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Turbo tax filing Publication 936 - Main Content Table of Contents Part I. Turbo tax filing Home Mortgage InterestSecured Debt Qualified Home Special Situations Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement How To Report Special Rule for Tenant-Stockholders in Cooperative Housing Corporations Part II. Turbo tax filing Limits on Home Mortgage Interest DeductionHome Acquisition Debt Home Equity Debt Grandfathered Debt Table 1 Instructions How To Get Tax HelpLow Income Taxpayer Clinics Part I. Turbo tax filing Home Mortgage Interest This part explains what you can deduct as home mortgage interest. Turbo tax filing It includes discussions on points, mortgage insurance premiums, and how to report deductible interest on your tax return. Turbo tax filing Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). Turbo tax filing The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. Turbo tax filing You can deduct home mortgage interest if all the following conditions are met. Turbo tax filing You file Form 1040 and itemize deductions on Schedule A (Form 1040). Turbo tax filing The mortgage is a secured debt on a qualified home in which you have an ownership interest. Turbo tax filing Secured Debt and Qualified Home are explained later. Turbo tax filing  Both you and the lender must intend that the loan be repaid. Turbo tax filing Fully deductible interest. Turbo tax filing   In most cases, you can deduct all of your home mortgage interest. Turbo tax filing How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. Turbo tax filing   If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. Turbo tax filing (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category. Turbo tax filing ) If one or more of your mortgages does not fit into any of these categories, use Part II of this publication to figure the amount of interest you can deduct. Turbo tax filing   The three categories are as follows. Turbo tax filing Mortgages you took out on or before October 13, 1987 (called grandfathered debt). Turbo tax filing Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2013 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately). Turbo tax filing Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2013 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2). Turbo tax filing The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. Turbo tax filing   See Part II for more detailed definitions of grandfathered, home acquisition, and home equity debt. Turbo tax filing    You can use Figure A to check whether your home mortgage interest is fully deductible. Turbo tax filing This image is too large to be displayed in the current screen. Turbo tax filing Please click the link to view the image. Turbo tax filing Figure A. Turbo tax filing Is My Home Mortgage Interest Fully Deductible? Secured Debt You can deduct your home mortgage interest only if your mortgage is a secured debt. Turbo tax filing A secured debt is one in which you sign an instrument (such as a mortgage, deed of trust, or land contract) that: Makes your ownership in a qualified home security for payment of the debt, Provides, in case of default, that your home could satisfy the debt, and Is recorded or is otherwise perfected under any state or local law that applies. Turbo tax filing In other words, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. Turbo tax filing If you cannot pay the debt, your home can then serve as payment to the lender to satisfy (pay) the debt. Turbo tax filing In this publication, mortgage will refer to secured debt. Turbo tax filing Debt not secured by home. Turbo tax filing   A debt is not secured by your home if it is secured solely because of a lien on your general assets or if it is a security interest that attaches to the property without your consent (such as a mechanic's lien or judgment lien). Turbo tax filing   A debt is not secured by your home if it once was, but is no longer secured by your home. Turbo tax filing Wraparound mortgage. Turbo tax filing   This is not a secured debt unless it is recorded or otherwise perfected under state law. Turbo tax filing Example. Turbo tax filing Beth owns a home subject to a mortgage of $40,000. Turbo tax filing She sells the home for $100,000 to John, who takes it subject to the $40,000 mortgage. Turbo tax filing Beth continues to make the payments on the $40,000 note. Turbo tax filing John pays $10,000 down and gives Beth a $90,000 note secured by a wraparound mortgage on the home. Turbo tax filing Beth does not record or otherwise perfect the $90,000 mortgage under the state law that applies. Turbo tax filing Therefore, the mortgage is not a secured debt and John cannot deduct any of the interest he pays on it as home mortgage interest. Turbo tax filing Choice to treat the debt as not secured by your home. Turbo tax filing   You can choose to treat any debt secured by your qualified home as not secured by the home. Turbo tax filing This treatment begins with the tax year for which you make the choice and continues for all later tax years. Turbo tax filing You can revoke your choice only with the consent of the Internal Revenue Service (IRS). Turbo tax filing   You may want to treat a debt as not secured by your home if the interest on that debt is fully deductible (for example, as a business expense) whether or not it qualifies as home mortgage interest. Turbo tax filing This may allow you, if the limits in Part II apply, more of a deduction for interest on other debts that are deductible only as home mortgage interest. Turbo tax filing Cooperative apartment owner. Turbo tax filing   If you own stock in a cooperative housing corporation, see the Special Rule for Tenant-Stockholders in Cooperative Housing Corporations , near the end of this Part I. Turbo tax filing Qualified Home For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. Turbo tax filing This means your main home or your second home. Turbo tax filing A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. Turbo tax filing The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Turbo tax filing Otherwise, it is considered personal interest and is not deductible. Turbo tax filing Main home. Turbo tax filing   You can have only one main home at any one time. Turbo tax filing This is the home where you ordinarily live most of the time. Turbo tax filing Second home. Turbo tax filing   A second home is a home that you choose to treat as your second home. Turbo tax filing Second home not rented out. Turbo tax filing   If you have a second home that you do not hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. Turbo tax filing You do not have to use the home during the year. Turbo tax filing Second home rented out. Turbo tax filing   If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. Turbo tax filing You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer. Turbo tax filing If you do not use the home long enough, it is considered rental property and not a second home. Turbo tax filing For information on residential rental property, see Publication 527. Turbo tax filing More than one second home. Turbo tax filing   If you have more than one second home, you can treat only one as the qualified second home during any year. Turbo tax filing However, you can change the home you treat as a second home during the year in the following situations. Turbo tax filing If you get a new home during the year, you can choose to treat the new home as your second home as of the day you buy it. Turbo tax filing If your main home no longer qualifies as your main home, you can choose to treat it as your second home as of the day you stop using it as your main home. Turbo tax filing If your second home is sold during the year or becomes your main home, you can choose a new second home as of the day you sell the old one or begin using it as your main home. Turbo tax filing Divided use of your home. Turbo tax filing   The only part of your home that is considered a qualified home is the part you use for residential living. Turbo tax filing If you use part of your home for other than residential living, such as a home office, you must allocate the use of your home. Turbo tax filing You must then divide both the cost and fair market value of your home between the part that is a qualified home and the part that is not. Turbo tax filing Dividing the cost may affect the amount of your home acquisition debt, which is limited to the cost of your home plus the cost of any improvements. Turbo tax filing (See Home Acquisition Debt in Part II. Turbo tax filing ) Dividing the fair market value may affect your home equity debt limit, also explained in Part II . Turbo tax filing Renting out part of home. Turbo tax filing   If you rent out part of a qualified home to another person (tenant), you can treat the rented part as being used by you for residential living only if all of the following conditions apply. Turbo tax filing The rented part of your home is used by the tenant primarily for residential living. Turbo tax filing The rented part of your home is not a self-contained residential unit having separate sleeping, cooking, and toilet facilities. Turbo tax filing You do not rent (directly or by sublease) the same or different parts of your home to more than two tenants at any time during the tax year. Turbo tax filing If two persons (and dependents of either) share the same sleeping quarters, they are treated as one tenant. Turbo tax filing Office in home. Turbo tax filing   If you have an office in your home that you use in your business, see Publication 587, Business Use of Your Home. Turbo tax filing It explains how to figure your deduction for the business use of your home, which includes the business part of your home mortgage interest. Turbo tax filing Home under construction. Turbo tax filing   You can treat a home under construction as a qualified home for a period of up to 24 months, but only if it becomes your qualified home at the time it is ready for occupancy. Turbo tax filing   The 24-month period can start any time on or after the day construction begins. Turbo tax filing Home destroyed. Turbo tax filing   You may be able to continue treating your home as a qualified home even after it is destroyed in a fire, storm, tornado, earthquake, or other casualty. Turbo tax filing This means you can continue to deduct the interest you pay on your home mortgage, subject to the limits described in this publication. Turbo tax filing   You can continue treating a destroyed home as a qualified home if, within a reasonable period of time after the home is destroyed, you: Rebuild the destroyed home and move into it, or Sell the land on which the home was located. Turbo tax filing   This rule applies to your main home and to a second home that you treat as a qualified home. Turbo tax filing Time-sharing arrangements. Turbo tax filing   You can treat a home you own under a time-sharing plan as a qualified home if it meets all the requirements. Turbo tax filing A time-sharing plan is an arrangement between two or more people that limits each person's interest in the home or right to use it to a certain part of the year. Turbo tax filing Rental of time-share. Turbo tax filing   If you rent out your time-share, it qualifies as a second home only if you also use it as a home during the year. Turbo tax filing See Second home rented out , earlier, for the use requirement. Turbo tax filing To know whether you meet that requirement, count your days of use and rental of the home only during the time you have a right to use it or to receive any benefits from the rental of it. Turbo tax filing Married taxpayers. Turbo tax filing   If you are married and file a joint return, your qualified home(s) can be owned either jointly or by only one spouse. Turbo tax filing Separate returns. Turbo tax filing   If you are married filing separately and you and your spouse own more than one home, you can each take into account only one home as a qualified home. Turbo tax filing However, if you both consent in writing, then one spouse can take both the main home and a second home into account. Turbo tax filing Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. Turbo tax filing It also describes certain special situations that may affect your deduction. Turbo tax filing Late payment charge on mortgage payment. Turbo tax filing   You can deduct as home mortgage interest a late payment charge if it was not for a specific service performed in connection with your mortgage loan. Turbo tax filing Mortgage prepayment penalty. Turbo tax filing   If you pay off your home mortgage early, you may have to pay a penalty. Turbo tax filing You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. Turbo tax filing Sale of home. Turbo tax filing   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of the sale. Turbo tax filing Example. Turbo tax filing John and Peggy Harris sold their home on May 7. Turbo tax filing Through April 30, they made home mortgage interest payments of $1,220. Turbo tax filing The settlement sheet for the sale of the home showed $50 interest for the 6-day period in May up to, but not including, the date of sale. Turbo tax filing Their mortgage interest deduction is $1,270 ($1,220 + $50). Turbo tax filing Prepaid interest. Turbo tax filing   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. Turbo tax filing You can deduct in each year only the interest that qualifies as home mortgage interest for that year. Turbo tax filing However, there is an exception that applies to points, discussed later. Turbo tax filing Mortgage interest credit. Turbo tax filing    You may be able to claim a mortgage interest credit if you were issued a mortgage credit certificate (MCC) by a state or local government. Turbo tax filing Figure the credit on Form 8396, Mortgage Interest Credit. Turbo tax filing If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. Turbo tax filing   See Form 8396 and Publication 530 for more information on the mortgage interest credit. Turbo tax filing Ministers' and military housing allowance. Turbo tax filing   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you can still deduct your home mortgage interest. Turbo tax filing Hardest Hit Fund and Emergency Homeowners' Loan Programs. Turbo tax filing   You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. Turbo tax filing You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. Turbo tax filing You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. Turbo tax filing If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098–MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received from payer(s) / borrower(s)), box 4 (mortgage insurance premiums), and box 5 (other information including real property taxes paid). Turbo tax filing However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. Turbo tax filing Mortgage assistance payments under section 235 of the National Housing Act. Turbo tax filing   If you qualify for mortgage assistance payments for lower-income families under section 235 of the National Housing Act, part or all of the interest on your mortgage may be paid for you. Turbo tax filing You cannot deduct the interest that is paid for you. Turbo tax filing No other effect on taxes. Turbo tax filing   Do not include these mortgage assistance payments in your income. Turbo tax filing Also, do not use these payments to reduce other deductions, such as real estate taxes. Turbo tax filing Divorced or separated individuals. Turbo tax filing   If a divorce or separation agreement requires you or your spouse or former spouse to pay home mortgage interest on a home owned by both of you, the payment of interest may be alimony. Turbo tax filing See the discussion of Payments for jointly-owned home under Alimony in Publication 504, Divorced or Separated Individuals. Turbo tax filing Redeemable ground rents. Turbo tax filing   In some states (such as Maryland), you can buy your home subject to a ground rent. Turbo tax filing A ground rent is an obligation you assume to pay a fixed amount per year on the property. Turbo tax filing Under this arrangement, you are leasing (rather than buying) the land on which your home is located. Turbo tax filing   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. Turbo tax filing   A ground rent is a redeemable ground rent if all of the following are true. Turbo tax filing Your lease, including renewal periods, is for more than 15 years. Turbo tax filing You can freely assign the lease. Turbo tax filing You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specific amount. Turbo tax filing The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. Turbo tax filing   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. Turbo tax filing Nonredeemable ground rents. Turbo tax filing   Payments on a nonredeemable ground rent are not mortgage interest. Turbo tax filing You can deduct them as rent if they are a business expense or if they are for rental property. Turbo tax filing Reverse mortgages. Turbo tax filing   A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. Turbo tax filing With a reverse mortgage, you retain title to your home. Turbo tax filing Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. Turbo tax filing Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Turbo tax filing Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until you actually pay it, which is usually when you pay off the loan in full. Turbo tax filing Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Part II. Turbo tax filing Rental payments. Turbo tax filing   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. Turbo tax filing This is true even if the settlement papers call them interest. Turbo tax filing You cannot deduct these payments as home mortgage interest. Turbo tax filing Mortgage proceeds invested in tax-exempt securities. Turbo tax filing   You cannot deduct the home mortgage interest on grandfathered debt or home equity debt if you used the proceeds of the mortgage to buy securities or certificates that produce tax-free income. Turbo tax filing “Grandfathered debt” and “home equity debt” are defined in Part II of this publication. Turbo tax filing Refunds of interest. Turbo tax filing   If you receive a refund of interest in the same tax year you paid it, you must reduce your interest expense by the amount refunded to you. Turbo tax filing If you receive a refund of interest you deducted in an earlier year, you generally must include the refund in income in the year you receive it. Turbo tax filing However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. Turbo tax filing This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. Turbo tax filing If you need to include the refund in income, report it on Form 1040, line 21. Turbo tax filing   If you received a refund of interest you overpaid in an earlier year, you generally will receive a Form 1098, Mortgage Interest Statement, showing the refund in box 3. Turbo tax filing For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. Turbo tax filing   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in Publication 525, Taxable and Nontaxable Income. Turbo tax filing Cooperative apartment owner. Turbo tax filing   If you own a cooperative apartment, you must reduce your home mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. Turbo tax filing The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. Turbo tax filing   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. Turbo tax filing Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Turbo tax filing Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Turbo tax filing This image is too large to be displayed in the current screen. Turbo tax filing Please click the link to view the image. Turbo tax filing Figure B. Turbo tax filing Are My Points Fully Deductible This Year? A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Turbo tax filing See Points paid by the seller , later. Turbo tax filing General Rule You generally cannot deduct the full amount of points in the year paid. Turbo tax filing Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. Turbo tax filing See Deduction Allowed Ratably , next. Turbo tax filing For exceptions to the general rule, see Deduction Allowed in Year Paid , later. Turbo tax filing Deduction Allowed Ratably If you do not meet the tests listed under Deduction Allowed in Year Paid , later, the loan is not a home improvement loan, or you choose not to deduct your points in full in the year paid, you can deduct the points ratably (equally) over the life of the loan if you meet all the following tests. Turbo tax filing You use the cash method of accounting. Turbo tax filing This means you report income in the year you receive it and deduct expenses in the year you pay them. Turbo tax filing Most individuals use this method. Turbo tax filing Your loan is secured by a home. Turbo tax filing (The home does not need to be your main home. Turbo tax filing ) Your loan period is not more than 30 years. Turbo tax filing If your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period. Turbo tax filing Either your loan amount is $250,000 or less, or the number of points is not more than: 4, if your loan period is 15 years or less, or 6, if your loan period is more than 15 years. Turbo tax filing Example. Turbo tax filing You use the cash method of accounting. Turbo tax filing In 2013, you took out a $100,000 loan payable over 20 years. Turbo tax filing The terms of the loan are the same as for other 20-year loans offered in your area. Turbo tax filing You paid $4,800 in points. Turbo tax filing You made 3 monthly payments on the loan in 2013. Turbo tax filing You can deduct $60 [($4,800 ÷ 240 months) x 3 payments] in 2013. Turbo tax filing In 2014, if you make all twelve payments, you will be able to deduct $240 ($20 x 12). Turbo tax filing Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. Turbo tax filing (You can use Figure B as a quick guide to see whether your points are fully deductible in the year paid. Turbo tax filing ) Your loan is secured by your main home. Turbo tax filing (Your main home is the one you ordinarily live in most of the time. Turbo tax filing ) Paying points is an established business practice in the area where the loan was made. Turbo tax filing The points paid were not more than the points generally charged in that area. Turbo tax filing You use the cash method of accounting. Turbo tax filing This means you report income in the year you receive it and deduct expenses in the year you pay them. Turbo tax filing Most individuals use this method. Turbo tax filing The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. Turbo tax filing The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Turbo tax filing The funds you provided are not required to have been applied to the points. Turbo tax filing They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Turbo tax filing You cannot have borrowed these funds from your lender or mortgage broker. Turbo tax filing You use your loan to buy or build your main home. Turbo tax filing The points were computed as a percentage of the principal amount of the mortgage. Turbo tax filing The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. Turbo tax filing The points may be shown as paid from either your funds or the seller's. Turbo tax filing Note. Turbo tax filing If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan. Turbo tax filing Home improvement loan. Turbo tax filing   You can also fully deduct in the year paid points paid on a loan to improve your main home, if tests (1) through (6) are met. Turbo tax filing Second home. Turbo tax filing You cannot fully deduct in the year paid points you pay on loans secured by your second home. Turbo tax filing You can deduct these points only over the life of the loan. Turbo tax filing Refinancing. Turbo tax filing   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. Turbo tax filing This is true even if the new mortgage is secured by your main home. Turbo tax filing   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Turbo tax filing You can deduct the rest of the points over the life of the loan. Turbo tax filing Example 1. Turbo tax filing In 1998, Bill Fields got a mortgage to buy a home. Turbo tax filing In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. Turbo tax filing The mortgage is secured by his home. Turbo tax filing To get the new loan, he had to pay three points ($3,000). Turbo tax filing Two points ($2,000) were for prepaid interest, and one point ($1,000) was charged for services, in place of amounts that ordinarily are stated separately on the settlement statement. Turbo tax filing Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. Turbo tax filing The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. Turbo tax filing Bill's first payment on the new loan was due July 1. Turbo tax filing He made six payments on the loan in 2013 and is a cash basis taxpayer. Turbo tax filing Bill used the funds from the new mortgage to repay his existing mortgage. Turbo tax filing Although the new mortgage loan was for Bill's continued ownership of his main home, it was not for the purchase or improvement of that home. Turbo tax filing He cannot deduct all of the points in 2013. Turbo tax filing He can deduct two points ($2,000) ratably over the life of the loan. Turbo tax filing He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. Turbo tax filing The other point ($1,000) was a fee for services and is not deductible. Turbo tax filing Example 2. Turbo tax filing The facts are the same as in Example 1, except that Bill used $25,000 of the loan proceeds to improve his home and $75,000 to repay his existing mortgage. Turbo tax filing Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. Turbo tax filing His deduction is $500 ($2,000 × 25%). Turbo tax filing Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. Turbo tax filing This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. Turbo tax filing The total amount Bill deducts in 2013 is $550 ($500 + $50). Turbo tax filing Special Situations This section describes certain special situations that may affect your deduction of points. Turbo tax filing Original issue discount. Turbo tax filing   If you do not qualify to either deduct the points in the year paid or deduct them ratably over the life of the loan, or if you choose not to use either of these methods, the points reduce the issue price of the loan. Turbo tax filing This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. Turbo tax filing Amounts charged for services. Turbo tax filing    Amounts charged by the lender for specific services connected to the loan are not interest. Turbo tax filing Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Turbo tax filing  You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Turbo tax filing Points paid by the seller. Turbo tax filing   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Turbo tax filing Treatment by seller. Turbo tax filing   The seller cannot deduct these fees as interest. Turbo tax filing But they are a selling expense that reduces the amount realized by the seller. Turbo tax filing See Publication 523 for information on selling your home. Turbo tax filing Treatment by buyer. Turbo tax filing   The buyer reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them. Turbo tax filing If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. Turbo tax filing If any of those tests are not met, the buyer deducts the points over the life of the loan. Turbo tax filing   If you need information about the basis of your home, see Publication 523 or Publication 530. Turbo tax filing Funds provided are less than points. Turbo tax filing   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the funds you provided were less than the points charged to you (test (6)), you can deduct the points in the year paid, up to the amount of funds you provided. Turbo tax filing In addition, you can deduct any points paid by the seller. Turbo tax filing Example 1. Turbo tax filing When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Turbo tax filing You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. Turbo tax filing Of the $1,000 charged for points, you can deduct $750 in the year paid. Turbo tax filing You spread the remaining $250 over the life of the mortgage. Turbo tax filing Example 2. Turbo tax filing The facts are the same as in Example 1, except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. Turbo tax filing In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Turbo tax filing You spread the remaining $250 over the life of the mortgage. Turbo tax filing You must reduce the basis of your home by the $1,000 paid by the seller. Turbo tax filing Excess points. Turbo tax filing   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the points paid were more than generally paid in your area (test (3)), you deduct in the year paid only the points that are generally charged. Turbo tax filing You must spread any additional points over the life of the mortgage. Turbo tax filing Mortgage ending early. Turbo tax filing   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. Turbo tax filing However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. Turbo tax filing Instead, deduct the remaining balance over the term of the new loan. Turbo tax filing   A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Turbo tax filing Example. Turbo tax filing Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. Turbo tax filing He deducts $200 points per year. Turbo tax filing Through 2012, Dan has deducted $2,200 of the points. Turbo tax filing Dan prepaid his mortgage in full in 2013. Turbo tax filing He can deduct the remaining $800 of points in 2013. Turbo tax filing Limits on deduction. Turbo tax filing   You cannot fully deduct points paid on a mortgage that exceeds the limits discussed in Part II . Turbo tax filing See the Table 1 Instructions for line 10. Turbo tax filing Form 1098. Turbo tax filing    The mortgage interest statement you receive should show not only the total interest paid during the year, but also your deductible points paid during the year. Turbo tax filing See Form 1098, Mortgage Interest Statement , later. Turbo tax filing Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. Turbo tax filing The insurance must be in connection with home acquisition debt, and the insurance contract must have been issued after 2006. Turbo tax filing Qualified mortgage insurance. Turbo tax filing   Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). Turbo tax filing   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. Turbo tax filing If provided by the Rural Housing Service, it is commonly known as a guarantee fee. Turbo tax filing The funding fee and guarantee fee can either be included in the amount of the loan or paid in full at the time of closing. Turbo tax filing These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Turbo tax filing Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. Turbo tax filing Special rules for prepaid mortgage insurance. Turbo tax filing   Generally, if you paid premiums for qualified mortgage insurance that are properly allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. Turbo tax filing You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. Turbo tax filing No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. Turbo tax filing This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. Turbo tax filing Example. Turbo tax filing Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. Turbo tax filing Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Turbo tax filing Since the $9,240 in private mortgage insurance is allocable to periods after 2012, Ryan must allocate the $9,240 over the shorter of the life of the mortgage or 84 months. Turbo tax filing Ryan's adjusted gross income (AGI) for 2012 is $76,000. Turbo tax filing Ryan can deduct $880 ($9,240 ÷ 84 x 8 months) for qualified mortgage insurance premiums in 2012. Turbo tax filing For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 x 12 months) if his AGI is $100,000 or less. Turbo tax filing In this example, the mortgage insurance premiums are allocated over 84 months, which is shorter than the life of the mortgage of 15 years (180 months). Turbo tax filing Limit on deduction. Turbo tax filing   If your adjusted gross income on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. Turbo tax filing See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. Turbo tax filing If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Turbo tax filing Form 1098. Turbo tax filing   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your mortgage insurance premiums paid during the year, which may qualify to be treated as deductible mortgage interest. Turbo tax filing See Form 1098, Mortgage Interest Statement, next. Turbo tax filing Form 1098, Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage, you generally will receive a Form 1098 or a similar statement from the mortgage holder. Turbo tax filing You will receive the statement if you pay interest to a person (including a financial institution or cooperative housing corporation) in the course of that person's trade or business. Turbo tax filing A governmental unit is a person for purposes of furnishing the statement. Turbo tax filing The statement for each year should be sent to you by January 31 of the following year. Turbo tax filing A copy of this form will also be sent to the IRS. Turbo tax filing The statement will show the total interest you paid during the year, any mortgage insurance premiums you paid, and if you purchased a main home during the year, it also will show the deductible points paid during the year, including seller-paid points. Turbo tax filing However, it should not show any interest that was paid for you by a government agency. Turbo tax filing As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Turbo tax filing However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. Turbo tax filing See the earlier discussion of Points to determine whether you can deduct points not shown on Form 1098. Turbo tax filing Prepaid interest on Form 1098. Turbo tax filing   If you prepaid interest in 2013 that accrued in full by January 15, 2014, this prepaid interest may be included in box 1 of Form 1098. Turbo tax filing However, you cannot deduct the prepaid amount for January 2014 in 2013. Turbo tax filing (See Prepaid interest , earlier. Turbo tax filing ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. Turbo tax filing You will include the interest for January 2014 with other interest you pay for 2014. Turbo tax filing Refunded interest. Turbo tax filing   If you received a refund of mortgage interest you overpaid in an earlier year, you generally will receive a Form 1098 showing the refund in box 3. Turbo tax filing See Refunds of interest , earlier. Turbo tax filing Mortgage insurance premiums. Turbo tax filing   The amount of mortgage insurance premiums you paid during 2013 may be shown in Box 4 of Form 1098. Turbo tax filing See Mortgage Insurance Premiums , earlier. Turbo tax filing How To Report Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. Turbo tax filing If you paid more deductible interest to the financial institution than the amount shown on Form 1098, show the larger deductible amount on line 10. Turbo tax filing Attach a statement explaining the difference and print “See attached” next to line 10. Turbo tax filing Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. Turbo tax filing If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and taxpayer identification number (TIN) on the dotted lines next to line 11. Turbo tax filing The seller must give you this number and you must give the seller your TIN. Turbo tax filing A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Turbo tax filing Failure to meet any of these requirements may result in a $50 penalty for each failure. Turbo tax filing The TIN can be either a social security number, an individual taxpayer identification number (issued by the Internal Revenue Service), or an employer identification number. Turbo tax filing If you can take a deduction for points that were not reported to you on Form 1098, deduct those points on Schedule A (Form 1040), line 12. Turbo tax filing Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. Turbo tax filing More than one borrower. Turbo tax filing   If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Turbo tax filing Show how much of the interest each of you paid, and give the name and address of the person who received the form. Turbo tax filing Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Turbo tax filing Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. Turbo tax filing   Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Turbo tax filing Let each of the other borrowers know what his or her share is. Turbo tax filing Mortgage proceeds used for business or investment. Turbo tax filing   If your home mortgage interest deduction is limited under the rules explained in Part II , but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 2 near the end of this publication. Turbo tax filing It shows where to deduct the part of your excess interest that is for those activities. Turbo tax filing The Table 1 Instructions for line 13 in Part II explain how to divide the excess interest among the activities for which the mortgage proceeds were used. Turbo tax filing Special Rule for Tenant-Stockholders in Cooperative Housing Corporations A qualified home includes stock in a cooperative housing corporation owned by a tenant-stockholder. Turbo tax filing This applies only if the tenant-stockholder is entitled to live in the house or apartment because of owning stock in the cooperative. Turbo tax filing Cooperative housing corporation. Turbo tax filing   This is a corporation that meets all of the following conditions. Turbo tax filing Has only one class of stock outstanding, Has no stockholders other than those who own the stock that can live in a house, apartment, or house trailer owned or leased by the corporation, Has no stockholders who can receive any distribution out of capital other than on a liquidation of the corporation, and Meets at least one of the following requirements. Turbo tax filing Receives at least 80% of its gross income for the year in which the mortgage interest is paid or incurred from tenant-stockholders. Turbo tax filing For this purpose, gross income is all income received during the entire year, including amounts received before the corporation changed to cooperative ownership. Turbo tax filing At all times during the year, at least 80% of the total square footage of the corporation's property is used or available for use by the tenant-stockholders for residential or residential-related use. Turbo tax filing At least 90% of the corporation's expenditures paid or incurred during the year are for the acquisition, construction, management, maintenance, or care of corporate property for the benefit of the tenant-stockholders. Turbo tax filing Stock used to secure debt. Turbo tax filing   In some cases, you cannot use your cooperative housing stock to secure a debt because of either: Restrictions under local or state law, or Restrictions in the cooperative agreement (other than restrictions in which the main purpose is to permit the tenant- stockholder to treat unsecured debt as secured debt). Turbo tax filing However, you can treat a debt as secured by the stock to the extent that the proceeds are used to buy the stock under the allocation of interest rules. Turbo tax filing See chapter 4 of Publication 535 for details on these rules. Turbo tax filing Figuring deductible home mortgage interest. Turbo tax filing   Generally, if you are a tenant-stockholder, you can deduct payments you make for your share of the interest paid or incurred by the cooperative. Turbo tax filing The interest must be on a debt to buy, build, change, improve, or maintain the cooperative's housing, or on a debt to buy the land. Turbo tax filing   Figure your share of this interest by multiplying the total by the following fraction. Turbo tax filing      Your shares of stock in the cooperative   The total shares of stock in the cooperative Limits on deduction. Turbo tax filing   To figure how the limits discussed in Part II apply to you, treat your share of the cooperative's debt as debt incurred by you. Turbo tax filing The cooperative should determine your share of its grandfathered debt, its home acquisition debt, and its home equity debt. Turbo tax filing (Your share of each of these types of debt is equal to the average balance of each debt multiplied by the fraction just given. Turbo tax filing ) After your share of the average balance of each type of debt is determined, you include it with the average balance of that type of debt secured by your stock. Turbo tax filing Form 1098. Turbo tax filing    The cooperative should give you a Form 1098 showing your share of the interest. Turbo tax filing Use the rules in this publication to determine your deductible mortgage interest. Turbo tax filing Part II. Turbo tax filing Limits on Home Mortgage Interest Deduction This part of the publication discusses the limits on deductible home mortgage interest. Turbo tax filing These limits apply to your home mortgage interest expense if you have a home mortgage that does not fit into any of the three categories listed at the beginning of Part I under Fully deductible interest . Turbo tax filing Your home mortgage interest deduction is limited to the interest on the part of your home mortgage debt that is not more than your qualified loan limit. Turbo tax filing This is the part of your home mortgage debt that is grandfathered debt or that is not more than the limits for home acquisition debt and home equity debt. Turbo tax filing Table 1 can help you figure your qualified loan limit and your deductible home mortgage interest. Turbo tax filing Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home (your main or second home). Turbo tax filing It also must be secured by that home. Turbo tax filing If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. Turbo tax filing The additional debt may qualify as home equity debt (discussed later). Turbo tax filing Home acquisition debt limit. Turbo tax filing   The total amount you can treat as home acquisition debt at any time on your main home and second home cannot be more than $1 million ($500,000 if married filing separately). Turbo tax filing This limit is reduced (but not below zero) by the amount of your grandfathered debt (discussed later). Turbo tax filing Debt over this limit may qualify as home equity debt (also discussed later). Turbo tax filing Refinanced home acquisition debt. Turbo tax filing   Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt. Turbo tax filing However, the new debt will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing. Turbo tax filing Any additional debt not used to buy, build, or substantially improve a qualified home is not home acquisition debt, but may qualify as home equity debt (discussed later). Turbo tax filing Mortgage that qualifies later. Turbo tax filing   A mortgage that does not qualify as home acquisition debt because it does not meet all the requirements may qualify at a later time. Turbo tax filing For example, a debt that you use to buy your home may not qualify as home acquisition debt because it is not secured by the home. Turbo tax filing However, if the debt is later secured by the home, it may qualify as home acquisition debt after that time. Turbo tax filing Similarly, a debt that you use to buy property may not qualify because the property is not a qualified home. Turbo tax filing However, if the property later becomes a qualified home, the debt may qualify after that time. Turbo tax filing Mortgage treated as used to buy, build, or improve home. Turbo tax filing   A mortgage secured by a qualified home may be treated as home acquisition debt, even if you do not actually use the proceeds to buy, build, or substantially improve the home. Turbo tax filing This applies in the following situations. Turbo tax filing You buy your home within 90 days before or after the date you take out the mortgage. Turbo tax filing The home acquisition debt is limited to the home's cost, plus the cost of any substantial improvements within the limit described below in (2) or (3). Turbo tax filing (See Example 1 later. Turbo tax filing ) You build or improve your home and take out the mortgage before the work is completed. Turbo tax filing The home acquisition debt is limited to the amount of the expenses incurred within 24 months before the date of the mortgage. Turbo tax filing You build or improve your home and take out the mortgage within 90 days after the work is completed. Turbo tax filing The home acquisition debt is limited to the amount of the expenses incurred within the period beginning 24 months before the work is completed and ending on the date of the mortgage. Turbo tax filing (See Example 2 later. Turbo tax filing ) Example 1. Turbo tax filing You bought your main home on June 3 for $175,000. Turbo tax filing You paid for the home with cash you got from the sale of your old home. Turbo tax filing On July 15, you took out a mortgage of $150,000 secured by your main home. Turbo tax filing You used the $150,000 to invest in stocks. Turbo tax filing You can treat the mortgage as taken out to buy your home because you bought the home within 90 days before you took out the mortgage. Turbo tax filing The entire mortgage qualifies as home acquisition debt because it was not more than the home's cost. Turbo tax filing Example 2. Turbo tax filing On January 31, John began building a home on the lot that he owned. Turbo tax filing He used $45,000 of his personal funds to build the home. Turbo tax filing The home was completed on October 31. Turbo tax filing On November 21, John took out a $36,000 mortgage that was secured by the home. Turbo tax filing The mortgage can be treated as used to build the home because it was taken out within 90 days after the home was completed. Turbo tax filing The entire mortgage qualifies as home acquisition debt because it was not more than the expenses incurred within the period beginning 24 months before the home was completed. Turbo tax filing This is illustrated by Figure C. Turbo tax filing   Please click here for the text description of the image. Turbo tax filing Figure C. Turbo tax filing John's example Date of the mortgage. Turbo tax filing   The date you take out your mortgage is the day the loan proceeds are disbursed. Turbo tax filing This is generally the closing date. Turbo tax filing You can treat the day you apply in writing for your mortgage as the date you take it out. Turbo tax filing However, this applies only if you receive the loan proceeds within a reasonable time (such as within 30 days) after your application is approved. Turbo tax filing If a timely application you make is rejected, a reasonable additional time will be allowed to make a new application. Turbo tax filing Cost of home or improvements. Turbo tax filing   To determine your cost, include amounts paid to acquire any interest in a qualified home or to substantially improve the home. Turbo tax filing   The cost of building or substantially improving a qualified home includes the costs to acquire real property and building materials, fees for architects and design plans, and required building permits. Turbo tax filing Substantial improvement. Turbo tax filing   An improvement is substantial if it: Adds to the value of your home, Prolongs your home's useful life, or Adapts your home to new uses. Turbo tax filing    Repairs that maintain your home in good condition, such as repainting your home, are not substantial improvements. Turbo tax filing However, if you paint your home as part of a renovation that substantially improves your qualified home, you can include the painting costs in the cost of the improvements. Turbo tax filing Acquiring an interest in a home because of a divorce. Turbo tax filing   If you incur debt to acquire the interest of a spouse or former spouse in a home, because of a divorce or legal separation, you can treat that debt as home acquisition debt. Turbo tax filing Part of home not a qualified home. Turbo tax filing    To figure your home acquisition debt, you must divide the cost of your home and improvements between the part of your home that is a qualified home and any part that is not a qualified home. Turbo tax filing See Divided use of your home under Qualified Home in Part I. Turbo tax filing Home Equity Debt If you took out a loan for reasons other than to buy, build, or substantially improve your home, it may qualify as home equity debt. Turbo tax filing In addition, debt you incurred to buy, build, or substantially improve your home, to the extent it is more than the home acquisition debt limit (discussed earlier), may qualify as home equity debt. Turbo tax filing Home equity debt is a mortgage you took out after October 13, 1987, that: Does not qualify as home acquisition debt or as grandfathered debt, and Is secured by your qualified home. Turbo tax filing Example. Turbo tax filing You bought your home for cash 10 years ago. Turbo tax filing You did not have a mortgage on your home until last year, when you took out a $50,000 loan, secured by your home, to pay for your daughter's college tuition and your father's medical bills. Turbo tax filing This loan is home equity debt. Turbo tax filing Home equity debt limit. Turbo tax filing   There is a limit on the amount of debt that can be treated as home equity debt. Turbo tax filing The total home equity debt on your main home and second home is limited to the smaller of: $100,000 ($50,000 if married filing separately), or The total of each home's fair market value (FMV) reduced (but not below zero) by the amount of its home acquisition debt and grandfathered debt. Turbo tax filing Determine the FMV and the outstanding home acquisition and grandfathered debt for each home on the date that the last debt was secured by the home. Turbo tax filing Example. Turbo tax filing You own one home that you bought in 2000. Turbo tax filing Its FMV now is $110,000, and the current balance on your original mortgage (home acquisition debt) is $95,000. Turbo tax filing Bank M offers you a home mortgage loan of 125% of the FMV of the home less any outstanding mortgages or other liens. Turbo tax filing To consolidate some of your other debts, you take out a $42,500 home mortgage loan [(125% × $110,000) − $95,000] with Bank M. Turbo tax filing Your home equity debt is limited to $15,000. Turbo tax filing This is the smaller of: $100,000, the maximum limit, or $15,000, the amount that the FMV of $110,000 exceeds the amount of home acquisition debt of $95,000. Turbo tax filing Debt higher than limit. Turbo tax filing   Interest on amounts over the home equity debt limit (such as the interest on $27,500 [$42,500 − $15,000] in the preceding example) generally is treated as personal interest and is not deductible. Turbo tax filing But if the proceeds of the loan were used for investment, business, or other deductible purposes, the interest may be deductible. Turbo tax filing If it is, see the Table 1 Instructions for line 13 for an explanation of how to allocate the excess interest. Turbo tax filing Part of home not a qualified home. Turbo tax filing   To figure the limit on your home equity debt, you must divide the FMV of your home between the part that is a qualified home and any part that is not a qualified home. Turbo tax filing See Divided use of your home under Qualified Home in Part I. Turbo tax filing Fair market value (FMV). Turbo tax filing    This is the price at which the home would change hands between you and a buyer, neither having to sell or buy, and both having reasonable knowledge of all relevant facts. Turbo tax filing Sales of similar homes in your area, on about the same date your last debt was secured by the home, may be helpful in figuring the FMV. Turbo tax filing Grandfathered Debt If you took out a mortgage on your home before October 14, 1987, or you refinanced such a mortgage, it may qualify as grandfathered debt. Turbo tax filing To qualify, it must have been secured by your qualified home on October 13, 1987, and at all times after that date. Turbo tax filing How you used the proceeds does not matter. Turbo tax filing Grandfathered debt is not limited. Turbo tax filing All of the interest you paid on grandfathered debt is fully deductible home mortgage interest. Turbo tax filing However, the amount of your grandfathered debt reduces the $1 million limit for home acquisition debt and the limit based on your home's fair market value for home equity debt. Turbo tax filing Refinanced grandfathered debt. Turbo tax filing   If you refinanced grandfathered debt after October 13, 1987, for an amount that was not more than the mortgage principal left on the debt, then you still treat it as grandfathered debt. Turbo tax filing To the extent the new debt is more than that mortgage principal, it is treated as home acquisition or home equity debt, and the mortgage is a mixed-use mortgage (discussed later under Average Mortgage Balance in the Table 1 instructions). Turbo tax filing The debt must be secured by the qualified home. Turbo tax filing   You treat grandfathered debt that was refinanced after October 13, 1987, as grandfathered debt only for the term left on the debt that was refinanced. Turbo tax filing After that, you treat it as home acquisition debt or home equity debt, depending on how you used the proceeds. Turbo tax filing Exception. Turbo tax filing   If the debt before refinancing was like a balloon note (the principal on the debt was not amortized over the term of the debt), then you treat the refinanced debt as grandfathered debt for the term of the first refinancing. Turbo tax filing This term cannot be more than 30 years. Turbo tax filing Example. Turbo tax filing Chester took out a $200,000 first mortgage on his home in 1986. Turbo tax filing The mortgage was a five-year balloon note and the entire balance on the note was due in 1991. Turbo tax filing Chester refinanced the debt in 1991 with a new 20-year mortgage. Turbo tax filing The refinanced debt is treated as grandfathered debt for its entire term (20 years). Turbo tax filing Line-of-credit mortgage. Turbo tax filing    If you had a line-of-credit mortgage on October 13, 1987, and borrowed additional amounts against it after that date, then the additional amounts are either home acquisition debt or home equity debt depending on how you used the proceeds. Turbo tax filing The balance on the mortgage before you borrowed the additional amounts is grandfathered debt. Turbo tax filing The newly borrowed amounts are not grandfathered debt because the funds were borrowed after October 13, 1987. Turbo tax filing See Average Mortgage Balance in the Table 1 Instructions that follow. Turbo tax filing Table 1 Instructions Unless you are subject to the overall limit on itemized deductions, you can deduct all of the interest you paid during the year on mortgages secured by your main home or second home in either of the following two situations. Turbo tax filing All the mortgages are grandfathered debt. Turbo tax filing The total of the mortgage balances for the entire year is within the limits discussed earlier under Home Acquisition Debt and Home Equity Debt . Turbo tax filing In either of those cases, you do not need Table 1. Turbo tax filing Otherwise, you can use Table 1 to determine your qualified loan limit and deductible home mortgage interest. Turbo tax filing Fill out only one Table 1 for both your main and second home regardless of how many mortgages you have. Turbo tax filing Table 1. Turbo tax filing Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. Turbo tax filing Part I Qualified Loan Limit 1. Turbo tax filing Enter the average balance of all your grandfathered debt. Turbo tax filing See line 1 instructions 1. Turbo tax filing   2. Turbo tax filing Enter the average balance of all your home acquisition debt. Turbo tax filing See line 2 instructions 2. Turbo tax filing   3. Turbo tax filing Enter $1,000,000 ($500,000 if married filing separately) 3. Turbo tax filing   4. Turbo tax filing Enter the larger of the amount on line 1 or the amount on line 3 4. Turbo tax filing   5. Turbo tax filing Add the amounts on lines 1 and 2. Turbo tax filing Enter the total here 5. Turbo tax filing   6. Turbo tax filing Enter the smaller of the amount on line 4 or the amount on line 5 6. Turbo tax filing   7. Turbo tax filing If you have home equity debt, enter the smaller of $100,000 ($50,000 if married filing separately) or your limited amount. Turbo tax filing See the line 7 instructions for the limit which may apply to you. Turbo tax filing 7. Turbo tax filing   8. Turbo tax filing Add the amounts on lines 6 and 7. Turbo tax filing Enter the total. Turbo tax filing This is your qualified loan limit. Turbo tax filing 8. Turbo tax filing   Part II Deductible Home Mortgage Interest 9. Turbo tax filing Enter the total of the average balances of all mortgages on all qualified homes. Turbo tax filing  See line 9 instructions 9. Turbo tax filing     If line 8 is less than line 9, go on to line 10. Turbo tax filing If line 8 is equal to or more than line 9, stop here. Turbo tax filing All of your interest on all the mortgages included on line 9 is deductible as home mortgage interest on Schedule A (Form 1040). Turbo tax filing     10. Turbo tax filing Enter the total amount of interest that you paid. Turbo tax filing See line 10 instructions 10. Turbo tax filing   11. Turbo tax filing Divide the amount on line 8 by the amount on line 9. Turbo tax filing Enter the result as a decimal amount (rounded to three places) 11. Turbo tax filing × . Turbo tax filing 12. Turbo tax filing Multiply the amount on line 10 by the decimal amount on line 11. Turbo tax filing Enter the result. Turbo tax filing This is your deductible home mortgage interest. Turbo tax filing Enter this amount on Schedule A (Form 1040) 12. Turbo tax filing   13. Turbo tax filing Subtract the amount on line 12 from the amount on line 10. Turbo tax filing Enter the result. Turbo tax filing This is not home mortgage interest. Turbo tax filing See line 13 instructions 13. Turbo tax filing   Home equity debt only. Turbo tax filing   If all of your mortgages are home equity debt, do not fill in lines 1 through 5. Turbo tax filing Enter zero on line 6 and complete the rest of Table 1. Turbo tax filing Average Mortgage Balance You have to figure the average balance of each mortgage to determine your qualified loan limit. Turbo tax filing You need these amounts to complete lines 1, 2, and 9 of Table 1. Turbo tax filing You can use the highest mortgage balances during the year, but you may benefit most by using the average balances. Turbo tax filing The following are methods you can use to figure your average mortgage balances. Turbo tax filing However, if a mortgage has more than one category of debt, see Mixed-use mortgages , later, in this section. Turbo tax filing Average of first and last balance method. Turbo tax filing   You can use this method if all the following apply. Turbo tax filing You did not borrow any new amounts on the mortgage during the year. Turbo tax filing (This does not include borrowing the original mortgage amount. Turbo tax filing ) You did not prepay more than one month's principal during the year. Turbo tax filing (This includes prepayment by refinancing your home or by applying proceeds from its sale. Turbo tax filing ) You had to make level payments at fixed equal intervals on at least a semi-annual basis. Turbo tax filing You treat your payments as level even if they were adjusted from time to time because of changes in the interest rate. Turbo tax filing    To figure your average balance, complete the following worksheet. Turbo tax filing    1. Turbo tax filing Enter the balance as of the first day of the year that the mortgage was secured by your qualified home during the year (generally January 1)   2. Turbo tax filing Enter the balance as of the last day of the year that the mortgage was secured by your qualified home during the year (generally December 31)   3. Turbo tax filing Add amounts on lines 1 and 2   4. Turbo tax filing Divide the amount on line 3 by 2. Turbo tax filing Enter the result   Interest paid divided by interest rate method. Turbo tax filing   You can use this method if at all times in 2013 the mortgage was secured by your qualified home and the interest was paid at least monthly. Turbo tax filing    Complete the following worksheet to figure your average balance. Turbo tax filing    1. Turbo tax filing Enter the interest paid in 2013. Turbo tax filing Do not include points, mortgage insurance premiums, or any interest paid in 2013 that is for a year after 2013. Turbo tax filing However, do include interest that is for 2013 but was paid in an earlier year   2. Turbo tax filing Enter the annual interest rate on the mortgage. Turbo tax filing If the interest rate varied in 2013, use the lowest rate for the year   3. Turbo tax filing Divide the amount on line 1 by the amount on line 2. Turbo tax filing Enter the result   Example. Turbo tax filing Mr. Turbo tax filing Blue had a line of credit secured by his main home all year. Turbo tax filing He paid interest of $2,500 on this loan. Turbo tax filing The interest rate on the loan was 9% (. Turbo tax filing 09) all year. Turbo tax filing His average balance using this method is $27,778, figured as follows. Turbo tax filing 1. Turbo tax filing Enter the interest paid in 2013. Turbo tax filing Do not include points, mortgage insurance premiums, or any interest paid in 2013 that is for a year after 2013. Turbo tax filing However, do include interest that is for 2013 but was paid in an earlier year $2,500 2. Turbo tax filing Enter the annual interest rate on the mortgage. Turbo tax filing If the interest rate varied in 2013, use the lowest rate for the year . Turbo tax filing 09 3. Turbo tax filing Divide the amount on line 1 by the amount on line 2. Turbo tax filing Enter the result $27,778 Statements provided by your lender. Turbo tax filing   If you receive monthly statements showing the closing balance or the average balance for the month, you can use either to figure your average balance for the year. Turbo tax filing You can treat the balance as zero for any month the mortgage was not secured by your qualified home. Turbo tax filing   For each mortgage, figure your average balance by adding your monthly closing or average balances and dividing that total by the number of months the home secured by that mortgage was a qualified home during the year. Turbo tax filing   If your lender can give you your average balance for the year, you can use that amount. Turbo tax filing Example. Turbo tax filing Ms. Turbo tax filing Brown had a home equity loan secured by her main home all year. Turbo tax filing She received monthly statements showing her average balance for each month. Turbo tax filing She can figure her average balance for the year by adding her monthly average balances and dividing the total by 12. Turbo tax filing Mixed-use mortgages. Turbo tax filing   A mixed-use mortgage is a loan that consists of more than one of the three categories of debt (grandfathered debt, home acquisition debt, and home equity debt). Turbo tax filing For example, a mortgage you took out during the year is a mixed-use mortgage if you used its proceeds partly to refinance a mortgage that you took out in an earlier year to buy your home (home acquisition debt) and partly to buy a car (home equity debt). Turbo tax filing   Complete lines 1 and 2 of Table 1 by including the separate average balances of any grandfathered debt and home acquisition debt in your mixed-use mortgage. Turbo tax filing Do not use the methods described earlier in this section to figure the average balance of either category. Turbo tax filing Instead, for each category, use the following method. Turbo tax filing Figure the balance of that category of debt for each month. Turbo tax filing This is the amount of the loan proceeds allocated to that category, reduced by your principal payments on the mortgage previously applied to that category. Turbo tax filing Principal payments on a mixed-use mortgage are applied in full to each category of debt, until its balance is zero, in the following order: First, any home equity debt, Next, any grandfathered debt, and Finally, any home acquisition debt. Turbo tax filing Add together the monthly balances figured in (1). Turbo tax filing Divide the result in (2) by 12. Turbo tax filing   Complete line 9 of Table 1 by including the average balance of the entire mixed-use mortgage, figured under one of the methods described earlier in this section. Turbo tax filing Example 1. Turbo tax filing In 1986, Sharon took out a $1,400,000 mortgage to buy her main home (grandfathered debt). Turbo tax filing On March 2, 2013, when the home had a fair market value of $1,700,000 and she owed $1,100,000 on the mortgage, Sharon took out a second mortgage for $200,000. Turbo tax filing She used $180,000 of the proceeds to make substantial improvements to her home (home acquisition debt) and the remaining $20,000 to buy a car (home equity debt). Turbo tax filing Under the loan agreement, Sharon must make principal payments of $1,000 at the end of each month. Turbo tax filing During 2013, her principal payments on the second mortgage totaled $10,000. Turbo tax filing To complete Table 1, line 2, Sharon must figure a separate average balance for the part of her second mortgage that is home acquisition debt. Turbo tax filing The January and February balances were zero. Turbo tax filing The March through December balances were all $180,000, because none of her principal payments are applied to the home acquisition debt. Turbo tax filing (They are all applied to the home equity debt, reducing it to $10,000 [$20,000 − $10,000]. Turbo tax filing ) The monthly balances of the home acquisition debt total $1,800,000 ($180,000 × 10). Turbo tax filing Therefore, the average balance of the home acquisition debt for 2013 was $150,000 ($1,800,000 ÷ 12). Turbo tax filing Example 2. Turbo tax filing The facts are the same as in Example 1. Turbo tax filing In 2014, Sharon's January through October principal payments on her second mortgage are applied to the home equity debt, reducing it to zero. Turbo tax filing The balance of the home acquisition debt remains $180,000 for each of those months. Turbo tax filing Because her November and December principal payments are applied to the home acquisition debt, the November balance is $179,000 ($180,000 − $1,000) and the December balance is $178,000 ($180,000 − $2,000). Turbo tax filing The monthly balances total $2,157,000 [($180,000 × 10) + $179,000 + $178,000]. Turbo tax filing Therefore, the average balance of the home acquisition debt for 2014 is $179,750 ($2,157,000 ÷ 12). Turbo tax filing L
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The Turbo Tax Filing

Turbo tax filing Internal Revenue Bulletin:  2011-12  March 21, 2011  Rev. Turbo tax filing Proc. Turbo tax filing 2011-21 Table of Contents SECTION 1. Turbo tax filing PURPOSE SECTION 2. Turbo tax filing BACKGROUND SECTION 3. Turbo tax filing SCOPE SECTION 4. Turbo tax filing APPLICATION SECTION 5. Turbo tax filing EFFECTIVE DATE SECTION 6. Turbo tax filing EFFECT ON OTHER DOCUMENTS SECTION 7. Turbo tax filing DRAFTING INFORMATION SECTION 1. Turbo tax filing PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2011, including separate tables of limitations on depreciation deductions for trucks and vans; (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2011, including a separate table of inclusion amounts for lessees of trucks and vans; and (3) revised tables of depreciation limitations and lessee inclusion amounts for passenger automobiles that were first placed in service or first leased by the taxpayer, respectively, during 2010 and to which the 50 percent additional first year depreciation deduction under § 168(k)(1)(A) of the Internal Revenue Code or the 100 percent additional first year depreciation deduction under § 168(k)(5) applies. Turbo tax filing The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7). Turbo tax filing SECTION 2. Turbo tax filing BACKGROUND . Turbo tax filing 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. Turbo tax filing For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. Turbo tax filing The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. Turbo tax filing This change reflects the higher rate of price inflation for trucks and vans since 1988. Turbo tax filing . Turbo tax filing 02 Section 2022(a) of the Small Business Jobs Act of 2010, Pub. Turbo tax filing L. Turbo tax filing No. Turbo tax filing 111-240, 124 Stat. Turbo tax filing 2504 (September 27, 2010), extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property (as defined in § 168(k)(2)) acquired by the taxpayer after December 31, 2007, and before January 1, 2011, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2011. Turbo tax filing Section 401(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. Turbo tax filing L. Turbo tax filing No. Turbo tax filing 111-312, 124 Stat. Turbo tax filing 3296 (Dec. Turbo tax filing 17, 2010) (the “Act”) further extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2013, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2013. Turbo tax filing Section 401(b) of the Act further amended § 168(k) by adding § 168(k)(5). Turbo tax filing It allows a 100 percent additional first year depreciation deduction for qualified property acquired by a taxpayer after September 8, 2010, and before January 1, 2012, if the taxpayer places the property in service generally before January 1, 2012. Turbo tax filing Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”) applies. Turbo tax filing . Turbo tax filing 03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). Turbo tax filing Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. Turbo tax filing Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax (“AMT”) credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2010, that is round 2 extension property (as defined in § 168(k)(4)(I)(iv). Turbo tax filing Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. Turbo tax filing This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2011 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation. Turbo tax filing . Turbo tax filing 04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. Turbo tax filing The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Turbo tax filing Under § 1. Turbo tax filing 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. Turbo tax filing One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. Turbo tax filing Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. Turbo tax filing SECTION 3. Turbo tax filing SCOPE . Turbo tax filing 01 The limitations on depreciation deductions in section 4. Turbo tax filing 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2011, and continue to apply for each taxable year that the passenger automobile remains in service. Turbo tax filing . Turbo tax filing 02 The tables in section 4. Turbo tax filing 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2011. Turbo tax filing Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. Turbo tax filing See Rev. Turbo tax filing Proc. Turbo tax filing 2006-18, 2006-1 C. Turbo tax filing B. Turbo tax filing 645, for passenger automobiles first leased during calendar year 2006; Rev. Turbo tax filing Proc. Turbo tax filing 2007-30, 2007-1 C. Turbo tax filing B. Turbo tax filing 1104, for passenger automobiles first leased during calendar year 2007; Rev. Turbo tax filing Proc. Turbo tax filing 2008-22, 2008-1 C. Turbo tax filing B. Turbo tax filing 658, for passenger automobiles first leased during calendar year 2008; Rev. Turbo tax filing Proc. Turbo tax filing 2009-24, 2009-1 C. Turbo tax filing B. Turbo tax filing 885, for passenger automobiles first leased during calendar year 2009; and Rev. Turbo tax filing Proc. Turbo tax filing 2010-18, 2010-1 C. Turbo tax filing B. Turbo tax filing 427, as amplified and modified by section 4. Turbo tax filing 03 of this revenue procedure, for passenger automobiles first leased during calendar year 2010. Turbo tax filing SECTION 4. Turbo tax filing APPLICATION . Turbo tax filing 01 Limitations on Depreciation Deductions for Certain Automobiles. Turbo tax filing (1) Amount of the inflation adjustment. Turbo tax filing (a) Passenger automobiles (other than trucks or vans). Turbo tax filing Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. Turbo tax filing Section 280F(d)(7)(B)(ii) defines the term “CPI automobile component” as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. Turbo tax filing The new car component of the CPI was 115. Turbo tax filing 2 for October 1987 and 137. Turbo tax filing 880 for October 2010. Turbo tax filing The October 2010 index exceeded the October 1987 index by 22. Turbo tax filing 680. Turbo tax filing Therefore, the automobile price inflation adjustment for 2011 for passenger automobiles (other than trucks and vans) is 19. Turbo tax filing 69 percent (22. Turbo tax filing 680/115. Turbo tax filing 2 x 100%). Turbo tax filing The dollar limitations in § 280F(a) are multiplied by a factor of 0. Turbo tax filing 1969, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2011. Turbo tax filing This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2011. Turbo tax filing (b) Trucks and vans. Turbo tax filing To determine the dollar limitations for trucks and vans first placed in service during calendar year 2011, the Service uses the new truck component of the CPI instead of the new car component. Turbo tax filing The new truck component of the CPI was 112. Turbo tax filing 4 for October 1987 and 142. Turbo tax filing 556 for October 2010. Turbo tax filing The October 2010 index exceeded the October 1987 index by 30. Turbo tax filing 156. Turbo tax filing Therefore, the automobile price inflation adjustment for 2011 for trucks and vans is 26. Turbo tax filing 83 percent (30. Turbo tax filing 156/112. Turbo tax filing 4 x 100%). Turbo tax filing The dollar limitations in § 280F(a) are multiplied by a factor of 0. Turbo tax filing 2683, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. Turbo tax filing This adjustment applies to all trucks and vans that are first placed in service in calendar year 2011. Turbo tax filing (2) Amount of the limitation. Turbo tax filing Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2011. Turbo tax filing Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2011 for which the § 168(k) additional first year depreciation deduction applies. Turbo tax filing Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2011 for which the § 168(k) additional first year depreciation deduction does not apply. Turbo tax filing The Service intends to issue additional guidance addressing the interaction between the 100 percent additional first year depreciation deduction and § 280F(a) for the taxable years subsequent to the first taxable year. Turbo tax filing REV. Turbo tax filing PROC. Turbo tax filing 2011-21 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. Turbo tax filing PROC. Turbo tax filing 2011-21 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,260 2nd Tax Year $5,200 3rd Tax Year $3,150 Each Succeeding Year $1,875 REV. Turbo tax filing PROC. Turbo tax filing 2011-21 TABLE 3 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. Turbo tax filing PROC. Turbo tax filing 2011-21 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2011 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,260 2nd Tax Year $5,200 3rd Tax Year $3,150 Each Succeeding Year $1,875 . Turbo tax filing 02 Inclusions in Income of Lessees of Passenger Automobiles. Turbo tax filing A taxpayer must follow the procedures in § 1. Turbo tax filing 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2011. Turbo tax filing In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure. Turbo tax filing REV. Turbo tax filing PROC. Turbo tax filing 2011-21 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2011 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & later $18,500 $19,000 3 8 11 13 16 19,000 19,500 4 9 13 15 18 19,500 20,000 4 10 15 17 20 20,000 20,500 5 11 16 19 23 20,500 21,000 5 12 18 21 25 21,000 21,500 6 13 19 24 26 21,500 22,000 6 14 21 26 29 22,000 23,000 7 16 23 29 32 23,000 24,000 8 18 27 32 37 24,000 25,000 9 20 30 36 42 25,000 26,000 10 23 33 40 46 26,000 27,000 11 25 36 44 51 27,000 28,000 12 27 40 48 55 28,000 29,000 13 29 43 52 60 29,000 30,000 14 31 47 55 65 30,000 31,000 15 34 49 60 69 31,000 32,000 16 36 53 63 73 32,000 33,000 17 38 56 68 77 33,000 34,000 18 40 60 71 82 34,000 35,000 19 42 63 75 87 35,000 36,000 20 45 66 79 91 36,000 37,000 21 47 69 83 96 37,000 38,000 22 49 73 87 100 38,000 39,000 23 51 76 91 105 39,000 40,000 24 53 80 94 110 40,000 41,000 25 56 82 99 114 41,000 42,000 26 58 86 102 119 42,000 43,000 27 60 89 107 123 43,000 44,000 28 62 93 110 128 44,000 45,000 29 64 96 114 133 45,000 46,000 30 67 98 119 137 46,000 47,000 31 69 102 122 141 47,000 48,000 32 71 105 127 145 48,000 49,000 33 73 109 130 150 49,000 50,000 34 76 111 134 155 50,000 51,000 35 78 115 138 159 51,000 52,000 36 80 118 142 164 52,000 53,000 37 82 122 146 168 53,000 54,000 38 84 125 150 173 54,000 55,000 39 87 128 153 178 55,000 56,000 40 89 131 158 182 56,000 57,000 41 91 135 161 187 57,000 58,000 42 93 138 166 191 58,000 59,000 43 95 142 169 196 59,000 60,000 44 98 144 174 200 60,000 62,000 46 101 149 179 207 62,000 64,000 48 105 156 187 216 64,000 66,000 50 109 163 195 225 66,000 68,000 52 114 169 203 234 68,000 70,000 54 118 176 211 243 70,000 72,000 56 123 182 218 253 72,000 74,000 58 127 189 226 262 74,000 76,000 60 132 195 234 270 76,000 78,000 62 136 202 242 279 78,000 80,000 64 140 209 250 288 80,000 85,000 67 148 220 264 304 85,000 90,000 72 159 237 283 327 90,000 95,000 77 170 253 303 350 95,000 100,000 82 181 269 323 372 100,000 110,000 90 198 293 352 406 110,000 120,000 100 220 326 391 452 120,000 130,000 110 242 359 430 497 130,000 140,000 120 264 392 469 543 140,000 150,000 130 286 424 509 588 150,000 160,000 140 308 457 548 633 160,000 170,000 150 330 490 587 679 170,000 180,000 160 352 523 626 724 180,000 190,000 170 374 555 666 769 190,000 200,000 180 396 588 705 815 200,000 210,000 190 418 621 744 860 210,000 220,000 200 440 654 784 904 220,000 230,000 210 462 687 823 950 230,000 240,000 220 484 719 863 995 240,000 And up 230 506 752 902 1,040 REV. Turbo tax filing PROC. Turbo tax filing 2011-21 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2011 Fair Market Value of Truck or Van Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & later $19,000 $19,500 3 7 9 12 13 19,500 20,000 3 8 11 14 15 20,000 20,500 4 9 13 15 18 20,500 21,000 4 10 15 17 20 21,000 21,500 5 11 16 20 22 21,500 22,000 5 12 18 22 24 22,000 23,000 6 14 20 24 29 23,000 24,000 7 16 24 28 32 24,000 25,000 8 18 27 32 37 25,000 26,000 9 20 31 36 41 26,000 27,000 10 23 33 40 46 27,000 28,000 11 25 37 43 51 28,000 29,000 12 27 40 48 55 29,000 30,000 13 29 43 52 60 30,000 31,000 14 31 47 56 64 31,000 32,000 15 34 49 60 69 32,000 33,000 16 36 53 63 74 33,000 34,000 17 38 56 68 78 34,000 35,000 18 40 60 71 83 35,000 36,000 19 43 62 76 87 36,000 37,000 20 45 66 79 92 37,000 38,000 21 47 69 83 97 38,000 39,000 22 49 73 87 101 39,000 40,000 23 51 76 91 105 40,000 41,000 24 54 79 95 109 41,000 42,000 25 56 82 99 114 42,000 43,000 26 58 86 103 118 43,000 44,000 27 60 89 107 123 44,000 45,000 28 62 93 110 128 45,000 46,000 29 65 95 115 132 46,000 47,000 30 67 99 118 137 47,000 48,000 31 69 102 123 141 48,000 49,000 32 71 106 126 146 49,000 50,000 33 73 109 130 151 50,000 51,000 34 76 112 134 155 51,000 52,000 35 78 115 138 160 52,000 53,000 36 80 118 143 164 53,000 54,000 37 82 122 146 169 54,000 55,000 38 84 125 150 173 55,000 56,000 39 87 128 154 177 56,000 57,000 40 89 131 158 182 57,000 58,000 41 91 135 162 186 58,000 59,000 42 93 138 166 191 59,000 60,000 43 95 142 169 196 60,000 62,000 45 99 146 175 203 62,000 64,000 47 103 153 183 212 64,000 66,000 49 107 160 191 221 66,000 68,000 51 112 166 199 229 68,000 70,000 53 116 173 206 239 70,000 72,000 55 121 179 214 248 72,000 74,000 57 125 186 222 257 74,000 76,000 59 129 192 231 266 76,000 78,000 61 134 198 239 275 78,000 80,000 63 138 205 246 285 80,000 85,000 66 146 217 260 300 85,000 90,000 71 157 233 280 322 90,000 95,000 76 168 250 299 345 95,000 100,000 81 179 266 319 368 100,000 110,000 89 196 290 348 402 110,000 120,000 99 218 323 387 447 120,000 130,000 109 240 355 427 493 130,000 140,000 119 262 388 466 538 140,000 150,000 129 284 421 505 583 150,000 160,000 139 306 454 544 629 160,000 170,000 149 328 487 583 674 170,000 180,000 159 350 519 623 719 180,000 190,000 169 372 552 662 765 190,000 200,000 179 394 585 701 810 200,000 210,000 189 416 618 740 856 210,000 220,000 199 438 651 779 901 220,000 230,000 209 460 683 819 946 230,000 240,000 219 482 716 858 992 240,000 And up 229 504 749 897 1,037 . Turbo tax filing 03 Revised Amounts for Passenger Automobiles Placed in Service During 2010. Turbo tax filing (1) Calculation of the Revised Amount. Turbo tax filing The revised depreciation limits provided in this section 4. Turbo tax filing 03 were calculated by increasing the existing limitations on the first year allowance in Rev. Turbo tax filing Proc. Turbo tax filing 2010-18 by $8,000 as provided in § 168(k)(2)(F)(i). Turbo tax filing (2) Amount of the Revised Limitation. Turbo tax filing For passenger automobiles (that are not trucks or vans) placed in service by the taxpayer in calendar year 2010 for which the § 168(k) additional first year depreciation deduction applies, Table 7 of this revenue procedure contains the revised dollar amount of the depreciation limitations for each taxable year. Turbo tax filing For trucks or vans placed in service by the taxpayer in calendar year 2010 for which the § 168(k) additional first year depreciation deduction applies, Table 8 of this revenue procedure contains the revised dollar amount of the depreciation limitations for each taxable year. Turbo tax filing If the § 168(k) additional first year depreciation deduction does not apply to a passenger automobile placed in service by the taxpayer in calendar year 2010, the depreciation limitations for each taxable year in Tables 1 and 2 of Rev. Turbo tax filing Proc. Turbo tax filing 2010-18 apply. Turbo tax filing REV. Turbo tax filing PROC. Turbo tax filing 2011-21 TABLE 7 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2010 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. Turbo tax filing PROC. Turbo tax filing 2011-21 TABLE 8 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2010 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 (3) Modification to lease inclusion amounts for 2010. Turbo tax filing The lease inclusion amounts in Tables 3 and 4 of Rev. Turbo tax filing Proc. Turbo tax filing 2010-18 are modified by striking the first four lines of the inclusion amounts in each table. Turbo tax filing Consequently, Table 3 of Rev. Turbo tax filing Proc. Turbo tax filing 2010-18 applies to passenger automobiles (other than trucks and vans) that are first leased by the taxpayer in calendar year 2010 with a fair market value over $18,500, and Table 4 of Rev. Turbo tax filing Proc. Turbo tax filing 2010-18 applies to trucks and vans that are first leased by the taxpayer in calendar year 2010 with a fair market value over $19,000. Turbo tax filing SECTION 5. Turbo tax filing EFFECTIVE DATE This revenue procedure, with the exception of section 4. Turbo tax filing 03, applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2011. Turbo tax filing Section 4. Turbo tax filing 03 of this revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2010. Turbo tax filing SECTION 6. Turbo tax filing EFFECT ON OTHER DOCUMENTS Rev. Turbo tax filing Proc. Turbo tax filing 2010-18 is amplified and modified. Turbo tax filing SECTION 7. Turbo tax filing DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. Turbo tax filing Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). Turbo tax filing For further information regarding this revenue procedure, contact Mr. Turbo tax filing Harvey at (202) 622-4930 (not a toll-free call). Turbo tax filing Prev  Up  Next   Home   More Internal Revenue Bulletins