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Tax Filing For 2012

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Tax Filing For 2012

Tax filing for 2012 Publication 531 - Main Content Table of Contents Keeping a Daily Tip RecordElectronic tip record. Tax filing for 2012 Reporting Tips to Your EmployerElectronic tip statement. Tax filing for 2012 Final report. Tax filing for 2012 Tip Rate Determination and Education Program Reporting Tips on Your Tax Return Allocated Tips How To Get Tax Help Keeping a Daily Tip Record Why keep a daily tip record. Tax filing for 2012   You must keep a daily tip record so you can: Report your tips accurately to your employer, Report your tips accurately on your tax return, and Prove your tip income if your return is ever questioned. Tax filing for 2012 How to keep a daily tip record. Tax filing for 2012   There are two ways to keep a daily tip record. Tax filing for 2012 You can either: Write information about your tips in a tip diary, or Keep copies of documents that show your tips, such as restaurant bills and credit or debit card charge slips. Tax filing for 2012 You should keep your daily tip record with your tax or other personal records. Tax filing for 2012 You must keep your records for as long as they are important for administration of the federal tax law. Tax filing for 2012 For information on how long to keep records, see How Long to Keep Records in chapter 1 of Publication 17, Your Federal Income Tax. Tax filing for 2012    If you keep a tip diary, you can use Form 4070A, Employee's Daily Record of Tips. Tax filing for 2012 To get Form 4070A, ask the Internal Revenue Service (IRS) or your employer for Publication 1244, Employee's Daily Record of Tips and Report to Employer. Tax filing for 2012 Publication 1244 is also available at www. Tax filing for 2012 irs. Tax filing for 2012 gov/pub1244. Tax filing for 2012 Publication 1244 includes a 1-year supply of Form 4070A. Tax filing for 2012 Each day, write in the information asked for on the form. Tax filing for 2012 A filled-in Form 4070A is shown on the following page. Tax filing for 2012   In addition to the information asked for on Form 4070A, you also need to keep a record of the date and value of any noncash tips you get, such as tickets, passes, or other items of value. Tax filing for 2012 Although you do not report these tips to your employer, you must report them on your tax return. Tax filing for 2012   If you do not use Form 4070A, start your records by writing your name, your employer's name, and the name of the business (if it is different from your employer's name). Tax filing for 2012 Then, each workday, write the date and the following information. Tax filing for 2012 Cash tips you get directly from customers or from other employees. Tax filing for 2012 Tips from credit and debit card charge customers that your employer pays you. Tax filing for 2012 The value of any noncash tips you get, such as tickets, passes, or other items of value. Tax filing for 2012 The amount of tips you paid out to other employees through tip pools or tip splitting, or other arrangements, and the names of the employees to whom you paid the tips. Tax filing for 2012 Please click here for the text description of the image. Tax filing for 2012 Sample Filled-in Form 4070A from Publication 1244 Electronic tip record. Tax filing for 2012   You can use an electronic system provided by your employer to record your daily tips. Tax filing for 2012 If you do, you must receive and keep a paper copy of this record. Tax filing for 2012 Service charges. Tax filing for 2012    Do not write in your tip diary the amount of any service charge that your employer adds to a customer's bill and then pays to you and treats as wages. Tax filing for 2012 This is part of your wages, not a tip. Tax filing for 2012 The following factors determine if you have a tip or service charge: The payment is made free from compulsion; The customer has the right to determine the amount of payment; The payment is not subject to negotiation or dictated by employer policy; and The customer generally has the right to determine who receives the payment. Tax filing for 2012 See examples below. Tax filing for 2012 Example 1. Tax filing for 2012 Good Food Restaurant adds an 18% charge to the bill for parties of 6 or more customers. Tax filing for 2012 Jane's bill for food and beverages for her party of 8 includes an amount on the tip line equal to 18% of the charges for food and beverages, and the total includes this amount. Tax filing for 2012 Because Jane did not have an unrestricted right to determine the amount on the “tip line,” the 18% charge is considered a service charge. Tax filing for 2012 Do not include the 18% charge in your tip diary. Tax filing for 2012 Service charges that are paid to you are considered wages, not tips. Tax filing for 2012 Example 2. Tax filing for 2012 Good Food Restaurant includes sample calculations of tip amounts at the bottom of its bills for food and beverages provided to customers. Tax filing for 2012 David's bill includes a blank “tip line,” with sample tip calculations of 15%, 18%, and 20% of the charges for food and beverages at the bottom of the bill beneath the signature line. Tax filing for 2012 Because David is free to enter any amount on the “tip line” or leave it blank, any amount he includes is considered a tip. Tax filing for 2012 Be sure to include this amount in your tip diary. Tax filing for 2012 Sample Filled-in Form 4070 from Publication 1244 Please click here for the text description of the image. Tax filing for 2012 Filled-in Form 4070 Reporting Tips to Your Employer Why report tips to your employer. Tax filing for 2012   You must report tips to your employer so that: Your employer can withhold federal income tax and social security, Medicare, Additional Medicare, or railroad retirement taxes, Your employer can report the correct amount of your earnings to the Social Security Administration or Railroad Retirement Board (which affects your benefits when you retire or if you become disabled, or your family's benefits if you die), and You can avoid the penalty for not reporting tips to your employer (explained later). Tax filing for 2012 What tips to report. Tax filing for 2012   Report to your employer only cash, check, and debit and credit card tips you receive. Tax filing for 2012   If your total tips for any 1 month from any one job are less than $20, do not report the tips for that month to that employer. Tax filing for 2012   If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. Tax filing for 2012 Do not report to your employer any portion of the tips you receive that you pass on to other employees. Tax filing for 2012 However, you must report tips you receive from other employees. Tax filing for 2012   Do not report the value of any noncash tips, such as tickets or passes, to your employer. Tax filing for 2012 You do not pay social security, Medicare, Additional Medicare, or railroad retirement taxes on these tips. Tax filing for 2012 How to report. Tax filing for 2012   If your employer does not give you any other way to report your tips, you can use Form 4070, Employee's Report of Tips to Employer. Tax filing for 2012 Fill in the information asked for on the form, sign and date the form, and give it to your employer. Tax filing for 2012 A sample filled-in Form 4070 is shown above. Tax filing for 2012 To get a 1-year supply of the form, ask the IRS or your employer for Publication 1244. Tax filing for 2012   If you do not use Form 4070, give your employer a statement with the following information. Tax filing for 2012 Your name, address, and social security number. Tax filing for 2012 Your employer's name, address, and business name (if it is different from your employer's name). Tax filing for 2012 The month (or the dates of any shorter period) in which you received tips. Tax filing for 2012 The total tips required to be reported for that period. Tax filing for 2012 You must sign and date the statement. Tax filing for 2012 Be sure to keep a copy with your tax or other personal records. Tax filing for 2012   Your employer may require you to report your tips more than once a month. Tax filing for 2012 However, the statement cannot cover a period of more than 1 calendar month. Tax filing for 2012 Electronic tip statement. Tax filing for 2012   Your employer can have you furnish your tip statements electronically. Tax filing for 2012 When to report. Tax filing for 2012   Give your report for each month to your employer by the 10th of the next month. Tax filing for 2012 If the 10th falls on a Saturday, Sunday, or legal holiday, give your employer the report by the next day that is not a Saturday, Sunday, or legal holiday. Tax filing for 2012 Example. Tax filing for 2012 You must report your tips received in September 2014 by October 10, 2014. Tax filing for 2012 Final report. Tax filing for 2012   If your employment ends during the month, you can report your tips when your employment ends. Tax filing for 2012 Penalty for not reporting tips. Tax filing for 2012   If you do not report tips to your employer as required, you may be subject to a penalty equal to 50% of the social security, Medicare, Additional Medicare, or railroad retirement taxes you owe on the unreported tips. Tax filing for 2012 (For information about these taxes, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, later. Tax filing for 2012 ) The penalty amount is in addition to the taxes you owe. Tax filing for 2012   You can avoid this penalty if you can show reasonable cause for not reporting the tips to your employer. Tax filing for 2012 To do so, attach a statement to your return explaining why you did not report them. Tax filing for 2012 Giving your employer money for taxes. Tax filing for 2012   Your regular pay may not be enough for your employer to withhold all the taxes you owe on your regular pay plus your reported tips. Tax filing for 2012 If this happens, you can give your employer money until the close of the calendar year to pay the rest of the taxes. Tax filing for 2012   If you do not give your employer enough money, your employer will apply your regular pay and any money you give to the taxes, in the following order. Tax filing for 2012 All taxes on your regular pay. Tax filing for 2012 Social security, Medicare, Additional Medicare, or railroad retirement taxes on your reported tips. Tax filing for 2012 Federal, state, and local income taxes on your reported tips. Tax filing for 2012    Any taxes that remain unpaid can be collected by your employer from your next paycheck. Tax filing for 2012 If withholding taxes remain uncollected at the end of the year, you may be subject to a penalty for underpayment of estimated taxes. Tax filing for 2012 See Publication 505, Tax Withholding and Estimated Tax, for more information. Tax filing for 2012    Uncollected taxes. Tax filing for 2012 You must report on your tax return any social security and Medicare taxes, or railroad retirement taxes that remained uncollected at the end of 2013. Tax filing for 2012 These uncollected taxes will be shown on your 2013 Form W-2. Tax filing for 2012 See Reporting uncollected social security, Medicare, Additional Medicare, or railroad retirement taxes on tips reported to your employer under Reporting Tips on Your Tax Return, later. Tax filing for 2012 Tip Rate Determination and Education Program Your employer may participate in the Tip Rate Determination and Education Program. Tax filing for 2012 The program was developed to help employees and employers understand and meet their tip reporting responsibilities. Tax filing for 2012 There are two agreements under the program: the Tip Rate Determination Agreement (TRDA) and the Tip Reporting Alternative Commitment (TRAC). Tax filing for 2012 A variation of the TRAC program, the Employer Tip Reporting Alternative Commitment, (EmTRAC) was designed to allow employers in the food and beverage industry to design and receive approval for their own TRAC programs. Tax filing for 2012 For information on the EmTRAC program, see Notice 2001-1, which is on page 261 of Internal Revenue Bulletin 2001-2 at www. Tax filing for 2012 irs. Tax filing for 2012 gov/pub/irs-irbs/irb01-02. Tax filing for 2012 pdf. Tax filing for 2012 If you are employed in the gaming industry, your employer may participate in the Gaming Industry Tip Compliance Agreement Program. Tax filing for 2012 See Revenue Procedure 2007-32, 2007-22 I. Tax filing for 2012 R. Tax filing for 2012 B. Tax filing for 2012 1322, available at www. Tax filing for 2012 irs. Tax filing for 2012 gov/pub/irs-irbs/irb07_22. Tax filing for 2012 pdf. Tax filing for 2012 Your employer can provide you with a copy of any applicable agreement. Tax filing for 2012 To find out more about these agreements, visit IRS. Tax filing for 2012 gov and enter “restaurant tip reporting” in the search box. Tax filing for 2012 You may also call 1-800-829-4933, visit www. Tax filing for 2012 irs. Tax filing for 2012 gov/localcontacts for the IRS Taxpayer Assistance Center in your area, or send an email to Tip. Tax filing for 2012 Program@irs. Tax filing for 2012 gov and request information on this program. Tax filing for 2012 Reporting Tips on Your Tax Return How to report tips. Tax filing for 2012   Report your tips with your wages on Form 1040, line 7; Form 1040A, line 7; Form 1040EZ, line 1; Form 1040NR, line 8; or Form 1040NR-EZ, line 3. Tax filing for 2012 What tips to report. Tax filing for 2012   Generally, you must report all tips you received in 2013 on your tax return, including both cash tips and noncash tips. Tax filing for 2012 Any tips you reported to your employer as required in 2013 are included in the wages shown in box 1 of your Form W-2. Tax filing for 2012 Add to the amount in box 1 only the tips you did not report to your employer. Tax filing for 2012   However, any tips you received in 2013 that you reported to your employer as required after 2013 but before January 11, 2014, are not included in the wages shown in box 1 of your 2013 Form W-2. Tax filing for 2012 Do not include the amount of these tips on your 2013 tax return. Tax filing for 2012 Instead, include them on your 2014 tax return. Tax filing for 2012 Tips you received in 2012 that you reported to your employer as required after 2012 but before January 11, 2013, are included in the wages shown in box 1 of your 2013 Form W-2. Tax filing for 2012 Although these tips were received in 2012, you must report them on your 2013 tax return. Tax filing for 2012   If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. Tax filing for 2012 Do not report on your income tax return any portion of the tips you receive that you pass on to other employees. Tax filing for 2012 However, you must report tips you receive from other employees. Tax filing for 2012    If you received $20 or more in cash and charge tips in a month and did not report all of those tips to your employer, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer, later. Tax filing for 2012    If you did not keep a daily tip record as required and an amount is shown in box 8 of your Form W-2, see Allocated Tips, later. Tax filing for 2012   If you kept a daily tip record and reported tips to your employer as required under the rules explained earlier, add the following tips to the amount in box 1 of your Form W-2. Tax filing for 2012 Cash and charge tips you received that totaled less than $20 for any month. Tax filing for 2012 The value of noncash tips, such as tickets, passes, or other items of value. Tax filing for 2012 Example. Tax filing for 2012 Ben Smith began working at the Blue Ocean Restaurant (his only employer in 2013) on June 30 and received $10,000 in wages during the year. Tax filing for 2012 Ben kept a daily tip record showing that his tips for June were $18 and his tips for the rest of the year totaled $7,000. Tax filing for 2012 He was not required to report his June tips to his employer, but he reported all of the rest of his tips to his employer as required. Tax filing for 2012 Ben's Form W-2 from Blue Ocean Restaurant shows $17,000 ($10,000 wages + $7,000 reported tips) in box 1. Tax filing for 2012 He adds the $18 unreported tips to that amount and reports $17,018 as wages on his tax return. Tax filing for 2012 Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer. Tax filing for 2012    If you received $20 or more in cash and charge tips in a month from any one job and did not report all of those tips to your employer, you must report the social security, Medicare, and Additional Medicare taxes on the unreported tips as additional tax on your return. Tax filing for 2012 To report these taxes, you must file a return even if you would not otherwise have to file. Tax filing for 2012 You must use Form 1040, Form 1040NR, Form 1040NR-EZ, Form 1040-SS, or 1040-PR (as appropriate) for this purpose. Tax filing for 2012 (You cannot file Form 1040EZ or Form 1040A. Tax filing for 2012 )    Use Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to figure social security and Medicare taxes. Tax filing for 2012 Enter the tax on your return as instructed, and attach the completed Form 4137 to your return. Tax filing for 2012 Use Form 8959 to figure Additional Medicare Tax. Tax filing for 2012 If you are subject to the Railroad Retirement Tax Act, you cannot use Form 4137 to pay railroad retirement tax on unreported tips. Tax filing for 2012 To get railroad retirement credit, you must report tips to your employer. Tax filing for 2012 Reporting uncollected social security, Medicare, Additional Medicare, or railroad retirement taxes on tips reported to your employer. Tax filing for 2012    You may have uncollected taxes if your regular pay was not enough for your employer to withhold all the taxes you owe and you did not give your employer enough money to pay the rest of the taxes. Tax filing for 2012 For more information, see Giving your employer money for taxes , under Reporting Tips to Your Employer, earlier. Tax filing for 2012   If your employer could not collect all the social security and Medicare taxes, or railroad retirement taxes you owe on tips reported for 2013, the uncollected taxes will be shown in box 12 of your Form W-2 (codes A and B). Tax filing for 2012 You must report these amounts as additional tax on your return. Tax filing for 2012   If you worked in the U. Tax filing for 2012 S. Tax filing for 2012 possessions and received Form W-2AS, Form W-2CM, Form W-2GU, or Form W-2VI, any uncollected taxes on tips will be shown in box 12 with codes A and B. Tax filing for 2012 If you received Form 499R-2/W-2PR, any uncollected taxes will be shown in boxes 22 and 23. Tax filing for 2012 Unlike the uncollected portion of the regular (1. Tax filing for 2012 45%) Medicare tax, the uncollected Additional Medicare Tax is not reported on Form W-2. Tax filing for 2012   To report these uncollected taxes, you must file a return even if you would not otherwise have to file. Tax filing for 2012 You can report these taxes on Form 1040, in the space next to line 60; Form 1040NR, line 59; Form 1040-SS, Part I, line 6; or Form 1040-PR, Part I, line 6. Tax filing for 2012 See the instructions for the appropriate form and line number indicated, and Form 8959. Tax filing for 2012 (You cannot file Form 1040A, Form 1040EZ, or Form 1040NR-EZ. Tax filing for 2012 ) Self-employed persons. Tax filing for 2012    If you receive tips as a self-employed person, you should report these tips as income on Schedule C or C-EZ. Tax filing for 2012 See Publication 334, Tax Guide for Small Business, for more information on reporting business income. Tax filing for 2012 Allocated Tips If your employer allocated tips to you, they are shown separately in box 8 of your Form W-2. Tax filing for 2012 They are not included in box 1 with your wages and reported tips. Tax filing for 2012 If box 8 is blank, this discussion does not apply to you. Tax filing for 2012 What are allocated tips. Tax filing for 2012   These are tips that your employer assigned to you in addition to the tips you reported to your employer for the year. Tax filing for 2012 Your employer will have done this only if: You worked in an establishment (restaurant, cocktail lounge, or similar business) that must allocate tips to employees, and The tips you reported to your employer were less than your share of 8% of food and drink sales. Tax filing for 2012 No income, social security, Medicare, Additional Medicare, or railroad retirement taxes are withheld on allocated tips. Tax filing for 2012 How were your allocated tips figured. Tax filing for 2012   The tips allocated to you are your share of an amount figured by subtracting the reported tips of all employees from 8% (or an approved lower rate) of food and drink sales (other than carryout sales and sales with a service charge of 10% or more). Tax filing for 2012 Your share of that amount was figured using either a method provided by an employer-employee agreement or a method provided by IRS regulations based on employees' sales or hours worked. Tax filing for 2012 For information about the exact allocation method used, ask your employer. Tax filing for 2012 Must you report your allocated tips on your tax return. Tax filing for 2012   You must report tips you received in 2013 (including both cash and noncash tips) on your tax return as explained in What tips to report , earlier. Tax filing for 2012 Any tips you reported to your employer in 2013 as required (explained under Reporting Tips to Your Employer , earlier) are included in the wages shown in box 1 of your Form W-2. Tax filing for 2012 Add to the amount in box 1 only the tips you did not report to your employer as required. Tax filing for 2012 This should include any allocated tips shown in box 8 on your Form(s) W-2, unless you have adequate records to show that you received less tips in the year than the allocated amount. Tax filing for 2012   See What tips to report under Reporting Tips on Your Tax Return, and Keeping a Daily Tip Record , earlier. Tax filing for 2012 How to report allocated tips. Tax filing for 2012   If you received any tips in 2013 that you did not report to your employer as required (including allocated tips that you are required to report on your tax return), add these tips to the amount in box 1 of your Form(s) W-2 and report this amount as wages on Form 1040, line 7; Form 1040NR, line 8; or Form 1040NR-EZ, line 3. Tax filing for 2012 (You cannot file Form 1040A or Form 1040EZ). Tax filing for 2012    Because social security, Medicare, or Additional Medicare taxes were not withheld from the allocated tips, you must report those taxes as additional tax on your return. Tax filing for 2012 Complete Form 4137 and include the allocated tips on line 1 of the form as provided in its instructions. Tax filing for 2012 See Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, earlier. Tax filing for 2012 How to request an approved lower rate. Tax filing for 2012   Your employer can use a tip rate lower than 8% (but not lower than 2%) to figure allocated tips only if the IRS approves the lower rate. Tax filing for 2012 Either the employer or the employees can request approval of a lower rate by filing a petition with the IRS. Tax filing for 2012 The petition must include specific information about the establishment that will justify the lower rate. Tax filing for 2012 A user fee must be paid with the petition. Tax filing for 2012    An employee petition can be filed only with the consent of a majority of the directly tipped employees (waiters, bartenders, and others who receive tips directly from customers). Tax filing for 2012 The petition must state the total number of directly tipped employees and the number of employees consenting to the petition. Tax filing for 2012 Employees filing the petition must promptly notify the employer, and the employer must promptly give the IRS a copy of all Forms 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, filed for the establishment for the previous 3 years. Tax filing for 2012   For more information about how to file a petition and what information to include, see Allocation of Tips in the Instructions for Form 8027. Tax filing for 2012 How To Get Tax Help Go online, use a smart phone, call or walk in to an office near you. Tax filing for 2012 Whether it's help with a tax issue, preparing your tax return or picking up a free publication or form, get the help you need the way you want it. Tax filing for 2012 Free help with your tax return. Tax filing for 2012   Free help in preparing your return is available nationwide from IRS-certified volunteers. Tax filing for 2012 The Volunteer Income Tax Assistance (VITA) program is designed to help low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers. Tax filing for 2012 The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Tax filing for 2012 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. Tax filing for 2012 Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. Tax filing for 2012 To find the nearest VITA or TCE site, visit IRS. Tax filing for 2012 gov or call 1-800-906-9887. Tax filing for 2012   As part of the TCE program, AARP offers the Tax-Aide counseling program. Tax filing for 2012 To find the nearest AARP Tax-Aide site, visit AARP's website at www. Tax filing for 2012 aarp. Tax filing for 2012 org/money/taxaide or call 1-888-227-7669. Tax filing for 2012   For more information on these programs, go to IRS. Tax filing for 2012 gov and enter “VITA” in the search box. Tax filing for 2012 Internet. Tax filing for 2012 IRS. Tax filing for 2012 gov and IRS2Go are ready when you are — every day, every night, 24 hours a day, 7 days a week. Tax filing for 2012 Apply for an Employer Identification Number (EIN). Tax filing for 2012 Go to IRS. Tax filing for 2012 gov and enter Apply for an EIN in the search box. Tax filing for 2012 Request an Electronic Filing PIN by going to IRS. Tax filing for 2012 gov and entering Electronic Filing PIN in the search box. Tax filing for 2012 Check the status of your 2013 refund with Where's My Refund? Go to IRS. Tax filing for 2012 gov or the IRS2Go app, and click on Where's My Refund? You'll get a personalized refund date as soon as the IRS processes your tax return and approves your refund. Tax filing for 2012 If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Tax filing for 2012 Check the status of your amended return. Tax filing for 2012 Go to IRS. Tax filing for 2012 gov and enter Where's My Amended Return in the search box. Tax filing for 2012 Download forms, instructions, and publications, including some accessible versions. Tax filing for 2012 Order free transcripts of your tax returns or tax account using the Order a Transcript tool on IRS. Tax filing for 2012 gov or IRS2Go. Tax filing for 2012 Tax return and tax account transcripts are generally available for the current year and past three years. Tax filing for 2012 Figure your income tax withholding with the IRS Withholding Calculator on IRS. Tax filing for 2012 gov. Tax filing for 2012 Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Tax filing for 2012 Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Tax filing for 2012 gov. Tax filing for 2012 Locate the nearest Taxpayer Assistance Center using the Office Locator tool on IRS. Tax filing for 2012 gov or IRS2Go. Tax filing for 2012 Stop by most business days for face-to-face tax help, no appointment necessary — just walk in. Tax filing for 2012 An employee can explain IRS letters, request adjustments to your tax account or help you set up a payment plan. Tax filing for 2012 Before you visit, check the Office Locator for the address, phone number, hours of operation and the services provided. Tax filing for 2012 If you have an ongoing tax account problem or a special need, such as a disability, you can request an appointment. Tax filing for 2012 Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Tax filing for 2012 Locate the nearest volunteer help site with the VITA Locator Tool on IRS. Tax filing for 2012 gov. Tax filing for 2012 Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Tax filing for 2012 The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. Tax filing for 2012 Most VITA and TCE sites offer free electronic filing and some provide IRS-certified volunteers who can help prepare your tax return. Tax filing for 2012 AARP offers the Tax-Aide counseling program as part of the TCE program. Tax filing for 2012 Visit AARP's website to find the nearest Tax-Aide location. Tax filing for 2012 Research your tax questions. Tax filing for 2012 Search publications and instructions by topic or keyword. Tax filing for 2012 Read the Internal Revenue Code, regulations, or other official guidance. Tax filing for 2012 Read Internal Revenue Bulletins. Tax filing for 2012 Sign up to receive local and national tax news by email. Tax filing for 2012 Phone. Tax filing for 2012 You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Tax filing for 2012 Download the free IRS2Go mobile app from the iTunes app store or from Google Play. Tax filing for 2012 Use it to watch the IRS YouTube channel, get IRS news as soon as it's released to the public, order transcripts of your tax returns or tax account, check your refund status, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Tax filing for 2012 Call to locate the nearest volunteer help site, 1-800-906-9887. Tax filing for 2012 Low-to-moderate income, elderly, persons with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Tax filing for 2012 The Tax Counseling for the Elderly (TCE) program helps taxpayers 60 and older with their tax returns. Tax filing for 2012 Most VITA and TCE sites offer free electronic filing. Tax filing for 2012 Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Tax filing for 2012 Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Tax filing for 2012 Call to check the status of your 2013 refund, 1-800-829-1954 or 1-800-829-4477. Tax filing for 2012 The automated Where's My Refund? information is available 24 hours a day, 7 days a week. Tax filing for 2012 If you e-file, your refund status is usually available within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Tax filing for 2012 Before you call, have your 2013 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Tax filing for 2012 Where's My Refund? can give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. Tax filing for 2012 Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. Tax filing for 2012 Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. Tax filing for 2012 Call to order forms, instructions and publications, 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). Tax filing for 2012 You should receive your order within 10 business days. Tax filing for 2012 Call to order transcripts of your tax returns or tax account, 1-800-908-9946. Tax filing for 2012 Follow the prompts to provide your Social Security Number or Individual Taxpayer Identification Number, date of birth, street address and ZIP code. Tax filing for 2012 Call for TeleTax topics, 1-800-829-4477, to listen to pre-recorded messages covering various tax topics. Tax filing for 2012 Call to ask tax questions, 1-800-829-1040. Tax filing for 2012 Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Tax filing for 2012 The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Tax filing for 2012 These individuals can also contact the IRS through relay services such as the Federal Relay Service available at www. Tax filing for 2012 gsa. Tax filing for 2012 gov/fedrelay. Tax filing for 2012 Walk-in. Tax filing for 2012 You can find a selection of forms, publications and services — in-person, face-to-face. Tax filing for 2012 Products. Tax filing for 2012 You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Tax filing for 2012 Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Tax filing for 2012 Services. Tax filing for 2012 You can walk in to your local TAC most business days for personal, face-to-face tax help. Tax filing for 2012 An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Tax filing for 2012 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. Tax filing for 2012 No appointment is necessary—just walk in. Tax filing for 2012 Before visiting, check www. Tax filing for 2012 irs. Tax filing for 2012 gov/localcontacts for hours of operation and services provided. Tax filing for 2012 Mail. Tax filing for 2012 You can send your order for forms, instructions, and publications to the address below. Tax filing for 2012 You should receive a response within 10 business days after your request is received. Tax filing for 2012  Internal Revenue Service 1201 N. Tax filing for 2012 Mitsubishi Motorway Bloomington, IL 61705-6613 The Taxpayer Advocate Service Is Here to Help You. Tax filing for 2012   The Taxpayer Advocate Service (TAS) is your voice at the IRS. Tax filing for 2012 Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Tax filing for 2012 What can TAS do for you?   We can offer you free help with IRS problems that you can't resolve on your own. Tax filing for 2012 We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. Tax filing for 2012 You face (or your business is facing) an immediate threat of adverse action. Tax filing for 2012 You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Tax filing for 2012   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. Tax filing for 2012 Here's why we can help: TAS is an independent organization within the IRS. Tax filing for 2012 Our advocates know how to work with the IRS. Tax filing for 2012 Our services are free and tailored to meet your needs. Tax filing for 2012 We have offices in every state, the District of Columbia, and Puerto Rico. Tax filing for 2012 How can you reach us?   If you think TAS can help you, call your local advocate, whose number is in your local directory and at www. Tax filing for 2012 irs. Tax filing for 2012 gov/advocate, or call us toll-free at 1-877-777-4778. Tax filing for 2012 How else does TAS help taxpayers?   TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Tax filing for 2012 If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. Tax filing for 2012 irs. Tax filing for 2012 gov/sams. Tax filing for 2012 Low Income Taxpayer Clinics. Tax filing for 2012   Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. Tax filing for 2012 Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Tax filing for 2012 Visit www. Tax filing for 2012 TaxpayerAdvocate. Tax filing for 2012 irs. Tax filing for 2012 gov or see IRS Publication 4134, Low Income Taxpayer Clinic List. 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The Tax Filing For 2012

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