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Fill 1040x form online 9. Fill 1040x form online   Tax Treaty Benefits Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Treaty Income Some Typical Tax Treaty BenefitsPersonal Services Teachers, Professors, and Researchers Employees of Foreign Governments Students, Apprentices, and Trainees Capital Gains Resident Aliens Reporting Treaty Benefits Claimed Introduction A nonresident alien (and certain resident aliens) from a country with which the United States has an income tax treaty may qualify for certain benefits. Fill 1040x form online Most treaties require that the nonresident alien be a resident of the treaty country to qualify. Fill 1040x form online However, some treaties require that the nonresident alien be a national or a citizen of the treaty country. Fill 1040x form online See Table 9-1 for a list of tax treaty countries. Fill 1040x form online You can generally arrange to have withholding tax reduced or eliminated on wages and other income that are eligible for tax treaty benefits. Fill 1040x form online See Income Entitled to Tax Treaty Benefits in chapter 8. Fill 1040x form online Topics - This chapter discusses: Typical tax treaty benefits, How to obtain copies of tax treaties, and How to claim tax treaty benefits on your tax return. Fill 1040x form online Useful Items - You may want to see: Publication 901 U. Fill 1040x form online S. Fill 1040x form online Tax Treaties Form (and Instructions) 1040NR U. Fill 1040x form online S. Fill 1040x form online Nonresident Alien Income Tax Return 1040NR-EZ U. Fill 1040x form online S. Fill 1040x form online Income Tax Return for Certain Nonresident Aliens With No Dependents 8833 Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b) See chapter 12 for information about getting these publications and forms. Fill 1040x form online Treaty Income A nonresident alien's treaty income is the gross income on which the tax is limited by a tax treaty. Fill 1040x form online Treaty income includes, for example, dividends from sources in the United States that are subject to tax at a tax treaty rate not to exceed 15%. Fill 1040x form online Nontreaty income is the gross income of a nonresident alien on which the tax is not limited by a tax treaty. Fill 1040x form online Figure the tax on treaty income on each separate item of income at the reduced rate that applies to that item under the treaty. Fill 1040x form online To determine tax on nontreaty income, figure the tax at either the flat 30% rate or the graduated rate, depending upon whether or not the income is effectively connected with your trade or business in the United States. Fill 1040x form online Your tax liability is the sum of the tax on treaty income plus the tax on nontreaty income, but cannot be more than the tax liability figured as if the tax treaty had not come into effect. Fill 1040x form online Example. Fill 1040x form online Arthur Banks is a nonresident alien who is single and a resident of a foreign country that has a tax treaty with the United States. Fill 1040x form online He received gross income of $25,850 during the tax year from sources within the United States, consisting of the following items: Dividends on which the tax is limited to a 15% rate by the tax treaty $1,400 Compensation for personal services on which the tax is not limited by the tax treaty 24,450 Total gross income $25,850 Arthur was engaged in business in the United States during the tax year. Fill 1040x form online His dividends are not effectively connected with that business. Fill 1040x form online He has no deductions other than his own personal exemption. Fill 1040x form online His tax liability, figured as though the tax treaty had not come into effect, is $3,060 determined as follows: Total compensation $24,450 Less: Personal exemption 3,900 Taxable income $20,550 Tax determined by graduated rate (Tax Table column for single taxpayers) $2,640 Plus: Tax on gross dividends ($1,400 × 30%) 420 Tax determined as though treaty had not come into effect $3,060 Arthur's tax liability, figured by taking into account the reduced rate on dividend income as provided by the tax treaty, is $2,850 determined as follows: Tax determined by graduated rate (same as figured above) $2,640 Plus: Tax on gross dividends ($1,400 × 15%) 210 Tax on compensation and dividends $2,850 His tax liability, therefore, is limited to $2,850, the tax liability figured using the tax treaty rate on the dividends. Fill 1040x form online Some Typical Tax Treaty Benefits The following paragraphs briefly explain the exemptions that are available under tax treaties for personal services income, remittances, scholarships, fellowships, and capital gain income. Fill 1040x form online The conditions for claiming the exemptions vary under each tax treaty. Fill 1040x form online For more information about the conditions under a particular tax treaty, see Publication 901. Fill 1040x form online Or, you may download the complete text of most U. Fill 1040x form online S. Fill 1040x form online tax treaties at IRS. Fill 1040x form online gov. Fill 1040x form online Technical explanations for many of those treaties are also available at that site. Fill 1040x form online Tax treaty benefits also cover income such as dividends, interest, rentals, royalties, pensions, and annuities. Fill 1040x form online These types of income may be exempt from U. Fill 1040x form online S. Fill 1040x form online tax or may be subject to a reduced rate of tax. Fill 1040x form online For more information, see Publication 901 or the applicable tax treaty. Fill 1040x form online Personal Services Nonresident aliens from treaty countries who are in the United States for a short stay and also meet certain other requirements may be exempt from tax on their compensation received for personal services performed in the United States. Fill 1040x form online Many tax treaties require that the nonresident alien claiming this exemption be present in the United States for a total of not more than 183 days during the tax year. Fill 1040x form online Other tax treaties specify different periods of maximum presence in the United States, such as 180 days or 90 days. Fill 1040x form online Spending part of a day in the United States counts as a day of presence. Fill 1040x form online Tax treaties may also require that: The compensation cannot be more than a specific amount (frequently $3,000), and The individual have a foreign employer; that is, an individual, corporation, or entity of a foreign country. Fill 1040x form online Note. Fill 1040x form online Under most treaties, income received as an employee (generally designated as dependent personal services) and income received as a self-employed person (generally designated as independent personal services or business income) are treated differently. Fill 1040x form online Teachers, Professors, and Researchers Under many income tax treaties, nonresident alien teachers or professors who temporarily visit the United States for the primary purpose of teaching at a university or other accredited educational institution are not subject to U. Fill 1040x form online S. Fill 1040x form online income tax on compensation received for teaching for the first 2 or 3 years after their arrival in the United States. Fill 1040x form online Many treaties also provide an exemption for engaging in research. Fill 1040x form online Generally, the teacher or professor must be in the United States primarily to teach, lecture, instruct, or engage in research. Fill 1040x form online A substantial part of that person's time must be devoted to those duties. Fill 1040x form online The normal duties of a teacher or professor include not only formal classroom work involving regularly scheduled lectures, demonstrations, or other student-participation activities, but also the less formal method of presenting ideas in seminars or other informal groups and in joint efforts in the laboratory. Fill 1040x form online If you entered the United States as a nonresident alien, but are now a resident alien, the treaty exemption may still apply. Fill 1040x form online See Students, Apprentices, Trainees, Teachers, Professors, and Researchers Who Became Resident Aliens later under Resident Aliens. Fill 1040x form online Employees of Foreign Governments All treaties have provisions for the exemption of income earned by certain employees of foreign governments. Fill 1040x form online However, a difference exists among treaties as to who qualifies for this benefit. Fill 1040x form online Under many treaties, aliens admitted to the United States for permanent residence do not qualify. Fill 1040x form online Under most treaties, aliens who are not nationals or subjects of the foreign country do not qualify. Fill 1040x form online Employees of foreign governments should read the pertinent treaty carefully to determine whether they qualify for benefits. Fill 1040x form online Chapter 10 of this publication also has information for employees of foreign governments. Fill 1040x form online Students, Apprentices, and Trainees Under some income tax treaties, students, apprentices, and trainees are exempt from tax on remittances received from abroad for study and maintenance. Fill 1040x form online Also, under some treaties, scholarship and fellowship grants, and a limited amount of compensation received by students, apprentices, and trainees may be exempt from tax. Fill 1040x form online If you entered the United States as a nonresident alien, but are now a resident alien, the treaty exemption may still apply. Fill 1040x form online See Students, Apprentices, Trainees, Teachers, Professors, and Researchers Who Became Resident Aliens , later, under Resident Aliens. Fill 1040x form online Capital Gains Most treaties provide for the exemption of gains from the sale or exchange of personal property. Fill 1040x form online Generally, gains from the sale or exchange of real property located in the United States are taxable. Fill 1040x form online Resident Aliens Resident aliens may qualify for tax treaty benefits in the situations discussed below. Fill 1040x form online U. Fill 1040x form online S. Fill 1040x form online Residency Under Tax Treaty “Tie-Breaker” Rule In certain circumstances, individuals who are treated as residents of the United States under an income tax treaty (after application of the so-called “tie-breaker” rule) will be entitled to treaty benefits. Fill 1040x form online (The “tie-breaker” rule is explained in chapter 1 under Effect of Tax Treaties. Fill 1040x form online ) If this applies to you, you generally will not need to file a Form 8833 for the income for which treaty benefits are claimed. Fill 1040x form online This is because the income will typically be of a category for which disclosure on a Form 8833 is waived. Fill 1040x form online See Reporting Treaty Benefits Claimed . Fill 1040x form online In most cases, you also will not need to report the income on your Form 1040 because the income will be exempt from U. Fill 1040x form online S. Fill 1040x form online tax under the treaty. Fill 1040x form online However, if the income has been reported as taxable income on a Form W-2, Form 1042-S, Form 1099, or other information return, you should report it on the appropriate line of Form 1040 (for example, line 7 in the case of wages or salaries). Fill 1040x form online Enter the amount for which treaty benefits are claimed in parentheses on Form 1040, line 21. Fill 1040x form online Next to the amount write “Exempt income,” the name of the treaty country, and the treaty article that provides the exemption. Fill 1040x form online On Form 1040, subtract this amount from your income to arrive at total income on Form 1040, line 22. Fill 1040x form online Also follow the above procedure for income that is subject to a reduced rate of tax, instead of an exemption, under the treaty. Fill 1040x form online Attach a statement to Form 1040 showing a computation of the tax at the reduced rate, the name of the treaty country, and the treaty article that provides for the reduced tax rate. Fill 1040x form online Include this tax on Form 1040, line 61. Fill 1040x form online On the dotted line next to line 61, write “Tax from attached statement” and the amount of the tax. Fill 1040x form online Example. Fill 1040x form online Jacques Dubois, who is a resident of the United States under Article 4 of the U. Fill 1040x form online S. Fill 1040x form online -France income tax treaty, receives French social security benefits. Fill 1040x form online Under Article 18(1) of the treaty, French social security benefits are not taxable by the United States. Fill 1040x form online Mr. Fill 1040x form online Dubois is not required to file a Form 8833 for his French social security benefits or report the benefits on Form 1040. Fill 1040x form online Special Rule for Canadian and German Social Security Benefits Under income tax treaties with Canada and Germany, if a U. Fill 1040x form online S. Fill 1040x form online resident receives social security benefits from Canada or Germany, those benefits are treated for U. Fill 1040x form online S. Fill 1040x form online income tax purposes as if they were received under the social security legislation of the United States. Fill 1040x form online If you receive social security benefits from Canada or Germany, include them on line 1 of your Social Security Benefits Worksheet for purposes of determining the taxable amount to be reported on Form 1040, line 20b or Form 1040A, line 14b. Fill 1040x form online You are not required to file a Form 8833 for those benefits. Fill 1040x form online Students, Apprentices, Trainees, Teachers, Professors, and Researchers Who Became Resident Aliens Generally, you must be a nonresident alien student, apprentice, trainee, teacher, professor, or researcher in order to claim a tax treaty exemption for remittances from abroad for study and maintenance in the United States, for scholarship, fellowship, and research grants, and for wages or other personal service compensation. Fill 1040x form online Once you become a resident alien, you generally can no longer claim a tax treaty exemption for this income. Fill 1040x form online However, if you entered the United States as a nonresident alien, but you are now a resident alien for U. Fill 1040x form online S. Fill 1040x form online tax purposes, the treaty exemption will continue to apply if the tax treaty's saving clause (explained later) provides an exception for it and you otherwise meet the requirements for the treaty exemption (including any time limit, explained later). Fill 1040x form online This is true even if you are a nonresident alien electing to file a joint return as explained in chapter 1. Fill 1040x form online Some exceptions to the saving clause apply to all resident aliens (for example, under the U. Fill 1040x form online S. Fill 1040x form online -People's Republic of China treaty); others apply only to resident aliens who are not lawful permanent residents of the United States (green card holders). Fill 1040x form online If you qualify under an exception to the treaty's saving clause, you can avoid income tax withholding by giving the payor a Form W-9 with the statement required by the Form W-9 instructions. Fill 1040x form online Saving clause. Fill 1040x form online   Most tax treaties have a saving clause. Fill 1040x form online A saving clause preserves or “saves” the right of each country to tax its own residents as if no tax treaty were in effect. Fill 1040x form online Thus, once you become a resident alien of the United States, you generally lose any tax treaty benefits that relate to your income. Fill 1040x form online However, many tax treaties have exceptions to the saving clause, which may allow you to continue to claim certain treaty benefits when you become a resident alien. Fill 1040x form online Read the treaty to find out if it has a saving clause and an exception to it. Fill 1040x form online Time limit for claiming treaty exemptions. Fill 1040x form online   Many treaties limit the number of years you can claim a treaty exemption. Fill 1040x form online For students, apprentices, and trainees, the limit is usually 4–5 years; for teachers, professors, and researchers, the limit is usually 2–3 years. Fill 1040x form online Once you reach this limit, you can no longer claim the treaty exemption. Fill 1040x form online See the treaty or Publication 901 for the time limits that apply. Fill 1040x form online How to report income on your tax return. Fill 1040x form online   In most cases, you also will not need to report the income on your Form 1040 because the income will be exempt from U. Fill 1040x form online S. Fill 1040x form online tax under the treaty. Fill 1040x form online However, if the income has been reported as taxable income on a Form W-2, Form 1042-S, Form 1099, or other information return, you should report it on the appropriate line of Form 1040 (for example, line 7 in the case of wages, salaries, scholarships, or fellowships). Fill 1040x form online Enter the amount for which treaty benefits are claimed in parentheses on Form 1040, line 21. Fill 1040x form online Next to the amount write “Exempt income,” the name of the treaty country, and the treaty article that provides the exemption. Fill 1040x form online On Form 1040, subtract this amount from your income to arrive at total income on Form 1040, line 22. Fill 1040x form online Example. Fill 1040x form online Mr. Fill 1040x form online Yu, a citizen of the People's Republic of China, entered the United States as a nonresident alien student on January 1, 2009. Fill 1040x form online He remained a nonresident alien through 2013 and was able to exclude his scholarship from U. Fill 1040x form online S. Fill 1040x form online tax in those years under Article 20 of the U. Fill 1040x form online S. Fill 1040x form online -People's Republic of China income tax treaty. Fill 1040x form online On January 1, 2014, he became a resident alien under the substantial presence test because his stay in the United States exceeded 5 years. Fill 1040x form online Even though Mr. Fill 1040x form online Yu is now a resident alien, the provisions of Article 20 still apply because of the exception to the saving clause in paragraph 2 of the Protocol to the U. Fill 1040x form online S. Fill 1040x form online -People's Republic of China treaty dated April 30, 1984. Fill 1040x form online Mr. Fill 1040x form online Yu should submit Form W-9 and the required statement to the payor. Fill 1040x form online Reporting Treaty Benefits Claimed If you claim treaty benefits that override or modify any provision of the Internal Revenue Code, and by claiming these benefits your tax is, or might be, reduced, you must attach a fully completed Form 8833 to your tax return. Fill 1040x form online See below, for the situations where you are not required to file Form 8833. Fill 1040x form online You must file a U. Fill 1040x form online S. Fill 1040x form online tax return and Form 8833 if you claim the following treaty benefits. Fill 1040x form online You claim a reduction or modification in the taxation of gain or loss from the disposition of a U. Fill 1040x form online S. Fill 1040x form online real property interest based on a treaty. Fill 1040x form online You claim a credit for a specific foreign tax for which foreign tax credit would not be allowed by the Internal Revenue Code. Fill 1040x form online You receive payments or income items totaling more than $100,000 and you determine your country of residence under a treaty and not under the rules for residency discussed in chapter 1. Fill 1040x form online These are the more common situations for which Form 8833 is required. Fill 1040x form online Exceptions. Fill 1040x form online   You do not have to file Form 8833 for any of the following situations. Fill 1040x form online You claim a reduced rate of withholding tax under a treaty on interest, dividends, rent, royalties, or other fixed or determinable annual or periodic income ordinarily subject to the 30% rate. Fill 1040x form online You claim a treaty reduces or modifies the taxation of income from dependent personal services, pensions, annuities, social security and other public pensions, or income of artists, athletes, students, trainees, or teachers. Fill 1040x form online This includes taxable scholarship and fellowship grants. Fill 1040x form online You claim a reduction or modification of taxation of income under an International Social Security Agreement or a Diplomatic or Consular Agreement. Fill 1040x form online You are a partner in a partnership or a beneficiary of an estate or trust and the partnership, estate, or trust reports the required information on its return. Fill 1040x form online The payments or items of income that are otherwise required to be disclosed total no more than $10,000. Fill 1040x form online You are claiming treaty benefits for amounts that are: Reported to you on Form 1042-S and Received by you: As a related party from a reporting corporation within the meaning of Internal Revenue Code section 6038A (relating to information returns on Form 5472 filed by U. Fill 1040x form online S. Fill 1040x form online corporations that are 25-percent owned by a foreign person), or As a beneficial owner that is a direct account holder of a U. Fill 1040x form online S. Fill 1040x form online financial institution or qualified intermediary, or a direct partner, beneficiary, or owner of a withholding foreign partnership or trust, from that U. Fill 1040x form online S. Fill 1040x form online financial institution, qualified intermediary, or withholding foreign partnership or trust. Fill 1040x form online The exception described in (6) above does not apply to any amounts for which a treaty-based return disclosure is specifically required by the Form 8833 instructions. Fill 1040x form online Penalty for failure to provide required information on Form 8833. Fill 1040x form online   If you are required to report the treaty benefits but do not, you may be subject to a penalty of $1,000 for each failure. Fill 1040x form online Additional information. Fill 1040x form online   For additional information, see section 301. Fill 1040x form online 6114-1(c) of the Income Tax Regulations. Fill 1040x form online Table 9-1. Fill 1040x form online Table of Tax Treaties (Updated through December 31, 2013) Country Official Text  Symbol1 General  Effective Date Citation Applicable Treasury Explanations  or Treasury Decision (T. Fill 1040x form online D. Fill 1040x form online ) Australia TIAS 10773 Dec. Fill 1040x form online 1, 1983 1986-2 C. Fill 1040x form online B. Fill 1040x form online 220 1986-2 C. Fill 1040x form online B. Fill 1040x form online 246 Protocol TIAS Jan. Fill 1040x form online 1, 2004     Austria TIAS Jan. Fill 1040x form online 1, 1999     Bangladesh TIAS Jan. Fill 1040x form online 1, 2007     Barbados TIAS 11090 Jan. Fill 1040x form online 1, 1984 1991-2 C. Fill 1040x form online B. Fill 1040x form online 436 1991-2 C. Fill 1040x form online B. Fill 1040x form online 466 Protocol TIAS Jan. Fill 1040x form online 1, 1994     Protocol TIAS Jan. Fill 1040x form online 1, 2005     Belgium TIAS Jan. Fill 1040x form online 1, 2008     Bulgaria TIAS Jan. Fill 1040x form online 1, 2009     Canada2 TIAS 11087 Jan. Fill 1040x form online 1, 1985 1986-2 C. Fill 1040x form online B. Fill 1040x form online 258 1987-2 C. Fill 1040x form online B. Fill 1040x form online 298 Protocol TIAS Jan. Fill 1040x form online 1, 1996     Protocol TIAS Dec. Fill 1040x form online 16, 1997     Protocol TIAS Jan. Fill 1040x form online 1, 2009     China, People's Republic of TIAS 12065 Jan. Fill 1040x form online 1, 1987 1988-1 C. Fill 1040x form online B. Fill 1040x form online 414 1988-1 C. Fill 1040x form online B. Fill 1040x form online 447 Commonwealth of Independent States3 TIAS 8225 Jan. Fill 1040x form online 1, 1976 1976-2 C. Fill 1040x form online B. Fill 1040x form online 463 1976-2 C. Fill 1040x form online B. Fill 1040x form online 475 Cyprus TIAS 10965 Jan. Fill 1040x form online 1, 1986 1989-2 C. Fill 1040x form online B. Fill 1040x form online 280 1989-2 C. Fill 1040x form online B. Fill 1040x form online 314 Czech Republic TIAS Jan. Fill 1040x form online 1, 1993     Denmark TIAS Jan. Fill 1040x form online 1, 2001     Protocol TIAS Jan. Fill 1040x form online 1, 2008     Egypt TIAS 10149 Jan. Fill 1040x form online 1, 1982 1982-1 C. Fill 1040x form online B. Fill 1040x form online 219 1982-1 C. Fill 1040x form online B. Fill 1040x form online 243 Estonia TIAS Jan. Fill 1040x form online 1, 2000     Finland TIAS 12101 Jan. Fill 1040x form online 1, 1991     Protocol TIAS Jan. Fill 1040x form online 1, 2008     France TIAS Jan. Fill 1040x form online 1, 1996     Protocol TIAS Jan. Fill 1040x form online 1, 2007     Protocol TIAS Jan. Fill 1040x form online 1, 2010     Germany TIAS Jan. Fill 1040x form online 1, 1990     Protocol TIAS Jan. Fill 1040x form online 1, 2008     Greece TIAS 2902 Jan. Fill 1040x form online 1, 1953 1958-2 C. Fill 1040x form online B. Fill 1040x form online 1054 T. Fill 1040x form online D. Fill 1040x form online 6109, 1954-2 C. Fill 1040x form online B. Fill 1040x form online 638 Hungary TIAS 9560 Jan. Fill 1040x form online 1, 1980 1980-1 C. Fill 1040x form online B. Fill 1040x form online 333 1980-1 C. Fill 1040x form online B. Fill 1040x form online 354 Iceland TIAS Jan. Fill 1040x form online 1, 2009     India TIAS Jan. Fill 1040x form online 1, 1991     Indonesia TIAS 11593 Jan. Fill 1040x form online 1, 1990     Ireland TIAS Jan. Fill 1040x form online 1, 1998     Israel TIAS Jan. Fill 1040x form online 1, 1995     Italy TIAS Jan. Fill 1040x form online 1, 2010     Jamaica TIAS 10207 Jan. Fill 1040x form online 1, 1982 1982-1 C. Fill 1040x form online B. Fill 1040x form online 257 1982-1 C. Fill 1040x form online B. Fill 1040x form online 291 Japan TIAS Jan. Fill 1040x form online 1, 2005     Kazakhstan TIAS Jan. Fill 1040x form online 1, 1996     Korea, South TIAS 9506 Jan. Fill 1040x form online 1, 1980 1979-2 C. Fill 1040x form online B. Fill 1040x form online 435 1979-2 C. Fill 1040x form online B. Fill 1040x form online 458 Latvia TIAS Jan. Fill 1040x form online 1, 2000     Lithuania TIAS Jan. Fill 1040x form online 1, 2000     Luxembourg TIAS Jan. Fill 1040x form online 1, 2001     Malta TIAS Jan. Fill 1040x form online 1, 2011     Mexico TIAS Jan. Fill 1040x form online 1, 1994 1994-2 C. Fill 1040x form online B. Fill 1040x form online 424 1994-2 C. Fill 1040x form online B. Fill 1040x form online 489 Protocol TIAS Oct. Fill 1040x form online 26, 1995     Protocol TIAS Jan. Fill 1040x form online 1, 2004     Morocco TIAS 10195 Jan. Fill 1040x form online 1, 1981 1982-2 C. Fill 1040x form online B. Fill 1040x form online 405 1982-2 C. Fill 1040x form online B. Fill 1040x form online 427 Netherlands TIAS Jan. Fill 1040x form online 1, 1994     Protocol TIAS Jan. Fill 1040x form online 1, 2005     New Zealand TIAS 10772 Nov. Fill 1040x form online 2, 1983 1990-2 C. Fill 1040x form online B. Fill 1040x form online 274 1990-2 C. Fill 1040x form online B. Fill 1040x form online 303 Protocol TIAS Jan. Fill 1040x form online 1, 2011     Norway TIAS 7474 Jan. Fill 1040x form online 1, 1971 1973-1 C. Fill 1040x form online B. Fill 1040x form online 669 1973-1 C. Fill 1040x form online B. Fill 1040x form online 693 Protocol TIAS 10205 Jan. Fill 1040x form online 1, 1982 1982-2 C. Fill 1040x form online B. Fill 1040x form online 440 1982-2 C. Fill 1040x form online B. Fill 1040x form online 454 Pakistan TIAS 4232 Jan. Fill 1040x form online 1, 1959 1960-2 C. Fill 1040x form online B. Fill 1040x form online 646 T. Fill 1040x form online D. Fill 1040x form online 6431, 1960-1 C. Fill 1040x form online B. Fill 1040x form online 755 Philippines TIAS 10417 Jan. Fill 1040x form online 1, 1983 1984-2 C. Fill 1040x form online B. Fill 1040x form online 384 1984-2 C. Fill 1040x form online B. Fill 1040x form online 412 Poland TIAS 8486 Jan. Fill 1040x form online 1, 1974 1977-1 C. Fill 1040x form online B. Fill 1040x form online 416 1977-1 C. Fill 1040x form online B. Fill 1040x form online 427 Portugal TIAS Jan. Fill 1040x form online 1, 1996     Romania TIAS 8228 Jan. Fill 1040x form online 1, 1974 1976-2 C. Fill 1040x form online B. Fill 1040x form online 492 1976-2 C. Fill 1040x form online B. Fill 1040x form online 504 Russia TIAS Jan. Fill 1040x form online 1, 1994     Slovak Republic TIAS Jan. Fill 1040x form online 1, 1993     Slovenia TIAS Jan. Fill 1040x form online 1, 2002     South Africa TIAS Jan. Fill 1040x form online 1, 1998     Spain TIAS Jan. Fill 1040x form online 1, 1991     Sri Lanka TIAS Jan. Fill 1040x form online 1, 2004     Sweden TIAS Jan. Fill 1040x form online 1, 1996     Protocol TIAS Jan. Fill 1040x form online 1, 2007     Switzerland TIAS Jan. Fill 1040x form online 1, 1998     Thailand TIAS Jan. Fill 1040x form online 1, 1998     Trinidad and Tobago TIAS 7047 Jan. Fill 1040x form online 1, 1970 1971-2 C. Fill 1040x form online B. Fill 1040x form online 479   Tunisia TIAS Jan. Fill 1040x form online 1, 1990     Turkey TIAS Jan. Fill 1040x form online 1, 1998     Ukraine TIAS Jan. Fill 1040x form online 1, 2001     United Kingdom TIAS Jan. Fill 1040x form online 1, 2004     Venezuela TIAS Jan. Fill 1040x form online 1, 2000     1(TIAS) Treaties and Other International Act Series 2Information on the treaty can be found in Publication 597, Information on the United States-Canada Income Tax Treaty. Fill 1040x form online 3The U. Fill 1040x form online S. Fill 1040x form online -U. Fill 1040x form online S. Fill 1040x form online S. Fill 1040x form online R. Fill 1040x form online income tax treaty applies to the countries of Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan. Fill 1040x form online Prev  Up  Next   Home   More Online Publications
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The Fill 1040x Form Online

Fill 1040x form online Publication 523 - Main Content Table of Contents Main HomeVacant land. Fill 1040x form online Factors used to determine main home. Fill 1040x form online Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining BasisCost As Basis Basis Other Than Cost Adjusted Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Nonqualified Use Business Use or Rental of HomeUnrecaptured section 1250 gain. Fill 1040x form online Property Used Partly for Business or Rental Reporting the SaleSeller-financed mortgage. Fill 1040x form online Individual taxpayer identification number (ITIN). Fill 1040x form online More information. Fill 1040x form online Comprehensive Examples Special SituationsException for sales to related persons. Fill 1040x form online Deducting Taxes in the Year of SaleForm 1099-S. Fill 1040x form online More information. Fill 1040x form online Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of First-Time Homebuyer CreditExample. Fill 1040x form online Worksheets How To Get Tax HelpLow Income Taxpayer Clinics Main Home This section explains the term “main home. Fill 1040x form online ” Usually, the home you live in most of the time is your main home and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Fill 1040x form online To exclude gain under the rules in this publication, you in most cases must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. Fill 1040x form online Land. Fill 1040x form online   If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land. Fill 1040x form online Example. Fill 1040x form online You buy a piece of land and move your main home to it. Fill 1040x form online Then, you sell the land on which your main home was located. Fill 1040x form online This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. Fill 1040x form online Vacant land. Fill 1040x form online   The sale of vacant land is not a sale of your main home unless: The vacant land is adjacent to land containing your home, You owned and used the vacant land as part of your main home, The separate sale of your home satisfies the requirements for exclusion and occurs within 2 years before or 2 years after the date of the sale of the vacant land, and The other requirements for excluding gain from the sale of a main home have been satisfied with respect to the vacant land. Fill 1040x form online If these requirements are met, the sale of the home and the sale of the vacant land are treated as one sale and only one maximum exclusion can be applied to any gain. Fill 1040x form online See Excluding the Gain , later. Fill 1040x form online The destruction of your home is treated as a sale of your home. Fill 1040x form online As a result, you may be able to meet these requirements if you sell vacant land used as a part of your main home within 2 years from the date of the destruction of your main home. Fill 1040x form online For information, see Publication 547. Fill 1040x form online More than one home. Fill 1040x form online   If you have more than one home, you can exclude gain only from the sale of your main home. Fill 1040x form online You must include in income the gain from the sale of any other home. Fill 1040x form online If you have two homes and live in each of them, your main home is ordinarily the one you live in most of the time during the year. Fill 1040x form online Example 1. Fill 1040x form online You own two homes, one in New York and one in Florida. Fill 1040x form online From 2009 through 2013, you live in the New York home for 7 months and in the Florida residence for 5 months of each year. Fill 1040x form online In the absence of facts and circumstances indicating otherwise, the New York home is your main home. Fill 1040x form online You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. Fill 1040x form online Example 2. Fill 1040x form online You own a house, but you live in another house that you rent. Fill 1040x form online The rented house is your main home. Fill 1040x form online Example 3. Fill 1040x form online You own two homes, one in Virginia and one in New Hampshire. Fill 1040x form online In 2009 and 2010, you lived in the Virginia home. Fill 1040x form online In 2011 and 2012, you lived in the New Hampshire home. Fill 1040x form online In 2013, you lived again in the Virginia home. Fill 1040x form online Your main home in 2009, 2010, and 2013 is the Virginia home. Fill 1040x form online Your main home in 2011 and 2012 is the New Hampshire home. Fill 1040x form online You would be eligible to exclude gain from the sale of either home (but not both) in 2013. Fill 1040x form online Factors used to determine main home. Fill 1040x form online   In addition to the amount of time you live in each home, other factors are relevant in determining which home is your main home. Fill 1040x form online Those factors include the following. Fill 1040x form online Your place of employment. Fill 1040x form online The location of your family members' main home. Fill 1040x form online Your mailing address for bills and correspondence. Fill 1040x form online The address listed on your: Federal and state tax returns, Driver's license, Car registration, and Voter registration card. Fill 1040x form online The location of the banks you use. Fill 1040x form online The location of recreational clubs and religious organizations of which you are a member. Fill 1040x form online Property used partly as your main home. Fill 1040x form online   If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. Fill 1040x form online For details, see Business Use or Rental of Home , later. Fill 1040x form online Figuring Gain or Loss To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. Fill 1040x form online Subtract the adjusted basis from the amount realized to get your gain or loss. Fill 1040x form online     Selling price     − Selling expenses       Amount realized     − Adjusted basis       Gain or loss   Gain. Fill 1040x form online   Gain is the excess of the amount realized over the adjusted basis of the property. Fill 1040x form online Loss. Fill 1040x form online   Loss is the excess of the adjusted basis over the amount realized for the property. Fill 1040x form online Selling Price The selling price is the total amount you receive for your home. Fill 1040x form online It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale. Fill 1040x form online Personal property. Fill 1040x form online   The selling price of your home does not include amounts you received for personal property sold with your home. Fill 1040x form online Personal property is property that is not a permanent part of the home. Fill 1040x form online Examples are furniture, draperies, rugs, a washer and dryer, and lawn equipment. Fill 1040x form online Separately stated amounts you received for these items should not be shown on Form 1099-S (discussed later). Fill 1040x form online Any gains from sales of personal property must be included in your income, but not as part of the sale of your home. Fill 1040x form online Payment by employer. Fill 1040x form online   You may have to sell your home because of a job transfer. Fill 1040x form online If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. Fill 1040x form online Your employer will include it as wages in box 1 of your Form W-2 and you will include it in your income on Form 1040, line 7, or on Form 1040NR, line 8. Fill 1040x form online Option to buy. Fill 1040x form online   If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. Fill 1040x form online If the option is not exercised, you must report the amount as ordinary income in the year the option expires. Fill 1040x form online Report this amount on Form 1040, line 21, or on Form 1040NR, line 21. Fill 1040x form online Form 1099-S. Fill 1040x form online   If you received Form 1099-S, box 2 (gross proceeds) should show the total amount you received for your home. Fill 1040x form online   However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. Fill 1040x form online Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. Fill 1040x form online Amount Realized The amount realized is the selling price minus selling expenses. Fill 1040x form online Selling expenses. Fill 1040x form online   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. Fill 1040x form online ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. Fill 1040x form online This adjusted basis must be determined before you can figure gain or loss on the sale of your home. Fill 1040x form online For information on how to figure your home's adjusted basis, see Determining Basis , later. Fill 1040x form online Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. Fill 1040x form online Gain on sale. Fill 1040x form online   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, generally is taxable. Fill 1040x form online Loss on sale. Fill 1040x form online   If the amount realized is less than the adjusted basis, the difference is a loss. Fill 1040x form online Generally, a loss on the sale of your main home cannot be deducted. Fill 1040x form online Jointly owned home. Fill 1040x form online   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. Fill 1040x form online Separate returns. Fill 1040x form online   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. Fill 1040x form online Your ownership interest is generally determined by state law. Fill 1040x form online Joint owners not married. Fill 1040x form online   If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. Fill 1040x form online Each of you applies the rules discussed in this publication on an individual basis. Fill 1040x form online Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. Fill 1040x form online Foreclosure or repossession. Fill 1040x form online   If your home was foreclosed on or repossessed, you have a disposition. Fill 1040x form online See Publication 4681 to determine if you have ordinary income, gain, or loss. Fill 1040x form online More information. Fill 1040x form online   If part of a home is used for business or rental purposes, see Foreclosures and Repossessions in chapter 1 of Publication 544 for more information. Fill 1040x form online Publication 544 has examples of how to figure gain or loss on a foreclosure or repossession. Fill 1040x form online Abandonment. Fill 1040x form online   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. Fill 1040x form online Trading (exchanging) homes. Fill 1040x form online   If you trade your home for another home, treat the trade as a sale and a purchase. Fill 1040x form online Example. Fill 1040x form online You owned and lived in a home with an adjusted basis of $41,000. Fill 1040x form online A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. Fill 1040x form online This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 − $41,000). Fill 1040x form online If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed). Fill 1040x form online Transfer to spouse. Fill 1040x form online   If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss (unless the Exception, discussed next, applies). Fill 1040x form online This is true even if you receive cash or other consideration for the home. Fill 1040x form online As a result, the rules explained in this publication do not apply. Fill 1040x form online   If you owned your home jointly with your spouse and transfer your interest in the home to your spouse, or to your former spouse incident to your divorce, the same rule applies. Fill 1040x form online You have no gain or loss. Fill 1040x form online Exception. Fill 1040x form online   These transfer rules do not apply if your spouse or former spouse is a nonresident alien. Fill 1040x form online In that case, you generally will have a gain or loss. Fill 1040x form online More information. Fill 1040x form online    See Property Settlements in Publication 504, Divorced or Separated Individuals, for more information. Fill 1040x form online Involuntary conversion. Fill 1040x form online   You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. Fill 1040x form online This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations (see Home destroyed or condemned ). Fill 1040x form online Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. Fill 1040x form online Your basis in your home is determined by how you got the home. Fill 1040x form online Generally, your basis is its cost if you bought it or built it. Fill 1040x form online If you got it in some other way (inheritance, gift, etc. Fill 1040x form online ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. Fill 1040x form online While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. Fill 1040x form online The result of these adjustments is your home's adjusted basis, which is used to figure gain or loss on the sale of your home. Fill 1040x form online To figure your adjusted basis, you can use Worksheet 1, near the end of this publication. Fill 1040x form online Filled-in examples of that worksheet are included in the Comprehensive Examples , later. Fill 1040x form online Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. Fill 1040x form online Purchase. Fill 1040x form online   If you bought your home, your basis is its cost to you. Fill 1040x form online This includes the purchase price and certain settlement or closing costs. Fill 1040x form online In most cases, your purchase price includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home. Fill 1040x form online If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed later. Fill 1040x form online Seller-paid points. Fill 1040x form online   If the person who sold you your home paid points on your loan, you may have to reduce your home's basis by the amount of the points, as shown in the following chart. Fill 1040x form online    IF you bought your home. Fill 1040x form online . Fill 1040x form online . Fill 1040x form online THEN reduce your home's basis by the seller-paid points. Fill 1040x form online . Fill 1040x form online . Fill 1040x form online after 1990 but before April 4, 1994 only if you deducted them as home mortgage interest in the year paid. Fill 1040x form online after April 3, 1994 even if you did not deduct them. Fill 1040x form online Settlement fees or closing costs. Fill 1040x form online   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. Fill 1040x form online You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. Fill 1040x form online A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing). Fill 1040x form online   Settlement fees do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Fill 1040x form online   Some of the settlement fees or closing costs that you can include in your basis are: Abstract fees (abstract of title fees), Charges for installing utility services, Legal fees (including fees for the title search and preparing the sales contract and deed), Recording fees, Survey fees, Transfer or stamp taxes, Owner's title insurance, and Any amounts the seller owes that you agree to pay, such as: Certain real estate taxes (discussed later), Back interest, Recording or mortgage fees, Charges for improvements or repairs, and Sales commissions. Fill 1040x form online   Some settlement fees and closing costs you cannot include in your basis are: Fire insurance premiums, Rent for occupancy of the house before closing, Charges for utilities or other services related to occupancy of the house before closing, Any fee or cost that you deducted as a moving expense (allowed for certain fees and costs before 1994), Charges connected with getting a mortgage loan, such as: Mortgage insurance premiums (including funding fees connected with loans guaranteed by the Department of Veterans Affairs), Loan assumption fees, Cost of a credit report, Fee for an appraisal required by a lender, and Fees for refinancing a mortgage. Fill 1040x form online Real estate taxes. Fill 1040x form online   Real estate taxes for the year you bought your home may affect your basis, as shown in the following chart. Fill 1040x form online    IF. Fill 1040x form online . Fill 1040x form online . Fill 1040x form online AND. Fill 1040x form online . Fill 1040x form online . Fill 1040x form online THEN the taxes. Fill 1040x form online . Fill 1040x form online . Fill 1040x form online you pay taxes that the seller owed on the home up to the date of sale the seller does not reimburse you are added to the basis of your home. Fill 1040x form online the seller reimburses you do not affect the basis of your home. Fill 1040x form online the seller pays taxes for you (taxes owed beginning on the date of sale) you do not reimburse the seller are subtracted from the basis of your home. Fill 1040x form online you reimburse the seller do not affect the basis of your home. Fill 1040x form online Construction. Fill 1040x form online   If you contracted to have your house built on land you own, your basis is: The cost of the land, plus The amount it cost you to complete the house, including: The cost of labor and materials, Any amounts paid to a contractor, Any architect's fees, Building permit charges, Utility meter and connection charges, and Legal fees directly connected with building the house. Fill 1040x form online   Your cost includes your down payment and any debt such as a first or second mortgage or notes you gave the seller or builder. Fill 1040x form online It also includes certain settlement or closing costs. Fill 1040x form online You may have to reduce your basis by points the seller paid for you. Fill 1040x form online For more information, see Seller-paid points and Settlement fees or closing costs , earlier. Fill 1040x form online Built by you. Fill 1040x form online   If you built all or part of your house yourself, its basis is the total amount it cost you to complete it. Fill 1040x form online Do not include in the cost of the house: The value of your own labor, or The value of any other labor you did not pay for. Fill 1040x form online Temporary housing. Fill 1040x form online   If a builder gave you temporary housing while your home was being finished, you must reduce your basis by the part of the contract price that was for the temporary housing. Fill 1040x form online To figure the amount of the reduction, multiply the contract price by a fraction. Fill 1040x form online The numerator is the value of the temporary housing, and the denominator is the sum of the value of the temporary housing plus the value of the new home. Fill 1040x form online Cooperative apartment. Fill 1040x form online   If you are a tenant-stockholder in a cooperative housing corporation, your basis in the cooperative apartment used as your home is usually the cost of your stock in the corporation. Fill 1040x form online This may include your share of a mortgage on the apartment building. Fill 1040x form online Condominium. Fill 1040x form online   To determine your basis in a condominium apartment used as your home, use the same rules as for any other home. Fill 1040x form online Basis Other Than Cost You must use a basis other than cost, such as adjusted basis or fair market value, if you received your home as a gift, inheritance, a trade, or from your spouse. Fill 1040x form online These situations are discussed in the following pages. Fill 1040x form online Also, the instructions for Worksheet 1 (near the end of the publication) address each of these issues. Fill 1040x form online Other special rules may apply in certain situations. Fill 1040x form online If you converted the property, or some part of it, to business or rental use, see Property Changed to Business or Rental Use, in Publication 551. Fill 1040x form online Home received as gift. Fill 1040x form online   Use the following chart to find the basis of a home you received as a gift. Fill 1040x form online IF the donor's adjusted basis at the time of the gift was. Fill 1040x form online . Fill 1040x form online . Fill 1040x form online THEN your basis is. Fill 1040x form online . Fill 1040x form online . Fill 1040x form online more than the fair market value of the home at that time the same as the donor's adjusted basis at the time of the gift. Fill 1040x form online   Exception: If using the donor's adjusted basis results in a loss when you sell the home, you must use the fair market value of the home at the time of the gift as your basis. Fill 1040x form online If using the fair market value results in a gain, you have neither gain nor loss. Fill 1040x form online equal to or less than the fair market value at that time, and you received the gift before 1977 the smaller of the: • donor's adjusted basis, plus  any federal gift tax paid on  the gift, or • the home's fair market value  at the time of the gift. Fill 1040x form online equal to or less than the fair market value at that time, and you received the gift after 1976 the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home (explained next). Fill 1040x form online Fair market value. Fill 1040x form online   The fair market value of property at the time of the gift is the value of the property as appraised for purposes of the federal gift tax. Fill 1040x form online If the gift was not subject to the federal gift tax, the fair market value is the value as appraised for the purposes of a state gift tax. Fill 1040x form online Part of federal gift tax due to net increase in value. Fill 1040x form online   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. Fill 1040x form online The numerator of the fraction is the net increase in the value of the home, and the denominator is the value of the home for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Fill 1040x form online The net increase in the value of the home is its fair market value minus the donor's adjusted basis immediately before the gift. Fill 1040x form online Home acquired from a decedent who died before or after 2010. Fill 1040x form online   If you inherited your home from a decedent who died before or after 2010, your basis is the fair market value of the property on the date of the decedent's death (or the later alternate valuation date chosen by the personal representative of the estate). Fill 1040x form online If an estate tax return was filed or required to be filed, the value of the property listed on the estate tax return is your basis. Fill 1040x form online If a federal estate tax return did not have to be filed, your basis in the home is the same as its appraised value at the date of death, for purposes of state inheritance or transmission taxes. Fill 1040x form online Surviving spouse. Fill 1040x form online   If you are a surviving spouse and you owned your home jointly, your basis in the home will change. Fill 1040x form online The new basis for the interest your spouse owned will be its fair market value on the date of death (or alternate valuation date). Fill 1040x form online The basis in your interest will remain the same. Fill 1040x form online Your new basis in the home is the total of these two amounts. Fill 1040x form online   If you and your spouse owned the home either as tenants by the entirety or as joint tenants with right of survivorship, you will each be considered to have owned one-half of the home. Fill 1040x form online Example. Fill 1040x form online Your jointly owned home (owned as joint tenants with right of survivorship) had an adjusted basis of $50,000 on the date of your spouse's death, and the fair market value on that date was $100,000. Fill 1040x form online Your new basis in the home is $75,000 ($25,000 for one-half of the adjusted basis plus $50,000 for one-half of the fair market value). Fill 1040x form online Community property. Fill 1040x form online   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), each spouse is usually considered to own half of the community property. Fill 1040x form online When either spouse dies, the total fair market value of the community property becomes the basis of the entire property, including the part belonging to the surviving spouse. Fill 1040x form online For this to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. Fill 1040x form online   For more information about community property, see Publication 555, Community Property. Fill 1040x form online    If you are selling a home in which you acquired an interest from a decedent who died in 2010, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your basis. Fill 1040x form online Home received as trade. Fill 1040x form online   If you acquired your home as a trade for other property, in most cases, the basis of your home is the fair market value (at the time of the trade) of the property you gave up. Fill 1040x form online If you traded one home for another, you have made a sale and purchase. Fill 1040x form online In that case, you may have a gain. Fill 1040x form online See Trading (exchanging) homes under Dispositions Other Than Sales, earlier, for an example of figuring the gain. Fill 1040x form online Home received from spouse. Fill 1040x form online   If you received your home from your spouse or from your former spouse incident to your divorce, your basis in the home depends on the date of the transfer. Fill 1040x form online Transfers after July 18, 1984. Fill 1040x form online   If you received the home after July 18, 1984, there was no gain or loss on the transfer. Fill 1040x form online In most cases, your basis in this home is the same as your spouse's (or former spouse's) adjusted basis just before you received it. Fill 1040x form online This rule applies even if you received the home in exchange for cash, the release of marital rights, the assumption of liabilities, or other considerations. Fill 1040x form online   If you owned a home jointly with your spouse and your spouse transferred his or her interest in the home to you, in most cases, your basis in the half interest received from your spouse is the same as your spouse's adjusted basis just before the transfer. Fill 1040x form online This also applies if your former spouse transferred his or her interest in the home to you incident to your divorce. Fill 1040x form online Your basis in the half interest you already owned does not change. Fill 1040x form online Your new basis in the home is the total of these two amounts. Fill 1040x form online Transfers before July 19, 1984. Fill 1040x form online   If you received your home before July 19, 1984, in exchange for your release of marital rights, in most cases, your basis in the home is generally its fair market value at the time you received it. Fill 1040x form online More information. Fill 1040x form online   For more information on property received from a spouse or former spouse, see Property Settlements in Publication 504. Fill 1040x form online Involuntary conversion. Fill 1040x form online   If your home is destroyed or condemned, you may receive insurance proceeds or a condemnation award. Fill 1040x form online If you acquired a replacement home with these proceeds, the basis is its cost decreased by any gain not recognized on the conversion under the rules explained in: Publication 547, in the case of a home that was destroyed, or Chapter 1 of Publication 544, in the case of a home that was condemned. Fill 1040x form online Example. Fill 1040x form online A fire destroyed your home that you owned and used for only 6 months. Fill 1040x form online The home had an adjusted basis of $80,000 and the insurance company paid you $130,000 for the loss. Fill 1040x form online Your gain is $50,000 ($130,000 − $80,000). Fill 1040x form online You bought a replacement home for $100,000. Fill 1040x form online The part of your gain that is taxable is $30,000 ($130,000 − $100,000), the unspent part of the payment from the insurance company. Fill 1040x form online The rest of the gain ($20,000) is not taxable, so that amount reduces your basis in the new home. Fill 1040x form online The basis of the new home is figured as follows. Fill 1040x form online Cost of replacement home $100,000 Minus: Gain not recognized 20,000 Basis of the replacement home $80,000 More information. Fill 1040x form online   For more information about basis, see Publication 551. Fill 1040x form online Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. Fill 1040x form online To figure your adjusted basis, you can use Worksheet 1, found toward the end of this publication. Fill 1040x form online Filled-in examples of that worksheet are included in Comprehensive Examples , later. Fill 1040x form online Recordkeeping. Fill 1040x form online You should keep records to prove your home's adjusted basis. Fill 1040x form online Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. Fill 1040x form online But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. Fill 1040x form online Keep records proving the basis of both homes as long as they are needed for tax purposes. Fill 1040x form online The records you should keep include: Proof of the home's purchase price and purchase expenses; Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis; Any worksheets or other computations you used to figure the adjusted basis of the home you sold, the gain or loss on the sale, the exclusion, and the taxable gain; Any Form 982 you filed to exclude any discharge of qualified principal residence indebtedness; Any Form 2119, Sale of Your Home, you filed to postpone gain from the sale of a previous home before May 7, 1997; and Any worksheets you used to prepare Form 2119, such as the Adjusted Basis of Home Sold Worksheet or the Capital Improvements Worksheet from the Form 2119 instructions, or other source of computations. Fill 1040x form online Increases to Basis These include the following. Fill 1040x form online Additions and other improvements that have a useful life of more than 1 year. Fill 1040x form online Special assessments for local improvements. Fill 1040x form online Amounts you spent after a casualty to restore damaged property. Fill 1040x form online Improvements. Fill 1040x form online   These add to the value of your home, prolong its useful life, or adapt it to new uses. Fill 1040x form online You add the cost of additions and other improvements to the basis of your property. Fill 1040x form online   The following chart lists some other examples of improvements. Fill 1040x form online Examples of Improvements That Increase Basis Additions Bedroom Bathroom Deck Garage Porch Patio Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Lawn & Grounds Landscaping Driveway Walkway Fence  Retaining wall Sprinkler system Swimming pool  Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system  Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances  Kitchen modernization  Flooring Wall-to-wall carpeting  Insulation Attic Walls Floors Pipes and duct work Improvements no longer part of home. Fill 1040x form online   Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. Fill 1040x form online Example. Fill 1040x form online You put wall-to-wall carpeting in your home 15 years ago. Fill 1040x form online Later, you replaced that carpeting with new wall-to-wall carpeting. Fill 1040x form online The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. Fill 1040x form online Repairs. Fill 1040x form online   These maintain your home in good condition but do not add to its value or prolong its life. Fill 1040x form online You do not add their cost to the basis of your property. Fill 1040x form online Examples. Fill 1040x form online Repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes are examples of repairs. Fill 1040x form online Exception. Fill 1040x form online   The entire job is considered an improvement if items that would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home. Fill 1040x form online For example, if you have a casualty and your home is damaged, increase your basis by the amount you spend on repairs that restore the property to its pre-casualty condition. Fill 1040x form online Decreases to Basis These include the following. Fill 1040x form online Discharge of qualified principal residence indebtedness that was excluded from income (but not below zero). Fill 1040x form online For details, see Publication 4681. Fill 1040x form online Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. Fill 1040x form online For details, see Publication 4681. Fill 1040x form online Gain you postponed from the sale of a previous home before May 7, 1997. Fill 1040x form online Deductible casualty losses. Fill 1040x form online Insurance payments you received or expect to receive for casualty losses. Fill 1040x form online Payments you received for granting an easement or right-of-way. Fill 1040x form online Depreciation allowed or allowable if you used your home for business or rental purposes. Fill 1040x form online Energy-related credits allowed for expenditures made on the residence. Fill 1040x form online (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. Fill 1040x form online ) Adoption credit you claimed for improvements added to the basis of your home. Fill 1040x form online Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. Fill 1040x form online Energy conservation subsidy excluded from your gross income because you received it (directly or indirectly) from a public utility after 1992 to buy or install any energy conservation measure. Fill 1040x form online An energy conservation measure is an installation or modification primarily designed either to reduce consumption of electricity or natural gas or to improve the management of energy demand for a home. Fill 1040x form online District of Columbia first-time homebuyer credit allowed on the purchase of a principal residence in the District of Columbia. Fill 1040x form online General sales taxes claimed as an itemized deduction on Schedule A (Form 1040) that were imposed on the purchase of personal property, such as a houseboat used as your home or a mobile home. Fill 1040x form online Discharges of qualified principal residence indebtedness. Fill 1040x form online   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. Fill 1040x form online This exclusion applies to discharges made after 2006 and before 2014. Fill 1040x form online If you choose to exclude this income, you must reduce (but not below zero) the basis of your principal residence by the amount excluded from gross income. Fill 1040x form online   File Form 982 with your tax return. Fill 1040x form online See the form's instructions for detailed information. Fill 1040x form online    A decrease in basis due to a discharge of qualified principal residence indebtedness that is excluded from income occurs only if you retain ownership of the principal residence after a discharge. Fill 1040x form online In most cases, this would occur in a refinancing or a restructuring of the mortgage. Fill 1040x form online Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. Fill 1040x form online This means that, if you qualify, you will not have to pay tax on the gain up to the limit described under Maximum Exclusion , next. Fill 1040x form online To qualify, you must meet the ownership and use tests described later. Fill 1040x form online You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. Fill 1040x form online This choice can be made (or revoked) at any time before the expiration of a 3-year period beginning on the due date of your return (not including extensions) for the year of the sale. Fill 1040x form online You can use Worksheet 2 (near the end of this publication) to figure the amount of your exclusion and your taxable gain, if any. Fill 1040x form online If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. Fill 1040x form online See Publication 505, Tax Withholding and Estimated Tax. Fill 1040x form online Maximum Exclusion You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. Fill 1040x form online You meet the ownership test. Fill 1040x form online You meet the use test. Fill 1040x form online During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. Fill 1040x form online For details on gain allocated to periods of nonqualified use, see Nonqualified Use , later. Fill 1040x form online If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed. Fill 1040x form online You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . Fill 1040x form online Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. Fill 1040x form online This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). Fill 1040x form online Exception. Fill 1040x form online   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. Fill 1040x form online However, the maximum amount you may be able to exclude will be reduced. Fill 1040x form online See Reduced Maximum Exclusion , later. Fill 1040x form online Example 1—home owned and occupied for at least 2 years. Fill 1040x form online Mya bought and moved into her main home in September 2011. Fill 1040x form online She sold the home at a gain in October 2013. Fill 1040x form online During the 5-year period ending on the date of sale in October 2013, she owned and lived in the home for more than 2 years. Fill 1040x form online She meets the ownership and use tests. Fill 1040x form online Example 2—ownership test met but use test not met. Fill 1040x form online Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. Fill 1040x form online He later sold the home for a gain in June 2013. Fill 1040x form online He owned the home during the entire 5-year period ending on the date of sale. Fill 1040x form online He meets the ownership test but not the use test. Fill 1040x form online He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). Fill 1040x form online Period of Ownership and Use The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time. Fill 1040x form online You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale. Fill 1040x form online Example. Fill 1040x form online Naomi bought and moved into a house in July 2009. Fill 1040x form online She lived there for 13 months and then moved in with a friend. Fill 1040x form online She later moved back into her house and lived there for 12 months until she sold it in August 2013. Fill 1040x form online Naomi meets the ownership and use tests because, during the 5-year period ending on the date of sale, she owned the house for more than 2 years and lived in it for a total of 25 (13 + 12) months. Fill 1040x form online Temporary absence. Fill 1040x form online   Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. Fill 1040x form online The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. Fill 1040x form online Example 1. Fill 1040x form online David Johnson, who is single, bought and moved into his home on February 1, 2011. Fill 1040x form online Each year during 2011 and 2012, David left his home for a 2-month summer vacation. Fill 1040x form online David sold the house on March 1, 2013. Fill 1040x form online Although the total time David lived in his home is less than 2 years (21 months), he meets the use requirement and may exclude gain. Fill 1040x form online The 2-month vacations are short temporary absences and are counted as periods of use in determining whether David used the home for the required 2 years. Fill 1040x form online Example 2. Fill 1040x form online Professor Paul Beard, who is single, bought and moved into a house in December 2010, went abroad for a 1-year sabbatical leave in January 2012, returned to the house in January 2013, and sold it at a gain in February 2013. Fill 1040x form online Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. Fill 1040x form online He cannot exclude any part of his gain because he did not use the residence for the required 2 years. Fill 1040x form online Ownership and use tests met at different times. Fill 1040x form online   You can meet the ownership and use tests during different 2-year periods. Fill 1040x form online However, you must meet both tests during the 5-year period ending on the date of the sale. Fill 1040x form online Example. Fill 1040x form online Beginning in 2002, Helen Jones lived in a rented apartment. Fill 1040x form online The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. Fill 1040x form online In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. Fill 1040x form online On July 12, 2013, while still living in her daughter's home, she sold her condominium. Fill 1040x form online Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 13, 2008, to July 12, 2013, the date she sold the condominium. Fill 1040x form online She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). Fill 1040x form online She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). Fill 1040x form online The time Helen lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use. Fill 1040x form online Cooperative apartment. Fill 1040x form online   If you sold stock as a tenant-shareholder in a cooperative housing corporation, the ownership and use tests are met if, during the 5-year period ending on the date of sale, you: Owned the stock for at least 2 years, and Lived in the house or apartment that the stock entitled you to occupy as your main home for at least 2 years. Fill 1040x form online Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. Fill 1040x form online Exception for individuals with a disability. Fill 1040x form online   There is an exception to the use test if: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home. Fill 1040x form online Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. Fill 1040x form online   If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. Fill 1040x form online Previous home destroyed or condemned. Fill 1040x form online   For the ownership and use tests, you add the time you owned and lived in a previous home that was destroyed or condemned to the time you owned and lived in the replacement home on whose sale you wish to exclude gain. Fill 1040x form online This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home (see Involuntary Conversions in Publication 551). Fill 1040x form online Otherwise, you must have owned and lived in the same home for 2 of the 5 years before the sale to qualify for the exclusion. Fill 1040x form online Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Fill 1040x form online   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty (defined later) as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. Fill 1040x form online You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve outside the United States either as an employee of the Peace Corps on qualified official extended duty (defined later) or as an enrolled volunteer or volunteer leader of the Peace Corps. Fill 1040x form online This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. Fill 1040x form online   If this helps you qualify to exclude gain, you can choose to have the 5-year test period suspended by filing a return for the year of sale that does not include the gain. Fill 1040x form online Example. Fill 1040x form online John bought and moved into a home in 2005. Fill 1040x form online He lived in it as his main home for 2½ years. Fill 1040x form online For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. Fill 1040x form online He then sold the home at a gain in 2013. Fill 1040x form online To meet the use test, John chooses to suspend the 5-year test period for the 6 years he was on qualified official extended duty. Fill 1040x form online This means he can disregard those 6 years. Fill 1040x form online Therefore, John's 5-year test period consists of the 5 years before he went on qualified official extended duty. Fill 1040x form online He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. Fill 1040x form online Period of suspension. Fill 1040x form online   The period of suspension cannot last more than 10 years. Fill 1040x form online Together, the 10-year suspension period and the 5-year test period can be as long as, but no more than, 15 years. Fill 1040x form online You cannot suspend the 5-year period for more than one property at a time. Fill 1040x form online You can revoke your choice to suspend the 5-year period at any time. Fill 1040x form online Example. Fill 1040x form online Mary bought a home on April 1, 1997. Fill 1040x form online She used it as her main home until August 31, 2000. Fill 1040x form online On September 1, 2000, she went on qualified official extended duty with the Navy. Fill 1040x form online She did not live in the house again before selling it on July 31, 2013. Fill 1040x form online Mary chooses to use the entire 10-year suspension period. Fill 1040x form online Therefore, the suspension period would extend back from July 31, 2013, to August 1, 2003, and the 5-year test period would extend back to August 1, 1998. Fill 1040x form online During that period, Mary owned the house all 5 years and lived in it as her main home from August 1, 1998, until August 31, 2000, a period of more than 24 months. Fill 1040x form online She meets the ownership and use tests because she owned and lived in the home for at least 2 years during this test period. Fill 1040x form online Uniformed services. Fill 1040x form online   The uniformed services are: The Armed Forces (the Army, Navy, Air Force, Marine Corps, and Coast Guard), The commissioned corps of the National Oceanic and Atmospheric Administration, and The commissioned corps of the Public Health Service. Fill 1040x form online Foreign Service member. Fill 1040x form online   For purposes of the choice to suspend the 5-year test period for ownership and use, you are a member of the Foreign Service if you are any of the following. Fill 1040x form online A Chief of mission. Fill 1040x form online An Ambassador at large. Fill 1040x form online A member of the Senior Foreign Service. Fill 1040x form online A Foreign Service officer. Fill 1040x form online Part of the Foreign Service personnel. Fill 1040x form online Employee of the intelligence community. Fill 1040x form online   For purposes of the choice to suspend the 5-year test period for ownership and use, you are an employee of the intelligence community if you are an employee of any of the following. Fill 1040x form online The Office of the Director of National Intelligence. Fill 1040x form online The Central Intelligence Agency. Fill 1040x form online The National Security Agency. Fill 1040x form online The Defense Intelligence Agency. Fill 1040x form online The National Geospatial-Intelligence Agency. Fill 1040x form online The National Reconnaissance Office and any other office within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs. Fill 1040x form online Any of the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, the Department of Treasury, the Department of Energy, and the Coast Guard. Fill 1040x form online The Bureau of Intelligence and Research of the Department of State. Fill 1040x form online Any of the elements of the Department of Homeland Security concerned with the analyses of foreign intelligence information. Fill 1040x form online Qualified official extended duty. Fill 1040x form online   You are on qualified official extended duty if you are on extended duty while: Serving at a duty station at least 50 miles from your main home, or Living in Government quarters under Government orders. Fill 1040x form online   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. Fill 1040x form online Married Persons If you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use tests, you can exclude up to $250,000 of the gain. Fill 1040x form online (But see Special rules for joint returns, next. Fill 1040x form online ) Special rules for joint returns. Fill 1040x form online   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. Fill 1040x form online You are married and file a joint return for the year. Fill 1040x form online Either you or your spouse meets the ownership test. Fill 1040x form online Both you and your spouse meet the use test. Fill 1040x form online During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. Fill 1040x form online If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. Fill 1040x form online For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. Fill 1040x form online Example 1—one spouse sells a home. Fill 1040x form online Emily sells her home in June 2013 for a gain of $300,000. Fill 1040x form online She marries Jamie later in the year. Fill 1040x form online She meets the ownership and use tests, but Jamie does not. Fill 1040x form online Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. Fill 1040x form online The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. Fill 1040x form online Example 2—each spouse sells a home. Fill 1040x form online The facts are the same as in Example 1 except that Jamie also sells a home in 2013 for a gain of $200,000 before he marries Emily. Fill 1040x form online He meets the ownership and use tests on his home, but Emily does not. Fill 1040x form online Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. Fill 1040x form online However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. Fill 1040x form online Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. Fill 1040x form online The $500,000 maximum exclusion for certain joint returns does not apply because Emily and Jamie do not both meet the use test for the same home. Fill 1040x form online Sale of main home by surviving spouse. Fill 1040x form online   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. Fill 1040x form online   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. Fill 1040x form online The sale or exchange took place after 2008. Fill 1040x form online The sale or exchange took place no more than 2 years after the date of death of your spouse. Fill 1040x form online You have not remarried. Fill 1040x form online You and your spouse met the use test at the time of your spouse's death. Fill 1040x form online You or your spouse met the ownership test at the time of your spouse's death. Fill 1040x form online Neither you nor your spouse excluded gain from the sale of another home during the last 2 years before the date of death. Fill 1040x form online The ownership and use tests were described earlier. Fill 1040x form online Example. Fill 1040x form online Harry owned and used a house as his main home since 2009. Fill 1040x form online Harry and Wilma married on July 1, 2013, and from that date they used Harry's house as their main home. Fill 1040x form online Harry died on August 15, 2013, and Wilma inherited the property. Fill 1040x form online Wilma sold the property on September 1, 2013, at which time she had not remarried. Fill 1040x form online Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Harry owned and used the property before death. Fill 1040x form online Home transferred from spouse. Fill 1040x form online   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. Fill 1040x form online Use of home after divorce. Fill 1040x form online   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. Fill 1040x form online Reduced Maximum Exclusion If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. Fill 1040x form online This applies to those who: Fail to meet the ownership and use tests, or Have used the exclusion within 2 years of selling their current home. Fill 1040x form online In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. Fill 1040x form online A change in place of employment. Fill 1040x form online Health. Fill 1040x form online Unforeseen circumstances. Fill 1040x form online Qualified individual. Fill 1040x form online   For purposes of the reduced maximum exclusion, a qualified individual is any of the following. Fill 1040x form online You. Fill 1040x form online Your spouse. Fill 1040x form online A co-owner of the home. Fill 1040x form online A person whose main home is the same as yours. Fill 1040x form online Primary reason for sale. Fill 1040x form online   One of the three reasons above will be considered to be the primary reason you sold your home if either (1) or (2) is true. Fill 1040x form online You qualify under a “safe harbor. Fill 1040x form online ” This is a specific set of facts and circumstances that, if applicable, qualifies you to claim a reduced maximum exclusion. Fill 1040x form online Safe harbors corresponding to the reasons listed above are described later. Fill 1040x form online A safe harbor does not apply, but you can establish, based on facts and circumstances, that the primary reason for the sale is a change in place of employment, health, or unforeseen circumstances. Fill 1040x form online  Factors that may be relevant in determining your primary reason for sale include whether: Your sale and the circumstances causing it were close in time, The circumstances causing your sale occurred during the time you owned and used the property as your main home, The circumstances causing your sale were not reasonably foreseeable when you began using the property as your main home, Your financial ability to maintain the property became materially impaired, The suitability of the property as your main home materially changed, and During the time you owned the property, you used it as your home. Fill 1040x form online Change in Place of Employment You may qualify for a reduced exclusion if the primary reason for the sale of your main home is a change in the location of employment of a qualified individual. Fill 1040x form online Employment. Fill 1040x form online   For this purpose, employment includes the start of work with a new employer or continuation of work with the same employer. Fill 1040x form online It also includes the start or continuation of self-employment. Fill 1040x form online Distance safe harbor. Fill 1040x form online   A change in place of employment is considered to be the reason you sold your home if: The change occurred during the period you owned and used the property as your main home, and The new place of employment is at least 50 miles farther from the home you sold than was the former place of employment (or, if there was no former place of employment, the distance between your new place of employment and the home sold is at least 50 miles). Fill 1040x form online Example. Fill 1040x form online Justin was unemployed and living in a townhouse in Florida he had owned and used as his main home since 2012. Fill 1040x form online He got a job in North Carolina and sold his townhouse in 2013. Fill 1040x form online Because the distance between Justin's new place of employment and the home he sold is at least 50 miles, the sale satisfies the conditions of the distance safe harbor. Fill 1040x form online Justin's sale of his home is considered to be because of a change in place of employment, and he is entitled to claim a reduced maximum exclusion of gain from the sale. Fill 1040x form online Health The sale of your main home is because of health if your primary reason for the sale is: To obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual, or To obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury. Fill 1040x form online The sale of your home is not because of health if the sale merely benefits a qualified individual's general health or well-being. Fill 1040x form online For purposes of this reason, a qualified individual includes, in addition to the individuals listed earlier under Qualified individual , any of the following family members of these individuals. Fill 1040x form online Parent, grandparent, stepmother, stepfather. Fill 1040x form online Child, grandchild, stepchild, adopted child, eligible foster child. Fill 1040x form online Brother, sister, stepbrother, stepsister, half-brother, half-sister. Fill 1040x form online Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law. Fill 1040x form online Uncle, aunt, nephew, niece, or cousin. Fill 1040x form online Example. Fill 1040x form online In 2012, Chase and Lauren, spouses, bought a house that they used as their main home. Fill 1040x form online Lauren's father has a chronic disease and is unable to care for himself. Fill 1040x form online In 2013, Chase and Lauren sold their home in order to move into Lauren's father's house to provide care for him. Fill 1040x form online Because the primary reason for the sale of their home was to provide care for Lauren's father, Chase and Lauren are entitled to a reduced maximum exclusion. Fill 1040x form online Doctor's recommendation safe harbor. Fill 1040x form online   Health is considered to be the reason you sold your home if, for one or more of the reasons listed at the beginning of this discussion, a doctor recommends a change of residence. Fill 1040x form online Unforeseen Circumstances The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying that home. Fill 1040x form online You are not considered to have an unforeseen circumstance if the primary reason you sold your home was that you preferred to get a different home or because your finances improved. Fill 1040x form online Specific event safe harbors. Fill 1040x form online   Unforeseen circumstances are considered to be the reason for selling your home if any of the following events occurred while you owned and used the property as your main home. Fill 1040x form online An involuntary conversion of your home, such as when your home is destroyed or condemned. Fill 1040x form online Natural or man-made disasters or acts of war or terrorism resulting in a casualty to your home, whether or not your loss is deductible. Fill 1040x form online In the case of qualified individuals (listed earlier under Qualified individual ): Death, Unemployment (if the individual is eligible for unemployment compensation), A change in employment or self-employment status that results in the individual's inability to pay reasonable basic living expenses (listed under Reasonable basic living expenses , later) for his or her household, Divorce or legal separation under a decree of divorce or separate maintenance, or Multiple births resulting from the same pregnancy. Fill 1040x form online An event the IRS determined to be an unforeseen circumstance in published guidance of general applicability. Fill 1040x form online For example, the IRS determined the September 11, 2001, terrorist attacks to be an unforeseen circumstance. Fill 1040x form online Reasonable basic living expenses. Fill 1040x form online   Reasonable basic living expenses for your household include the following. Fill 1040x form online Amounts spent for food. Fill 1040x form online Amounts spent for clothing. Fill 1040x form online Housing and related expenses. Fill 1040x form online Medical expenses. Fill 1040x form online Transportation expenses. Fill 1040x form online Tax payments. Fill 1040x form online Court-ordered payments. Fill 1040x form online Expenses reasonably necessary to produce income. Fill 1040x form online   Any of these amounts spent to maintain an affluent or luxurious standard of living are not reasonable basic living expenses. Fill 1040x form online Nonqualified Use Gain from the sale or exchange of the main home is not excludable from income if it is allocable to periods of nonqualified use. Fill 1040x form online Nonqualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions (see next). Fill 1040x form online Exceptions. Fill 1040x form online   A period of nonqualified use does not include: Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home; Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty: As a member of the uniformed services; As a member of the Foreign Service of the United States; or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. Fill 1040x form online Calculation. Fill 1040x form online   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain (net of any depreciation allowed or allowable on the property for periods after May 6, 1997) by the following fraction:   Total nonqualified use during the period of ownership after 2008     Total period of ownership     This calculation can be found in Worksheet 2, line 10, later in this publication. Fill 1040x form online   For examples of this calculation, see Business Use or Rental of Home , next. Fill 1040x form online Business Use or Rental of Home You may be able to exclude gain from the sale of a home you have used for business or to produce rental income if you meet the ownership and use tests. Fill 1040x form online Example 1. Fill 1040x form online On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. Fill 1040x form online She moved in on that date and lived in it until May 31, 2009, when she moved out of the house and put it up for rent. Fill 1040x form online The house was rented from June 1, 2009, to March 31, 2011. Fill 1040x form online Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. Fill 1040x form online Amy moved back into the house on April 1, 2011, and lived there until she sold it on January 31, 2013, for a gain of $200,000. Fill 1040x form online During the 5-year period ending on the date of the sale (January 31, 2008–January 31, 2013), Amy owned and lived in the house for more than 2 years as shown in the following table. Fill 1040x form online Five-Year Period Used as Home Used as Rental 1/31/08 – 5/31/09 16 months   6/01/09 – 3/31/11   22 months 4/01/11 – 1/31/13 22 months     38 months 22 months       During the period Amy owned the house (2,080 days), her period of nonqualified use was 668 days. Fill 1040x form online Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain, as shown on Worksheet 2. Fill 1040x form online Example 2. Fill 1040x form online William owned and used a house as his main home from 2007 through 2010. Fill 1040x form online On January 1, 2011, he moved to another state. Fill 1040x form online He rented his house from that date until April 30, 2013, when he sold it. Fill 1040x form online During the 5-year period ending on the date of sale (May 1, 2008-April 30, 2013), William owned and lived in the house for more than 2 years. Fill 1040x form online Because it was rental property at the time of the sale, he must report the sale on Form 4797. Fill 1040x form online Because the period of nonqualified use does not include any part of the 5-year period after the last date William lived in the house, he has no period of nonqualified use. Fill 1040x form online Because he met the ownership and use tests, he can exclude gain up to $250,000. Fill 1040x form online However, he cannot exclude the part of the gain equal to the depreciation he claimed or could have claimed for renting the house, as explained next. Fill 1040x form online Depreciation after May 6, 1997. Fill 1040x form online   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. Fill 1040x form online If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed. Fill 1040x form online Unrecaptured section 1250 gain. Fill 1040x form online   This is the part of any long-term capital gain from the sale of your home that is due to depreciation and cannot be excluded. Fill 1040x form online To figure the amount of unrecaptured section 1250 gain to be reported on Schedule D (Form 1040), you must also take into account certain gains or losses from the sale of property other than your home. Fill 1040x form online Use the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions for this purpose. Fill 1040x form online Worksheet 2. Fill 1040x form online Taxable Gain on Sale of Home—Completed Example 1 for Amy Part 1. Fill 1040x form online Gain or (Loss) on Sale       1. Fill 1040x form online   Selling price of home 1. Fill 1040x form online     2. Fill 1040x form online   Selling expenses (including commissions, advertising and legal fees, and seller-paid loan charges) 2. Fill 1040x form online     3. Fill 1040x form online   Subtract line 2 from line 1. Fill 1040x form online This is the amount realized 3. Fill 1040x form online     4. Fill 1040x form online   Adjusted basis of home sold (from Worksheet 1, line 13) 4. Fill 1040x form online     5. Fill 1040x form online   Gain or (loss) on the sale. Fill 1040x form online Subtract line 4 from line 3. Fill 1040x form online If this is a loss, stop here 5. Fill 1040x form online 200,000   Part 2. Fill 1040x form online Exclusion and Taxable Gain       6. Fill 1040x form online   Enter any depreciation allowed or allowable on the property for periods after May 6, 1997. Fill 1040x form online If none, enter -0- 6. Fill 1040x form online 10,000   7. Fill 1040x form online   Subtract line 6 from line 5. Fill 1040x form online If the result is less than zero, enter -0- 7. Fill 1040x form online 190,000   8. Fill 1040x form online   Aggregate number of days of nonqualified use after 2008. Fill 1040x form online If none, enter -0-. Fill 1040x form online  If line 8 is equal to zero, skip to line 12 and enter the amount from line 7 on line 12 8. Fill 1040x form online 668   9. Fill 1040x form online   Number of days taxpayer owned the property 9. Fill 1040x form online 2,080   10. Fill 1040x form online   Divide the amount on line 8 by the amount on line 9. Fill 1040x form online Enter the result as a decimal (rounded to at least 3 places). Fill 1040x form online But do not enter an amount greater than 1. Fill 1040x form online 00 10. Fill 1040x form online 0. Fill 1040x form online 321   11. Fill 1040x form online   Gain allocated to nonqualified use. Fill 1040x form online (Line 7 multiplied by line 10) 11. Fill 1040x form online 60,990   12. Fill 1040x form online   Gain eligible for exclusion. Fill 1040x form online Subtract line 11 from line 7 12. Fill 1040x form online 129,010   13. Fill 1040x form online   If you qualify to exclude gain on the sale, enter your maximum exclusion (see Maximum Exclusion ). Fill 1040x form online  If you qualify for a reduced maximum exclusion, enter the amount from Worksheet 3, line 7. Fill 1040x form online If you do  not qualify to exclude gain, enter -0- 13. Fill 1040x form online 250,000   14. Fill 1040x form online   Exclusion. Fill 1040x form online Enter the smaller of line 12 or line 13 14. Fill 1040x form online 129,010   15. Fill 1040x form online   Taxable gain. Fill 1040x form online Subtract line 14 from line 5. Fill 1040x form online Report your taxable gain as described under Reporting the Sale . Fill 1040x form online If the amount on line 6 is more than zero, complete line 16 15. Fill 1040x form online 70,990   16. Fill 1040x form online   Enter the smaller of line 6 or line 15. Fill 1040x form online Enter this amount on line 12 of the Unrecaptured Section 1250 Gain  Worksheet in the instructions for Schedule D (Form 1040) 16. Fill 1040x form online 10,000 Property Used Partly for Business or Rental If you use property partly as a home and partly for business or to produce rental income, the treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. Fill 1040x form online Part of Home Used for Business or Rental If the part of your property used for business or to produce rental income is within your home, such as a room used as a home office for a business, you do not need to allocate gain on the sale of the property between the business part of the property and the part used as a home. Fill 1040x form online In addition, you do not need to report the sale of the business or rental part on Form 4797. Fill 1040x form online This is true whether or not you were entitled to claim any depreciation. Fill 1040x form online However, you cannot exclude the part of any gain equal to any depreciation allowed or allowable after May 6, 1997. Fill 1040x form online See Depreciation after May 6, 1997, earlier. Fill 1040x form online Example 1. Fill 1040x form online Ray sold his main home in 2013 at a $30,000 gain. Fill 1040x form online He has no gains or losses from the sale of property other than the gain from the sale of his home. Fill 1040x form online He meets the ownership and use tests to exclude the gain from his income. Fill 1040x form online However, he used part of the home as a business office in 2012 and claimed $500 depreciation. Fill 1040x form online Because the business office was part of his home (not separate from it), he does not have to allocate the gain on the sale between the business part of the property and the part used as a home. Fill 1040x form online In addition, he does not have to report any part of the gain on Form 4797. Fill 1040x form online Because Ray was entitled to take a depreciation deduction, he must recognize $500 of the gain as unrecaptured section 1250 gain. Fill 1040x form online He reports his gain, exclusion, and the taxable gain of $500 on Form 8949 and Schedule D (Form 1040). Fill 1040x form online Example 2. Fill 1040x form online The facts are the same as in Example 1 except that Ray was not entitled to claim depreciation for the business use of his home. Fill 1040x form online Since Ray did not claim any depreciation, he can exclude the entire $30,000 gain. Fill 1040x form online Separate Part of Property Used for Business or Rental You may have used part of your property as your home and a separate part of it for business or to produce rental income. Fill 1040x form online Examples are: A working farm on which your house was located, A duplex in w