Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Irs1040

File Tax ReturnCan I File 1040ez OnlineDo State Taxes Online Free1040ez Printable Tax FormsHr Block Free State ReturnHow Can I File My 2012 Taxes OnlineFiling 1040ez Online1040ez Electronic FilingDownload A 1040ez Federal Tax Form2011 Form 1040File My 2011 Taxes Online Free1040x Form For 2010Can I Do My State Taxes Online For Free2008 Tax Software Free DownloadCan I Still File My 2011 Tax ReturnTax Adjustment FormI Still Need To File My 2012 TaxesIrs Tax Forms 2012 1040aFree Income Tax HelpAmend TaxDoes H&r Block Do Taxes For Free2010 Ez Tax FormE File State Taxes Only For FreeFree Federal State Tax Filing2010 Irs Form 1040Irs Gov 1040 EzIrs Form 1040x 2013 Tax ReturnForma 1040How To File 1040x FormFree Online State And Federal Tax FilingFree Federal And State E FileFree E File IrsTurbo Tax Military Discount2010 Tax Forms InstructionsFree Tax Efile1040 Ez Online FilingTaxact 2007File Federal Taxes Online For FreeFree State Filing Online1040x Irs Form

Irs1040

Irs1040 Publication 901 - Additional Material Table of Contents How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Irs1040 How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. Irs1040 By selecting the method that is best for you, you will have quick and easy access to tax help. Irs1040 Free help with your tax return. Irs1040   Free help in preparing your return is available nationwide from IRS-certified volunteers. Irs1040 The Volunteer Income Tax Assistance (VITA) program is designed to help low-moderate income, elderly, disabled, and limited English proficient taxpayers. Irs1040 The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Irs1040 Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Irs1040 Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. Irs1040 To find the nearest VITA or TCE site, visit IRS. Irs1040 gov or call 1-800-906-9887 or 1-800-829-1040. Irs1040   As part of the TCE program, AARP offers the Tax-Aide counseling program. Irs1040 To find the nearest AARP Tax-Aide site, visit AARP's website at www. Irs1040 aarp. Irs1040 org/money/taxaide or call 1-888-227-7669. Irs1040   For more information on these programs, go to IRS. Irs1040 gov and enter “VITA” in the search box. Irs1040 Internet. Irs1040 You can access the IRS website at IRS. Irs1040 gov 24 hours a day, 7 days a week to: E-file your return. Irs1040 Find out about commercial tax preparation and e-file services available free to eligible taxpayers. Irs1040 Check the status of your 2012 refund. Irs1040 Go to IRS. Irs1040 gov and click on Where’s My Refund. Irs1040 Information about your return will generally be available within 24 hours after the IRS receives your e-filed return, or 4 weeks after you mail your paper return. Irs1040 If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Irs1040 Have your 2012 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Irs1040 Where's My Refund? has a new look this year! The tool will include a tracker that displays progress through three stages: (1) return received, (2) refund approved, and (3) refund sent. Irs1040 Where's My Refund? will provide an actual personalized refund date as soon as the IRS processes your tax return and approves your refund. Irs1040 So in a change from previous filing seasons, you won't get an estimated refund date right away. Irs1040 Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. Irs1040 You can obtain a free transcript online at IRS. Irs1040 gov by clicking on Order a Return or Account Transcript under “Tools. Irs1040 ” For a transcript by phone, call 1-800-908-9946 and follow the prompts in the recorded message. Irs1040 You will be prompted to provide your SSN or Individual Taxpayer Identification Number (ITIN), date of birth, street address and ZIP code. Irs1040 Download forms, including talking tax forms, instructions, and publications. Irs1040 Order IRS products. Irs1040 Research your tax questions. Irs1040 Search publications by topic or keyword. Irs1040 Use the Internal Revenue Code, regulations, or other official guidance. Irs1040 View Internal Revenue Bulletins (IRBs) published in the last few years. Irs1040 Figure your withholding allowances using the IRS Withholding Calculator at www. Irs1040 irs. Irs1040 gov/individuals. Irs1040 Determine if Form 6251 (Alternative Minimum Tax— Individuals), must be filed by using our Alternative Minimum Tax (AMT) Assistant available at IRS. Irs1040 gov by typing Alternative Minimum Tax Assistant in the search box. Irs1040 Sign up to receive local and national tax news by email. Irs1040 Get information on starting and operating a small business. Irs1040 Phone. Irs1040 Many services are available by phone. Irs1040   Ordering forms, instructions, and publications. Irs1040 Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions (limited to 5 years). Irs1040 You should receive your order within 10 days. Irs1040 Asking tax questions. Irs1040 Call the IRS with your tax questions at 1-800-829-1040. Irs1040 Solving problems. Irs1040 You can get face-to-face help solving tax problems most business days in IRS Taxpayer Assistance Centers (TAC). Irs1040 An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Irs1040 Call your local Taxpayer Assistance Center for an appointment. Irs1040 To find the number, go to www. Irs1040 irs. Irs1040 gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Irs1040 TTY/TDD equipment. Irs1040 If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. Irs1040 The TTY/TDD telephone number is for individuals who are deaf, hard of hearing, or have a speech disability. Irs1040 These individuals can also access the IRS through relay services such as the Federal Relay Service at www. Irs1040 gsa. Irs1040 gov/fedrelay. Irs1040 TeleTax topics. Irs1040 Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. Irs1040 Checking the status of your 2012 refund. Irs1040 To check the status of your 2012 refund, call 1-800-829-1954 or 1-800-829-4477 (automated Where's My Refund? information 24 hours a day, 7 days a week). Irs1040 Information about your return will generally be available within 24 hours after the IRS receives your e-filed return, or 4 weeks after you mail your paper return. Irs1040 If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Irs1040 Have your 2012 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Irs1040 Where's My Refund? will provide an actual personalized refund date as soon as the IRS processes your tax return and approves your refund. Irs1040 Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. Irs1040 Evaluating the quality of our telephone services. Irs1040 To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. Irs1040 One method is for a second IRS representative to listen in on or record random telephone calls. Irs1040 Another is to ask some callers to complete a short survey at the end of the call. Irs1040 Walk-in. Irs1040 Some products and services are available on a walk-in basis. Irs1040   Products. Irs1040 You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Irs1040 Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Irs1040 Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. Irs1040 Services. Irs1040 You can walk in to your local TAC most business days for personal, face-to-face tax help. Irs1040 An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Irs1040 If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local TAC where you can talk with an IRS representative face-to-face. Irs1040 No appointment is necessary—just walk in. Irs1040 Before visiting, check www. Irs1040 irs. Irs1040 gov/localcontacts for hours of operation and services provided. Irs1040 If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested by calling your local TAC. Irs1040 You can leave a message and a representative will call you back within 2 business days. Irs1040 All other issues will be handled without an appointment. Irs1040 To call your local TAC, go to  www. Irs1040 irs. Irs1040 gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Irs1040 Mail. Irs1040 You can send your order for forms, instructions, and publications to the address below. Irs1040 You should receive a response within 10 days after your request is received. Irs1040  Internal Revenue Service 1201 N. Irs1040 Mitsubishi Motorway Bloomington, IL 61705-6613 Taxpayer Advocate Service. Irs1040   The Taxpayer Advocate Service (TAS) is your voice at the IRS. Irs1040 Its job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights. Irs1040 TAS offers free help to guide you through the often-confusing process of resolving tax problems that you haven’t been able to solve on your own. Irs1040 Remember, the worst thing you can do is nothing at all. Irs1040   TAS can help if you can’t resolve your problem with the IRS and: Your problem is causing financial difficulties for you, your family, or your business. Irs1040 You face (or your business is facing) an immediate threat of adverse action. Irs1040 You have tried repeatedly to contact the IRS but no one has responded, or the IRS has not responded to you by the date promised. Irs1040   If you qualify for help, they will do everything they can to get your problem resolved. Irs1040 You will be assigned to one advocate who will be with you at every turn. Irs1040 TAS has offices in every state, the District of Columbia, and Puerto Rico. Irs1040 Although TAS is independent within the IRS, their advocates know how to work with the IRS to get your problems resolved. Irs1040 And its services are always free. Irs1040   As a taxpayer, you have rights that the IRS must abide by in its dealings with you. Irs1040 The TAS tax toolkit at www. Irs1040 TaxpayerAdvocate. Irs1040 irs. Irs1040 gov can help you understand these rights. Irs1040   If you think TAS might be able to help you, call your local advocate, whose number is in your phone book and on our website at www. Irs1040 irs. Irs1040 gov/advocate. Irs1040 You can also call the toll-free number at 1-877-777-4778. Irs1040 Deaf and hard of hearing individuals who have access to TTY/TDD equipment can call 1-800-829-4059. Irs1040 These individuals can also access the IRS through relay services such as the Federal Relay Service at www. Irs1040 gsa. Irs1040 gov/fedrelay. Irs1040   TAS also handles large-scale or systemic problems that affect many taxpayers. Irs1040 If you know of one of these broad issues, please report it through the Systemic Advocacy Management System at www. Irs1040 irs. Irs1040 gov/advocate. Irs1040 Low Income Taxpayer Clinics (LITCs). Irs1040   Low Income Taxpayer Clinics (LITCs) are independent from the IRS. Irs1040 Some clinics serve individuals whose income is below a certain level and who need to resolve a tax problem. Irs1040 These clinics provide professional representation before the IRS or in court on audits, appeals, tax collection disputes, and other issues for free or for a small fee. Irs1040 Some clinics can provide information about taxpayer rights and responsibilities in many different languages for individuals who speak English as a second language. Irs1040 For more information and to find a clinic near you, see the LITC page on www. Irs1040 irs. Irs1040 gov/advocate or IRS Publication 4134, Low Income Taxpayer Clinic List. Irs1040 This publication is also available by calling 1-800-TAX-FORM (1-800-829-3676) or at your local IRS office. Irs1040 Free tax services. Irs1040   Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. Irs1040 Learn about free tax information from the IRS, including publications, services, and education and assistance programs. Irs1040 The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. Irs1040 The majority of the information and services listed in this publication are available to you free of charge. Irs1040 If there is a fee associated with a resource or service, it is listed in the publication. Irs1040   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. Irs1040 DVD for tax products. Irs1040 You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. Irs1040 Prior-year forms, instructions, and publications. Irs1040 Tax Map: an electronic research tool and finding aid. Irs1040 Tax law frequently asked questions. Irs1040 Tax Topics from the IRS telephone response system. Irs1040 Internal Revenue Code—Title 26 of the U. Irs1040 S. Irs1040 Code. Irs1040 Links to other Internet-based tax research materials. Irs1040 Fill-in, print, and save features for most tax forms. Irs1040 Internal Revenue Bulletins. Irs1040 Toll-free and email technical support. Irs1040 Two releases during the year. Irs1040  – The first release will ship the beginning of January 2013. Irs1040  – The final release will ship the beginning of March 2013. Irs1040 Purchase the DVD from National Technical Information Service (NTIS) at www. Irs1040 irs. Irs1040 gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee). Irs1040 Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

IRS Opens Online FATCA Registration System

IR-2013-69, Aug. 19, 2013

WASHINGTON — The Internal Revenue Service today announced the opening of a new online registration system for financial institutions that need to register with the IRS under the Foreign Account Tax Compliance Act (FATCA).

Financial institutions that must register with the IRS to meet their FATCA obligations can now begin the process of registering by creating an account and providing required information. Financial institutions will also be able to provide required information for their branches of operation and other members of their expanded affiliate groups in which the financial institution is the lead organization.

The registration system, designed to enable secure account management, is a web-based application with around-the-clock availability.

Within a secure environment, the new registration system enables financial institutions to:

  • establish online accounts;
  • customize home pages to manage accounts;
  • designate points of contact to handle registrations;
  • oversee member and/or branch information; and
  • receive automatic notifications of status changes.

Financial institutions are encouraged to become familiar with the system, create their online accounts and begin submitting their information. Starting in January 2014, financial institutions will be expected to finalize their registration information by logging into their accounts, making any necessary changes and submitting the information as final.

As registrations are finalized and approved in 2014, registering financial institutions will receive a notice of registration acceptance and will be issued a global intermediary identification number.

The IRS will electronically post the first IRS Foreign Financial Institution (FFI) List in June 2014, and will update the list monthly. To ensure inclusion in the June 2014 IRS FFI List, financial institutions will need to finalize their registrations by April 25, 2014. 

Access to the FATCA registration system and related support information can be found on the FATCA page of IRS.gov.

Follow the IRS on New Media
Subscribe to IRS Newswire

Page Last Reviewed or Updated: 04-Sep-2013

The Irs1040

Irs1040 Publication 936 - Main Content Table of Contents Part I. Irs1040 Home Mortgage InterestSecured Debt Qualified Home Special Situations Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement How To Report Special Rule for Tenant-Stockholders in Cooperative Housing Corporations Part II. Irs1040 Limits on Home Mortgage Interest DeductionHome Acquisition Debt Home Equity Debt Grandfathered Debt Table 1 Instructions How To Get Tax HelpLow Income Taxpayer Clinics Part I. Irs1040 Home Mortgage Interest This part explains what you can deduct as home mortgage interest. Irs1040 It includes discussions on points, mortgage insurance premiums, and how to report deductible interest on your tax return. Irs1040 Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). Irs1040 The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. Irs1040 You can deduct home mortgage interest if all the following conditions are met. Irs1040 You file Form 1040 and itemize deductions on Schedule A (Form 1040). Irs1040 The mortgage is a secured debt on a qualified home in which you have an ownership interest. Irs1040 Secured Debt and Qualified Home are explained later. Irs1040  Both you and the lender must intend that the loan be repaid. Irs1040 Fully deductible interest. Irs1040   In most cases, you can deduct all of your home mortgage interest. Irs1040 How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. Irs1040   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. Irs1040 (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. Irs1040 ) If one or more of your mortgages does not fit into any of these categories, use Part II of this publication to figure the amount of interest you can deduct. Irs1040   The three categories are as follows. Irs1040 Mortgages you took out on or before October 13, 1987 (called grandfathered debt). Irs1040 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). Irs1040 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). Irs1040 The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. Irs1040   See Part II for more detailed definitions of grandfathered, home acquisition, and home equity debt. Irs1040    You can use Figure A to check whether your home mortgage interest is fully deductible. Irs1040 This image is too large to be displayed in the current screen. Irs1040 Please click the link to view the image. Irs1040 Figure A. Irs1040 Is My Home Mortgage Interest Fully Deductible? Secured Debt You can deduct your home mortgage interest only if your mortgage is a secured debt. Irs1040 A secured debt is one in which you sign an instrument (such as a mortgage, deed of trust, or land contract) that: Makes your ownership in a qualified home security for payment of the debt, Provides, in case of default, that your home could satisfy the debt, and Is recorded or is otherwise perfected under any state or local law that applies. Irs1040 In other words, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. Irs1040 If you cannot pay the debt, your home can then serve as payment to the lender to satisfy (pay) the debt. Irs1040 In this publication, mortgage will refer to secured debt. Irs1040 Debt not secured by home. Irs1040   A debt is not secured by your home if it is secured solely because of a lien on your general assets or if it is a security interest that attaches to the property without your consent (such as a mechanic's lien or judgment lien). Irs1040   A debt is not secured by your home if it once was, but is no longer secured by your home. Irs1040 Wraparound mortgage. Irs1040   This is not a secured debt unless it is recorded or otherwise perfected under state law. Irs1040 Example. Irs1040 Beth owns a home subject to a mortgage of $40,000. Irs1040 She sells the home for $100,000 to John, who takes it subject to the $40,000 mortgage. Irs1040 Beth continues to make the payments on the $40,000 note. Irs1040 John pays $10,000 down and gives Beth a $90,000 note secured by a wraparound mortgage on the home. Irs1040 Beth does not record or otherwise perfect the $90,000 mortgage under the state law that applies. Irs1040 Therefore, the mortgage is not a secured debt and John cannot deduct any of the interest he pays on it as home mortgage interest. Irs1040 Choice to treat the debt as not secured by your home. Irs1040   You can choose to treat any debt secured by your qualified home as not secured by the home. Irs1040 This treatment begins with the tax year for which you make the choice and continues for all later tax years. Irs1040 You can revoke your choice only with the consent of the Internal Revenue Service (IRS). Irs1040   You may want to treat a debt as not secured by your home if the interest on that debt is fully deductible (for example, as a business expense) whether or not it qualifies as home mortgage interest. Irs1040 This may allow you, if the limits in Part II apply, more of a deduction for interest on other debts that are deductible only as home mortgage interest. Irs1040 Cooperative apartment owner. Irs1040   If you own stock in a cooperative housing corporation, see the Special Rule for Tenant-Stockholders in Cooperative Housing Corporations , near the end of this Part I. Irs1040 Qualified Home For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. Irs1040 This means your main home or your second home. Irs1040 A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. Irs1040 The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Irs1040 Otherwise, it is considered personal interest and is not deductible. Irs1040 Main home. Irs1040   You can have only one main home at any one time. Irs1040 This is the home where you ordinarily live most of the time. Irs1040 Second home. Irs1040   A second home is a home that you choose to treat as your second home. Irs1040 Second home not rented out. Irs1040   If you have a second home that you do not hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. Irs1040 You do not have to use the home during the year. Irs1040 Second home rented out. Irs1040   If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. Irs1040 You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer. Irs1040 If you do not use the home long enough, it is considered rental property and not a second home. Irs1040 For information on residential rental property, see Publication 527. Irs1040 More than one second home. Irs1040   If you have more than one second home, you can treat only one as the qualified second home during any year. Irs1040 However, you can change the home you treat as a second home during the year in the following situations. Irs1040 If you get a new home during the year, you can choose to treat the new home as your second home as of the day you buy it. Irs1040 If your main home no longer qualifies as your main home, you can choose to treat it as your second home as of the day you stop using it as your main home. Irs1040 If your second home is sold during the year or becomes your main home, you can choose a new second home as of the day you sell the old one or begin using it as your main home. Irs1040 Divided use of your home. Irs1040   The only part of your home that is considered a qualified home is the part you use for residential living. Irs1040 If you use part of your home for other than residential living, such as a home office, you must allocate the use of your home. Irs1040 You must then divide both the cost and fair market value of your home between the part that is a qualified home and the part that is not. Irs1040 Dividing the cost may affect the amount of your home acquisition debt, which is limited to the cost of your home plus the cost of any improvements. Irs1040 (See Home Acquisition Debt in Part II. Irs1040 ) Dividing the fair market value may affect your home equity debt limit, also explained in Part II . Irs1040 Renting out part of home. Irs1040   If you rent out part of a qualified home to another person (tenant), you can treat the rented part as being used by you for residential living only if all of the following conditions apply. Irs1040 The rented part of your home is used by the tenant primarily for residential living. Irs1040 The rented part of your home is not a self-contained residential unit having separate sleeping, cooking, and toilet facilities. Irs1040 You do not rent (directly or by sublease) the same or different parts of your home to more than two tenants at any time during the tax year. Irs1040 If two persons (and dependents of either) share the same sleeping quarters, they are treated as one tenant. Irs1040 Office in home. Irs1040   If you have an office in your home that you use in your business, see Publication 587, Business Use of Your Home. Irs1040 It explains how to figure your deduction for the business use of your home, which includes the business part of your home mortgage interest. Irs1040 Home under construction. Irs1040   You can treat a home under construction as a qualified home for a period of up to 24 months, but only if it becomes your qualified home at the time it is ready for occupancy. Irs1040   The 24-month period can start any time on or after the day construction begins. Irs1040 Home destroyed. Irs1040   You may be able to continue treating your home as a qualified home even after it is destroyed in a fire, storm, tornado, earthquake, or other casualty. Irs1040 This means you can continue to deduct the interest you pay on your home mortgage, subject to the limits described in this publication. Irs1040   You can continue treating a destroyed home as a qualified home if, within a reasonable period of time after the home is destroyed, you: Rebuild the destroyed home and move into it, or Sell the land on which the home was located. Irs1040   This rule applies to your main home and to a second home that you treat as a qualified home. Irs1040 Time-sharing arrangements. Irs1040   You can treat a home you own under a time-sharing plan as a qualified home if it meets all the requirements. Irs1040 A time-sharing plan is an arrangement between two or more people that limits each person's interest in the home or right to use it to a certain part of the year. Irs1040 Rental of time-share. Irs1040   If you rent out your time-share, it qualifies as a second home only if you also use it as a home during the year. Irs1040 See Second home rented out , earlier, for the use requirement. Irs1040 To know whether you meet that requirement, count your days of use and rental of the home only during the time you have a right to use it or to receive any benefits from the rental of it. Irs1040 Married taxpayers. Irs1040   If you are married and file a joint return, your qualified home(s) can be owned either jointly or by only one spouse. Irs1040 Separate returns. Irs1040   If you are married filing separately and you and your spouse own more than one home, you can each take into account only one home as a qualified home. Irs1040 However, if you both consent in writing, then one spouse can take both the main home and a second home into account. Irs1040 Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. Irs1040 It also describes certain special situations that may affect your deduction. Irs1040 Late payment charge on mortgage payment. Irs1040   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. Irs1040 Mortgage prepayment penalty. Irs1040   If you pay off your home mortgage early, you may have to pay a penalty. Irs1040 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. Irs1040 Sale of home. Irs1040   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of the sale. Irs1040 Example. Irs1040 John and Peggy Harris sold their home on May 7. Irs1040 Through April 30, they made home mortgage interest payments of $1,220. Irs1040 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. Irs1040 Their mortgage interest deduction is $1,270 ($1,220 + $50). Irs1040 Prepaid interest. Irs1040   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. Irs1040 You can deduct in each year only the interest that qualifies as home mortgage interest for that year. Irs1040 However, there is an exception that applies to points, discussed later. Irs1040 Mortgage interest credit. Irs1040    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. Irs1040 Figure the credit on Form 8396, Mortgage Interest Credit. Irs1040 If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. Irs1040   See Form 8396 and Publication 530 for more information on the mortgage interest credit. Irs1040 Ministers' and military housing allowance. Irs1040   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. Irs1040 Hardest Hit Fund and Emergency Homeowners' Loan Programs. Irs1040   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. Irs1040 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. Irs1040 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. Irs1040 If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098–MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received from payer(s) / borrower(s)), box 4 (mortgage insurance premiums), and box 5 (other information including real property taxes paid). Irs1040 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. Irs1040 Mortgage assistance payments under section 235 of the National Housing Act. Irs1040   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. Irs1040 You cannot deduct the interest that is paid for you. Irs1040 No other effect on taxes. Irs1040   Do not include these mortgage assistance payments in your income. Irs1040 Also, do not use these payments to reduce other deductions, such as real estate taxes. Irs1040 Divorced or separated individuals. Irs1040   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. Irs1040 See the discussion of Payments for jointly-owned home under Alimony in Publication 504, Divorced or Separated Individuals. Irs1040 Redeemable ground rents. Irs1040   In some states (such as Maryland), you can buy your home subject to a ground rent. Irs1040 A ground rent is an obligation you assume to pay a fixed amount per year on the property. Irs1040 Under this arrangement, you are leasing (rather than buying) the land on which your home is located. Irs1040   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. Irs1040   A ground rent is a redeemable ground rent if all of the following are true. Irs1040 Your lease, including renewal periods, is for more than 15 years. Irs1040 You can freely assign the lease. Irs1040 You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specific amount. Irs1040 The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. Irs1040   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. Irs1040 Nonredeemable ground rents. Irs1040   Payments on a nonredeemable ground rent are not mortgage interest. Irs1040 You can deduct them as rent if they are a business expense or if they are for rental property. Irs1040 Reverse mortgages. Irs1040   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. Irs1040 With a reverse mortgage, you retain title to your home. Irs1040 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. Irs1040 Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Irs1040 Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until you actually pay it, which is usually when you pay off the loan in full. Irs1040 Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Part II. Irs1040 Rental payments. Irs1040   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. Irs1040 This is true even if the settlement papers call them interest. Irs1040 You cannot deduct these payments as home mortgage interest. Irs1040 Mortgage proceeds invested in tax-exempt securities. Irs1040   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. Irs1040 “Grandfathered debt” and “home equity debt” are defined in Part II of this publication. Irs1040 Refunds of interest. Irs1040   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. Irs1040 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. Irs1040 However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. Irs1040 This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. Irs1040 If you need to include the refund in income, report it on Form 1040, line 21. Irs1040   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. Irs1040 For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. Irs1040   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in Publication 525, Taxable and Nontaxable Income. Irs1040 Cooperative apartment owner. Irs1040   If you own a cooperative apartment, you must reduce your home mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. Irs1040 The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. Irs1040   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. Irs1040 Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Irs1040 Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Irs1040 This image is too large to be displayed in the current screen. Irs1040 Please click the link to view the image. Irs1040 Figure B. Irs1040 Are My Points Fully Deductible This Year? A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Irs1040 See Points paid by the seller , later. Irs1040 General Rule You generally cannot deduct the full amount of points in the year paid. Irs1040 Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. Irs1040 See Deduction Allowed Ratably , next. Irs1040 For exceptions to the general rule, see Deduction Allowed in Year Paid , later. Irs1040 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. Irs1040 You use the cash method of accounting. Irs1040 This means you report income in the year you receive it and deduct expenses in the year you pay them. Irs1040 Most individuals use this method. Irs1040 Your loan is secured by a home. Irs1040 (The home does not need to be your main home. Irs1040 ) Your loan period is not more than 30 years. Irs1040 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. Irs1040 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. Irs1040 Example. Irs1040 You use the cash method of accounting. Irs1040 In 2013, you took out a $100,000 loan payable over 20 years. Irs1040 The terms of the loan are the same as for other 20-year loans offered in your area. Irs1040 You paid $4,800 in points. Irs1040 You made 3 monthly payments on the loan in 2013. Irs1040 You can deduct $60 [($4,800 ÷ 240 months) x 3 payments] in 2013. Irs1040 In 2014, if you make all twelve payments, you will be able to deduct $240 ($20 x 12). Irs1040 Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. Irs1040 (You can use Figure B as a quick guide to see whether your points are fully deductible in the year paid. Irs1040 ) Your loan is secured by your main home. Irs1040 (Your main home is the one you ordinarily live in most of the time. Irs1040 ) Paying points is an established business practice in the area where the loan was made. Irs1040 The points paid were not more than the points generally charged in that area. Irs1040 You use the cash method of accounting. Irs1040 This means you report income in the year you receive it and deduct expenses in the year you pay them. Irs1040 Most individuals use this method. Irs1040 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. Irs1040 The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Irs1040 The funds you provided are not required to have been applied to the points. Irs1040 They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Irs1040 You cannot have borrowed these funds from your lender or mortgage broker. Irs1040 You use your loan to buy or build your main home. Irs1040 The points were computed as a percentage of the principal amount of the mortgage. Irs1040 The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. Irs1040 The points may be shown as paid from either your funds or the seller's. Irs1040 Note. Irs1040 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. Irs1040 Home improvement loan. Irs1040   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. Irs1040 Second home. Irs1040 You cannot fully deduct in the year paid points you pay on loans secured by your second home. Irs1040 You can deduct these points only over the life of the loan. Irs1040 Refinancing. Irs1040   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. Irs1040 This is true even if the new mortgage is secured by your main home. Irs1040   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Irs1040 You can deduct the rest of the points over the life of the loan. Irs1040 Example 1. Irs1040 In 1998, Bill Fields got a mortgage to buy a home. Irs1040 In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. Irs1040 The mortgage is secured by his home. Irs1040 To get the new loan, he had to pay three points ($3,000). Irs1040 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. Irs1040 Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. Irs1040 The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. Irs1040 Bill's first payment on the new loan was due July 1. Irs1040 He made six payments on the loan in 2013 and is a cash basis taxpayer. Irs1040 Bill used the funds from the new mortgage to repay his existing mortgage. Irs1040 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. Irs1040 He cannot deduct all of the points in 2013. Irs1040 He can deduct two points ($2,000) ratably over the life of the loan. Irs1040 He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. Irs1040 The other point ($1,000) was a fee for services and is not deductible. Irs1040 Example 2. Irs1040 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. Irs1040 Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. Irs1040 His deduction is $500 ($2,000 × 25%). Irs1040 Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. Irs1040 This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. Irs1040 The total amount Bill deducts in 2013 is $550 ($500 + $50). Irs1040 Special Situations This section describes certain special situations that may affect your deduction of points. Irs1040 Original issue discount. Irs1040   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. Irs1040 This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. Irs1040 Amounts charged for services. Irs1040    Amounts charged by the lender for specific services connected to the loan are not interest. Irs1040 Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Irs1040  You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Irs1040 Points paid by the seller. Irs1040   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Irs1040 Treatment by seller. Irs1040   The seller cannot deduct these fees as interest. Irs1040 But they are a selling expense that reduces the amount realized by the seller. Irs1040 See Publication 523 for information on selling your home. Irs1040 Treatment by buyer. Irs1040   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. Irs1040 If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. Irs1040 If any of those tests are not met, the buyer deducts the points over the life of the loan. Irs1040   If you need information about the basis of your home, see Publication 523 or Publication 530. Irs1040 Funds provided are less than points. Irs1040   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. Irs1040 In addition, you can deduct any points paid by the seller. Irs1040 Example 1. Irs1040 When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Irs1040 You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. Irs1040 Of the $1,000 charged for points, you can deduct $750 in the year paid. Irs1040 You spread the remaining $250 over the life of the mortgage. Irs1040 Example 2. Irs1040 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. Irs1040 In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Irs1040 You spread the remaining $250 over the life of the mortgage. Irs1040 You must reduce the basis of your home by the $1,000 paid by the seller. Irs1040 Excess points. Irs1040   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. Irs1040 You must spread any additional points over the life of the mortgage. Irs1040 Mortgage ending early. Irs1040   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. Irs1040 However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. Irs1040 Instead, deduct the remaining balance over the term of the new loan. Irs1040   A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Irs1040 Example. Irs1040 Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. Irs1040 He deducts $200 points per year. Irs1040 Through 2012, Dan has deducted $2,200 of the points. Irs1040 Dan prepaid his mortgage in full in 2013. Irs1040 He can deduct the remaining $800 of points in 2013. Irs1040 Limits on deduction. Irs1040   You cannot fully deduct points paid on a mortgage that exceeds the limits discussed in Part II . Irs1040 See the Table 1 Instructions for line 10. Irs1040 Form 1098. Irs1040    The mortgage interest statement you receive should show not only the total interest paid during the year, but also your deductible points paid during the year. Irs1040 See Form 1098, Mortgage Interest Statement , later. Irs1040 Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. Irs1040 The insurance must be in connection with home acquisition debt, and the insurance contract must have been issued after 2006. Irs1040 Qualified mortgage insurance. Irs1040   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). Irs1040   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. Irs1040 If provided by the Rural Housing Service, it is commonly known as a guarantee fee. Irs1040 The funding fee and guarantee fee can either be included in the amount of the loan or paid in full at the time of closing. Irs1040 These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Irs1040 Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. Irs1040 Special rules for prepaid mortgage insurance. Irs1040   Generally, if you paid premiums for qualified mortgage insurance that are properly allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. Irs1040 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. Irs1040 No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. Irs1040 This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. Irs1040 Example. Irs1040 Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. Irs1040 Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Irs1040 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. Irs1040 Ryan's adjusted gross income (AGI) for 2012 is $76,000. Irs1040 Ryan can deduct $880 ($9,240 ÷ 84 x 8 months) for qualified mortgage insurance premiums in 2012. Irs1040 For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 x 12 months) if his AGI is $100,000 or less. Irs1040 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). Irs1040 Limit on deduction. Irs1040   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. Irs1040 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. Irs1040 If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Irs1040 Form 1098. Irs1040   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your mortgage insurance premiums paid during the year, which may qualify to be treated as deductible mortgage interest. Irs1040 See Form 1098, Mortgage Interest Statement, next. Irs1040 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. Irs1040 You will receive the statement if you pay interest to a person (including a financial institution or cooperative housing corporation) in the course of that person's trade or business. Irs1040 A governmental unit is a person for purposes of furnishing the statement. Irs1040 The statement for each year should be sent to you by January 31 of the following year. Irs1040 A copy of this form will also be sent to the IRS. Irs1040 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. Irs1040 However, it should not show any interest that was paid for you by a government agency. Irs1040 As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Irs1040 However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. Irs1040 See the earlier discussion of Points to determine whether you can deduct points not shown on Form 1098. Irs1040 Prepaid interest on Form 1098. Irs1040   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. Irs1040 However, you cannot deduct the prepaid amount for January 2014 in 2013. Irs1040 (See Prepaid interest , earlier. Irs1040 ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. Irs1040 You will include the interest for January 2014 with other interest you pay for 2014. Irs1040 Refunded interest. Irs1040   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. Irs1040 See Refunds of interest , earlier. Irs1040 Mortgage insurance premiums. Irs1040   The amount of mortgage insurance premiums you paid during 2013 may be shown in Box 4 of Form 1098. Irs1040 See Mortgage Insurance Premiums , earlier. Irs1040 How To Report Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. Irs1040 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. Irs1040 Attach a statement explaining the difference and print “See attached” next to line 10. Irs1040 Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. Irs1040 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. Irs1040 The seller must give you this number and you must give the seller your TIN. Irs1040 A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Irs1040 Failure to meet any of these requirements may result in a $50 penalty for each failure. Irs1040 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. Irs1040 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. Irs1040 Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. Irs1040 More than one borrower. Irs1040   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. Irs1040 Show how much of the interest each of you paid, and give the name and address of the person who received the form. Irs1040 Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Irs1040 Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. Irs1040   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. Irs1040 Let each of the other borrowers know what his or her share is. Irs1040 Mortgage proceeds used for business or investment. Irs1040   If your home mortgage interest deduction is limited under the rules explained in Part II , but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 2 near the end of this publication. Irs1040 It shows where to deduct the part of your excess interest that is for those activities. Irs1040 The Table 1 Instructions for line 13 in Part II explain how to divide the excess interest among the activities for which the mortgage proceeds were used. Irs1040 Special Rule for Tenant-Stockholders in Cooperative Housing Corporations A qualified home includes stock in a cooperative housing corporation owned by a tenant-stockholder. Irs1040 This applies only if the tenant-stockholder is entitled to live in the house or apartment because of owning stock in the cooperative. Irs1040 Cooperative housing corporation. Irs1040   This is a corporation that meets all of the following conditions. Irs1040 Has only one class of stock outstanding, Has no stockholders other than those who own the stock that can live in a house, apartment, or house trailer owned or leased by the corporation, Has no stockholders who can receive any distribution out of capital other than on a liquidation of the corporation, and Meets at least one of the following requirements. Irs1040 Receives at least 80% of its gross income for the year in which the mortgage interest is paid or incurred from tenant-stockholders. Irs1040 For this purpose, gross income is all income received during the entire year, including amounts received before the corporation changed to cooperative ownership. Irs1040 At all times during the year, at least 80% of the total square footage of the corporation's property is used or available for use by the tenant-stockholders for residential or residential-related use. Irs1040 At least 90% of the corporation's expenditures paid or incurred during the year are for the acquisition, construction, management, maintenance, or care of corporate property for the benefit of the tenant-stockholders. Irs1040 Stock used to secure debt. Irs1040   In some cases, you cannot use your cooperative housing stock to secure a debt because of either: Restrictions under local or state law, or Restrictions in the cooperative agreement (other than restrictions in which the main purpose is to permit the tenant- stockholder to treat unsecured debt as secured debt). Irs1040 However, you can treat a debt as secured by the stock to the extent that the proceeds are used to buy the stock under the allocation of interest rules. Irs1040 See chapter 4 of Publication 535 for details on these rules. Irs1040 Figuring deductible home mortgage interest. Irs1040   Generally, if you are a tenant-stockholder, you can deduct payments you make for your share of the interest paid or incurred by the cooperative. Irs1040 The interest must be on a debt to buy, build, change, improve, or maintain the cooperative's housing, or on a debt to buy the land. Irs1040   Figure your share of this interest by multiplying the total by the following fraction. Irs1040      Your shares of stock in the cooperative   The total shares of stock in the cooperative Limits on deduction. Irs1040   To figure how the limits discussed in Part II apply to you, treat your share of the cooperative's debt as debt incurred by you. Irs1040 The cooperative should determine your share of its grandfathered debt, its home acquisition debt, and its home equity debt. Irs1040 (Your share of each of these types of debt is equal to the average balance of each debt multiplied by the fraction just given. Irs1040 ) After your share of the average balance of each type of debt is determined, you include it with the average balance of that type of debt secured by your stock. Irs1040 Form 1098. Irs1040    The cooperative should give you a Form 1098 showing your share of the interest. Irs1040 Use the rules in this publication to determine your deductible mortgage interest. Irs1040 Part II. Irs1040 Limits on Home Mortgage Interest Deduction This part of the publication discusses the limits on deductible home mortgage interest. Irs1040 These limits apply to your home mortgage interest expense if you have a home mortgage that does not fit into any of the three categories listed at the beginning of Part I under Fully deductible interest . Irs1040 Your home mortgage interest deduction is limited to the interest on the part of your home mortgage debt that is not more than your qualified loan limit. Irs1040 This is the part of your home mortgage debt that is grandfathered debt or that is not more than the limits for home acquisition debt and home equity debt. Irs1040 Table 1 can help you figure your qualified loan limit and your deductible home mortgage interest. Irs1040 Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home (your main or second home). Irs1040 It also must be secured by that home. Irs1040 If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. Irs1040 The additional debt may qualify as home equity debt (discussed later). Irs1040 Home acquisition debt limit. Irs1040   The total amount you can treat as home acquisition debt at any time on your main home and second home cannot be more than $1 million ($500,000 if married filing separately). Irs1040 This limit is reduced (but not below zero) by the amount of your grandfathered debt (discussed later). Irs1040 Debt over this limit may qualify as home equity debt (also discussed later). Irs1040 Refinanced home acquisition debt. Irs1040   Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt. Irs1040 However, the new debt will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing. Irs1040 Any additional debt not used to buy, build, or substantially improve a qualified home is not home acquisition debt, but may qualify as home equity debt (discussed later). Irs1040 Mortgage that qualifies later. Irs1040   A mortgage that does not qualify as home acquisition debt because it does not meet all the requirements may qualify at a later time. Irs1040 For example, a debt that you use to buy your home may not qualify as home acquisition debt because it is not secured by the home. Irs1040 However, if the debt is later secured by the home, it may qualify as home acquisition debt after that time. Irs1040 Similarly, a debt that you use to buy property may not qualify because the property is not a qualified home. Irs1040 However, if the property later becomes a qualified home, the debt may qualify after that time. Irs1040 Mortgage treated as used to buy, build, or improve home. Irs1040   A mortgage secured by a qualified home may be treated as home acquisition debt, even if you do not actually use the proceeds to buy, build, or substantially improve the home. Irs1040 This applies in the following situations. Irs1040 You buy your home within 90 days before or after the date you take out the mortgage. Irs1040 The home acquisition debt is limited to the home's cost, plus the cost of any substantial improvements within the limit described below in (2) or (3). Irs1040 (See Example 1 later. Irs1040 ) You build or improve your home and take out the mortgage before the work is completed. Irs1040 The home acquisition debt is limited to the amount of the expenses incurred within 24 months before the date of the mortgage. Irs1040 You build or improve your home and take out the mortgage within 90 days after the work is completed. Irs1040 The home acquisition debt is limited to the amount of the expenses incurred within the period beginning 24 months before the work is completed and ending on the date of the mortgage. Irs1040 (See Example 2 later. Irs1040 ) Example 1. Irs1040 You bought your main home on June 3 for $175,000. Irs1040 You paid for the home with cash you got from the sale of your old home. Irs1040 On July 15, you took out a mortgage of $150,000 secured by your main home. Irs1040 You used the $150,000 to invest in stocks. Irs1040 You can treat the mortgage as taken out to buy your home because you bought the home within 90 days before you took out the mortgage. Irs1040 The entire mortgage qualifies as home acquisition debt because it was not more than the home's cost. Irs1040 Example 2. Irs1040 On January 31, John began building a home on the lot that he owned. Irs1040 He used $45,000 of his personal funds to build the home. Irs1040 The home was completed on October 31. Irs1040 On November 21, John took out a $36,000 mortgage that was secured by the home. Irs1040 The mortgage can be treated as used to build the home because it was taken out within 90 days after the home was completed. Irs1040 The entire mortgage qualifies as home acquisition debt because it was not more than the expenses incurred within the period beginning 24 months before the home was completed. Irs1040 This is illustrated by Figure C. Irs1040   Please click here for the text description of the image. Irs1040 Figure C. Irs1040 John's example Date of the mortgage. Irs1040   The date you take out your mortgage is the day the loan proceeds are disbursed. Irs1040 This is generally the closing date. Irs1040 You can treat the day you apply in writing for your mortgage as the date you take it out. Irs1040 However, this applies only if you receive the loan proceeds within a reasonable time (such as within 30 days) after your application is approved. Irs1040 If a timely application you make is rejected, a reasonable additional time will be allowed to make a new application. Irs1040 Cost of home or improvements. Irs1040   To determine your cost, include amounts paid to acquire any interest in a qualified home or to substantially improve the home. Irs1040   The cost of building or substantially improving a qualified home includes the costs to acquire real property and building materials, fees for architects and design plans, and required building permits. Irs1040 Substantial improvement. Irs1040   An improvement is substantial if it: Adds to the value of your home, Prolongs your home's useful life, or Adapts your home to new uses. Irs1040    Repairs that maintain your home in good condition, such as repainting your home, are not substantial improvements. Irs1040 However, if you paint your home as part of a renovation that substantially improves your qualified home, you can include the painting costs in the cost of the improvements. Irs1040 Acquiring an interest in a home because of a divorce. Irs1040   If you incur debt to acquire the interest of a spouse or former spouse in a home, because of a divorce or legal separation, you can treat that debt as home acquisition debt. Irs1040 Part of home not a qualified home. Irs1040    To figure your home acquisition debt, you must divide the cost of your home and improvements between the part of your home that is a qualified home and any part that is not a qualified home. Irs1040 See Divided use of your home under Qualified Home in Part I. Irs1040 Home Equity Debt If you took out a loan for reasons other than to buy, build, or substantially improve your home, it may qualify as home equity debt. Irs1040 In addition, debt you incurred to buy, build, or substantially improve your home, to the extent it is more than the home acquisition debt limit (discussed earlier), may qualify as home equity debt. Irs1040 Home equity debt is a mortgage you took out after October 13, 1987, that: Does not qualify as home acquisition debt or as grandfathered debt, and Is secured by your qualified home. Irs1040 Example. Irs1040 You bought your home for cash 10 years ago. Irs1040 You did not have a mortgage on your home until last year, when you took out a $50,000 loan, secured by your home, to pay for your daughter's college tuition and your father's medical bills. Irs1040 This loan is home equity debt. Irs1040 Home equity debt limit. Irs1040   There is a limit on the amount of debt that can be treated as home equity debt. Irs1040 The total home equity debt on your main home and second home is limited to the smaller of: $100,000 ($50,000 if married filing separately), or The total of each home's fair market value (FMV) reduced (but not below zero) by the amount of its home acquisition debt and grandfathered debt. Irs1040 Determine the FMV and the outstanding home acquisition and grandfathered debt for each home on the date that the last debt was secured by the home. Irs1040 Example. Irs1040 You own one home that you bought in 2000. Irs1040 Its FMV now is $110,000, and the current balance on your original mortgage (home acquisition debt) is $95,000. Irs1040 Bank M offers you a home mortgage loan of 125% of the FMV of the home less any outstanding mortgages or other liens. Irs1040 To consolidate some of your other debts, you take out a $42,500 home mortgage loan [(125% × $110,000) − $95,000] with Bank M. Irs1040 Your home equity debt is limited to $15,000. Irs1040 This is the smaller of: $100,000, the maximum limit, or $15,000, the amount that the FMV of $110,000 exceeds the amount of home acquisition debt of $95,000. Irs1040 Debt higher than limit. Irs1040   Interest on amounts over the home equity debt limit (such as the interest on $27,500 [$42,500 − $15,000] in the preceding example) generally is treated as personal interest and is not deductible. Irs1040 But if the proceeds of the loan were used for investment, business, or other deductible purposes, the interest may be deductible. Irs1040 If it is, see the Table 1 Instructions for line 13 for an explanation of how to allocate the excess interest. Irs1040 Part of home not a qualified home. Irs1040   To figure the limit on your home equity debt, you must divide the FMV of your home between the part that is a qualified home and any part that is not a qualified home. Irs1040 See Divided use of your home under Qualified Home in Part I. Irs1040 Fair market value (FMV). Irs1040    This is the price at which the home would change hands between you and a buyer, neither having to sell or buy, and both having reasonable knowledge of all relevant facts. Irs1040 Sales of similar homes in your area, on about the same date your last debt was secured by the home, may be helpful in figuring the FMV. Irs1040 Grandfathered Debt If you took out a mortgage on your home before October 14, 1987, or you refinanced such a mortgage, it may qualify as grandfathered debt. Irs1040 To qualify, it must have been secured by your qualified home on October 13, 1987, and at all times after that date. Irs1040 How you used the proceeds does not matter. Irs1040 Grandfathered debt is not limited. Irs1040 All of the interest you paid on grandfathered debt is fully deductible home mortgage interest. Irs1040 However, the amount of your grandfathered debt reduces the $1 million limit for home acquisition debt and the limit based on your home's fair market value for home equity debt. Irs1040 Refinanced grandfathered debt. Irs1040   If you refinanced grandfathered debt after October 13, 1987, for an amount that was not more than the mortgage principal left on the debt, then you still treat it as grandfathered debt. Irs1040 To the extent the new debt is more than that mortgage principal, it is treated as home acquisition or home equity debt, and the mortgage is a mixed-use mortgage (discussed later under Average Mortgage Balance in the Table 1 instructions). Irs1040 The debt must be secured by the qualified home. Irs1040   You treat grandfathered debt that was refinanced after October 13, 1987, as grandfathered debt only for the term left on the debt that was refinanced. Irs1040 After that, you treat it as home acquisition debt or home equity debt, depending on how you used the proceeds. Irs1040 Exception. Irs1040   If the debt before refinancing was like a balloon note (the principal on the debt was not amortized over the term of the debt), then you treat the refinanced debt as grandfathered debt for the term of the first refinancing. Irs1040 This term cannot be more than 30 years. Irs1040 Example. Irs1040 Chester took out a $200,000 first mortgage on his home in 1986. Irs1040 The mortgage was a five-year balloon note and the entire balance on the note was due in 1991. Irs1040 Chester refinanced the debt in 1991 with a new 20-year mortgage. Irs1040 The refinanced debt is treated as grandfathered debt for its entire term (20 years). Irs1040 Line-of-credit mortgage. Irs1040    If you had a line-of-credit mortgage on October 13, 1987, and borrowed additional amounts against it after that date, then the additional amounts are either home acquisition debt or home equity debt depending on how you used the proceeds. Irs1040 The balance on the mortgage before you borrowed the additional amounts is grandfathered debt. Irs1040 The newly borrowed amounts are not grandfathered debt because the funds were borrowed after October 13, 1987. Irs1040 See Average Mortgage Balance in the Table 1 Instructions that follow. Irs1040 Table 1 Instructions Unless you are subject to the overall limit on itemized deductions, you can deduct all of the interest you paid during the year on mortgages secured by your main home or second home in either of the following two situations. Irs1040 All the mortgages are grandfathered debt. Irs1040 The total of the mortgage balances for the entire year is within the limits discussed earlier under Home Acquisition Debt and Home Equity Debt . Irs1040 In either of those cases, you do not need Table 1. Irs1040 Otherwise, you can use Table 1 to determine your qualified loan limit and deductible home mortgage interest. Irs1040 Fill out only one Table 1 for both your main and second home regardless of how many mortgages you have. Irs1040 Table 1. Irs1040 Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. Irs1040 Part I Qualified Loan Limit 1. Irs1040 Enter the average balance of all your grandfathered debt. Irs1040 See line 1 instructions 1. Irs1040   2. Irs1040 Enter the average balance of all your home acquisition debt. Irs1040 See line 2 instructions 2. Irs1040   3. Irs1040 Enter $1,000,000 ($500,000 if married filing separately) 3. Irs1040   4. Irs1040 Enter the larger of the amount on line 1 or the amount on line 3 4. Irs1040   5. Irs1040 Add the amounts on lines 1 and 2. Irs1040 Enter the total here 5. Irs1040   6. Irs1040 Enter the smaller of the amount on line 4 or the amount on line 5 6. Irs1040   7. Irs1040 If you have home equity debt, enter the smaller of $100,000 ($50,000 if married filing separately) or your limited amount. Irs1040 See the line 7 instructions for the limit which may apply to you. Irs1040 7. Irs1040   8. Irs1040 Add the amounts on lines 6 and 7. Irs1040 Enter the total. Irs1040 This is your qualified loan limit. Irs1040 8. Irs1040   Part II Deductible Home Mortgage Interest 9. Irs1040 Enter the total of the average balances of all mortgages on all qualified homes. Irs1040  See line 9 instructions 9. Irs1040     If line 8 is less than line 9, go on to line 10. Irs1040 If line 8 is equal to or more than line 9, stop here. Irs1040 All of your interest on all the mortgages included on line 9 is deductible as home mortgage interest on Schedule A (Form 1040). Irs1040     10. Irs1040 Enter the total amount of interest that you paid. Irs1040 See line 10 instructions 10. Irs1040   11. Irs1040 Divide the amount on line 8 by the amount on line 9. Irs1040 Enter the result as a decimal amount (rounded to three places) 11. Irs1040 × . Irs1040 12. Irs1040 Multiply the amount on line 10 by the decimal amount on line 11. Irs1040 Enter the result. Irs1040 This is your deductible home mortgage interest. Irs1040 Enter this amount on Schedule A (Form 1040) 12. Irs1040   13. Irs1040 Subtract the amount on line 12 from the amount on line 10. Irs1040 Enter the result. Irs1040 This is not home mortgage interest. Irs1040 See line 13 instructions 13. Irs1040   Home equity debt only. Irs1040   If all of your mortgages are home equity debt, do not fill in lines 1 through 5. Irs1040 Enter zero on line 6 and complete the rest of Table 1. Irs1040 Average Mortgage Balance You have to figure the average balance of each mortgage to determine your qualified loan limit. Irs1040 You need these amounts to complete lines 1, 2, and 9 of Table 1. Irs1040 You can use the highest mortgage balances during the year, but you may benefit most by using the average balances. Irs1040 The following are methods you can use to figure your average mortgage balances. Irs1040 However, if a mortgage has more than one category of debt, see Mixed-use mortgages , later, in this section. Irs1040 Average of first and last balance method. Irs1040   You can use this method if all the following apply. Irs1040 You did not borrow any new amounts on the mortgage during the year. Irs1040 (This does not include borrowing the original mortgage amount. Irs1040 ) You did not prepay more than one month's principal during the year. Irs1040 (This includes prepayment by refinancing your home or by applying proceeds from its sale. Irs1040 ) You had to make level payments at fixed equal intervals on at least a semi-annual basis. Irs1040 You treat your payments as level even if they were adjusted from time to time because of changes in the interest rate. Irs1040    To figure your average balance, complete the following worksheet. Irs1040    1. Irs1040 Enter the balance as of the first day of the year that the mortgage was secured by your qualified home during the year (generally January 1)   2. Irs1040 Enter the balance as of the last day of the year that the mortgage was secured by your qualified home during the year (generally December 31)   3. Irs1040 Add amounts on lines 1 and 2   4. Irs1040 Divide the amount on line 3 by 2. Irs1040 Enter the result   Interest paid divided by interest rate method. Irs1040   You can use this method if at all times in 2013 the mortgage was secured by your qualified home and the interest was paid at least monthly. Irs1040    Complete the following worksheet to figure your average balance. Irs1040    1. Irs1040 Enter the interest paid in 2013. Irs1040 Do not include points, mortgage insurance premiums, or any interest paid in 2013 that is for a year after 2013. Irs1040 However, do include interest that is for 2013 but was paid in an earlier year   2. Irs1040 Enter the annual interest rate on the mortgage. Irs1040 If the interest rate varied in 2013, use the lowest rate for the year   3. Irs1040 Divide the amount on line 1 by the amount on line 2. Irs1040 Enter the result   Example. Irs1040 Mr. Irs1040 Blue had a line of credit secured by his main home all year. Irs1040 He paid interest of $2,500 on this loan. Irs1040 The interest rate on the loan was 9% (. Irs1040 09) all year. Irs1040 His average balance using this method is $27,778, figured as follows. Irs1040 1. Irs1040 Enter the interest paid in 2013. Irs1040 Do not include points, mortgage insurance premiums, or any interest paid in 2013 that is for a year after 2013. Irs1040 However, do include interest that is for 2013 but was paid in an earlier year $2,500 2. Irs1040 Enter the annual interest rate on the mortgage. Irs1040 If the interest rate varied in 2013, use the lowest rate for the year . Irs1040 09 3. Irs1040 Divide the amount on line 1 by the amount on line 2. Irs1040 Enter the result $27,778 Statements provided by your lender. Irs1040   If you receive monthly statements showing the closing balance or the average balance for the month, you can use either to figure your average balance for the year. Irs1040 You can treat the balance as zero for any month the mortgage was not secured by your qualified home. Irs1040   For each mortgage, figure your average balance by adding your monthly closing or average balances and dividing that total by the number of months the home secured by that mortgage was a qualified home during the year. Irs1040   If your lender can give you your average balance for the year, you can use that amount. Irs1040 Example. Irs1040 Ms. Irs1040 Brown had a home equity loan secured by her main home all year. Irs1040 She received monthly statements showing her average balance for each month. Irs1040 She can figure her average balance for the year by adding her monthly average balances and dividing the total by 12. Irs1040 Mixed-use mortgages. Irs1040   A mixed-use mortgage is a loan that consists of more than one of the three categories of debt (grandfathered debt, home acquisition debt, and home equity debt). Irs1040 For example, a mortgage you took out during the year is a mixed-use mortgage if you used its proceeds partly to refinance a mortgage that you took out in an earlier year to buy your home (home acquisition debt) and partly to buy a car (home equity debt). Irs1040   Complete lines 1 and 2 of Table 1 by including the separate average balances of any grandfathered debt and home acquisition debt in your mixed-use mortgage. Irs1040 Do not use the methods described earlier in this section to figure the average balance of either category. Irs1040 Instead, for each category, use the following method. Irs1040 Figure the balance of that category of debt for each month. Irs1040 This is the amount of the loan proceeds allocated to that category, reduced by your principal payments on the mortgage previously applied to that category. Irs1040 Principal payments on a mixed-use mortgage are applied in full to each category of debt, until its balance is zero, in the following order: First, any home equity debt, Next, any grandfathered debt, and Finally, any home acquisition debt. Irs1040 Add together the monthly balances figured in (1). Irs1040 Divide the result in (2) by 12. Irs1040   Complete line 9 of Table 1 by including the average balance of the entire mixed-use mortgage, figured under one of the methods described earlier in this section. Irs1040 Example 1. Irs1040 In 1986, Sharon took out a $1,400,000 mortgage to buy her main home (grandfathered debt). Irs1040 On March 2, 2013, when the home had a fair market value of $1,700,000 and she owed $1,100,000 on the mortgage, Sharon took out a second mortgage for $200,000. Irs1040 She used $180,000 of the proceeds to make substantial improvements to her home (home acquisition debt) and the remaining $20,000 to buy a car (home equity debt). Irs1040 Under the loan agreement, Sharon must make principal payments of $1,000 at the end of each month. Irs1040 During 2013, her principal payments on the second mortgage totaled $10,000. Irs1040 To complete Table 1, line 2, Sharon must figure a separate average balance for the part of her second mortgage that is home acquisition debt. Irs1040 The January and February balances were zero. Irs1040 The March through December balances were all $180,000, because none of her principal payments are applied to the home acquisition debt. Irs1040 (They are all applied to the home equity debt, reducing it to $10,000 [$20,000 − $10,000]. Irs1040 ) The monthly balances of the home acquisition debt total $1,800,000 ($180,000 × 10). Irs1040 Therefore, the average balance of the home acquisition debt for 2013 was $150,000 ($1,800,000 ÷ 12). Irs1040 Example 2. Irs1040 The facts are the same as in Example 1. Irs1040 In 2014, Sharon's January through October principal payments on her second mortgage are applied to the home equity debt, reducing it to zero. Irs1040 The balance of the home acquisition debt remains $180,000 for each of those months. Irs1040 Because her November and December principal payments are applied to the home acquisition debt, the November balance is $179,000 ($180,000 − $1,000) and the December balance is $178,000 ($180,000 − $2,000). Irs1040 The monthly balances total $2,157,000 [($180,000 × 10) + $179,000 + $178,000]. Irs1040 Therefore, the average balance of the home acquisition debt for 2014 is $179,750 ($2,157,000 ÷ 12). Irs1040 L