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Can I Refile My Taxes

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The Can I Refile My Taxes

Can i refile my taxes 23. Can i refile my taxes   Interest Expense Table of Contents Introduction Useful Items - You may want to see: Home Mortgage InterestAmount Deductible Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement Investment InterestInvestment Property Allocation of Interest Expense Limit on Deduction Items You Cannot DeductPersonal Interest Allocation of Interest How To ReportMore than one borrower. Can i refile my taxes Mortgage proceeds used for business or investment. Can i refile my taxes Introduction This chapter discusses what interest expenses you can deduct. Can i refile my taxes Interest is the amount you pay for the use of borrowed money. Can i refile my taxes The following are types of interest you can deduct as itemized deductions on Schedule A (Form 1040). Can i refile my taxes Home mortgage interest, including certain points and mortgage insurance premiums. Can i refile my taxes Investment interest. Can i refile my taxes This chapter explains these deductions. Can i refile my taxes It also explains where to deduct other types of interest and lists some types of interest you cannot deduct. Can i refile my taxes Use Table 23-1 to find out where to get more information on various types of interest, including investment interest. Can i refile my taxes Useful Items - You may want to see: Publication 936 Home Mortgage Interest Deduction 550 Investment Income and Expenses Home Mortgage Interest Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). Can i refile my taxes The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. Can i refile my taxes You can deduct home mortgage interest if all the following conditions are met. Can i refile my taxes You file Form 1040 and itemize deductions on Schedule A (Form 1040). Can i refile my taxes The mortgage is a secured debt on a qualified home in which you have an ownership interest. Can i refile my taxes (Generally, your mortgage is a secured debt if you put your home up as collateral to protect the interest of the lender. Can i refile my taxes The term “qualified home” means your main home or second home. Can i refile my taxes For details, see Publication 936. Can i refile my taxes )  Both you and the lender must intend that the loan be repaid. Can i refile my taxes Amount Deductible In most cases, you can deduct all of your home mortgage interest. Can i refile my taxes How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. Can i refile my taxes Fully deductible interest. Can i refile my taxes   If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. Can i refile my taxes (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category. Can i refile my taxes )   The three categories are as follows: Mortgages you took out on or before October 13, 1987 (called grandfathered debt). Can i refile my taxes Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2013 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately). Can i refile my taxes Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2013 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2). Can i refile my taxes The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. Can i refile my taxes   See Part II of Publication 936 for more detailed definitions of grandfathered, home acquisition, and home equity debt. Can i refile my taxes    You can use Figure 23-A to check whether your home mortgage interest is fully deductible. Can i refile my taxes Figure 23-A. Can i refile my taxes Is My Home Mortgage Interest Fully Deductible? Please click here for the text description of the image. Can i refile my taxes Figure 23-A. Can i refile my taxes Is My Interest Fully Deductible? Limits on deduction. Can i refile my taxes   You cannot fully deduct interest on a mortgage that does not fit into any of the three categories listed earlier. Can i refile my taxes If this applies to you, see Part II of Publication 936 to figure the amount of interest you can deduct. Can i refile my taxes Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. Can i refile my taxes It also describes certain special situations that may affect your deduction. Can i refile my taxes Late payment charge on mortgage payment. Can i refile my taxes   You can deduct as home mortgage interest a late payment charge if it was not for a specific service performed in connection with your mortgage loan. Can i refile my taxes Mortgage prepayment penalty. Can i refile my taxes   If you pay off your home mortgage early, you may have to pay a penalty. Can i refile my taxes 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. Can i refile my taxes Sale of home. Can i refile my taxes   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of sale. Can i refile my taxes Example. Can i refile my taxes John and Peggy Harris sold their home on May 7. Can i refile my taxes Through April 30, they made home mortgage interest payments of $1,220. Can i refile my taxes The settlement sheet for the sale of the home showed $50 interest for the 6-day period in May up to, but not including, the date of sale. Can i refile my taxes Their mortgage interest deduction is $1,270 ($1,220 + $50). Can i refile my taxes Prepaid interest. Can i refile my taxes   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. Can i refile my taxes You can deduct in each year only the interest that qualifies as home mortgage interest for that year. Can i refile my taxes However, there is an exception that applies to points, discussed later. Can i refile my taxes Mortgage interest credit. Can i refile my taxes   You may be able to claim a mortgage interest credit if you were issued a mortgage credit certificate (MCC) by a state or local government. Can i refile my taxes Figure the credit on Form 8396, Mortgage Interest Credit. Can i refile my taxes If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. Can i refile my taxes   For more information on the credit, see chapter 37. Can i refile my taxes Ministers' and military housing allowance. Can i refile my taxes   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you can still deduct your home mortgage interest. Can i refile my taxes Hardest Hit Fund and Emergency Homeowners' Loan Programs. Can i refile my taxes   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. Can i refile my taxes 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. Can i refile my taxes 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. Can i refile my taxes 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 from payer(s) / borrower(s)), box 4 (mortgage insurance premiums) and box 5 (real property taxes). Can i refile my taxes 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. Can i refile my taxes Mortgage assistance payments under section 235 of the National Housing Act. Can i refile my taxes   If you qualify for mortgage assistance payments for lower-income families under section 235 of the National Housing Act, part or all of the interest on your mortgage may be paid for you. Can i refile my taxes You cannot deduct the interest that is paid for you. Can i refile my taxes No other effect on taxes. Can i refile my taxes   Do not include these mortgage assistance payments in your income. Can i refile my taxes Also, do not use these payments to reduce other deductions, such as real estate taxes. Can i refile my taxes Divorced or separated individuals. Can i refile my taxes   If a divorce or separation agreement requires you or your spouse or former spouse to pay home mortgage interest on a home owned by both of you, the payment of interest may be alimony. Can i refile my taxes See the discussion of Payments for jointly-owned home in chapter 18. Can i refile my taxes Redeemable ground rents. Can i refile my taxes   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. Can i refile my taxes   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. Can i refile my taxes For more information, see Publication 936. Can i refile my taxes Nonredeemable ground rents. Can i refile my taxes   Payments on a nonredeemable ground rent are not mortgage interest. Can i refile my taxes You can deduct them as rent if they are a business expense or if they are for rental property. Can i refile my taxes Reverse mortgages. Can i refile my taxes   A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. Can i refile my taxes With a reverse mortgage, you retain title to your home. Can i refile my taxes Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. Can i refile my taxes Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Can i refile my taxes Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until the loan is paid in full. Can i refile my taxes Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Publication 936. Can i refile my taxes Rental payments. Can i refile my taxes   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. Can i refile my taxes This is true even if the settlement papers call them interest. Can i refile my taxes You cannot deduct these payments as home mortgage interest. Can i refile my taxes Mortgage proceeds invested in tax-exempt securities. Can i refile my taxes   You cannot deduct the home mortgage interest on grandfathered debt or home equity debt if you used the proceeds of the mortgage to buy securities or certificates that produce tax-free income. Can i refile my taxes “Grandfathered debt” and “home equity debt” are defined earlier under Amount Deductible. Can i refile my taxes Refunds of interest. Can i refile my taxes   If you receive a refund of interest in the same tax year you paid it, you must reduce your interest expense by the amount refunded to you. Can i refile my taxes If you receive a refund of interest you deducted in an earlier year, you generally must include the refund in income in the year you receive it. Can i refile my taxes However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. Can i refile my taxes This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. Can i refile my taxes    If you received a refund of interest you overpaid in an earlier year, you generally will receive a Form 1098, Mortgage Interest Statement, showing the refund in box 3. Can i refile my taxes For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. Can i refile my taxes   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in chapter 12. Can i refile my taxes Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Can i refile my taxes Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Can i refile my taxes A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Can i refile my taxes See Points paid by the seller , later. Can i refile my taxes General Rule You generally cannot deduct the full amount of points in the year paid. Can i refile my taxes Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. Can i refile my taxes See Deduction Allowed Ratably , next. Can i refile my taxes For exceptions to the general rule, see Deduction Allowed in Year Paid , later. Can i refile my taxes Deduction Allowed Ratably If you do not meet the tests listed under Deduction Allowed in Year Paid , later, the loan is not a home improvement loan, or you choose not to deduct your points in full in the year paid, you can deduct the points ratably (equally) over the life of the loan if you meet all the following tests. Can i refile my taxes You use the cash method of accounting. Can i refile my taxes This means you report income in the year you receive it and deduct expenses in the year you pay them. Can i refile my taxes Most individuals use this method. Can i refile my taxes Your loan is secured by a home. Can i refile my taxes (The home does not need to be your main home. Can i refile my taxes ) Your loan period is not more than 30 years. Can i refile my taxes If your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period. Can i refile my taxes Either your loan amount is $250,000 or less, or the number of points is not more than: 4, if your loan period is 15 years or less, or 6, if your loan period is more than 15 years. Can i refile my taxes Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. Can i refile my taxes (You can use Figure 23-B as a quick guide to see whether your points are fully deductible in the year paid. Can i refile my taxes ) Your loan is secured by your main home. Can i refile my taxes (Your main home is the one you ordinarily live in most of the time. Can i refile my taxes ) Paying points is an established business practice in the area where the loan was made. Can i refile my taxes The points paid were not more than the points generally charged in that area. Can i refile my taxes You use the cash method of accounting. Can i refile my taxes This means you report income in the year you receive it and deduct expenses in the year you pay them. Can i refile my taxes (If you want more information about this method, see Accounting Methods in chapter 1. Can i refile my taxes ) 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. Can i refile my taxes The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Can i refile my taxes The funds you provided are not required to have been applied to the points. Can i refile my taxes They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Can i refile my taxes You cannot have borrowed these funds from your lender or mortgage broker. Can i refile my taxes You use your loan to buy or build your main home. Can i refile my taxes The points were computed as a percentage of the principal amount of the mortgage. Can i refile my taxes The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. Can i refile my taxes The points may be shown as paid from either your funds or the seller's. Can i refile my taxes Figure 23-B. Can i refile my taxes Are My Points Fully Deductible This Year? Please click here for the text description of the image. Can i refile my taxes Figure 23-B. Can i refile my taxes Are My Points Fully Deductible This Year? Note. Can i refile my taxes If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan. Can i refile my taxes Home improvement loan. Can i refile my taxes   You can also fully deduct in the year paid points paid on a loan to improve your main home, if tests (1) through (6) are met. Can i refile my taxes Second home. Can i refile my taxes You cannot fully deduct in the year paid points you pay on loans secured by your second home. Can i refile my taxes You can deduct these points only over the life of the loan. Can i refile my taxes Refinancing. Can i refile my taxes   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. Can i refile my taxes This is true even if the new mortgage is secured by your main home. Can i refile my taxes   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Can i refile my taxes You can deduct the rest of the points over the life of the loan. Can i refile my taxes Example 1. Can i refile my taxes In 1998, Bill Fields got a mortgage to buy a home. Can i refile my taxes In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. Can i refile my taxes The mortgage is secured by his home. Can i refile my taxes To get the new loan, he had to pay three points ($3,000). Can i refile my taxes Two points ($2,000) were for prepaid interest, and one point ($1,000) was charged for services, in place of amounts that ordinarily are stated separately on the settlement statement. Can i refile my taxes Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. Can i refile my taxes The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. Can i refile my taxes Bill's first payment on the new loan was due July 1. Can i refile my taxes He made six payments on the loan in 2013 and is a cash basis taxpayer. Can i refile my taxes Bill used the funds from the new mortgage to repay his existing mortgage. Can i refile my taxes Although the new mortgage loan was for Bill's continued ownership of his main home, it was not for the purchase or improvement of that home. Can i refile my taxes He cannot deduct all of the points in 2013. Can i refile my taxes He can deduct two points ($2,000) ratably over the life of the loan. Can i refile my taxes He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. Can i refile my taxes The other point ($1,000) was a fee for services and is not deductible. Can i refile my taxes Example 2. Can i refile my taxes The facts are the same as in Example 1, except that Bill used $25,000 of the loan proceeds to improve his home and $75,000 to repay his existing mortgage. Can i refile my taxes Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. Can i refile my taxes His deduction is $500 ($2,000 × 25%). Can i refile my taxes Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. Can i refile my taxes This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. Can i refile my taxes The total amount Bill deducts in 2013 is $550 ($500 + $50). Can i refile my taxes Special Situations This section describes certain special situations that may affect your deduction of points. Can i refile my taxes Original issue discount. Can i refile my taxes   If you do not qualify to either deduct the points in the year paid or deduct them ratably over the life of the loan, or if you choose not to use either of these methods, the points reduce the issue price of the loan. Can i refile my taxes This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. Can i refile my taxes Amounts charged for services. Can i refile my taxes   Amounts charged by the lender for specific services connected to the loan are not interest. Can i refile my taxes Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Can i refile my taxes You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Can i refile my taxes Points paid by the seller. Can i refile my taxes   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Can i refile my taxes Treatment by seller. Can i refile my taxes   The seller cannot deduct these fees as interest. Can i refile my taxes But they are a selling expense that reduces the amount realized by the seller. Can i refile my taxes See chapter 15 for information on selling your home. Can i refile my taxes Treatment by buyer. Can i refile my taxes    The buyer reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them. Can i refile my taxes If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. Can i refile my taxes If any of those tests are not met, the buyer deducts the points over the life of the loan. Can i refile my taxes   For information about basis, see chapter 13. Can i refile my taxes Funds provided are less than points. Can i refile my taxes   If you meet all the tests in Deduction Allowed in Year Paid , earlier, 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. Can i refile my taxes In addition, you can deduct any points paid by the seller. Can i refile my taxes Example 1. Can i refile my taxes When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Can i refile my taxes You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. Can i refile my taxes Of the $1,000 charged for points, you can deduct $750 in the year paid. Can i refile my taxes You spread the remaining $250 over the life of the mortgage. Can i refile my taxes Example 2. Can i refile my taxes 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. Can i refile my taxes In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Can i refile my taxes You spread the remaining $250 over the life of the mortgage. Can i refile my taxes You must reduce the basis of your home by the $1,000 paid by the seller. Can i refile my taxes Excess points. Can i refile my taxes   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the points paid were more than generally paid in your area (test (3)), you deduct in the year paid only the points that are generally charged. Can i refile my taxes You must spread any additional points over the life of the mortgage. Can i refile my taxes Mortgage ending early. Can i refile my taxes   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. Can i refile my taxes However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. Can i refile my taxes Instead, deduct the remaining balance over the term of the new loan. Can i refile my taxes    A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Can i refile my taxes Example. Can i refile my taxes Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. Can i refile my taxes He deducts $200 points per year. Can i refile my taxes Through 2012, Dan has deducted $2,200 of the points. Can i refile my taxes Dan prepaid his mortgage in full in 2013. Can i refile my taxes He can deduct the remaining $800 of points in 2013. Can i refile my taxes Limits on deduction. Can i refile my taxes   You cannot fully deduct points paid on a mortgage unless the mortgage fits into one of the categories listed earlier under Fully deductible interest . Can i refile my taxes See Publication 936 for details. Can i refile my taxes Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. Can i refile my taxes The insurance must be in connection with home acquisition debt and the insurance contract must have been issued after 2006. Can i refile my taxes Qualified mortgage insurance. Can i refile my taxes   Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). Can i refile my taxes   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. Can i refile my taxes If provided by the Rural Housing Service, it is commonly known as a guarantee fee. Can i refile my taxes These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Can i refile my taxes Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. Can i refile my taxes Special rules for prepaid mortgage insurance. Can i refile my taxes   Generally, if you paid premiums for qualified mortgage insurance that are allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. Can i refile my taxes You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. Can i refile my taxes No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. Can i refile my taxes This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. Can i refile my taxes See the Example below. Can i refile my taxes Example. Can i refile my taxes Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. Can i refile my taxes Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Can i refile my taxes Since the $9,240 in private mortgage insurance is allocable to periods after 2012, Ryan must allocate the $9,240 over the shorter of the life of the mortgage or 84 months. Can i refile my taxes Ryan's adjusted gross income (AGI) for 2012 is $76,000. Can i refile my taxes Ryan can deduct $880 ($9,240 ÷ 84 × 8 months) for qualified mortgage insurance premiums in 2012. Can i refile my taxes For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 × 12 months) if his AGI is $100,000 or less. Can i refile my taxes In this example, the mortgage insurance premiums are allocated over 84 months, which is shorter than the life of the mortgage of 15 years (180 months). Can i refile my taxes Limit on deduction. Can i refile my taxes   If your adjusted gross income 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 otherwise deductible is reduced and may be eliminated. Can i refile my taxes 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. Can i refile my taxes If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Can i refile my taxes Form 1098, 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, you generally will receive a Form 1098 or a similar statement from the mortgage holder. Can i refile my taxes You will receive the statement if you pay interest to a person (including a financial institution or a cooperative housing corporation) in the course of that person's trade or business. Can i refile my taxes A governmental unit is a person for purposes of furnishing the statement. Can i refile my taxes The statement for each year should be sent to you by January 31 of the following year. Can i refile my taxes A copy of this form will also be sent to the IRS. Can i refile my taxes The statement will show the total interest you paid during the year, any mortgage insurance premiums you paid, and if you purchased a main home during the year, it also will show the deductible points paid during the year, including seller-paid points. Can i refile my taxes However, it should not show any interest that was paid for you by a government agency. Can i refile my taxes As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Can i refile my taxes However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. Can i refile my taxes See Points , earlier, to determine whether you can deduct points not shown on Form 1098. Can i refile my taxes Prepaid interest on Form 1098. Can i refile my taxes   If you prepaid interest in 2013 that accrued in full by January 15, 2014, this prepaid interest may be included in box 1 of Form 1098. Can i refile my taxes However, you cannot deduct the prepaid amount for January 2014 in 2013. Can i refile my taxes (See Prepaid interest , earlier. Can i refile my taxes ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. Can i refile my taxes You will include the interest for January 2014 with the other interest you pay for 2014. Can i refile my taxes See How To Report , later. Can i refile my taxes Refunded interest. Can i refile my taxes   If you received a refund of mortgage interest you overpaid in an earlier year, you generally will receive a Form 1098 showing the refund in box 3. Can i refile my taxes See Refunds of interest , earlier. Can i refile my taxes Mortgage insurance premiums. Can i refile my taxes   The amount of mortgage insurance premiums you paid during 2013 may be shown in box 4 of Form 1098. Can i refile my taxes See Mortgage Insurance Premiums, earlier. Can i refile my taxes Investment Interest This section discusses interest expenses you may be able to deduct as an investor. Can i refile my taxes If you borrow money to buy property you hold for investment, the interest you pay is investment interest. Can i refile my taxes You can deduct investment interest subject to the limit discussed later. Can i refile my taxes However, you cannot deduct interest you incurred to produce tax-exempt income. Can i refile my taxes Nor can you deduct interest expenses on straddles. Can i refile my taxes Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. Can i refile my taxes Investment Property Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. Can i refile my taxes It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). Can i refile my taxes Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). Can i refile my taxes Partners, shareholders, and beneficiaries. Can i refile my taxes   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. Can i refile my taxes Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. Can i refile my taxes Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. Can i refile my taxes The allocation is not affected by the use of property that secures the debt. Can i refile my taxes Limit on Deduction Generally, your deduction for investment interest expense is limited to the amount of your net investment income. Can i refile my taxes You can carry over the amount of investment interest that you could not deduct because of this limit to the next tax year. Can i refile my taxes The interest carried over is treated as investment interest paid or accrued in that next year. Can i refile my taxes You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. Can i refile my taxes Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. Can i refile my taxes Investment income. Can i refile my taxes    This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). Can i refile my taxes Investment income does not include Alaska Permanent Fund dividends. Can i refile my taxes It also does not include qualified dividends or net capital gain unless you choose to include them. Can i refile my taxes Choosing to include qualified dividends. Can i refile my taxes   Investment income generally does not include qualified dividends, discussed in chapter 8. Can i refile my taxes However, you can choose to include all or part of your qualified dividends in investment income. Can i refile my taxes   You make this choice by completing Form 4952, line 4g, according to its instructions. Can i refile my taxes   If you choose to include any amount of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. Can i refile my taxes Choosing to include net capital gain. Can i refile my taxes   Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). Can i refile my taxes However, you can choose to include all or part of your net capital gain in investment income. Can i refile my taxes    You make this choice by completing Form 4952, line 4g, according to its instructions. Can i refile my taxes   If you choose to include any amount of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. Can i refile my taxes    Before making either choice, consider the overall effect on your tax liability. Can i refile my taxes Compare your tax if you make one or both of these choices with your tax if you do not. Can i refile my taxes Investment income of child reported on parent's return. Can i refile my taxes    Investment income includes the part of your child's interest and dividend income that you choose to report on your return. Can i refile my taxes If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814, Parents' Election To Report Child's Interest and Dividends. Can i refile my taxes Child's qualified dividends. Can i refile my taxes   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. Can i refile my taxes However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. Can i refile my taxes   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). Can i refile my taxes Child's Alaska Permanent Fund dividends. Can i refile my taxes   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. Can i refile my taxes To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. Can i refile my taxes Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. Can i refile my taxes Subtract the result from the amount on Form 8814, line 12. Can i refile my taxes Child's capital gain distributions. Can i refile my taxes    If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D, line 13, or Form 1040, line 13) generally does not count as investment income. Can i refile my taxes However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. Can i refile my taxes   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). Can i refile my taxes Investment expenses. Can i refile my taxes   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. Can i refile my taxes Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. Can i refile my taxes Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A, line 27. Can i refile my taxes Losses from passive activities. Can i refile my taxes   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). Can i refile my taxes See Publication 925, Passive Activity and At-Risk Rules, for information about passive activities. Can i refile my taxes Form 4952 Use Form 4952, Investment Interest Expense Deduction, to figure your deduction for investment interest. Can i refile my taxes Exception to use of Form 4952. Can i refile my taxes   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. Can i refile my taxes Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. Can i refile my taxes You do not have any other deductible investment expenses. Can i refile my taxes You have no carryover of investment interest expense from 2012. Can i refile my taxes If you meet all of these tests, you can deduct all of your investment interest. Can i refile my taxes More Information For more information on investment interest, see Interest Expenses in chapter 3 of Publication 550. Can i refile my taxes Items You Cannot Deduct Some interest payments are not deductible. Can i refile my taxes Certain expenses similar to interest also are not deductible. Can i refile my taxes Nondeductible expenses include the following items. Can i refile my taxes Personal interest (discussed later). Can i refile my taxes Service charges (however, see Other Expenses (Line 23) in chapter 28). Can i refile my taxes Annual fees for credit cards. Can i refile my taxes Loan fees. Can i refile my taxes Credit investigation fees. Can i refile my taxes Interest to purchase or carry tax-exempt securities. Can i refile my taxes Penalties. Can i refile my taxes   You cannot deduct fines and penalties paid to a government for violations of law, regardless of their nature. Can i refile my taxes Personal Interest Personal interest is not deductible. Can i refile my taxes Personal interest is any interest that is not home mortgage interest, investment interest, business interest, or other deductible interest. Can i refile my taxes It includes the following items. Can i refile my taxes Interest on car loans (unless you use the car for business). Can i refile my taxes Interest on federal, state, or local income tax. Can i refile my taxes Finance charges on credit cards, retail installment contracts, and revolving charge accounts incurred for personal expenses. Can i refile my taxes Late payment charges by a public utility. Can i refile my taxes You may be able to deduct interest you pay on a qualified student loan. Can i refile my taxes For details, see Publication 970, Tax Benefits for Education. Can i refile my taxes Allocation of Interest If you use the proceeds of a loan for more than one purpose (for example, personal and business), you must allocate the interest on the loan to each use. Can i refile my taxes However, you do not have to allocate home mortgage interest if it is fully deductible, regardless of how the funds are used. Can i refile my taxes You allocate interest (other than fully deductible home mortgage interest) on a loan in the same way as the loan itself is allocated. Can i refile my taxes You do this by tracing disbursements of the debt proceeds to specific uses. Can i refile my taxes For details on how to do this, see chapter 4 of Publication 535. Can i refile my taxes How To Report You must file Form 1040 to deduct any home mortgage interest expense on your tax return. Can i refile my taxes Where you deduct your interest expense generally depends on how you use the loan proceeds. Can i refile my taxes See Table 23-1 for a summary of where to deduct your interest expense. Can i refile my taxes Home mortgage interest and points. Can i refile my taxes   Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. Can i refile my taxes If you paid more deductible interest to the financial institution than the amount shown on Form 1098, show the larger deductible amount on line 10. Can i refile my taxes Attach a statement explaining the difference and print “See attached” next to line 10. Can i refile my taxes    Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. Can i refile my taxes If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and taxpayer identification number (TIN) on the dotted lines next to line 11. Can i refile my taxes The seller must give you this number and you must give the seller your TIN. Can i refile my taxes A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Can i refile my taxes Failure to meet any of these requirements may result in a $50 penalty for each failure. Can i refile my taxes The TIN can be either a social security number, an individual taxpayer identification number (issued by the Internal Revenue Service), or an employer identification number. Can i refile my taxes See Social Security Number (SSN) in chapter 1 for more information about TINs. Can i refile my taxes    If you can take a deduction for points that were not reported to you on Form 1098, deduct those points on Schedule A (Form 1040), line 12. Can i refile my taxes   Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. Can i refile my taxes More than one borrower. Can i refile my taxes   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. Can i refile my taxes Show how much of the interest each of you paid, and give the name and address of the person who received the form. Can i refile my taxes Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Can i refile my taxes Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. Can i refile my taxes   Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Can i refile my taxes You should let each of the other borrowers know what his or her share is. Can i refile my taxes Mortgage proceeds used for business or investment. Can i refile my taxes    If your home mortgage interest deduction is limited, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 23-1. Can i refile my taxes It shows where to deduct the part of your excess interest that is for those activities. Can i refile my taxes Investment interest. Can i refile my taxes    Deduct investment interest, subject to certain limits discussed in Publication 550, on Schedule A (Form 1040), line 14. Can i refile my taxes Amortization of bond premium. Can i refile my taxes   There are various ways to treat the premium you pay to buy taxable bonds. Can i refile my taxes See Bond Premium Amortization in Publication 550. Can i refile my taxes Income-producing rental or royalty interest. Can i refile my taxes   Deduct interest on a loan for income-producing rental or royalty property that is not used in your business in Part I of Schedule E (Form 1040). Can i refile my taxes Example. Can i refile my taxes You rent out part of your home and borrow money to make repairs. Can i refile my taxes You can deduct only the interest payment for the rented part in Part I of Schedule E (Form 1040). Can i refile my taxes Deduct the rest of the interest payment on Schedule A (Form 1040) if it is deductible home mortgage interest. Can i refile my taxes Table 23-1. Can i refile my taxes Where To Deduct Your Interest Expense IF you have . Can i refile my taxes . Can i refile my taxes . Can i refile my taxes THEN deduct it on . Can i refile my taxes . Can i refile my taxes . Can i refile my taxes AND for more information go to . Can i refile my taxes . Can i refile my taxes . Can i refile my taxes deductible student loan interest Form 1040, line 33, or Form 1040A, line 18 Publication 970. Can i refile my taxes deductible home mortgage interest and points reported on Form 1098 Schedule A (Form 1040), line 10 Publication 936. Can i refile my taxes deductible home mortgage interest not reported on Form 1098 Schedule A (Form 1040), line 11 Publication 936. Can i refile my taxes deductible points not reported on Form 1098 Schedule A (Form 1040), line 12 Publication 936. Can i refile my taxes deductible mortgage insurance premiums Schedule A (Form 1040), line 13 Publication 936. Can i refile my taxes deductible investment interest (other than incurred to produce rents or royalties) Schedule A (Form 1040), line 14 Publication 550. Can i refile my taxes deductible business interest (non-farm) Schedule C or C-EZ (Form 1040) Publication 535. Can i refile my taxes deductible farm business interest Schedule F (Form 1040) Publications 225 and 535. Can i refile my taxes deductible interest incurred to produce rents or royalties Schedule E (Form 1040) Publications 527 and 535. Can i refile my taxes personal interest not deductible. Can i refile my taxes Prev  Up  Next   Home   More Online Publications