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When Can You Amend A Tax Return

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When Can You Amend A Tax Return

When can you amend a tax return 18. When can you amend a tax return   Alimony Table of Contents IntroductionSpouse or former spouse. When can you amend a tax return Divorce or separation instrument. When can you amend a tax return Useful Items - You may want to see: General RulesMortgage payments. When can you amend a tax return Taxes and insurance. When can you amend a tax return Other payments to a third party. When can you amend a tax return Instruments Executed After 1984Payments to a third party. When can you amend a tax return Exception. When can you amend a tax return Substitute payments. When can you amend a tax return Specifically designated as child support. When can you amend a tax return Contingency relating to your child. When can you amend a tax return Clearly associated with a contingency. When can you amend a tax return How To Deduct Alimony Paid How To Report Alimony Received Recapture Rule Introduction This chapter discusses the rules that apply if you pay or receive alimony. When can you amend a tax return It covers the following topics. When can you amend a tax return What payments are alimony. When can you amend a tax return What payments are not alimony, such as child support. When can you amend a tax return How to deduct alimony you paid. When can you amend a tax return How to report alimony you received as income. When can you amend a tax return Whether you must recapture the tax benefits of alimony. When can you amend a tax return Recapture means adding back in your income all or part of a deduction you took in a prior year. When can you amend a tax return Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. When can you amend a tax return It does not include voluntary payments that are not made under a divorce or separation instrument. When can you amend a tax return Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. When can you amend a tax return Although this chapter is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony. When can you amend a tax return To be alimony, a payment must meet certain requirements. When can you amend a tax return Different requirements generally apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. When can you amend a tax return This chapter discusses the rules for payments under instruments executed after 1984. When can you amend a tax return If you need the rules for payments under pre-1985 instruments, get and keep a copy of the 2004 version of Publication 504. When can you amend a tax return That was the last year the information on pre-1985 instruments was included in Publication 504. When can you amend a tax return Use Table 18-1 in this chapter as a guide to determine whether certain payments are considered alimony. When can you amend a tax return Definitions. When can you amend a tax return   The following definitions apply throughout this chapter. When can you amend a tax return Spouse or former spouse. When can you amend a tax return   Unless otherwise stated, the term “spouse” includes former spouse. When can you amend a tax return Divorce or separation instrument. When can you amend a tax return   The term “divorce or separation instrument” means: A decree of divorce or separate maintenance or a written instrument incident to that decree, A written separation agreement, or A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. When can you amend a tax return This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement). When can you amend a tax return Useful Items - You may want to see: Publication 504 Divorced or Separated Individuals General Rules The following rules apply to alimony regardless of when the divorce or separation instrument was executed. When can you amend a tax return Payments not alimony. When can you amend a tax return   Not all payments under a divorce or separation instrument are alimony. When can you amend a tax return Alimony does not include: Child support, Noncash property settlements, Payments that are your spouse's part of community income, as explained under Community Property in Publication 504, Payments to keep up the payer's property, or Use of the payer's property. When can you amend a tax return Payments to a third party. When can you amend a tax return   Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify. When can you amend a tax return These include payments for your spouse's medical expenses, housing costs (rent, utilities, etc. When can you amend a tax return ), taxes, tuition, etc. When can you amend a tax return The payments are treated as received by your spouse and then paid to the third party. When can you amend a tax return Life insurance premiums. When can you amend a tax return   Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy. When can you amend a tax return Payments for jointly-owned home. When can you amend a tax return   If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse, some of your payments may be alimony. When can you amend a tax return Mortgage payments. When can you amend a tax return   If you must pay all the mortgage payments (principal and interest) on a jointly-owned home, and they otherwise qualify as alimony, you can deduct one-half of the total payments as alimony. When can you amend a tax return If you itemize deductions and the home is a qualified home, you can claim one-half of the interest in figuring your deductible interest. When can you amend a tax return Your spouse must report one-half of the payments as alimony received. When can you amend a tax return If your spouse itemizes deductions and the home is a qualified home, he or she can claim one-half of the interest on the mortgage in figuring deductible interest. When can you amend a tax return Taxes and insurance. When can you amend a tax return   If you must pay all the real estate taxes or insurance on a home held as tenants in common, you can deduct one-half of these payments as alimony. When can you amend a tax return Your spouse must report one-half of these payments as alimony received. When can you amend a tax return If you and your spouse itemize deductions, you can each claim one-half of the real estate taxes and none of the home insurance. When can you amend a tax return    If your home is held as tenants by the entirety or joint tenants, none of your payments for taxes or insurance are alimony. When can you amend a tax return But if you itemize deductions, you can claim all of the real estate taxes and none of the home insurance. When can you amend a tax return Other payments to a third party. When can you amend a tax return   If you made other third-party payments, see Publication 504 to see whether any part of the payments qualifies as alimony. When can you amend a tax return Instruments Executed After 1984 The following rules for alimony apply to payments under divorce or separation instruments executed after 1984. When can you amend a tax return Exception for instruments executed before 1985. When can you amend a tax return   There are two situations where the rules for instruments executed after 1984 apply to instruments executed before 1985. When can you amend a tax return A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply. When can you amend a tax return A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that: Changes the amount or period of payment, or Adds or deletes any contingency or condition. When can you amend a tax return   For the rules for alimony payments under pre-1985 instruments not meeting these exceptions, get the 2004 version of Publication 504 at www. When can you amend a tax return irs. When can you amend a tax return gov/pub504. When can you amend a tax return Example 1. When can you amend a tax return In November 1984, you and your former spouse executed a written separation agreement. When can you amend a tax return In February 1985, a decree of divorce was substituted for the written separation agreement. When can you amend a tax return The decree of divorce did not change the terms for the alimony you pay your former spouse. When can you amend a tax return The decree of divorce is treated as executed before 1985. When can you amend a tax return Alimony payments under this decree are not subject to the rules for payments under instruments executed after 1984. When can you amend a tax return Example 2. When can you amend a tax return Assume the same facts as in Example 1 except that the decree of divorce changed the amount of the alimony. When can you amend a tax return In this example, the decree of divorce is not treated as executed before 1985. When can you amend a tax return The alimony payments are subject to the rules for payments under instruments executed after 1984. When can you amend a tax return Alimony requirements. When can you amend a tax return   A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met. When can you amend a tax return The payment is in cash. When can you amend a tax return The instrument does not designate the payment as not alimony. When can you amend a tax return Spouses legally separated under a decree of divorce or separate maintenance are not members of the same household. When can you amend a tax return There is no liability to make any payment (in cash or property) after the death of the recipient spouse. When can you amend a tax return The payment is not treated as child support. When can you amend a tax return Each of these requirements is discussed below. When can you amend a tax return Cash payment requirement. When can you amend a tax return   Only cash payments, including checks and money orders, qualify as alimony. When can you amend a tax return The following do not qualify as alimony. When can you amend a tax return Transfers of services or property (including a debt instrument of a third party or an annuity contract). When can you amend a tax return Execution of a debt instrument by the payer. When can you amend a tax return The use of the payer's property. When can you amend a tax return Payments to a third party. When can you amend a tax return   Cash payments to a third party under the terms of your divorce or separation instrument can qualify as cash payments to your spouse. When can you amend a tax return See Payments to a third party under General Rules, earlier. When can you amend a tax return   Also, cash payments made to a third party at the written request of your spouse may qualify as alimony if all the following requirements are met. When can you amend a tax return The payments are in lieu of payments of alimony directly to your spouse. When can you amend a tax return The written request states that both spouses intend the payments to be treated as alimony. When can you amend a tax return You receive the written request from your spouse before you file your return for the year you made the payments. When can you amend a tax return Payments designated as not alimony. When can you amend a tax return   You and your spouse can designate that otherwise qualifying payments are not alimony. When can you amend a tax return You do this by including a provision in your divorce or separation instrument that states the payments are not deductible as alimony by you and are excludable from your spouse's income. When can you amend a tax return For this purpose, any instrument (written statement) signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement (and therefore a divorce or separation instrument). When can you amend a tax return If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order. When can you amend a tax return   Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. When can you amend a tax return The copy must be attached each year the designation applies. When can you amend a tax return Spouses cannot be members of the same household. When can you amend a tax return    Payments to your spouse while you are members of the same household are not alimony if you are legally separated under a decree of divorce or separate maintenance. When can you amend a tax return A home you formerly shared is considered one household, even if you physically separate yourselves in the home. When can you amend a tax return   You are not treated as members of the same household if one of you is preparing to leave the household and does leave no later than 1 month after the date of the payment. When can you amend a tax return Exception. When can you amend a tax return   If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree, or other court order may qualify as alimony even if you are members of the same household when the payment is made. When can you amend a tax return Table 18-1. When can you amend a tax return Alimony Requirements (Instruments Executed After 1984) Payments ARE alimony if all of the following are true: Payments are NOT alimony if any of the following are true: Payments are required by a divorce or separation instrument. When can you amend a tax return Payments are not required by a divorce or separation instrument. When can you amend a tax return Payer and recipient spouse do not file a joint return with each other. When can you amend a tax return Payer and recipient spouse file a joint return with each other. When can you amend a tax return Payment is in cash (including checks or money orders). When can you amend a tax return Payment is: Not in cash, A noncash property settlement, Spouse's part of community income, or To keep up the payer's property. When can you amend a tax return Payment is not designated in the instrument as not alimony. When can you amend a tax return Payment is designated in the instrument as not alimony. When can you amend a tax return Spouses legally separated under a decree of divorce or separate maintenance are not members of the same household. When can you amend a tax return Spouses legally separated under a decree of divorce or separate maintenance are members of the same household. When can you amend a tax return Payments are not required after death of the recipient spouse. When can you amend a tax return Payments are required after death of the recipient spouse. When can you amend a tax return Payment is not treated as child support. When can you amend a tax return Payment is treated as child support. When can you amend a tax return These payments are deductible by the payer and includible in income by the recipient. When can you amend a tax return These payments are neither deductible by the payer nor includible in income by the recipient. When can you amend a tax return Liability for payments after death of recipient spouse. When can you amend a tax return   If any part of payments you make must continue to be made for any period after your spouse's death, that part of your payments is not alimony, whether made before or after the death. When can you amend a tax return If all of the payments would continue, then none of the payments made before or after the death are alimony. When can you amend a tax return   The divorce or separation instrument does not have to expressly state that the payments cease upon the death of your spouse if, for example, the liability for continued payments would end under state law. When can you amend a tax return Example. When can you amend a tax return You must pay your former spouse $10,000 in cash each year for 10 years. When can you amend a tax return Your divorce decree states that the payments will end upon your former spouse's death. When can you amend a tax return You must also pay your former spouse or your former spouse's estate $20,000 in cash each year for 10 years. When can you amend a tax return The death of your spouse would not terminate these payments under state law. When can you amend a tax return The $10,000 annual payments may qualify as alimony. When can you amend a tax return The $20,000 annual payments that do not end upon your former spouse's death are not alimony. When can you amend a tax return Substitute payments. When can you amend a tax return   If you must make any payments in cash or property after your spouse's death as a substitute for continuing otherwise qualifying payments before the death, the otherwise qualifying payments are not alimony. When can you amend a tax return To the extent that your payments begin, accelerate, or increase because of the death of your spouse, otherwise qualifying payments you made may be treated as payments that were not alimony. When can you amend a tax return Whether or not such payments will be treated as not alimony depends on all the facts and circumstances. When can you amend a tax return Example 1. When can you amend a tax return Under your divorce decree, you must pay your former spouse $30,000 annually. When can you amend a tax return The payments will stop at the end of 6 years or upon your former spouse's death, if earlier. When can you amend a tax return Your former spouse has custody of your minor children. When can you amend a tax return The decree provides that if any child is still a minor at your spouse's death, you must pay $10,000 annually to a trust until the youngest child reaches the age of majority. When can you amend a tax return The trust income and corpus (principal) are to be used for your children's benefit. When can you amend a tax return These facts indicate that the payments to be made after your former spouse's death are a substitute for $10,000 of the $30,000 annual payments. When can you amend a tax return Of each of the $30,000 annual payments, $10,000 is not alimony. When can you amend a tax return Example 2. When can you amend a tax return Under your divorce decree, you must pay your former spouse $30,000 annually. When can you amend a tax return The payments will stop at the end of 15 years or upon your former spouse's death, if earlier. When can you amend a tax return The decree provides that if your former spouse dies before the end of the 15-year period, you must pay the estate the difference between $450,000 ($30,000 × 15) and the total amount paid up to that time. When can you amend a tax return For example, if your spouse dies at the end of the tenth year, you must pay the estate $150,000 ($450,000 − $300,000). When can you amend a tax return These facts indicate that the lump-sum payment to be made after your former spouse's death is a substitute for the full amount of the $30,000 annual payments. When can you amend a tax return None of the annual payments are alimony. When can you amend a tax return The result would be the same if the payment required at death were to be discounted by an appropriate interest factor to account for the prepayment. When can you amend a tax return Child support. When can you amend a tax return   A payment that is specifically designated as child support or treated as specifically designated as child support under your divorce or separation instrument is not alimony. When can you amend a tax return The amount of child support may vary over time. When can you amend a tax return Child support payments are not deductible by the payer and are not taxable to the recipient. When can you amend a tax return Specifically designated as child support. When can you amend a tax return   A payment will be treated as specifically designated as child support to the extent that the payment is reduced either: On the happening of a contingency relating to your child, or At a time that can be clearly associated with the contingency. When can you amend a tax return A payment may be treated as specifically designated as child support even if other separate payments are specifically designated as child support. When can you amend a tax return Contingency relating to your child. When can you amend a tax return   A contingency relates to your child if it depends on any event relating to that child. When can you amend a tax return It does not matter whether the event is certain or likely to occur. When can you amend a tax return Events relating to your child include the child's: Becoming employed, Dying, Leaving the household, Leaving school, Marrying, or Reaching a specified age or income level. When can you amend a tax return Clearly associated with a contingency. When can you amend a tax return   Payments that would otherwise qualify as alimony are presumed to be reduced at a time clearly associated with the happening of a contingency relating to your child only in the following situations. When can you amend a tax return The payments are to be reduced not more than 6 months before or after the date the child will reach 18, 21, or local age of majority. When can you amend a tax return The payments are to be reduced on two or more occasions that occur not more than 1 year before or after a different one of your children reaches a certain age from 18 to 24. When can you amend a tax return This certain age must be the same for each child, but need not be a whole number of years. When can you amend a tax return In all other situations, reductions in payments are not treated as clearly associated with the happening of a contingency relating to your child. When can you amend a tax return   Either you or the IRS can overcome the presumption in the two situations above. When can you amend a tax return This is done by showing that the time at which the payments are to be reduced was determined independently of any contingencies relating to your children. When can you amend a tax return For example, if you can show that the period of alimony payments is customary in the local jurisdiction, such as a period equal to one-half of the duration of the marriage, you can overcome the presumption and may be able to treat the amount as alimony. When can you amend a tax return How To Deduct Alimony Paid You can deduct alimony you paid, whether or not you itemize deductions on your return. When can you amend a tax return You must file Form 1040. When can you amend a tax return You cannot use Form 1040A or Form 1040EZ. When can you amend a tax return Enter the amount of alimony you paid on Form 1040, line 31a. When can you amend a tax return In the space provided on line 31b, enter your spouse's social security number (SSN) or individual taxpayer identification number (ITIN). When can you amend a tax return If you paid alimony to more than one person, enter the SSN or ITIN of one of the recipients. When can you amend a tax return Show the SSN or ITIN and amount paid to each other recipient on an attached statement. When can you amend a tax return Enter your total payments on line 31a. When can you amend a tax return You must provide your spouse's SSN or ITIN. When can you amend a tax return If you do not, you may have to pay a $50 penalty and your deduction may be disallowed. When can you amend a tax return For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. When can you amend a tax return How To Report Alimony Received Report alimony you received as income on Form 1040, line 11. When can you amend a tax return You cannot use Form 1040A or Form 1040EZ. When can you amend a tax return You must give the person who paid the alimony your SSN or ITIN. When can you amend a tax return If you do not, you may have to pay a $50 penalty. When can you amend a tax return Recapture Rule If your alimony payments decrease or end during the first 3 calendar years, you may be subject to the recapture rule. When can you amend a tax return If you are subject to this rule, you have to include in income in the third year part of the alimony payments you previously deducted. When can you amend a tax return Your spouse can deduct in the third year part of the alimony payments he or she previously included in income. When can you amend a tax return The 3-year period starts with the first calendar year you make a payment qualifying as alimony under a decree of divorce or separate maintenance or a written separation agreement. When can you amend a tax return Do not include any time in which payments were being made under temporary support orders. When can you amend a tax return The second and third years are the next 2 calendar years, whether or not payments are made during those years. When can you amend a tax return The reasons for a reduction or end of alimony payments that can require a recapture include: A change in your divorce or separation instrument, A failure to make timely payments, A reduction in your ability to provide support, or A reduction in your spouse's support needs. When can you amend a tax return When to apply the recapture rule. When can you amend a tax return   You are subject to the recapture rule in the third year if the alimony you pay in the third year decreases by more than $15,000 from the second year or the alimony you pay in the second and third years decreases significantly from the alimony you pay in the first year. When can you amend a tax return   When you figure a decrease in alimony, do not include the following amounts. When can you amend a tax return Payments made under a temporary support order. When can you amend a tax return Payments required over a period of at least 3 calendar years that vary because they are a fixed part of your income from a business or property, or from compensation for employment or self-employment. When can you amend a tax return Payments that decrease because of the death of either spouse or the remarriage of the spouse receiving the payments before the end of the third year. When can you amend a tax return Figuring the recapture. When can you amend a tax return   You can use Worksheet 1 in Publication 504 to figure recaptured alimony. When can you amend a tax return Including the recapture in income. When can you amend a tax return   If you must include a recapture amount in income, show it on Form 1040, line 11 (“Alimony received”). When can you amend a tax return Cross out “received” and enter “recapture. When can you amend a tax return ” On the dotted line next to the amount, enter your spouse's last name and SSN or ITIN. When can you amend a tax return Deducting the recapture. When can you amend a tax return   If you can deduct a recapture amount, show it on Form 1040, line 31a (“Alimony paid”). When can you amend a tax return Cross out “paid” and enter “recapture. When can you amend a tax return ” In the space provided, enter your spouse's SSN or ITIN. When can you amend a tax return Prev  Up  Next   Home   More Online Publications
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Changes to the 403(b) Pre-Approved Plan Program

Revenue Procedure 2014-28 extends the deadline for submitting 403(b) pre-approved plans under Revenue Procedure 2013-22 from April 30, 2014, to April 30, 2015.

In response to comments from plan sponsors and practitioners, Revenue Procedure 2014-28 also modifies the eligibility criteria under Revenue Procedure 2013-22 to allow more plan sponsors and employers to participate in the 403(b) pre-approved plan program.

The IRS established the 403(b) pre-approved plan program in Revenue Procedure 2013-22. Under the program, pre-approved sponsors of 403(b) plans may apply to the IRS for approval of a 403(b) prototype plan or a 403(b) volume submitter plan. Once approved, plan sponsors make the plan available to employers for adoption.

Revenue Procedure 2014-28 makes the following changes to Revenue Procedure 2013-22:

  • Reduces the required number of employers expected to adopt a plan sponsor’s pre-approved plan from 30 to 15.
  • Reduces the required number of plan sponsors required to use a mass submitter’s plan as their pre-approved plan on a word-for-word identical basis from 30 to 15.
  • Changes the definition of a “minor modifier” by allowing a plan sponsor to make minor modifications to a mass submitter’s volume submitter plan as well as its prototype plan.

Additional resources

Page Last Reviewed or Updated: 25-Mar-2014

The When Can You Amend A Tax Return

When can you amend a tax return 15. When can you amend a tax return   Selling Your Home Table of Contents Reminder Introduction Useful Items - You may want to see: Main Home Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Business Use or Rental of Home Reporting the SaleSeller-financed mortgage. When can you amend a tax return More information. When can you amend a tax return Special SituationsException for sales to related persons. When can you amend a tax return Recapturing (Paying Back) a Federal Mortgage Subsidy Reminder Home sold with undeducted points. When can you amend a tax return  If you have not deducted all the points you paid to secure a mortgage on your old home, you may be able to deduct the remaining points in the year of the sale. When can you amend a tax return See Mortgage ending early under Points in chapter 23. When can you amend a tax return Introduction This chapter explains the tax rules that apply when you sell your main home. When can you amend a tax return In most cases, your main home is the one in which you live most of the time. When can you amend a tax return If you sold your main home in 2013, you may be able to exclude from income any gain up to a limit of $250,000 ($500,000 on a joint return in most cases). When can you amend a tax return See Excluding the Gain , later. When can you amend a tax return Generally, if you can exclude all the gain, you do not need to report the sale on your tax return. When can you amend a tax return If you have gain that cannot be excluded, it is taxable. When can you amend a tax return Report it on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D (Form 1040). When can you amend a tax return You may also have to complete Form 4797, Sales of Business Property. When can you amend a tax return See Reporting the Sale , later. When can you amend a tax return If you have a loss on the sale, you generally cannot deduct it on your return. When can you amend a tax return However, you may need to report it. When can you amend a tax return See Reporting the Sale , later. When can you amend a tax return The following are main topics in this chapter. When can you amend a tax return Figuring gain or loss. When can you amend a tax return Basis. When can you amend a tax return Excluding the gain. When can you amend a tax return Ownership and use tests. When can you amend a tax return Reporting the sale. When can you amend a tax return Other topics include the following. When can you amend a tax return Business use or rental of home. When can you amend a tax return Recapturing a federal mortgage subsidy. When can you amend a tax return Useful Items - You may want to see: Publication 523 Selling Your Home 530 Tax Information for Homeowners 547 Casualties, Disasters, and Thefts Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 982 Reduction of Tax Attributes Due to Discharge of Indebtedness 8828 Recapture of Federal Mortgage Subsidy 8949 Sales and Other Dispositions of Capital Assets Main Home This section explains the term “main home. When can you amend a tax return ” Usually, the home you live in most of the time is your main home and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. When can you amend a tax return To exclude gain under the rules of this chapter, you in most cases must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. When can you amend a tax return Land. When can you amend a tax return   If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land. When can you amend a tax return However, if you sell vacant land used as part of your main home and that is adjacent to it, you may be able to exclude the gain from the sale under certain circumstances. When can you amend a tax return See Vacant land under Main Home in Publication 523 for more information. When can you amend a tax return Example. When can you amend a tax return You buy a piece of land and move your main home to it. When can you amend a tax return Then you sell the land on which your main home was located. When can you amend a tax return This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. When can you amend a tax return More than one home. When can you amend a tax return   If you have more than one home, you can exclude gain only from the sale of your main home. When can you amend a tax return You must include in income gain from the sale of any other home. When can you amend a tax return If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time during the year. When can you amend a tax return Example 1. When can you amend a tax return You own two homes, one in New York and one in Florida. When can you amend a tax return From 2009 through 2013, you live in the New York home for 7 months and in the Florida residence for 5 months of each year. When can you amend a tax return In the absence of facts and circumstances indicating otherwise, the New York home is your main home. When can you amend a tax return You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. When can you amend a tax return Example 2. When can you amend a tax return You own a house, but you live in another house that you rent. When can you amend a tax return The rented house is your main home. When can you amend a tax return Example 3. When can you amend a tax return You own two homes, one in Virginia and one in New Hampshire. When can you amend a tax return In 2009 and 2010, you lived in the Virginia home. When can you amend a tax return In 2011 and 2012, you lived in the New Hampshire home. When can you amend a tax return In 2013, you lived again in the Virginia home. When can you amend a tax return Your main home in 2009, 2010, and 2013 is the Virginia home. When can you amend a tax return Your main home in 2011 and 2012 is the New Hampshire home. When can you amend a tax return You would be eligible to exclude gain from the sale of either home (but not both) in 2013. When can you amend a tax return Property used partly as your main home. When can you amend a tax return   If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. When can you amend a tax return For details, see Business Use or Rental of Home , later. When can you amend a tax return Figuring Gain or Loss To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. When can you amend a tax return Subtract the adjusted basis from the amount realized to get your gain or loss. When can you amend a tax return     Selling price     − Selling expenses       Amount realized       Amount realized     − Adjusted basis       Gain or loss   Selling Price The selling price is the total amount you receive for your home. When can you amend a tax return It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale. When can you amend a tax return Payment by employer. When can you amend a tax return   You may have to sell your home because of a job transfer. When can you amend a tax return If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. When can you amend a tax return Your employer will include it as wages in box 1 of your Form W-2, and you will include it in your income on Form 1040, line 7. When can you amend a tax return Option to buy. When can you amend a tax return   If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. When can you amend a tax return If the option is not exercised, you must report the amount as ordinary income in the year the option expires. When can you amend a tax return Report this amount on Form 1040, line 21. When can you amend a tax return Form 1099-S. When can you amend a tax return   If you received Form 1099-S, Proceeds From Real Estate Transactions, box 2 (Gross proceeds) should show the total amount you received for your home. When can you amend a tax return   However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. When can you amend a tax return Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. When can you amend a tax return Amount Realized The amount realized is the selling price minus selling expenses. When can you amend a tax return Selling expenses. When can you amend a tax return   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. When can you amend a tax return ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. When can you amend a tax return This adjusted basis must be determined before you can figure gain or loss on the sale of your home. When can you amend a tax return For information on how to figure your home's adjusted basis, see Determining Basis , later. When can you amend a tax return Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. When can you amend a tax return Gain on sale. When can you amend a tax return   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, in most cases is taxable. When can you amend a tax return Loss on sale. When can you amend a tax return   If the amount realized is less than the adjusted basis, the difference is a loss. When can you amend a tax return A loss on the sale of your main home cannot be deducted. When can you amend a tax return Jointly owned home. When can you amend a tax return   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. When can you amend a tax return Separate returns. When can you amend a tax return   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. When can you amend a tax return Your ownership interest is generally determined by state law. When can you amend a tax return Joint owners not married. When can you amend a tax return   If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. When can you amend a tax return Each of you applies the rules discussed in this chapter on an individual basis. When can you amend a tax return Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. When can you amend a tax return Foreclosure or repossession. When can you amend a tax return   If your home was foreclosed on or repossessed, you have a disposition. When can you amend a tax return See Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments, to determine if you have ordinary income, gain, or loss. When can you amend a tax return Abandonment. When can you amend a tax return   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. When can you amend a tax return Trading (exchanging) homes. When can you amend a tax return   If you trade your old home for another home, treat the trade as a sale and a purchase. When can you amend a tax return Example. When can you amend a tax return You owned and lived in a home with an adjusted basis of $41,000. When can you amend a tax return A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. When can you amend a tax return This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 – $41,000). When can you amend a tax return If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed). When can you amend a tax return Transfer to spouse. When can you amend a tax return   If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss. When can you amend a tax return This is true even if you receive cash or other consideration for the home. When can you amend a tax return As a result, the rules in this chapter do not apply. When can you amend a tax return More information. When can you amend a tax return   If you need more information, see Transfer to spouse in Publication 523 and Property Settlements in Publication 504, Divorced or Separated Individuals. When can you amend a tax return Involuntary conversion. When can you amend a tax return   You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. When can you amend a tax return This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations . When can you amend a tax return Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. When can you amend a tax return Your basis in your home is determined by how you got the home. When can you amend a tax return Generally, your basis is its cost if you bought it or built it. When can you amend a tax return If you got it in some other way (inheritance, gift, etc. When can you amend a tax return ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. When can you amend a tax return While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. When can you amend a tax return The result of these adjustments is your home's adjusted basis, which is used to figure gain or loss on the sale of your home. When can you amend a tax return See Adjusted Basis , later. When can you amend a tax return You can find more information on basis and adjusted basis in chapter 13 of this publication and in Publication 523. When can you amend a tax return Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. When can you amend a tax return Purchase. When can you amend a tax return   If you bought your home, your basis is its cost to you. When can you amend a tax return This includes the purchase price and certain settlement or closing costs. When can you amend a tax return In most cases, your purchase price includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home. When can you amend a tax return If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed in Publication 523. When can you amend a tax return Settlement fees or closing costs. When can you amend a tax return   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. When can you amend a tax return You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. When can you amend a tax return A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing). When can you amend a tax return    Chapter 13 lists some of the settlement fees and closing costs that you can include in the basis of property, including your home. When can you amend a tax return It also lists some settlement costs that cannot be included in basis. When can you amend a tax return   Also see Publication 523 for additional items and a discussion of basis other than cost. When can you amend a tax return Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. When can you amend a tax return To figure your adjusted basis, you can use Worksheet 1 in Publication 523. When can you amend a tax return Do not use Worksheet 1 if you acquired an interest in your home from a decedent who died in 2010 and whose executor filed Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent. When can you amend a tax return Increases to basis. When can you amend a tax return   These include the following. When can you amend a tax return Additions and other improvements that have a useful life of more than 1 year. When can you amend a tax return Special assessments for local improvements. When can you amend a tax return Amounts you spent after a casualty to restore damaged property. When can you amend a tax return Improvements. When can you amend a tax return   These add to the value of your home, prolong its useful life, or adapt it to new uses. When can you amend a tax return You add the cost of additions and other improvements to the basis of your property. When can you amend a tax return   For example, putting a recreation room or another bathroom in your unfinished basement, putting up a new fence, putting in new plumbing or wiring, putting on a new roof, or paving your unpaved driveway are improvements. When can you amend a tax return An addition to your house, such as a new deck, a sunroom, or a new garage, is also an improvement. When can you amend a tax return Repairs. When can you amend a tax return   These maintain your home in good condition but do not add to its value or prolong its life. When can you amend a tax return You do not add their cost to the basis of your property. When can you amend a tax return   Examples of repairs include repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes. When can you amend a tax return Decreases to basis. When can you amend a tax return   These include the following. When can you amend a tax return Discharge of qualified principal residence indebtedness that was excluded from income. When can you amend a tax return Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. When can you amend a tax return For details, see Publication 4681. When can you amend a tax return Gain you postponed from the sale of a previous home before May 7, 1997. When can you amend a tax return Deductible casualty losses. When can you amend a tax return Insurance payments you received or expect to receive for casualty losses. When can you amend a tax return Payments you received for granting an easement or right-of-way. When can you amend a tax return Depreciation allowed or allowable if you used your home for business or rental purposes. When can you amend a tax return Energy-related credits allowed for expenditures made on the residence. When can you amend a tax return (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. When can you amend a tax return ) Adoption credit you claimed for improvements added to the basis of your home. When can you amend a tax return Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. When can you amend a tax return Energy conservation subsidy excluded from your gross income because you received it (directly or indirectly) from a public utility after 1992 to buy or install any energy conservation measure. When can you amend a tax return An energy conservation measure is an installation or modification primarily designed either to reduce consumption of electricity or natural gas or to improve the management of energy demand for a home. When can you amend a tax return District of Columbia first-time homebuyer credit (allowed on the purchase of a principal residence in the District of Columbia beginning on August 5, 1997 and before January 1, 2012). When can you amend a tax return General sales taxes (allowed beginning 2004 and ending before 2014) claimed as an itemized deduction on Schedule A (Form 1040) that were imposed on the purchase of personal property, such as a houseboat used as your home or a mobile home. When can you amend a tax return Discharges of qualified principal residence indebtedness. When can you amend a tax return   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. When can you amend a tax return This exclusion applies to discharges made after 2006 and before 2014. When can you amend a tax return If you choose to exclude this income, you must reduce (but not below zero) the basis of the principal residence by the amount excluded from your gross income. When can you amend a tax return   File Form 982 with your tax return. When can you amend a tax return See the form's instructions for detailed information. When can you amend a tax return Recordkeeping. When can you amend a tax return You should keep records to prove your home's adjusted basis. When can you amend a tax return Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. When can you amend a tax return But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. When can you amend a tax return Keep records proving the basis of both homes as long as they are needed for tax purposes. When can you amend a tax return The records you should keep include: Proof of the home's purchase price and purchase expenses, Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis, Any worksheets or other computations you used to figure the adjusted basis of the home you sold, the gain or loss on the sale, the exclusion, and the taxable gain, Any Form 982 you filed to report any discharge of qualified principal residence indebtedness, Any Form 2119, Sale of Your Home, you filed to postpone gain from the sale of a previous home before May 7, 1997, and Any worksheets you used to prepare Form 2119, such as the Adjusted Basis of Home Sold Worksheet or the Capital Improvements Worksheet from the Form 2119 instructions, or other source of computations. When can you amend a tax return Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. When can you amend a tax return This means that, if you qualify, you will not have to pay tax on the gain up to the limit described under Maximum Exclusion , next. When can you amend a tax return To qualify, you must meet the ownership and use tests described later. When can you amend a tax return You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. When can you amend a tax return You can use Worksheet 2 in Publication 523 to figure the amount of your exclusion and your taxable gain, if any. When can you amend a tax return If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. When can you amend a tax return See Publication 505, Tax Withholding and Estimated Tax. When can you amend a tax return Maximum Exclusion You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. When can you amend a tax return You meet the ownership test. When can you amend a tax return You meet the use test. When can you amend a tax return During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. When can you amend a tax return For details on gain allocated to periods of nonqualified use, see Periods of nonqualified use , later. When can you amend a tax return You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . When can you amend a tax return Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. When can you amend a tax return This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). When can you amend a tax return Exception. When can you amend a tax return   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. When can you amend a tax return However, the maximum amount you may be able to exclude will be reduced. When can you amend a tax return See Reduced Maximum Exclusion , later. When can you amend a tax return Example 1—home owned and occupied for at least 2 years. When can you amend a tax return Mya bought and moved into her main home in September 2011. When can you amend a tax return She sold the home at a gain in October 2013. When can you amend a tax return During the 5-year period ending on the date of sale in October 2013, she owned and lived in the home for more than 2 years. When can you amend a tax return She meets the ownership and use tests. When can you amend a tax return Example 2—ownership test met but use test not met. When can you amend a tax return Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. When can you amend a tax return He later sold the home for a gain. When can you amend a tax return He owned the home during the entire 5-year period ending on the date of sale. When can you amend a tax return He meets the ownership test but not the use test. When can you amend a tax return He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). When can you amend a tax return Period of Ownership and Use The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time. When can you amend a tax return You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale. When can you amend a tax return Temporary absence. When can you amend a tax return   Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. When can you amend a tax return The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. When can you amend a tax return Example 1. When can you amend a tax return David Johnson, who is single, bought and moved into his home on February 1, 2011. When can you amend a tax return Each year during 2011 and 2012, David left his home for a 2-month summer vacation. When can you amend a tax return David sold the house on March 1, 2013. When can you amend a tax return Although the total time David used his home is less than 2 years (21 months), he meets the requirement and may exclude gain. When can you amend a tax return The 2-month vacations are short temporary absences and are counted as periods of use in determining whether David used the home for the required 2 years. When can you amend a tax return Example 2. When can you amend a tax return Professor Paul Beard, who is single, bought and moved into a house on August 18, 2010. When can you amend a tax return He lived in it as his main home continuously until January 5, 2012, when he went abroad for a 1-year sabbatical leave. When can you amend a tax return On February 6, 2013, 1 month after returning from the leave, Paul sold the house at a gain. When can you amend a tax return Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. When can you amend a tax return He cannot exclude any part of his gain, because he did not use the residence for the required 2 years. When can you amend a tax return Ownership and use tests met at different times. When can you amend a tax return   You can meet the ownership and use tests during different 2-year periods. When can you amend a tax return However, you must meet both tests during the 5-year period ending on the date of the sale. When can you amend a tax return Example. When can you amend a tax return Beginning in 2002, Helen Jones lived in a rented apartment. When can you amend a tax return The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. When can you amend a tax return In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. When can you amend a tax return On July 12, 2013, while still living in her daughter's home, she sold her condominium. When can you amend a tax return Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 13, 2008, to July 12, 2013, the date she sold the condominium. When can you amend a tax return She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). When can you amend a tax return She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). When can you amend a tax return The time Helen lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use. When can you amend a tax return Cooperative apartment. When can you amend a tax return   If you sold stock as a tenant-stockholder in a cooperative housing corporation, the ownership and use tests are met if, during the 5-year period ending on the date of sale, you: Owned the stock for at least 2 years, and Lived in the house or apartment that the stock entitles you to occupy as your main home for at least 2 years. When can you amend a tax return Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. When can you amend a tax return Exception for individuals with a disability. When can you amend a tax return   There is an exception to the use test if: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home. When can you amend a tax return Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. When can you amend a tax return If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. When can you amend a tax return Previous home destroyed or condemned. When can you amend a tax return   For the ownership and use tests, you add the time you owned and lived in a previous home that was destroyed or condemned to the time you owned and lived in the replacement home on whose sale you wish to exclude gain. When can you amend a tax return This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home. When can you amend a tax return Otherwise, you must have owned and lived in the same home for 2 of the 5 years before the sale to qualify for the exclusion. When can you amend a tax return Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. When can you amend a tax return   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on “qualified official extended duty” as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. When can you amend a tax return You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve outside the United States either as an employee of the Peace Corps on "qualified official extended duty" or as an enrolled volunteer or volunteer leader of the Peace Corps. When can you amend a tax return This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. When can you amend a tax return   If this helps you qualify to exclude gain, you can choose to have the 5-year test period suspended by filing a return for the year of sale that does not include the gain. When can you amend a tax return For more information about the suspension of the 5-year test period, see Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps in Publication 523. When can you amend a tax return Married Persons If you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use tests, you can exclude up to $250,000 of the gain. When can you amend a tax return (But see Special rules for joint returns , next. When can you amend a tax return ) Special rules for joint returns. When can you amend a tax return   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. When can you amend a tax return You are married and file a joint return for the year. When can you amend a tax return Either you or your spouse meets the ownership test. When can you amend a tax return Both you and your spouse meet the use test. When can you amend a tax return During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. When can you amend a tax return If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. When can you amend a tax return For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. When can you amend a tax return Example 1—one spouse sells a home. When can you amend a tax return Emily sells her home in June 2013 for a gain of $300,000. When can you amend a tax return She marries Jamie later in the year. When can you amend a tax return She meets the ownership and use tests, but Jamie does not. When can you amend a tax return Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. When can you amend a tax return The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. When can you amend a tax return Example 2—each spouse sells a home. When can you amend a tax return The facts are the same as in Example 1 except that Jamie also sells a home in 2013 for a gain of $200,000 before he marries Emily. When can you amend a tax return He meets the ownership and use tests on his home, but Emily does not. When can you amend a tax return Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. When can you amend a tax return However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. When can you amend a tax return Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. When can you amend a tax return The $500,000 maximum exclusion for certain joint returns does not apply because Emily and Jamie do not both meet the use test for the same home. When can you amend a tax return Sale of main home by surviving spouse. When can you amend a tax return   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. When can you amend a tax return   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. When can you amend a tax return The sale or exchange took place after 2008. When can you amend a tax return The sale or exchange took place no more than 2 years after the date of death of your spouse. When can you amend a tax return You have not remarried. When can you amend a tax return You and your spouse met the use test at the time of your spouse's death. When can you amend a tax return You or your spouse met the ownership test at the time of your spouse's death. When can you amend a tax return Neither you nor your spouse excluded gain from the sale of another home during the last 2 years. When can you amend a tax return Example. When can you amend a tax return   Harry owned and used a house as his main home since 2009. When can you amend a tax return Harry and Wilma married on July 1, 2013, and from that date they use Harry's house as their main home. When can you amend a tax return Harry died on August 15, 2013, and Wilma inherited the property. When can you amend a tax return Wilma sold the property on September 3, 2013, at which time she had not remarried. When can you amend a tax return Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Harry owned and used the property before death. When can you amend a tax return Home transferred from spouse. When can you amend a tax return   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. When can you amend a tax return Use of home after divorce. When can you amend a tax return   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. When can you amend a tax return Reduced Maximum Exclusion If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. When can you amend a tax return This applies to those who: Fail to meet the ownership and use tests, or Have used the exclusion within 2 years of selling their current home. When can you amend a tax return In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. When can you amend a tax return A change in place of employment. When can you amend a tax return Health. When can you amend a tax return Unforeseen circumstances. When can you amend a tax return Unforeseen circumstances. When can you amend a tax return   The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying your main home. When can you amend a tax return   See Publication 523 for more information and to use Worksheet 3 to figure your reduced maximum exclusion. When can you amend a tax return Business Use or Rental of Home You may be able to exclude gain from the sale of a home you have used for business or to produce rental income. When can you amend a tax return But you must meet the ownership and use tests. When can you amend a tax return Periods of nonqualified use. When can you amend a tax return   In most cases, gain from the sale or exchange of your main home will not qualify for the exclusion to the extent that the gains are allocated to periods of nonqualified use. When can you amend a tax return Nonqualified use is any period after 2008 during which neither you nor your spouse (or your former spouse) used the property as a main home with the following exceptions. When can you amend a tax return Exceptions. When can you amend a tax return   A period of nonqualified use does not include: Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home; Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty: As a member of the uniformed services; As a member of the Foreign Service of the United States; or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. When can you amend a tax return The gain resulting from the sale of the property is allocated between qualified and nonqualified use periods based on the amount of time the property was held for qualified and nonqualified use. When can you amend a tax return Gain from the sale or exchange of a main home allocable to periods of qualified use will continue to qualify for the exclusion for the sale of your main home. When can you amend a tax return Gain from the sale or exchange of property allocable to nonqualified use will not qualify for the exclusion. When can you amend a tax return Calculation. When can you amend a tax return   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain by the following fraction:   Total nonqualified use during the period of ownership after 2008      Total period of ownership     This calculation can be found in Worksheet 2, line 10, in Publication 523. When can you amend a tax return Example 1. When can you amend a tax return On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. When can you amend a tax return She moved in on that date and lived in it until May 31, 2009, when she moved out of the house and put it up for rent. When can you amend a tax return The house was rented from June 1, 2009, to March 31, 2011. When can you amend a tax return Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. When can you amend a tax return Amy moved back into the house on April 1, 2011, and lived there until she sold it on January 31, 2013, for a gain of $200,000. When can you amend a tax return During the 5-year period ending on the date of the sale (January 31, 2008-January 31, 2013), Amy owned and lived in the house for more than 2 years as shown in the following table. When can you amend a tax return Five Year Period Used as  Home Used as  Rental 1/31/08 – 5/31/09 16 months       6/1/09 – 3/31/11   22 months 4/1/11 – 1/31/13 22 months         38 months 22 months During the period Amy owned the house (2,080 days), her period of nonqualified use was 668 days. When can you amend a tax return Amy divides 668 by 2,080 and obtains a decimal (rounded to at least three decimal places) of 0. When can you amend a tax return 321. When can you amend a tax return To figure her gain attributable to the period of nonqualified use, she multiplies $190,000 (the gain not attributable to the $10,000 depreciation deduction) by 0. When can you amend a tax return 321. When can you amend a tax return Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain. When can you amend a tax return Example 2. When can you amend a tax return William owned and used a house as his main home from 2007 through 2010. When can you amend a tax return On January 1, 2011, he moved to another state. When can you amend a tax return He rented his house from that date until April 30, 2013, when he sold it. When can you amend a tax return During the 5-year period ending on the date of sale (May 1, 2008-April 30, 2013), William owned and lived in the house for more than 2 years. When can you amend a tax return He must report the sale on Form 4797 because it was rental property at the time of sale. When can you amend a tax return Because the period of nonqualified use does not include any part of the 5-year period after the last date William lived in the house, he has no period of nonqualified use. When can you amend a tax return Because he met the ownership and use tests, he can exclude gain up to $250,000. When can you amend a tax return However, he cannot exclude the part of the gain equal to the depreciation he claimed or could have claimed for renting the house, as explained next. When can you amend a tax return Depreciation after May 6, 1997. When can you amend a tax return   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. When can you amend a tax return If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed. When can you amend a tax return See Publication 544 for more information. When can you amend a tax return Property used partly for business or rental. When can you amend a tax return   If you used property partly as a home and partly for business or to produce rental income, see Publication 523. When can you amend a tax return Reporting the Sale Do not report the 2013 sale of your main home on your tax return unless: You have a gain and do not qualify to exclude all of it, You have a gain and choose not to exclude it, or You received Form 1099-S. When can you amend a tax return If any of these conditions apply, report the entire gain or loss. When can you amend a tax return For details on how to report the gain or loss, see the Instructions for Schedule D (Form 1040) and the Instructions for Form 8949. When can you amend a tax return If you used the home for business or to produce rental income, you may have to use Form 4797 to report the sale of the business or rental part (or the sale of the entire property if used entirely for business or rental). When can you amend a tax return See Business Use or Rental of Home in Publication 523 and the Instructions for Form 4797. When can you amend a tax return Installment sale. When can you amend a tax return    Some sales are made under arrangements that provide for part or all of the selling price to be paid in a later year. When can you amend a tax return These sales are called “installment sales. When can you amend a tax return ” If you finance the buyer's purchase of your home yourself instead of having the buyer get a loan or mortgage from a bank, you probably have an installment sale. When can you amend a tax return You may be able to report the part of the gain you cannot exclude on the installment basis. When can you amend a tax return    Use Form 6252, Installment Sale Income, to report the sale. When can you amend a tax return Enter your exclusion on line 15 of Form 6252. When can you amend a tax return Seller-financed mortgage. When can you amend a tax return   If you sell your home and hold a note, mortgage, or other financial agreement, the payments you receive in most cases consist of both interest and principal. When can you amend a tax return You must separately report as interest income the interest you receive as part of each payment. When can you amend a tax return If the buyer of your home uses the property as a main or second home, you must also report the name, address, and social security number (SSN) of the buyer on line 1 of Schedule B (Form 1040A or 1040). When can you amend a tax return The buyer must give you his or her SSN, and you must give the buyer your SSN. When can you amend a tax return Failure to meet these requirements may result in a $50 penalty for each failure. When can you amend a tax return If either you or the buyer does not have and is not eligible to get an SSN, see Social Security Number in chapter 1. When can you amend a tax return More information. When can you amend a tax return   For more information on installment sales, see Publication 537, Installment Sales. When can you amend a tax return Special Situations The situations that follow may affect your exclusion. When can you amend a tax return Sale of home acquired in a like-kind exchange. When can you amend a tax return   You cannot claim the exclusion if: You acquired your home in a like-kind exchange (also known as a section 1031 exchange), or your basis in your home is determined by reference to the basis of the home in the hands of the person who acquired the property in a like-kind exchange (for example, you received the home from that person as a gift), and You sold the home during the 5-year period beginning with the date your home was acquired in the like-kind exchange. When can you amend a tax return Gain from a like-kind exchange is not taxable at the time of the exchange. When can you amend a tax return This means that gain will not be taxed until you sell or otherwise dispose of the property you receive. When can you amend a tax return To defer gain from a like-kind exchange, you must have exchanged business or investment property for business or investment property of a like kind. When can you amend a tax return For more information about like-kind exchanges, see Publication 544, Sales and Other Dispositions of Assets. When can you amend a tax return Home relinquished in a like-kind exchange. When can you amend a tax return   If you use your main home partly for business or rental purposes and then exchange the home for another property, see Publication 523. When can you amend a tax return Expatriates. When can you amend a tax return   You cannot claim the exclusion if the expatriation tax applies to you. When can you amend a tax return The expatriation tax applies to certain U. When can you amend a tax return S. When can you amend a tax return citizens who have renounced their citizenship (and to certain long-term residents who have ended their residency). When can you amend a tax return For more information about the expatriation tax, see Expatriation Tax in chapter 4 of Publication 519, U. When can you amend a tax return S. When can you amend a tax return Tax Guide for Aliens. When can you amend a tax return Home destroyed or condemned. When can you amend a tax return   If your home was destroyed or condemned, any gain (for example, because of insurance proceeds you received) qualifies for the exclusion. When can you amend a tax return   Any part of the gain that cannot be excluded (because it is more than the maximum exclusion) can be postponed under the rules explained in: Publication 547, in the case of a home that was destroyed, or Publication 544, chapter 1, in the case of a home that was condemned. When can you amend a tax return Sale of remainder interest. When can you amend a tax return   Subject to the other rules in this chapter, you can choose to exclude gain from the sale of a remainder interest in your home. When can you amend a tax return If you make this choice, you cannot choose to exclude gain from your sale of any other interest in the home that you sell separately. When can you amend a tax return Exception for sales to related persons. When can you amend a tax return   You cannot exclude gain from the sale of a remainder interest in your home to a related person. When can you amend a tax return Related persons include your brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. When can you amend a tax return ), and lineal descendants (children, grandchildren, etc. When can you amend a tax return ). When can you amend a tax return Related persons also include certain corporations, partnerships, trusts, and exempt organizations. When can you amend a tax return Recapturing (Paying Back) a Federal Mortgage Subsidy If you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. When can you amend a tax return You recapture the benefit by increasing your federal income tax for the year of the sale. When can you amend a tax return You may have to pay this recapture tax even if you can exclude your gain from income under the rules discussed earlier; that exclusion does not affect the recapture tax. When can you amend a tax return Loans subject to recapture rules. When can you amend a tax return   The recapture applies to loans that: Came from the proceeds of qualified mortgage bonds, or Were based on mortgage credit certificates. When can you amend a tax return The recapture also applies to assumptions of these loans. When can you amend a tax return When recapture applies. When can you amend a tax return   Recapture of the federal mortgage subsidy applies only if you meet both of the following conditions. When can you amend a tax return You sell or otherwise dispose of your home at a gain within the first 9 years after the date you close your mortgage loan. When can you amend a tax return Your income for the year of disposition is more than that year's adjusted qualifying income for your family size for that year (related to the income requirements a person must meet to qualify for the federally subsidized program). When can you amend a tax return When recapture does not apply. When can you amend a tax return   Recapture does not apply in any of the following situations. When can you amend a tax return Your mortgage loan was a qualified home improvement loan (QHIL) of not more than $15,000 used for alterations, repairs, and improvements that protect or improve the basic livability or energy efficiency of your home. When can you amend a tax return Your mortgage loan was a QHIL of not more than $150,000 in the case of a QHIL used to repair damage from Hurricane Katrina to homes in the hurricane disaster area; a QHIL funded by a qualified mortgage bond that is a qualified Gulf Opportunity Zone Bond; or a QHIL for an owner-occupied home in the Gulf Opportunity Zone (GO Zone), Rita GO Zone, or Wilma GO Zone. When can you amend a tax return For more information, see Publication 4492, Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma. When can you amend a tax return Also see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. When can you amend a tax return The home is disposed of as a result of your death. When can you amend a tax return You dispose of the home more than 9 years after the date you closed your mortgage loan. When can you amend a tax return You transfer the home to your spouse, or to your former spouse incident to a divorce, where no gain is included in your income. When can you amend a tax return You dispose of the home at a loss. When can you amend a tax return Your home is destroyed by a casualty, and you replace it on its original site within 2 years after the end of the tax year when the destruction happened. When can you amend a tax return The replacement period is extended for main homes destroyed in a federally declared disaster area, a Midwestern disaster area, the Kansas disaster area, and the Hurricane Katrina disaster area. When can you amend a tax return For more information, see Replacement Period in Publication 547. When can you amend a tax return You refinance your mortgage loan (unless you later meet the conditions listed previously under When recapture applies ). When can you amend a tax return Notice of amounts. When can you amend a tax return   At or near the time of settlement of your mortgage loan, you should receive a notice that provides the federally subsidized amount and other information you will need to figure your recapture tax. When can you amend a tax return How to figure and report the recapture. When can you amend a tax return    The recapture tax is figured on Form 8828. When can you amend a tax return If you sell your home and your mortgage is subject to recapture rules, you must file Form 8828 even if you do not owe a recapture tax. When can you amend a tax return Attach Form 8828 to your Form 1040. When can you amend a tax return For more information, see Form 8828 and its instructions. When can you amend a tax return Prev  Up  Next   Home   More Online Publications