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Individual Income Tax Return Resident 2012 N11

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Individual Income Tax Return Resident 2012 N11

Individual income tax return resident 2012 n11 23. Individual income tax return resident 2012 n11   Interest Expense Table of Contents Introduction Useful Items - You may want to see: Home Mortgage InterestAmount Deductible Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement Investment InterestInvestment Property Allocation of Interest Expense Limit on Deduction Items You Cannot DeductPersonal Interest Allocation of Interest How To ReportMore than one borrower. Individual income tax return resident 2012 n11 Mortgage proceeds used for business or investment. Individual income tax return resident 2012 n11 Introduction This chapter discusses what interest expenses you can deduct. Individual income tax return resident 2012 n11 Interest is the amount you pay for the use of borrowed money. Individual income tax return resident 2012 n11 The following are types of interest you can deduct as itemized deductions on Schedule A (Form 1040). Individual income tax return resident 2012 n11 Home mortgage interest, including certain points and mortgage insurance premiums. Individual income tax return resident 2012 n11 Investment interest. Individual income tax return resident 2012 n11 This chapter explains these deductions. Individual income tax return resident 2012 n11 It also explains where to deduct other types of interest and lists some types of interest you cannot deduct. Individual income tax return resident 2012 n11 Use Table 23-1 to find out where to get more information on various types of interest, including investment interest. Individual income tax return resident 2012 n11 Useful Items - You may want to see: Publication 936 Home Mortgage Interest Deduction 550 Investment Income and Expenses Home Mortgage Interest Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). Individual income tax return resident 2012 n11 The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. Individual income tax return resident 2012 n11 You can deduct home mortgage interest if all the following conditions are met. Individual income tax return resident 2012 n11 You file Form 1040 and itemize deductions on Schedule A (Form 1040). Individual income tax return resident 2012 n11 The mortgage is a secured debt on a qualified home in which you have an ownership interest. Individual income tax return resident 2012 n11 (Generally, your mortgage is a secured debt if you put your home up as collateral to protect the interest of the lender. Individual income tax return resident 2012 n11 The term “qualified home” means your main home or second home. Individual income tax return resident 2012 n11 For details, see Publication 936. Individual income tax return resident 2012 n11 )  Both you and the lender must intend that the loan be repaid. Individual income tax return resident 2012 n11 Amount Deductible In most cases, you can deduct all of your home mortgage interest. Individual income tax return resident 2012 n11 How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. Individual income tax return resident 2012 n11 Fully deductible interest. Individual income tax return resident 2012 n11   If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. Individual income tax return resident 2012 n11 (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category. Individual income tax return resident 2012 n11 )   The three categories are as follows: Mortgages you took out on or before October 13, 1987 (called grandfathered debt). Individual income tax return resident 2012 n11 Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2013 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately). Individual income tax return resident 2012 n11 Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2013 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2). Individual income tax return resident 2012 n11 The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. Individual income tax return resident 2012 n11   See Part II of Publication 936 for more detailed definitions of grandfathered, home acquisition, and home equity debt. Individual income tax return resident 2012 n11    You can use Figure 23-A to check whether your home mortgage interest is fully deductible. Individual income tax return resident 2012 n11 Figure 23-A. Individual income tax return resident 2012 n11 Is My Home Mortgage Interest Fully Deductible? Please click here for the text description of the image. Individual income tax return resident 2012 n11 Figure 23-A. Individual income tax return resident 2012 n11 Is My Interest Fully Deductible? Limits on deduction. Individual income tax return resident 2012 n11   You cannot fully deduct interest on a mortgage that does not fit into any of the three categories listed earlier. Individual income tax return resident 2012 n11 If this applies to you, see Part II of Publication 936 to figure the amount of interest you can deduct. Individual income tax return resident 2012 n11 Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. Individual income tax return resident 2012 n11 It also describes certain special situations that may affect your deduction. Individual income tax return resident 2012 n11 Late payment charge on mortgage payment. Individual income tax return resident 2012 n11   You can deduct as home mortgage interest a late payment charge if it was not for a specific service performed in connection with your mortgage loan. Individual income tax return resident 2012 n11 Mortgage prepayment penalty. Individual income tax return resident 2012 n11   If you pay off your home mortgage early, you may have to pay a penalty. Individual income tax return resident 2012 n11 You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. Individual income tax return resident 2012 n11 Sale of home. Individual income tax return resident 2012 n11   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of sale. Individual income tax return resident 2012 n11 Example. Individual income tax return resident 2012 n11 John and Peggy Harris sold their home on May 7. Individual income tax return resident 2012 n11 Through April 30, they made home mortgage interest payments of $1,220. Individual income tax return resident 2012 n11 The settlement sheet for the sale of the home showed $50 interest for the 6-day period in May up to, but not including, the date of sale. Individual income tax return resident 2012 n11 Their mortgage interest deduction is $1,270 ($1,220 + $50). Individual income tax return resident 2012 n11 Prepaid interest. Individual income tax return resident 2012 n11   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. Individual income tax return resident 2012 n11 You can deduct in each year only the interest that qualifies as home mortgage interest for that year. Individual income tax return resident 2012 n11 However, there is an exception that applies to points, discussed later. Individual income tax return resident 2012 n11 Mortgage interest credit. Individual income tax return resident 2012 n11   You may be able to claim a mortgage interest credit if you were issued a mortgage credit certificate (MCC) by a state or local government. Individual income tax return resident 2012 n11 Figure the credit on Form 8396, Mortgage Interest Credit. Individual income tax return resident 2012 n11 If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. Individual income tax return resident 2012 n11   For more information on the credit, see chapter 37. Individual income tax return resident 2012 n11 Ministers' and military housing allowance. Individual income tax return resident 2012 n11   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you can still deduct your home mortgage interest. Individual income tax return resident 2012 n11 Hardest Hit Fund and Emergency Homeowners' Loan Programs. Individual income tax return resident 2012 n11   You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. Individual income tax return resident 2012 n11 You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. Individual income tax return resident 2012 n11 You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. Individual income tax return resident 2012 n11 If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098-MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received from payer(s) / borrower(s)), box 4 (mortgage insurance premiums) and box 5 (real property taxes). Individual income tax return resident 2012 n11 However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. Individual income tax return resident 2012 n11 Mortgage assistance payments under section 235 of the National Housing Act. Individual income tax return resident 2012 n11   If you qualify for mortgage assistance payments for lower-income families under section 235 of the National Housing Act, part or all of the interest on your mortgage may be paid for you. Individual income tax return resident 2012 n11 You cannot deduct the interest that is paid for you. Individual income tax return resident 2012 n11 No other effect on taxes. Individual income tax return resident 2012 n11   Do not include these mortgage assistance payments in your income. Individual income tax return resident 2012 n11 Also, do not use these payments to reduce other deductions, such as real estate taxes. Individual income tax return resident 2012 n11 Divorced or separated individuals. Individual income tax return resident 2012 n11   If a divorce or separation agreement requires you or your spouse or former spouse to pay home mortgage interest on a home owned by both of you, the payment of interest may be alimony. Individual income tax return resident 2012 n11 See the discussion of Payments for jointly-owned home in chapter 18. Individual income tax return resident 2012 n11 Redeemable ground rents. Individual income tax return resident 2012 n11   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. Individual income tax return resident 2012 n11   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. Individual income tax return resident 2012 n11 For more information, see Publication 936. Individual income tax return resident 2012 n11 Nonredeemable ground rents. Individual income tax return resident 2012 n11   Payments on a nonredeemable ground rent are not mortgage interest. Individual income tax return resident 2012 n11 You can deduct them as rent if they are a business expense or if they are for rental property. Individual income tax return resident 2012 n11 Reverse mortgages. Individual income tax return resident 2012 n11   A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. Individual income tax return resident 2012 n11 With a reverse mortgage, you retain title to your home. Individual income tax return resident 2012 n11 Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. Individual income tax return resident 2012 n11 Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Individual income tax return resident 2012 n11 Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until the loan is paid in full. Individual income tax return resident 2012 n11 Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Publication 936. Individual income tax return resident 2012 n11 Rental payments. Individual income tax return resident 2012 n11   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. Individual income tax return resident 2012 n11 This is true even if the settlement papers call them interest. Individual income tax return resident 2012 n11 You cannot deduct these payments as home mortgage interest. Individual income tax return resident 2012 n11 Mortgage proceeds invested in tax-exempt securities. Individual income tax return resident 2012 n11   You cannot deduct the home mortgage interest on grandfathered debt or home equity debt if you used the proceeds of the mortgage to buy securities or certificates that produce tax-free income. Individual income tax return resident 2012 n11 “Grandfathered debt” and “home equity debt” are defined earlier under Amount Deductible. Individual income tax return resident 2012 n11 Refunds of interest. Individual income tax return resident 2012 n11   If you receive a refund of interest in the same tax year you paid it, you must reduce your interest expense by the amount refunded to you. Individual income tax return resident 2012 n11 If you receive a refund of interest you deducted in an earlier year, you generally must include the refund in income in the year you receive it. Individual income tax return resident 2012 n11 However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. Individual income tax return resident 2012 n11 This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. Individual income tax return resident 2012 n11    If you received a refund of interest you overpaid in an earlier year, you generally will receive a Form 1098, Mortgage Interest Statement, showing the refund in box 3. Individual income tax return resident 2012 n11 For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. Individual income tax return resident 2012 n11   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in chapter 12. Individual income tax return resident 2012 n11 Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Individual income tax return resident 2012 n11 Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Individual income tax return resident 2012 n11 A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Individual income tax return resident 2012 n11 See Points paid by the seller , later. Individual income tax return resident 2012 n11 General Rule You generally cannot deduct the full amount of points in the year paid. Individual income tax return resident 2012 n11 Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. Individual income tax return resident 2012 n11 See Deduction Allowed Ratably , next. Individual income tax return resident 2012 n11 For exceptions to the general rule, see Deduction Allowed in Year Paid , later. Individual income tax return resident 2012 n11 Deduction Allowed Ratably If you do not meet the tests listed under Deduction Allowed in Year Paid , later, the loan is not a home improvement loan, or you choose not to deduct your points in full in the year paid, you can deduct the points ratably (equally) over the life of the loan if you meet all the following tests. Individual income tax return resident 2012 n11 You use the cash method of accounting. Individual income tax return resident 2012 n11 This means you report income in the year you receive it and deduct expenses in the year you pay them. Individual income tax return resident 2012 n11 Most individuals use this method. Individual income tax return resident 2012 n11 Your loan is secured by a home. Individual income tax return resident 2012 n11 (The home does not need to be your main home. Individual income tax return resident 2012 n11 ) Your loan period is not more than 30 years. Individual income tax return resident 2012 n11 If your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period. Individual income tax return resident 2012 n11 Either your loan amount is $250,000 or less, or the number of points is not more than: 4, if your loan period is 15 years or less, or 6, if your loan period is more than 15 years. Individual income tax return resident 2012 n11 Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. Individual income tax return resident 2012 n11 (You can use Figure 23-B as a quick guide to see whether your points are fully deductible in the year paid. Individual income tax return resident 2012 n11 ) Your loan is secured by your main home. Individual income tax return resident 2012 n11 (Your main home is the one you ordinarily live in most of the time. Individual income tax return resident 2012 n11 ) Paying points is an established business practice in the area where the loan was made. Individual income tax return resident 2012 n11 The points paid were not more than the points generally charged in that area. Individual income tax return resident 2012 n11 You use the cash method of accounting. Individual income tax return resident 2012 n11 This means you report income in the year you receive it and deduct expenses in the year you pay them. Individual income tax return resident 2012 n11 (If you want more information about this method, see Accounting Methods in chapter 1. Individual income tax return resident 2012 n11 ) The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. Individual income tax return resident 2012 n11 The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Individual income tax return resident 2012 n11 The funds you provided are not required to have been applied to the points. Individual income tax return resident 2012 n11 They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Individual income tax return resident 2012 n11 You cannot have borrowed these funds from your lender or mortgage broker. Individual income tax return resident 2012 n11 You use your loan to buy or build your main home. Individual income tax return resident 2012 n11 The points were computed as a percentage of the principal amount of the mortgage. Individual income tax return resident 2012 n11 The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. Individual income tax return resident 2012 n11 The points may be shown as paid from either your funds or the seller's. Individual income tax return resident 2012 n11 Figure 23-B. Individual income tax return resident 2012 n11 Are My Points Fully Deductible This Year? Please click here for the text description of the image. Individual income tax return resident 2012 n11 Figure 23-B. Individual income tax return resident 2012 n11 Are My Points Fully Deductible This Year? Note. Individual income tax return resident 2012 n11 If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan. Individual income tax return resident 2012 n11 Home improvement loan. Individual income tax return resident 2012 n11   You can also fully deduct in the year paid points paid on a loan to improve your main home, if tests (1) through (6) are met. Individual income tax return resident 2012 n11 Second home. Individual income tax return resident 2012 n11 You cannot fully deduct in the year paid points you pay on loans secured by your second home. Individual income tax return resident 2012 n11 You can deduct these points only over the life of the loan. Individual income tax return resident 2012 n11 Refinancing. Individual income tax return resident 2012 n11   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. Individual income tax return resident 2012 n11 This is true even if the new mortgage is secured by your main home. Individual income tax return resident 2012 n11   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Individual income tax return resident 2012 n11 You can deduct the rest of the points over the life of the loan. Individual income tax return resident 2012 n11 Example 1. Individual income tax return resident 2012 n11 In 1998, Bill Fields got a mortgage to buy a home. Individual income tax return resident 2012 n11 In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. Individual income tax return resident 2012 n11 The mortgage is secured by his home. Individual income tax return resident 2012 n11 To get the new loan, he had to pay three points ($3,000). Individual income tax return resident 2012 n11 Two points ($2,000) were for prepaid interest, and one point ($1,000) was charged for services, in place of amounts that ordinarily are stated separately on the settlement statement. Individual income tax return resident 2012 n11 Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. Individual income tax return resident 2012 n11 The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. Individual income tax return resident 2012 n11 Bill's first payment on the new loan was due July 1. Individual income tax return resident 2012 n11 He made six payments on the loan in 2013 and is a cash basis taxpayer. Individual income tax return resident 2012 n11 Bill used the funds from the new mortgage to repay his existing mortgage. Individual income tax return resident 2012 n11 Although the new mortgage loan was for Bill's continued ownership of his main home, it was not for the purchase or improvement of that home. Individual income tax return resident 2012 n11 He cannot deduct all of the points in 2013. Individual income tax return resident 2012 n11 He can deduct two points ($2,000) ratably over the life of the loan. Individual income tax return resident 2012 n11 He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. Individual income tax return resident 2012 n11 The other point ($1,000) was a fee for services and is not deductible. Individual income tax return resident 2012 n11 Example 2. Individual income tax return resident 2012 n11 The facts are the same as in Example 1, except that Bill used $25,000 of the loan proceeds to improve his home and $75,000 to repay his existing mortgage. Individual income tax return resident 2012 n11 Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. Individual income tax return resident 2012 n11 His deduction is $500 ($2,000 × 25%). Individual income tax return resident 2012 n11 Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. Individual income tax return resident 2012 n11 This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. Individual income tax return resident 2012 n11 The total amount Bill deducts in 2013 is $550 ($500 + $50). Individual income tax return resident 2012 n11 Special Situations This section describes certain special situations that may affect your deduction of points. Individual income tax return resident 2012 n11 Original issue discount. Individual income tax return resident 2012 n11   If you do not qualify to either deduct the points in the year paid or deduct them ratably over the life of the loan, or if you choose not to use either of these methods, the points reduce the issue price of the loan. Individual income tax return resident 2012 n11 This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. Individual income tax return resident 2012 n11 Amounts charged for services. Individual income tax return resident 2012 n11   Amounts charged by the lender for specific services connected to the loan are not interest. Individual income tax return resident 2012 n11 Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Individual income tax return resident 2012 n11 You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Individual income tax return resident 2012 n11 Points paid by the seller. Individual income tax return resident 2012 n11   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Individual income tax return resident 2012 n11 Treatment by seller. Individual income tax return resident 2012 n11   The seller cannot deduct these fees as interest. Individual income tax return resident 2012 n11 But they are a selling expense that reduces the amount realized by the seller. Individual income tax return resident 2012 n11 See chapter 15 for information on selling your home. Individual income tax return resident 2012 n11 Treatment by buyer. Individual income tax return resident 2012 n11    The buyer reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them. Individual income tax return resident 2012 n11 If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. Individual income tax return resident 2012 n11 If any of those tests are not met, the buyer deducts the points over the life of the loan. Individual income tax return resident 2012 n11   For information about basis, see chapter 13. Individual income tax return resident 2012 n11 Funds provided are less than points. Individual income tax return resident 2012 n11   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the funds you provided were less than the points charged to you (test (6)), you can deduct the points in the year paid, up to the amount of funds you provided. Individual income tax return resident 2012 n11 In addition, you can deduct any points paid by the seller. Individual income tax return resident 2012 n11 Example 1. Individual income tax return resident 2012 n11 When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Individual income tax return resident 2012 n11 You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. Individual income tax return resident 2012 n11 Of the $1,000 charged for points, you can deduct $750 in the year paid. Individual income tax return resident 2012 n11 You spread the remaining $250 over the life of the mortgage. Individual income tax return resident 2012 n11 Example 2. Individual income tax return resident 2012 n11 The facts are the same as in Example 1, except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. Individual income tax return resident 2012 n11 In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Individual income tax return resident 2012 n11 You spread the remaining $250 over the life of the mortgage. Individual income tax return resident 2012 n11 You must reduce the basis of your home by the $1,000 paid by the seller. Individual income tax return resident 2012 n11 Excess points. Individual income tax return resident 2012 n11   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the points paid were more than generally paid in your area (test (3)), you deduct in the year paid only the points that are generally charged. Individual income tax return resident 2012 n11 You must spread any additional points over the life of the mortgage. Individual income tax return resident 2012 n11 Mortgage ending early. Individual income tax return resident 2012 n11   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. Individual income tax return resident 2012 n11 However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. Individual income tax return resident 2012 n11 Instead, deduct the remaining balance over the term of the new loan. Individual income tax return resident 2012 n11    A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Individual income tax return resident 2012 n11 Example. Individual income tax return resident 2012 n11 Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. Individual income tax return resident 2012 n11 He deducts $200 points per year. Individual income tax return resident 2012 n11 Through 2012, Dan has deducted $2,200 of the points. Individual income tax return resident 2012 n11 Dan prepaid his mortgage in full in 2013. Individual income tax return resident 2012 n11 He can deduct the remaining $800 of points in 2013. Individual income tax return resident 2012 n11 Limits on deduction. Individual income tax return resident 2012 n11   You cannot fully deduct points paid on a mortgage unless the mortgage fits into one of the categories listed earlier under Fully deductible interest . Individual income tax return resident 2012 n11 See Publication 936 for details. Individual income tax return resident 2012 n11 Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. Individual income tax return resident 2012 n11 The insurance must be in connection with home acquisition debt and the insurance contract must have been issued after 2006. Individual income tax return resident 2012 n11 Qualified mortgage insurance. Individual income tax return resident 2012 n11   Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). Individual income tax return resident 2012 n11   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. Individual income tax return resident 2012 n11 If provided by the Rural Housing Service, it is commonly known as a guarantee fee. Individual income tax return resident 2012 n11 These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Individual income tax return resident 2012 n11 Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. Individual income tax return resident 2012 n11 Special rules for prepaid mortgage insurance. Individual income tax return resident 2012 n11   Generally, if you paid premiums for qualified mortgage insurance that are allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. Individual income tax return resident 2012 n11 You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. Individual income tax return resident 2012 n11 No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. Individual income tax return resident 2012 n11 This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. Individual income tax return resident 2012 n11 See the Example below. Individual income tax return resident 2012 n11 Example. Individual income tax return resident 2012 n11 Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. Individual income tax return resident 2012 n11 Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Individual income tax return resident 2012 n11 Since the $9,240 in private mortgage insurance is allocable to periods after 2012, Ryan must allocate the $9,240 over the shorter of the life of the mortgage or 84 months. Individual income tax return resident 2012 n11 Ryan's adjusted gross income (AGI) for 2012 is $76,000. Individual income tax return resident 2012 n11 Ryan can deduct $880 ($9,240 ÷ 84 × 8 months) for qualified mortgage insurance premiums in 2012. Individual income tax return resident 2012 n11 For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 × 12 months) if his AGI is $100,000 or less. Individual income tax return resident 2012 n11 In this example, the mortgage insurance premiums are allocated over 84 months, which is shorter than the life of the mortgage of 15 years (180 months). Individual income tax return resident 2012 n11 Limit on deduction. Individual income tax return resident 2012 n11   If your adjusted gross income on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. Individual income tax return resident 2012 n11 See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. Individual income tax return resident 2012 n11 If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Individual income tax return resident 2012 n11 Form 1098, Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage, you generally will receive a Form 1098 or a similar statement from the mortgage holder. Individual income tax return resident 2012 n11 You will receive the statement if you pay interest to a person (including a financial institution or a cooperative housing corporation) in the course of that person's trade or business. Individual income tax return resident 2012 n11 A governmental unit is a person for purposes of furnishing the statement. Individual income tax return resident 2012 n11 The statement for each year should be sent to you by January 31 of the following year. Individual income tax return resident 2012 n11 A copy of this form will also be sent to the IRS. Individual income tax return resident 2012 n11 The statement will show the total interest you paid during the year, any mortgage insurance premiums you paid, and if you purchased a main home during the year, it also will show the deductible points paid during the year, including seller-paid points. Individual income tax return resident 2012 n11 However, it should not show any interest that was paid for you by a government agency. Individual income tax return resident 2012 n11 As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Individual income tax return resident 2012 n11 However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. Individual income tax return resident 2012 n11 See Points , earlier, to determine whether you can deduct points not shown on Form 1098. Individual income tax return resident 2012 n11 Prepaid interest on Form 1098. Individual income tax return resident 2012 n11   If you prepaid interest in 2013 that accrued in full by January 15, 2014, this prepaid interest may be included in box 1 of Form 1098. Individual income tax return resident 2012 n11 However, you cannot deduct the prepaid amount for January 2014 in 2013. Individual income tax return resident 2012 n11 (See Prepaid interest , earlier. Individual income tax return resident 2012 n11 ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. Individual income tax return resident 2012 n11 You will include the interest for January 2014 with the other interest you pay for 2014. Individual income tax return resident 2012 n11 See How To Report , later. Individual income tax return resident 2012 n11 Refunded interest. Individual income tax return resident 2012 n11   If you received a refund of mortgage interest you overpaid in an earlier year, you generally will receive a Form 1098 showing the refund in box 3. Individual income tax return resident 2012 n11 See Refunds of interest , earlier. Individual income tax return resident 2012 n11 Mortgage insurance premiums. Individual income tax return resident 2012 n11   The amount of mortgage insurance premiums you paid during 2013 may be shown in box 4 of Form 1098. Individual income tax return resident 2012 n11 See Mortgage Insurance Premiums, earlier. Individual income tax return resident 2012 n11 Investment Interest This section discusses interest expenses you may be able to deduct as an investor. Individual income tax return resident 2012 n11 If you borrow money to buy property you hold for investment, the interest you pay is investment interest. Individual income tax return resident 2012 n11 You can deduct investment interest subject to the limit discussed later. Individual income tax return resident 2012 n11 However, you cannot deduct interest you incurred to produce tax-exempt income. Individual income tax return resident 2012 n11 Nor can you deduct interest expenses on straddles. Individual income tax return resident 2012 n11 Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. Individual income tax return resident 2012 n11 Investment Property Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. Individual income tax return resident 2012 n11 It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). Individual income tax return resident 2012 n11 Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). Individual income tax return resident 2012 n11 Partners, shareholders, and beneficiaries. Individual income tax return resident 2012 n11   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. Individual income tax return resident 2012 n11 Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. Individual income tax return resident 2012 n11 Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. Individual income tax return resident 2012 n11 The allocation is not affected by the use of property that secures the debt. Individual income tax return resident 2012 n11 Limit on Deduction Generally, your deduction for investment interest expense is limited to the amount of your net investment income. Individual income tax return resident 2012 n11 You can carry over the amount of investment interest that you could not deduct because of this limit to the next tax year. Individual income tax return resident 2012 n11 The interest carried over is treated as investment interest paid or accrued in that next year. Individual income tax return resident 2012 n11 You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. Individual income tax return resident 2012 n11 Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. Individual income tax return resident 2012 n11 Investment income. Individual income tax return resident 2012 n11    This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). Individual income tax return resident 2012 n11 Investment income does not include Alaska Permanent Fund dividends. Individual income tax return resident 2012 n11 It also does not include qualified dividends or net capital gain unless you choose to include them. Individual income tax return resident 2012 n11 Choosing to include qualified dividends. Individual income tax return resident 2012 n11   Investment income generally does not include qualified dividends, discussed in chapter 8. Individual income tax return resident 2012 n11 However, you can choose to include all or part of your qualified dividends in investment income. Individual income tax return resident 2012 n11   You make this choice by completing Form 4952, line 4g, according to its instructions. Individual income tax return resident 2012 n11   If you choose to include any amount of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. Individual income tax return resident 2012 n11 Choosing to include net capital gain. Individual income tax return resident 2012 n11   Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). Individual income tax return resident 2012 n11 However, you can choose to include all or part of your net capital gain in investment income. Individual income tax return resident 2012 n11    You make this choice by completing Form 4952, line 4g, according to its instructions. Individual income tax return resident 2012 n11   If you choose to include any amount of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. Individual income tax return resident 2012 n11    Before making either choice, consider the overall effect on your tax liability. Individual income tax return resident 2012 n11 Compare your tax if you make one or both of these choices with your tax if you do not. Individual income tax return resident 2012 n11 Investment income of child reported on parent's return. Individual income tax return resident 2012 n11    Investment income includes the part of your child's interest and dividend income that you choose to report on your return. Individual income tax return resident 2012 n11 If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814, Parents' Election To Report Child's Interest and Dividends. Individual income tax return resident 2012 n11 Child's qualified dividends. Individual income tax return resident 2012 n11   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. Individual income tax return resident 2012 n11 However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. Individual income tax return resident 2012 n11   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). Individual income tax return resident 2012 n11 Child's Alaska Permanent Fund dividends. Individual income tax return resident 2012 n11   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. Individual income tax return resident 2012 n11 To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. Individual income tax return resident 2012 n11 Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. Individual income tax return resident 2012 n11 Subtract the result from the amount on Form 8814, line 12. Individual income tax return resident 2012 n11 Child's capital gain distributions. Individual income tax return resident 2012 n11    If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D, line 13, or Form 1040, line 13) generally does not count as investment income. Individual income tax return resident 2012 n11 However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. Individual income tax return resident 2012 n11   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). Individual income tax return resident 2012 n11 Investment expenses. Individual income tax return resident 2012 n11   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. Individual income tax return resident 2012 n11 Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. Individual income tax return resident 2012 n11 Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A, line 27. Individual income tax return resident 2012 n11 Losses from passive activities. Individual income tax return resident 2012 n11   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). Individual income tax return resident 2012 n11 See Publication 925, Passive Activity and At-Risk Rules, for information about passive activities. Individual income tax return resident 2012 n11 Form 4952 Use Form 4952, Investment Interest Expense Deduction, to figure your deduction for investment interest. Individual income tax return resident 2012 n11 Exception to use of Form 4952. Individual income tax return resident 2012 n11   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. Individual income tax return resident 2012 n11 Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. Individual income tax return resident 2012 n11 You do not have any other deductible investment expenses. Individual income tax return resident 2012 n11 You have no carryover of investment interest expense from 2012. Individual income tax return resident 2012 n11 If you meet all of these tests, you can deduct all of your investment interest. Individual income tax return resident 2012 n11 More Information For more information on investment interest, see Interest Expenses in chapter 3 of Publication 550. Individual income tax return resident 2012 n11 Items You Cannot Deduct Some interest payments are not deductible. Individual income tax return resident 2012 n11 Certain expenses similar to interest also are not deductible. Individual income tax return resident 2012 n11 Nondeductible expenses include the following items. Individual income tax return resident 2012 n11 Personal interest (discussed later). Individual income tax return resident 2012 n11 Service charges (however, see Other Expenses (Line 23) in chapter 28). Individual income tax return resident 2012 n11 Annual fees for credit cards. Individual income tax return resident 2012 n11 Loan fees. Individual income tax return resident 2012 n11 Credit investigation fees. Individual income tax return resident 2012 n11 Interest to purchase or carry tax-exempt securities. Individual income tax return resident 2012 n11 Penalties. Individual income tax return resident 2012 n11   You cannot deduct fines and penalties paid to a government for violations of law, regardless of their nature. Individual income tax return resident 2012 n11 Personal Interest Personal interest is not deductible. Individual income tax return resident 2012 n11 Personal interest is any interest that is not home mortgage interest, investment interest, business interest, or other deductible interest. Individual income tax return resident 2012 n11 It includes the following items. Individual income tax return resident 2012 n11 Interest on car loans (unless you use the car for business). Individual income tax return resident 2012 n11 Interest on federal, state, or local income tax. Individual income tax return resident 2012 n11 Finance charges on credit cards, retail installment contracts, and revolving charge accounts incurred for personal expenses. Individual income tax return resident 2012 n11 Late payment charges by a public utility. Individual income tax return resident 2012 n11 You may be able to deduct interest you pay on a qualified student loan. Individual income tax return resident 2012 n11 For details, see Publication 970, Tax Benefits for Education. Individual income tax return resident 2012 n11 Allocation of Interest If you use the proceeds of a loan for more than one purpose (for example, personal and business), you must allocate the interest on the loan to each use. Individual income tax return resident 2012 n11 However, you do not have to allocate home mortgage interest if it is fully deductible, regardless of how the funds are used. Individual income tax return resident 2012 n11 You allocate interest (other than fully deductible home mortgage interest) on a loan in the same way as the loan itself is allocated. Individual income tax return resident 2012 n11 You do this by tracing disbursements of the debt proceeds to specific uses. Individual income tax return resident 2012 n11 For details on how to do this, see chapter 4 of Publication 535. Individual income tax return resident 2012 n11 How To Report You must file Form 1040 to deduct any home mortgage interest expense on your tax return. Individual income tax return resident 2012 n11 Where you deduct your interest expense generally depends on how you use the loan proceeds. Individual income tax return resident 2012 n11 See Table 23-1 for a summary of where to deduct your interest expense. Individual income tax return resident 2012 n11 Home mortgage interest and points. Individual income tax return resident 2012 n11   Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. Individual income tax return resident 2012 n11 If you paid more deductible interest to the financial institution than the amount shown on Form 1098, show the larger deductible amount on line 10. Individual income tax return resident 2012 n11 Attach a statement explaining the difference and print “See attached” next to line 10. Individual income tax return resident 2012 n11    Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. Individual income tax return resident 2012 n11 If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and taxpayer identification number (TIN) on the dotted lines next to line 11. Individual income tax return resident 2012 n11 The seller must give you this number and you must give the seller your TIN. Individual income tax return resident 2012 n11 A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Individual income tax return resident 2012 n11 Failure to meet any of these requirements may result in a $50 penalty for each failure. Individual income tax return resident 2012 n11 The TIN can be either a social security number, an individual taxpayer identification number (issued by the Internal Revenue Service), or an employer identification number. Individual income tax return resident 2012 n11 See Social Security Number (SSN) in chapter 1 for more information about TINs. Individual income tax return resident 2012 n11    If you can take a deduction for points that were not reported to you on Form 1098, deduct those points on Schedule A (Form 1040), line 12. Individual income tax return resident 2012 n11   Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. Individual income tax return resident 2012 n11 More than one borrower. Individual income tax return resident 2012 n11   If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Individual income tax return resident 2012 n11 Show how much of the interest each of you paid, and give the name and address of the person who received the form. Individual income tax return resident 2012 n11 Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Individual income tax return resident 2012 n11 Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. Individual income tax return resident 2012 n11   Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Individual income tax return resident 2012 n11 You should let each of the other borrowers know what his or her share is. Individual income tax return resident 2012 n11 Mortgage proceeds used for business or investment. Individual income tax return resident 2012 n11    If your home mortgage interest deduction is limited, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 23-1. Individual income tax return resident 2012 n11 It shows where to deduct the part of your excess interest that is for those activities. Individual income tax return resident 2012 n11 Investment interest. Individual income tax return resident 2012 n11    Deduct investment interest, subject to certain limits discussed in Publication 550, on Schedule A (Form 1040), line 14. Individual income tax return resident 2012 n11 Amortization of bond premium. Individual income tax return resident 2012 n11   There are various ways to treat the premium you pay to buy taxable bonds. Individual income tax return resident 2012 n11 See Bond Premium Amortization in Publication 550. Individual income tax return resident 2012 n11 Income-producing rental or royalty interest. Individual income tax return resident 2012 n11   Deduct interest on a loan for income-producing rental or royalty property that is not used in your business in Part I of Schedule E (Form 1040). Individual income tax return resident 2012 n11 Example. Individual income tax return resident 2012 n11 You rent out part of your home and borrow money to make repairs. Individual income tax return resident 2012 n11 You can deduct only the interest payment for the rented part in Part I of Schedule E (Form 1040). Individual income tax return resident 2012 n11 Deduct the rest of the interest payment on Schedule A (Form 1040) if it is deductible home mortgage interest. Individual income tax return resident 2012 n11 Table 23-1. Individual income tax return resident 2012 n11 Where To Deduct Your Interest Expense IF you have . Individual income tax return resident 2012 n11 . Individual income tax return resident 2012 n11 . Individual income tax return resident 2012 n11 THEN deduct it on . Individual income tax return resident 2012 n11 . Individual income tax return resident 2012 n11 . Individual income tax return resident 2012 n11 AND for more information go to . Individual income tax return resident 2012 n11 . Individual income tax return resident 2012 n11 . Individual income tax return resident 2012 n11 deductible student loan interest Form 1040, line 33, or Form 1040A, line 18 Publication 970. Individual income tax return resident 2012 n11 deductible home mortgage interest and points reported on Form 1098 Schedule A (Form 1040), line 10 Publication 936. Individual income tax return resident 2012 n11 deductible home mortgage interest not reported on Form 1098 Schedule A (Form 1040), line 11 Publication 936. Individual income tax return resident 2012 n11 deductible points not reported on Form 1098 Schedule A (Form 1040), line 12 Publication 936. Individual income tax return resident 2012 n11 deductible mortgage insurance premiums Schedule A (Form 1040), line 13 Publication 936. Individual income tax return resident 2012 n11 deductible investment interest (other than incurred to produce rents or royalties) Schedule A (Form 1040), line 14 Publication 550. Individual income tax return resident 2012 n11 deductible business interest (non-farm) Schedule C or C-EZ (Form 1040) Publication 535. Individual income tax return resident 2012 n11 deductible farm business interest Schedule F (Form 1040) Publications 225 and 535. Individual income tax return resident 2012 n11 deductible interest incurred to produce rents or royalties Schedule E (Form 1040) Publications 527 and 535. Individual income tax return resident 2012 n11 personal interest not deductible. Individual income tax return resident 2012 n11 Prev  Up  Next   Home   More Online Publications
 

The Individual Income Tax Return Resident 2012 N11

Individual income tax return resident 2012 n11 Index A Abandonment of home, Abandonment. Individual income tax return resident 2012 n11 Absence, temporary, Temporary absence. Individual income tax return resident 2012 n11 Abstract fees, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Address, change of, Reminders Adjusted basis, Adjusted Basis, Adjusted Basis Definition of, Determining Basis Worksheet 1 to figure, Determining Basis, Worksheet 1. Individual income tax return resident 2012 n11 Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 1. Individual income tax return resident 2012 n11 Adjusted Basis of Home Sold—Illustrated Example 3 for Emily White, Worksheet 1 Instructions. Individual income tax return resident 2012 n11 Adjusted Basis of Home Sold Adoption Adjusted basis of home for credit claimed, Decreases to Basis Advertising fees, Selling expenses. Individual income tax return resident 2012 n11 Amount realized, Amount Realized Appraisal fees, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Architect's fees, Construction. Individual income tax return resident 2012 n11 Armed forces Ownership and use tests, Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Individual income tax return resident 2012 n11 Assistance (see Tax help) B Back interest, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Basis Adjusted basis (see Adjusted basis) Determination of, Determining Basis, Adjusted Basis Other than cost, Basis Other Than Cost Building permit fees, Construction. Individual income tax return resident 2012 n11 Business use of home, Business Use or Rental of Home, Use test met for business part (with no business use in year of sale). Individual income tax return resident 2012 n11 C Casualties Amounts spent after to restore damaged property, Increases to Basis Deductible casualty losses, Decreases to Basis Disaster as cause of, Specific event safe harbors. Individual income tax return resident 2012 n11 Insurance payments for casualty losses, Decreases to Basis Change of address, Reminders Closing costs, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Commissions, Selling expenses. Individual income tax return resident 2012 n11 , Settlement fees or closing costs. Individual income tax return resident 2012 n11 Community property Basis determination, Community property. Individual income tax return resident 2012 n11 Condemnation Gain exclusion, Home destroyed or condemned. Individual income tax return resident 2012 n11 Ownership and use test when previous home condemned, Previous home destroyed or condemned. Individual income tax return resident 2012 n11 Condominiums As main home, Main Home Basis determination, Condominium. Individual income tax return resident 2012 n11 Construction costs, Construction. Individual income tax return resident 2012 n11 Built by you, Built by you. Individual income tax return resident 2012 n11 Cooperative apartments As main home, Main Home Basis determination, Cooperative apartment. Individual income tax return resident 2012 n11 Ownership and use tests, Cooperative apartment. Individual income tax return resident 2012 n11 Cost as basis, Cost As Basis Credit reports Cost of obtaining, Settlement fees or closing costs. Individual income tax return resident 2012 n11 D Date of sale, Date of sale. Individual income tax return resident 2012 n11 Death Sale due to, Specific event safe harbors. Individual income tax return resident 2012 n11 Spouse's death before sale, ownership and use tests, Sale of main home by surviving spouse. Individual income tax return resident 2012 n11 Decreases to basis, Decreases to Basis Depreciation After May 6, 1997, Depreciation after May 6, 1997. Individual income tax return resident 2012 n11 Home used for business or rental purposes, Decreases to Basis Destroyed homes Gain exclusion, Home destroyed or condemned. Individual income tax return resident 2012 n11 Ownership and use test when previous home destroyed, Previous home destroyed or condemned. Individual income tax return resident 2012 n11 Disabilities, individuals with Ownership and use test, Exception for individuals with a disability. Individual income tax return resident 2012 n11 Disasters, Specific event safe harbors. Individual income tax return resident 2012 n11 Discharge of qualified principal residence indebtedness, Adjusted Basis Divorce Home received from spouse, Home received from spouse. Individual income tax return resident 2012 n11 Home transferred to spouse, Transfer to spouse. Individual income tax return resident 2012 n11 Ownership and use tests, Home transferred from spouse. Individual income tax return resident 2012 n11 Sale due to, Specific event safe harbors. Individual income tax return resident 2012 n11 Transfers after July 18, 1984, Transfers after July 18, 1984. Individual income tax return resident 2012 n11 Transfers before July 19, 1984, Transfers before July 19, 1984. Individual income tax return resident 2012 n11 Use of home after divorce, Use of home after divorce. Individual income tax return resident 2012 n11 Doctor's recommendation for sale, Doctor's recommendation safe harbor. Individual income tax return resident 2012 n11 E Easements, Decreases to Basis Employee of the intelligence community, Employee of the intelligence community. Individual income tax return resident 2012 n11 Employment Change in place of employment, Change in Place of Employment Payment by employer, when job transfer involved, Payment by employer. Individual income tax return resident 2012 n11 Energy Conservation subsidies, Decreases to Basis Credit, Decreases to Basis Exclusion of gain, Excluding the Gain, Nonqualified Use Reduced maximum exclusion, Reduced Maximum Exclusion Expatriates, Expatriates. Individual income tax return resident 2012 n11 F Federal mortgage subsidies Recapture of, Recapturing (Paying Back) a Federal Mortgage Subsidy Figuring gain or loss, Figuring Gain or Loss, More information. Individual income tax return resident 2012 n11 Fire insurance premiums, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Foreclosure, Foreclosure or repossession. Individual income tax return resident 2012 n11 Foreign Service, Foreign Service member. Individual income tax return resident 2012 n11 Ownership and use tests, Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Individual income tax return resident 2012 n11 Form 1040 Reporting sale of home, Reporting the Sale Seller-financed mortgages, Seller-financed mortgage. Individual income tax return resident 2012 n11 Form 1040, Schedule A Real estate taxes, Real estate taxes. Individual income tax return resident 2012 n11 Form 1040, Schedule D Reporting sale of home, Reporting the Sale Form 1099-S Proceeds from real estate transactions, Date of sale. Individual income tax return resident 2012 n11 , Form 1099-S. Individual income tax return resident 2012 n11 , Form 1099-S. Individual income tax return resident 2012 n11 Form 2119 Sale of home, Adjusted Basis Form 6252 Installment sale income, Installment sale. Individual income tax return resident 2012 n11 Form 8828 Recapture tax, How to figure and report the recapture. Individual income tax return resident 2012 n11 Form 8960 Net Investment Income Tax, Net Investment Income Tax (NIIT). Individual income tax return resident 2012 n11 NIIT, Net Investment Income Tax (NIIT). Individual income tax return resident 2012 n11 Form 982 Discharge of indebtedness, Adjusted Basis Free tax services, Free help with your tax return. Individual income tax return resident 2012 n11 Future developments, Future Developments G Gain or loss Basis determination, Determining Basis, Adjusted Basis Exclusion of gain, Excluding the Gain Exclusion of gain, nonqualified use, Nonqualified Use Gain on sale, Gain on sale. Individual income tax return resident 2012 n11 Loss on sale, Loss on sale. Individual income tax return resident 2012 n11 Postponed from sale of previous home before May 7, 1997, Decreases to Basis Worksheet 2 to figure, Worksheet 2. Individual income tax return resident 2012 n11 Taxable Gain on Sale of Home—Completed Example 1 for Amy, Worksheet 1. Individual income tax return resident 2012 n11 Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 2. Individual income tax return resident 2012 n11 Taxable Gain on Sale of Home—Illustrated Example 2 for Peter and Betty Clark, Worksheet 2. Individual income tax return resident 2012 n11 Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White, Worksheet 2. Individual income tax return resident 2012 n11 Taxable Gain on Sale of Home Gifts Home received as, Home received as gift. Individual income tax return resident 2012 n11 H Health Sale of home due to, Health Help (see Tax help) Homebuyer credit Recapture, Recapture of the post-2008 first-time homebuyer credit. Individual income tax return resident 2012 n11 Houseboats As main home, Main Home I Important reminders Change of address, Reminders Home sold with undeducted points, Reminders Improvements Adjusted basis determination, Improvements. Individual income tax return resident 2012 n11 Charges for, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Receipts and other records, Adjusted Basis Useful life of more than 1 year, Increases to Basis Increases to basis, Increases to Basis Individual taxpayer identification numbers (ITINs), Individual taxpayer identification number (ITIN). Individual income tax return resident 2012 n11 Inheritance Home received as, Home acquired from a decedent who died before or after 2010. Individual income tax return resident 2012 n11 Installment sales, Installment sale. Individual income tax return resident 2012 n11 Involuntary conversion, Specific event safe harbors. Individual income tax return resident 2012 n11 ITINs (Individual taxpayer identification numbers), Individual taxpayer identification number (ITIN). Individual income tax return resident 2012 n11 J Joint owners not married, Joint owners not married. Individual income tax return resident 2012 n11 Joint returns, Jointly owned home. Individual income tax return resident 2012 n11 Ownership and use tests, Married Persons L Land Sale of land on which home located, Land. Individual income tax return resident 2012 n11 Sale of vacant land, Vacant land. Individual income tax return resident 2012 n11 Legal fees, Selling expenses. Individual income tax return resident 2012 n11 , Settlement fees or closing costs. Individual income tax return resident 2012 n11 , Construction. Individual income tax return resident 2012 n11 Legal separation Sale due to, Specific event safe harbors. Individual income tax return resident 2012 n11 Like-kind exchange, Sale of home acquired in a like-kind exchange. Individual income tax return resident 2012 n11 Living expenses, Reasonable basic living expenses. Individual income tax return resident 2012 n11 Loan assumption fees, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Loan placement fees, Selling expenses. Individual income tax return resident 2012 n11 Loss (see Gain or loss) M Main home Defined, Main Home Factors used to determine, Factors used to determine main home. Individual income tax return resident 2012 n11 Property used partly as, Property used partly as your main home. Individual income tax return resident 2012 n11 , Property Used Partly for Business or Rental Married taxpayers (see Joint returns) Maximum exclusion, Maximum Exclusion Reduced, Reduced Maximum Exclusion Military (see Armed forces) Missing children, photographs of, Reminders Mobile homes As main home, Main Home More than one home, More than one home. Individual income tax return resident 2012 n11 Mortgage fees, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Mortgage insurance premiums, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Mortgage subsidies Recapturing (paying back) federal mortgage subsidy, Recapturing (Paying Back) a Federal Mortgage Subsidy Mortgages, seller-financed, Seller-financed mortgage. Individual income tax return resident 2012 n11 Moving expense, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Multiple births Sale due to, Specific event safe harbors. Individual income tax return resident 2012 n11 N Nonqualified use, Nonqualified Use Nonresident aliens Spouse as, transfer of home to, Exception. Individual income tax return resident 2012 n11 O Option to buy home, Option to buy. Individual income tax return resident 2012 n11 Ownership and use tests, Ownership and Use Tests, Ownership and use tests met at different times. Individual income tax return resident 2012 n11 P Partly used for business, Property Used Partly for Business or Rental Personal property Selling price of home not to include, Personal property. Individual income tax return resident 2012 n11 Points, Selling expenses. Individual income tax return resident 2012 n11 Home sold with undeducted points, Reminders Seller-paid, Seller-paid points. Individual income tax return resident 2012 n11 Publications (see Tax help) R Real estate taxes, Settlement fees or closing costs. Individual income tax return resident 2012 n11 , Real estate taxes. Individual income tax return resident 2012 n11 Deducting in year of sale, Deducting Taxes in the Year of Sale Recapture of federal mortgage subsidy, Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of first-time homebuyer credit, Recapture of First-Time Homebuyer Credit Recording fees, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Recordkeeping, Adjusted Basis Reduced maximum exclusion, Reduced Maximum Exclusion Worksheet 3, Worksheet 3. Individual income tax return resident 2012 n11 Reduced Maximum Exclusion Refinancing, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Relatives Sale of home to, Exception for sales to related persons. Individual income tax return resident 2012 n11 Remainder interest Sale of, Sale of remainder interest. Individual income tax return resident 2012 n11 Remodeling, Improvements. Individual income tax return resident 2012 n11 , Exception. Individual income tax return resident 2012 n11 (see also Improvements) Rental of home, Business Use or Rental of Home, Use test met for business part (with no business use in year of sale). Individual income tax return resident 2012 n11 Before closing, by buyer, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Partial use, Property Used Partly for Business or Rental Repairs, Settlement fees or closing costs. Individual income tax return resident 2012 n11 , Improvements. Individual income tax return resident 2012 n11 , Repairs. Individual income tax return resident 2012 n11 (see also Improvements) Reporting the sale, Reporting the Sale, Worksheet 2. Individual income tax return resident 2012 n11 Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White Repossession, Foreclosure or repossession. Individual income tax return resident 2012 n11 Right-of-ways, Decreases to Basis S Safe harbors Distance safe harbor, Distance safe harbor. Individual income tax return resident 2012 n11 Doctor's recommendation for sale, Doctor's recommendation safe harbor. Individual income tax return resident 2012 n11 Unforeseeable events, Specific event safe harbors. Individual income tax return resident 2012 n11 Sales commissions, Selling expenses. Individual income tax return resident 2012 n11 , Settlement fees or closing costs. Individual income tax return resident 2012 n11 Sales to related persons, Exception for sales to related persons. Individual income tax return resident 2012 n11 Self-employed persons Change in status causing inability to pay basic expenses, Specific event safe harbors. Individual income tax return resident 2012 n11 Seller-financed mortgages, Seller-financed mortgage. Individual income tax return resident 2012 n11 Seller-paid points, Seller-paid points. Individual income tax return resident 2012 n11 Selling expenses, Selling expenses. Individual income tax return resident 2012 n11 Selling price, Selling Price Separate returns, Separate returns. Individual income tax return resident 2012 n11 Settlement fees, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Spouse Death of (see Surviving spouse) Divorce, transfers subsequent to (see Divorce) Survey fees, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Surviving spouse Basis determination, Surviving spouse. Individual income tax return resident 2012 n11 Ownership and use tests, Sale of main home by surviving spouse. Individual income tax return resident 2012 n11 T Tax help, How To Get Tax Help Temporary absence, Temporary absence. Individual income tax return resident 2012 n11 Temporary housing, Temporary housing. Individual income tax return resident 2012 n11 Title insurance, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Title search fees, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Trading homes, Trading (exchanging) homes. Individual income tax return resident 2012 n11 , Home received as trade. Individual income tax return resident 2012 n11 Transfer taxes, Settlement fees or closing costs. Individual income tax return resident 2012 n11 , Transfer taxes. Individual income tax return resident 2012 n11 Transfer to spouse, Transfer to spouse. Individual income tax return resident 2012 n11 After July 18, 1984, Transfers after July 18, 1984. Individual income tax return resident 2012 n11 Before July 19, 1984, Transfers before July 19, 1984. Individual income tax return resident 2012 n11 TTY/TDD information, How To Get Tax Help U Unemployment, Specific event safe harbors. Individual income tax return resident 2012 n11 Unforeseen circumstances, Unforeseen Circumstances Uniformed services (see Armed forces) Use tests, Ownership and Use Tests, Ownership and use tests met at different times. Individual income tax return resident 2012 n11 Utilities Charges for installing, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Charges related to occupancy of house before closing, Settlement fees or closing costs. Individual income tax return resident 2012 n11 Energy conservation subsidy, Decreases to Basis Meter and connection charges for construction, Construction. Individual income tax return resident 2012 n11 V Vacant land Sale of, Vacant land. Individual income tax return resident 2012 n11 W Worksheets, Worksheets. Individual income tax return resident 2012 n11 Adjusted basis (Worksheet 1), Determining Basis, Worksheet 1. Individual income tax return resident 2012 n11 Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 1. Individual income tax return resident 2012 n11 Adjusted Basis of Home Sold—Illustrated Example 3 for Emily White, Worksheet 1 Instructions. Individual income tax return resident 2012 n11 Adjusted Basis of Home Sold Gain (or loss), exclusion, and taxable gain (Worksheet 2), Worksheet 2. Individual income tax return resident 2012 n11 Taxable Gain on Sale of Home—Completed Example 1 for Amy, Worksheet 1. Individual income tax return resident 2012 n11 Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 2. Individual income tax return resident 2012 n11 Taxable Gain on Sale of Home—Illustrated Example 2 for Peter and Betty Clark, Worksheet 2. Individual income tax return resident 2012 n11 Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White, Worksheet 2. Individual income tax return resident 2012 n11 Taxable Gain on Sale of Home Recordkeeping and, Adjusted Basis Reduced maximum exclusion (Worksheet 3), Worksheet 3. Individual income tax return resident 2012 n11 Reduced Maximum Exclusion Prev  Up     Home   More Online Publications