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Free State Tax Return E-file

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Free State Tax Return E-file

Free state tax return e-file 10. Free state tax return e-file   Self-Employment (SE) Tax Table of Contents Who Must Pay SE Tax?Special Rules and Exceptions Figuring Earnings Subject to SE Tax Farm Optional Method Using Both Optional Methods Reporting Self-Employment Tax The SE tax rules apply no matter how old you are and even if you are already receiving social security and Medicare benefits. Free state tax return e-file Who Must Pay SE Tax? Generally, you must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. Free state tax return e-file Use Schedule SE to figure net earnings from self-employment. Free state tax return e-file Sole proprietor or independent contractor. Free state tax return e-file   If you are self-employed as a sole proprietor or independent contractor, you generally use Schedule C or C-EZ (Form 1040) to figure your earnings subject to SE tax. Free state tax return e-file SE tax rate. Free state tax return e-file    For 2013, the SE tax rate on net earnings is 15. Free state tax return e-file 3% (12. Free state tax return e-file 4% social security tax plus 2. Free state tax return e-file 9% Medicare tax). Free state tax return e-file Maximum earnings subject to self-employment tax. Free state tax return e-file    Only the first $113,700 of your combined wages, tips, and net earnings in 2013 is subject to any combination of the 12. Free state tax return e-file 4% social security part of SE tax, social security tax, or railroad retirement (tier 1) tax. Free state tax return e-file   All of your combined wages, tips, and net earnings in 2013 are subject to any combination of the 2. Free state tax return e-file 9% Medicare part of SE tax, social security tax, or railroad retirement (tier 1) tax. Free state tax return e-file   If your wages and tips are subject to either social security or railroad retirement (tier 1) tax, or both, and total at least $113,700, do not pay the 12. Free state tax return e-file 4% social security part of the SE tax on any of your net earnings. Free state tax return e-file However, you must pay the 2. Free state tax return e-file 9% Medicare part of the SE tax on all your net earnings. Free state tax return e-file Special Rules and Exceptions Aliens. Free state tax return e-file   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. Free state tax return e-file S. Free state tax return e-file citizens. Free state tax return e-file Nonresident aliens are not subject to SE tax unless an international social security agreement in effect determines that they are covered under the U. Free state tax return e-file S. Free state tax return e-file social security system. Free state tax return e-file However, residents of the Virgin Islands, Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, or American Samoa are subject to self-employment tax, as they are considered U. Free state tax return e-file S. Free state tax return e-file residents for self-employment tax purposes. Free state tax return e-file For more information on aliens, see Publication 519, U. Free state tax return e-file S. Free state tax return e-file Tax Guide for Aliens. Free state tax return e-file Child employed by parent. Free state tax return e-file   You are not subject to SE tax if you are under age 18 and you are working for your father or mother. Free state tax return e-file Church employee. Free state tax return e-file    If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes, you are subject to SE tax if you receive $108. Free state tax return e-file 28 or more in wages from the church or organization. Free state tax return e-file For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Free state tax return e-file Fishing crew member. Free state tax return e-file   If you are a member of the crew on a boat that catches fish or other water life, your earnings are subject to SE tax if all the following conditions apply. Free state tax return e-file You do not get any pay for the work except your share of the catch or a share of the proceeds from the sale of the catch, unless the pay meets all the following conditions. Free state tax return e-file The pay is not more than $100 per trip. Free state tax return e-file The pay is received only if there is a minimum catch. Free state tax return e-file The pay is solely for additional duties (such as mate, engineer, or cook) for which additional cash pay is traditional in the fishing industry. Free state tax return e-file You get a share of the catch or a share of the proceeds from the sale of the catch. Free state tax return e-file Your share depends on the amount of the catch. Free state tax return e-file The boat's operating crew normally numbers fewer than 10 individuals. Free state tax return e-file (An operating crew is considered as normally made up of fewer than 10 if the average size of the crew on trips made during the last four calendar quarters is fewer than 10. Free state tax return e-file ) Notary public. Free state tax return e-file   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ but are not subject to self-employment tax (see the Instructions for Schedule SE (Form 1040)). Free state tax return e-file State or local government employee. Free state tax return e-file   You are subject to SE tax if you are an employee of a state or local government, are paid solely on a fee basis, and your services are not covered under a federal-state social security agreement. Free state tax return e-file Foreign government or international organization employee. Free state tax return e-file   You are subject to SE tax if both the following conditions are true. Free state tax return e-file You are a U. Free state tax return e-file S. Free state tax return e-file citizen employed in the United States, Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, or the Virgin Islands by: A foreign government, A wholly-owned agency of a foreign government, or An international organization. Free state tax return e-file Your employer is not required to withhold social security and Medicare taxes from your wages. Free state tax return e-file U. Free state tax return e-file S. Free state tax return e-file citizen or resident alien residing abroad. Free state tax return e-file    If you are a self-employed U. Free state tax return e-file S. Free state tax return e-file citizen or resident alien living outside the United States, in most cases you must pay SE tax. Free state tax return e-file Do not reduce your foreign earnings from self-employment by your foreign earned income exclusion. Free state tax return e-file Exception. Free state tax return e-file    The United States has social security agreements with many countries to eliminate double taxation under two social security systems. Free state tax return e-file Under these agreements, you generally must only pay social security and Medicare taxes to the country in which you live. Free state tax return e-file The country to which you must pay the tax will issue a certificate which serves as proof of exemption from social security tax in the other country. Free state tax return e-file   For more information, see the Instructions for Schedule SE (Form 1040). Free state tax return e-file More Than One Business If you have earnings subject to SE tax from more than one trade, business, or profession, you must combine the net profit (or loss) from each to determine your total earnings subject to SE tax. Free state tax return e-file A loss from one business reduces your profit from another business. Free state tax return e-file Community Property Income If any of the income from a trade or business, other than a partnership, is community property income under state law, it is included in the earnings subject to SE tax of the spouse carrying on the trade or business. Free state tax return e-file Gain or Loss Do not include in earnings subject to SE tax a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. Free state tax return e-file It does not matter whether the disposition is a sale, exchange, or an involuntary conversion. Free state tax return e-file Lost Income Payments If you are self-employed and reduce or stop your business activities, any payment you receive from insurance or other sources for the lost business income is included in earnings subject to SE tax. Free state tax return e-file If you are not working when you receive the payment, it still relates to your business and is included in earnings subject to SE tax, even though your business is temporarily inactive. Free state tax return e-file Figuring Earnings Subject to SE Tax Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. Free state tax return e-file The regular method. Free state tax return e-file The nonfarm optional method. Free state tax return e-file The farm optional method. Free state tax return e-file You must use the regular method unless you are eligible to use one or both of the optional methods. Free state tax return e-file Why use an optional method?    You may want to use the optional methods (discussed later) when you have a loss or a small net profit and any one of the following applies. Free state tax return e-file You want to receive credit for social security benefit coverage. Free state tax return e-file You incurred child or dependent care expenses for which you could claim a credit. Free state tax return e-file (An optional method may increase your earned income, which could increase your credit. Free state tax return e-file ) You are entitled to the earned income credit. Free state tax return e-file (An optional method may increase your earned income, which could increase your credit. Free state tax return e-file ) You are entitled to the additional child tax credit. Free state tax return e-file (An optional method may increase your earned income, which could increase your credit. Free state tax return e-file ) Effects of using an optional method. Free state tax return e-file   Using an optional method could increase your SE tax. Free state tax return e-file Paying more SE tax could result in your getting higher benefits when you retire. Free state tax return e-file   If you use either or both optional methods, you must figure and pay the SE tax due under these methods even if you would have had a smaller tax or no tax using the regular method. Free state tax return e-file   The optional methods may be used only to figure your SE tax. Free state tax return e-file To figure your income tax, include your actual earnings in gross income, regardless of which method you use to determine SE tax. Free state tax return e-file Regular Method Multiply your total earnings subject to SE tax by 92. Free state tax return e-file 35% (. Free state tax return e-file 9235) to get your net earnings under the regular method. Free state tax return e-file See Short Schedule SE, line 4, or Long Schedule SE, line 4a. Free state tax return e-file Net earnings figured using the regular method are also called actual net earnings. Free state tax return e-file Nonfarm Optional Method Use the nonfarm optional method only for earnings that do not come from farming. Free state tax return e-file You may use this method if you meet all the following tests. Free state tax return e-file You are self-employed on a regular basis. Free state tax return e-file This means that your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. Free state tax return e-file The net earnings can be from either farm or nonfarm earnings or both. Free state tax return e-file You have used this method less than 5 years. Free state tax return e-file (There is a 5-year lifetime limit. Free state tax return e-file ) The years do not have to be one after another. Free state tax return e-file Your net nonfarm profits were: Less than $5,024, and Less than 72. Free state tax return e-file 189% of your gross nonfarm income. Free state tax return e-file Net nonfarm profits. Free state tax return e-file   Net nonfarm profit generally is the total of the amounts from: Line 31, Schedule C (Form 1040), Line 3, Schedule C-EZ (Form 1040), Box 14, code A, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J1, Schedule K-1 (Form 1065-B). Free state tax return e-file   However, you may need to adjust the amount reported on Schedule K-1 if you are a general partner or if it is a loss. Free state tax return e-file Gross nonfarm income. Free state tax return e-file   Your gross nonfarm income generally is the total of the amounts from: Line 7, Schedule C (Form 1040), Line 1, Schedule C-EZ (Form 1040), Box 14, code C, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J2, Schedule K-1 (Form 1065-B). Free state tax return e-file Figuring Nonfarm Net Earnings If you meet the three tests explained earlier, use the following table to figure your net earnings from self-employment under the nonfarm optional method. Free state tax return e-file Table 10-1. Free state tax return e-file Figuring Nonfarm Net Earnings IF your gross nonfarm income is. Free state tax return e-file . Free state tax return e-file . Free state tax return e-file THEN your net earnings are equal to. Free state tax return e-file . Free state tax return e-file . Free state tax return e-file $6,960 or less Two-thirds of your gross nonfarm income. Free state tax return e-file More than $6,960 $4,640 Actual net earnings. Free state tax return e-file   Your actual net earnings are 92. Free state tax return e-file 35% of your total earnings subject to SE tax (that is, multiply total earnings subject to SE tax by 92. Free state tax return e-file 35% (. Free state tax return e-file 9235) to get actual net earnings). Free state tax return e-file Actual net earnings are equivalent to net earnings figured using the regular method. Free state tax return e-file Optional net earnings less than actual net earnings. Free state tax return e-file   You cannot use this method to report an amount less than your actual net earnings from self-employment. Free state tax return e-file Gross nonfarm income of $6,960 or less. Free state tax return e-file   The following examples illustrate how to figure net earnings when gross nonfarm income is $6,960 or less. Free state tax return e-file Example 1. Free state tax return e-file Net nonfarm profit less than $5,024 and less than 72. Free state tax return e-file 189% of gross nonfarm income. Free state tax return e-file Ann Green runs a craft business. Free state tax return e-file Her actual net earnings from self-employment were $800 in 2011 and $900 in 2012. Free state tax return e-file She meets the test for being self-employed on a regular basis. Free state tax return e-file She has used the nonfarm optional method less than 5 years. Free state tax return e-file Her gross income and net profit in 2013 are as follows: Gross nonfarm income $5,400 Net nonfarm profit $1,200 Ann's actual net earnings for 2013 are $1,108 ($1,200 × . Free state tax return e-file 9235). Free state tax return e-file Because her net profit is less than $5,024 and less than 72. Free state tax return e-file 189% of her gross income, she can use the nonfarm optional method to figure net earnings of $3,600 (2/3 × $5,400). Free state tax return e-file Because these net earnings are higher than her actual net earnings, she can report net earnings of $3,600 for 2013. Free state tax return e-file Example 2. Free state tax return e-file Net nonfarm profit less than $5,024 but not less than 72. Free state tax return e-file 189% of gross nonfarm income. Free state tax return e-file Assume that in Example 1 Ann's gross income is $1,000 and her net profit is $800. Free state tax return e-file She must use the regular method to figure her net earnings. Free state tax return e-file She cannot use the nonfarm optional method because her net profit is not less than 72. Free state tax return e-file 189% of her gross income. Free state tax return e-file Example 3. Free state tax return e-file Net loss from a nonfarm business. Free state tax return e-file Assume that in Example 1 Ann has a net loss of $700. Free state tax return e-file She can use the nonfarm optional method and report $3,600 (2/3 × $5,400) as her net earnings. Free state tax return e-file Example 4. Free state tax return e-file Nonfarm net earnings less than $400. Free state tax return e-file Assume that in Example 1 Ann has gross income of $525 and a net profit of $175. Free state tax return e-file In this situation, she would not pay any SE tax under either the regular method or the nonfarm optional method because her net earnings under both methods are less than $400. Free state tax return e-file Gross nonfarm income of more than $6,960. Free state tax return e-file   The following examples illustrate how to figure net earnings when gross nonfarm income is more than $6,960. Free state tax return e-file Example 1. Free state tax return e-file Net nonfarm profit less than $5,024 and less than 72. Free state tax return e-file 189% of gross nonfarm income. Free state tax return e-file John White runs an appliance repair shop. Free state tax return e-file His actual net earnings from self-employment were $10,500 in 2011 and $9,500 in 2012. Free state tax return e-file He meets the test for being self-employed on a regular basis. Free state tax return e-file He has used the nonfarm optional method less than 5 years. Free state tax return e-file His gross income and net profit in 2013 are as follows: Gross nonfarm income $12,000 Net nonfarm profit $1,200 John's actual net earnings for 2013 are $1,108 ($1,200 × . Free state tax return e-file 9235). Free state tax return e-file Because his net profit is less than $5,024 and less than 72. Free state tax return e-file 189% of his gross income, he can use the nonfarm optional method to figure net earnings of $4,640. Free state tax return e-file Because these net earnings are higher than his actual net earnings, he can report net earnings of $4,640 for 2013. Free state tax return e-file Example 2. Free state tax return e-file Net nonfarm profit not less than $5,024. Free state tax return e-file Assume that in Example 1 John's net profit is $5,400. Free state tax return e-file He must use the regular method. Free state tax return e-file He cannot use the nonfarm optional method because his net nonfarm profit is not less than $5,024. Free state tax return e-file Example 3. Free state tax return e-file Net loss from a nonfarm business. Free state tax return e-file Assume that in Example 1 John has a net loss of $700. Free state tax return e-file He can use the nonfarm optional method and report $4,640 as his net earnings from self-employment. Free state tax return e-file Farm Optional Method Use the farm optional method only for earnings from a farming business. Free state tax return e-file See Publication 225 for information about this method. Free state tax return e-file Using Both Optional Methods If you have both farm and nonfarm earnings, you may be able to use both optional methods to determine your net earnings from self-employment. Free state tax return e-file To figure your net earnings using both optional methods, you must: Figure your farm and nonfarm net earnings separately under each method. Free state tax return e-file Do not combine farm earnings with nonfarm earnings to figure your net earnings under either method. Free state tax return e-file Add the net earnings figured under each method to arrive at your total net earnings from self-employment. Free state tax return e-file You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. Free state tax return e-file If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. Free state tax return e-file Example. Free state tax return e-file You are a self-employed farmer. Free state tax return e-file You also operate a retail grocery store. Free state tax return e-file Your gross income, actual net earnings from self-employment, and optional farm and optional nonfarm net earnings from self-employment are shown in Table 10-2. Free state tax return e-file Table 10-2. Free state tax return e-file Example—Farm and Nonfarm Earnings Income and Earnings Farm Nonfarm Gross income $3,000 $6,000 Actual net earnings $900 $500 Optional net earnings (2/3 of gross income) $2,000 $4,000 Table 10-3 shows four methods or combinations of methods you can use to figure net earnings from self-employment using the farm and nonfarm gross income and actual net earnings shown in Table 10-2. Free state tax return e-file Method 1. Free state tax return e-file Using the regular method for both farm and nonfarm income. Free state tax return e-file Method 2. Free state tax return e-file Using the optional method for farm income and the regular method for nonfarm income. Free state tax return e-file Method 3. Free state tax return e-file Using the regular method for farm income and the optional method for nonfarm income. Free state tax return e-file Method 4. Free state tax return e-file Using the optional method for both farm and nonfarm income. Free state tax return e-file Note. Free state tax return e-file Actual net earnings is the same as net earnings figured using the regular method. Free state tax return e-file Table 10-3. Free state tax return e-file Example—Net Earnings Net Earnings 1 2 3 4 Actual  farm $ 900   $ 900   Optional  farm   $ 2,000   $ 2,000 Actual nonfarm $ 500 $ 500     Optional nonfarm     $4,000 $4,000 Amount you can report: $1,400 $2,500 $4,900 $4,640* *Limited to $4,640 because you used both optional methods. Free state tax return e-file Fiscal Year Filer If you use a tax year other than the calendar year, you must use the tax rate and maximum earnings limit in effect at the beginning of your tax year. Free state tax return e-file Even if the tax rate or maximum earnings limit changes during your tax year, continue to use the same rate and limit throughout your tax year. Free state tax return e-file Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. Free state tax return e-file Then enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. Free state tax return e-file Most taxpayers can use Section A—Short Schedule SE to figure their SE tax. Free state tax return e-file However, certain taxpayers must use Section B—Long Schedule SE. Free state tax return e-file If you have to pay SE tax, you must file Form 1040 (with Schedule SE attached) even if you do not otherwise have to file a federal income tax return. Free state tax return e-file Joint return. Free state tax return e-file   Even if you file a joint return, you cannot file a joint Schedule SE. Free state tax return e-file This is true whether one spouse or both spouses have earnings subject to SE tax. Free state tax return e-file If both of you have earnings subject to SE tax, each of you must complete a separate Schedule SE. Free state tax return e-file However, if one spouse uses the Short Schedule SE and the other spouse has to use the Long Schedule SE, both can use the same form. Free state tax return e-file Attach both schedules to the joint return. Free state tax return e-file More than one business. Free state tax return e-file   If you have more than one trade or business, you must combine the net profit (or loss) from each business to figure your SE tax. Free state tax return e-file A loss from one business will reduce your profit from another business. Free state tax return e-file File one Schedule SE showing the earnings from self-employment, but file a separate Schedule C, C-EZ, or F for each business. Free state tax return e-file Example. Free state tax return e-file You are the sole proprietor of two separate businesses. Free state tax return e-file You operate a restaurant that made a net profit of $25,000. Free state tax return e-file You also have a cabinetmaking business that had a net loss of $500. Free state tax return e-file You must file a Schedule C for the restaurant showing your net profit of $25,000 and another Schedule C for the cabinetmaking business showing your net loss of $500. Free state tax return e-file You file Schedule SE showing total earnings subject to SE tax of $24,500. Free state tax return e-file Prev  Up  Next   Home   More Online Publications
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The Free State Tax Return E-file

Free state tax return e-file 5. Free state tax return e-file   Personal Use of Dwelling Unit (Including Vacation Home) Table of Contents Dividing Expenses Dwelling Unit Used as a HomeMain home. Free state tax return e-file Shared equity financing agreement. Free state tax return e-file Donation of use of the property. Free state tax return e-file Examples. Free state tax return e-file Days used for repairs and maintenance. Free state tax return e-file Days used as a main home before or after renting. Free state tax return e-file Reporting Income and DeductionsNot used as a home. Free state tax return e-file Used as a home but rented less than 15 days. Free state tax return e-file Used as a home and rented 15 days or more. Free state tax return e-file If you have any personal use of a dwelling unit (including a vacation home) that you rent, you must divide your expenses between rental use and personal use. Free state tax return e-file In general, your rental expenses will be no more than your total expenses multiplied by a fraction; the denominator of which is the total number of days the dwelling unit is used and the numerator of which is the total number of days actually rented at a fair rental price. Free state tax return e-file Only your rental expenses may deducted on Schedule E (Form 1040). Free state tax return e-file Some of your personal expenses may be deductible if you itemize your deductions on Schedule A (Form 1040). Free state tax return e-file You must also determine if the dwelling unit is considered a home. Free state tax return e-file The amount of rental expenses that you can deduct may be limited if the dwelling unit is considered a home. Free state tax return e-file Whether a dwelling unit is considered a home depends on how many days during the year are considered to be days of personal use. Free state tax return e-file There is a special rule if you used the dwelling unit as a home and you rented it for less than 15 days during the year. Free state tax return e-file Dwelling unit. Free state tax return e-file   A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. Free state tax return e-file It also includes all structures or other property belonging to the dwelling unit. Free state tax return e-file A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. Free state tax return e-file   A dwelling unit does not include property (or part of the property) used solely as a hotel, motel, inn, or similar establishment. Free state tax return e-file Property is used solely as a hotel, motel, inn, or similar establishment if it is regularly available for occupancy by paying customers and is not used by an owner as a home during the year. Free state tax return e-file Example. Free state tax return e-file You rent a room in your home that is always available for short-term occupancy by paying customers. Free state tax return e-file You do not use the room yourself and you allow only paying customers to use the room. Free state tax return e-file This room is used solely as a hotel, motel, inn, or similar establishment and is not a dwelling unit. Free state tax return e-file Dividing Expenses If you use a dwelling unit for both rental and personal purposes, divide your expenses between the rental use and the personal use based on the number of days used for each purpose. Free state tax return e-file When dividing your expenses, follow these rules. Free state tax return e-file Any day that the unit is rented at a fair rental price is a day of rental use even if you used the unit for personal purposes that day. Free state tax return e-file (This rule does not apply when determining whether you used the unit as a home. Free state tax return e-file ) Any day that the unit is available for rent but not actually rented is not a day of rental use. Free state tax return e-file Fair rental price. Free state tax return e-file   A fair rental price for your property generally is the amount of rent that a person who is not related to you would be willing to pay. Free state tax return e-file The rent you charge is not a fair rental price if it is substantially less than the rents charged for other properties that are similar to your property in your area. Free state tax return e-file   Ask yourself the following questions when comparing another property with yours. Free state tax return e-file Is it used for the same purpose? Is it approximately the same size? Is it in approximately the same condition? Does it have similar furnishings? Is it in a similar location? If any of the answers are no, the properties probably are not similar. Free state tax return e-file Example. Free state tax return e-file Your beach cottage was available for rent from June 1 through August 31 (92 days). Free state tax return e-file Except for the first week in August (7 days), when you were unable to find a renter, you rented the cottage at a fair rental price during that time. Free state tax return e-file The person who rented the cottage for July allowed you to use it over the weekend (2 days) without any reduction in or refund of rent. Free state tax return e-file Your family also used the cottage during the last 2 weeks of May (14 days). Free state tax return e-file The cottage was not used at all before May 17 or after August 31. Free state tax return e-file You figure the part of the cottage expenses to treat as rental expenses as follows. Free state tax return e-file The cottage was used for rental a total of 85 days (92 − 7). Free state tax return e-file The days it was available for rent but not rented (7 days) are not days of rental use. Free state tax return e-file The July weekend (2 days) you used it is rental use because you received a fair rental price for the weekend. Free state tax return e-file You used the cottage for personal purposes for 14 days (the last 2 weeks in May). Free state tax return e-file The total use of the cottage was 99 days (14 days personal use + 85 days rental use). Free state tax return e-file Your rental expenses are 85/99 (86%) of the cottage expenses. Free state tax return e-file Note. Free state tax return e-file When determining whether you used the cottage as a home, the July weekend (2 days) you used it is considered personal use even though you received a fair rental price for the weekend. Free state tax return e-file Therefore, you had 16 days of personal use and 83 days of rental use for this purpose. Free state tax return e-file Because you used the cottage for personal purposes more than 14 days and more than 10% of the days of rental use (8 days), you used it as a home. Free state tax return e-file If you have a net loss, you may not be able to deduct all of the rental expenses. Free state tax return e-file See Dwelling Unit Used as a Home, next. Free state tax return e-file Dwelling Unit Used as a Home If you use a dwelling unit for both rental and personal purposes, the tax treatment of the rental expenses you figured earlier under Dividing Expenses and rental income depends on whether you are considered to be using the dwelling unit as a home. Free state tax return e-file You use a dwelling unit as a home during the tax year if you use it for personal purposes more than the greater of: 14 days, or 10% of the total days it is rented to others at a fair rental price. Free state tax return e-file See What is a day of personal use , later. Free state tax return e-file If a dwelling unit is used for personal purposes on a day it is rented at a fair rental price (discussed earlier), do not count that day as a day of rental use in applying (2) above. Free state tax return e-file Instead, count it as a day of personal use in applying both (1) and (2) above. Free state tax return e-file What is a day of personal use?   A day of personal use of a dwelling unit is any day that the unit is used by any of the following persons. Free state tax return e-file You or any other person who owns an interest in it, unless you rent it to another owner as his or her main home under a shared equity financing agreement (defined later). Free state tax return e-file However, see Days used as a main home before or after renting , later. Free state tax return e-file A member of your family or a member of the family of any other person who owns an interest in it, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. Free state tax return e-file Family includes only your spouse, brothers and sisters, half-brothers and half-sisters, ancestors (parents, grandparents, etc. Free state tax return e-file ), and lineal descendants (children, grandchildren, etc. Free state tax return e-file ). Free state tax return e-file Anyone under an arrangement that lets you use some other dwelling unit. Free state tax return e-file Anyone at less than a fair rental price. Free state tax return e-file Main home. Free state tax return e-file   If the other person or member of the family in (1) or (2) above has more than one home, his or her main home is ordinarily the one he or she lived in most of the time. Free state tax return e-file Shared equity financing agreement. Free state tax return e-file   This is an agreement under which two or more persons acquire undivided interests for more than 50 years in an entire dwelling unit, including the land, and one or more of the co-owners is entitled to occupy the unit as his or her main home upon payment of rent to the other co-owner or owners. Free state tax return e-file Donation of use of the property. Free state tax return e-file   You use a dwelling unit for personal purposes if: You donate the use of the unit to a charitable organization, The organization sells the use of the unit at a fund-raising event, and The “purchaser” uses the unit. Free state tax return e-file Examples. Free state tax return e-file   The following examples show how to determine if you have days of personal use. Free state tax return e-file Example 1. Free state tax return e-file You and your neighbor are co-owners of a condominium at the beach. Free state tax return e-file Last year, you rented the unit to vacationers whenever possible. Free state tax return e-file The unit was not used as a main home by anyone. Free state tax return e-file Your neighbor used the unit for 2 weeks last year; you did not use it at all. Free state tax return e-file Because your neighbor has an interest in the unit, both of you are considered to have used the unit for personal purposes during those 2 weeks. Free state tax return e-file Example 2. Free state tax return e-file You and your neighbors are co-owners of a house under a shared equity financing agreement. Free state tax return e-file Your neighbors live in the house and pay you a fair rental price. Free state tax return e-file Even though your neighbors have an interest in the house, the days your neighbors live there are not counted as days of personal use by you. Free state tax return e-file This is because your neighbors rent the house as their main home under a shared equity financing agreement. Free state tax return e-file Example 3. Free state tax return e-file You own a rental property that you rent to your son. Free state tax return e-file Your son does not own any interest in this property. Free state tax return e-file He uses it as his main home and pays you a fair rental price. Free state tax return e-file Your son's use of the property is not personal use by you because your son is using it as his main home, he owns no interest in the property, and he is paying you a fair rental price. Free state tax return e-file Example 4. Free state tax return e-file You rent your beach house to Rosa. Free state tax return e-file Rosa rents her cabin in the mountains to you. Free state tax return e-file You each pay a fair rental price. Free state tax return e-file You are using your beach house for personal purposes on the days that Rosa uses it because your house is used by Rosa under an arrangement that allows you to use her cabin. Free state tax return e-file Example 5. Free state tax return e-file You rent an apartment to your mother at less than a fair rental price. Free state tax return e-file You are using the apartment for personal purposes on the days that your mother rents it because you rent it for less than a fair rental price. Free state tax return e-file Days used for repairs and maintenance. Free state tax return e-file   Any day that you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. Free state tax return e-file Do not count such a day as a day of personal use even if family members use the property for recreational purposes on the same day. Free state tax return e-file Example. Free state tax return e-file Corey owns a cabin in the mountains that he rents for most of the year. Free state tax return e-file He spends a week at the cabin with family members. Free state tax return e-file Corey works on maintenance of the cabin 3 or 4 hours each day during the week and spends the rest of the time fishing, hiking, and relaxing. Free state tax return e-file Corey's family members, however, work substantially full time on the cabin each day during the week. Free state tax return e-file The main purpose of being at the cabin that week is to do maintenance work. Free state tax return e-file Therefore, the use of the cabin during the week by Corey and his family will not be considered personal use by Corey. Free state tax return e-file Days used as a main home before or after renting. Free state tax return e-file   For purposes of determining whether a dwelling unit was used as a home, you may not have to count days you used the property as your main home before or after renting it or offering it for rent as days of personal use. Free state tax return e-file Do not count them as days of personal use if: You rented or tried to rent the property for 12 or more consecutive months. Free state tax return e-file You rented or tried to rent the property for a period of less than 12 consecutive months and the period ended because you sold or exchanged the property. Free state tax return e-file However, this special rule does not apply when dividing expenses between rental and personal use. Free state tax return e-file See Property Changed to Rental Use in chapter 4. Free state tax return e-file Example 1. Free state tax return e-file On February 29, 2012, you moved out of the house you had lived in for 6 years because you accepted a job in another town. Free state tax return e-file You rented your house at a fair rental price from March 15, 2012, to May 14, 2013 (14 months). Free state tax return e-file On June 1, 2013, you moved back into your old house. Free state tax return e-file The days you used the house as your main home from January 1 to February 29, 2012, and from June 1 to December 31, 2013, are not counted as days of personal use. Free state tax return e-file Therefore, you would use the rules in chapter 1 when figuring your rental income and expenses. Free state tax return e-file Example 2. Free state tax return e-file On January 31, you moved out of the condominium where you had lived for 3 years. Free state tax return e-file You offered it for rent at a fair rental price beginning on February 1. Free state tax return e-file You were unable to rent it until April. Free state tax return e-file On September 15, you sold the condominium. Free state tax return e-file The days you used the condominium as your main home from January 1 to January 31 are not counted as days of personal use when determining whether you used it as a home. Free state tax return e-file Examples. Free state tax return e-file   The following examples show how to determine whether you used your rental property as a home. Free state tax return e-file Example 1. Free state tax return e-file You converted the basement of your home into an apartment with a bedroom, a bathroom, and a small kitchen. Free state tax return e-file You rented the basement apartment at a fair rental price to college students during the regular school year. Free state tax return e-file You rented to them on a 9-month lease (273 days). Free state tax return e-file You figured 10% of the total days rented to others at a fair rental price is 27 days. Free state tax return e-file During June (30 days), your brothers stayed with you and lived in the basement apartment rent free. Free state tax return e-file Your basement apartment was used as a home because you used it for personal purposes for 30 days. Free state tax return e-file Rent-free use by your brothers is considered personal use. Free state tax return e-file Your personal use (30 days) is more than the greater of 14 days or 10% of the total days it was rented (27 days). Free state tax return e-file Example 2. Free state tax return e-file You rented the guest bedroom in your home at a fair rental price during the local college's homecoming, commencement, and football weekends (a total of 27 days). Free state tax return e-file Your sister-in-law stayed in the room, rent free, for the last 3 weeks (21 days) in July. Free state tax return e-file You figured 10% of the total days rented to others at a fair rental price is 3 days. Free state tax return e-file The room was used as a home because you used it for personal purposes for 21 days. Free state tax return e-file That is more than the greater of 14 days or 10% of the 27 days it was rented (3 days). Free state tax return e-file Example 3. Free state tax return e-file You own a condominium apartment in a resort area. Free state tax return e-file You rented it at a fair rental price for a total of 170 days during the year. Free state tax return e-file For 12 of these days, the tenant was not able to use the apartment and allowed you to use it even though you did not refund any of the rent. Free state tax return e-file Your family actually used the apartment for 10 of those days. Free state tax return e-file Therefore, the apartment is treated as having been rented for 160 (170 – 10) days. Free state tax return e-file You figured 10% of the total days rented to others at a fair rental price is 16 days. Free state tax return e-file Your family also used the apartment for 7 other days during the year. Free state tax return e-file You used the apartment as a home because you used it for personal purposes for 17 days. Free state tax return e-file That is more than the greater of 14 days or 10% of the 160 days it was rented (16 days). Free state tax return e-file Minimal rental use. Free state tax return e-file   If you use the dwelling unit as a home and you rent it less than 15 days during the year, that period is not treated as rental activity. Free state tax return e-file See Used as a home but rented less than 15 days, later, for more information. Free state tax return e-file Limit on deductions. Free state tax return e-file   Renting a dwelling unit that is considered a home is not a passive activity. Free state tax return e-file Instead, if your rental expenses are more than your rental income, some or all of the excess expenses cannot be used to offset income from other sources. Free state tax return e-file The excess expenses that cannot be used to offset income from other sources are carried forward to the next year and treated as rental expenses for the same property. Free state tax return e-file Any expenses carried forward to the next year will be subject to any limits that apply for that year. Free state tax return e-file This limitation will apply to expenses carried forward to another year even if you do not use the property as your home for that subsequent year. Free state tax return e-file   To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 5–1. Free state tax return e-file Reporting Income and Deductions Property not used for personal purposes. Free state tax return e-file   If you do not use a dwelling unit for personal purposes, see chapter 3 for how to report your rental income and expenses. Free state tax return e-file Property used for personal purposes. Free state tax return e-file   If you do use a dwelling unit for personal purposes, then how you report your rental income and expenses depends on whether you used the dwelling unit as a home. Free state tax return e-file Not used as a home. Free state tax return e-file   If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. Free state tax return e-file Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in this chapter under Dividing Expenses . Free state tax return e-file The expenses for personal use are not deductible as rental expenses. Free state tax return e-file   Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses in chapter 3. Free state tax return e-file Used as a home but rented less than 15 days. Free state tax return e-file   If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function is not considered to be rental and it should not be reported on Schedule E (Form 1040). Free state tax return e-file You are not required to report the rental income and rental expenses from this activity. Free state tax return e-file The expenses, including qualified mortgage interest, property taxes, and any qualified casualty loss will be reported as normally allowed on Schedule A (Form 1040). Free state tax return e-file See the Instructions for Schedule A (Form 1040) for more information on deducting these expenses. Free state tax return e-file Used as a home and rented 15 days or more. Free state tax return e-file   If you use a dwelling unit as a home and rent it 15 days or more during the year, include all your rental income in your income. Free state tax return e-file Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in this chapter under Dividing Expenses . Free state tax return e-file The expenses for personal use are not deductible as rental expenses. Free state tax return e-file   If you had a net profit from renting the dwelling unit for the year (that is, if your rental income is more than the total of your rental expenses, including depreciation), deduct all of your rental expenses. Free state tax return e-file You do not need to use Worksheet 5-1. Free state tax return e-file   However, if you had a net loss from renting the dwelling unit for the year, your deduction for certain rental expenses is limited. Free state tax return e-file To figure your deductible rental expenses and any carryover to next year, use Worksheet 5–1. Free state tax return e-file Worksheet 5-1. Free state tax return e-file Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Use this worksheet only if you answer “yes” to all of the following questions. Free state tax return e-file Did you use the dwelling unit as a home this year? (See Dwelling Unit Used as a Home . Free state tax return e-file ) Did you rent the dwelling unit at a fair rental price 15 days or more this year? Is the total of your rental expenses and depreciation more than your rental income? PART I. Free state tax return e-file Rental Use Percentage A. Free state tax return e-file Total days available for rent at fair rental price A. Free state tax return e-file       B. Free state tax return e-file Total days available for rent (line A) but not rented B. Free state tax return e-file       C. Free state tax return e-file Total days of rental use. Free state tax return e-file Subtract line B from line A C. Free state tax return e-file       D. Free state tax return e-file Total days of personal use (including days rented at less than fair rental price) D. Free state tax return e-file       E. Free state tax return e-file Total days of rental and personal use. Free state tax return e-file Add lines C and D E. Free state tax return e-file       F. Free state tax return e-file Percentage of expenses allowed for rental. Free state tax return e-file Divide line C by line E     F. Free state tax return e-file . Free state tax return e-file PART II. Free state tax return e-file Allowable Rental Expenses 1. Free state tax return e-file Enter rents received 1. Free state tax return e-file   2a. Free state tax return e-file Enter the rental portion of deductible home mortgage interest and qualified mortgage insurance premiums (see instructions) 2a. Free state tax return e-file       b. Free state tax return e-file Enter the rental portion of real estate taxes b. Free state tax return e-file       c. Free state tax return e-file Enter the rental portion of deductible casualty and theft losses (see instructions) c. Free state tax return e-file       d. Free state tax return e-file Enter direct rental expenses (see instructions) d. Free state tax return e-file       e. Free state tax return e-file Fully deductible rental expenses. Free state tax return e-file Add lines 2a–2d. Free state tax return e-file Enter here and  on the appropriate lines on Schedule E (see instructions) 2e. Free state tax return e-file   3. Free state tax return e-file Subtract line 2e from line 1. Free state tax return e-file If zero or less, enter -0- 3. Free state tax return e-file   4a. Free state tax return e-file Enter the rental portion of expenses directly related to operating or maintaining  the dwelling unit (such as repairs, insurance, and utilities) 4a. Free state tax return e-file       b. Free state tax return e-file Enter the rental portion of excess mortgage interest and qualified mortgage insurance premiums (see instructions) b. Free state tax return e-file       c. Free state tax return e-file Carryover of operating expenses from 2012 worksheet c. Free state tax return e-file       d. Free state tax return e-file Add lines 4a–4c d. Free state tax return e-file       e. Free state tax return e-file Allowable expenses. Free state tax return e-file Enter the smaller of line 3 or line 4d (see instructions) 4e. Free state tax return e-file   5. Free state tax return e-file Subtract line 4e from line 3. Free state tax return e-file If zero or less, enter -0- 5. Free state tax return e-file   6a. Free state tax return e-file Enter the rental portion of excess casualty and theft losses (see instructions) 6a. Free state tax return e-file       b. Free state tax return e-file Enter the rental portion of depreciation of the dwelling unit b. Free state tax return e-file       c. Free state tax return e-file Carryover of excess casualty losses and depreciation from 2012 worksheet c. Free state tax return e-file       d. Free state tax return e-file Add lines 6a–6c d. Free state tax return e-file       e. Free state tax return e-file Allowable excess casualty and theft losses and depreciation. Free state tax return e-file Enter the smaller of  line 5 or line 6d (see instructions) 6e. Free state tax return e-file   PART III. Free state tax return e-file Carryover of Unallowed Expenses to Next Year 7a. Free state tax return e-file Operating expenses to be carried over to next year. Free state tax return e-file Subtract line 4e from line 4d 7a. Free state tax return e-file   b. Free state tax return e-file Excess casualty and theft losses and depreciation to be carried over to next year. Free state tax return e-file  Subtract line 6e from line 6d b. Free state tax return e-file   Worksheet 5-1 Instructions. Free state tax return e-file Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Caution. Free state tax return e-file Use the percentage determined in Part I, line F, to figure the rental portions to enter on lines 2a–2c, 4a–4b, and 6a–6b of  Part II. Free state tax return e-file Line 2a. Free state tax return e-file Figure the mortgage interest on the dwelling unit that you could deduct on Schedule A as if you had not rented the unit. Free state tax return e-file Do not include interest on a loan that did not benefit the dwelling unit. Free state tax return e-file For example, do not include interest on a home equity loan used to pay off credit cards or other personal loans, buy a car, or pay college tuition. Free state tax return e-file Include interest on a loan used to buy, build, or improve the dwelling unit, or to refinance such a loan. Free state tax return e-file Include the rental portion of this interest in the total you enter on line 2a of the worksheet. Free state tax return e-file   Figure the qualified mortgage insurance premiums on the dwelling unit that you could deduct on line 13 of Schedule A as if you had not rented the unit. Free state tax return e-file See the Schedule A instructions. Free state tax return e-file However, figure your adjusted gross income (Form 1040, line 38) without your rental income and expenses from the dwelling unit. Free state tax return e-file See Line 4b to deduct the part of the qualified mortgage insurance premiums not allowed because of the adjusted gross income limit. Free state tax return e-file Include the rental portion of the amount from Schedule A, line 13, in the total you enter on line 2a of the worksheet. Free state tax return e-file   Note. Free state tax return e-file Do not file this Schedule A or use it to figure the amount to deduct on line 13 of that schedule. Free state tax return e-file Instead, figure the personal portion on a separate Schedule A. Free state tax return e-file If you have deducted mortgage interest or qualified mortgage insurance premiums on the dwelling unit on other forms, such as Schedule C or F, remember to reduce your Schedule A deduction by that amount. Free state tax return e-file           Line 2c. Free state tax return e-file Figure the casualty and theft losses related to the dwelling unit that you could deduct on Schedule A as if you had not rented the dwelling unit. Free state tax return e-file To do this, complete Section A of Form 4684, Casualties and Thefts, treating the losses as personal losses. Free state tax return e-file If any of the loss is due to a federally declared disaster, see the Instructions for Form 4684. Free state tax return e-file On Form 4684, line 17, enter 10% of your adjusted gross income figured without your rental income and expenses from the dwelling unit. Free state tax return e-file Enter the rental portion of the result from Form 4684, line 18, on line 2c of this worksheet. Free state tax return e-file   Note. Free state tax return e-file Do not file this Form 4684 or use it to figure your personal losses on Schedule A. Free state tax return e-file Instead, figure the personal portion on a separate Form 4684. Free state tax return e-file           Line 2d. Free state tax return e-file Enter the total of your rental expenses that are directly related only to the rental activity. Free state tax return e-file These include interest on loans used for rental activities other than to buy, build, or improve the dwelling unit. Free state tax return e-file Also include rental agency fees, advertising, office supplies, and depreciation on office equipment used in your rental activity. Free state tax return e-file           Line 2e. Free state tax return e-file You can deduct the amounts on lines 2a, 2b, 2c, and 2d as rental expenses on Schedule E even if your rental expenses are more than your rental income. Free state tax return e-file Enter the amounts on lines 2a, 2b, 2c, and 2d on the appropriate lines of Schedule E. Free state tax return e-file           Line 4b. Free state tax return e-file On line 2a, you entered the rental portion of the mortgage interest or qualified mortgage insurance premiums you could deduct on Schedule A if you had not rented the dwelling unit. Free state tax return e-file If you had additional mortgage interest and qualified mortgage insurance premiums that would not be deductible on Schedule A because of limits imposed on them, enter on line 4b of this worksheet the rental portion of those excess amounts. Free state tax return e-file Do not include interest on a loan that did not benefit the dwelling unit  (as explained in the line 2a instructions). Free state tax return e-file           Line 4e. Free state tax return e-file You can deduct the amounts on lines 4a, 4b, and 4c as rental expenses on Schedule E only to the extent they are not more than the amount on line 4e. Free state tax return e-file *           Line 6a. Free state tax return e-file To find the rental portion of excess casualty and theft losses, use the Form 4684 you prepared for line 2c of this worksheet. Free state tax return e-file   A. Free state tax return e-file Enter the amount from Form 4684, line 10       B. Free state tax return e-file Enter the rental portion of line A       C. Free state tax return e-file Enter the amount from line 2c of this worksheet       D. Free state tax return e-file Subtract line C from line B. Free state tax return e-file Enter the result here and on line 6a of this worksheet               Line 6e. Free state tax return e-file You can deduct the amounts on lines 6a, 6b, and 6c as rental expenses on Schedule E only to the extent they are not more than the amount on line 6e. Free state tax return e-file * *Allocating the limited deduction. Free state tax return e-file If you cannot deduct all of the amount on line 4d or 6d this year, you can allocate the allowable deduction in any way you wish among the expenses included on line 4d or 6d. Free state tax return e-file Enter the amount you allocate to each expense on the appropriate line of Schedule E, Part I. Free state tax return e-file Prev  Up  Next   Home   More Online Publications