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File Taxes For 2012

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File Taxes For 2012

File taxes for 2012 Publication 936 - Main Content Table of Contents Part I. File taxes for 2012 Home Mortgage InterestSecured Debt Qualified Home Special Situations Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement How To Report Special Rule for Tenant-Stockholders in Cooperative Housing Corporations Part II. File taxes for 2012 Limits on Home Mortgage Interest DeductionHome Acquisition Debt Home Equity Debt Grandfathered Debt Table 1 Instructions How To Get Tax HelpLow Income Taxpayer Clinics Part I. File taxes for 2012 Home Mortgage Interest This part explains what you can deduct as home mortgage interest. File taxes for 2012 It includes discussions on points, mortgage insurance premiums, and how to report deductible interest on your tax return. File taxes for 2012 Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). File taxes for 2012 The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. File taxes for 2012 You can deduct home mortgage interest if all the following conditions are met. File taxes for 2012 You file Form 1040 and itemize deductions on Schedule A (Form 1040). File taxes for 2012 The mortgage is a secured debt on a qualified home in which you have an ownership interest. File taxes for 2012 Secured Debt and Qualified Home are explained later. File taxes for 2012  Both you and the lender must intend that the loan be repaid. File taxes for 2012 Fully deductible interest. File taxes for 2012   In most cases, you can deduct all of your home mortgage interest. File taxes for 2012 How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. File taxes for 2012   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. File taxes for 2012 (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. File taxes for 2012 ) If one or more of your mortgages does not fit into any of these categories, use Part II of this publication to figure the amount of interest you can deduct. File taxes for 2012   The three categories are as follows. File taxes for 2012 Mortgages you took out on or before October 13, 1987 (called grandfathered debt). File taxes for 2012 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). File taxes for 2012 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). File taxes for 2012 The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. File taxes for 2012   See Part II for more detailed definitions of grandfathered, home acquisition, and home equity debt. File taxes for 2012    You can use Figure A to check whether your home mortgage interest is fully deductible. File taxes for 2012 This image is too large to be displayed in the current screen. File taxes for 2012 Please click the link to view the image. File taxes for 2012 Figure A. File taxes for 2012 Is My Home Mortgage Interest Fully Deductible? Secured Debt You can deduct your home mortgage interest only if your mortgage is a secured debt. File taxes for 2012 A secured debt is one in which you sign an instrument (such as a mortgage, deed of trust, or land contract) that: Makes your ownership in a qualified home security for payment of the debt, Provides, in case of default, that your home could satisfy the debt, and Is recorded or is otherwise perfected under any state or local law that applies. File taxes for 2012 In other words, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. File taxes for 2012 If you cannot pay the debt, your home can then serve as payment to the lender to satisfy (pay) the debt. File taxes for 2012 In this publication, mortgage will refer to secured debt. File taxes for 2012 Debt not secured by home. File taxes for 2012   A debt is not secured by your home if it is secured solely because of a lien on your general assets or if it is a security interest that attaches to the property without your consent (such as a mechanic's lien or judgment lien). File taxes for 2012   A debt is not secured by your home if it once was, but is no longer secured by your home. File taxes for 2012 Wraparound mortgage. File taxes for 2012   This is not a secured debt unless it is recorded or otherwise perfected under state law. File taxes for 2012 Example. File taxes for 2012 Beth owns a home subject to a mortgage of $40,000. File taxes for 2012 She sells the home for $100,000 to John, who takes it subject to the $40,000 mortgage. File taxes for 2012 Beth continues to make the payments on the $40,000 note. File taxes for 2012 John pays $10,000 down and gives Beth a $90,000 note secured by a wraparound mortgage on the home. File taxes for 2012 Beth does not record or otherwise perfect the $90,000 mortgage under the state law that applies. File taxes for 2012 Therefore, the mortgage is not a secured debt and John cannot deduct any of the interest he pays on it as home mortgage interest. File taxes for 2012 Choice to treat the debt as not secured by your home. File taxes for 2012   You can choose to treat any debt secured by your qualified home as not secured by the home. File taxes for 2012 This treatment begins with the tax year for which you make the choice and continues for all later tax years. File taxes for 2012 You can revoke your choice only with the consent of the Internal Revenue Service (IRS). File taxes for 2012   You may want to treat a debt as not secured by your home if the interest on that debt is fully deductible (for example, as a business expense) whether or not it qualifies as home mortgage interest. File taxes for 2012 This may allow you, if the limits in Part II apply, more of a deduction for interest on other debts that are deductible only as home mortgage interest. File taxes for 2012 Cooperative apartment owner. File taxes for 2012   If you own stock in a cooperative housing corporation, see the Special Rule for Tenant-Stockholders in Cooperative Housing Corporations , near the end of this Part I. File taxes for 2012 Qualified Home For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. File taxes for 2012 This means your main home or your second home. File taxes for 2012 A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. File taxes for 2012 The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. File taxes for 2012 Otherwise, it is considered personal interest and is not deductible. File taxes for 2012 Main home. File taxes for 2012   You can have only one main home at any one time. File taxes for 2012 This is the home where you ordinarily live most of the time. File taxes for 2012 Second home. File taxes for 2012   A second home is a home that you choose to treat as your second home. File taxes for 2012 Second home not rented out. File taxes for 2012   If you have a second home that you do not hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. File taxes for 2012 You do not have to use the home during the year. File taxes for 2012 Second home rented out. File taxes for 2012   If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. File taxes for 2012 You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer. File taxes for 2012 If you do not use the home long enough, it is considered rental property and not a second home. File taxes for 2012 For information on residential rental property, see Publication 527. File taxes for 2012 More than one second home. File taxes for 2012   If you have more than one second home, you can treat only one as the qualified second home during any year. File taxes for 2012 However, you can change the home you treat as a second home during the year in the following situations. File taxes for 2012 If you get a new home during the year, you can choose to treat the new home as your second home as of the day you buy it. File taxes for 2012 If your main home no longer qualifies as your main home, you can choose to treat it as your second home as of the day you stop using it as your main home. File taxes for 2012 If your second home is sold during the year or becomes your main home, you can choose a new second home as of the day you sell the old one or begin using it as your main home. File taxes for 2012 Divided use of your home. File taxes for 2012   The only part of your home that is considered a qualified home is the part you use for residential living. File taxes for 2012 If you use part of your home for other than residential living, such as a home office, you must allocate the use of your home. File taxes for 2012 You must then divide both the cost and fair market value of your home between the part that is a qualified home and the part that is not. File taxes for 2012 Dividing the cost may affect the amount of your home acquisition debt, which is limited to the cost of your home plus the cost of any improvements. File taxes for 2012 (See Home Acquisition Debt in Part II. File taxes for 2012 ) Dividing the fair market value may affect your home equity debt limit, also explained in Part II . File taxes for 2012 Renting out part of home. File taxes for 2012   If you rent out part of a qualified home to another person (tenant), you can treat the rented part as being used by you for residential living only if all of the following conditions apply. File taxes for 2012 The rented part of your home is used by the tenant primarily for residential living. File taxes for 2012 The rented part of your home is not a self-contained residential unit having separate sleeping, cooking, and toilet facilities. File taxes for 2012 You do not rent (directly or by sublease) the same or different parts of your home to more than two tenants at any time during the tax year. File taxes for 2012 If two persons (and dependents of either) share the same sleeping quarters, they are treated as one tenant. File taxes for 2012 Office in home. File taxes for 2012   If you have an office in your home that you use in your business, see Publication 587, Business Use of Your Home. File taxes for 2012 It explains how to figure your deduction for the business use of your home, which includes the business part of your home mortgage interest. File taxes for 2012 Home under construction. File taxes for 2012   You can treat a home under construction as a qualified home for a period of up to 24 months, but only if it becomes your qualified home at the time it is ready for occupancy. File taxes for 2012   The 24-month period can start any time on or after the day construction begins. File taxes for 2012 Home destroyed. File taxes for 2012   You may be able to continue treating your home as a qualified home even after it is destroyed in a fire, storm, tornado, earthquake, or other casualty. File taxes for 2012 This means you can continue to deduct the interest you pay on your home mortgage, subject to the limits described in this publication. File taxes for 2012   You can continue treating a destroyed home as a qualified home if, within a reasonable period of time after the home is destroyed, you: Rebuild the destroyed home and move into it, or Sell the land on which the home was located. File taxes for 2012   This rule applies to your main home and to a second home that you treat as a qualified home. File taxes for 2012 Time-sharing arrangements. File taxes for 2012   You can treat a home you own under a time-sharing plan as a qualified home if it meets all the requirements. File taxes for 2012 A time-sharing plan is an arrangement between two or more people that limits each person's interest in the home or right to use it to a certain part of the year. File taxes for 2012 Rental of time-share. File taxes for 2012   If you rent out your time-share, it qualifies as a second home only if you also use it as a home during the year. File taxes for 2012 See Second home rented out , earlier, for the use requirement. File taxes for 2012 To know whether you meet that requirement, count your days of use and rental of the home only during the time you have a right to use it or to receive any benefits from the rental of it. File taxes for 2012 Married taxpayers. File taxes for 2012   If you are married and file a joint return, your qualified home(s) can be owned either jointly or by only one spouse. File taxes for 2012 Separate returns. File taxes for 2012   If you are married filing separately and you and your spouse own more than one home, you can each take into account only one home as a qualified home. File taxes for 2012 However, if you both consent in writing, then one spouse can take both the main home and a second home into account. File taxes for 2012 Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. File taxes for 2012 It also describes certain special situations that may affect your deduction. File taxes for 2012 Late payment charge on mortgage payment. File taxes for 2012   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. File taxes for 2012 Mortgage prepayment penalty. File taxes for 2012   If you pay off your home mortgage early, you may have to pay a penalty. File taxes for 2012 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. File taxes for 2012 Sale of home. File taxes for 2012   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 the sale. File taxes for 2012 Example. File taxes for 2012 John and Peggy Harris sold their home on May 7. File taxes for 2012 Through April 30, they made home mortgage interest payments of $1,220. File taxes for 2012 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. File taxes for 2012 Their mortgage interest deduction is $1,270 ($1,220 + $50). File taxes for 2012 Prepaid interest. File taxes for 2012   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. File taxes for 2012 You can deduct in each year only the interest that qualifies as home mortgage interest for that year. File taxes for 2012 However, there is an exception that applies to points, discussed later. File taxes for 2012 Mortgage interest credit. File taxes for 2012    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. File taxes for 2012 Figure the credit on Form 8396, Mortgage Interest Credit. File taxes for 2012 If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. File taxes for 2012   See Form 8396 and Publication 530 for more information on the mortgage interest credit. File taxes for 2012 Ministers' and military housing allowance. File taxes for 2012   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. File taxes for 2012 Hardest Hit Fund and Emergency Homeowners' Loan Programs. File taxes for 2012   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. File taxes for 2012 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. File taxes for 2012 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. File taxes for 2012 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 (other information including real property taxes paid). File taxes for 2012 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. File taxes for 2012 Mortgage assistance payments under section 235 of the National Housing Act. File taxes for 2012   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. File taxes for 2012 You cannot deduct the interest that is paid for you. File taxes for 2012 No other effect on taxes. File taxes for 2012   Do not include these mortgage assistance payments in your income. File taxes for 2012 Also, do not use these payments to reduce other deductions, such as real estate taxes. File taxes for 2012 Divorced or separated individuals. File taxes for 2012   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. File taxes for 2012 See the discussion of Payments for jointly-owned home under Alimony in Publication 504, Divorced or Separated Individuals. File taxes for 2012 Redeemable ground rents. File taxes for 2012   In some states (such as Maryland), you can buy your home subject to a ground rent. File taxes for 2012 A ground rent is an obligation you assume to pay a fixed amount per year on the property. File taxes for 2012 Under this arrangement, you are leasing (rather than buying) the land on which your home is located. File taxes for 2012   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. File taxes for 2012   A ground rent is a redeemable ground rent if all of the following are true. File taxes for 2012 Your lease, including renewal periods, is for more than 15 years. File taxes for 2012 You can freely assign the lease. File taxes for 2012 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 specific amount. File taxes for 2012 The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. File taxes for 2012   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. File taxes for 2012 Nonredeemable ground rents. File taxes for 2012   Payments on a nonredeemable ground rent are not mortgage interest. File taxes for 2012 You can deduct them as rent if they are a business expense or if they are for rental property. File taxes for 2012 Reverse mortgages. File taxes for 2012   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. File taxes for 2012 With a reverse mortgage, you retain title to your home. File taxes for 2012 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. File taxes for 2012 Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. File taxes for 2012 Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until you actually pay it, which is usually when you pay off the loan in full. File taxes for 2012 Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Part II. File taxes for 2012 Rental payments. File taxes for 2012   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. File taxes for 2012 This is true even if the settlement papers call them interest. File taxes for 2012 You cannot deduct these payments as home mortgage interest. File taxes for 2012 Mortgage proceeds invested in tax-exempt securities. File taxes for 2012   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. File taxes for 2012 “Grandfathered debt” and “home equity debt” are defined in Part II of this publication. File taxes for 2012 Refunds of interest. File taxes for 2012   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. File taxes for 2012 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. File taxes for 2012 However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. File taxes for 2012 This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. File taxes for 2012 If you need to include the refund in income, report it on Form 1040, line 21. File taxes for 2012   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. File taxes for 2012 For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. File taxes for 2012   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in Publication 525, Taxable and Nontaxable Income. File taxes for 2012 Cooperative apartment owner. File taxes for 2012   If you own a cooperative apartment, you must reduce your home mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. File taxes for 2012 The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. File taxes for 2012   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. File taxes for 2012 Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. File taxes for 2012 Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. File taxes for 2012 This image is too large to be displayed in the current screen. File taxes for 2012 Please click the link to view the image. File taxes for 2012 Figure B. File taxes for 2012 Are My Points Fully Deductible This Year? A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. File taxes for 2012 See Points paid by the seller , later. File taxes for 2012 General Rule You generally cannot deduct the full amount of points in the year paid. File taxes for 2012 Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. File taxes for 2012 See Deduction Allowed Ratably , next. File taxes for 2012 For exceptions to the general rule, see Deduction Allowed in Year Paid , later. File taxes for 2012 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. File taxes for 2012 You use the cash method of accounting. File taxes for 2012 This means you report income in the year you receive it and deduct expenses in the year you pay them. File taxes for 2012 Most individuals use this method. File taxes for 2012 Your loan is secured by a home. File taxes for 2012 (The home does not need to be your main home. File taxes for 2012 ) Your loan period is not more than 30 years. File taxes for 2012 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. File taxes for 2012 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. File taxes for 2012 Example. File taxes for 2012 You use the cash method of accounting. File taxes for 2012 In 2013, you took out a $100,000 loan payable over 20 years. File taxes for 2012 The terms of the loan are the same as for other 20-year loans offered in your area. File taxes for 2012 You paid $4,800 in points. File taxes for 2012 You made 3 monthly payments on the loan in 2013. File taxes for 2012 You can deduct $60 [($4,800 ÷ 240 months) x 3 payments] in 2013. File taxes for 2012 In 2014, if you make all twelve payments, you will be able to deduct $240 ($20 x 12). File taxes for 2012 Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. File taxes for 2012 (You can use Figure B as a quick guide to see whether your points are fully deductible in the year paid. File taxes for 2012 ) Your loan is secured by your main home. File taxes for 2012 (Your main home is the one you ordinarily live in most of the time. File taxes for 2012 ) Paying points is an established business practice in the area where the loan was made. File taxes for 2012 The points paid were not more than the points generally charged in that area. File taxes for 2012 You use the cash method of accounting. File taxes for 2012 This means you report income in the year you receive it and deduct expenses in the year you pay them. File taxes for 2012 Most individuals use this method. File taxes for 2012 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. File taxes for 2012 The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. File taxes for 2012 The funds you provided are not required to have been applied to the points. File taxes for 2012 They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. File taxes for 2012 You cannot have borrowed these funds from your lender or mortgage broker. File taxes for 2012 You use your loan to buy or build your main home. File taxes for 2012 The points were computed as a percentage of the principal amount of the mortgage. File taxes for 2012 The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. File taxes for 2012 The points may be shown as paid from either your funds or the seller's. File taxes for 2012 Note. File taxes for 2012 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. File taxes for 2012 Home improvement loan. File taxes for 2012   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. File taxes for 2012 Second home. File taxes for 2012 You cannot fully deduct in the year paid points you pay on loans secured by your second home. File taxes for 2012 You can deduct these points only over the life of the loan. File taxes for 2012 Refinancing. File taxes for 2012   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. File taxes for 2012 This is true even if the new mortgage is secured by your main home. File taxes for 2012   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 , you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. File taxes for 2012 You can deduct the rest of the points over the life of the loan. File taxes for 2012 Example 1. File taxes for 2012 In 1998, Bill Fields got a mortgage to buy a home. File taxes for 2012 In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. File taxes for 2012 The mortgage is secured by his home. File taxes for 2012 To get the new loan, he had to pay three points ($3,000). File taxes for 2012 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. File taxes for 2012 Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. File taxes for 2012 The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. File taxes for 2012 Bill's first payment on the new loan was due July 1. File taxes for 2012 He made six payments on the loan in 2013 and is a cash basis taxpayer. File taxes for 2012 Bill used the funds from the new mortgage to repay his existing mortgage. File taxes for 2012 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. File taxes for 2012 He cannot deduct all of the points in 2013. File taxes for 2012 He can deduct two points ($2,000) ratably over the life of the loan. File taxes for 2012 He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. File taxes for 2012 The other point ($1,000) was a fee for services and is not deductible. File taxes for 2012 Example 2. File taxes for 2012 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. File taxes for 2012 Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. File taxes for 2012 His deduction is $500 ($2,000 × 25%). File taxes for 2012 Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. File taxes for 2012 This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. File taxes for 2012 The total amount Bill deducts in 2013 is $550 ($500 + $50). File taxes for 2012 Special Situations This section describes certain special situations that may affect your deduction of points. File taxes for 2012 Original issue discount. File taxes for 2012   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. File taxes for 2012 This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. File taxes for 2012 Amounts charged for services. File taxes for 2012    Amounts charged by the lender for specific services connected to the loan are not interest. File taxes for 2012 Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. File taxes for 2012  You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. File taxes for 2012 Points paid by the seller. File taxes for 2012   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. File taxes for 2012 Treatment by seller. File taxes for 2012   The seller cannot deduct these fees as interest. File taxes for 2012 But they are a selling expense that reduces the amount realized by the seller. File taxes for 2012 See Publication 523 for information on selling your home. File taxes for 2012 Treatment by buyer. File taxes for 2012   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. File taxes for 2012 If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. File taxes for 2012 If any of those tests are not met, the buyer deducts the points over the life of the loan. File taxes for 2012   If you need information about the basis of your home, see Publication 523 or Publication 530. File taxes for 2012 Funds provided are less than points. File taxes for 2012   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. File taxes for 2012 In addition, you can deduct any points paid by the seller. File taxes for 2012 Example 1. File taxes for 2012 When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). File taxes for 2012 You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. File taxes for 2012 Of the $1,000 charged for points, you can deduct $750 in the year paid. File taxes for 2012 You spread the remaining $250 over the life of the mortgage. File taxes for 2012 Example 2. File taxes for 2012 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. File taxes for 2012 In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). File taxes for 2012 You spread the remaining $250 over the life of the mortgage. File taxes for 2012 You must reduce the basis of your home by the $1,000 paid by the seller. File taxes for 2012 Excess points. File taxes for 2012   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. File taxes for 2012 You must spread any additional points over the life of the mortgage. File taxes for 2012 Mortgage ending early. File taxes for 2012   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. File taxes for 2012 However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. File taxes for 2012 Instead, deduct the remaining balance over the term of the new loan. File taxes for 2012   A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. File taxes for 2012 Example. File taxes for 2012 Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. File taxes for 2012 He deducts $200 points per year. File taxes for 2012 Through 2012, Dan has deducted $2,200 of the points. File taxes for 2012 Dan prepaid his mortgage in full in 2013. File taxes for 2012 He can deduct the remaining $800 of points in 2013. File taxes for 2012 Limits on deduction. File taxes for 2012   You cannot fully deduct points paid on a mortgage that exceeds the limits discussed in Part II . File taxes for 2012 See the Table 1 Instructions for line 10. File taxes for 2012 Form 1098. File taxes for 2012    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. File taxes for 2012 See Form 1098, Mortgage Interest Statement , later. File taxes for 2012 Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. File taxes for 2012 The insurance must be in connection with home acquisition debt, and the insurance contract must have been issued after 2006. File taxes for 2012 Qualified mortgage insurance. File taxes for 2012   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). File taxes for 2012   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. File taxes for 2012 If provided by the Rural Housing Service, it is commonly known as a guarantee fee. File taxes for 2012 The funding fee and guarantee fee can either be included in the amount of the loan or paid in full at the time of closing. File taxes for 2012 These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. File taxes for 2012 Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. File taxes for 2012 Special rules for prepaid mortgage insurance. File taxes for 2012   Generally, if you paid premiums for qualified mortgage insurance that are properly allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. File taxes for 2012 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. File taxes for 2012 No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. File taxes for 2012 This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. File taxes for 2012 Example. File taxes for 2012 Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. File taxes for 2012 Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. File taxes for 2012 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. File taxes for 2012 Ryan's adjusted gross income (AGI) for 2012 is $76,000. File taxes for 2012 Ryan can deduct $880 ($9,240 ÷ 84 x 8 months) for qualified mortgage insurance premiums in 2012. File taxes for 2012 For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 x 12 months) if his AGI is $100,000 or less. File taxes for 2012 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). File taxes for 2012 Limit on deduction. File taxes for 2012   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. File taxes for 2012 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. File taxes for 2012 If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. File taxes for 2012 Form 1098. File taxes for 2012   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your mortgage insurance premiums paid during the year, which may qualify to be treated as deductible mortgage interest. File taxes for 2012 See Form 1098, Mortgage Interest Statement, next. File taxes for 2012 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. File taxes for 2012 You will receive the statement if you pay interest to a person (including a financial institution or cooperative housing corporation) in the course of that person's trade or business. File taxes for 2012 A governmental unit is a person for purposes of furnishing the statement. File taxes for 2012 The statement for each year should be sent to you by January 31 of the following year. File taxes for 2012 A copy of this form will also be sent to the IRS. File taxes for 2012 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. File taxes for 2012 However, it should not show any interest that was paid for you by a government agency. File taxes for 2012 As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. File taxes for 2012 However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. File taxes for 2012 See the earlier discussion of Points to determine whether you can deduct points not shown on Form 1098. File taxes for 2012 Prepaid interest on Form 1098. File taxes for 2012   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. File taxes for 2012 However, you cannot deduct the prepaid amount for January 2014 in 2013. File taxes for 2012 (See Prepaid interest , earlier. File taxes for 2012 ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. File taxes for 2012 You will include the interest for January 2014 with other interest you pay for 2014. File taxes for 2012 Refunded interest. File taxes for 2012   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. File taxes for 2012 See Refunds of interest , earlier. File taxes for 2012 Mortgage insurance premiums. File taxes for 2012   The amount of mortgage insurance premiums you paid during 2013 may be shown in Box 4 of Form 1098. File taxes for 2012 See Mortgage Insurance Premiums , earlier. File taxes for 2012 How To Report Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. File taxes for 2012 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. File taxes for 2012 Attach a statement explaining the difference and print “See attached” next to line 10. File taxes for 2012 Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. File taxes for 2012 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. File taxes for 2012 The seller must give you this number and you must give the seller your TIN. File taxes for 2012 A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. File taxes for 2012 Failure to meet any of these requirements may result in a $50 penalty for each failure. File taxes for 2012 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. File taxes for 2012 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. File taxes for 2012 Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. File taxes for 2012 More than one borrower. File taxes for 2012   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. File taxes for 2012 Show how much of the interest each of you paid, and give the name and address of the person who received the form. File taxes for 2012 Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. File taxes for 2012 Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. File taxes for 2012   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. File taxes for 2012 Let each of the other borrowers know what his or her share is. File taxes for 2012 Mortgage proceeds used for business or investment. File taxes for 2012   If your home mortgage interest deduction is limited under the rules explained in Part II , but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 2 near the end of this publication. File taxes for 2012 It shows where to deduct the part of your excess interest that is for those activities. File taxes for 2012 The Table 1 Instructions for line 13 in Part II explain how to divide the excess interest among the activities for which the mortgage proceeds were used. File taxes for 2012 Special Rule for Tenant-Stockholders in Cooperative Housing Corporations A qualified home includes stock in a cooperative housing corporation owned by a tenant-stockholder. File taxes for 2012 This applies only if the tenant-stockholder is entitled to live in the house or apartment because of owning stock in the cooperative. File taxes for 2012 Cooperative housing corporation. File taxes for 2012   This is a corporation that meets all of the following conditions. File taxes for 2012 Has only one class of stock outstanding, Has no stockholders other than those who own the stock that can live in a house, apartment, or house trailer owned or leased by the corporation, Has no stockholders who can receive any distribution out of capital other than on a liquidation of the corporation, and Meets at least one of the following requirements. File taxes for 2012 Receives at least 80% of its gross income for the year in which the mortgage interest is paid or incurred from tenant-stockholders. File taxes for 2012 For this purpose, gross income is all income received during the entire year, including amounts received before the corporation changed to cooperative ownership. File taxes for 2012 At all times during the year, at least 80% of the total square footage of the corporation's property is used or available for use by the tenant-stockholders for residential or residential-related use. File taxes for 2012 At least 90% of the corporation's expenditures paid or incurred during the year are for the acquisition, construction, management, maintenance, or care of corporate property for the benefit of the tenant-stockholders. File taxes for 2012 Stock used to secure debt. File taxes for 2012   In some cases, you cannot use your cooperative housing stock to secure a debt because of either: Restrictions under local or state law, or Restrictions in the cooperative agreement (other than restrictions in which the main purpose is to permit the tenant- stockholder to treat unsecured debt as secured debt). File taxes for 2012 However, you can treat a debt as secured by the stock to the extent that the proceeds are used to buy the stock under the allocation of interest rules. File taxes for 2012 See chapter 4 of Publication 535 for details on these rules. File taxes for 2012 Figuring deductible home mortgage interest. File taxes for 2012   Generally, if you are a tenant-stockholder, you can deduct payments you make for your share of the interest paid or incurred by the cooperative. File taxes for 2012 The interest must be on a debt to buy, build, change, improve, or maintain the cooperative's housing, or on a debt to buy the land. File taxes for 2012   Figure your share of this interest by multiplying the total by the following fraction. File taxes for 2012      Your shares of stock in the cooperative   The total shares of stock in the cooperative Limits on deduction. File taxes for 2012   To figure how the limits discussed in Part II apply to you, treat your share of the cooperative's debt as debt incurred by you. File taxes for 2012 The cooperative should determine your share of its grandfathered debt, its home acquisition debt, and its home equity debt. File taxes for 2012 (Your share of each of these types of debt is equal to the average balance of each debt multiplied by the fraction just given. File taxes for 2012 ) After your share of the average balance of each type of debt is determined, you include it with the average balance of that type of debt secured by your stock. File taxes for 2012 Form 1098. File taxes for 2012    The cooperative should give you a Form 1098 showing your share of the interest. File taxes for 2012 Use the rules in this publication to determine your deductible mortgage interest. File taxes for 2012 Part II. File taxes for 2012 Limits on Home Mortgage Interest Deduction This part of the publication discusses the limits on deductible home mortgage interest. File taxes for 2012 These limits apply to your home mortgage interest expense if you have a home mortgage that does not fit into any of the three categories listed at the beginning of Part I under Fully deductible interest . File taxes for 2012 Your home mortgage interest deduction is limited to the interest on the part of your home mortgage debt that is not more than your qualified loan limit. File taxes for 2012 This is the part of your home mortgage debt that is grandfathered debt or that is not more than the limits for home acquisition debt and home equity debt. File taxes for 2012 Table 1 can help you figure your qualified loan limit and your deductible home mortgage interest. File taxes for 2012 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 (your main or second home). File taxes for 2012 It also must be secured by that home. File taxes for 2012 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. File taxes for 2012 The additional debt may qualify as home equity debt (discussed later). File taxes for 2012 Home acquisition debt limit. File taxes for 2012   The total amount you can treat as home acquisition debt at any time on your main home and second home cannot be more than $1 million ($500,000 if married filing separately). File taxes for 2012 This limit is reduced (but not below zero) by the amount of your grandfathered debt (discussed later). File taxes for 2012 Debt over this limit may qualify as home equity debt (also discussed later). File taxes for 2012 Refinanced home acquisition debt. File taxes for 2012   Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt. File taxes for 2012 However, the new debt will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing. File taxes for 2012 Any additional debt not used to buy, build, or substantially improve a qualified home is not home acquisition debt, but may qualify as home equity debt (discussed later). File taxes for 2012 Mortgage that qualifies later. File taxes for 2012   A mortgage that does not qualify as home acquisition debt because it does not meet all the requirements may qualify at a later time. File taxes for 2012 For example, a debt that you use to buy your home may not qualify as home acquisition debt because it is not secured by the home. File taxes for 2012 However, if the debt is later secured by the home, it may qualify as home acquisition debt after that time. File taxes for 2012 Similarly, a debt that you use to buy property may not qualify because the property is not a qualified home. File taxes for 2012 However, if the property later becomes a qualified home, the debt may qualify after that time. File taxes for 2012 Mortgage treated as used to buy, build, or improve home. File taxes for 2012   A mortgage secured by a qualified home may be treated as home acquisition debt, even if you do not actually use the proceeds to buy, build, or substantially improve the home. File taxes for 2012 This applies in the following situations. File taxes for 2012 You buy your home within 90 days before or after the date you take out the mortgage. File taxes for 2012 The home acquisition debt is limited to the home's cost, plus the cost of any substantial improvements within the limit described below in (2) or (3). File taxes for 2012 (See Example 1 later. File taxes for 2012 ) You build or improve your home and take out the mortgage before the work is completed. File taxes for 2012 The home acquisition debt is limited to the amount of the expenses incurred within 24 months before the date of the mortgage. File taxes for 2012 You build or improve your home and take out the mortgage within 90 days after the work is completed. File taxes for 2012 The home acquisition debt is limited to the amount of the expenses incurred within the period beginning 24 months before the work is completed and ending on the date of the mortgage. File taxes for 2012 (See Example 2 later. File taxes for 2012 ) Example 1. File taxes for 2012 You bought your main home on June 3 for $175,000. File taxes for 2012 You paid for the home with cash you got from the sale of your old home. File taxes for 2012 On July 15, you took out a mortgage of $150,000 secured by your main home. File taxes for 2012 You used the $150,000 to invest in stocks. File taxes for 2012 You can treat the mortgage as taken out to buy your home because you bought the home within 90 days before you took out the mortgage. File taxes for 2012 The entire mortgage qualifies as home acquisition debt because it was not more than the home's cost. File taxes for 2012 Example 2. File taxes for 2012 On January 31, John began building a home on the lot that he owned. File taxes for 2012 He used $45,000 of his personal funds to build the home. File taxes for 2012 The home was completed on October 31. File taxes for 2012 On November 21, John took out a $36,000 mortgage that was secured by the home. File taxes for 2012 The mortgage can be treated as used to build the home because it was taken out within 90 days after the home was completed. File taxes for 2012 The entire mortgage qualifies as home acquisition debt because it was not more than the expenses incurred within the period beginning 24 months before the home was completed. File taxes for 2012 This is illustrated by Figure C. File taxes for 2012   Please click here for the text description of the image. File taxes for 2012 Figure C. File taxes for 2012 John's example Date of the mortgage. File taxes for 2012   The date you take out your mortgage is the day the loan proceeds are disbursed. File taxes for 2012 This is generally the closing date. File taxes for 2012 You can treat the day you apply in writing for your mortgage as the date you take it out. File taxes for 2012 However, this applies only if you receive the loan proceeds within a reasonable time (such as within 30 days) after your application is approved. File taxes for 2012 If a timely application you make is rejected, a reasonable additional time will be allowed to make a new application. File taxes for 2012 Cost of home or improvements. File taxes for 2012   To determine your cost, include amounts paid to acquire any interest in a qualified home or to substantially improve the home. File taxes for 2012   The cost of building or substantially improving a qualified home includes the costs to acquire real property and building materials, fees for architects and design plans, and required building permits. File taxes for 2012 Substantial improvement. File taxes for 2012   An improvement is substantial if it: Adds to the value of your home, Prolongs your home's useful life, or Adapts your home to new uses. File taxes for 2012    Repairs that maintain your home in good condition, such as repainting your home, are not substantial improvements. File taxes for 2012 However, if you paint your home as part of a renovation that substantially improves your qualified home, you can include the painting costs in the cost of the improvements. File taxes for 2012 Acquiring an interest in a home because of a divorce. File taxes for 2012   If you incur debt to acquire the interest of a spouse or former spouse in a home, because of a divorce or legal separation, you can treat that debt as home acquisition debt. File taxes for 2012 Part of home not a qualified home. File taxes for 2012    To figure your home acquisition debt, you must divide the cost of your home and improvements between the part of your home that is a qualified home and any part that is not a qualified home. File taxes for 2012 See Divided use of your home under Qualified Home in Part I. File taxes for 2012 Home Equity Debt If you took out a loan for reasons other than to buy, build, or substantially improve your home, it may qualify as home equity debt. File taxes for 2012 In addition, debt you incurred to buy, build, or substantially improve your home, to the extent it is more than the home acquisition debt limit (discussed earlier), may qualify as home equity debt. File taxes for 2012 Home equity debt is a mortgage you took out after October 13, 1987, that: Does not qualify as home acquisition debt or as grandfathered debt, and Is secured by your qualified home. File taxes for 2012 Example. File taxes for 2012 You bought your home for cash 10 years ago. File taxes for 2012 You did not have a mortgage on your home until last year, when you took out a $50,000 loan, secured by your home, to pay for your daughter's college tuition and your father's medical bills. File taxes for 2012 This loan is home equity debt. File taxes for 2012 Home equity debt limit. File taxes for 2012   There is a limit on the amount of debt that can be treated as home equity debt. File taxes for 2012 The total home equity debt on your main home and second home is limited to the smaller of: $100,000 ($50,000 if married filing separately), or The total of each home's fair market value (FMV) reduced (but not below zero) by the amount of its home acquisition debt and grandfathered debt. File taxes for 2012 Determine the FMV and the outstanding home acquisition and grandfathered debt for each home on the date that the last debt was secured by the home. File taxes for 2012 Example. File taxes for 2012 You own one home that you bought in 2000. File taxes for 2012 Its FMV now is $110,000, and the current balance on your original mortgage (home acquisition debt) is $95,000. File taxes for 2012 Bank M offers you a home mortgage loan of 125% of the FMV of the home less any outstanding mortgages or other liens. File taxes for 2012 To consolidate some of your other debts, you take out a $42,500 home mortgage loan [(125% × $110,000) − $95,000] with Bank M. File taxes for 2012 Your home equity debt is limited to $15,000. File taxes for 2012 This is the smaller of: $100,000, the maximum limit, or $15,000, the amount that the FMV of $110,000 exceeds the amount of home acquisition debt of $95,000. File taxes for 2012 Debt higher than limit. File taxes for 2012   Interest on amounts over the home equity debt limit (such as the interest on $27,500 [$42,500 − $15,000] in the preceding example) generally is treated as personal interest and is not deductible. File taxes for 2012 But if the proceeds of the loan were used for investment, business, or other deductible purposes, the interest may be deductible. File taxes for 2012 If it is, see the Table 1 Instructions for line 13 for an explanation of how to allocate the excess interest. File taxes for 2012 Part of home not a qualified home. File taxes for 2012   To figure the limit on your home equity debt, you must divide the FMV of your home between the part that is a qualified home and any part that is not a qualified home. File taxes for 2012 See Divided use of your home under Qualified Home in Part I. File taxes for 2012 Fair market value (FMV). File taxes for 2012    This is the price at which the home would change hands between you and a buyer, neither having to sell or buy, and both having reasonable knowledge of all relevant facts. File taxes for 2012 Sales of similar homes in your area, on about the same date your last debt was secured by the home, may be helpful in figuring the FMV. File taxes for 2012 Grandfathered Debt If you took out a mortgage on your home before October 14, 1987, or you refinanced such a mortgage, it may qualify as grandfathered debt. File taxes for 2012 To qualify, it must have been secured by your qualified home on October 13, 1987, and at all times after that date. File taxes for 2012 How you used the proceeds does not matter. File taxes for 2012 Grandfathered debt is not limited. File taxes for 2012 All of the interest you paid on grandfathered debt is fully deductible home mortgage interest. File taxes for 2012 However, the amount of your grandfathered debt reduces the $1 million limit for home acquisition debt and the limit based on your home's fair market value for home equity debt. File taxes for 2012 Refinanced grandfathered debt. File taxes for 2012   If you refinanced grandfathered debt after October 13, 1987, for an amount that was not more than the mortgage principal left on the debt, then you still treat it as grandfathered debt. File taxes for 2012 To the extent the new debt is more than that mortgage principal, it is treated as home acquisition or home equity debt, and the mortgage is a mixed-use mortgage (discussed later under Average Mortgage Balance in the Table 1 instructions). File taxes for 2012 The debt must be secured by the qualified home. File taxes for 2012   You treat grandfathered debt that was refinanced after October 13, 1987, as grandfathered debt only for the term left on the debt that was refinanced. File taxes for 2012 After that, you treat it as home acquisition debt or home equity debt, depending on how you used the proceeds. File taxes for 2012 Exception. File taxes for 2012   If the debt before refinancing was like a balloon note (the principal on the debt was not amortized over the term of the debt), then you treat the refinanced debt as grandfathered debt for the term of the first refinancing. File taxes for 2012 This term cannot be more than 30 years. File taxes for 2012 Example. File taxes for 2012 Chester took out a $200,000 first mortgage on his home in 1986. File taxes for 2012 The mortgage was a five-year balloon note and the entire balance on the note was due in 1991. File taxes for 2012 Chester refinanced the debt in 1991 with a new 20-year mortgage. File taxes for 2012 The refinanced debt is treated as grandfathered debt for its entire term (20 years). File taxes for 2012 Line-of-credit mortgage. File taxes for 2012    If you had a line-of-credit mortgage on October 13, 1987, and borrowed additional amounts against it after that date, then the additional amounts are either home acquisition debt or home equity debt depending on how you used the proceeds. File taxes for 2012 The balance on the mortgage before you borrowed the additional amounts is grandfathered debt. File taxes for 2012 The newly borrowed amounts are not grandfathered debt because the funds were borrowed after October 13, 1987. File taxes for 2012 See Average Mortgage Balance in the Table 1 Instructions that follow. File taxes for 2012 Table 1 Instructions Unless you are subject to the overall limit on itemized deductions, you can deduct all of the interest you paid during the year on mortgages secured by your main home or second home in either of the following two situations. File taxes for 2012 All the mortgages are grandfathered debt. File taxes for 2012 The total of the mortgage balances for the entire year is within the limits discussed earlier under Home Acquisition Debt and Home Equity Debt . File taxes for 2012 In either of those cases, you do not need Table 1. File taxes for 2012 Otherwise, you can use Table 1 to determine your qualified loan limit and deductible home mortgage interest. File taxes for 2012 Fill out only one Table 1 for both your main and second home regardless of how many mortgages you have. File taxes for 2012 Table 1. File taxes for 2012 Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. File taxes for 2012 Part I Qualified Loan Limit 1. File taxes for 2012 Enter the average balance of all your grandfathered debt. File taxes for 2012 See line 1 instructions 1. File taxes for 2012   2. File taxes for 2012 Enter the average balance of all your home acquisition debt. File taxes for 2012 See line 2 instructions 2. File taxes for 2012   3. File taxes for 2012 Enter $1,000,000 ($500,000 if married filing separately) 3. File taxes for 2012   4. File taxes for 2012 Enter the larger of the amount on line 1 or the amount on line 3 4. File taxes for 2012   5. File taxes for 2012 Add the amounts on lines 1 and 2. File taxes for 2012 Enter the total here 5. File taxes for 2012   6. File taxes for 2012 Enter the smaller of the amount on line 4 or the amount on line 5 6. File taxes for 2012   7. File taxes for 2012 If you have home equity debt, enter the smaller of $100,000 ($50,000 if married filing separately) or your limited amount. File taxes for 2012 See the line 7 instructions for the limit which may apply to you. File taxes for 2012 7. File taxes for 2012   8. File taxes for 2012 Add the amounts on lines 6 and 7. File taxes for 2012 Enter the total. File taxes for 2012 This is your qualified loan limit. File taxes for 2012 8. File taxes for 2012   Part II Deductible Home Mortgage Interest 9. File taxes for 2012 Enter the total of the average balances of all mortgages on all qualified homes. File taxes for 2012  See line 9 instructions 9. File taxes for 2012     If line 8 is less than line 9, go on to line 10. File taxes for 2012 If line 8 is equal to or more than line 9, stop here. File taxes for 2012 All of your interest on all the mortgages included on line 9 is deductible as home mortgage interest on Schedule A (Form 1040). File taxes for 2012     10. File taxes for 2012 Enter the total amount of interest that you paid. File taxes for 2012 See line 10 instructions 10. File taxes for 2012   11. File taxes for 2012 Divide the amount on line 8 by the amount on line 9. File taxes for 2012 Enter the result as a decimal amount (rounded to three places) 11. File taxes for 2012 × . File taxes for 2012 12. File taxes for 2012 Multiply the amount on line 10 by the decimal amount on line 11. File taxes for 2012 Enter the result. File taxes for 2012 This is your deductible home mortgage interest. File taxes for 2012 Enter this amount on Schedule A (Form 1040) 12. File taxes for 2012   13. File taxes for 2012 Subtract the amount on line 12 from the amount on line 10. File taxes for 2012 Enter the result. File taxes for 2012 This is not home mortgage interest. File taxes for 2012 See line 13 instructions 13. File taxes for 2012   Home equity debt only. File taxes for 2012   If all of your mortgages are home equity debt, do not fill in lines 1 through 5. File taxes for 2012 Enter zero on line 6 and complete the rest of Table 1. File taxes for 2012 Average Mortgage Balance You have to figure the average balance of each mortgage to determine your qualified loan limit. File taxes for 2012 You need these amounts to complete lines 1, 2, and 9 of Table 1. File taxes for 2012 You can use the highest mortgage balances during the year, but you may benefit most by using the average balances. File taxes for 2012 The following are methods you can use to figure your average mortgage balances. File taxes for 2012 However, if a mortgage has more than one category of debt, see Mixed-use mortgages , later, in this section. File taxes for 2012 Average of first and last balance method. File taxes for 2012   You can use this method if all the following apply. File taxes for 2012 You did not borrow any new amounts on the mortgage during the year. File taxes for 2012 (This does not include borrowing the original mortgage amount. File taxes for 2012 ) You did not prepay more than one month's principal during the year. File taxes for 2012 (This includes prepayment by refinancing your home or by applying proceeds from its sale. File taxes for 2012 ) You had to make level payments at fixed equal intervals on at least a semi-annual basis. File taxes for 2012 You treat your payments as level even if they were adjusted from time to time because of changes in the interest rate. File taxes for 2012    To figure your average balance, complete the following worksheet. File taxes for 2012    1. File taxes for 2012 Enter the balance as of the first day of the year that the mortgage was secured by your qualified home during the year (generally January 1)   2. File taxes for 2012 Enter the balance as of the last day of the year that the mortgage was secured by your qualified home during the year (generally December 31)   3. File taxes for 2012 Add amounts on lines 1 and 2   4. File taxes for 2012 Divide the amount on line 3 by 2. File taxes for 2012 Enter the result   Interest paid divided by interest rate method. File taxes for 2012   You can use this method if at all times in 2013 the mortgage was secured by your qualified home and the interest was paid at least monthly. File taxes for 2012    Complete the following worksheet to figure your average balance. File taxes for 2012    1. File taxes for 2012 Enter the interest paid in 2013. File taxes for 2012 Do not include points, mortgage insurance premiums, or any interest paid in 2013 that is for a year after 2013. File taxes for 2012 However, do include interest that is for 2013 but was paid in an earlier year   2. File taxes for 2012 Enter the annual interest rate on the mortgage. File taxes for 2012 If the interest rate varied in 2013, use the lowest rate for the year   3. File taxes for 2012 Divide the amount on line 1 by the amount on line 2. File taxes for 2012 Enter the result   Example. File taxes for 2012 Mr. File taxes for 2012 Blue had a line of credit secured by his main home all year. File taxes for 2012 He paid interest of $2,500 on this loan. File taxes for 2012 The interest rate on the loan was 9% (. File taxes for 2012 09) all year. File taxes for 2012 His average balance using this method is $27,778, figured as follows. File taxes for 2012 1. File taxes for 2012 Enter the interest paid in 2013. File taxes for 2012 Do not include points, mortgage insurance premiums, or any interest paid in 2013 that is for a year after 2013. File taxes for 2012 However, do include interest that is for 2013 but was paid in an earlier year $2,500 2. File taxes for 2012 Enter the annual interest rate on the mortgage. File taxes for 2012 If the interest rate varied in 2013, use the lowest rate for the year . File taxes for 2012 09 3. File taxes for 2012 Divide the amount on line 1 by the amount on line 2. File taxes for 2012 Enter the result $27,778 Statements provided by your lender. File taxes for 2012   If you receive monthly statements showing the closing balance or the average balance for the month, you can use either to figure your average balance for the year. File taxes for 2012 You can treat the balance as zero for any month the mortgage was not secured by your qualified home. File taxes for 2012   For each mortgage, figure your average balance by adding your monthly closing or average balances and dividing that total by the number of months the home secured by that mortgage was a qualified home during the year. File taxes for 2012   If your lender can give you your average balance for the year, you can use that amount. File taxes for 2012 Example. File taxes for 2012 Ms. File taxes for 2012 Brown had a home equity loan secured by her main home all year. File taxes for 2012 She received monthly statements showing her average balance for each month. File taxes for 2012 She can figure her average balance for the year by adding her monthly average balances and dividing the total by 12. File taxes for 2012 Mixed-use mortgages. File taxes for 2012   A mixed-use mortgage is a loan that consists of more than one of the three categories of debt (grandfathered debt, home acquisition debt, and home equity debt). File taxes for 2012 For example, a mortgage you took out during the year is a mixed-use mortgage if you used its proceeds partly to refinance a mortgage that you took out in an earlier year to buy your home (home acquisition debt) and partly to buy a car (home equity debt). File taxes for 2012   Complete lines 1 and 2 of Table 1 by including the separate average balances of any grandfathered debt and home acquisition debt in your mixed-use mortgage. File taxes for 2012 Do not use the methods described earlier in this section to figure the average balance of either category. File taxes for 2012 Instead, for each category, use the following method. File taxes for 2012 Figure the balance of that category of debt for each month. File taxes for 2012 This is the amount of the loan proceeds allocated to that category, reduced by your principal payments on the mortgage previously applied to that category. File taxes for 2012 Principal payments on a mixed-use mortgage are applied in full to each category of debt, until its balance is zero, in the following order: First, any home equity debt, Next, any grandfathered debt, and Finally, any home acquisition debt. File taxes for 2012 Add together the monthly balances figured in (1). File taxes for 2012 Divide the result in (2) by 12. File taxes for 2012   Complete line 9 of Table 1 by including the average balance of the entire mixed-use mortgage, figured under one of the methods described earlier in this section. File taxes for 2012 Example 1. File taxes for 2012 In 1986, Sharon took out a $1,400,000 mortgage to buy her main home (grandfathered debt). File taxes for 2012 On March 2, 2013, when the home had a fair market value of $1,700,000 and she owed $1,100,000 on the mortgage, Sharon took out a second mortgage for $200,000. File taxes for 2012 She used $180,000 of the proceeds to make substantial improvements to her home (home acquisition debt) and the remaining $20,000 to buy a car (home equity debt). File taxes for 2012 Under the loan agreement, Sharon must make principal payments of $1,000 at the end of each month. File taxes for 2012 During 2013, her principal payments on the second mortgage totaled $10,000. File taxes for 2012 To complete Table 1, line 2, Sharon must figure a separate average balance for the part of her second mortgage that is home acquisition debt. File taxes for 2012 The January and February balances were zero. File taxes for 2012 The March through December balances were all $180,000, because none of her principal payments are applied to the home acquisition debt. File taxes for 2012 (They are all applied to the home equity debt, reducing it to $10,000 [$20,000 − $10,000]. File taxes for 2012 ) The monthly balances of the home acquisition debt total $1,800,000 ($180,000 × 10). File taxes for 2012 Therefore, the average balance of the home acquisition debt for 2013 was $150,000 ($1,800,000 ÷ 12). File taxes for 2012 Example 2. File taxes for 2012 The facts are the same as in Example 1. File taxes for 2012 In 2014, Sharon's January through October principal payments on her second mortgage are applied to the home equity debt, reducing it to zero. File taxes for 2012 The balance of the home acquisition debt remains $180,000 for each of those months. File taxes for 2012 Because her November and December principal payments are applied to the home acquisition debt, the November balance is $179,000 ($180,000 − $1,000) and the December balance is $178,000 ($180,000 − $2,000). File taxes for 2012 The monthly balances total $2,157,000 [($180,000 × 10) + $179,000 + $178,000]. File taxes for 2012 Therefore, the average balance of the home acquisition debt for 2014 is $179,750 ($2,157,000 ÷ 12). File taxes for 2012 L
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Most Tax Return Preparers Must Use IRS e-file

As of January 1, 2012, any tax return preparer who anticipates preparing and filing 11 or more Forms 1040, 1040A, 1040EZ and 1041 during a calendar year must use IRS e-file (unless the preparer or a particular return is administratively exempt from the e-file requirement or the return is filed by a preparer with an approved hardship waiver).

Members of firms must count returns in the aggregate. If the number of applicable income tax returns is 11 or more, then all members of the firm generally must e-file the returns they prepare and file. This is true even if a member expects to prepare and file fewer than 11 returns on an individual basis.

Those who are subject to the e-file requirement are referred to as "specified tax return preparers."

Apply to become an e-file provider now
You must be an authorized e-file provider to use IRS e-file. The authorization process generally takes about 45 days.

Explain paper returns

Even if you are an authorized e-file provider, clients for whom you prepare one of the returns identified above may choose to file on paper if the return will be submitted to the IRS by the taxpayer. As described in Rev. Proc. 2011-25, tax return preparers in this situation should obtain and keep a signed and dated statement from the client. Also, in this situation and in the cases of administratively exempt returns or returns filed by a tax return preparer with an approved hardship waiver, specified tax return preparers generally should attach Form 8948, Preparer Explanation for Not Filing Electronically, to the client's paper return.

Request a hardship waiver

Specified tax return preparers may request an undue hardship waiver from the e-file requirement using Form 8944, Preparer e-file Hardship Waiver Request. Form 8944 generally must be submitted to the IRS no later than February 15 of the year for which a waiver is being requested.

Additional References:

Page Last Reviewed or Updated: 27-Jan-2014

The File Taxes For 2012

File taxes for 2012 7. File taxes for 2012   Interest Income Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationSSN for joint account. File taxes for 2012 Custodian account for your child. File taxes for 2012 Penalty for failure to supply SSN. File taxes for 2012 Reporting backup withholding. File taxes for 2012 Savings account with parent as trustee. File taxes for 2012 Interest not reported on Form 1099-INT. File taxes for 2012 Nominees. File taxes for 2012 Incorrect amount. File taxes for 2012 Information reporting requirement. File taxes for 2012 Taxable InterestInterest subject to penalty for early withdrawal. File taxes for 2012 Money borrowed to invest in certificate of deposit. File taxes for 2012 U. File taxes for 2012 S. File taxes for 2012 Savings Bonds Education Savings Bond Program U. File taxes for 2012 S. File taxes for 2012 Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Original Issue Discount (OID) When To Report Interest IncomeConstructive receipt. File taxes for 2012 How To Report Interest IncomeSchedule B (Form 1040A or 1040). File taxes for 2012 Reporting tax-exempt interest. File taxes for 2012 U. File taxes for 2012 S. File taxes for 2012 savings bond interest previously reported. File taxes for 2012 Reminder Foreign-source income. File taxes for 2012  If you are a U. File taxes for 2012 S. File taxes for 2012 citizen with interest income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt by U. File taxes for 2012 S. File taxes for 2012 law. File taxes for 2012 This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. File taxes for 2012 Introduction This chapter discusses the following topics. File taxes for 2012 Different types of interest income. File taxes for 2012 What interest is taxable and what interest is nontaxable. File taxes for 2012 When to report interest income. File taxes for 2012 How to report interest income on your tax return. File taxes for 2012 In general, any interest you receive or that is credited to your account and can be withdrawn is taxable income. File taxes for 2012 Exceptions to this rule are discussed later in this chapter. File taxes for 2012 You may be able to deduct expenses you have in earning this income on Schedule A (Form 1040) if you itemize your deductions. File taxes for 2012 See Money borrowed to invest in certificate of deposit , later, and chapter 28. File taxes for 2012 Useful Items - You may want to see: Publication 537 Installment Sales 550 Investment Income and Expenses 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends 8815 Exclusion of Interest From Series EE and I U. File taxes for 2012 S. File taxes for 2012 Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. File taxes for 2012 S. File taxes for 2012 Savings Bonds Issued After 1989 General Information A few items of general interest are covered here. File taxes for 2012 Recordkeeping. File taxes for 2012 You should keep a list showing sources and interest amounts received during the year. File taxes for 2012 Also, keep the forms you receive showing your interest income (Forms 1099-INT, for example) as an important part of your records. File taxes for 2012 Tax on unearned income of certain children. File taxes for 2012    Part of a child's 2013 unearned income may be taxed at the parent's tax rate. File taxes for 2012 If so, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. File taxes for 2012 If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. File taxes for 2012   Some parents can choose to include the child's interest and dividends on the parent's return. File taxes for 2012 If you can, use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. File taxes for 2012   For more information about the tax on unearned income of children and the parents' election, see chapter 31. File taxes for 2012 Beneficiary of an estate or trust. File taxes for 2012   Interest you receive as a beneficiary of an estate or trust is generally taxable income. File taxes for 2012 You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. File taxes for 2012 , from the fiduciary. File taxes for 2012 Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. File taxes for 2012 Social security number (SSN). File taxes for 2012   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. File taxes for 2012 This includes payers of interest. File taxes for 2012 If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. File taxes for 2012 SSN for joint account. File taxes for 2012   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. File taxes for 2012 (For information on who owns the funds in a joint account, see Joint accounts , later. File taxes for 2012 ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. File taxes for 2012 This is because only one name and SSN can be shown on Form 1099. File taxes for 2012   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. File taxes for 2012 For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. File taxes for 2012 Custodian account for your child. File taxes for 2012   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. File taxes for 2012 For example, you must give your child's SSN to the payer of interest on an account owned by your child, even though the interest is paid to you as custodian. File taxes for 2012 Penalty for failure to supply SSN. File taxes for 2012   If you do not give your SSN to the payer of interest, you may have to pay a penalty. File taxes for 2012 See Failure to supply SSN under Penalties in chapter 1. File taxes for 2012 Backup withholding also may apply. File taxes for 2012 Backup withholding. File taxes for 2012   Your interest income is generally not subject to regular withholding. File taxes for 2012 However, it may be subject to backup withholding to ensure that income tax is collected on the income. File taxes for 2012 Under backup withholding, the payer of interest must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. File taxes for 2012   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. File taxes for 2012 For more information, see Backup Withholding in chapter 4. File taxes for 2012 Reporting backup withholding. File taxes for 2012   If backup withholding is deducted from your interest income, the payer must give you a Form 1099-INT for the year indicating the amount withheld. File taxes for 2012 The Form 1099-INT will show any backup withholding as “Federal income tax withheld. File taxes for 2012 ” Joint accounts. File taxes for 2012   If two or more persons hold property (such as a savings account or bond) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest from the property is determined by local law. File taxes for 2012 Income from property given to a child. File taxes for 2012   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. File taxes for 2012   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. File taxes for 2012 Savings account with parent as trustee. File taxes for 2012   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. File taxes for 2012 The savings account legally belongs to the child. File taxes for 2012 The parents are not legally permitted to use any of the funds to support the child. File taxes for 2012 Form 1099-INT. File taxes for 2012   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. File taxes for 2012 This form shows you the interest you received during the year. File taxes for 2012 Keep this form for your records. File taxes for 2012 You do not have to attach it to your tax return. File taxes for 2012   Report on your tax return the total interest income you receive for the tax year. File taxes for 2012 Interest not reported on Form 1099-INT. File taxes for 2012   Even if you do not receive Form 1099-INT, you must still report all of your interest income. File taxes for 2012 For example, you may receive distributive shares of interest from partnerships or S corporations. File taxes for 2012 This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deduction, Credits, etc. File taxes for 2012 , or Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. File taxes for 2012 Nominees. File taxes for 2012   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. File taxes for 2012   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on nominee distributions under How To Report Interest Income in chapter 1 of Publication 550, or Schedule B (Form 1040A or 1040) instructions. File taxes for 2012 Incorrect amount. File taxes for 2012   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. File taxes for 2012 The new Form 1099-INT you receive will be marked “Corrected. File taxes for 2012 ” Form 1099-OID. File taxes for 2012   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. File taxes for 2012 For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. File taxes for 2012 Exempt-interest dividends. File taxes for 2012   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. File taxes for 2012 (However, see Information reporting requirement , next. File taxes for 2012 ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. File taxes for 2012 You do not reduce your basis for distributions that are exempt-interest dividends. File taxes for 2012 Information reporting requirement. File taxes for 2012   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. File taxes for 2012 This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. File taxes for 2012 Note. File taxes for 2012 Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. File taxes for 2012 See Alternative Minimum Tax (AMT) in chapter 30 for more information. File taxes for 2012 Chapter 1 of Publication 550 contains a discussion on private activity bonds under State or Local Government Obligations. File taxes for 2012 Interest on VA dividends. File taxes for 2012   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. File taxes for 2012 This includes interest paid on dividends on converted United States Government Life Insurance and on National Service Life Insurance policies. File taxes for 2012 Individual retirement arrangements (IRAs). File taxes for 2012   Interest on a Roth IRA generally is not taxable. File taxes for 2012 Interest on a traditional IRA is tax deferred. File taxes for 2012 You generally do not include it in your income until you make withdrawals from the IRA. File taxes for 2012 See chapter 17. File taxes for 2012 Taxable Interest Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. File taxes for 2012 The following are some sources of taxable interest. File taxes for 2012 Dividends that are actually interest. File taxes for 2012   Certain distributions commonly called dividends are actually interest. File taxes for 2012 You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. File taxes for 2012  The “dividends” will be shown as interest income on Form 1099-INT. File taxes for 2012 Money market funds. File taxes for 2012   Money market funds pay dividends and are offered by nonbank financial institutions, such as mutual funds and stock brokerage houses. File taxes for 2012 Generally, amounts you receive from money market funds should be reported as dividends, not as interest. File taxes for 2012 Certificates of deposit and other deferred interest accounts. File taxes for 2012   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. File taxes for 2012 You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. File taxes for 2012 The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. File taxes for 2012 If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. File taxes for 2012 Interest subject to penalty for early withdrawal. File taxes for 2012   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. File taxes for 2012 You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. File taxes for 2012 See Penalty on early withdrawal of savings in chapter 1 of Publication 550 for more information on how to report the interest and deduct the penalty. File taxes for 2012 Money borrowed to invest in certificate of deposit. File taxes for 2012   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. File taxes for 2012 You must report the total interest you earn on the certificate in your income. File taxes for 2012 If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. File taxes for 2012 See Interest Expenses in chapter 3 of Publication 550. File taxes for 2012 Example. File taxes for 2012 You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. File taxes for 2012 The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. File taxes for 2012 The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. File taxes for 2012 The bank also gives you a statement showing that you paid $310 interest for 2013. File taxes for 2012 You must include the $575 in your income. File taxes for 2012 If you itemize your deductions on Schedule A (Form 1040), you can deduct $310, subject to the net investment income limit. File taxes for 2012 Gift for opening account. File taxes for 2012   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. File taxes for 2012   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. File taxes for 2012 For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. File taxes for 2012 The value is determined by the cost to the financial institution. File taxes for 2012 Example. File taxes for 2012 You open a savings account at your local bank and deposit $800. File taxes for 2012 The account earns $20 interest. File taxes for 2012 You also receive a $15 calculator. File taxes for 2012 If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. File taxes for 2012 You must report $35 interest income on your tax return. File taxes for 2012 Interest on insurance dividends. File taxes for 2012   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. File taxes for 2012 However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. File taxes for 2012 Prepaid insurance premiums. File taxes for 2012   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. File taxes for 2012 U. File taxes for 2012 S. File taxes for 2012 obligations. File taxes for 2012   Interest on U. File taxes for 2012 S. File taxes for 2012 obligations, such as U. File taxes for 2012 S. File taxes for 2012 Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. File taxes for 2012 Interest on tax refunds. File taxes for 2012   Interest you receive on tax refunds is taxable income. File taxes for 2012 Interest on condemnation award. File taxes for 2012   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. File taxes for 2012 Installment sale payments. File taxes for 2012   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. File taxes for 2012 That interest is taxable when you receive it. File taxes for 2012 If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. File taxes for 2012 See Unstated Interest and Original Issue Discount in Publication 537, Installment Sales. File taxes for 2012 Interest on annuity contract. File taxes for 2012   Accumulated interest on an annuity contract you sell before its maturity date is taxable. File taxes for 2012 Usurious interest. File taxes for 2012   Usurious interest is interest charged at an illegal rate. File taxes for 2012 This is taxable as interest unless state law automatically changes it to a payment on the principal. File taxes for 2012 Interest income on frozen deposits. File taxes for 2012   Exclude from your gross income interest on frozen deposits. File taxes for 2012 A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state where the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. File taxes for 2012   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). File taxes for 2012 If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income in chapter 1 of Publication 550, for information about reporting this interest income exclusion on your tax return. File taxes for 2012   The interest you exclude is treated as credited to your account in the following year. File taxes for 2012 You must include it in income in the year you can withdraw it. File taxes for 2012 Example. File taxes for 2012 $100 of interest was credited on your frozen deposit during the year. File taxes for 2012 You withdrew $80 but could not withdraw any more as of the end of the year. File taxes for 2012 You must include $80 in your income and exclude $20 from your income for the year. File taxes for 2012 You must include the $20 in your income for the year you can withdraw it. File taxes for 2012 Bonds traded flat. File taxes for 2012   If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. File taxes for 2012 The defaulted or unpaid interest is not income and is not taxable as interest if paid later. File taxes for 2012 When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. File taxes for 2012 Interest that accrues after the date of purchase, however, is taxable interest income for the year it is received or accrued. File taxes for 2012 See Bonds Sold Between Interest Dates , later, for more information. File taxes for 2012 Below-market loans. File taxes for 2012   In general, a below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. File taxes for 2012 See Below-Market Loans in chapter 1 of Publication 550 for more information. File taxes for 2012 U. File taxes for 2012 S. File taxes for 2012 Savings Bonds This section provides tax information on U. File taxes for 2012 S. File taxes for 2012 savings bonds. File taxes for 2012 It explains how to report the interest income on these bonds and how to treat transfers of these bonds. File taxes for 2012 For other information on U. File taxes for 2012 S. File taxes for 2012 savings bonds, write to:  For series EE and I paper savings bonds: Bureau of the Public Debt Division of Customer Assistance P. File taxes for 2012 O. File taxes for 2012 Box 7012 Parkersburg, WV 26106-7012  For series EE and I electronic bonds: Bureau of the Public Debt Division of Customer Assistance P. File taxes for 2012 O. File taxes for 2012 Box 7015 Parkersburg, WV 26106–7015  For series HH/H: Bureau of the Public Debt Division of Customer Assistance P. File taxes for 2012 O. File taxes for 2012 Box 2186 Parkersburg, WV 26106-2186 Or, on the Internet, visit: www. File taxes for 2012 treasurydirect. File taxes for 2012 gov/indiv/indiv. File taxes for 2012 htm. File taxes for 2012 Accrual method taxpayers. File taxes for 2012   If you use an accrual method of accounting, you must report interest on U. File taxes for 2012 S. File taxes for 2012 savings bonds each year as it accrues. File taxes for 2012 You cannot postpone reporting interest until you receive it or until the bonds mature. File taxes for 2012 Accrual methods of accounting are explained in chapter 1 under Accounting Methods . File taxes for 2012 Cash method taxpayers. File taxes for 2012   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. File taxes for 2012 S. File taxes for 2012 savings bonds when you receive it. File taxes for 2012 The cash method of accounting is explained in chapter 1 under Accounting Methods. File taxes for 2012 But see Reporting options for cash method taxpayers , later. File taxes for 2012 Series HH bonds. File taxes for 2012    These bonds were issued at face value. File taxes for 2012 Interest is paid twice a year by direct deposit to your bank account. File taxes for 2012 If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. File taxes for 2012   Series HH bonds were first offered in 1980 and last offered in August 2004. File taxes for 2012 Before 1980, series H bonds were issued. File taxes for 2012 Series H bonds are treated the same as series HH bonds. File taxes for 2012 If you are a cash method taxpayer, you must report the interest when you receive it. File taxes for 2012   Series H bonds have a maturity period of 30 years. File taxes for 2012 Series HH bonds mature in 20 years. File taxes for 2012 The last series H bonds matured in 2009. File taxes for 2012 Series EE and series I bonds. File taxes for 2012   Interest on these bonds is payable when you redeem the bonds. File taxes for 2012 The difference between the purchase price and the redemption value is taxable interest. File taxes for 2012 Series EE bonds. File taxes for 2012   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. File taxes for 2012   Before July 1980, series E bonds were issued. File taxes for 2012 The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. File taxes for 2012 Paper series EE and series E bonds are issued at a discount. File taxes for 2012 The face value is payable to you at maturity. File taxes for 2012 Electronic series EE bonds are issued at their face value. File taxes for 2012 The face value plus accrued interest is payable to you at maturity. File taxes for 2012 As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. File taxes for 2012   Owners of paper series EE bonds can convert them to electronic bonds. File taxes for 2012 These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). File taxes for 2012 Series I bonds. File taxes for 2012   Series I bonds were first offered in 1998. File taxes for 2012 These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. File taxes for 2012 The face value plus all accrued interest is payable to you at maturity. File taxes for 2012 Reporting options for cash method taxpayers. File taxes for 2012   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. File taxes for 2012 Method 1. File taxes for 2012 Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year they mature. File taxes for 2012 (However, see Savings bonds traded , later. File taxes for 2012 )  Note. File taxes for 2012 Series EE bonds issued in 1983 matured in 2013. File taxes for 2012 If you have used method 1, you generally must report the interest on these bonds on your 2013 return. File taxes for 2012 The last series E bonds were issued in 1980 and matured in 2010. File taxes for 2012 If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. File taxes for 2012 Method 2. File taxes for 2012 Choose to report the increase in redemption value as interest each year. File taxes for 2012 You must use the same method for all series EE, series E, and series I bonds you own. File taxes for 2012 If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. File taxes for 2012    If you plan to cash your bonds in the same year you will pay for higher education expenses, you may want to use method 1 because you may be able to exclude the interest from your income. File taxes for 2012 To learn how, see Education Savings Bond Program, later. File taxes for 2012 Change from method 1. File taxes for 2012   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. File taxes for 2012 In the year of change you must report all interest accrued to date and not previously reported for all your bonds. File taxes for 2012   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. File taxes for 2012 Change from method 2. File taxes for 2012   To change from method 2 to method 1, you must request permission from the IRS. File taxes for 2012 Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. File taxes for 2012 You have typed or printed the following number at the top: “131. File taxes for 2012 ” It includes your name and social security number under “131. File taxes for 2012 ” It includes the year of change (both the beginning and ending dates). File taxes for 2012 It identifies the savings bonds for which you are requesting this change. File taxes for 2012 It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. File taxes for 2012   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). File taxes for 2012   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. File taxes for 2012 On the statement, type or print “Filed pursuant to section 301. File taxes for 2012 9100-2. File taxes for 2012 ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). File taxes for 2012    By the date you file the original statement with your return, you must also send a signed copy to the address below. File taxes for 2012   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. File taxes for 2012 O. File taxes for 2012 Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. File taxes for 2012   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW  Washington, DC 20224   Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115, Application for Change in Accounting Method. File taxes for 2012 In that case, follow the form instructions for an automatic change. File taxes for 2012 No user fee is required. File taxes for 2012 Co-owners. File taxes for 2012   If a U. File taxes for 2012 S. File taxes for 2012 savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. File taxes for 2012 One co-owner's funds used. File taxes for 2012    If you used your funds to buy the bond, you must pay the tax on the interest. File taxes for 2012 This is true even if you let the other co-owner redeem the bond and keep all the proceeds. File taxes for 2012 Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. File taxes for 2012 The co-owner who redeemed the bond is a “nominee. File taxes for 2012 ” See Nominee distributions under How To Report Interest Income in chapter 1 of Publication 550 for more information about how a person who is a nominee reports interest income belonging to another person. File taxes for 2012 Both co-owners' funds used. File taxes for 2012   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. File taxes for 2012 Community property. File taxes for 2012   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. File taxes for 2012 If you file separate returns, each of you generally must report one-half of the bond interest. File taxes for 2012 For more information about community property, see Publication 555. File taxes for 2012 Table 7-1. File taxes for 2012   These rules are also shown in Table 7-1. File taxes for 2012 Ownership transferred. File taxes for 2012   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. File taxes for 2012 But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. File taxes for 2012   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. File taxes for 2012 Purchased jointly. File taxes for 2012   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. File taxes for 2012 The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. File taxes for 2012 This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. File taxes for 2012   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. File taxes for 2012 But the new co-owner will report only his or her share of the interest earned after the transfer. File taxes for 2012   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. File taxes for 2012    Table 7-1. File taxes for 2012 Who Pays the Tax on U. File taxes for 2012 S. File taxes for 2012 Savings Bond Interest IF . File taxes for 2012 . File taxes for 2012 . File taxes for 2012 THEN the interest must be reported by . File taxes for 2012 . File taxes for 2012 . File taxes for 2012 you buy a bond in your name and the name of another person as co-owners, using only your own funds you. File taxes for 2012 you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. File taxes for 2012 you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. File taxes for 2012 you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. File taxes for 2012 If you file separate returns, both you and your spouse generally report one-half of the interest. File taxes for 2012 Example 1. File taxes for 2012 You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. File taxes for 2012 The bond was issued to you and your spouse as co-owners. File taxes for 2012 You both postpone reporting interest on the bond. File taxes for 2012 You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. File taxes for 2012 At that time neither you nor your spouse has to report the interest earned to the date of reissue. File taxes for 2012 Example 2. File taxes for 2012 You bought a $1,000 series EE savings bond entirely with your own funds. File taxes for 2012 The bond was issued to you and your spouse as co-owners. File taxes for 2012 You both postpone reporting interest on the bond. File taxes for 2012 You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. File taxes for 2012 You must report half the interest earned to the date of reissue. File taxes for 2012 Transfer to a trust. File taxes for 2012   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. File taxes for 2012 However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. File taxes for 2012 You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. File taxes for 2012   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. File taxes for 2012 See Savings bonds traded , later. File taxes for 2012 Decedents. File taxes for 2012   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. File taxes for 2012 This is explained in chapter 1 of Publication 550. File taxes for 2012 Savings bonds traded. File taxes for 2012   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. File taxes for 2012 (You cannot trade series I bonds for series HH bonds. File taxes for 2012 After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. File taxes for 2012 ) Any cash you received is income up to the amount of the interest earned on the bonds traded. File taxes for 2012 When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. File taxes for 2012 Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. File taxes for 2012 Example. File taxes for 2012 You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. File taxes for 2012 You reported the $223 as taxable income on your tax return. File taxes for 2012 At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. File taxes for 2012 You hold the series HH bonds until maturity, when you receive $2,500. File taxes for 2012 You must report $300 as interest income in the year of maturity. File taxes for 2012 This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). File taxes for 2012 (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. File taxes for 2012 ) Choice to report interest in year of trade. File taxes for 2012   You could have chosen to treat all of the previously unreported accrued interest on the series EE or series E bonds traded for series HH bonds as income in the year of the trade. File taxes for 2012 If you made this choice, it is treated as a change from method 1. File taxes for 2012 See Change from method 1 under Series EE and series I bonds, earlier. File taxes for 2012 Form 1099-INT for U. File taxes for 2012 S. File taxes for 2012 savings bonds interest. File taxes for 2012   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. File taxes for 2012 Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. File taxes for 2012 However, your Form 1099-INT may show more interest than you have to include on your income tax return. File taxes for 2012 For example, this may happen if any of the following are true. File taxes for 2012 You chose to report the increase in the redemption value of the bond each year. File taxes for 2012 The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. File taxes for 2012 You received the bond from a decedent. File taxes for 2012 The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. File taxes for 2012 Ownership of the bond was transferred. File taxes for 2012 The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. File taxes for 2012 You were named as a co-owner, and the other co-owner contributed funds to buy the bond. File taxes for 2012 The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. File taxes for 2012 (See Co-owners , earlier in this chapter, for more information about the reporting requirements. File taxes for 2012 ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. File taxes for 2012 The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. File taxes for 2012 (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. File taxes for 2012 , for the year of distribution. File taxes for 2012 )   For more information on including the correct amount of interest on your return, see How To Report Interest Income , later. File taxes for 2012 Publication 550 includes examples showing how to report these amounts. File taxes for 2012    Interest on U. File taxes for 2012 S. File taxes for 2012 savings bonds is exempt from state and local taxes. File taxes for 2012 The Form 1099-INT you receive will indicate the amount that is for U. File taxes for 2012 S. File taxes for 2012 savings bond interest in box 3. File taxes for 2012 Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. File taxes for 2012 S. File taxes for 2012 savings bonds during the year if you pay qualified higher educational expenses during the same year. File taxes for 2012 This exclusion is known as the Education Savings Bond Program. File taxes for 2012 You do not qualify for this exclusion if your filing status is married filing separately. File taxes for 2012 Form 8815. File taxes for 2012   Use Form 8815 to figure your exclusion. File taxes for 2012 Attach the form to your Form 1040 or Form 1040A. File taxes for 2012 Qualified U. File taxes for 2012 S. File taxes for 2012 savings bonds. File taxes for 2012   A qualified U. File taxes for 2012 S. File taxes for 2012 savings bond is a series EE bond issued after 1989 or a series I bond. File taxes for 2012 The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). File taxes for 2012 You must be at least 24 years old before the bond's issue date. File taxes for 2012 For example, a bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child. File taxes for 2012    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. File taxes for 2012 Beneficiary. File taxes for 2012   You can designate any individual (including a child) as a beneficiary of the bond. File taxes for 2012 Verification by IRS. File taxes for 2012   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of the Treasury. File taxes for 2012 Qualified expenses. File taxes for 2012   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. File taxes for 2012   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. File taxes for 2012   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. File taxes for 2012 Eligible educational institutions. File taxes for 2012   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the U. File taxes for 2012 S. File taxes for 2012 Department of Education. File taxes for 2012 Reduction for certain benefits. File taxes for 2012   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. File taxes for 2012 Tax-free part of scholarships and fellowships (see Scholarships and fellowships in chapter 12). File taxes for 2012 Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. File taxes for 2012 Expenses used to figure the tax-free portion of distributions from a qualified tuition program. File taxes for 2012 Any tax-free payments (other than gifts or inheritances) received for educational expenses, such as Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. File taxes for 2012 Any expense used in figuring the American Opportunity and lifetime learning credits. File taxes for 2012 Amount excludable. File taxes for 2012   If the total proceeds (interest and principal) from the qualified U. File taxes for 2012 S. File taxes for 2012 savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. File taxes for 2012 If the proceeds are more than the expenses, you may be able to exclude only part of the interest. File taxes for 2012   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. File taxes for 2012 The numerator of the fraction is the qualified higher educational expenses you paid during the year. File taxes for 2012 The denominator of the fraction is the total proceeds you received during the year. File taxes for 2012 Example. File taxes for 2012 In February 2013, Mark and Joan, a married couple, cashed a qualified series EE U. File taxes for 2012 S. File taxes for 2012 savings bond they bought in April 1997. File taxes for 2012 They received proceeds of $8,372 representing principal of $5,000 and interest of $3,372. File taxes for 2012 In 2013, they paid $4,000 of their daughter's college tuition. File taxes for 2012 They are not claiming an education credit for that amount, and their daughter does not have any tax-free educational assistance. File taxes for 2012 They can exclude $1,611 ($3,372 × ($4,000 ÷ $8,372)) of interest in 2013. File taxes for 2012 They must pay tax on the remaining $1,761 ($3,372 − $1,611) interest. File taxes for 2012 Modified adjusted gross income limit. File taxes for 2012   The interest exclusion is limited if your modified adjusted gross income (modified AGI) is: $74,700 to $89,700 for taxpayers filing single or head of household, and $112,050 to $142,050 for married taxpayers filing jointly or for a qualifying widow(er) with dependent child. File taxes for 2012 You do not qualify for the interest exclusion if your modified AGI is equal to or more than the upper limit for your filing status. File taxes for 2012   Modified AGI, for purposes of this exclusion, is adjusted gross income (Form 1040, line 37, or Form 1040A, line 21) figured before the interest exclusion, and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion and deduction, Exclusion of income for bona fide residents of American Samoa, Exclusion for income from Puerto Rico, Exclusion for adoption benefits received under an employer's adoption assistance program, Deduction for tuition and fees, Deduction for student loan interest, and Deduction for domestic production activities. File taxes for 2012   Use the Line 9 Worksheet in the Form 8815 instructions to figure your modified AGI. File taxes for 2012 If you claim any of the exclusion or deduction items listed above (except items 6, 7, and 8), add the amount of the exclusion or deduction (except items 6, 7, and 8) to the amount on line 5 of the worksheet, and enter the total on Form 8815, line 9, as your modified AGI. File taxes for 2012   If you have investment interest expense incurred to earn royalties and other investment income, see Education Savings Bond Program in chapter 1 of Publication 550. File taxes for 2012 Recordkeeping. File taxes for 2012 If you claim the interest exclusion, you must keep a written record of the qualified U. File taxes for 2012 S. File taxes for 2012 savings bonds you redeem. File taxes for 2012 Your record must include the serial number, issue date, face value, and total redemption proceeds (principal and interest) of each bond. File taxes for 2012 You can use Form 8818 to record this information. File taxes for 2012 You should also keep bills, receipts, canceled checks, or other documentation that shows you paid qualified higher educational expenses during the year. File taxes for 2012 U. File taxes for 2012 S. File taxes for 2012 Treasury Bills, Notes, and Bonds Treasury bills, notes, and bonds are direct debts (obligations) of the U. File taxes for 2012 S. File taxes for 2012 Government. File taxes for 2012 Taxation of interest. File taxes for 2012   Interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. File taxes for 2012 You should receive Form 1099-INT showing the interest (in box 3) paid to you for the year. File taxes for 2012   Payments of principal and interest generally will be credited to your designated checking or savings account by direct deposit through the TreasuryDirect® system. File taxes for 2012 Treasury bills. File taxes for 2012   These bills generally have a 4-week, 13-week, 26-week, or 52-week maturity period. File taxes for 2012 They are generally issued at a discount in the amount of $100 and multiples of $100. File taxes for 2012 The difference between the discounted price you pay for the bills and the face value you receive at maturity is interest income. File taxes for 2012 Generally, you report this interest income when the bill is paid at maturity. File taxes for 2012 If you paid a premium for a bill (more than the face value), you generally report the premium as a section 171 deduction when the bill is paid at maturity. File taxes for 2012 Treasury notes and bonds. File taxes for 2012   Treasury notes have maturity periods of more than 1 year, ranging up to 10 years. File taxes for 2012 Maturity periods for Treasury bonds are longer than 10 years. File taxes for 2012 Both generally are issued in denominations of $100 to $1 million and generally pay interest every 6 months. File taxes for 2012 Generally, you report this interest for the year paid. File taxes for 2012 For more information, see U. File taxes for 2012 S. File taxes for 2012 Treasury Bills, Notes, and Bonds in chapter 1 of Publication 550. File taxes for 2012 For other information on Treasury notes or bonds, write to:  Bureau of the Public Debt P. File taxes for 2012 O. File taxes for 2012 Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. File taxes for 2012 treasurydirect. File taxes for 2012 gov/indiv/indiv. File taxes for 2012 htm. File taxes for 2012 For information on series EE, series I, and series HH savings bonds, see U. File taxes for 2012 S. File taxes for 2012 Savings Bonds , earlier. File taxes for 2012 Treasury inflation-protected securities (TIPS). File taxes for 2012   These securities pay interest twice a year at a fixed rate, based on a principal amount adjusted to take into account inflation and deflation. File taxes for 2012 For the tax treatment of these securities, see Inflation-Indexed Debt Instruments under Original Issue Discount (OID), in Publication 550. File taxes for 2012 Bonds Sold Between Interest Dates If you sell a bond between interest payment dates, part of the sales price represents interest accrued to the date of sale. File taxes for 2012 You must report that part of the sales price as interest income for the year of sale. File taxes for 2012 If you buy a bond between interest payment dates, part of the purchase price represents interest accrued before the date of purchase. File taxes for 2012 When that interest is paid to you, treat it as a return of your capital investment, rather than interest income, by reducing your basis in the bond. File taxes for 2012 See Accrued interest on bonds under How To Report Interest Income in chapter 1 of Publication 550 for information on reporting the payment. File taxes for 2012 Insurance Life insurance proceeds paid to you as beneficiary of the insured person are usually not taxable. File taxes for 2012 But if you receive the proceeds in installments, you must usually report a part of each installment payment as interest income. File taxes for 2012 For more information about insurance proceeds received in installments, see Publication 525, Taxable and Nontaxable Income. File taxes for 2012 Annuity. File taxes for 2012   If you buy an annuity with life insurance proceeds, the annuity payments you receive are taxed as pension and annuity income from a nonqualified plan, not as interest income. File taxes for 2012 See chapter 10 for information on pension and annuity income from nonqualified plans. File taxes for 2012 State or Local Government Obligations Interest on a bond used to finance government operations generally is not taxable if the bond is issued by a state, the District of Columbia, a possession of the United States, or any of their political subdivisions. File taxes for 2012 Bonds issued after 1982 (including tribal economic development bonds issued after February 17, 2009) by an Indian tribal government are treated as issued by a state. File taxes for 2012 Interest on these bonds is generally tax exempt if the bonds are part of an issue of which substantially all proceeds are to be used in the exercise of any essential government function. File taxes for 2012 For information on federally guaranteed bonds, mortgage revenue bonds, arbitrage bonds, private activity bonds, qualified tax credit bonds, and Build America bonds, see State or Local Government Obligations in chapter 1 of Publication 550. File taxes for 2012 Information reporting requirement. File taxes for 2012   If you must file a tax return, you are required to show any tax-exempt interest you received on your return. File taxes for 2012 This is an information reporting requirement only. File taxes for 2012 It does not change tax-exempt interest to taxable interest. File taxes for 2012 Original Issue Discount (OID) Original issue discount (OID) is a form of interest. File taxes for 2012 You generally include OID in your income as it accrues over the term of the debt instrument, whether or not you receive any payments from the issuer. File taxes for 2012 A debt instrument generally has OID when the instrument is issued for a price that is less than its stated redemption price at maturity. File taxes for 2012 OID is the difference between the stated redemption price at maturity and the issue price. File taxes for 2012 All debt instruments that pay no interest before maturity are presumed to be issued at a discount. File taxes for 2012 Zero coupon bonds are one example of these instruments. File taxes for 2012 The OID accrual rules generally do not apply to short-term obligations (those with a fixed maturity date of 1 year or less from date of issue). File taxes for 2012 See Discount on Short-Term Obligations in chapter 1 of Publication 550. File taxes for 2012 De minimis OID. File taxes for 2012   You can treat the discount as zero if it is less than one-fourth of 1% (. File taxes for 2012 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. File taxes for 2012 This small discount is known as “de minimis” OID. File taxes for 2012 Example 1. File taxes for 2012 You bought a 10-year bond with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. File taxes for 2012 One-fourth of 1% of $1,000 (stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. File taxes for 2012 Because the $20 discount is less than $25, the OID is treated as zero. File taxes for 2012 (If you hold the bond at maturity, you will recognize $20 ($1,000 − $980) of capital gain. File taxes for 2012 ) Example 2. File taxes for 2012 The facts are the same as in Example 1, except that the bond was issued at $950. File taxes for 2012 The OID is $50. File taxes for 2012 Because the $50 discount is more than the $25 figured in Example 1, you must include the OID in income as it accrues over the term of the bond. File taxes for 2012 Debt instrument bought after original issue. File taxes for 2012   If you buy a debt instrument with de minimis OID at a premium, the discount is not includible in income. File taxes for 2012 If you buy a debt instrument with de minimis OID at a discount, the discount is reported under the market discount rules. File taxes for 2012 See Market Discount Bonds in chapter 1 of Publication 550. File taxes for 2012 Exceptions to reporting OID. File taxes for 2012   The OID rules discussed in this chapter do not apply to the following debt instruments. File taxes for 2012 Tax-exempt obligations. File taxes for 2012 (However, see Stripped tax-exempt obligations under Stripped Bonds and Coupons in chapter 1 of Publication 550). File taxes for 2012 U. File taxes for 2012 S. File taxes for 2012 savings bonds. File taxes for 2012 Short-term debt instruments (those with a fixed maturity date of not more than 1 year from the date of issue). File taxes for 2012 Obligations issued by an individual before March 2, 1984. File taxes for 2012 Loans between individuals if all the following are true. File taxes for 2012 The lender is not in the business of lending money. File taxes for 2012 The amount of the loan, plus the amount of any outstanding prior loans between the same individuals, is $10,000 or less. File taxes for 2012 Avoiding any federal tax is not one of the principal purposes of the loan. File taxes for 2012 Form 1099-OID. File taxes for 2012   The issuer of the debt instrument (or your broker if you held the instrument through a broker) should give you Form 1099-OID, or a similar statement, if the total OID for the calendar year is $10 or more. File taxes for 2012 Form 1099-OID will show, in box 1, the amount of OID for the part of the year that you held the bond. File taxes for 2012 It also will show, in box 2, the stated interest you must include in your income. File taxes for 2012 A copy of Form 1099-OID will be sent to the IRS. File taxes for 2012 Do not file your copy with your return. File taxes for 2012 Keep it for your records. File taxes for 2012   In most cases, you must report the entire amount in boxes 1 and 2 of Form 1099-OID as interest income. File taxes for 2012 But see Refiguring OID shown on Form 1099-OID, later in this discussion, for more information. File taxes for 2012 Form 1099-OID not received. File taxes for 2012   If you had OID for the year but did not receive a Form 1099-OID, you can find tables on IRS. File taxes for 2012 gov that list total OID on certain debt instruments and have information that will help you figure OID. File taxes for 2012 For the latest OID tables, go to www. File taxes for 2012 irs. File taxes for 2012 gov and enter “OID tables” in the Search box. File taxes for 2012 If your debt instrument is not listed, consult the issuer for further information about the accrued OID for the year. File taxes for 2012 Nominee. File taxes for 2012   If someone else is the holder of record (the registered owner) of an OID instrument belonging to you and receives a Form 1099-OID on your behalf, that person must give you a Form 1099-OID. File taxes for 2012 Refiguring OID shown on Form 1099-OID. File taxes for 2012   You must refigure the OID shown in box 1 or box 8 of Form 1099-OID if either of the following apply. File taxes for 2012 You bought the debt instrument after its original issue and paid a premium or an acquisition premium. File taxes for 2012 The debt instrument is a stripped bond or a stripped coupon (including certain zero coupon instruments). File taxes for 2012 For information about figuring the correct amount of OID to include in your income, see Figuring OID on Long-Term Debt Instruments in Publication 1212. File taxes for 2012 Refiguring periodic interest shown on Form 1099-OID. File taxes for 2012   If you disposed of a debt instrument or acquired it from another holder during the year, see Bonds Sold Between Interest Dates , earlier, for information about the treatment of periodic interest that may be shown in box 2 of Form 1099-OID for that instrument. File taxes for 2012 Certificates of deposit (CDs). File taxes for 2012   If you buy a CD with a maturity of more than 1 year, you must include in income each year a part of the total interest due and report it in the same manner as other OID. File taxes for 2012   This also applies to similar deposit arrangements with banks, building and loan associations, etc. File taxes for 2012 , including: Time deposits, Bonus plans, Savings certificates, Deferred income certificates, Bonus savings certificates, and Growth savings certificates. File taxes for 2012 Bearer CDs. File taxes for 2012   CDs issued after 1982 generally must be in registered form. File taxes for 2012 Bearer CDs are CDs not in registered form. File taxes for 2012 They are not issued in the depositor's name and are transferable from one individual to another. File taxes for 2012   Banks must provide the IRS and the person redeeming a bearer CD with a Form 1099-INT. File taxes for 2012 More information. File taxes for 2012   See chapter 1 of Publication 550 for more information about OID and related topics, such as market discount bonds. File taxes for 2012 When To Report Interest Income When to report your interest income depends on whether you use the cash method or an accrual method to report income. File taxes for 2012 Cash method. File taxes for 2012   Most individual taxpayers use the cash method. File taxes for 2012 If you use this method, you generally report your interest income in the year in which you actually or constructively receive it. File taxes for 2012 However, there are special rules for reporting the discount on certain debt instruments. File taxes for 2012 See U. File taxes for 2012 S. File taxes for 2012 Savings Bonds and Original Issue Discount (OID) , earlier. File taxes for 2012 Example. File taxes for 2012 On September 1, 2011, you loaned another individual $2,000 at 12%, compounded annually. File taxes for 2012 You are not in the business of lending money. File taxes for 2012 The note stated that principal and interest would be due on August 31, 2013. File taxes for 2012 In 2013, you received $2,508. File taxes for 2012 80 ($2,000 principal and $508. File taxes for 2012 80 interest). File taxes for 2012 If you use the cash method, you must include in income on your 2013 return the $508. File taxes for 2012 80 interest you received in that year. File taxes for 2012 Constructive receipt. File taxes for 2012   You constructively receive income when it is credited to your account or made available to you. File taxes for 2012 You do not need to have physical possession of it. File taxes for 2012 For example, you are considered to receive interest, dividends, or other earnings on any deposit or account in a bank, savings and loan, or similar financial institution, or interest on life insurance policy dividends left to accumulate, when they are credited to your account and subject to your withdrawal. File taxes for 2012 This is true even if they are not yet entered in your passbook. File taxes for 2012   You constructively receive income on the deposit or account even if you must: Make withdrawals in multiples of even amounts, Give a notice to withdraw before making the withdrawal, Withdraw all or part of the account to withdraw the earnings, or Pay a penalty on early withdrawals, unless the interest you are to receive on an early withdrawal or redemption is substantially less than the interest payable at maturity. File taxes for 2012 Accrual method. File taxes for 2012   If you use an accrual method, you report your interest income when you earn it, whether or not you have received it. File taxes for 2012 Interest is earned over the term of the debt instrument. File taxes for 2012 Example. File taxes for 2012 If, in the previous example, you use an accrual method, you must include the interest in your income as you earn it. File taxes for 2012 You would report the interest as follows: 2011, $80; 2012, $249. File taxes for 2012 60; and 2013, $179. File taxes for 2012 20. File taxes for 2012 Coupon bonds. File taxes for 2012   Interest on coupon bonds is taxable in the year the coupon becomes due and payable. File taxes for 2012 It does not matter when you mail the coupon for payment. File taxes for 2012 How To Report Interest Income Generally, you report all your taxable interest income on Form 1040, line 8a; Form 1040A, line 8a; or Form 1040EZ, line 2. File taxes for 2012 You cannot use Form 1040EZ if your taxable interest income is more than $1,500. File taxes for 2012 Instead, you must use Form 1040A or Form 1040. File taxes for 2012 Form 1040A. File taxes for 2012   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040A and any of the following are true. File taxes for 2012 Your taxable interest income is more than $1,500. File taxes for 2012 You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). File taxes for 2012 You received interest from a seller-financed mortgage, and the buyer used the property as a home. File taxes for 2012 You received a Form 1099-INT for U. File taxes for 2012 S. File taxes for 2012 savings bond interest that includes amounts you reported before 2013. File taxes for 2012 You received, as a nominee, interest that actually belongs to someone else. File taxes for 2012 You received a Form 1099-INT for interest on frozen deposits. File taxes for 2012 You are reporting OID in an amount less than the amount shown on Form 1099-OID. File taxes for 2012 You received a Form 1099-INT for interest on a bond you bought between interest payment dates. File taxes for 2012 You acquired taxable bonds after 1987 and choose to reduce interest income from the bonds by any amortizable bond premium (see Bond Premium Amortization in chapter 3 of Publication 550). File taxes for 2012 List each payer's name and the amount of interest income received from each payer on line 1. File taxes for 2012 If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. File taxes for 2012   You cannot use Form 1040A if you must use Form 1040, as described next. File taxes for 2012 Form 1040. File taxes for 2012   You must use Form 1040 instead of Form 1040A or Form 1040EZ if: You forfeited interest income because of the early withdrawal of a time deposit; You acquired taxable bonds after 1987, you choose to reduce interest income from the bonds by any amortizable bond premium, and you are deducting the excess of bond premium amortization for the accrual period over the qualified stated interest for the period (see Bond Premium Amortization in chapter 3 of Publication 550); or You received tax-exempt interest from private activity bonds issued after August 7, 1986. File taxes for 2012 Schedule B (Form 1040A or 1040). File taxes for 2012   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040 and any of the following apply. File taxes for 2012 Your taxable interest income is more than $1,500. File taxes for 2012 You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). File taxes for 2012 You received interest from a seller-financed mortgage, and the buyer used the property as a home. File taxes for 2012 You received a Form 1099-INT for U. File taxes for 2012 S. File taxes for 2012 savings bond interest that includes amounts you reported before 2013. File taxes for 2012 You received, as a nominee, interest that actually belongs to someone else. File taxes for 2012 You received a Form 1099-INT for interest on frozen deposits. File taxes for 2012 You received a Form 1099-INT for interest on a bond you bought between interest payment dates. File taxes for 2012 You are reporting OID in an amount less than the amount shown on Form 1099-OID. File taxes for 2012 Statement (2) in the preceding list under Form 1040 is true. File taxes for 2012 In Part I, line 1, list each payer's name and the amount received from each. File taxes for 2012 If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. File taxes for 2012 Reporting tax-exempt interest. File taxes for 2012   Total your tax-exempt interest (such as interest or accrued OID on certain state and municipal bonds, including tax-exempt interest on zero coupon municipal bonds) and exempt-interest dividends from a mutual fund as shown on Form 1099-INT, box 8, and on Form 1099-DIV, box 10. File taxes for 2012 Add these amounts to any other tax-exempt interest you received. File taxes for 2012 Report the total on line 8b of Form 1040A or 1040. File taxes for 2012   If you file Form 1040EZ, enter “TEI” and the amount in the space to the left of line 2. File taxes for 2012 Do not add tax-exempt interest in the total on Form 1040EZ, line 2. File taxes for 2012   Form 1099-INT, box 9, and Form 1099-DIV, box 11, show the tax-exempt interest subject to the alternative minimum tax on Form 6251. File taxes for 2012 These amounts are already included in the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. File taxes for 2012 Do not add the amounts in Form 1099-INT, box 9 and Form 1099-DIV, box 11 to, or subtract them from, the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. File taxes for 2012    Do not report interest from an individual retirement account (IRA) as tax-exempt interest. File taxes for 2012 Form 1099-INT. File taxes for 2012   Your taxable interest income, except for interest from U. File taxes for 2012 S. File taxes for 2012 savings bonds and Treasury obligations, is shown in box 1 of Form 1099-INT. File taxes for 2012 Add this amount to any other taxable interest income you received. File taxes for 2012 You must report all of your taxable interest income even if you do not receive a Form 1099-INT. File taxes for 2012 Generally, contact your financial institution if you do not receive a Form 1099-INT by February 15. File taxes for 2012 Your identifying number may be truncated on any paper Form 1099-INT you receive. File taxes for 2012   If you forfeited interest income because of the early withdrawal of a time deposit, the deductible amount will be shown on Form 1099-INT in box 2. File taxes for 2012 See Penalty on early withdrawal of savings in chapter 1 of Publication 550. File taxes for 2012   Box 3 of Form 1099-INT shows the interest income you received from U. File taxes for 2012 S. File taxes for 2012 savings bonds, Treasury bills, Treasury notes, and Treasury bonds. File taxes for 2012 Add the amount shown in box 3 to any other taxable interest income you received, unless part of the amount in box 3 was previously included in your interest income. File taxes for 2012 If part of the amount shown in box 3 was previously included in your interest income, see U. File taxes for 2012 S. File taxes for 2012 savings bond interest previously reported , later. File taxes for 2012   Box 4 of Form 1099-INT will contain an amount if you were subject to backup withholding. File taxes for 2012 Report the amount from box 4 on Form 1040EZ, line 7; on Form 1040A, line 36; or Form 1040, line 62 (federal income tax withheld). File taxes for 2012   Box 5 of Form 1099-INT shows investment expenses you may be able to deduct as an itemized deduction. File taxes for 2012 See chapter 28 for more information about investment expenses. File taxes for 2012   If there are entries in boxes 6 and 7 of Form 1099-INT, you must file Form 1040. File taxes for 2012 You may be able to take a credit for the amount shown in box 6 unless you deduct this amount on line 8 of Schedule A (Form 1040). File taxes for 2012 To take the credit, you may have to file Form 1116, Foreign Tax Credit. File taxes for 2012 For more information, see Publication 514, Foreign Tax Credit for Individuals. File taxes for 2012 U. File taxes for 2012 S. File taxes for 2012 savings bond interest previously reported. File taxes for 2012   If you received a Form 1099-INT for U. File taxes for 2012 S. File taxes for 2012 savings bond interest, the form may show interest you do not have to report. File taxes for 2012 See Form 1099-INT for U. File taxes for 2012 S. File taxes for 2012 savings bonds interest , earlier, under U. File taxes for 2012 S. File taxes for 2012 Savings Bonds. File taxes for 2012   On Schedule B (Form 1040A or 1040), Part I, line 1, report all the interest shown on your Form 1099-INT. File taxes for 2012 Then follow these steps. File taxes for 2012 Several lines above line 2, enter a subtotal of all interest listed on line 1. File taxes for 2012 Below the subtotal enter “U. File taxes for 2012 S. File taxes for 2012 Savings Bond Interest Previously Reported” and enter amounts previously reported or interest accrued before you received the bond. File taxes for 2012 Subtract these amounts from the subtotal and enter the result on line 2. File taxes for 2012 More information. File taxes for 2012   For more information about how to report interest income, see chapter 1 of Publication 550 or the instructions for the form you must file. File taxes for 2012 Prev  Up  Next   Home   More Online Publications