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1040 Forms And Instructions

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1040 Forms And Instructions

1040 forms and instructions 1. 1040 forms and instructions   Rental Income and Expenses (If No Personal Use of Dwelling) Table of Contents Rental IncomeWhen To Report Types of Income Rental ExpensesWhen To Deduct Types of Expenses This chapter discusses the various types of rental income and expenses for a residential rental activity with no personal use of the dwelling. 1040 forms and instructions Generally, each year you will report all income and deduct all out-of-pocket expenses in full. 1040 forms and instructions The deduction to recover the cost of your rental property—depreciation—is taken over a prescribed number of years, and is discussed in chapter 2, Depreciation of Rental Property. 1040 forms and instructions If your rental income is from property you also use personally or rent to someone at less than a fair rental price, first read the information in chapter 5 , Personal Use of Dwelling Unit (Including Vacation Home). 1040 forms and instructions Rental Income In most cases, you must include in your gross income all amounts you receive as rent. 1040 forms and instructions Rental income is any payment you receive for the use or occupation of property. 1040 forms and instructions In addition to amounts you receive as normal rental payments, there are other amounts that may be rental income. 1040 forms and instructions When To Report When you report rental income on your tax return generally depends on whether you are a cash basis taxpayer or use an accrual method. 1040 forms and instructions Most individual taxpayers use the cash method. 1040 forms and instructions Cash method. 1040 forms and instructions   You are a cash basis taxpayer if you report income on your return in the year you actually or constructively receive it, regardless of when it was earned. 1040 forms and instructions You constructively receive income when it is made available to you, for example, by being credited to your bank account. 1040 forms and instructions Accrual method. 1040 forms and instructions    If you are an accrual basis taxpayer, you generally report income when you earn it, rather than when you receive it. 1040 forms and instructions You generally deduct your expenses when you incur them, rather than when you pay them. 1040 forms and instructions More information. 1040 forms and instructions   See Publication 538, Accounting Periods and Methods, for more information about when you constructively receive income and accrual methods of accounting. 1040 forms and instructions Types of Income The following are common types of rental income. 1040 forms and instructions Advance rent. 1040 forms and instructions   Advance rent is any amount you receive before the period that it covers. 1040 forms and instructions Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. 1040 forms and instructions Example. 1040 forms and instructions On March 18, 2013, you signed a 10-year lease to rent your property. 1040 forms and instructions During 2013, you received $9,600 for the first year's rent and $9,600 as rent for the last year of the lease. 1040 forms and instructions You must include $19,200 in your rental income in the first year. 1040 forms and instructions Canceling a lease. 1040 forms and instructions   If your tenant pays you to cancel a lease, the amount you receive is rent. 1040 forms and instructions Include the payment in your income in the year you receive it regardless of your method of accounting. 1040 forms and instructions Expenses paid by tenant. 1040 forms and instructions   If your tenant pays any of your expenses, those payments are rental income. 1040 forms and instructions Because you must include this amount in income, you can also deduct the expenses if they are deductible rental expenses. 1040 forms and instructions For more information, see Rental Expenses , later. 1040 forms and instructions Example 1. 1040 forms and instructions Your tenant pays the water and sewage bill for your rental property and deducts the amount from the normal rent payment. 1040 forms and instructions Under the terms of the lease, your tenant does not have to pay this bill. 1040 forms and instructions Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income. 1040 forms and instructions You can deduct the utility payment made by your tenant as a rental expense. 1040 forms and instructions Example 2. 1040 forms and instructions While you are out of town, the furnace in your rental property stops working. 1040 forms and instructions Your tenant pays for the necessary repairs and deducts the repair bill from the rent payment. 1040 forms and instructions Include the repair bill paid by the tenant and any amount received as a rent payment in your rental income. 1040 forms and instructions You can deduct the repair payment made by your tenant as a rental expense. 1040 forms and instructions Property or services. 1040 forms and instructions   If you receive property or services as rent, instead of money, include the fair market value of the property or services in your rental income. 1040 forms and instructions   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. 1040 forms and instructions Example. 1040 forms and instructions Your tenant is a house painter. 1040 forms and instructions He offers to paint your rental property instead of paying 2 months rent. 1040 forms and instructions You accept his offer. 1040 forms and instructions Include in your rental income the amount the tenant would have paid for 2 months rent. 1040 forms and instructions You can deduct that same amount as a rental expense for painting your property. 1040 forms and instructions Security deposits. 1040 forms and instructions   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. 1040 forms and instructions But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. 1040 forms and instructions    If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. 1040 forms and instructions Include it in your income when you receive it. 1040 forms and instructions Other Sources of Rental Income Lease with option to buy. 1040 forms and instructions   If the rental agreement gives your tenant the right to buy your rental property, the payments you receive under the agreement are generally rental income. 1040 forms and instructions If your tenant exercises the right to buy the property, the payments you receive for the period after the date of sale are considered part of the selling price. 1040 forms and instructions Part interest. 1040 forms and instructions   If you own a part interest in rental property, you must report your part of the rental income from the property. 1040 forms and instructions Rental of property also used as your home. 1040 forms and instructions   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. 1040 forms and instructions However, you can deduct on Schedule A (Form 1040), Itemized Deductions, the interest, taxes, and casualty and theft losses that are allowed for nonrental property. 1040 forms and instructions See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). 1040 forms and instructions Rental Expenses In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. 1040 forms and instructions Personal use of rental property. 1040 forms and instructions   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. 1040 forms and instructions Also, your rental expense deductions may be limited. 1040 forms and instructions See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). 1040 forms and instructions Part interest. 1040 forms and instructions   If you own a part interest in rental property, you can deduct expenses you paid according to your percentage of ownership. 1040 forms and instructions Example. 1040 forms and instructions Roger owns a one-half undivided interest in a rental house. 1040 forms and instructions Last year he paid $968 for necessary repairs on the property. 1040 forms and instructions Roger can deduct $484 (50% × $968) as a rental expense. 1040 forms and instructions He is entitled to reimbursement for the remaining half from the co-owner. 1040 forms and instructions When To Deduct You generally deduct your rental expenses in the year you pay them. 1040 forms and instructions If you use the accrual method, see Publication 538 for more information. 1040 forms and instructions Types of Expenses Listed below are the most common rental expenses. 1040 forms and instructions Advertising. 1040 forms and instructions Auto and travel expenses. 1040 forms and instructions Cleaning and maintenance. 1040 forms and instructions Commissions. 1040 forms and instructions Depreciation. 1040 forms and instructions Insurance. 1040 forms and instructions Interest (other). 1040 forms and instructions Legal and other professional fees. 1040 forms and instructions Local transportation expenses. 1040 forms and instructions Management fees. 1040 forms and instructions Mortgage interest paid to banks, etc. 1040 forms and instructions Points. 1040 forms and instructions Rental payments. 1040 forms and instructions Repairs. 1040 forms and instructions Taxes. 1040 forms and instructions Utilities. 1040 forms and instructions Some of these expenses, as well as other less common ones, are discussed below. 1040 forms and instructions Depreciation. 1040 forms and instructions   Depreciation is a capital expense. 1040 forms and instructions It is the mechanism for recovering your cost in an income producing property and must be taken over the expected life of the property. 1040 forms and instructions   You can begin to depreciate rental property when it is ready and available for rent. 1040 forms and instructions See Placed in Service under When Does Depreciation Begin and End in chapter 2. 1040 forms and instructions Insurance premiums paid in advance. 1040 forms and instructions   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. 1040 forms and instructions You cannot deduct the total premium in the year you pay it. 1040 forms and instructions See chapter 6 of Publication 535 for information on deductible premiums. 1040 forms and instructions Interest expense. 1040 forms and instructions   You can deduct mortgage interest you pay on your rental property. 1040 forms and instructions When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. 1040 forms and instructions Chapter 4 of Publication 535 explains mortgage interest in detail. 1040 forms and instructions Expenses paid to obtain a mortgage. 1040 forms and instructions   Certain expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. 1040 forms and instructions These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property. 1040 forms and instructions Form 1098, Mortgage Interest Statement. 1040 forms and instructions   If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098 or similar statement showing the interest you paid for the year. 1040 forms and instructions 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, the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. 1040 forms and instructions Attach a statement to your return showing the name and address of the other person. 1040 forms and instructions On the dotted line next to line 13, enter “See attached. 1040 forms and instructions ” Legal and other professional fees. 1040 forms and instructions   You can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. 1040 forms and instructions For example, on your 2013 Schedule E you can deduct fees paid in 2013 to prepare Part I of your 2012 Schedule E. 1040 forms and instructions You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. 1040 forms and instructions Local benefit taxes. 1040 forms and instructions   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. 1040 forms and instructions These charges are nondepreciable capital expenditures and must be added to the basis of your property. 1040 forms and instructions However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. 1040 forms and instructions Local transportation expenses. 1040 forms and instructions   You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. 1040 forms and instructions However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. 1040 forms and instructions See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. 1040 forms and instructions   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. 1040 forms and instructions For 2013, the standard mileage rate for business use is 56. 1040 forms and instructions 5 cents per mile. 1040 forms and instructions For more information, see chapter 4 of Publication 463. 1040 forms and instructions    To deduct car expenses under either method, you must keep records that follow the rules in chapter 5 of Publication 463. 1040 forms and instructions In addition, you must complete Form 4562, Part V, and attach it to your tax return. 1040 forms and instructions Pre-rental expenses. 1040 forms and instructions   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. 1040 forms and instructions Rental of equipment. 1040 forms and instructions   You can deduct the rent you pay for equipment that you use for rental purposes. 1040 forms and instructions However, in some cases, lease contracts are actually purchase contracts. 1040 forms and instructions If so, you cannot deduct these payments. 1040 forms and instructions You can recover the cost of purchased equipment through depreciation. 1040 forms and instructions Rental of property. 1040 forms and instructions   You can deduct the rent you pay for property that you use for rental purposes. 1040 forms and instructions If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. 1040 forms and instructions Travel expenses. 1040 forms and instructions   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. 1040 forms and instructions You must properly allocate your expenses between rental and nonrental activities. 1040 forms and instructions You cannot deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. 1040 forms and instructions The cost of improvements is recovered by taking depreciation. 1040 forms and instructions For information on travel expenses, see chapter 1 of Publication 463. 1040 forms and instructions    To deduct travel expenses, you must keep records that follow the rules in chapter 5 of Publication 463. 1040 forms and instructions Uncollected rent. 1040 forms and instructions   If you are a cash basis taxpayer, do not deduct uncollected rent. 1040 forms and instructions Because you have not included it in your income, it is not deductible. 1040 forms and instructions   If you use an accrual method, report income when you earn it. 1040 forms and instructions If you are unable to collect the rent, you may be able to deduct it as a business bad debt. 1040 forms and instructions See chapter 10 of Publication 535 for more information about business bad debts. 1040 forms and instructions Vacant rental property. 1040 forms and instructions   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. 1040 forms and instructions However, you cannot deduct any loss of rental income for the period the property is vacant. 1040 forms and instructions Vacant while listed for sale. 1040 forms and instructions   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. 1040 forms and instructions If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. 1040 forms and instructions Points The term “points” is often used to describe some of the charges paid, or treated as paid, by a borrower to take out a loan or a mortgage. 1040 forms and instructions These charges are also called loan origination fees, maximum loan charges, or premium charges. 1040 forms and instructions Any of these charges (points) that are solely for the use of money are interest. 1040 forms and instructions Because points are prepaid interest, you generally cannot deduct the full amount in the year paid, but must deduct the interest over the term of the loan. 1040 forms and instructions The method used to figure the amount of points you can deduct each year follows the original issue discount (OID) rules. 1040 forms and instructions In this case, points are equivalent to OID, which is the difference between: The amount borrowed (redemption price at maturity, or principal) and The proceeds (issue price). 1040 forms and instructions The first step is to determine whether your total OID (which you may have on bonds or other investments in addition to the mortgage loan), including the OID resulting from the points, is insignificant or de minimis. 1040 forms and instructions If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct. 1040 forms and instructions De minimis OID. 1040 forms and instructions   The OID is de minimis if it is less than one-fourth of 1% (. 1040 forms and instructions 0025) of the stated redemption price at maturity (principal amount of the loan) multiplied by the number of full years from the date of original issue to maturity (term of the loan). 1040 forms and instructions   If the OID is de minimis, you can choose one of the following ways to figure the amount of points you can deduct each year. 1040 forms and instructions On a constant-yield basis over the term of the loan. 1040 forms and instructions On a straight line basis over the term of the loan. 1040 forms and instructions In proportion to stated interest payments. 1040 forms and instructions In its entirety at maturity of the loan. 1040 forms and instructions You make this choice by deducting the OID (points) in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued. 1040 forms and instructions Example. 1040 forms and instructions Carol Madison took out a $100,000 mortgage loan on January 1, 2013, to buy a house she will use as a rental during 2013. 1040 forms and instructions The loan is to be repaid over 30 years. 1040 forms and instructions During 2013, Carol paid $10,000 of mortgage interest (stated interest) to the lender. 1040 forms and instructions When the loan was made, she paid $1,500 in points to the lender. 1040 forms and instructions The points reduced the principal amount of the loan from $100,000 to $98,500, resulting in $1,500 of OID. 1040 forms and instructions Carol determines that the points (OID) she paid are de minimis based on the following computation. 1040 forms and instructions Redemption price at maturity (principal amount of the loan) $100,000 Multiplied by: The term of the  loan in complete years ×30 Multiplied by ×. 1040 forms and instructions 0025 De minimis amount $7,500 The points (OID) she paid ($1,500) are less than the de minimis amount ($7,500). 1040 forms and instructions Therefore, Carol has de minimis OID and she can choose one of the four ways discussed earlier to figure the amount she can deduct each year. 1040 forms and instructions Under the straight line method, she can deduct $50 each year for 30 years. 1040 forms and instructions Constant-yield method. 1040 forms and instructions   If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. 1040 forms and instructions   You figure your deduction for the first year in the following manner. 1040 forms and instructions Determine the issue price of the loan. 1040 forms and instructions If you paid points on the loan, the issue price generally is the difference between the principal and the points. 1040 forms and instructions Multiply the result in (1) by the yield to maturity (defined later). 1040 forms and instructions Subtract any qualified stated interest payments (defined later) from the result in (2). 1040 forms and instructions This is the OID you can deduct in the first year. 1040 forms and instructions Yield to maturity (YTM). 1040 forms and instructions   This rate is generally shown in the literature you receive from your lender. 1040 forms and instructions If you do not have this information, consult your lender or tax advisor. 1040 forms and instructions In general, the YTM is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan. 1040 forms and instructions Qualified stated interest (QSI). 1040 forms and instructions   In general, this is the stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a fixed rate. 1040 forms and instructions Example—Year 1. 1040 forms and instructions The facts are the same as in the previous example. 1040 forms and instructions The yield to maturity on Carol's loan is 10. 1040 forms and instructions 2467%, compounded annually. 1040 forms and instructions She figured the amount of points (OID) she could deduct in 2013 as follows. 1040 forms and instructions Principal amount of the loan $100,000 Minus: Points (OID) –1,500 Issue price of the loan $98,500 Multiplied by: YTM × . 1040 forms and instructions 102467 Total 10,093 Minus: QSI –10,000 Points (OID) deductible in 2013 $93 To figure your deduction in any subsequent year, you start with the adjusted issue price. 1040 forms and instructions To get the adjusted issue price, add to the issue price figured in Year 1 any OID previously deducted. 1040 forms and instructions Then follow steps (2) and (3), earlier. 1040 forms and instructions Example—Year 2. 1040 forms and instructions Carol figured the deduction for 2014 as follows. 1040 forms and instructions Issue price $98,500 Plus: Points (OID) deducted  in 2013 +93 Adjusted issue price $98,593 Multiplied by: YTM × . 1040 forms and instructions 102467 Total 10,103 Minus: QSI –10,000 Points (OID) deductible in 2014 $103 Loan or mortgage ends. 1040 forms and instructions    If your loan or mortgage ends, you may be able to deduct any remaining points (OID) in the tax year in which the loan or mortgage ends. 1040 forms and instructions A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event. 1040 forms and instructions However, if the refinancing is with the same lender, the remaining points (OID) generally are not deductible in the year in which the refinancing occurs, but may be deductible over the term of the new mortgage or loan. 1040 forms and instructions Points when loan refinance is more than the previous outstanding balance. 1040 forms and instructions   When you refinance a rental property for more than the previous outstanding balance, the portion of the points allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. 1040 forms and instructions For example, if an individual refinanced a loan with a balance of $100,000, the amount of the new loan was $120,000, and the taxpayer used $20,000 to purchase a car, points allocable to the $20,000 would be treated as nondeductible personal interest. 1040 forms and instructions Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. 1040 forms and instructions Improvements. 1040 forms and instructions   You must capitalize any expense you pay to improve your rental property. 1040 forms and instructions An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. 1040 forms and instructions Betterments. 1040 forms and instructions   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. 1040 forms and instructions Restoration. 1040 forms and instructions   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. 1040 forms and instructions Adaptation. 1040 forms and instructions   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. 1040 forms and instructions Separate the costs of repairs and improvements, and keep accurate records. 1040 forms and instructions You will need to know the cost of improvements when you sell or depreciate your property. 1040 forms and instructions The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. 1040 forms and instructions Table 1-1. 1040 forms and instructions Examples of Improvements Additions Bedroom Bathroom Deck Garage Porch Patio  Lawn & Grounds Landscaping Driveway Walkway Fence Retaining wall Sprinkler system Swimming pool Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system   Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances Kitchen modernization Flooring Wall-to-wall carpeting  Insulation Attic Walls, floor Pipes, duct work Prev  Up  Next   Home   More Online Publications
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Understanding Your CP63 Notice

We are holding your refund because you have not filed one or more tax returns and we believe you will owe tax.


What you need to do

  • File your personal tax return immediately or explain to us:
    • why you're filing late
    • why you don't have to file
    • that you've already filed

You may want to...


Answers to Common Questions

What should I do if I disagree with the notice, I didn't file my tax return, or it's been more than eight weeks since I filed it?
Call us at the toll free number on the top right corner of your notice. Please have your paperwork ready when you call. If you prefer, you can write to us. If you choose to write, please enclose your response in the envelope we've provided.

What should I do if I've just filed my tax return?
You don't have to do anything if you filed your tax return(s) within the last eight weeks.

What happens if I can't pay the full amount I owe when I file my return?
You can make a payment plan with us when you can't pay the full amount you owe. If you owe tax on any return(s) you file, we will use your refund to help pay it.

When will my refund be released?
We can release your refund when we have received all past due returns, or explanations showing you did not have to file for those years.


Tips for next year

File your return on time, even if you will owe taxes. If necessary, you can make a payment plan to pay what you owe.

Filing on time saves you money because it costs the Internal Revenue Service less money to process your return when it's filed on time.

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

If you have dependent children, you may be able to claim a tax credit for them. Publication 972, Child Tax Credit, has information about this credit.

Page Last Reviewed or Updated: 04-Mar-2014

The 1040 Forms And Instructions

1040 forms and instructions 5. 1040 forms and instructions   Personal Use of Dwelling Unit (Including Vacation Home) Table of Contents Dividing Expenses Dwelling Unit Used as a HomeMain home. 1040 forms and instructions Shared equity financing agreement. 1040 forms and instructions Donation of use of the property. 1040 forms and instructions Examples. 1040 forms and instructions Days used for repairs and maintenance. 1040 forms and instructions Days used as a main home before or after renting. 1040 forms and instructions Reporting Income and DeductionsNot used as a home. 1040 forms and instructions Used as a home but rented less than 15 days. 1040 forms and instructions Used as a home and rented 15 days or more. 1040 forms and instructions If you have any personal use of a dwelling unit (including a vacation home) that you rent, you must divide your expenses between rental use and personal use. 1040 forms and instructions In general, your rental expenses will be no more than your total expenses multiplied by a fraction; the denominator of which is the total number of days the dwelling unit is used and the numerator of which is the total number of days actually rented at a fair rental price. 1040 forms and instructions Only your rental expenses may deducted on Schedule E (Form 1040). 1040 forms and instructions Some of your personal expenses may be deductible if you itemize your deductions on Schedule A (Form 1040). 1040 forms and instructions You must also determine if the dwelling unit is considered a home. 1040 forms and instructions The amount of rental expenses that you can deduct may be limited if the dwelling unit is considered a home. 1040 forms and instructions Whether a dwelling unit is considered a home depends on how many days during the year are considered to be days of personal use. 1040 forms and instructions There is a special rule if you used the dwelling unit as a home and you rented it for less than 15 days during the year. 1040 forms and instructions Dwelling unit. 1040 forms and instructions   A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. 1040 forms and instructions It also includes all structures or other property belonging to the dwelling unit. 1040 forms and instructions A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. 1040 forms and instructions   A dwelling unit does not include property (or part of the property) used solely as a hotel, motel, inn, or similar establishment. 1040 forms and instructions Property is used solely as a hotel, motel, inn, or similar establishment if it is regularly available for occupancy by paying customers and is not used by an owner as a home during the year. 1040 forms and instructions Example. 1040 forms and instructions You rent a room in your home that is always available for short-term occupancy by paying customers. 1040 forms and instructions You do not use the room yourself and you allow only paying customers to use the room. 1040 forms and instructions This room is used solely as a hotel, motel, inn, or similar establishment and is not a dwelling unit. 1040 forms and instructions Dividing Expenses If you use a dwelling unit for both rental and personal purposes, divide your expenses between the rental use and the personal use based on the number of days used for each purpose. 1040 forms and instructions When dividing your expenses, follow these rules. 1040 forms and instructions Any day that the unit is rented at a fair rental price is a day of rental use even if you used the unit for personal purposes that day. 1040 forms and instructions (This rule does not apply when determining whether you used the unit as a home. 1040 forms and instructions ) Any day that the unit is available for rent but not actually rented is not a day of rental use. 1040 forms and instructions Fair rental price. 1040 forms and instructions   A fair rental price for your property generally is the amount of rent that a person who is not related to you would be willing to pay. 1040 forms and instructions The rent you charge is not a fair rental price if it is substantially less than the rents charged for other properties that are similar to your property in your area. 1040 forms and instructions   Ask yourself the following questions when comparing another property with yours. 1040 forms and instructions Is it used for the same purpose? Is it approximately the same size? Is it in approximately the same condition? Does it have similar furnishings? Is it in a similar location? If any of the answers are no, the properties probably are not similar. 1040 forms and instructions Example. 1040 forms and instructions Your beach cottage was available for rent from June 1 through August 31 (92 days). 1040 forms and instructions Except for the first week in August (7 days), when you were unable to find a renter, you rented the cottage at a fair rental price during that time. 1040 forms and instructions The person who rented the cottage for July allowed you to use it over the weekend (2 days) without any reduction in or refund of rent. 1040 forms and instructions Your family also used the cottage during the last 2 weeks of May (14 days). 1040 forms and instructions The cottage was not used at all before May 17 or after August 31. 1040 forms and instructions You figure the part of the cottage expenses to treat as rental expenses as follows. 1040 forms and instructions The cottage was used for rental a total of 85 days (92 − 7). 1040 forms and instructions The days it was available for rent but not rented (7 days) are not days of rental use. 1040 forms and instructions The July weekend (2 days) you used it is rental use because you received a fair rental price for the weekend. 1040 forms and instructions You used the cottage for personal purposes for 14 days (the last 2 weeks in May). 1040 forms and instructions The total use of the cottage was 99 days (14 days personal use + 85 days rental use). 1040 forms and instructions Your rental expenses are 85/99 (86%) of the cottage expenses. 1040 forms and instructions Note. 1040 forms and instructions When determining whether you used the cottage as a home, the July weekend (2 days) you used it is considered personal use even though you received a fair rental price for the weekend. 1040 forms and instructions Therefore, you had 16 days of personal use and 83 days of rental use for this purpose. 1040 forms and instructions Because you used the cottage for personal purposes more than 14 days and more than 10% of the days of rental use (8 days), you used it as a home. 1040 forms and instructions If you have a net loss, you may not be able to deduct all of the rental expenses. 1040 forms and instructions See Dwelling Unit Used as a Home, next. 1040 forms and instructions Dwelling Unit Used as a Home If you use a dwelling unit for both rental and personal purposes, the tax treatment of the rental expenses you figured earlier under Dividing Expenses and rental income depends on whether you are considered to be using the dwelling unit as a home. 1040 forms and instructions You use a dwelling unit as a home during the tax year if you use it for personal purposes more than the greater of: 14 days, or 10% of the total days it is rented to others at a fair rental price. 1040 forms and instructions See What is a day of personal use , later. 1040 forms and instructions If a dwelling unit is used for personal purposes on a day it is rented at a fair rental price (discussed earlier), do not count that day as a day of rental use in applying (2) above. 1040 forms and instructions Instead, count it as a day of personal use in applying both (1) and (2) above. 1040 forms and instructions What is a day of personal use?   A day of personal use of a dwelling unit is any day that the unit is used by any of the following persons. 1040 forms and instructions You or any other person who owns an interest in it, unless you rent it to another owner as his or her main home under a shared equity financing agreement (defined later). 1040 forms and instructions However, see Days used as a main home before or after renting , later. 1040 forms and instructions A member of your family or a member of the family of any other person who owns an interest in it, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. 1040 forms and instructions Family includes only your spouse, brothers and sisters, half-brothers and half-sisters, ancestors (parents, grandparents, etc. 1040 forms and instructions ), and lineal descendants (children, grandchildren, etc. 1040 forms and instructions ). 1040 forms and instructions Anyone under an arrangement that lets you use some other dwelling unit. 1040 forms and instructions Anyone at less than a fair rental price. 1040 forms and instructions Main home. 1040 forms and instructions   If the other person or member of the family in (1) or (2) above has more than one home, his or her main home is ordinarily the one he or she lived in most of the time. 1040 forms and instructions Shared equity financing agreement. 1040 forms and instructions   This is an agreement under which two or more persons acquire undivided interests for more than 50 years in an entire dwelling unit, including the land, and one or more of the co-owners is entitled to occupy the unit as his or her main home upon payment of rent to the other co-owner or owners. 1040 forms and instructions Donation of use of the property. 1040 forms and instructions   You use a dwelling unit for personal purposes if: You donate the use of the unit to a charitable organization, The organization sells the use of the unit at a fund-raising event, and The “purchaser” uses the unit. 1040 forms and instructions Examples. 1040 forms and instructions   The following examples show how to determine if you have days of personal use. 1040 forms and instructions Example 1. 1040 forms and instructions You and your neighbor are co-owners of a condominium at the beach. 1040 forms and instructions Last year, you rented the unit to vacationers whenever possible. 1040 forms and instructions The unit was not used as a main home by anyone. 1040 forms and instructions Your neighbor used the unit for 2 weeks last year; you did not use it at all. 1040 forms and instructions Because your neighbor has an interest in the unit, both of you are considered to have used the unit for personal purposes during those 2 weeks. 1040 forms and instructions Example 2. 1040 forms and instructions You and your neighbors are co-owners of a house under a shared equity financing agreement. 1040 forms and instructions Your neighbors live in the house and pay you a fair rental price. 1040 forms and instructions Even though your neighbors have an interest in the house, the days your neighbors live there are not counted as days of personal use by you. 1040 forms and instructions This is because your neighbors rent the house as their main home under a shared equity financing agreement. 1040 forms and instructions Example 3. 1040 forms and instructions You own a rental property that you rent to your son. 1040 forms and instructions Your son does not own any interest in this property. 1040 forms and instructions He uses it as his main home and pays you a fair rental price. 1040 forms and instructions Your son's use of the property is not personal use by you because your son is using it as his main home, he owns no interest in the property, and he is paying you a fair rental price. 1040 forms and instructions Example 4. 1040 forms and instructions You rent your beach house to Rosa. 1040 forms and instructions Rosa rents her cabin in the mountains to you. 1040 forms and instructions You each pay a fair rental price. 1040 forms and instructions You are using your beach house for personal purposes on the days that Rosa uses it because your house is used by Rosa under an arrangement that allows you to use her cabin. 1040 forms and instructions Example 5. 1040 forms and instructions You rent an apartment to your mother at less than a fair rental price. 1040 forms and instructions You are using the apartment for personal purposes on the days that your mother rents it because you rent it for less than a fair rental price. 1040 forms and instructions Days used for repairs and maintenance. 1040 forms and instructions   Any day that you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. 1040 forms and instructions Do not count such a day as a day of personal use even if family members use the property for recreational purposes on the same day. 1040 forms and instructions Example. 1040 forms and instructions Corey owns a cabin in the mountains that he rents for most of the year. 1040 forms and instructions He spends a week at the cabin with family members. 1040 forms and instructions Corey works on maintenance of the cabin 3 or 4 hours each day during the week and spends the rest of the time fishing, hiking, and relaxing. 1040 forms and instructions Corey's family members, however, work substantially full time on the cabin each day during the week. 1040 forms and instructions The main purpose of being at the cabin that week is to do maintenance work. 1040 forms and instructions Therefore, the use of the cabin during the week by Corey and his family will not be considered personal use by Corey. 1040 forms and instructions Days used as a main home before or after renting. 1040 forms and instructions   For purposes of determining whether a dwelling unit was used as a home, you may not have to count days you used the property as your main home before or after renting it or offering it for rent as days of personal use. 1040 forms and instructions Do not count them as days of personal use if: You rented or tried to rent the property for 12 or more consecutive months. 1040 forms and instructions You rented or tried to rent the property for a period of less than 12 consecutive months and the period ended because you sold or exchanged the property. 1040 forms and instructions However, this special rule does not apply when dividing expenses between rental and personal use. 1040 forms and instructions See Property Changed to Rental Use in chapter 4. 1040 forms and instructions Example 1. 1040 forms and instructions On February 29, 2012, you moved out of the house you had lived in for 6 years because you accepted a job in another town. 1040 forms and instructions You rented your house at a fair rental price from March 15, 2012, to May 14, 2013 (14 months). 1040 forms and instructions On June 1, 2013, you moved back into your old house. 1040 forms and instructions The days you used the house as your main home from January 1 to February 29, 2012, and from June 1 to December 31, 2013, are not counted as days of personal use. 1040 forms and instructions Therefore, you would use the rules in chapter 1 when figuring your rental income and expenses. 1040 forms and instructions Example 2. 1040 forms and instructions On January 31, you moved out of the condominium where you had lived for 3 years. 1040 forms and instructions You offered it for rent at a fair rental price beginning on February 1. 1040 forms and instructions You were unable to rent it until April. 1040 forms and instructions On September 15, you sold the condominium. 1040 forms and instructions The days you used the condominium as your main home from January 1 to January 31 are not counted as days of personal use when determining whether you used it as a home. 1040 forms and instructions Examples. 1040 forms and instructions   The following examples show how to determine whether you used your rental property as a home. 1040 forms and instructions Example 1. 1040 forms and instructions You converted the basement of your home into an apartment with a bedroom, a bathroom, and a small kitchen. 1040 forms and instructions You rented the basement apartment at a fair rental price to college students during the regular school year. 1040 forms and instructions You rented to them on a 9-month lease (273 days). 1040 forms and instructions You figured 10% of the total days rented to others at a fair rental price is 27 days. 1040 forms and instructions During June (30 days), your brothers stayed with you and lived in the basement apartment rent free. 1040 forms and instructions Your basement apartment was used as a home because you used it for personal purposes for 30 days. 1040 forms and instructions Rent-free use by your brothers is considered personal use. 1040 forms and instructions Your personal use (30 days) is more than the greater of 14 days or 10% of the total days it was rented (27 days). 1040 forms and instructions Example 2. 1040 forms and instructions You rented the guest bedroom in your home at a fair rental price during the local college's homecoming, commencement, and football weekends (a total of 27 days). 1040 forms and instructions Your sister-in-law stayed in the room, rent free, for the last 3 weeks (21 days) in July. 1040 forms and instructions You figured 10% of the total days rented to others at a fair rental price is 3 days. 1040 forms and instructions The room was used as a home because you used it for personal purposes for 21 days. 1040 forms and instructions That is more than the greater of 14 days or 10% of the 27 days it was rented (3 days). 1040 forms and instructions Example 3. 1040 forms and instructions You own a condominium apartment in a resort area. 1040 forms and instructions You rented it at a fair rental price for a total of 170 days during the year. 1040 forms and instructions For 12 of these days, the tenant was not able to use the apartment and allowed you to use it even though you did not refund any of the rent. 1040 forms and instructions Your family actually used the apartment for 10 of those days. 1040 forms and instructions Therefore, the apartment is treated as having been rented for 160 (170 – 10) days. 1040 forms and instructions You figured 10% of the total days rented to others at a fair rental price is 16 days. 1040 forms and instructions Your family also used the apartment for 7 other days during the year. 1040 forms and instructions You used the apartment as a home because you used it for personal purposes for 17 days. 1040 forms and instructions That is more than the greater of 14 days or 10% of the 160 days it was rented (16 days). 1040 forms and instructions Minimal rental use. 1040 forms and instructions   If you use the dwelling unit as a home and you rent it less than 15 days during the year, that period is not treated as rental activity. 1040 forms and instructions See Used as a home but rented less than 15 days, later, for more information. 1040 forms and instructions Limit on deductions. 1040 forms and instructions   Renting a dwelling unit that is considered a home is not a passive activity. 1040 forms and instructions Instead, if your rental expenses are more than your rental income, some or all of the excess expenses cannot be used to offset income from other sources. 1040 forms and instructions The excess expenses that cannot be used to offset income from other sources are carried forward to the next year and treated as rental expenses for the same property. 1040 forms and instructions Any expenses carried forward to the next year will be subject to any limits that apply for that year. 1040 forms and instructions This limitation will apply to expenses carried forward to another year even if you do not use the property as your home for that subsequent year. 1040 forms and instructions   To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 5–1. 1040 forms and instructions Reporting Income and Deductions Property not used for personal purposes. 1040 forms and instructions   If you do not use a dwelling unit for personal purposes, see chapter 3 for how to report your rental income and expenses. 1040 forms and instructions Property used for personal purposes. 1040 forms and instructions   If you do use a dwelling unit for personal purposes, then how you report your rental income and expenses depends on whether you used the dwelling unit as a home. 1040 forms and instructions Not used as a home. 1040 forms and instructions   If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. 1040 forms and instructions Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in this chapter under Dividing Expenses . 1040 forms and instructions The expenses for personal use are not deductible as rental expenses. 1040 forms and instructions   Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses in chapter 3. 1040 forms and instructions Used as a home but rented less than 15 days. 1040 forms and instructions   If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function is not considered to be rental and it should not be reported on Schedule E (Form 1040). 1040 forms and instructions You are not required to report the rental income and rental expenses from this activity. 1040 forms and instructions The expenses, including qualified mortgage interest, property taxes, and any qualified casualty loss will be reported as normally allowed on Schedule A (Form 1040). 1040 forms and instructions See the Instructions for Schedule A (Form 1040) for more information on deducting these expenses. 1040 forms and instructions Used as a home and rented 15 days or more. 1040 forms and instructions   If you use a dwelling unit as a home and rent it 15 days or more during the year, include all your rental income in your income. 1040 forms and instructions Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in this chapter under Dividing Expenses . 1040 forms and instructions The expenses for personal use are not deductible as rental expenses. 1040 forms and instructions   If you had a net profit from renting the dwelling unit for the year (that is, if your rental income is more than the total of your rental expenses, including depreciation), deduct all of your rental expenses. 1040 forms and instructions You do not need to use Worksheet 5-1. 1040 forms and instructions   However, if you had a net loss from renting the dwelling unit for the year, your deduction for certain rental expenses is limited. 1040 forms and instructions To figure your deductible rental expenses and any carryover to next year, use Worksheet 5–1. 1040 forms and instructions Worksheet 5-1. 1040 forms and instructions Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Use this worksheet only if you answer “yes” to all of the following questions. 1040 forms and instructions Did you use the dwelling unit as a home this year? (See Dwelling Unit Used as a Home . 1040 forms and instructions ) Did you rent the dwelling unit at a fair rental price 15 days or more this year? Is the total of your rental expenses and depreciation more than your rental income? PART I. 1040 forms and instructions Rental Use Percentage A. 1040 forms and instructions Total days available for rent at fair rental price A. 1040 forms and instructions       B. 1040 forms and instructions Total days available for rent (line A) but not rented B. 1040 forms and instructions       C. 1040 forms and instructions Total days of rental use. 1040 forms and instructions Subtract line B from line A C. 1040 forms and instructions       D. 1040 forms and instructions Total days of personal use (including days rented at less than fair rental price) D. 1040 forms and instructions       E. 1040 forms and instructions Total days of rental and personal use. 1040 forms and instructions Add lines C and D E. 1040 forms and instructions       F. 1040 forms and instructions Percentage of expenses allowed for rental. 1040 forms and instructions Divide line C by line E     F. 1040 forms and instructions . 1040 forms and instructions PART II. 1040 forms and instructions Allowable Rental Expenses 1. 1040 forms and instructions Enter rents received 1. 1040 forms and instructions   2a. 1040 forms and instructions Enter the rental portion of deductible home mortgage interest and qualified mortgage insurance premiums (see instructions) 2a. 1040 forms and instructions       b. 1040 forms and instructions Enter the rental portion of real estate taxes b. 1040 forms and instructions       c. 1040 forms and instructions Enter the rental portion of deductible casualty and theft losses (see instructions) c. 1040 forms and instructions       d. 1040 forms and instructions Enter direct rental expenses (see instructions) d. 1040 forms and instructions       e. 1040 forms and instructions Fully deductible rental expenses. 1040 forms and instructions Add lines 2a–2d. 1040 forms and instructions Enter here and  on the appropriate lines on Schedule E (see instructions) 2e. 1040 forms and instructions   3. 1040 forms and instructions Subtract line 2e from line 1. 1040 forms and instructions If zero or less, enter -0- 3. 1040 forms and instructions   4a. 1040 forms and instructions Enter the rental portion of expenses directly related to operating or maintaining  the dwelling unit (such as repairs, insurance, and utilities) 4a. 1040 forms and instructions       b. 1040 forms and instructions Enter the rental portion of excess mortgage interest and qualified mortgage insurance premiums (see instructions) b. 1040 forms and instructions       c. 1040 forms and instructions Carryover of operating expenses from 2012 worksheet c. 1040 forms and instructions       d. 1040 forms and instructions Add lines 4a–4c d. 1040 forms and instructions       e. 1040 forms and instructions Allowable expenses. 1040 forms and instructions Enter the smaller of line 3 or line 4d (see instructions) 4e. 1040 forms and instructions   5. 1040 forms and instructions Subtract line 4e from line 3. 1040 forms and instructions If zero or less, enter -0- 5. 1040 forms and instructions   6a. 1040 forms and instructions Enter the rental portion of excess casualty and theft losses (see instructions) 6a. 1040 forms and instructions       b. 1040 forms and instructions Enter the rental portion of depreciation of the dwelling unit b. 1040 forms and instructions       c. 1040 forms and instructions Carryover of excess casualty losses and depreciation from 2012 worksheet c. 1040 forms and instructions       d. 1040 forms and instructions Add lines 6a–6c d. 1040 forms and instructions       e. 1040 forms and instructions Allowable excess casualty and theft losses and depreciation. 1040 forms and instructions Enter the smaller of  line 5 or line 6d (see instructions) 6e. 1040 forms and instructions   PART III. 1040 forms and instructions Carryover of Unallowed Expenses to Next Year 7a. 1040 forms and instructions Operating expenses to be carried over to next year. 1040 forms and instructions Subtract line 4e from line 4d 7a. 1040 forms and instructions   b. 1040 forms and instructions Excess casualty and theft losses and depreciation to be carried over to next year. 1040 forms and instructions  Subtract line 6e from line 6d b. 1040 forms and instructions   Worksheet 5-1 Instructions. 1040 forms and instructions Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Caution. 1040 forms and instructions Use the percentage determined in Part I, line F, to figure the rental portions to enter on lines 2a–2c, 4a–4b, and 6a–6b of  Part II. 1040 forms and instructions Line 2a. 1040 forms and instructions Figure the mortgage interest on the dwelling unit that you could deduct on Schedule A as if you had not rented the unit. 1040 forms and instructions Do not include interest on a loan that did not benefit the dwelling unit. 1040 forms and instructions For example, do not include interest on a home equity loan used to pay off credit cards or other personal loans, buy a car, or pay college tuition. 1040 forms and instructions Include interest on a loan used to buy, build, or improve the dwelling unit, or to refinance such a loan. 1040 forms and instructions Include the rental portion of this interest in the total you enter on line 2a of the worksheet. 1040 forms and instructions   Figure the qualified mortgage insurance premiums on the dwelling unit that you could deduct on line 13 of Schedule A as if you had not rented the unit. 1040 forms and instructions See the Schedule A instructions. 1040 forms and instructions However, figure your adjusted gross income (Form 1040, line 38) without your rental income and expenses from the dwelling unit. 1040 forms and instructions See Line 4b to deduct the part of the qualified mortgage insurance premiums not allowed because of the adjusted gross income limit. 1040 forms and instructions Include the rental portion of the amount from Schedule A, line 13, in the total you enter on line 2a of the worksheet. 1040 forms and instructions   Note. 1040 forms and instructions Do not file this Schedule A or use it to figure the amount to deduct on line 13 of that schedule. 1040 forms and instructions Instead, figure the personal portion on a separate Schedule A. 1040 forms and instructions If you have deducted mortgage interest or qualified mortgage insurance premiums on the dwelling unit on other forms, such as Schedule C or F, remember to reduce your Schedule A deduction by that amount. 1040 forms and instructions           Line 2c. 1040 forms and instructions Figure the casualty and theft losses related to the dwelling unit that you could deduct on Schedule A as if you had not rented the dwelling unit. 1040 forms and instructions To do this, complete Section A of Form 4684, Casualties and Thefts, treating the losses as personal losses. 1040 forms and instructions If any of the loss is due to a federally declared disaster, see the Instructions for Form 4684. 1040 forms and instructions On Form 4684, line 17, enter 10% of your adjusted gross income figured without your rental income and expenses from the dwelling unit. 1040 forms and instructions Enter the rental portion of the result from Form 4684, line 18, on line 2c of this worksheet. 1040 forms and instructions   Note. 1040 forms and instructions Do not file this Form 4684 or use it to figure your personal losses on Schedule A. 1040 forms and instructions Instead, figure the personal portion on a separate Form 4684. 1040 forms and instructions           Line 2d. 1040 forms and instructions Enter the total of your rental expenses that are directly related only to the rental activity. 1040 forms and instructions These include interest on loans used for rental activities other than to buy, build, or improve the dwelling unit. 1040 forms and instructions Also include rental agency fees, advertising, office supplies, and depreciation on office equipment used in your rental activity. 1040 forms and instructions           Line 2e. 1040 forms and instructions You can deduct the amounts on lines 2a, 2b, 2c, and 2d as rental expenses on Schedule E even if your rental expenses are more than your rental income. 1040 forms and instructions Enter the amounts on lines 2a, 2b, 2c, and 2d on the appropriate lines of Schedule E. 1040 forms and instructions           Line 4b. 1040 forms and instructions On line 2a, you entered the rental portion of the mortgage interest or qualified mortgage insurance premiums you could deduct on Schedule A if you had not rented the dwelling unit. 1040 forms and instructions If you had additional mortgage interest and qualified mortgage insurance premiums that would not be deductible on Schedule A because of limits imposed on them, enter on line 4b of this worksheet the rental portion of those excess amounts. 1040 forms and instructions Do not include interest on a loan that did not benefit the dwelling unit  (as explained in the line 2a instructions). 1040 forms and instructions           Line 4e. 1040 forms and instructions You can deduct the amounts on lines 4a, 4b, and 4c as rental expenses on Schedule E only to the extent they are not more than the amount on line 4e. 1040 forms and instructions *           Line 6a. 1040 forms and instructions To find the rental portion of excess casualty and theft losses, use the Form 4684 you prepared for line 2c of this worksheet. 1040 forms and instructions   A. 1040 forms and instructions Enter the amount from Form 4684, line 10       B. 1040 forms and instructions Enter the rental portion of line A       C. 1040 forms and instructions Enter the amount from line 2c of this worksheet       D. 1040 forms and instructions Subtract line C from line B. 1040 forms and instructions Enter the result here and on line 6a of this worksheet               Line 6e. 1040 forms and instructions You can deduct the amounts on lines 6a, 6b, and 6c as rental expenses on Schedule E only to the extent they are not more than the amount on line 6e. 1040 forms and instructions * *Allocating the limited deduction. 1040 forms and instructions If you cannot deduct all of the amount on line 4d or 6d this year, you can allocate the allowable deduction in any way you wish among the expenses included on line 4d or 6d. 1040 forms and instructions Enter the amount you allocate to each expense on the appropriate line of Schedule E, Part I. 1040 forms and instructions Prev  Up  Next   Home   More Online Publications