach a statement of all income and deductions allocable to each spouse and the IRS will make the proper allocation. Amended tax return   You must attach Form 1310 to all returns and claims for refund. Amended tax return However, for exceptions to filing Form 1310, see Form 1310. Amended tax return Statement of Person Claiming Refund Due a Deceased Taxpayer, under Refund, earlier. Amended tax return   You must also attach proof of death that includes a statement that the individual was a U. Amended tax return S. Amended tax return employee on the date of injury and on the date of death and died as the result of a military or terrorist action. Amended tax return For military and civilian employees of the Department of Defense, attach DD Form 1300, Report of Casualty. Amended tax return For other U. Amended tax return S. Amended tax return civilian employees killed in the United States, attach a death certificate and a certification (letter) from the federal employer. Amended tax return For other U. Amended tax return S. Amended tax return civilian employees killed overseas, attach a certification from the Department of State. Amended tax return   If you do not have enough tax information to file a timely claim for refund, you can suspend the period for filing a claim by filing Form 1040X. Amended tax return Attach Form 1310, any required documentation currently available, and a statement that you will file an amended claim as soon as you have the required tax information. Amended tax return Joint returns. Amended tax return   If a joint return was filed, only the decedent's part of the income tax liability is eligible for forgiveness. Amended tax return Determine the decedent's tax liability as follows. Amended tax return Figure the income tax for which the decedent would have been liable if a separate return had been filed. Amended tax return Figure the income tax for which the spouse would have been liable if a separate return had been filed. Amended tax return Multiply the joint tax liability by a fraction. Amended tax return The numerator of the fraction is the amount in (1), above. Amended tax return The denominator of the fraction is the total of (1) and (2). Amended tax return   The resulting amount from (3) above is the decedent's tax liability eligible for forgiveness. Amended tax return Filing Reminders To minimize the time needed to process the decedent's final return and issue any refund, be sure to follow these procedures. Amended tax return Write “DECEASED,” the decedent's name, and the date of death across the top of the tax return. Amended tax return If a personal representative has been appointed, the personal representative must sign the return. Amended tax return If it is a joint return, the surviving spouse must also sign it. Amended tax return If you are the decedent's spouse filing a joint return with the decedent and no personal representative has been appointed, write “Filing as surviving spouse” in the area where you sign the return. Amended tax return If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative. Amended tax return ” To claim a refund for the decedent, do the following. Amended tax return If you are the decedent's spouse filing a joint return with the decedent, file only the tax return to claim the refund. Amended tax return If you are the personal representative and the return is not a joint return filed with the decedent's surviving spouse, file the return and attach a copy of the certificate that shows your appointment by the court. Amended tax return (A power of attorney or a copy of the decedent's will is not acceptable evidence of your appointment as the personal representative. Amended tax return ) If you are filing an amended return, attach Form 1310 and a copy of the certificate of appointment (or, if you have already sent the certificate of appointment to IRS, write “Certificate Previously Filed” at the bottom of Form 1310). Amended tax return If you are not filing a joint return as the surviving spouse and a personal representative has not been appointed, file the return and attach Form 1310. Amended tax return Other Tax Information Discussed below is information about the effect of an individual's death on the income tax liability of the survivors (including widows and widowers), the beneficiaries, and the estate. Amended tax return Tax Benefits for Survivors Survivors can qualify for certain benefits when filing their own income tax returns. Amended tax return Joint return by surviving spouse. Amended tax return   A surviving spouse can file a joint return for the year of death and may qualify for special tax rates for the following 2 years, as explained under Qualifying widows and widowers, later. Amended tax return Decedent as your dependent. Amended tax return   If the decedent qualified as your dependent for a part of the year before death, you can claim the exemption for the dependent on your tax return, regardless of when death occurred during the year. Amended tax return   If the decedent was your qualifying child, you may be able to claim the child tax credit or the earned income credit. Amended tax return To determine if you qualify for the child tax credit, see the instructions for Form 1040, line 51; Form 1040A, line 33; or Form 1040NR, line 48. Amended tax return To determine if you qualify for the earned income credit, see the instructions for Form 1040, lines 64a and 64b or Form 1040A, lines 38a and 38b. Amended tax return Qualifying widows and widowers. Amended tax return   If your spouse died within the 2 tax years preceding the year for which your return is being filed, you may be eligible to claim the filing status of qualifying widow(er) with dependent child and qualify to use the married-filing-jointly tax rates. Amended tax return Requirements. Amended tax return   Generally, you qualify for this special benefit if you meet all of the following requirements. Amended tax return You were entitled to file a joint return with your spouse for the year of death—whether or not you actually filed jointly. Amended tax return You did not remarry before the end of the current tax year. Amended tax return You have a child, stepchild, or foster child who qualifies as your dependent for the tax year. Amended tax return You provide more than half the cost of maintaining your home, which is the principal residence of that child for the entire year except for temporary absences. Amended tax return Example. Amended tax return William Burns' wife died in 2010. Amended tax return William has not remarried and continued throughout 2011 and 2012 to maintain a home for himself and his dependent child. Amended tax return For 2010, he was entitled to file a joint return for himself and his deceased wife. Amended tax return For 2011 and 2012, he qualifies to file as a qualifying widower with dependent child. Amended tax return For later years, he may qualify to file as a head of household. Amended tax return Figuring your tax. Amended tax return   Check the box on line 5 (Form 1040 or 1040A) under Filing Status on your tax return. Amended tax return Use the Tax Rate Schedule or the column in the Tax Table for Married filing jointly, which gives you the split-income benefits. Amended tax return   The last year you can file jointly with, or claim an exemption for, your deceased spouse is the year of death. Amended tax return Joint return filing rules. Amended tax return   If you are the surviving spouse and a personal representative is handling the estate for the decedent, you should coordinate filing your return for the year of death with this personal representative. Amended tax return See Joint Return under Final Income Tax Return for Decedent—Form 1040, earlier. Amended tax return Income in Respect of a Decedent All income the decedent would have received had death not occurred that was not properly includible on the final return, discussed earlier, is income in respect of a decedent. Amended tax return If the decedent is a specified terrorist victim (see Specified Terrorist Victim, earlier), income received after the date of death and before the end of the decedent's tax year (determined without regard to death) is excluded from the recipient's gross income. Amended tax return This exclusion does not apply to certain income. Amended tax return For more information, see Publication 3920. Amended tax return How To Report Income in respect of a decedent must be included in the income of one of the following. Amended tax return The decedent's estate, if the estate receives it. Amended tax return The beneficiary, if the right to income is passed directly to the beneficiary and the beneficiary receives it. Amended tax return Any person to whom the estate properly distributes the right to receive it. Amended tax return If you have to include income in respect of a decedent in your gross income and an estate tax return (Form 706) was filed for the decedent, you may be able to claim a deduction for the estate tax paid on that income. Amended tax return See Estate Tax Deduction, later. Amended tax return Example 1. Amended tax return Frank Johnson owned and operated an apple orchard. Amended tax return He used the cash method of accounting. Amended tax return He sold and delivered 1,000 bushels of apples to a canning factory for $2,000, but did not receive payment before his death. Amended tax return The proceeds from the sale are income in respect of a decedent. Amended tax return When the estate was settled, payment had not been made and the estate transferred the right to the payment to his widow. Amended tax return When Frank's widow collects the $2,000, she must include that amount in her return. Amended tax return It is not reported on the final return of the decedent or on the return of the estate. Amended tax return Example 2. Amended tax return Assume the same facts as in Example 1, except that Frank used the accrual method of accounting. Amended tax return The amount accrued from the sale of the apples would be included on his final return. Amended tax return Neither the estate nor the widow would realize income in respect of a decedent when the money is later paid. Amended tax return Example 3. Amended tax return On February 1, George High, a cash method taxpayer, sold his tractor for $3,000, payable March 1 of the same year. Amended tax return His adjusted basis in the tractor was $2,000. Amended tax return George died on February 15, before receiving payment. Amended tax return The gain to be reported as income in respect of a decedent is the $1,000 difference between the decedent's basis in the property and the sale proceeds. Amended tax return In other words, the income in respect of a decedent is the gain the decedent would have realized had he lived. Amended tax return Example 4. Amended tax return Cathy O'Neil was entitled to a large salary payment at the date of her death. Amended tax return The amount was to be paid in five annual installments. Amended tax return The estate, after collecting two installments, distributed the right to the remaining installments to you, the beneficiary. Amended tax return The payments are income in respect of a decedent. Amended tax return None of the payments were includible on Cathy's final return. Amended tax return The estate must include in its income the two installments it received, and you must include in your income each of the three installments as you receive them. Amended tax return Example 5. Amended tax return You inherited the right to receive renewal commissions on life insurance sold by your father before his death. Amended tax return You inherited the right from your mother, who acquired it by bequest from your father. Amended tax return Your mother died before she received all the commissions she had the right to receive, so you received the rest. Amended tax return The commissions are income in respect of a decedent. Amended tax return None of these commissions were includible in your father's final return. Amended tax return The commissions received by your mother were included in her income. Amended tax return The commissions you received are not includible in your mother's income, even on her final return. Amended tax return You must include them in your income. Amended tax return Character of income. Amended tax return   The character of the income you receive in respect of a decedent remains the same as it would have been to the decedent if he or she were alive. Amended tax return If the income would have been a capital gain to the decedent, it will be a capital gain to you. Amended tax return Transfer of right to income. Amended tax return   If you transfer your right to income in respect of a decedent, you must include in your income the greater of: The amount you receive for the right, or The fair market value of the right you transfer. Amended tax return   If you make a gift of such a right, you must include in your income the fair market value of the right at the time of the gift. Amended tax return   If the right to income from an installment obligation is transferred, the amount you must include in income is reduced by the basis of the obligation. Amended tax return See Installment obligations, later. Amended tax return Transfer defined. Amended tax return   A transfer for this purpose includes a sale, exchange, or other disposition, the satisfaction of an installment obligation at other than face value, or the cancellation of an installment obligation. Amended tax return Installment obligations. Amended tax return   If the decedent sold property using the installment method and you are collecting payments on an installment obligation acquired from the decedent, use the same gross profit percentage the decedent used to figure the part of each payment that represents profit. Amended tax return Include in your income the same profit the decedent would have included had death not occurred. Amended tax return For more information, see Publication 537, Installment Sales. Amended tax return   If you dispose of an installment obligation acquired from a decedent (other than by transfer to the obligor), the rules explained in Publication 537 for figuring gain or loss on the disposition apply to you. Amended tax return Transfer to obligor. Amended tax return   A transfer of a right to income, discussed earlier, has occurred if the decedent (seller) sold property using the installment method and the installment obligation was transferred to the obligor (buyer or person legally obligated to pay the installments). Amended tax return A transfer also occurs if the obligation was canceled either at death or by the estate or person receiving the obligation from the decedent. Amended tax return An obligation that becomes unenforceable is treated as having been canceled. Amended tax return   If such a transfer occurs, the amount included in the income of the transferor (the estate or beneficiary) is the greater of the amount received or the fair market value of the installment obligation at the time of transfer, reduced by the basis of the obligation. Amended tax return The basis of the obligation is the decedent's basis, adjusted for all installment payments received after the decedent's death and before the transfer. Amended tax return   If the decedent and obligor were related persons, the fair market value of the obligation cannot be less than its face value. Amended tax return Specific Types of Income in Respect of a Decedent This section explains and provides examples of some specific types of income in respect of a decedent. Amended tax return Wages. Amended tax return   The entire amount of wages or other employee compensation earned by the decedent but unpaid at the time of death is income in respect of a decedent. Amended tax return The income is not reduced by any amounts withheld by the employer. Amended tax return If the income is $600 or more, the employer should report it in box 3 of Form 1099-MISC, Miscellaneous Income, and give the recipient a copy of the form or a similar statement. Amended tax return   Wages paid as income in respect of a decedent are not subject to federal income tax withholding. Amended tax return However, if paid during the calendar year of death, they are subject to withholding for social security and Medicare taxes. Amended tax return These taxes should be included on the decedent's Form W-2 along with the taxes withheld before death. Amended tax return These wages are not included in box 1 of Form W-2. Amended tax return   Wages paid as income in respect of a decedent after the year of death generally are not subject to withholding for any federal taxe