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Taxes 2012

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Taxes 2012

Taxes 2012 Publication 536 - Main Content Table of Contents NOL Steps How To Figure an NOLNonbusiness deductions (line 6). Taxes 2012 Nonbusiness income (line 7). Taxes 2012 Nonbusiness capital losses. Taxes 2012 Business capital losses. Taxes 2012 Illustrated Form 1045, Schedule A When To Use an NOLExceptions to 2-Year Carryback Rule Waiving the Carryback Period How To Carry an NOL Back or Forward How To Claim an NOL DeductionDeducting a Carryback Deducting a Carryforward Change in Marital Status Change in Filing Status Illustrated Form 1045 How To Figure an NOL CarryoverIllustrated Form 1045, Schedule B NOL Carryover From 2013 to 2014Worksheet Instructions How To Get Tax HelpLow Income Taxpayer Clinics NOL Steps Follow Steps 1 through 5 to figure and use your NOL. Taxes 2012 Step 1. Taxes 2012   Complete your tax return for the year. Taxes 2012 You may have an NOL if a negative figure appears on the line below: Individuals — Form 1040, line 41, or Form 1040NR, line 39. Taxes 2012 Estates and trusts — Form 1041, line 22. Taxes 2012   If the amount on that line is not negative, stop here — you do not have an NOL. Taxes 2012 Step 2. Taxes 2012   Determine whether you have an NOL and its amount. Taxes 2012 See How To Figure an NOL , later. Taxes 2012 If you do not have an NOL, stop here. Taxes 2012 Step 3. Taxes 2012   Decide whether to carry the NOL back to a past year or to waive the carryback period and instead carry the NOL forward to a future year. Taxes 2012 See When To Use an NOL , later. Taxes 2012 Step 4. Taxes 2012   Deduct the NOL in the carryback or carryforward year. Taxes 2012 See How To Claim an NOL Deduction , later. Taxes 2012 If your NOL deduction is equal to or less than your taxable income without the deduction, stop here — you have used up your NOL. Taxes 2012 Step 5. Taxes 2012   Determine the amount of your unused NOL. Taxes 2012 See How To Figure an NOL Carryover , later. Taxes 2012 Carry over the unused NOL to the next carryback or carryforward year and begin again at Step 4. Taxes 2012 Note. Taxes 2012   If your NOL deduction includes more than one NOL amount, apply Step 5 separately to each NOL amount, starting with the amount from the earliest year. Taxes 2012 How To Figure an NOL If your deductions for the year are more than your income for the year, you may have an NOL. Taxes 2012 There are rules that limit what you can deduct when figuring an NOL. Taxes 2012 In general, the following items are not allowed when figuring an NOL. Taxes 2012 Any deduction for personal exemptions. Taxes 2012 Capital losses in excess of capital gains. Taxes 2012 The section 1202 exclusion of the gain from the sale or exchange of qualified small business stock. Taxes 2012 Nonbusiness deductions in excess of nonbusiness income. Taxes 2012 The net operating loss deduction. Taxes 2012 The domestic production activities deduction. Taxes 2012 Form 1045, Schedule A. Taxes 2012   Use Form 1045, Schedule A, to figure an NOL. Taxes 2012 The following discussion explains Schedule A and includes an illustrated example. Taxes 2012   First, complete Form 1045, Schedule A, line 1, using amounts from your return. Taxes 2012 If line 1 is a negative amount, you may have an NOL. Taxes 2012   Next, complete the rest of Form 1045, Schedule A, to figure your NOL. Taxes 2012 Nonbusiness deductions (line 6). Taxes 2012   Enter on line 6 deductions that are not connected to your trade or business or your employment. Taxes 2012 Examples of deductions not related to your trade or business are: Alimony paid, Deductions for contributions to an IRA or a self-employed retirement plan, Health savings account deduction, Archer medical savings account deduction, Most itemized deductions (except for casualty and theft losses, state income tax on trade and business income, and any employee business expenses), and The standard deduction. Taxes 2012   Do not include on line 6 the deduction for personal exemptions for you, your spouse, or your dependents. Taxes 2012   Do not enter business deductions on line 6. Taxes 2012 These are deductions that are connected to your trade or business. Taxes 2012 They include the following. Taxes 2012 State income tax on income attributable to trade or business (including wages, salary, and unemployment compensation). Taxes 2012 Moving expenses. Taxes 2012 Educator expenses. Taxes 2012 The deduction for the deductible part of self-employed health insurance. Taxes 2012 Domestic production activities deduction. Taxes 2012 Rental losses. Taxes 2012 Loss on the sale or exchange of business real estate or depreciable property. Taxes 2012 Your share of a business loss from a partnership or an S corporation. Taxes 2012 Ordinary loss on the sale or exchange of stock in a small business corporation or a small business investment company. Taxes 2012 If you itemize your deductions, casualty and theft losses (even if they involve nonbusiness property) and employee business expenses (such as union dues, uniforms, tools, education expenses, and travel and transportation expenses). Taxes 2012 Loss on the sale of accounts receivable (if you use an accrual method of accounting). Taxes 2012 Interest and litigation expenses on state and federal income taxes related to your business. Taxes 2012 Unrecovered investment in a pension or annuity claimed on a decedent's final return. Taxes 2012 Payment by a federal employee to buy back sick leave used in an earlier year. Taxes 2012 Nonbusiness income (line 7). Taxes 2012   Enter on line 7 only income that is not related to your trade or business or your employment. Taxes 2012 For example, enter your annuity income, dividends, and interest on investments. Taxes 2012 Also, include your share of nonbusiness income from partnerships and S corporations. Taxes 2012   Do not include on line 7 the income you receive from your trade or business or your employment. Taxes 2012 This includes salaries and wages, self-employment income, unemployment compensation included in your gross income, and your share of business income from partnerships and S corporations. Taxes 2012 Also, do not include rental income or ordinary gain from the sale or other disposition of business real estate or depreciable business property. Taxes 2012 Adjustment for section 1202 exclusion (line 17). Taxes 2012   Enter on line 17 any gain you excluded under section 1202 on the sale or exchange of qualified small business stock. Taxes 2012 Adjustments for capital losses (lines 19–22). Taxes 2012   The amount deductible for capital losses is limited based on whether the losses are business capital losses or nonbusiness capital losses. Taxes 2012 Nonbusiness capital losses. Taxes 2012   You can deduct your nonbusiness capital losses (line 2) only up to the amount of your nonbusiness capital gains without regard to any section 1202 exclusion (line 3). Taxes 2012 If your nonbusiness capital losses are more than your nonbusiness capital gains without regard to any section 1202 exclusion, you cannot deduct the excess. Taxes 2012 Business capital losses. Taxes 2012   You can deduct your business capital losses (line 11) only up to the total of: Your nonbusiness capital gains that are more than the total of your nonbusiness capital losses and excess nonbusiness deductions (line 10), and Your total business capital gains without regard to any section 1202 exclusion (line 12). Taxes 2012 Domestic production activities deduction (line 23). Taxes 2012   You cannot take the domestic production activities deduction when figuring your NOL. Taxes 2012 Enter on line 23 any domestic production activities deduction claimed on your return. Taxes 2012 NOLs from other years (line 24). Taxes 2012   You cannot deduct any NOL carryovers or carrybacks from other years. Taxes 2012 Enter the total amount of your NOL deduction for losses from other years. Taxes 2012 Illustrated Form 1045, Schedule A The following example illustrates how to figure an NOL. Taxes 2012 It includes filled-in pages 1 and 2 of Form 1040 and Form 1045, Schedule A. Taxes 2012 Example. Taxes 2012 Glenn Johnson is in the retail record business. Taxes 2012 He is single and has the following income and deductions on his Form 1040 for 2013. Taxes 2012 See the illustrated Form 1040 , later. Taxes 2012 INCOME   Wages from part-time job $1,225 Interest on savings 425 Net long-term capital gain on sale of real estate used in business 2,000 Glenn's total income $3,650 DEDUCTIONS   Net loss from business (gross income of $67,000 minus expenses of $72,000) $5,000 Net short-term capital loss on sale of stock 1,000 Standard deduction 6,100 Personal exemption 3,900 Glenn's total deductions $16,000 Glenn's deductions exceed his income by $12,350 ($16,000 − $3,650). Taxes 2012 However, to figure whether he has an NOL, certain deductions are not allowed. Taxes 2012 He uses Form 1045, Schedule A, to figure his NOL. Taxes 2012 See the Illustrated Form 1045, Schedule A , later. Taxes 2012 The following items are not allowed on Form 1045, Schedule A. Taxes 2012 Nonbusiness net short-term capital loss $1,000 Nonbusiness deductions (standard deduction, $6,100) minus nonbusiness income (interest, $425) 5,675 Deduction for personal exemption 3,900 Total adjustments to net loss $10,575     Therefore, Glenn's NOL for 2013 is figured as follows: Glenn's total 2013 income $3,650 Less:     Glenn's original 2013 total deductions $16,000   Reduced by the disallowed items − 10,575 − 5,425 Glenn's NOL for 2013 $1,775 This image is too large to be displayed in the current screen. Taxes 2012 Please click the link to view the image. Taxes 2012 Form 1040, page 1 This image is too large to be displayed in the current screen. Taxes 2012 Please click the link to view the image. Taxes 2012 Form 1040, page 2 This image is too large to be displayed in the current screen. Taxes 2012 Please click the link to view the image. Taxes 2012 Form 1045, page 2 When To Use an NOL Generally, if you have an NOL for a tax year ending in 2013, you must carry back the entire amount of the NOL to the 2 tax years before the NOL year (the carryback period), and then carry forward any remaining NOL for up to 20 years after the NOL year (the carryforward period). Taxes 2012 You can, however, choose not to carry back an NOL and only carry it forward. Taxes 2012 See Waiving the Carryback Period , later. Taxes 2012 You cannot deduct any part of the NOL remaining after the 20-year carryforward period. Taxes 2012 NOL year. Taxes 2012   This is the year in which the NOL occurred. Taxes 2012 Exceptions to 2-Year Carryback Rule Eligible losses, farming losses, qualified disaster losses, and specified liability losses, all defined next, qualify for longer carryback periods. Taxes 2012 Eligible loss. Taxes 2012   The carryback period for eligible losses is 3 years. Taxes 2012 Only the eligible loss portion of the NOL can be carried back 3 years. Taxes 2012 An eligible loss is any part of an NOL that: Is from a casualty or theft, or Is attributable to a federally declared disaster for a qualified small business or certain qualified farming businesses. Taxes 2012 Qualified small business. Taxes 2012   A qualified small business is a sole proprietorship or a partnership that has average annual gross receipts (reduced by returns and allowances) of $5 million or less during the 3-year period ending with the tax year of the NOL. Taxes 2012 If the business did not exist for this entire 3-year period, use the period the business was in existence. Taxes 2012   An eligible loss does not include a farming loss or a qualified disaster loss. Taxes 2012 Farming loss. Taxes 2012   The carryback period for a farming loss is 5 years. Taxes 2012 Only the farming loss portion of the NOL can be carried back 5 years. Taxes 2012 A farming loss is the smaller of: The amount that would be the NOL for the tax year if only income and deductions attributable to farming businesses were taken into account, or The NOL for the tax year. Taxes 2012 Farming business. Taxes 2012   A farming business is a trade or business involving cultivation of land or the raising or harvesting of any agricultural or horticultural commodity. Taxes 2012 A farming business can include operating a nursery or sod farm or raising or harvesting most ornamental trees or trees bearing fruit, nuts, or other crops. Taxes 2012 The raising, shearing, feeding, caring for, training, and management of animals is also considered a farming business. Taxes 2012   A farming business does not include contract harvesting of an agricultural or horticultural commodity grown or raised by someone else. Taxes 2012 It also does not include a business in which you merely buy or sell plants or animals grown or raised entirely by someone else. Taxes 2012 Waiving the 5-year carryback. Taxes 2012   You can choose to figure the carryback period for a farming loss without regard to the special 5-year carryback rule. Taxes 2012 To make this choice for 2013, attach to your 2013 income tax return filed by the due date (including extensions) a statement that you are choosing to treat any 2013 farming losses without regard to the special 5-year carryback rule. Taxes 2012 If you filed your original return on time but did not file the statement with it, you can make this choice on an amended return filed within 6 months after the due date of the return (excluding extensions). Taxes 2012 Attach an election statement to your amended return, and write “Filed pursuant to section 301. Taxes 2012 9100-2” at the top of the statement. Taxes 2012 Once made, this choice is irrevocable. Taxes 2012 Qualified disaster loss. Taxes 2012   The carryback period for a qualified disaster loss is 5 years. Taxes 2012 Only the qualified disaster loss portion of the NOL can be carried back 5 years. Taxes 2012 A qualified disaster loss is the smaller of: The sum of: Any losses attributable to a federally declared disaster and occurring before January 1, 2010, in the disaster area, plus Any allowable qualified disaster expenses (even if you did not choose to treat those expenses as deductions in the current year), or The NOL for the tax year. Taxes 2012 Qualified disaster expenses. Taxes 2012   A qualified disaster expense is any capital expense paid or incurred in connection with a trade or business or with business-related property which is: For the abatement or control of hazardous substances that were released as a result of a federally declared disaster occurring before January 1, 2010, For the removal of debris from, or the demolition of structures on, real property which is business-related property damaged or destroyed as a result of a federally declared disaster occurring before January 1, 2010, or For the repair of business-related property damaged as a result of a federally declared disaster occurring before January 1, 2010. Taxes 2012 Business-related property is property held for use in a trade or business, property held for the production of income, or inventory property. Taxes 2012 Note. Taxes 2012 Section 198A allows taxpayers to treat certain capital expenses (qualified disaster expenses) as deductions in the year the expenses were paid or incurred. Taxes 2012 Excluded losses. Taxes 2012   A qualified disaster loss does not include any losses from property used in connection with any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store for which the principal business is the sale of alcoholic beverages for consumption off premises. Taxes 2012   A qualified disaster loss also does not include any losses from any gambling or animal racing property. Taxes 2012 Gambling or animal racing property is any equipment, furniture, software, or other property used directly in connection with gambling, the racing of animals, or the on-site viewing of such racing, and the portion of any real property (determined by square footage) that is dedicated to gambling, the racing of animals, or the on-site viewing of such racing, unless this portion is less than 100 square feet. Taxes 2012 Specified liability loss. Taxes 2012   The carryback period for a specified liability loss is 10 years. Taxes 2012 Only the specified liability loss portion of the NOL can be carried back 10 years. Taxes 2012 Generally, a specified liability loss is a loss arising from: Product liability and expenses incurred in the investigation or settlement of, or opposition to, product liability claims, or An act (or failure to act) that occurred at least 3 years before the beginning of the loss year and resulted in a liability under a federal or state law requiring: Reclamation of land, Dismantling of a drilling platform, Remediation of environmental contamination, or Payment under any workers compensation act. Taxes 2012   Any loss from a liability arising from (1) through (4) above can be taken into account as a specified liability loss only if you used an accrual method of accounting throughout the period in which the act (or failure to act) occurred. Taxes 2012 For details, see section 172(f). Taxes 2012 Waiving the 10-year carryback. Taxes 2012   You can choose to figure the carryback period for a specified liability loss without regard to the special 10-year carryback rule. Taxes 2012 To make this choice for 2013 attach to your 2013 income tax return filed by the due date (including extensions) a statement that you are choosing to treat any 2013 specified liability losses without regard to the special 10-year carryback rule. Taxes 2012 If you filed your original return on time but did not file the statement with it, you can make this choice on an amended return filed within 6 months after the due date of the return (excluding extensions). Taxes 2012 Attach a statement to your amended return and write “Filed pursuant to section 301. Taxes 2012 9100-2” at the top of the statement. Taxes 2012 Once made, this choice is irrevocable. Taxes 2012 Waiving the Carryback Period You can choose not to carry back your NOL. Taxes 2012 If you make this choice, then you can use your NOL only in the 20-year carryforward period. Taxes 2012 (This choice means you also choose not to carry back any alternative tax NOL. Taxes 2012 ) To make this choice, attach a statement to your original return filed by the due date (including extensions) for the NOL year. Taxes 2012 This statement must show that you are choosing to waive the carryback period under section 172(b)(3). Taxes 2012 If you filed your original return on time but did not file the statement with it, you can make this choice on an amended return filed within 6 months of the due date of the return (excluding extensions). Taxes 2012 Attach a statement to your amended return, and write “Filed pursuant to section 301. Taxes 2012 9100-2” at the top of the statement. Taxes 2012 Once you choose to waive the carryback period, it generally is irrevocable. Taxes 2012 If you choose to waive the carryback period for more than one NOL, you must make a separate choice and attach a separate statement for each NOL year. Taxes 2012 If you do not file this statement on time, you cannot waive the carryback period. Taxes 2012 How To Carry an NOL Back or Forward If you choose to carry back the NOL, you must first carry the entire NOL to the earliest carryback year. Taxes 2012 If your NOL is not used up, you can carry the rest to the next earliest carryback year, and so on. Taxes 2012 If you waive the carryback period or do not use up the NOL in the carryback period, carry forward what remains of the NOL to the 20 tax years following the NOL year. Taxes 2012 Start by carrying it to the first tax year after the NOL year. Taxes 2012 If you do not use it up, carry the unused part to the next year. Taxes 2012 Continue to carry any unused part of the NOL forward until the NOL is used up or you complete the 20-year carryforward period. Taxes 2012 Example 1. Taxes 2012 You started your business as a sole proprietor in 2013 and had a $42,000 NOL for the year. Taxes 2012 No part of the NOL qualifies for the 3-year, 5-year, or 10-year carryback. Taxes 2012 You begin using your NOL in 2011, the second year before the NOL year, as shown in the following chart. Taxes 2012 Year   Carryback/  Carryover Unused  Loss 2011 $42,000 $40,000 2012 40,000 37,000 2013 (NOL year)     2014 37,000 31,500 2015 31,500 22,500 2016 22,500 12,700 2017 12,700 4,000 2018 4,000 -0- If your loss were larger, you could carry it forward until the year 2033. Taxes 2012 If you still had an unused 2013 carryforward after the year 2033, you would not be allowed to deduct it. Taxes 2012 Example 2. Taxes 2012 Assume the same facts as in Example 1 , except that $4,000 of the NOL is attributable to a casualty loss and this loss qualifies for a 3-year carryback period. Taxes 2012 You begin using the $4,000 in 2010. Taxes 2012 As shown in the following chart, $3,000 of this NOL is used in 2010. Taxes 2012 The remaining $1,000 is carried to 2011 with the $38,000 NOL that you must begin using in 2011. Taxes 2012 Year   Carryback/  Carryover Unused  Loss 2010 $4,000 $1,000 2011 39,000 37,000 2012 37,000 34,000 2013 (NOL year)     2014 34,000 28,500 2015 28,500 19,500 2016 19,500 9,700 2017 9,700 1,000 2018 1,000 -0- How To Claim an NOL Deduction If you have not already carried the NOL to an earlier year, your NOL deduction is the total NOL. Taxes 2012 If you carried the NOL to an earlier year, your NOL deduction is the carried over NOL minus the NOL amount you used in the earlier year or years. Taxes 2012 If you carry more than one NOL to the same year, your NOL deduction is the total of these carrybacks and carryovers. Taxes 2012 NOL resulting in no taxable income. Taxes 2012   If your NOL is more than the taxable income of the year you carry it to (figured before deducting the NOL), you generally will have an NOL carryover to the next year. Taxes 2012 See How To Figure an NOL Carryover , later, to determine how much NOL you have used and how much you carry to the next year. Taxes 2012 Deducting a Carryback If you carry back your NOL, you can use either Form 1045 or Form 1040X. Taxes 2012 You can get your refund faster by using Form 1045, but you have a shorter time to file it. Taxes 2012 You can use Form 1045 to apply an NOL to all carryback years. Taxes 2012 If you use Form 1040X, you must use a separate Form 1040X for each carryback year to which you apply the NOL. Taxes 2012 Estates and trusts that do not file Form 1045 must file an amended Form 1041 (instead of Form 1040X) for each carryback year to which NOLs are applied. Taxes 2012 Use a copy of the appropriate year's Form 1041, check the “Amended return” box, and follow the Form 1041 instructions for amended returns. Taxes 2012 Include the NOL deduction with other deductions not subject to the 2% limit (line 15a). Taxes 2012 Also, see the special procedures for filing an amended return due to an NOL carryback, explained under Form 1040X , later. Taxes 2012 Form 1045. Taxes 2012   You can apply for a quick refund by filing Form 1045. Taxes 2012 This form results in a tentative adjustment of tax in the carryback year. Taxes 2012 See the Illustrated Form 1045 . Taxes 2012 at the end of this discussion. Taxes 2012   If the IRS refunds or credits an amount to you from Form 1045 and later determines that the refund or credit is too much, the IRS may assess and collect the excess immediately. Taxes 2012   Generally, you must file Form 1045 on or after the date you file your tax return for the NOL year, but not later than one year after the end of the NOL year. Taxes 2012 If the last day of the NOL year falls on a Saturday, Sunday, or holiday, the form will be considered timely if postmarked on the next business day. Taxes 2012 For example, if you are a calendar year taxpayer with a carryback from 2013 to 2011, you must file Form 1045 on or after the date you file your tax return for 2013, but no later than December 31, 2014. Taxes 2012 Form 1040X. Taxes 2012   If you do not file Form 1045, you can file Form 1040X to get a refund of tax because of an NOL carryback. Taxes 2012 File Form 1040X within 3 years after the due date, including extensions, for filing the return for the NOL year. Taxes 2012 For example, if you are a calendar year taxpayer and filed your 2011 return by the April 15, 2012, due date, you must file a claim for refund of 2008 tax because of an NOL carryback from 2011 by April 15, 2015. Taxes 2012   Attach a computation of your NOL using Form 1045, Schedule A, and, if it applies, your NOL carryover using Form 1045, Schedule B, discussed later . Taxes 2012 Refiguring your tax. Taxes 2012   To refigure your total tax liability for a carryback year, first refigure your adjusted gross income for that year. Taxes 2012 (On Form 1045, use lines 10 and 11 and the “After carryback” column for the applicable carryback year. Taxes 2012 ) Use your adjusted gross income after applying the NOL deduction to refigure income or deduction items that are based on, or limited to, a percentage of your adjusted gross income. Taxes 2012 Refigure the following items. Taxes 2012 The special allowance for passive activity losses from rental real estate activities. Taxes 2012 Taxable social security and tier 1 railroad retirement benefits. Taxes 2012 IRA deductions. Taxes 2012 Excludable savings bond interest. Taxes 2012 Excludable employer-provided adoption benefits. Taxes 2012 The student loan interest deduction. Taxes 2012 The tuition and fees deduction. Taxes 2012   If more than one of these items apply, refigure them in the order listed above, using your adjusted gross income after applying the NOL deduction and any previous item. Taxes 2012 (Enter your NOL deduction on Form 1045, line 10. Taxes 2012 On line 11, using the “After carryback” column, enter your adjusted gross income refigured after applying the NOL deduction and after refiguring any above items. Taxes 2012 )   Next, refigure your taxable income. Taxes 2012 (On Form 1045, use lines 12 through 15 and the “After carryback” column. Taxes 2012 ) Use your refigured adjusted gross income (Form 1045, line 11, using the “After carryback” column) to refigure certain deductions and other items that are based on or limited to a percentage of your adjusted gross income. Taxes 2012 Refigure the following items. Taxes 2012 The itemized deduction for medical expenses. Taxes 2012 The itemized deduction for qualified mortgage insurance premiums. Taxes 2012 The itemized deduction for casualty losses. Taxes 2012 Miscellaneous itemized deductions subject to the 2% limit. Taxes 2012 The overall limit on itemized deductions (do not apply to carryback years beginning after December 31, 2009). Taxes 2012 The phaseout of the deduction for exemptions (do not apply to carryback years beginning after December 31, 2009). Taxes 2012 Qualified motor vehicle tax (do not apply to carryback years beginning after December 31, 2009). Taxes 2012    Do not refigure the itemized deduction for charitable contributions. Taxes 2012   Finally, use your refigured taxable income (Form 1045, line 15, using the “After carryback” column) to refigure your total tax liability. Taxes 2012 Refigure your income tax, your alternative minimum tax, and any credits that are based on or limited by your adjusted gross income (AGI), modified adjusted gross income (MAGI), or tax liability. Taxes 2012 (On Form 1045, use lines 16 through 25, and the “After carryback” column. Taxes 2012 ) The earned income credit, for example, may be affected by changes to adjusted gross income or the amount of tax (or both) and, therefore, must be recomputed. Taxes 2012 If you become eligible for a credit because of the carryback, complete the form for that specific credit (such as the EIC Worksheet) for that year. Taxes 2012   While it is necessary to refigure your income tax, alternative minimum tax, and credits, do not refigure your self-employment tax. Taxes 2012 Deducting a Carryforward If you carry forward your NOL to a tax year after the NOL year, list your NOL deduction as a negative figure on the “Other income” line of Form 1040 or Form 1040NR (line 21 for 2013). Taxes 2012 Estates and trusts include an NOL deduction on Form 1041 with other deductions not subject to the 2% limit (line 15a for 2013). Taxes 2012 You must attach a statement that shows all the important facts about the NOL. Taxes 2012 Your statement should include a computation showing how you figured the NOL deduction. Taxes 2012 If you deduct more than one NOL in the same year, your statement must cover each of them. Taxes 2012 Change in Marital Status If you and your spouse were not married to each other in all years involved in figuring NOL carrybacks and carryovers, only the spouse who had the loss can take the NOL deduction. Taxes 2012 If you file a joint return, the NOL deduction is limited to the income of that spouse. Taxes 2012 For example, if your marital status changes because of death or divorce, and in a later year you have an NOL, you can carry back that loss only to the part of the income reported on the joint return (filed with your former spouse) that was related to your taxable income. Taxes 2012 After you deduct the NOL in the carryback year, the joint rates apply to the resulting taxable income. Taxes 2012 Refund limit. Taxes 2012   If you are not married in the NOL year (or are married to a different spouse), and in the carryback year you were married and filed a joint return, your refund for the overpaid joint tax may be limited. Taxes 2012 You can claim a refund for the difference between your share of the refigured tax and your contribution toward the tax paid on the joint return. Taxes 2012 The refund cannot be more than the joint overpayment. Taxes 2012 Attach a statement showing how you figured your refund. Taxes 2012 Figuring your share of a joint tax liability. Taxes 2012   There are five steps for figuring your share of the refigured joint tax liability. Taxes 2012 Figure your total tax as though you had filed as married filing separately. Taxes 2012 Figure your spouse's total tax as though your spouse had also filed as married filing separately. Taxes 2012 Add the amounts in (1) and (2). Taxes 2012 Divide the amount in (1) by the amount in (3). Taxes 2012 Multiply the refigured tax on your joint return by the amount figured in (4). Taxes 2012 This is your share of the joint tax liability. Taxes 2012 Figuring your contribution toward tax paid. Taxes 2012   Unless you have an agreement or clear evidence of each spouse's contributions toward the payment of the joint tax liability, figure your contribution by adding the tax withheld on your wages and your share of joint estimated tax payments or tax paid with the return. Taxes 2012 If the original return for the carryback year resulted in an overpayment, reduce your contribution by your share of the tax refund. Taxes 2012 Figure your share of a joint payment or refund by the same method used in figuring your share of the joint tax liability. Taxes 2012 Use your taxable income as originally reported on the joint return in steps (1) and (2) above, and substitute the joint payment or refund for the refigured joint tax in step (5). Taxes 2012 Change in Filing Status If you and your spouse were married and filed a joint return for each year involved in figuring NOL carrybacks and carryovers, figure the NOL deduction on a joint return as you would for an individual. Taxes 2012 However, treat the NOL deduction as a joint NOL. Taxes 2012 If you and your spouse were married and filed separate returns for each year involved in figuring NOL carrybacks and carryovers, the spouse who sustained the loss may take the NOL deduction on a separate return. Taxes 2012 Special rules apply for figuring the NOL carrybacks and carryovers of married people whose filing status changes for any tax year involved in figuring an NOL carryback or carryover. Taxes 2012 Separate to joint return. Taxes 2012   If you and your spouse file a joint return for a carryback or carryforward year, and were married but filed separate returns for any of the tax years involved in figuring the NOL carryback or carryover, treat the separate carryback or carryover as a joint carryback or carryover. Taxes 2012 Joint to separate returns. Taxes 2012   If you and your spouse file separate returns for a carryback or carryforward year, but filed a joint return for any or all of the tax years involved in figuring the NOL carryover, figure each of your carryovers separately. Taxes 2012 Joint return in NOL year. Taxes 2012   Figure each spouse's share of the joint NOL through the following steps. Taxes 2012 Figure each spouse's NOL as if he or she filed a separate return. Taxes 2012 See How To Figure an NOL , earlier. Taxes 2012 If only one spouse has an NOL, stop here. Taxes 2012 All of the joint NOL is that spouse's NOL. Taxes 2012 If both spouses have an NOL, multiply the joint NOL by a fraction, the numerator of which is spouse A's NOL figured in (1) and the denominator of which is the total of the spouses' NOLs figured in (1). Taxes 2012 The result is spouse A's share of the joint NOL. Taxes 2012 The rest of the joint NOL is spouse B's share. Taxes 2012 Example 1. Taxes 2012 Mark and Nancy are married and file a joint return for 2013. Taxes 2012 They have an NOL of $5,000. Taxes 2012 They carry the NOL back to 2011, a year in which Mark and Nancy filed separate returns. Taxes 2012 Figured separately, Nancy's 2013 deductions were more than her income, and Mark's income was more than his deductions. Taxes 2012 Mark does not have any NOL to carry back. Taxes 2012 Nancy can carry back the entire $5,000 NOL to her 2011 separate return. Taxes 2012 Example 2. Taxes 2012 Assume the same facts as in Example 1 , except that both Mark and Nancy had deductions in 2013 that were more than their income. Taxes 2012 Figured separately, his NOL is $1,800 and her NOL is $3,000. Taxes 2012 The sum of their separate NOLs ($4,800) is less than their $5,000 joint NOL because his deductions included a $200 net capital loss that is not allowed in figuring his separate NOL. Taxes 2012 The loss is allowed in figuring their joint NOL because it was offset by Nancy's capital gains. Taxes 2012 Mark's share of their $5,000 joint NOL is $1,875 ($5,000 × $1,800/$4,800) and Nancy's is $3,125 ($5,000 − $1,875). Taxes 2012 Joint return in previous carryback or carryforward year. Taxes 2012   If only one spouse had an NOL deduction on the previous year's joint return, all of the joint carryover is that spouse's carryover. Taxes 2012 If both spouses had an NOL deduction (including separate carryovers of a joint NOL, figured as explained in the previous discussion ), figure each spouse's share of the joint carryover through the following steps. Taxes 2012 Figure each spouse's modified taxable income as if he or she filed a separate return. Taxes 2012 See Modified taxable income under How To Figure an NOL Carryover , later. Taxes 2012 Multiply the joint modified taxable income you used to figure the joint carryover by a fraction, the numerator of which is spouse A's modified taxable income figured in (1) and the denominator of which is the total of the spouses' modified taxable incomes figured in (1). Taxes 2012 This is spouse A's share of the joint modified taxable income. Taxes 2012 Subtract the amount figured in (2) from the joint modified taxable income. Taxes 2012 This is spouse B's share of the joint modified taxable income. Taxes 2012 Reduce the amount figured in (3), but not below zero, by spouse B's NOL deduction. Taxes 2012 Add the amounts figured in (2) and (4). Taxes 2012 Subtract the amount figured in (5) from spouse A's NOL deduction. Taxes 2012 This is spouse A's share of the joint carryover. Taxes 2012 The rest of the joint carryover is spouse B's share. Taxes 2012 Example. Taxes 2012 Sam and Wanda filed a joint return for 2011 and separate returns for 2012 and 2013. Taxes 2012 In 2013, Sam had an NOL of $18,000 and Wanda had an NOL of $2,000. Taxes 2012 They choose to carry back both NOLs 2 years to their 2011 joint return and claim a $20,000 NOL deduction. Taxes 2012 Their joint modified taxable income (MTI) for 2011 is $15,000, and their joint NOL carryover to 2012 is $5,000 ($20,000 – $15,000). Taxes 2012 Sam and Wanda each figure their separate MTI for 2011 as if they had filed separate returns. Taxes 2012 Then they figure their shares of the $5,000 carryover as follows. Taxes 2012 Step 1. Taxes 2012   Sam's separate MTI $9,000 Wanda's separate MTI + 3,000 Total MTI $12,000 Step 2. Taxes 2012   Joint MTI $15,000 Sam's MTI ÷ total MTI ($9,000 ÷ $12,000) × . Taxes 2012 75 Sam's share of joint MTI $11,250 Step 3. Taxes 2012   Joint MTI $15,000 Sam's share of joint MTI − 11,250 Wanda's share of joint MTI $3,750 Step 4. Taxes 2012   Wanda's share of joint MTI $3,750 Wanda's NOL deduction − 2,000 Wanda's remaining share $1,750 Step 5. Taxes 2012   Sam's share of joint MTI $11,250 Wanda's remaining share + 1,750 Joint MTI to be offset $13,000 Step 6. Taxes 2012   Sam's NOL deduction $18,000 Joint MTI to be offset − 13,000 Sam's carryover to 2012 $5,000 Joint carryover to 2012 $5,000 Sam's carryover − 5,000 Wanda's carryover to 2012 $-0- Wanda's $2,000 NOL deduction offsets $2,000 of her $3,750 share of the joint modified taxable income and is completely used up. Taxes 2012 She has no carryover to 2012. Taxes 2012 Sam's $18,000 NOL deduction offsets all of his $11,250 share of joint modified taxable income and the remaining $1,750 of Wanda's share. Taxes 2012 His carryover to 2012 is $5,000. Taxes 2012 Illustrated Form 1045 The following example illustrates how to use Form 1045 to claim an NOL deduction in a carryback year. Taxes 2012 It includes a filled-in page 1 of Form 1045. Taxes 2012 Example. Taxes 2012 Martha Sanders is a self-employed contractor. Taxes 2012 Martha's 2013 deductions are more than her 2013 income because of a business loss. Taxes 2012 She uses Form 1045 to carry back her NOL 2 years and claim an NOL deduction in 2011. Taxes 2012 Her filing status in both years was single. Taxes 2012 See the filled-in Form 1045 later. Taxes 2012 Martha figures her 2013 NOL on Form 1045, Schedule A (not shown). Taxes 2012 (For an example using Form 1045, Schedule A, see Illustrated Form 1045, Schedule A under How To Figure an NOL , earlier. Taxes 2012 ) She enters the $10,000 NOL from Form 1045, Schedule A, line 25, on Form 1045, line 1a. Taxes 2012 Martha completes lines 10 through 25, using the “Before carryback” column under the column for the second preceding tax year ended 12/31/11 on page 1 of Form 1045 using the following amounts from her 2011 return. Taxes 2012 2011 Adjusted gross income $50,000 Itemized deductions:     Medical expenses [$6,000 − ($50,000 × 7. Taxes 2012 5%)] $2,250   State income tax + 2,000   Real estate tax + 4,000   Home mortgage interest + 5,000   Total itemized deductions $13,250 Exemption $3,700 Income tax $4,550 Self-employment tax $6,120   Martha refigures her taxable income for 2011 after carrying back her 2013 NOL as follows: 2011 Adjusted gross income $50,000 Less:     NOL from 2013 −10,000 2011 Adjusted gross income after carryback $40,000 Less:     Itemized deductions:     Medical expenses [$6,000 − ($40,000 × 7. Taxes 2012 5%)] $3,000   State income tax + 2,000   Real estate tax + 4,000   Home mortgage interest + 5,000   Total itemized deductions −14,000 Less:     Exemption − 3,700 2011 Taxable income after carryback $22,300 Martha then completes lines 10 through 25, using the “After carryback” column under the column for the second preceding tax year ended 12/31/11. Taxes 2012 On line 10, Martha enters her $10,000 NOL deduction. Taxes 2012 Her new adjusted gross income on line 11 is $40,000 ($50,000 − $10,000). Taxes 2012 To complete line 12, she must refigure her medical expense deduction using her new adjusted gross income. Taxes 2012 Her refigured medical expense deduction is $3,000 [$6,000 − ($40,000 × 7. Taxes 2012 5%)]. Taxes 2012 This increases her total itemized deductions to $14,000 [$13,250 + ($3,000 − $2,250)]. Taxes 2012 Martha uses her refigured taxable income ($22,300) from line 15, and the tax tables in her 2011 Form 1040 instructions to find her income tax. Taxes 2012 She enters the new amount, $2,924, on line 16, and her new total tax liability, $9,044, on line 25. Taxes 2012 Martha used up her $10,000 NOL in 2011 so she does not complete a column for the first preceding tax year ended 12/31/2012. Taxes 2012 The decrease in tax because of her NOL deduction (line 27) is $1,612. Taxes 2012 Martha files Form 1045 after filing her 2013 return, but no later than December 31, 2014. Taxes 2012 She mails it to the Internal Revenue Service Center for the place where she lives as shown in the 2013 instructions for Form 1040 and attaches a copy of her 2013 return (including the applicable forms and schedules). Taxes 2012 This image is too large to be displayed in the current screen. Taxes 2012 Please click the link to view the image. Taxes 2012 Form 1045, page 1 How To Figure an NOL Carryover If your NOL is more than your taxable income for the year to which you carry it (figured before deducting the NOL), you may have an NOL carryover. Taxes 2012 You must make certain modifications to your taxable income to determine how much NOL you will use up in that year and how much you can carry over to the next tax year. Taxes 2012 Your carryover is the excess of your NOL deduction over your modified taxable income for the carryback or carryforward year. Taxes 2012 If your NOL deduction includes more than one NOL, apply the NOLs against your modified taxable income in the same order in which you incurred them, starting with the earliest. Taxes 2012 Modified taxable income. Taxes 2012   Your modified taxable income is your taxable income figured with the following changes. Taxes 2012 You cannot claim an NOL deduction for the NOL carryover you are figuring or for any later NOL. Taxes 2012 You cannot claim a deduction for capital losses in excess of your capital gains. Taxes 2012 Also, you must increase your taxable income by the amount of any section 1202 exclusion. Taxes 2012 You cannot claim the domestic production activities deduction. Taxes 2012 You cannot claim a deduction for your exemptions for yourself, your spouse, or dependents. Taxes 2012 You must figure any item affected by the amount of your adjusted gross income after making the changes in (1), (2), and (3), above, and certain other changes to your adjusted gross income that result from (1), (2), and (3). Taxes 2012 This includes income and deduction items used to figure adjusted gross income (for example, IRA deductions), as well as certain itemized deductions. Taxes 2012 To figure a charitable contribution deduction, do not include deductions for NOL carrybacks in the change in (1) but do include deductions for NOL carryforwards from tax years before the NOL year. Taxes 2012   Your taxable income as modified cannot be less than zero. Taxes 2012 Form 1045, Schedule B. Taxes 2012   You can use Form 1045, Schedule B, to figure your modified taxable income for carryback years and your carryover from each of those years. Taxes 2012 Do not use Form 1045, Schedule B, for a carryforward year. Taxes 2012 If your 2013 return includes an NOL deduction from an NOL year before 2013 that reduced your taxable income to zero (to less than zero, if an estate or trust), see NOL Carryover From 2013 to 2014 , later. Taxes 2012 Illustrated Form 1045, Schedule B The following example illustrates how to figure an NOL carryover from a carryback year. Taxes 2012 It includes a filled-in Form 1045, Schedule B. Taxes 2012 Example. Taxes 2012 Ida Brown runs a small clothing shop. Taxes 2012 In 2013, she has an NOL of $36,000 that she carries back to 2011. Taxes 2012 She has no other carrybacks or carryforwards to 2011. Taxes 2012 Ida's adjusted gross income in 2011 was $35,000, consisting of her salary of $36,000 minus a $1,000 capital loss deduction. Taxes 2012 She is single and claimed only one personal exemption of $3,700. Taxes 2012 During that year, she gave $1,450 in charitable contributions. Taxes 2012 Her medical expenses were $3,000. Taxes 2012 She also deducted $1,650 in taxes and $3,125 in home mortgage interest. Taxes 2012 Her deduction for charitable contributions was not limited because her contributions, $1,450, were less than 50% of her adjusted gross income. Taxes 2012 The deduction for medical expenses was limited to expenses over 7. Taxes 2012 5% of adjusted gross income (. Taxes 2012 075 × $35,000 = $2,625; $3,000 − $2,625 = $375). Taxes 2012 The deductions for taxes and home mortgage interest were not subject to any limits. Taxes 2012 She was able to claim $6,600 ($1,450 + $375 + $1,650 + $3,125) in itemized deductions and a personal exemption deduction of $3,700 for 2011. Taxes 2012 She had no other deductions in 2011 (except the NOL deduction). Taxes 2012 Her taxable income (figured without the NOL deduction) for the year was $24,700. Taxes 2012 Ida's adjusted gross income in 2012 was $9,325, consisting of net business income from the clothing shop of $12,325 and a net capital loss of $3,000. Taxes 2012 She did not itemize her deductions in 2012. Taxes 2012 She deducted the standard deduction of $5,950 and the personal exemption deduction of $3,800. Taxes 2012 She had no other deductions in 2012 (other than the NOL deduction). Taxes 2012 Her taxable income, therefore, was ($425). Taxes 2012 Ida's $36,000 carryback will result in her having 2011 taxable income of zero. Taxes 2012 She then completes the column for the second preceding tax year ended 12/31/11 on Form 1045, Schedule B, to figure how much of her NOL she uses up in 2011 and how much she can carry over to 2012. Taxes 2012 She completes the column for the first preceding tax year ended 12/31/12. Taxes 2012 See the illustrated Form 1045, Schedule B , shown later. Taxes 2012 Column 1, line 1. Taxes 2012 Ida enters $36,000, her 2013 net operating loss, on line 1. Taxes 2012 Column 1, line 2. Taxes 2012 She enters $24,700, her 2011 taxable income (figured without the NOL deduction), on line 2. Taxes 2012 Column 1, line 3. Taxes 2012 Ida enters her net capital loss deduction of $1,000 on line 3. Taxes 2012 Column 1, lines 4 and 5. Taxes 2012 Ida had no section 1202 exclusion or domestic production activities deduction in 2011. Taxes 2012 She enters zero on lines 4 and 5. Taxes 2012 Column 1, line 6. Taxes 2012 Although Ida's entry on line 3 modifies her adjusted gross income, that does not affect any other items included in her adjusted gross income. Taxes 2012 Ida enters zero on line 6. Taxes 2012 Column 1, line 7. Taxes 2012 Ida had itemized deductions and entered $1,000 on line 3, so she completes lines 11 through 38 to figure her adjustment to itemized deductions. Taxes 2012 On line 7, she enters the total adjustment from line 38. Taxes 2012 Column 1, line 8. Taxes 2012 Ida enters the deduction for her personal exemption of $3,700 for 2011. Taxes 2012 Column 1, line 9. Taxes 2012 After combining lines 2 through 8, Ida's modified taxable income is $29,475. Taxes 2012 Column 1, line 10. Taxes 2012 Ida figures her carryover to 2012 by subtracting her modified taxable income (line 9) from her NOL deduction (line 1). Taxes 2012 She enters the $6,525 carryover on line 10. Taxes 2012 She also enters the $6,525 as her NOL deduction for 2012 on Form 1045, page 1, line 10, in the “After carryback” column under the column for the first preceding tax year ended 12/31/12. Taxes 2012 (For an illustrated example of page 1 of Form 1045, see Illustrated Form 1045 under How To Claim an NOL Deduction , earlier. Taxes 2012 ) Next, Ida completes column 2 for the first preceding tax year ended 12/31/12. Taxes 2012 Column 1, line 11. Taxes 2012 Ida's adjusted gross income for 2011 was $35,000. Taxes 2012 Column 1, line 12. Taxes 2012 She adds lines 3 through 6 and enters $1,000 on line 12. Taxes 2012 (This is her net capital loss deduction added back, which modifies her adjusted gross income. Taxes 2012 ) Column 1, line 13. Taxes 2012 Her modified adjusted gross income for 2011 is now $36,000. Taxes 2012 Column 1, line 14. Taxes 2012 On her 2011 tax return, she deducted $375 as medical expenses. Taxes 2012 Column 1, line 15. Taxes 2012 Her actual medical expenses were $3,000. Taxes 2012 Column 1, line 16. Taxes 2012 She multiplies her modified adjusted gross income, $36,000, by . Taxes 2012 075. Taxes 2012 She enters $2,700 on line 16. Taxes 2012 Column 1, line 17. Taxes 2012 She substracts $2,700 from her actual medical expenses, $3,000. Taxes 2012 She enters $300 on line 17. Taxes 2012 This is her modified medical deduction. Taxes 2012 Column 1, line 18. Taxes 2012 The difference between her medical deduction and her modified medical deduction is $75. Taxes 2012 She enters this on line 18. Taxes 2012 Column 1, lines 19 through 21. Taxes 2012 Ida had no deduction for qualified mortgage insurance premiums in 2011. Taxes 2012 She skips lines 19 and 20 and enters zero on line 21. Taxes 2012 Column 1, line 22. Taxes 2012 She enters her modified adjusted gross income of $36,000 on line 22. Taxes 2012 Column 1, line 23. Taxes 2012 She had no other carrybacks to 2011 and enters zero on line 23. Taxes 2012 Column 1, line 24. Taxes 2012 Her modified adjusted gross income remains $36,000. Taxes 2012 Column 1, line 25. Taxes 2012 Her actual contributions for 2011 were $1,450, which she enters on line 25. Taxes 2012 Column 1, line 26. Taxes 2012 She now refigures her charitable contributions based on her modified adjusted gross income. Taxes 2012 Her contributions are well below the 50% limit, so she enters $1,450 on line 26. Taxes 2012 Column 1, line 27. Taxes 2012 The difference is zero. Taxes 2012 Column 1, lines 28 through 37. Taxes 2012 Ida had no casualty losses or deductions for miscellaneous items in 2011. Taxes 2012 She skips lines 28 through 31 and lines 33 through 36. Taxes 2012 Ida enters zero on lines 32 and 37. Taxes 2012 Column 1, line 38. Taxes 2012 She combines lines 18, 21, 27, 32, and 37 and enters $75 on line 38. Taxes 2012 She carries this figure to line 7. Taxes 2012 Column 2, line 1. Taxes 2012 Ida enters $6,525, the carryback of her 2013 NOL to 2012, from column 1, line 10, on line 1. Taxes 2012 Column 2, line 2. Taxes 2012 She enters ($425), her 2012 taxable income, on line 2. Taxes 2012 Column 2, line 3. Taxes 2012 Ida enters her net capital loss deduction of $3,000 on line 3. Taxes 2012 Column 2, lines 4 and 5. Taxes 2012 Ida had no section 1202 exclusion or domestic production activities deduction in 2012. Taxes 2012 She enters zero on lines 4 and 5. Taxes 2012 Column 2, line 6. Taxes 2012 Although Ida's entry on line 3 modifies her adjusted gross income, that does not affect any other items included in her adjusted gross income. Taxes 2012 Ida enters zero on line 6. Taxes 2012 Column 2, line 7. Taxes 2012 Because Ida did not itemize deductions on her 2012 tax return, she enters zero on line 7. Taxes 2012 Column 2, line 8. Taxes 2012 Ida enters the deduction for her personal exemption of $3,800 for 2012. Taxes 2012 Column 2, line 9. Taxes 2012 After combining lines 2 through 8, Ida's modified taxable income is $6,375. Taxes 2012 Column 2, line 10. Taxes 2012 Ida figures her carryforward to 2014 by subtracting her modified taxable income (line 9) from her NOL deduction (line 1). Taxes 2012 She enters the $150 carryover on line 10. Taxes 2012 This image is too large to be displayed in the current screen. Taxes 2012 Please click the link to view the image. Taxes 2012 Form 1045, page 3 This image is too large to be displayed in the current screen. Taxes 2012 Please click the link to view the image. Taxes 2012 Form 1045, page 4 NOL Carryover From 2013 to 2014 If you had an NOL deduction carried forward from a year prior to 2013 that resulted in your having taxable income on your 2013 return of zero (of less than zero, if an estate or trust), complete Table 1 , Worksheet for NOL Carryover From 2013 to 2014, on the following pages. Taxes 2012 It will help you figure your NOL to carry to 2014. Taxes 2012 Keep the worksheet for your records. Taxes 2012 Worksheet Instructions At the top of the worksheet, enter the NOL year for which you are figuring the carryover. Taxes 2012 More than one NOL. Taxes 2012   If your 2013 NOL deduction includes amounts for more than one loss year, complete this worksheet only for one loss year. Taxes 2012 To determine which year, start with your earliest NOL and subtract each NOL separately from your taxable income figured without the NOL deduction. Taxes 2012 Complete this worksheet for the earliest NOL that results in your having taxable income below zero. Taxes 2012 Your NOL carryover to 2014 is the total of the amount on line 10 of the worksheet and all later NOL amounts. Taxes 2012 Example. Taxes 2012 Your taxable income for 2013 is $5,000 without your $9,000 NOL deduction. Taxes 2012 Your NOL deduction includes a $2,000 carryover from 2011 and a $7,000 carryover from 2012. Taxes 2012 Subtract your 2011 NOL of $2,000 from $5,000. Taxes 2012 This gives you taxable income of $3,000. Taxes 2012 Your 2011 NOL is now completely used up. Taxes 2012 Subtract your $7,000 2012 NOL from $3,000. Taxes 2012 This gives you taxable income of ($4,000). Taxes 2012 You now complete the worksheet for your 2012 NOL. Taxes 2012 Your NOL carryover to 2014 is the unused part of your 2012 NOL from line 10 of the worksheet. Taxes 2012 Line 2. Taxes 2012   Treat your NOL deduction for the NOL year entered at the top of the worksheet and later years as a positive amount. Taxes 2012 Add it to your negative taxable income (figured without the NOL deduction). Taxes 2012 Enter the result on line 2. Taxes 2012 Line 6. Taxes 2012   You must refigure the following income and deductions based on adjusted gross income. Taxes 2012 The special allowance for passive activity losses from rental real estate activities. Taxes 2012 Taxable social security and tier 1 railroad retirement benefits. Taxes 2012 IRA deductions. Taxes 2012 Excludable savings bond interest. Taxes 2012 Excludable employer-provided adoption benefits. Taxes 2012 The student loan interest deduction. Taxes 2012 The tuition and fees deduction. Taxes 2012   If none of these items apply to you, enter zero on line 6. Taxes 2012 Otherwise, increase your adjusted gross income by the total of lines 3 through 5 and your NOL deduction for the NOL year entered at the top of the worksheet and later years. Taxes 2012 Using this increased adjusted gross income, refigure the items that apply, in the order listed above. Taxes 2012 Your adjustment for each item is the difference between the refigured amount and the amount included on your return. Taxes 2012 Combine the adjustments for previous items with your adjusted gross income before refiguring the next item. Taxes 2012 Keep a record of your computations. Taxes 2012   Enter your total adjustments for the above items on line 6. Taxes 2012 Line 7. Taxes 2012   Enter zero if you claimed the standard deduction or the amounts on lines 3 through 5 are zero. Taxes 2012 Otherwise, use lines 11 through 33 of the worksheet to figure the amount to enter on this line. Taxes 2012 Complete only those sections that apply to you. Taxes 2012 Estates and trusts. Taxes 2012   Enter zero on line 7 if you did not claim any miscellaneous deductions on Form 1041, line 15c, or a casualty or theft loss. Taxes 2012 Otherwise, refigure these deductions by substituting modified adjusted gross income (see below ) for adjusted gross income. Taxes 2012 Subtract the recomputed deductions from those claimed on the return. Taxes 2012 Enter the result on line 7. Taxes 2012 Modified adjusted gross income. Taxes 2012   To refigure miscellaneous itemized deductions of an estate or trust (Form 1041, line 15c), modified adjusted gross income is the total of the following amounts. Taxes 2012 The adjusted gross income on the return. Taxes 2012 The amounts from lines 3 through 5 of the worksheet. Taxes 2012 The exemption amount from Form 1041, line 20. Taxes 2012 The NOL deduction for the NOL year entered at the top of the worksheet and for later years. Taxes 2012   To refigure the casualty and theft loss deduction of an estate or trust, modified adjusted gross income is the total of the following amounts. Taxes 2012 The adjusted gross income amount you used to figure the deduction claimed on the return. Taxes 2012 The amounts from lines 3 through 5 of the worksheet. Taxes 2012 The NOL deduction for the NOL year entered at the top of the worksheet and for later years. Taxes 2012 Line 11. Taxes 2012   Treat your NOL deduction for the NOL year entered at the top of the worksheet and for later years as a positive amount. Taxes 2012 Add it to your adjusted gross income. Taxes 2012 Enter the result on line 11. Taxes 2012 Line 20. Taxes 2012   Is your modified adjusted gross income from line 13 of this worksheet more than $100,000 ($50,000 if married filing separately)?   □ Yes. Taxes 2012 Your deduction is limited. Taxes 2012 Refigure your deduction using the Mortgage Insurance Premiums Deduction Worksheet in the 2013 Instructions for Form 1045. Taxes 2012 On line 2 of the Mortgage Insurance Premiums Deduction Worksheet, enter the amount from line 13 of this worksheet. Taxes 2012   □ No. Taxes 2012 Your deduction is not limited. Taxes 2012 Enter the amount from line 19 on line 20 and enter -0- on line 21. Taxes 2012 Line 23. Taxes 2012   If you had a contributions carryover from 2012 to 2013 and your NOL deduction includes an amount from an NOL year before 2012, you may have to reduce your contributions carryover. Taxes 2012 Reduce the contributions carryover by the amount of any adjustment you made to your 2012 charitable contributions deduction when figuring your NOL carryover to 2013. Taxes 2012 Use the reduced contributions carryover to figure the amount to enter on line 23. Taxes 2012 Please click here for the text description of the image. Taxes 2012 Worksheet for NOL Carryover Worksheet for NOL Carryover (Continued) How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Taxes 2012 Free help with your tax return. Taxes 2012   You can get free help preparing your return nationwide from IRS-certified volunteers. Taxes 2012 The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Taxes 2012 The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Taxes 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. Taxes 2012 In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Taxes 2012 To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Taxes 2012 gov, download the IRS2Go app, or call 1-800-906-9887. Taxes 2012   As part of the TCE program, AARP offers the Tax-Aide counseling program. Taxes 2012 To find the nearest AARP Tax-Aide site, visit AARP's website at www. Taxes 2012 aarp. Taxes 2012 org/money/taxaide or call 1-888-227-7669. Taxes 2012 For more information on these programs, go to IRS. Taxes 2012 gov and enter “VITA” in the search box. Taxes 2012 Internet. Taxes 2012    IRS. Taxes 2012 gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Taxes 2012 Download the free IRS2Go app from the iTunes app store or from Google Play. Taxes 2012 Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, 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. Taxes 2012 Check the status of your 2013 refund with the Where's My Refund? application on IRS. Taxes 2012 gov or download the IRS2Go app and select the Refund Status option. Taxes 2012 The IRS issues more than 9 out of 10 refunds in less than 21 days. Taxes 2012 Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Taxes 2012 You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Taxes 2012 The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Taxes 2012 Use the Interactive Tax Assistant (ITA) to research your tax questions. Taxes 2012 No need to wait on the phone or stand in line. Taxes 2012 The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Taxes 2012 When you reach the response screen, you can print the entire interview and the final response for your records. Taxes 2012 New subject areas are added on a regular basis. Taxes 2012  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Taxes 2012 gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Taxes 2012 You can use the IRS Tax Map to search publications and instructions by topic or keyword. Taxes 2012 The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Taxes 2012 When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Taxes 2012 Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Taxes 2012 You can also ask the IRS to mail a return or an account transcript to you. Taxes 2012 Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Taxes 2012 gov or by calling 1-800-908-9946. Taxes 2012 Tax return and tax account transcripts are generally available for the current year and the past three years. Taxes 2012 Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Taxes 2012 Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Taxes 2012 If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Taxes 2012 Check the status of your amended return using Where's My Amended Return? Go to IRS. Taxes 2012 gov and enter Where's My Amended Return? in the search box. Taxes 2012 You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Taxes 2012 It can take up to 3 weeks from the date you mailed it to show up in our system. Taxes 2012 Make a payment using one of several safe and convenient electronic payment options available on IRS. Taxes 2012 gov. Taxes 2012 Select the Payment tab on the front page of IRS. Taxes 2012 gov for more information. Taxes 2012 Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Taxes 2012 Figure your income tax withholding with the IRS Withholding Calculator on IRS. Taxes 2012 gov. Taxes 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. Taxes 2012 Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Taxes 2012 gov. Taxes 2012 Request an Electronic Filing PIN by going to IRS. Taxes 2012 gov and entering Electronic Filing PIN in the search box. Taxes 2012 Download forms, instructions and publications, including accessible versions for people with disabilities. Taxes 2012 Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Taxes 2012 gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Taxes 2012 An employee can answer questions about your tax account or help you set up a payment plan. Taxes 2012 Before you visit, check the Office Locator on IRS. Taxes 2012 gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Taxes 2012 If you have a special need, such as a disability, you can request an appointment. Taxes 2012 Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Taxes 2012 Apply for an Employer Identification Number (EIN). Taxes 2012 Go to IRS. Taxes 2012 gov and enter Apply for an EIN in the search box. Taxes 2012 Read the Internal Revenue Code, regulations, or other official guidance. Taxes 2012 Read Internal Revenue Bulletins. Taxes 2012 Sign up to receive local and national tax news and more by email. Taxes 2012 Just click on “subscriptions” above the search box on IRS. Taxes 2012 gov and choose from a variety of options. Taxes 2012 Phone. Taxes 2012    You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Taxes 2012 Download the free IRS2Go app from the iTunes app store or from Google Play. Taxes 2012 Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. Taxes 2012 gov, or download the IRS2Go app. Taxes 2012 Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Taxes 2012 The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Taxes 2012 Most VITA and TCE sites offer free electronic filing. Taxes 2012 Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Taxes 2012 Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Taxes 2012 Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. Taxes 2012 If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Taxes 2012 The IRS issues more than 9 out of 10 refunds in less than 21 days. Taxes 2012 Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. Taxes 2012 Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. Taxes 2012 The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Taxes 2012 Note, the above information is for our automated hotline. Taxes 2012 Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. Taxes 2012 Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. Taxes 2012 You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Taxes 2012 It can take up to 3 weeks from the date you mailed it to show up in our system. Taxes 2012 Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). Taxes 2012 You should receive your order within 10 business days. Taxes 2012 Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. Taxes 2012 If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. Taxes 2012 Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Taxes 2012 The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Taxes 2012 These individuals can also contact the IRS through relay services such as the Federal Relay Service. Taxes 2012 Walk-in. Taxes 2012   You can find a selection of forms, publications and services — in person. Taxes 2012 Products. Taxes 2012 You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Taxes 2012 Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Taxes 2012 Services. Taxes 2012 You can walk in to your local TAC for face-to-face tax help. Taxes 2012 An employee can answer questions about your tax account or help you set up a payment plan. Taxes 2012 Before visiting, use the Office Locator tool on IRS. Taxes 2012 gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. Taxes 2012 Mail. Taxes 2012   You can send your order for forms, instructions, and publications to the address below. Taxes 2012 You should receive a response within 10 business days after your request is received. Taxes 2012 Internal Revenue Service 1201 N. Taxes 2012 Mitsubishi Motorway Bloomington, IL 61705-6613    The Taxpayer Advocate Service Is Here to Help You. Taxes 2012 The Taxpayer Advocate Service (TAS) is your voice at the IRS. Taxes 2012 Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Taxes 2012   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. Taxes 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. Taxes 2012 You face (or your business is facing) an immediate threat of adverse action. Taxes 2012 You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Taxes 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. Taxes 2012 Here's why we can help: TAS is an independent organization within the IRS. Taxes 2012 Our advocates know how to work with the IRS. Taxes 2012 Our services are free and tailored to meet your needs. Taxes 2012 We have offices in every state, the District of Columbia, and Puerto Rico. Taxes 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 Taxpayer Advocate, or call us toll-free at 1-877-777-4778. Taxes 2012   How else does TAS help taxpayers?  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Taxes 2012 If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System. Taxes 2012 Low Income Taxpayer Clinics Low Income
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Taxes 2012 15. Taxes 2012   Selling Your Home Table of Contents Reminder Introduction Useful Items - You may want to see: Main Home Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Business Use or Rental of Home Reporting the SaleSeller-financed mortgage. Taxes 2012 More information. Taxes 2012 Special SituationsException for sales to related persons. Taxes 2012 Recapturing (Paying Back) a Federal Mortgage Subsidy Reminder Home sold with undeducted points. Taxes 2012  If you have not deducted all the points you paid to secure a mortgage on your old home, you may be able to deduct the remaining points in the year of the sale. Taxes 2012 See Mortgage ending early under Points in chapter 23. Taxes 2012 Introduction This chapter explains the tax rules that apply when you sell your main home. Taxes 2012 In most cases, your main home is the one in which you live most of the time. Taxes 2012 If you sold your main home in 2013, you may be able to exclude from income any gain up to a limit of $250,000 ($500,000 on a joint return in most cases). Taxes 2012 See Excluding the Gain , later. Taxes 2012 Generally, if you can exclude all the gain, you do not need to report the sale on your tax return. Taxes 2012 If you have gain that cannot be excluded, it is taxable. Taxes 2012 Report it on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D (Form 1040). Taxes 2012 You may also have to complete Form 4797, Sales of Business Property. Taxes 2012 See Reporting the Sale , later. Taxes 2012 If you have a loss on the sale, you generally cannot deduct it on your return. Taxes 2012 However, you may need to report it. Taxes 2012 See Reporting the Sale , later. Taxes 2012 The following are main topics in this chapter. Taxes 2012 Figuring gain or loss. Taxes 2012 Basis. Taxes 2012 Excluding the gain. Taxes 2012 Ownership and use tests. Taxes 2012 Reporting the sale. Taxes 2012 Other topics include the following. Taxes 2012 Business use or rental of home. Taxes 2012 Recapturing a federal mortgage subsidy. Taxes 2012 Useful Items - You may want to see: Publication 523 Selling Your Home 530 Tax Information for Homeowners 547 Casualties, Disasters, and Thefts Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 982 Reduction of Tax Attributes Due to Discharge of Indebtedness 8828 Recapture of Federal Mortgage Subsidy 8949 Sales and Other Dispositions of Capital Assets Main Home This section explains the term “main home. Taxes 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. Taxes 2012 To exclude gain under the rules of this chapter, 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. Taxes 2012 Land. Taxes 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. Taxes 2012 However, if you sell vacant land used as part of your main home and that is adjacent to it, you may be able to exclude the gain from the sale under certain circumstances. Taxes 2012 See Vacant land under Main Home in Publication 523 for more information. Taxes 2012 Example. Taxes 2012 You buy a piece of land and move your main home to it. Taxes 2012 Then you sell the land on which your main home was located. Taxes 2012 This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. Taxes 2012 More than one home. Taxes 2012   If you have more than one home, you can exclude gain only from the sale of your main home. Taxes 2012 You must include in income gain from the sale of any other home. Taxes 2012 If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time during the year. Taxes 2012 Example 1. Taxes 2012 You own two homes, one in New York and one in Florida. Taxes 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. Taxes 2012 In the absence of facts and circumstances indicating otherwise, the New York home is your main home. Taxes 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. Taxes 2012 Example 2. Taxes 2012 You own a house, but you live in another house that you rent. Taxes 2012 The rented house is your main home. Taxes 2012 Example 3. Taxes 2012 You own two homes, one in Virginia and one in New Hampshire. Taxes 2012 In 2009 and 2010, you lived in the Virginia home. Taxes 2012 In 2011 and 2012, you lived in the New Hampshire home. Taxes 2012 In 2013, you lived again in the Virginia home. Taxes 2012 Your main home in 2009, 2010, and 2013 is the Virginia home. Taxes 2012 Your main home in 2011 and 2012 is the New Hampshire home. Taxes 2012 You would be eligible to exclude gain from the sale of either home (but not both) in 2013. Taxes 2012 Property used partly as your main home. Taxes 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. Taxes 2012 For details, see Business Use or Rental of Home , later. Taxes 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. Taxes 2012 Subtract the adjusted basis from the amount realized to get your gain or loss. Taxes 2012     Selling price     − Selling expenses       Amount realized       Amount realized     − Adjusted basis       Gain or loss   Selling Price The selling price is the total amount you receive for your home. Taxes 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. Taxes 2012 Payment by employer. Taxes 2012   You may have to sell your home because of a job transfer. Taxes 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. Taxes 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. Taxes 2012 Option to buy. Taxes 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. Taxes 2012 If the option is not exercised, you must report the amount as ordinary income in the year the option expires. Taxes 2012 Report this amount on Form 1040, line 21. Taxes 2012 Form 1099-S. Taxes 2012   If you received Form 1099-S, Proceeds From Real Estate Transactions, box 2 (Gross proceeds) should show the total amount you received for your home. Taxes 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. Taxes 2012 Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. Taxes 2012 Amount Realized The amount realized is the selling price minus selling expenses. Taxes 2012 Selling expenses. Taxes 2012   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. Taxes 2012 ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. Taxes 2012 This adjusted basis must be determined before you can figure gain or loss on the sale of your home. Taxes 2012 For information on how to figure your home's adjusted basis, see Determining Basis , later. Taxes 2012 Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. Taxes 2012 Gain on sale. Taxes 2012   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, in most cases is taxable. Taxes 2012 Loss on sale. Taxes 2012   If the amount realized is less than the adjusted basis, the difference is a loss. Taxes 2012 A loss on the sale of your main home cannot be deducted. Taxes 2012 Jointly owned home. Taxes 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. Taxes 2012 Separate returns. Taxes 2012   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. Taxes 2012 Your ownership interest is generally determined by state law. Taxes 2012 Joint owners not married. Taxes 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. Taxes 2012 Each of you applies the rules discussed in this chapter on an individual basis. Taxes 2012 Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. Taxes 2012 Foreclosure or repossession. Taxes 2012   If your home was foreclosed on or repossessed, you have a disposition. Taxes 2012 See Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments, to determine if you have ordinary income, gain, or loss. Taxes 2012 Abandonment. Taxes 2012   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. Taxes 2012 Trading (exchanging) homes. Taxes 2012   If you trade your old home for another home, treat the trade as a sale and a purchase. Taxes 2012 Example. Taxes 2012 You owned and lived in a home with an adjusted basis of $41,000. Taxes 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. Taxes 2012 This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 – $41,000). Taxes 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). Taxes 2012 Transfer to spouse. Taxes 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. Taxes 2012 This is true even if you receive cash or other consideration for the home. Taxes 2012 As a result, the rules in this chapter do not apply. Taxes 2012 More information. Taxes 2012   If you need more information, see Transfer to spouse in Publication 523 and Property Settlements in Publication 504, Divorced or Separated Individuals. Taxes 2012 Involuntary conversion. Taxes 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. Taxes 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 . Taxes 2012 Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. Taxes 2012 Your basis in your home is determined by how you got the home. Taxes 2012 Generally, your basis is its cost if you bought it or built it. Taxes 2012 If you got it in some other way (inheritance, gift, etc. Taxes 2012 ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. Taxes 2012 While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. Taxes 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. Taxes 2012 See Adjusted Basis , later. Taxes 2012 You can find more information on basis and adjusted basis in chapter 13 of this publication and in Publication 523. Taxes 2012 Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. Taxes 2012 Purchase. Taxes 2012   If you bought your home, your basis is its cost to you. Taxes 2012 This includes the purchase price and certain settlement or closing costs. Taxes 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. Taxes 2012 If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed in Publication 523. Taxes 2012 Settlement fees or closing costs. Taxes 2012   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. Taxes 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. Taxes 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). Taxes 2012    Chapter 13 lists some of the settlement fees and closing costs that you can include in the basis of property, including your home. Taxes 2012 It also lists some settlement costs that cannot be included in basis. Taxes 2012   Also see Publication 523 for additional items and a discussion of basis other than cost. Taxes 2012 Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. Taxes 2012 To figure your adjusted basis, you can use Worksheet 1 in Publication 523. Taxes 2012 Do not use Worksheet 1 if you acquired an interest in your home from a decedent who died in 2010 and whose executor filed Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent. Taxes 2012 Increases to basis. Taxes 2012   These include the following. Taxes 2012 Additions and other improvements that have a useful life of more than 1 year. Taxes 2012 Special assessments for local improvements. Taxes 2012 Amounts you spent after a casualty to restore damaged property. Taxes 2012 Improvements. Taxes 2012   These add to the value of your home, prolong its useful life, or adapt it to new uses. Taxes 2012 You add the cost of additions and other improvements to the basis of your property. Taxes 2012   For example, putting a recreation room or another bathroom in your unfinished basement, putting up a new fence, putting in new plumbing or wiring, putting on a new roof, or paving your unpaved driveway are improvements. Taxes 2012 An addition to your house, such as a new deck, a sunroom, or a new garage, is also an improvement. Taxes 2012 Repairs. Taxes 2012   These maintain your home in good condition but do not add to its value or prolong its life. Taxes 2012 You do not add their cost to the basis of your property. Taxes 2012   Examples of repairs include repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes. Taxes 2012 Decreases to basis. Taxes 2012   These include the following. Taxes 2012 Discharge of qualified principal residence indebtedness that was excluded from income. Taxes 2012 Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. Taxes 2012 For details, see Publication 4681. Taxes 2012 Gain you postponed from the sale of a previous home before May 7, 1997. Taxes 2012 Deductible casualty losses. Taxes 2012 Insurance payments you received or expect to receive for casualty losses. Taxes 2012 Payments you received for granting an easement or right-of-way. Taxes 2012 Depreciation allowed or allowable if you used your home for business or rental purposes. Taxes 2012 Energy-related credits allowed for expenditures made on the residence. Taxes 2012 (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. Taxes 2012 ) Adoption credit you claimed for improvements added to the basis of your home. Taxes 2012 Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. Taxes 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. Taxes 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. Taxes 2012 District of Columbia first-time homebuyer credit (allowed on the purchase of a principal residence in the District of Columbia beginning on August 5, 1997 and before January 1, 2012). Taxes 2012 General sales taxes (allowed beginning 2004 and ending before 2014) 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. Taxes 2012 Discharges of qualified principal residence indebtedness. Taxes 2012   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. Taxes 2012 This exclusion applies to discharges made after 2006 and before 2014. Taxes 2012 If you choose to exclude this income, you must reduce (but not below zero) the basis of the principal residence by the amount excluded from your gross income. Taxes 2012   File Form 982 with your tax return. Taxes 2012 See the form's instructions for detailed information. Taxes 2012 Recordkeeping. Taxes 2012 You should keep records to prove your home's adjusted basis. Taxes 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. Taxes 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. Taxes 2012 Keep records proving the basis of both homes as long as they are needed for tax purposes. Taxes 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 report 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. Taxes 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. Taxes 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. Taxes 2012 To qualify, you must meet the ownership and use tests described later. Taxes 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. Taxes 2012 You can use Worksheet 2 in Publication 523 to figure the amount of your exclusion and your taxable gain, if any. Taxes 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. Taxes 2012 See Publication 505, Tax Withholding and Estimated Tax. Taxes 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. Taxes 2012 You meet the ownership test. Taxes 2012 You meet the use test. Taxes 2012 During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. Taxes 2012 For details on gain allocated to periods of nonqualified use, see Periods of nonqualified use , later. Taxes 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 . Taxes 2012 Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. Taxes 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). Taxes 2012 Exception. Taxes 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. Taxes 2012 However, the maximum amount you may be able to exclude will be reduced. Taxes 2012 See Reduced Maximum Exclusion , later. Taxes 2012 Example 1—home owned and occupied for at least 2 years. Taxes 2012 Mya bought and moved into her main home in September 2011. Taxes 2012 She sold the home at a gain in October 2013. Taxes 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. Taxes 2012 She meets the ownership and use tests. Taxes 2012 Example 2—ownership test met but use test not met. Taxes 2012 Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. Taxes 2012 He later sold the home for a gain. Taxes 2012 He owned the home during the entire 5-year period ending on the date of sale. Taxes 2012 He meets the ownership test but not the use test. Taxes 2012 He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). Taxes 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. Taxes 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. Taxes 2012 Temporary absence. Taxes 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. Taxes 2012 The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. Taxes 2012 Example 1. Taxes 2012 David Johnson, who is single, bought and moved into his home on February 1, 2011. Taxes 2012 Each year during 2011 and 2012, David left his home for a 2-month summer vacation. Taxes 2012 David sold the house on March 1, 2013. Taxes 2012 Although the total time David used his home is less than 2 years (21 months), he meets the requirement and may exclude gain. Taxes 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. Taxes 2012 Example 2. Taxes 2012 Professor Paul Beard, who is single, bought and moved into a house on August 18, 2010. Taxes 2012 He lived in it as his main home continuously until January 5, 2012, when he went abroad for a 1-year sabbatical leave. Taxes 2012 On February 6, 2013, 1 month after returning from the leave, Paul sold the house at a gain. Taxes 2012 Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. Taxes 2012 He cannot exclude any part of his gain, because he did not use the residence for the required 2 years. Taxes 2012 Ownership and use tests met at different times. Taxes 2012   You can meet the ownership and use tests during different 2-year periods. Taxes 2012 However, you must meet both tests during the 5-year period ending on the date of the sale. Taxes 2012 Example. Taxes 2012 Beginning in 2002, Helen Jones lived in a rented apartment. Taxes 2012 The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. Taxes 2012 In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. Taxes 2012 On July 12, 2013, while still living in her daughter's home, she sold her condominium. Taxes 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. Taxes 2012 She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). Taxes 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). Taxes 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. Taxes 2012 Cooperative apartment. Taxes 2012   If you sold stock as a tenant-stockholder 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 entitles you to occupy as your main home for at least 2 years. Taxes 2012 Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. Taxes 2012 Exception for individuals with a disability. Taxes 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. Taxes 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. Taxes 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. Taxes 2012 Previous home destroyed or condemned. Taxes 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. Taxes 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. Taxes 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. Taxes 2012 Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Taxes 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” as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. Taxes 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" or as an enrolled volunteer or volunteer leader of the Peace Corps. Taxes 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. Taxes 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. Taxes 2012 For more information about the suspension of the 5-year test period, see Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps in Publication 523. Taxes 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. Taxes 2012 (But see Special rules for joint returns , next. Taxes 2012 ) Special rules for joint returns. Taxes 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. Taxes 2012 You are married and file a joint return for the year. Taxes 2012 Either you or your spouse meets the ownership test. Taxes 2012 Both you and your spouse meet the use test. Taxes 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. Taxes 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. Taxes 2012 For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. Taxes 2012 Example 1—one spouse sells a home. Taxes 2012 Emily sells her home in June 2013 for a gain of $300,000. Taxes 2012 She marries Jamie later in the year. Taxes 2012 She meets the ownership and use tests, but Jamie does not. Taxes 2012 Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. Taxes 2012 The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. Taxes 2012 Example 2—each spouse sells a home. Taxes 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. Taxes 2012 He meets the ownership and use tests on his home, but Emily does not. Taxes 2012 Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. Taxes 2012 However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. Taxes 2012 Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. Taxes 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. Taxes 2012 Sale of main home by surviving spouse. Taxes 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. Taxes 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. Taxes 2012 The sale or exchange took place after 2008. Taxes 2012 The sale or exchange took place no more than 2 years after the date of death of your spouse. Taxes 2012 You have not remarried. Taxes 2012 You and your spouse met the use test at the time of your spouse's death. Taxes 2012 You or your spouse met the ownership test at the time of your spouse's death. Taxes 2012 Neither you nor your spouse excluded gain from the sale of another home during the last 2 years. Taxes 2012 Example. Taxes 2012   Harry owned and used a house as his main home since 2009. Taxes 2012 Harry and Wilma married on July 1, 2013, and from that date they use Harry's house as their main home. Taxes 2012 Harry died on August 15, 2013, and Wilma inherited the property. Taxes 2012 Wilma sold the property on September 3, 2013, at which time she had not remarried. Taxes 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. Taxes 2012 Home transferred from spouse. Taxes 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. Taxes 2012 Use of home after divorce. Taxes 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. Taxes 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. Taxes 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. Taxes 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. Taxes 2012 A change in place of employment. Taxes 2012 Health. Taxes 2012 Unforeseen circumstances. Taxes 2012 Unforeseen circumstances. Taxes 2012   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 your main home. Taxes 2012   See Publication 523 for more information and to use Worksheet 3 to figure your reduced maximum exclusion. Taxes 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. Taxes 2012 But you must meet the ownership and use tests. Taxes 2012 Periods of nonqualified use. Taxes 2012   In most cases, gain from the sale or exchange of your main home will not qualify for the exclusion to the extent that the gains are allocated to periods of nonqualified use. Taxes 2012 Nonqualified use is any period after 2008 during which neither you nor your spouse (or your former spouse) used the property as a main home with the following exceptions. Taxes 2012 Exceptions. Taxes 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. Taxes 2012 The gain resulting from the sale of the property is allocated between qualified and nonqualified use periods based on the amount of time the property was held for qualified and nonqualified use. Taxes 2012 Gain from the sale or exchange of a main home allocable to periods of qualified use will continue to qualify for the exclusion for the sale of your main home. Taxes 2012 Gain from the sale or exchange of property allocable to nonqualified use will not qualify for the exclusion. Taxes 2012 Calculation. Taxes 2012   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain 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, in Publication 523. Taxes 2012 Example 1. Taxes 2012 On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. Taxes 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. Taxes 2012 The house was rented from June 1, 2009, to March 31, 2011. Taxes 2012 Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. Taxes 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. Taxes 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. Taxes 2012 Five Year Period Used as  Home Used as  Rental 1/31/08 – 5/31/09 16 months       6/1/09 – 3/31/11   22 months 4/1/11 – 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. Taxes 2012 Amy divides 668 by 2,080 and obtains a decimal (rounded to at least three decimal places) of 0. Taxes 2012 321. Taxes 2012 To figure her gain attributable to the period of nonqualified use, she multiplies $190,000 (the gain not attributable to the $10,000 depreciation deduction) by 0. Taxes 2012 321. Taxes 2012 Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain. Taxes 2012 Example 2. Taxes 2012 William owned and used a house as his main home from 2007 through 2010. Taxes 2012 On January 1, 2011, he moved to another state. Taxes 2012 He rented his house from that date until April 30, 2013, when he sold it. Taxes 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. Taxes 2012 He must report the sale on Form 4797 because it was rental property at the time of sale. Taxes 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. Taxes 2012 Because he met the ownership and use tests, he can exclude gain up to $250,000. Taxes 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. Taxes 2012 Depreciation after May 6, 1997. Taxes 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. Taxes 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. Taxes 2012 See Publication 544 for more information. Taxes 2012 Property used partly for business or rental. Taxes 2012   If you used property partly as a home and partly for business or to produce rental income, see Publication 523. Taxes 2012 Reporting the Sale Do not report the 2013 sale of your main home on your tax return unless: You have a gain and do not qualify to exclude all of it, You have a gain and choose not to exclude it, or You received Form 1099-S. Taxes 2012 If any of these conditions apply, report the entire gain or loss. Taxes 2012 For details on how to report the gain or loss, see the Instructions for Schedule D (Form 1040) and the Instructions for Form 8949. Taxes 2012 If you used the home for business or to produce rental income, you may have to use Form 4797 to report the sale of the business or rental part (or the sale of the entire property if used entirely for business or rental). Taxes 2012 See Business Use or Rental of Home in Publication 523 and the Instructions for Form 4797. Taxes 2012 Installment sale. Taxes 2012    Some sales are made under arrangements that provide for part or all of the selling price to be paid in a later year. Taxes 2012 These sales are called “installment sales. Taxes 2012 ” If you finance the buyer's purchase of your home yourself instead of having the buyer get a loan or mortgage from a bank, you probably have an installment sale. Taxes 2012 You may be able to report the part of the gain you cannot exclude on the installment basis. Taxes 2012    Use Form 6252, Installment Sale Income, to report the sale. Taxes 2012 Enter your exclusion on line 15 of Form 6252. Taxes 2012 Seller-financed mortgage. Taxes 2012   If you sell your home and hold a note, mortgage, or other financial agreement, the payments you receive in most cases consist of both interest and principal. Taxes 2012 You must separately report as interest income the interest you receive as part of each payment. Taxes 2012 If the buyer of your home uses the property as a main or second home, you must also report the name, address, and social security number (SSN) of the buyer on line 1 of Schedule B (Form 1040A or 1040). Taxes 2012 The buyer must give you his or her SSN, and you must give the buyer your SSN. Taxes 2012 Failure to meet these requirements may result in a $50 penalty for each failure. Taxes 2012 If either you or the buyer does not have and is not eligible to get an SSN, see Social Security Number in chapter 1. Taxes 2012 More information. Taxes 2012   For more information on installment sales, see Publication 537, Installment Sales. Taxes 2012 Special Situations The situations that follow may affect your exclusion. Taxes 2012 Sale of home acquired in a like-kind exchange. Taxes 2012   You cannot claim the exclusion if: You acquired your home in a like-kind exchange (also known as a section 1031 exchange), or your basis in your home is determined by reference to the basis of the home in the hands of the person who acquired the property in a like-kind exchange (for example, you received the home from that person as a gift), and You sold the home during the 5-year period beginning with the date your home was acquired in the like-kind exchange. Taxes 2012 Gain from a like-kind exchange is not taxable at the time of the exchange. Taxes 2012 This means that gain will not be taxed until you sell or otherwise dispose of the property you receive. Taxes 2012 To defer gain from a like-kind exchange, you must have exchanged business or investment property for business or investment property of a like kind. Taxes 2012 For more information about like-kind exchanges, see Publication 544, Sales and Other Dispositions of Assets. Taxes 2012 Home relinquished in a like-kind exchange. Taxes 2012   If you use your main home partly for business or rental purposes and then exchange the home for another property, see Publication 523. Taxes 2012 Expatriates. Taxes 2012   You cannot claim the exclusion if the expatriation tax applies to you. Taxes 2012 The expatriation tax applies to certain U. Taxes 2012 S. Taxes 2012 citizens who have renounced their citizenship (and to certain long-term residents who have ended their residency). Taxes 2012 For more information about the expatriation tax, see Expatriation Tax in chapter 4 of Publication 519, U. Taxes 2012 S. Taxes 2012 Tax Guide for Aliens. Taxes 2012 Home destroyed or condemned. Taxes 2012   If your home was destroyed or condemned, any gain (for example, because of insurance proceeds you received) qualifies for the exclusion. Taxes 2012   Any part of the gain that cannot be excluded (because it is more than the maximum exclusion) can be postponed under the rules explained in: Publication 547, in the case of a home that was destroyed, or Publication 544, chapter 1, in the case of a home that was condemned. Taxes 2012 Sale of remainder interest. Taxes 2012   Subject to the other rules in this chapter, you can choose to exclude gain from the sale of a remainder interest in your home. Taxes 2012 If you make this choice, you cannot choose to exclude gain from your sale of any other interest in the home that you sell separately. Taxes 2012 Exception for sales to related persons. Taxes 2012   You cannot exclude gain from the sale of a remainder interest in your home to a related person. Taxes 2012 Related persons include your brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. Taxes 2012 ), and lineal descendants (children, grandchildren, etc. Taxes 2012 ). Taxes 2012 Related persons also include certain corporations, partnerships, trusts, and exempt organizations. Taxes 2012 Recapturing (Paying Back) a Federal Mortgage Subsidy If you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. Taxes 2012 You recapture the benefit by increasing your federal income tax for the year of the sale. Taxes 2012 You may have to pay this recapture tax even if you can exclude your gain from income under the rules discussed earlier; that exclusion does not affect the recapture tax. Taxes 2012 Loans subject to recapture rules. Taxes 2012   The recapture applies to loans that: Came from the proceeds of qualified mortgage bonds, or Were based on mortgage credit certificates. Taxes 2012 The recapture also applies to assumptions of these loans. Taxes 2012 When recapture applies. Taxes 2012   Recapture of the federal mortgage subsidy applies only if you meet both of the following conditions. Taxes 2012 You sell or otherwise dispose of your home at a gain within the first 9 years after the date you close your mortgage loan. Taxes 2012 Your income for the year of disposition is more than that year's adjusted qualifying income for your family size for that year (related to the income requirements a person must meet to qualify for the federally subsidized program). Taxes 2012 When recapture does not apply. Taxes 2012   Recapture does not apply in any of the following situations. Taxes 2012 Your mortgage loan was a qualified home improvement loan (QHIL) of not more than $15,000 used for alterations, repairs, and improvements that protect or improve the basic livability or energy efficiency of your home. Taxes 2012 Your mortgage loan was a QHIL of not more than $150,000 in the case of a QHIL used to repair damage from Hurricane Katrina to homes in the hurricane disaster area; a QHIL funded by a qualified mortgage bond that is a qualified Gulf Opportunity Zone Bond; or a QHIL for an owner-occupied home in the Gulf Opportunity Zone (GO Zone), Rita GO Zone, or Wilma GO Zone. Taxes 2012 For more information, see Publication 4492, Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma. Taxes 2012 Also see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. Taxes 2012 The home is disposed of as a result of your death. Taxes 2012 You dispose of the home more than 9 years after the date you closed your mortgage loan. Taxes 2012 You transfer the home to your spouse, or to your former spouse incident to a divorce, where no gain is included in your income. Taxes 2012 You dispose of the home at a loss. Taxes 2012 Your home is destroyed by a casualty, and you replace it on its original site within 2 years after the end of the tax year when the destruction happened. Taxes 2012 The replacement period is extended for main homes destroyed in a federally declared disaster area, a Midwestern disaster area, the Kansas disaster area, and the Hurricane Katrina disaster area. Taxes 2012 For more information, see Replacement Period in Publication 547. Taxes 2012 You refinance your mortgage loan (unless you later meet the conditions listed previously under When recapture applies ). Taxes 2012 Notice of amounts. Taxes 2012   At or near the time of settlement of your mortgage loan, you should receive a notice that provides the federally subsidized amount and other information you will need to figure your recapture tax. Taxes 2012 How to figure and report the recapture. Taxes 2012    The recapture tax is figured on Form 8828. Taxes 2012 If you sell your home and your mortgage is subject to recapture rules, you must file Form 8828 even if you do not owe a recapture tax. Taxes 2012 Attach Form 8828 to your Form 1040. Taxes 2012 For more information, see Form 8828 and its instructions. Taxes 2012 Prev  Up  Next   Home   More Online Publications