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1040ez Tax Form 2013

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1040ez Tax Form 2013

1040ez tax form 2013 25. 1040ez tax form 2013   Nonbusiness Casualty and Theft Losses Table of Contents What's New Introduction Useful Items - You may want to see: CasualtyFamily pet. 1040ez tax form 2013 Progressive deterioration. 1040ez tax form 2013 Damage from corrosive drywall. 1040ez tax form 2013 Theft Loss on Deposits Proof of Loss Figuring a LossDecrease in Fair Market Value Adjusted Basis Insurance and Other Reimbursements Single Casualty on Multiple Properties Deduction Limits$100 Rule 10% Rule When To Report Gains and LossesDisaster Area Loss How To Report Gains and Losses What's New New Section C of Form 4684 for Ponzi-type investment schemes. 1040ez tax form 2013  Section C of Form 4684 is new for 2013. 1040ez tax form 2013 You must complete Section C if you are claiming a theft loss deduction due to a Ponzi-type investment scheme and are using Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58. 1040ez tax form 2013 Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. 1040ez tax form 2013 You do not need to complete Appendix A. 1040ez tax form 2013 For details, see Losses from Ponzi-type investment schemes , in this chapter. 1040ez tax form 2013 Introduction This chapter explains the tax treatment of personal (not business or investment related) casualty losses, theft losses, and losses on deposits. 1040ez tax form 2013 The chapter also explains the following  topics. 1040ez tax form 2013 How to figure the amount of your loss. 1040ez tax form 2013 How to treat insurance and other reimbursements you receive. 1040ez tax form 2013 The deduction limits. 1040ez tax form 2013 When and how to report a casualty or theft. 1040ez tax form 2013 Forms to file. 1040ez tax form 2013    When you have a casualty or theft, you have to file Form 4684. 1040ez tax form 2013 You will also have to file one or more of the following forms. 1040ez tax form 2013 Schedule A (Form 1040), Itemized Deductions Schedule D (Form 1040), Capital Gains and Losses Condemnations. 1040ez tax form 2013   For information on condemnations of property, see Involuntary Conversions in chapter 1 of Publication 544, Sales and Other Disposition of Assets. 1040ez tax form 2013 Workbook for casualties and thefts. 1040ez tax form 2013    Publication 584 is available to help you make a list of your stolen or damaged personal-use property and figure your loss. 1040ez tax form 2013 It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. 1040ez tax form 2013 Business or investment-related losses. 1040ez tax form 2013   For information on a casualty or theft loss of business or income-producing property, see Publication 547, Casualties, Disasters, and Thefts. 1040ez tax form 2013 Useful Items - You may want to see: Publication 544 Sales and Other Dispositions  of Assets 547 Casualties, Disasters, and   Thefts 584 Casualty, Disaster, and Theft   Loss Workbook (Personal-Use  Property) Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule D (Form 1040) Capital Gains and Losses 4684 Casualties and Thefts Casualty A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. 1040ez tax form 2013 A sudden event is one that is swift, not gradual or progressive. 1040ez tax form 2013 An unexpected event is one that is ordinarily unanticipated and unintended. 1040ez tax form 2013 An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. 1040ez tax form 2013 Deductible losses. 1040ez tax form 2013   Deductible casualty losses can result from a number of different causes, including the following. 1040ez tax form 2013 Car accidents (but see Nondeductible losses , next, for exceptions). 1040ez tax form 2013 Earthquakes. 1040ez tax form 2013 Fires (but see Nondeductible losses , next, for exceptions). 1040ez tax form 2013 Floods. 1040ez tax form 2013 Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses in Publication 547. 1040ez tax form 2013 Mine cave-ins. 1040ez tax form 2013 Shipwrecks. 1040ez tax form 2013 Sonic booms. 1040ez tax form 2013 Storms, including hurricanes and tornadoes. 1040ez tax form 2013 Terrorist attacks. 1040ez tax form 2013 Vandalism. 1040ez tax form 2013 Volcanic eruptions. 1040ez tax form 2013 Nondeductible losses. 1040ez tax form 2013   A casualty loss is not deductible if the damage or destruction is caused by the following. 1040ez tax form 2013 Accidentally breaking articles such as glassware or china under normal conditions. 1040ez tax form 2013 A family pet (explained below). 1040ez tax form 2013 A fire if you willfully set it or pay someone else to set it. 1040ez tax form 2013 A car accident if your willful negligence or willful act caused it. 1040ez tax form 2013 The same is true if the willful act or willful negligence of someone acting for you caused the accident. 1040ez tax form 2013 Progressive deterioration (explained later). 1040ez tax form 2013 Family pet. 1040ez tax form 2013   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed earlier under Casualty are met. 1040ez tax form 2013 Example. 1040ez tax form 2013 Your antique oriental rug was damaged by your new puppy before it was housebroken. 1040ez tax form 2013 Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. 1040ez tax form 2013 Progressive deterioration. 1040ez tax form 2013    Loss of property due to progressive deterioration is not deductible as a casualty loss. 1040ez tax form 2013 This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. 1040ez tax form 2013 The following are examples of damage due to progressive deterioration. 1040ez tax form 2013 The steady weakening of a building due to normal wind and weather conditions. 1040ez tax form 2013 The deterioration and damage to a water heater that bursts. 1040ez tax form 2013 However, the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty. 1040ez tax form 2013 Most losses of property caused by droughts. 1040ez tax form 2013 To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit. 1040ez tax form 2013 Termite or moth damage. 1040ez tax form 2013 The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. 1040ez tax form 2013 However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. 1040ez tax form 2013 Damage from corrosive drywall. 1040ez tax form 2013   Under a special procedure, you may be able to claim a casualty loss deduction for amounts you paid to repair damage to your home and household appliances that resulted from corrosive drywall. 1040ez tax form 2013 For details, see Publication 547. 1040ez tax form 2013 Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. 1040ez tax form 2013 The taking of property must be illegal under the laws of the state where it occurred and it must have been done with criminal intent. 1040ez tax form 2013 You do not need to show a conviction for theft. 1040ez tax form 2013 Theft includes the taking of money or property by the following means. 1040ez tax form 2013 Blackmail. 1040ez tax form 2013 Burglary. 1040ez tax form 2013 Embezzlement. 1040ez tax form 2013 Extortion. 1040ez tax form 2013 Kidnapping for ransom. 1040ez tax form 2013 Larceny. 1040ez tax form 2013 Robbery. 1040ez tax form 2013 The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. 1040ez tax form 2013 Decline in market value of stock. 1040ez tax form 2013   You cannot deduct as a theft loss the decline in market value of stock acquired on the open market for investment if the decline is caused by disclosure of accounting fraud or other illegal misconduct by the officers or directors of the corporation that issued the stock. 1040ez tax form 2013 However, you can deduct as a capital loss the loss you sustain when you sell or exchange the stock or the stock becomes completely worthless. 1040ez tax form 2013 You report a capital loss on Schedule D (Form 1040). 1040ez tax form 2013 For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. 1040ez tax form 2013 Mislaid or lost property. 1040ez tax form 2013   The simple disappearance of money or property is not a theft. 1040ez tax form 2013 However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. 1040ez tax form 2013 Sudden, unexpected, and unusual events are defined earlier. 1040ez tax form 2013 Example. 1040ez tax form 2013 A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. 1040ez tax form 2013 The diamond falls from the ring and is never found. 1040ez tax form 2013 The loss of the diamond is a casualty. 1040ez tax form 2013 Losses from Ponzi-type investment schemes. 1040ez tax form 2013   If you had a loss from a Ponzi-type investment scheme, see: Revenue Ruling 2009-9, 2009-14 I. 1040ez tax form 2013 R. 1040ez tax form 2013 B. 1040ez tax form 2013 735 (available at www. 1040ez tax form 2013 irs. 1040ez tax form 2013 gov/irb/2009-14_IRB/ar07. 1040ez tax form 2013 html). 1040ez tax form 2013 Revenue Procedure 2009-20, 2009-14 I. 1040ez tax form 2013 R. 1040ez tax form 2013 B. 1040ez tax form 2013 749 (available at www. 1040ez tax form 2013 irs. 1040ez tax form 2013 gov/irb/2009-14_IRB/ar11. 1040ez tax form 2013 html). 1040ez tax form 2013 Revenue Procedure 2011-58, 2011-50 I. 1040ez tax form 2013 R. 1040ez tax form 2013 B. 1040ez tax form 2013 849 (available at www. 1040ez tax form 2013 irs. 1040ez tax form 2013 gov/irb/2011-50_IRB/ar11. 1040ez tax form 2013 html). 1040ez tax form 2013 If you qualify to use Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58, and you choose to follow the procedures in the guidance, first fill out Section C of Form 4684 to determine the amount to enter on Section B, line 28. 1040ez tax form 2013 Skip lines 19 to 27. 1040ez tax form 2013 Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. 1040ez tax form 2013 You do not need to complete Appendix A. 1040ez tax form 2013 For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. 1040ez tax form 2013   If you choose not to use the procedures in Revenue Procedure 2009-20, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate. 1040ez tax form 2013 Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. 1040ez tax form 2013 If you incurred this type of loss, you can choose one of the following ways to deduct the loss. 1040ez tax form 2013 As a casualty loss. 1040ez tax form 2013 As an ordinary loss. 1040ez tax form 2013 As a nonbusiness bad debt. 1040ez tax form 2013 Casualty loss or ordinary loss. 1040ez tax form 2013   You can choose to deduct a loss on deposits as a casualty loss or as an ordinary loss for any year in which you can reasonably estimate how much of your deposits you have lost in an insolvent or bankrupt financial institution. 1040ez tax form 2013 The choice is generally made on the return you file for that year and applies to all your losses on deposits for the year in that particular financial institution. 1040ez tax form 2013 If you treat the loss as a casualty or ordinary loss, you cannot treat the same amount of the loss as a nonbusiness bad debt when it actually becomes worthless. 1040ez tax form 2013 However, you can take a nonbusiness bad debt deduction for any amount of loss that is more than the estimated amount you deducted as a casualty or ordinary loss. 1040ez tax form 2013 Once you make this choice, you cannot change it without permission from the Internal Revenue Service. 1040ez tax form 2013   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. 1040ez tax form 2013 The maximum amount you can claim is $20,000 ($10,000 if you are married filing separately) reduced by any expected state insurance proceeds. 1040ez tax form 2013 Your loss is subject to the 2%-of-adjusted-gross-income limit. 1040ez tax form 2013 You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. 1040ez tax form 2013 Nonbusiness bad debt. 1040ez tax form 2013   If you do not choose to deduct the loss as a casualty loss or as an ordinary loss, you must wait until the year the actual loss is determined and deduct the loss as a nonbusiness bad debt in that year. 1040ez tax form 2013 How to report. 1040ez tax form 2013   The kind of deduction you choose for your loss on deposits determines how you report your loss. 1040ez tax form 2013 If you choose: Casualty loss — report it on Form 4684 first and then on Schedule A (Form 1040). 1040ez tax form 2013 Ordinary loss — report it on Schedule A (Form 1040) as a miscellaneous itemized deduction. 1040ez tax form 2013 Nonbusiness bad debt — report it on Form 8949 first and then on Schedule D (Form 1040). 1040ez tax form 2013 More information. 1040ez tax form 2013   For more information, see Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the Instructions for Form 4684 or Deposit in Insolvent or Bankrupt Financial Institution in Publication 550. 1040ez tax form 2013 Proof of Loss To deduct a casualty or theft loss, you must be able to prove that you had a casualty or theft. 1040ez tax form 2013 You also must be able to support the amount you take as a deduction. 1040ez tax form 2013 Casualty loss proof. 1040ez tax form 2013   For a casualty loss, your records should show all the following. 1040ez tax form 2013 The type of casualty (car accident, fire, storm, etc. 1040ez tax form 2013 ) and when it occurred. 1040ez tax form 2013 That the loss was a direct result of the casualty. 1040ez tax form 2013 That you were the owner of the property or, if you leased the property from someone else, that you were contractually liable to the owner for the damage. 1040ez tax form 2013 Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. 1040ez tax form 2013 Theft loss proof. 1040ez tax form 2013   For a theft loss, your records should show all the following. 1040ez tax form 2013 When you discovered that your property was missing. 1040ez tax form 2013 That your property was stolen. 1040ez tax form 2013 That you were the owner of the property. 1040ez tax form 2013 Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. 1040ez tax form 2013 It is important that you have records that will prove your deduction. 1040ez tax form 2013 If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. 1040ez tax form 2013 Figuring a Loss Figure the amount of your loss using the following steps. 1040ez tax form 2013 Determine your adjusted basis in the property before the casualty or theft. 1040ez tax form 2013 Determine the decrease in fair market value of the property as a result of the casualty or theft. 1040ez tax form 2013 From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. 1040ez tax form 2013 For personal-use property and property used in performing services as an employee, apply the deduction limits, discussed later, to determine the amount of your deductible loss. 1040ez tax form 2013 Gain from reimbursement. 1040ez tax form 2013   If your reimbursement is more than your adjusted basis in the property, you have a gain. 1040ez tax form 2013 This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. 1040ez tax form 2013 If you have a gain, you may have to pay tax on it, or you may be able to postpone reporting the gain. 1040ez tax form 2013 See Publication 547 for more information on how to treat a gain from a reimbursement for a casualty or theft. 1040ez tax form 2013 Leased property. 1040ez tax form 2013   If you are liable for casualty damage to property you lease, your loss is the amount you must pay to repair the property minus any insurance or other reimbursement you receive or expect to receive. 1040ez tax form 2013 Decrease in Fair Market Value Fair market value (FMV) is the price for which you could sell your property to a willing buyer when neither of you has to sell or buy and both of you know all the relevant facts. 1040ez tax form 2013 The decrease in FMV used to figure the amount of a casualty or theft loss is the difference between the property's fair market value immediately before and immediately after the casualty or theft. 1040ez tax form 2013 FMV of stolen property. 1040ez tax form 2013   The FMV of property immediately after a theft is considered to be zero, since you no longer have the property. 1040ez tax form 2013 Example. 1040ez tax form 2013 Several years ago, you purchased silver dollars at face value for $150. 1040ez tax form 2013 This is your adjusted basis in the property. 1040ez tax form 2013 Your silver dollars were stolen this year. 1040ez tax form 2013 The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. 1040ez tax form 2013 Your theft loss is $150. 1040ez tax form 2013 Recovered stolen property. 1040ez tax form 2013   Recovered stolen property is your property that was stolen and later returned to you. 1040ez tax form 2013 If you recovered property after you had already taken a theft loss deduction, you must refigure your loss using the smaller of the property's adjusted basis (explained later) or the decrease in FMV from the time just before it was stolen until the time it was recovered. 1040ez tax form 2013 Use this amount to refigure your total loss for the year in which the loss was deducted. 1040ez tax form 2013   If your refigured loss is less than the loss you deducted, you generally have to report the difference as income in the recovery year. 1040ez tax form 2013 But report the difference only up to the amount of the loss that reduced your tax. 1040ez tax form 2013 For more information on the amount to report, see Recoveries in chapter 12. 1040ez tax form 2013 Figuring Decrease in FMV— Items To Consider To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. 1040ez tax form 2013 However, other measures can also be used to establish certain decreases. 1040ez tax form 2013 Appraisal. 1040ez tax form 2013   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterward should be made by a competent appraiser. 1040ez tax form 2013 The appraiser must recognize the effects of any general market decline that may occur along with the casualty. 1040ez tax form 2013 This information is needed to limit any deduction to the actual loss resulting from damage to the property. 1040ez tax form 2013   Several factors are important in evaluating the accuracy of an appraisal, including the following. 1040ez tax form 2013 The appraiser's familiarity with your property before and after the casualty or theft. 1040ez tax form 2013 The appraiser's knowledge of sales of comparable property in the area. 1040ez tax form 2013 The appraiser's knowledge of conditions in the area of the casualty. 1040ez tax form 2013 The appraiser's method of appraisal. 1040ez tax form 2013    You may be able to use an appraisal that you used to get a federal loan (or a federal loan guarantee) as the result of a federally declared disaster to establish the amount of your disaster loss. 1040ez tax form 2013 For more information on disasters, see Disaster Area Losses, in Pub. 1040ez tax form 2013 547. 1040ez tax form 2013 Cost of cleaning up or making repairs. 1040ez tax form 2013   The cost of repairing damaged property is not part of a casualty loss. 1040ez tax form 2013 Neither is the cost of cleaning up after a casualty. 1040ez tax form 2013 But you can use the cost of cleaning up or making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. 1040ez tax form 2013 The repairs are actually made. 1040ez tax form 2013 The repairs are necessary to bring the property back to its condition before the casualty. 1040ez tax form 2013 The amount spent for repairs is not excessive. 1040ez tax form 2013 The repairs take care of the damage only. 1040ez tax form 2013 The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. 1040ez tax form 2013 Landscaping. 1040ez tax form 2013   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. 1040ez tax form 2013 You may be able to measure your loss by what you spend on the following. 1040ez tax form 2013 Removing destroyed or damaged trees and shrubs minus any salvage you receive. 1040ez tax form 2013 Pruning and other measures taken to preserve damaged trees and shrubs. 1040ez tax form 2013 Replanting necessary to restore the property to its approximate value before the casualty. 1040ez tax form 2013 Car value. 1040ez tax form 2013    Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. 1040ez tax form 2013 You can use the book's retail values and modify them by such factors as mileage and the condition of your car to figure its value. 1040ez tax form 2013 The prices are not official, but they may be useful in determining value and suggesting relative prices for comparison with current sales and offerings in your area. 1040ez tax form 2013 If your car is not listed in the books, determine its value from other sources. 1040ez tax form 2013 A dealer's offer for your car as a trade-in on a new car is not usually a measure of its true value. 1040ez tax form 2013 Figuring Decrease in FMV— Items Not To Consider You generally should not consider the following items when attempting to establish the decrease in FMV of your property. 1040ez tax form 2013 Cost of protection. 1040ez tax form 2013   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. 1040ez tax form 2013 The amount you spend on insurance or to board up your house against a storm is not part of your loss. 1040ez tax form 2013   If you make permanent improvements to your property to protect it against a casualty or theft, add the cost of these improvements to your basis in the property. 1040ez tax form 2013 An example would be the cost of a dike to prevent flooding. 1040ez tax form 2013 Exception. 1040ez tax form 2013   You cannot increase your basis in the property by, or deduct as a business expense, any expenditures you made with respect to qualified disaster mitigation payments. 1040ez tax form 2013 See Disaster Area Losses in Publication 547. 1040ez tax form 2013 Incidental expenses. 1040ez tax form 2013   Any incidental expenses you have due to a casualty or theft, such as expenses for the treatment of personal injuries, for temporary housing, or for a rental car, are not part of your casualty or theft loss. 1040ez tax form 2013 Replacement cost. 1040ez tax form 2013   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. 1040ez tax form 2013 Sentimental value. 1040ez tax form 2013   Do not consider sentimental value when determining your loss. 1040ez tax form 2013 If a family portrait, heirloom, or keepsake is damaged, destroyed, or stolen, you must base your loss on its FMV, as limited by your adjusted basis in the property. 1040ez tax form 2013 Decline in market value of property in or near casualty area. 1040ez tax form 2013   A decrease in the value of your property because it is in or near an area that suffered a casualty, or that might again suffer a casualty, is not to be taken into consideration. 1040ez tax form 2013 You have a loss only for actual casualty damage to your property. 1040ez tax form 2013 However, if your home is in a federally declared disaster area, see Disaster Area Losses in Publication 547. 1040ez tax form 2013 Costs of photographs and appraisals. 1040ez tax form 2013    Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. 1040ez tax form 2013 Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. 1040ez tax form 2013    Appraisals are used to figure the decrease in FMV because of a casualty or theft. 1040ez tax form 2013 See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. 1040ez tax form 2013   The costs of photographs and appraisals used as evidence of the value and condition of property damaged as a result of a casualty are not a part of the loss. 1040ez tax form 2013 You can claim these costs as a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit on Schedule A (Form 1040). 1040ez tax form 2013 For information about miscellaneous deductions, see chapter 28. 1040ez tax form 2013 Adjusted Basis Adjusted basis is your basis in the property (usually cost) increased or decreased by various events, such as improvements and casualty losses. 1040ez tax form 2013 For more information, see chapter 13. 1040ez tax form 2013 Insurance and Other Reimbursements If you receive an insurance payment or other type of reimbursement, you must subtract the reimbursement when you figure your loss. 1040ez tax form 2013 You do not have a casualty or theft loss to the extent you are reimbursed. 1040ez tax form 2013 If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. 1040ez tax form 2013 You must reduce your loss even if you do not receive payment until a later tax year. 1040ez tax form 2013 See Reimbursement Received After Deducting Loss , later. 1040ez tax form 2013 Failure to file a claim for reimbursement. 1040ez tax form 2013   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. 1040ez tax form 2013 Otherwise, you cannot deduct this loss as a casualty or theft loss. 1040ez tax form 2013 However, this rule does not apply to the portion of the loss not covered by insurance (for example, a deductible). 1040ez tax form 2013 Example. 1040ez tax form 2013 You have a car insurance policy with a $1,000 deductible. 1040ez tax form 2013 Because your insurance did not cover the first $1,000 of an auto collision, the $1,000 would be deductible (subject to the deduction limits discussed later). 1040ez tax form 2013 This is true even if you do not file an insurance claim, because your insurance policy would never have reimbursed you for the deductible. 1040ez tax form 2013 Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. 1040ez tax form 2013 Other types of reimbursements are discussed next. 1040ez tax form 2013 Also see the Instructions for Form 4684. 1040ez tax form 2013 Employer's emergency disaster fund. 1040ez tax form 2013   If you receive money from your employer's emergency disaster fund and you must use that money to rehabilitate or replace property on which you are claiming a casualty loss deduction, you must take that money into consideration in computing the casualty loss deduction. 1040ez tax form 2013 Take into consideration only the amount you used to replace your destroyed or damaged property. 1040ez tax form 2013 Example. 1040ez tax form 2013 Your home was extensively damaged by a tornado. 1040ez tax form 2013 Your loss after reimbursement from your insurance company was $10,000. 1040ez tax form 2013 Your employer set up a disaster relief fund for its employees. 1040ez tax form 2013 Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. 1040ez tax form 2013 You received $4,000 from the fund and spent the entire amount on repairs to your home. 1040ez tax form 2013 In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer's fund. 1040ez tax form 2013 Your casualty loss before applying the deduction limits discussed later is $6,000. 1040ez tax form 2013 Cash gifts. 1040ez tax form 2013   If you receive excludable cash gifts as a disaster victim and there are no limits on how you can use the money, you do not reduce your casualty loss by these excludable cash gifts. 1040ez tax form 2013 This applies even if you use the money to pay for repairs to property damaged in the disaster. 1040ez tax form 2013 Example. 1040ez tax form 2013 Your home was damaged by a hurricane. 1040ez tax form 2013 Relatives and neighbors made cash gifts to you that were excludable from your income. 1040ez tax form 2013 You used part of the cash gifts to pay for repairs to your home. 1040ez tax form 2013 There were no limits or restrictions on how you could use the cash gifts. 1040ez tax form 2013 Because it was an excludable gift, the money you received and used to pay for repairs to your home does not reduce your casualty loss on the damaged home. 1040ez tax form 2013 Insurance payments for living expenses. 1040ez tax form 2013   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. 1040ez tax form 2013 You lose the use of your main home because of a casualty. 1040ez tax form 2013 Government authorities do not allow you access to your main home because of a casualty or threat of one. 1040ez tax form 2013 Inclusion in income. 1040ez tax form 2013   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. 1040ez tax form 2013 Report this amount on Form 1040, line 21. 1040ez tax form 2013 However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. 1040ez tax form 2013 See Qualified disaster relief payments, under Disaster Area Losses in Publication 547. 1040ez tax form 2013   A temporary increase in your living expenses is the difference between the actual living expenses you and your family incurred during the period you could not use your home and your normal living expenses for that period. 1040ez tax form 2013 Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. 1040ez tax form 2013 Generally, these expenses include the amounts you pay for the following. 1040ez tax form 2013 Rent for suitable housing. 1040ez tax form 2013 Transportation. 1040ez tax form 2013 Food. 1040ez tax form 2013 Utilities. 1040ez tax form 2013 Miscellaneous services. 1040ez tax form 2013 Normal living expenses consist of these same expenses that you would have incurred but did not because of the casualty or the threat of one. 1040ez tax form 2013 Example. 1040ez tax form 2013 As a result of a fire, you vacated your apartment for a month and moved to a motel. 1040ez tax form 2013 You normally pay $525 a month for rent. 1040ez tax form 2013 None was charged for the month the apartment was vacated. 1040ez tax form 2013 Your motel rent for this month was $1,200. 1040ez tax form 2013 You normally pay $200 a month for food. 1040ez tax form 2013 Your food expenses for the month you lived in the motel were $400. 1040ez tax form 2013 You received $1,100 from your insurance company to cover your living expenses. 1040ez tax form 2013 You determine the payment you must include in income as follows. 1040ez tax form 2013 1) Insurance payment for living expenses $1,100 2) Actual expenses during the month you are unable to use your home because of fire 1,600   3) Normal living expenses 725   4) Temporary increase in living  expenses: Subtract line 3 from line 2 875 5) Amount of payment includible  in income: Subtract line 4  from line 1 $ 225 Tax year of inclusion. 1040ez tax form 2013   You include the taxable part of the insurance payment in income for the year you regain the use of your main home or, if later, for the year you receive the taxable part of the insurance payment. 1040ez tax form 2013 Example. 1040ez tax form 2013 Your main home was destroyed by a tornado in August 2011. 1040ez tax form 2013 You regained use of your home in November 2012. 1040ez tax form 2013 The insurance payments you received in 2011 and 2012 were $1,500 more than the temporary increase in your living expenses during those years. 1040ez tax form 2013 You include this amount in income on your 2012 Form 1040. 1040ez tax form 2013 If, in 2013, you receive further payments to cover the living expenses you had in 2011 and 2012, you must include those payments in income on your 2013 Form 1040. 1040ez tax form 2013 Disaster relief. 1040ez tax form 2013   Food, medical supplies, and other forms of assistance you receive do not reduce your casualty loss unless they are replacements for lost or destroyed property. 1040ez tax form 2013 Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster are not taxable income to you. 1040ez tax form 2013 For more information, see Disaster Area Losses in Publication 547. 1040ez tax form 2013 Disaster unemployment assistance payments are unemployment benefits that are taxable. 1040ez tax form 2013 Generally, disaster relief grants and qualified disaster mitigation payments made under the Robert T. 1040ez tax form 2013 Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) are not includible in your income. 1040ez tax form 2013 See Disaster Area Losses in Publication 547. 1040ez tax form 2013 Reimbursement Received After Deducting Loss If you figured your casualty or theft loss using your expected reimbursement, you may have to adjust your tax return for the tax year in which you receive your actual reimbursement. 1040ez tax form 2013 This section explains the adjustment you may have to make. 1040ez tax form 2013 Actual reimbursement less than expected. 1040ez tax form 2013   If you later receive less reimbursement than you expected, include that difference as a loss with your other losses (if any) on your return for the year in which you can reasonably expect no more reimbursement. 1040ez tax form 2013 Example. 1040ez tax form 2013 Your personal car had an FMV of $2,000 when it was destroyed in a collision with another car in 2012. 1040ez tax form 2013 The accident was due to the negligence of the other driver. 1040ez tax form 2013 At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. 1040ez tax form 2013 You did not have a deductible loss in 2012. 1040ez tax form 2013 In January 2013, the court awarded you a judgment of $2,000. 1040ez tax form 2013 However, in July it became apparent that you will be unable to collect any amount from the other driver. 1040ez tax form 2013 You can deduct the loss in 2013 subject to the limits discussed later. 1040ez tax form 2013 Actual reimbursement more than expected. 1040ez tax form 2013   If you later receive more reimbursement than you expected after you claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. 1040ez tax form 2013 However, if any part of the original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. 1040ez tax form 2013 You do not refigure your tax for the year you claimed the deduction. 1040ez tax form 2013 For more information, see Recoveries in chapter 12. 1040ez tax form 2013 If the total of all the reimbursements you receive is more than your adjusted basis in the destroyed or stolen property, you will have a gain on the casualty or theft. 1040ez tax form 2013 If you have already taken a deduction for a loss and you receive the reimbursement in a later year, you may have to include the gain in your income for the later year. 1040ez tax form 2013 Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. 1040ez tax form 2013 See Figuring a Gain in Publication 547 for more information on how to treat a gain from the reimbursement of a casualty or theft. 1040ez tax form 2013 Actual reimbursement same as expected. 1040ez tax form 2013   If you receive exactly the reimbursement you expected to receive, you do not have to include any of the reimbursement in your income and you cannot deduct any additional loss. 1040ez tax form 2013 Example. 1040ez tax form 2013 In December 2013, you had a collision while driving your personal car. 1040ez tax form 2013 Repairs to the car cost $950. 1040ez tax form 2013 You had $100 deductible collision insurance. 1040ez tax form 2013 Your insurance company agreed to reimburse you for the rest of the damage. 1040ez tax form 2013 Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. 1040ez tax form 2013 Due to the $100 rule (discussed later under Deduction Limits ), you cannot deduct the $100 you paid as the deductible. 1040ez tax form 2013 When you receive the $850 from the insurance company in 2014, do not report it as income. 1040ez tax form 2013 Single Casualty on Multiple Properties Personal property. 1040ez tax form 2013   Personal property is any property that is not real property. 1040ez tax form 2013 If your personal property is stolen or is damaged or destroyed by a casualty, you must figure your loss separately for each item of property. 1040ez tax form 2013 Then combine these separate losses to figure the total loss from that casualty or theft. 1040ez tax form 2013 Example. 1040ez tax form 2013 A fire in your home destroyed an upholstered chair, an oriental rug, and an antique table. 1040ez tax form 2013 You did not have fire insurance to cover your loss. 1040ez tax form 2013 (This was the only casualty or theft you had during the year. 1040ez tax form 2013 ) You paid $750 for the chair and you established that it had an FMV of $500 just before the fire. 1040ez tax form 2013 The rug cost $3,000 and had an FMV of $2,500 just before the fire. 1040ez tax form 2013 You bought the table at an auction for $100 before discovering it was an antique. 1040ez tax form 2013 It had been appraised at $900 before the fire. 1040ez tax form 2013 You figure your loss on each of these items as follows:     Chair Rug Table 1) Basis (cost) $750 $3,000 $100 2) FMV before fire $500 $2,500 $900 3) FMV after fire –0– –0– –0– 4) Decrease in FMV $500 $2,500 $900 5) Loss (smaller of (1) or  (4)) $500 $2,500 $100           6) Total loss     $3,100 Real property. 1040ez tax form 2013   In figuring a casualty loss on personal-use real property, treat the entire property (including any improvements, such as buildings, trees, and shrubs) as one item. 1040ez tax form 2013 Figure the loss using the smaller of the adjusted basis or the decrease in FMV of the entire property. 1040ez tax form 2013 Example. 1040ez tax form 2013 You bought your home a few years ago. 1040ez tax form 2013 You paid $160,000 ($20,000 for the land and $140,000 for the house). 1040ez tax form 2013 You also spent $2,000 for landscaping. 1040ez tax form 2013 This year a fire destroyed your home. 1040ez tax form 2013 The fire also damaged the shrubbery and trees in your yard. 1040ez tax form 2013 The fire was your only casualty or theft loss this year. 1040ez tax form 2013 Competent appraisers valued the property as a whole at $200,000 before the fire, but only $30,000 after the fire. 1040ez tax form 2013 (The loss to your household furnishings is not shown in this example. 1040ez tax form 2013 It would be figured separately on each item, as explained earlier under Personal property . 1040ez tax form 2013 ) Shortly after the fire, the insurance company paid you $155,000 for the loss. 1040ez tax form 2013 You figure your casualty loss as follows: 1) Adjusted basis of the entire property (land, building, and landscaping) $162,000 2) FMV of entire property before fire $200,000 3) FMV of entire property after fire 30,000 4) Decrease in FMV of entire  property $170,000 5) Loss (smaller of (1) or (4)) $162,000 6) Subtract insurance 155,000 7) Amount of loss after reimbursement $7,000 Deduction Limits After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. 1040ez tax form 2013 If the loss was to property for your personal use or your family's use, there are two limits on the amount you can deduct for your casualty or theft loss. 1040ez tax form 2013 You must reduce each casualty or theft loss by $100 ($100 rule). 1040ez tax form 2013 You must further reduce the total of all your casualty or theft losses by 10% of your adjusted gross income (10% rule). 1040ez tax form 2013 You make these reductions on Form 4684. 1040ez tax form 2013 These rules are explained next and Table 25-1 summarizes how to apply the $100 rule and the 10% rule in various situations. 1040ez tax form 2013 For more detailed explanations and examples, see Publication 547. 1040ez tax form 2013 Table 25-1. 1040ez tax form 2013 How To Apply the Deduction Limits for Personal-Use Property   $100 Rule 10% Rule General Application You must reduce each casualty or theft loss by $100 when figuring your deduction. 1040ez tax form 2013 Apply this rule after you have figured the amount of your loss. 1040ez tax form 2013 You must reduce your total casualty or theft loss by 10% of your adjusted gross income. 1040ez tax form 2013 Apply this rule after you reduce each loss by $100 (the $100 rule). 1040ez tax form 2013 Single Event Apply this rule only once, even if many pieces of property are affected. 1040ez tax form 2013 Apply this rule only once, even if many pieces of property are affected. 1040ez tax form 2013 More Than One Event Apply to the loss from each event. 1040ez tax form 2013 Apply to the total of all your losses from all events. 1040ez tax form 2013 More Than One Person— With Loss From the Same Event (other than a married couple filing jointly) Apply separately to each person. 1040ez tax form 2013 Apply separately to each person. 1040ez tax form 2013 Married Couple—With Loss From the Same Event Filing Jointly Apply as if you were one person. 1040ez tax form 2013 Apply as if you were one person. 1040ez tax form 2013 Filing Separately Apply separately to each spouse. 1040ez tax form 2013 Apply separately to each spouse. 1040ez tax form 2013 More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. 1040ez tax form 2013 Apply separately to each owner of jointly owned property. 1040ez tax form 2013 Property used partly for business and partly for personal purposes. 1040ez tax form 2013   When property is used partly for personal purposes and partly for business or income-producing purposes, the casualty or theft loss deduction must be figured separately for the personal-use part and for the business or income-producing part. 1040ez tax form 2013 You must figure each loss separately because the $100 rule and the 10% rule apply only to the loss on the personal-use part of the property. 1040ez tax form 2013 $100 Rule After you have figured your casualty or theft loss on personal-use property, you must reduce that loss by $100. 1040ez tax form 2013 This reduction applies to each total casualty or theft loss. 1040ez tax form 2013 It does not matter how many pieces of property are involved in an event. 1040ez tax form 2013 Only a single $100 reduction applies. 1040ez tax form 2013 Example. 1040ez tax form 2013 A hailstorm damages your home and your car. 1040ez tax form 2013 Determine the amount of loss, as discussed earlier, for each of these items. 1040ez tax form 2013 Since the losses are due to a single event, you combine the losses and reduce the combined amount by $100. 1040ez tax form 2013 Single event. 1040ez tax form 2013   Generally, events closely related in origin cause a single casualty. 1040ez tax form 2013 It is a single casualty when the damage is from two or more closely related causes, such as wind and flood damage caused by the same storm. 1040ez tax form 2013 10% Rule You must reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. 1040ez tax form 2013 Apply this rule after you reduce each loss by $100. 1040ez tax form 2013 For more information, see the Form 4684 instructions. 1040ez tax form 2013 If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. 1040ez tax form 2013 Example 1. 1040ez tax form 2013 In June, you discovered that your house had been burglarized. 1040ez tax form 2013 Your loss after insurance reimbursement was $2,000. 1040ez tax form 2013 Your adjusted gross income for the year you discovered the theft is $29,500. 1040ez tax form 2013 You first apply the $100 rule and then the 10% rule. 1040ez tax form 2013 Figure your theft loss deduction as follows. 1040ez tax form 2013 1) Loss after insurance $2,000 2) Subtract $100 100 3) Loss after $100 rule $1,900 4) Subtract 10% × $29,500 AGI 2,950 5) Theft loss deduction –0– You do not have a theft loss deduction because your loss after you apply the $100 rule ($1,900) is less than 10% of your adjusted gross income ($2,950). 1040ez tax form 2013 Example 2. 1040ez tax form 2013 In March, you had a car accident that totally destroyed your car. 1040ez tax form 2013 You did not have collision insurance on your car, so you did not receive any insurance reimbursement. 1040ez tax form 2013 Your loss on the car was $1,800. 1040ez tax form 2013 In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items stored there. 1040ez tax form 2013 Your loss on the basement items after reimbursement was $2,100. 1040ez tax form 2013 Your adjusted gross income for the year that the accident and fire occurred is $25,000. 1040ez tax form 2013 You figure your casualty loss deduction as follows. 1040ez tax form 2013       Base-     Car ment 1) Loss $1,800 $2,100 2) Subtract $100 per incident 100 100 3) Loss after $100 rule $1,700 $2,000 4) Total loss $3,700 5) Subtract 10% × $25,000 AGI 2,500 6) Casualty loss deduction $1,200 Gains and losses. 1040ez tax form 2013   If you had both gains and losses from casualties or thefts to personal-use property, you must compare your total gains to your total losses. 1040ez tax form 2013 Do this after you have reduced each loss by any reimbursements and by $100, but before you have reduced the losses by 10% of your adjusted gross income. 1040ez tax form 2013 Casualty or theft gains do not include gains you choose to postpone. 1040ez tax form 2013 See Publication 547 for information on the postponement of gain. 1040ez tax form 2013 Losses more than gains. 1040ez tax form 2013   If your losses are more than your recognized gains, subtract your gains from your losses and reduce the result by 10% of your adjusted gross income. 1040ez tax form 2013 The rest, if any, is your deductible loss from personal-use property. 1040ez tax form 2013 Gains more than losses. 1040ez tax form 2013   If your recognized gains are more than your losses, subtract your losses from your gains. 1040ez tax form 2013 The difference is treated as capital gain and must be reported on Schedule D (Form 1040). 1040ez tax form 2013 The 10% rule does not apply to your gains. 1040ez tax form 2013 When To Report Gains and Losses Gains. 1040ez tax form 2013   If you receive an insurance or other reimbursement that is more than your adjusted basis in the destroyed or stolen property, you have a gain from the casualty or theft. 1040ez tax form 2013 You must include this gain in your income in the year you receive the reimbursement, unless you choose to postpone reporting the gain as explained in Publication 547. 1040ez tax form 2013 If you have a loss, see Table 25-2 . 1040ez tax form 2013 Table 25-2. 1040ez tax form 2013 When To Deduct a Loss IF you have a loss. 1040ez tax form 2013 . 1040ez tax form 2013 . 1040ez tax form 2013 THEN deduct it in the year. 1040ez tax form 2013 . 1040ez tax form 2013 . 1040ez tax form 2013 from a casualty, the loss occurred. 1040ez tax form 2013 in a federally declared disaster area, the disaster occurred or the year immediately before the disaster. 1040ez tax form 2013 from a theft, the theft was discovered. 1040ez tax form 2013 on a deposit treated as a:   • casualty or any ordinary loss, a reasonable estimate can be made. 1040ez tax form 2013 • bad debt, deposits are totally worthless. 1040ez tax form 2013 Losses. 1040ez tax form 2013   Generally, you can deduct a casualty loss that is not reimbursable only in the tax year in which the casualty occurred. 1040ez tax form 2013 This is true even if you do not repair or replace the damaged property until a later year. 1040ez tax form 2013   You can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. 1040ez tax form 2013   If you are not sure whether part of your casualty or theft loss will be reimbursed, do not deduct that part until the tax year when you become reasonably certain that it will not be reimbursed. 1040ez tax form 2013 Loss on deposits. 1040ez tax form 2013   If your loss is a loss on deposits in an insolvent or bankrupt financial institution, see Loss on Deposits , earlier. 1040ez tax form 2013 Disaster Area Loss You generally must deduct a casualty loss in the year it occurred. 1040ez tax form 2013 However, if you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct the loss on your tax return or amended return for either of the following years. 1040ez tax form 2013 The year the disaster occurred. 1040ez tax form 2013 The year immediately preceding the year the disaster occurred. 1040ez tax form 2013 Gains. 1040ez tax form 2013    Special rules apply if you choose to postpone reporting gain on property damaged or destroyed in a federally declared disaster area. 1040ez tax form 2013 For those special rules, see Publication 547. 1040ez tax form 2013 Postponed tax deadlines. 1040ez tax form 2013   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. 1040ez tax form 2013 The tax deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. 1040ez tax form 2013   If any tax deadline is postponed, the IRS will publicize the postponement in your area by publishing a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). 1040ez tax form 2013 Go to www. 1040ez tax form 2013 irs. 1040ez tax form 2013 gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. 1040ez tax form 2013 Who is eligible. 1040ez tax form 2013   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. 1040ez tax form 2013 Any individual whose main home is located in a covered disaster area (defined next). 1040ez tax form 2013 Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. 1040ez tax form 2013 Any individual who is a relief worker affiliated with a recognized government or philanthropic organization who is assisting in a covered disaster area. 1040ez tax form 2013 Any individual, business entity, or sole proprietorship whose records are needed to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. 1040ez tax form 2013 The main home or principal place of business does not have to be located in the covered disaster area. 1040ez tax form 2013 Any estate or trust that has tax records necessary to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. 1040ez tax form 2013 The spouse on a joint return with a taxpayer who is eligible for postponements. 1040ez tax form 2013 Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose records necessary to meet a postponed tax deadline are located in the covered disaster area. 1040ez tax form 2013 Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. 1040ez tax form 2013 Any other person determined by the IRS to be affected by a federally declared disaster. 1040ez tax form 2013 Covered disaster area. 1040ez tax form 2013   This is an area of a federally declared disaster in which the IRS has decided to postpone tax deadlines for up to 1 year. 1040ez tax form 2013 Abatement of interest and penalties. 1040ez tax form 2013   The IRS may abate the interest and penalties on underpaid income tax for the length of any postponement of tax deadlines. 1040ez tax form 2013 More information. 1040ez tax form 2013   For more information, see Disaster Area Losses in Publication 547. 1040ez tax form 2013 How To Report Gains and Losses Use Form 4684 to report a gain or a deductible loss from a casualty or theft. 1040ez tax form 2013 If you have more than one casualty or theft, use a separate Form 4684 to determine your gain or loss for each event. 1040ez tax form 2013 Combine the gains and losses on one Form 4684. 1040ez tax form 2013 Follow the form instructions as to which lines to fill out. 1040ez tax form 2013 In addition, you must use the appropriate schedule to report a gain or loss. 1040ez tax form 2013 The schedule you use depends on whether you have a gain or loss. 1040ez tax form 2013 If you have a: Report it on: Gain Schedule D (Form 1040) Loss Schedule A (Form 1040) Adjustments to basis. 1040ez tax form 2013   If you have a casualty or theft loss, you must decrease your basis in the property by any insurance or other reimbursement you receive, and by any deductible loss. 1040ez tax form 2013 Amounts you spend to restore your property after a casualty increase your adjusted basis. 1040ez tax form 2013 See Adjusted Basis in chapter 13 for more information. 1040ez tax form 2013 Net operating loss (NOL). 1040ez tax form 2013    If your casualty or theft loss deduction causes your deductions for the year to be more than your income for the year, you may have an NOL. 1040ez tax form 2013 You can use an NOL to lower your tax in an earlier year, allowing you to get a refund for tax you have already paid. 1040ez tax form 2013 Or, you can use it to lower your tax in a later year. 1040ez tax form 2013 You do not have to be in business to have an NOL from a casualty or theft loss. 1040ez tax form 2013 For more information, see Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. 1040ez tax form 2013 Prev  Up  Next   Home   More Online Publications
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Credits & Deductions For Businesses

Alternative Motor Vehicle Credit
The Alternative Fuel Motor Vehicle Credit was enacted by the Energy Policy Act of 2005 and includes separate credits for four distinct categories of vehicles: Hybrid vehicles, Fuel Cell vehicles, Qualified Alternative Fuel Motor vehicles (QAFMV) and Advanced Lean Burn Technology vehicles. The amount of the potential credit varies by type of vehicle and which of the four credits applies.

Manufacturers' Energy Efficient Appliance Credit
Act Section 305 - Modifications of Energy Efficient Appliance Credit for Appliances Produced After 2007

Plug-In Electric Drive Vehicle Credit (IRC 30D)
Plug-In Electric Drive Vehicle Credit (IRC 30D) - Internal Revenue Code Section 30D provides a credit for Qualified Plug-in Electric Drive Motor Vehicles including passenger vehicles and light trucks.

Research Credit
Guidelines and audit technique guide are provided for field examiners on the examination of Research Credit cases.

Deducting Business Expenses
Find out what qualifies as a deductible business expense, including depreciation.

Abusive Tax Shelters and Transactions
The Internal Revenue Service has a comprehensive strategy in place to combat abusive tax shelters and transactions. This strategy includes guidance on abusive transactions, regulations governing tax shelters, a hotline for taxpayers to use to report abusive technical transactions, and enforcement activity against abusive tax shelter promoters and investors.

Page Last Reviewed or Updated: 18-Feb-2014

The 1040ez Tax Form 2013

1040ez tax form 2013 Publication 530 - Main Content Table of Contents What You Can and Cannot DeductHardest Hit Fund and Emergency Homeowners' Loan Programs Real Estate Taxes Sales Taxes Home Mortgage Interest Mortgage Insurance Premiums Mortgage Interest CreditFiguring the Credit BasisFiguring Your Basis Adjusted Basis Keeping Records How To Get Tax HelpLow Income Taxpayer Clinics What You Can and Cannot Deduct To deduct expenses of owning a home, you must file Form 1040, U. 1040ez tax form 2013 S. 1040ez tax form 2013 Individual Income Tax Return, and itemize your deductions on Schedule A (Form 1040). 1040ez tax form 2013 If you itemize, you cannot take the standard deduction. 1040ez tax form 2013 This section explains what expenses you can deduct as a homeowner. 1040ez tax form 2013 It also points out expenses that you cannot deduct. 1040ez tax form 2013 There are four primary discussions: real estate taxes, sales taxes, home mortgage interest, and mortgage insurance premiums. 1040ez tax form 2013 Generally, your real estate taxes, home mortgage interest, and mortgage insurance premiums are included in your house payment. 1040ez tax form 2013 Your house payment. 1040ez tax form 2013   If you took out a mortgage (loan) to finance the purchase of your home, you probably have to make monthly house payments. 1040ez tax form 2013 Your house payment may include several costs of owning a home. 1040ez tax form 2013 The only costs you can deduct are real estate taxes actually paid to the taxing authority, interest that qualifies as home mortgage interest, and mortgage insurance premiums. 1040ez tax form 2013 These are discussed in more detail later. 1040ez tax form 2013   Some nondeductible expenses that may be included in your house payment include: Fire or homeowner's insurance premiums, and The amount applied to reduce the principal of the mortgage. 1040ez tax form 2013 Minister's or military housing allowance. 1040ez tax form 2013   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you still can deduct your real estate taxes and your home mortgage interest. 1040ez tax form 2013 You do not have to reduce your deductions by your nontaxable allowance. 1040ez tax form 2013 For more information see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers, and Publication 3, Armed Forces' Tax Guide. 1040ez tax form 2013 Nondeductible payments. 1040ez tax form 2013   You cannot deduct any of the following items. 1040ez tax form 2013 Insurance (other than mortgage insurance premiums), including fire and comprehensive coverage, and title insurance. 1040ez tax form 2013 Wages you pay for domestic help. 1040ez tax form 2013 Depreciation. 1040ez tax form 2013 The cost of utilities, such as gas, electricity, or water. 1040ez tax form 2013 Most settlement costs. 1040ez tax form 2013 See Settlement or closing costs under Cost as Basis, later, for more information. 1040ez tax form 2013 Forfeited deposits, down payments, or earnest money. 1040ez tax form 2013 Hardest Hit Fund and Emergency Homeowners' Loan Programs You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. 1040ez tax form 2013 You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. 1040ez tax form 2013 You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. 1040ez tax form 2013 If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098-MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received), box 4 (mortgage insurance premiums) and box 5 (real property taxes). 1040ez tax form 2013 However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. 1040ez tax form 2013 Real Estate Taxes Most state and local governments charge an annual tax on the value of real property. 1040ez tax form 2013 This is called a real estate tax. 1040ez tax form 2013 You can deduct the tax if it is assessed uniformly at a like rate on all real property throughout the community. 1040ez tax form 2013 The proceeds must be for general community or governmental purposes and not be a payment for a special privilege granted or service rendered to you. 1040ez tax form 2013 Deductible Real Estate Taxes You can deduct real estate taxes imposed on you. 1040ez tax form 2013 You must have paid them either at settlement or closing, or to a taxing authority (either directly or through an escrow account) during the year. 1040ez tax form 2013 If you own a cooperative apartment, see Special Rules for Cooperatives , later. 1040ez tax form 2013 Where to deduct real estate taxes. 1040ez tax form 2013   Enter the amount of your deductible real estate taxes on Schedule A (Form 1040), line 6. 1040ez tax form 2013 Real estate taxes paid at settlement or closing. 1040ez tax form 2013   Real estate taxes are generally divided so that you and the seller each pay taxes for the part of the property tax year you owned the home. 1040ez tax form 2013 Your share of these taxes is fully deductible if you itemize your deductions. 1040ez tax form 2013 Division of real estate taxes. 1040ez tax form 2013   For federal income tax purposes, the seller is treated as paying the property taxes up to, but not including, the date of sale. 1040ez tax form 2013 You (the buyer) are treated as paying the taxes beginning with the date of sale. 1040ez tax form 2013 This applies regardless of the lien dates under local law. 1040ez tax form 2013 Generally, this information is included on the settlement statement you get at closing. 1040ez tax form 2013   You and the seller each are considered to have paid your own share of the taxes, even if one or the other paid the entire amount. 1040ez tax form 2013 You each can deduct your own share, if you itemize deductions, for the year the property is sold. 1040ez tax form 2013 Example. 1040ez tax form 2013 You bought your home on September 1. 1040ez tax form 2013 The property tax year (the period to which the tax relates) in your area is the calendar year. 1040ez tax form 2013 The tax for the year was $730 and was due and paid by the seller on August 15. 1040ez tax form 2013 You owned your new home during the property tax year for 122 days (September 1 to December 31, including your date of purchase). 1040ez tax form 2013 You figure your deduction for real estate taxes on your home as follows. 1040ez tax form 2013 1. 1040ez tax form 2013 Enter the total real estate taxes for the real property tax year $730 2. 1040ez tax form 2013 Enter the number of days in the property tax year that you owned the property 122 3. 1040ez tax form 2013 Divide line 2 by 365 . 1040ez tax form 2013 3342 4. 1040ez tax form 2013 Multiply line 1 by line 3. 1040ez tax form 2013 This is your deduction. 1040ez tax form 2013 Enter it on Schedule A (Form 1040), line 6 $244   You can deduct $244 on your return for the year if you itemize your deductions. 1040ez tax form 2013 You are considered to have paid this amount and can deduct it on your return even if, under the contract, you did not have to reimburse the seller. 1040ez tax form 2013 Delinquent taxes. 1040ez tax form 2013   Delinquent taxes are unpaid taxes that were imposed on the seller for an earlier tax year. 1040ez tax form 2013 If you agree to pay delinquent taxes when you buy your home, you cannot deduct them. 1040ez tax form 2013 You treat them as part of the cost of your home. 1040ez tax form 2013 See Real estate taxes , later, under Basis. 1040ez tax form 2013 Escrow accounts. 1040ez tax form 2013   Many monthly house payments include an amount placed in escrow (put in the care of a third party) for real estate taxes. 1040ez tax form 2013 You may not be able to deduct the total you pay into the escrow account. 1040ez tax form 2013 You can deduct only the real estate taxes that the lender actually paid from escrow to the taxing authority. 1040ez tax form 2013 Your real estate tax bill will show this amount. 1040ez tax form 2013 Refund or rebate of real estate taxes. 1040ez tax form 2013   If you receive a refund or rebate of real estate taxes this year for amounts you paid this year, you must reduce your real estate tax deduction by the amount refunded to you. 1040ez tax form 2013 If the refund or rebate was for real estate taxes paid for a prior year, you may have to include some or all of the refund in your income. 1040ez tax form 2013 For more information, see Recoveries in Publication 525, Taxable and Nontaxable Income. 1040ez tax form 2013 Items You Cannot Deduct as Real Estate Taxes The following items are not deductible as real estate taxes. 1040ez tax form 2013 Charges for services. 1040ez tax form 2013   An itemized charge for services to specific property or people is not a tax, even if the charge is paid to the taxing authority. 1040ez tax form 2013 You cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged for trash collection), or A flat fee charged for a single service provided by your local government (such as a $30 charge for mowing your lawn because it had grown higher than permitted under a local ordinance). 1040ez tax form 2013    You must look at your real estate tax bill to decide if any nondeductible itemized charges, such as those listed above, are included in the bill. 1040ez tax form 2013 If your taxing authority (or lender) does not furnish you a copy of your real estate tax bill, ask for it. 1040ez tax form 2013 Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. 1040ez tax form 2013 Assessments for local benefits. 1040ez tax form 2013   You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. 1040ez tax form 2013 Local benefits include the construction of streets, sidewalks, or water and sewer systems. 1040ez tax form 2013 You must add these amounts to the basis of your property. 1040ez tax form 2013   You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. 1040ez tax form 2013 An example is a charge to repair an existing sidewalk and any interest included in that charge. 1040ez tax form 2013   If only a part of the assessment is for maintenance, repair, or interest charges, you must be able to show the amount of that part to claim the deduction. 1040ez tax form 2013 If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. 1040ez tax form 2013   An assessment for a local benefit may be listed as an item in your real estate tax bill. 1040ez tax form 2013 If so, use the rules in this section to find how much of it, if any, you can deduct. 1040ez tax form 2013 Transfer taxes (or stamp taxes). 1040ez tax form 2013   You cannot deduct transfer taxes and similar taxes and charges on the sale of a personal home. 1040ez tax form 2013 If you are the buyer and you pay them, include them in the cost basis of the property. 1040ez tax form 2013 If you are the seller and you pay them, they are expenses of the sale and reduce the amount realized on the sale. 1040ez tax form 2013 Homeowners association assessments. 1040ez tax form 2013   You cannot deduct these assessments because the homeowners association, rather than a state or local government, imposes them. 1040ez tax form 2013 Special Rules for Cooperatives If you own a cooperative apartment, some special rules apply to you, though you generally receive the same tax treatment as other homeowners. 1040ez tax form 2013 As an owner of a cooperative apartment, you own shares of stock in a corporation that owns or leases housing facilities. 1040ez tax form 2013 You can deduct your share of the corporation's deductible real estate taxes if the cooperative housing corporation meets the following conditions: The corporation has only one class of stock outstanding, Each stockholder, solely because of ownership of the stock, can live in a house, apartment, or house trailer owned or leased by the corporation, No stockholder can receive any distribution out of capital, except on a partial or complete liquidation of the corporation, and At least one of the following: At least 80% of the corporation's gross income for the tax year was paid by the tenant-stockholders. 1040ez tax form 2013 For this purpose, gross income means all income received during the entire tax year, including any received before the corporation changed to cooperative ownership. 1040ez tax form 2013 At least 80% of the total square footage of the corporation's property must be available for use by the tenant-stockholders during the entire tax year. 1040ez tax form 2013 At least 90% of the expenditures paid or incurred by the corporation were used for the acquisition, construction, management, maintenance, or care of the property for the benefit of the tenant-shareholders during the entire tax year. 1040ez tax form 2013 Tenant-stockholders. 1040ez tax form 2013   A tenant-stockholder can be any entity (such as a corporation, trust, estate, partnership, or association) as well as an individual. 1040ez tax form 2013 The tenant-stockholder does not have to live in any of the cooperative's dwelling units. 1040ez tax form 2013 The units that the tenant-stockholder has the right to occupy can be rented to others. 1040ez tax form 2013 Deductible taxes. 1040ez tax form 2013   You figure your share of real estate taxes in the following way. 1040ez tax form 2013 Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. 1040ez tax form 2013 Multiply the corporation's deductible real estate taxes by the number you figured in (1). 1040ez tax form 2013 This is your share of the real estate taxes. 1040ez tax form 2013   Generally, the corporation will tell you your share of its real estate tax. 1040ez tax form 2013 This is the amount you can deduct if it reasonably reflects the cost of real estate taxes for your dwelling unit. 1040ez tax form 2013 Refund of real estate taxes. 1040ez tax form 2013   If the corporation receives a refund of real estate taxes it paid in an earlier year, it must reduce the amount of real estate taxes paid this year when it allocates the tax expense to you. 1040ez tax form 2013 Your deduction for real estate taxes the corporation paid this year is reduced by your share of the refund the corporation received. 1040ez tax form 2013 Sales Taxes Generally, you can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040). 1040ez tax form 2013 Deductible sales taxes may include sales taxes paid on your home (including mobile and prefabricated), or home building materials if the tax rate was the same as the general sales tax rate. 1040ez tax form 2013 For information on figuring your deduction, see the Instructions for Schedule A (Form 1040). 1040ez tax form 2013 If you elect to deduct the sales taxes paid on your home, or home building materials, you cannot include them as part of your cost basis in the home. 1040ez tax form 2013 Home Mortgage Interest This section of the publication gives you basic information about home mortgage interest, including information on interest paid at settlement, points, and Form 1098, Mortgage Interest Statement. 1040ez tax form 2013 Most home buyers take out a mortgage (loan) to buy their home. 1040ez tax form 2013 They then make monthly payments to either the mortgage holder or someone collecting the payments for the mortgage holder. 1040ez tax form 2013 Usually, you can deduct the entire part of your payment that is for mortgage interest, if you itemize your deductions on Schedule A (Form 1040). 1040ez tax form 2013 However, your deduction may be limited if: Your total mortgage balance is more than $1 million ($500,000 if married filing separately), or You took out a mortgage for reasons other than to buy, build, or improve your home. 1040ez tax form 2013 If either of these situations applies to you, see Publication 936 for more information. 1040ez tax form 2013 Also see Publication 936 if you later refinance your mortgage or buy a second home. 1040ez tax form 2013 Refund of home mortgage interest. 1040ez tax form 2013   If you receive a refund of home mortgage interest that you deducted in an earlier year and that reduced your tax, you generally must include the refund in income in the year you receive it. 1040ez tax form 2013 For more information, see Recoveries in Publication 525. 1040ez tax form 2013 The amount of the refund will usually be shown on the mortgage interest statement you receive from your mortgage lender. 1040ez tax form 2013 See Mortgage Interest Statement , later. 1040ez tax form 2013 Deductible Mortgage Interest To be deductible, the interest you pay must be on a loan secured by your main home or a second home. 1040ez tax form 2013 The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. 1040ez tax form 2013 Prepaid interest. 1040ez tax form 2013   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. 1040ez tax form 2013 Generally, you can deduct in each year only the interest that qualifies as home mortgage interest for that year. 1040ez tax form 2013 An exception (discussed later) applies to points. 1040ez tax form 2013 Late payment charge on mortgage payment. 1040ez tax form 2013   You can deduct as home mortgage interest a late payment charge if it was not for a specific service in connection with your mortgage loan. 1040ez tax form 2013 Mortgage prepayment penalty. 1040ez tax form 2013   If you pay off your home mortgage early, you may have to pay a penalty. 1040ez tax form 2013 You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. 1040ez tax form 2013 Ground rent. 1040ez tax form 2013   In some states (such as Maryland), you may buy your home subject to a ground rent. 1040ez tax form 2013 A ground rent is an obligation you assume to pay a fixed amount per year on the property. 1040ez tax form 2013 Under this arrangement, you are leasing (rather than buying) the land on which your home is located. 1040ez tax form 2013 Redeemable ground rents. 1040ez tax form 2013   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. 1040ez tax form 2013 The ground rent is a redeemable ground rent only if all of the following are true. 1040ez tax form 2013 Your lease, including renewal periods, is for more than 15 years. 1040ez tax form 2013 You can freely assign the lease. 1040ez tax form 2013 You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specified amount. 1040ez tax form 2013 The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. 1040ez tax form 2013   Payments made to end the lease and buy the lessor's entire interest in the land are not redeemable ground rents. 1040ez tax form 2013 You cannot deduct them. 1040ez tax form 2013 Nonredeemable ground rents. 1040ez tax form 2013   Payments on a nonredeemable ground rent are not mortgage interest. 1040ez tax form 2013 You can deduct them as rent only if they are a business expense or if they are for rental property. 1040ez tax form 2013 Cooperative apartment. 1040ez tax form 2013   You can usually treat the interest on a loan you took out to buy stock in a cooperative housing corporation as home mortgage interest if you own a cooperative apartment, and the cooperative housing corporation meets the conditions described earlier under Special Rules for Cooperatives . 1040ez tax form 2013 In addition, you can treat as home mortgage interest your share of the corporation's deductible mortgage interest. 1040ez tax form 2013 Figure your share of mortgage interest the same way that is shown for figuring your share of real estate taxes in the Example under Division of real estate taxes, earlier. 1040ez tax form 2013 For more information on cooperatives, see Special Rule for Tenant-Stockholders in Cooperative Housing Corporations in Publication 936. 1040ez tax form 2013 Refund of cooperative's mortgage interest. 1040ez tax form 2013   You must reduce your mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. 1040ez tax form 2013 The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. 1040ez tax form 2013   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. 1040ez tax form 2013 Mortgage Interest Paid at Settlement One item that normally appears on a settlement or closing statement is home mortgage interest. 1040ez tax form 2013 You can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). 1040ez tax form 2013 This amount should be included in the mortgage interest statement provided by your lender. 1040ez tax form 2013 See the discussion under Mortgage Interest Statement , later. 1040ez tax form 2013 Also, if you pay interest in advance, see Prepaid interest , earlier, and Points , next. 1040ez tax form 2013 Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. 1040ez tax form 2013 Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points. 1040ez tax form 2013 A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. 1040ez tax form 2013 See Points paid by the seller , later. 1040ez tax form 2013 General rule. 1040ez tax form 2013   You cannot deduct the full amount of points in the year paid. 1040ez tax form 2013 They are prepaid interest, so you generally must deduct them over the life (term) of the mortgage. 1040ez tax form 2013 Exception. 1040ez tax form 2013   You can deduct the full amount of points in the year paid if you meet all the following tests. 1040ez tax form 2013 Your loan is secured by your main home. 1040ez tax form 2013 (Generally, your main home is the one you live in most of the time. 1040ez tax form 2013 ) Paying points is an established business practice in the area where the loan was made. 1040ez tax form 2013 The points paid were not more than the points generally charged in that area. 1040ez tax form 2013 You use the cash method of accounting. 1040ez tax form 2013 This means you report income in the year you receive it and deduct expenses in the year you pay them. 1040ez tax form 2013 Most individuals use this method. 1040ez tax form 2013 The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. 1040ez tax form 2013 The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. 1040ez tax form 2013 The funds you provided are not required to have been applied to the points. 1040ez tax form 2013 They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. 1040ez tax form 2013 You cannot have borrowed these funds. 1040ez tax form 2013 You use your loan to buy or build your main home. 1040ez tax form 2013 The points were computed as a percentage of the principal amount of the mortgage. 1040ez tax form 2013 The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. 1040ez tax form 2013 The points may be shown as paid from either your funds or the seller's. 1040ez tax form 2013 Note. 1040ez tax form 2013 If you meet all of the tests listed above and you itemize your deductions in the year you get the loan, you can either deduct the full amount of points in the year paid or deduct them over the life of the loan, beginning in the year you get the loan. 1040ez tax form 2013 If you do not itemize your deductions in the year you get the loan, you can spread the points over the life of the loan and deduct the appropriate amount in each future year, if any, when you do itemize your deductions. 1040ez tax form 2013 Home improvement loan. 1040ez tax form 2013   You can also fully deduct in the year paid points paid on a loan to improve your main home, if you meet the first six tests listed earlier. 1040ez tax form 2013 Refinanced loan. 1040ez tax form 2013   If you use part of the refinanced mortgage proceeds to improve your main home and you meet the first six tests listed earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. 1040ez tax form 2013 You can deduct the rest of the points over the life of the loan. 1040ez tax form 2013 Points not fully deductible in year paid. 1040ez tax form 2013    If you do not qualify under the exception to deduct the full amount of points in the year paid (or choose not to do so), see Points in Publication 936 for the rules on when and how much you can deduct. 1040ez tax form 2013 Figure A. 1040ez tax form 2013   You can use Figure A, next, as a quick guide to see whether your points are fully deductible in the year paid. 1040ez tax form 2013    Please click here for the text description of the image. 1040ez tax form 2013 Figure A. 1040ez tax form 2013 Are my points fully deductible this year? Amounts charged for services. 1040ez tax form 2013   Amounts charged by the lender for specific services connected to the loan are not interest. 1040ez tax form 2013 Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. 1040ez tax form 2013 You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. 1040ez tax form 2013 For information about the tax treatment of these amounts and other settlement fees and closing costs, see Basis , later. 1040ez tax form 2013 Points paid by the seller. 1040ez tax form 2013   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. 1040ez tax form 2013 Treatment by seller. 1040ez tax form 2013   The seller cannot deduct these fees as interest. 1040ez tax form 2013 However, they are a selling expense that reduces the seller's amount realized. 1040ez tax form 2013 See Publication 523 for more information. 1040ez tax form 2013 Treatment by buyer. 1040ez tax form 2013   The buyer treats seller-paid points as if he or she had paid them. 1040ez tax form 2013 If all the tests listed earlier under Exception are met, the buyer can deduct the points in the year paid. 1040ez tax form 2013 If any of those tests are not met, the buyer must deduct the points over the life of the loan. 1040ez tax form 2013   The buyer must also reduce the basis of the home by the amount of the seller-paid points. 1040ez tax form 2013 For more information about the basis of your home, see Basis , later. 1040ez tax form 2013 Funds provided are less than points. 1040ez tax form 2013   If you meet all the tests listed earlier under Exception except that the funds you provided were less than the points charged to you (test 6), you can deduct the points in the year paid up to the amount of funds you provided. 1040ez tax form 2013 In addition, you can deduct any points paid by the seller. 1040ez tax form 2013 Example 1. 1040ez tax form 2013 When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). 1040ez tax form 2013 You meet all the tests for deducting points in the year paid (see Exception , earlier), except the only funds you provided were a $750 down payment. 1040ez tax form 2013 Of the $1,000 you were charged for points, you can deduct $750 in the year paid. 1040ez tax form 2013 You spread the remaining $250 over the life of the mortgage. 1040ez tax form 2013 Example 2. 1040ez tax form 2013 The facts are the same as in Example 1 , except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. 1040ez tax form 2013 In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). 1040ez tax form 2013 You spread the remaining $250 over the life of the mortgage. 1040ez tax form 2013 You must reduce the basis of your home by the $1,000 paid by the seller. 1040ez tax form 2013 Excess points. 1040ez tax form 2013   If you meet all the tests under Exception , earlier, except that the points paid were more than are generally charged in your area (test 3), you can deduct in the year paid only the points that are generally charged. 1040ez tax form 2013 You must spread any additional points over the life of the mortgage. 1040ez tax form 2013 Mortgage ending early. 1040ez tax form 2013   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. 1040ez tax form 2013 A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. 1040ez tax form 2013 Example. 1040ez tax form 2013 Dan paid $3,000 in points in 2006 that he had to spread out over the 15-year life of the mortgage. 1040ez tax form 2013 He had deducted $1,400 of these points through 2012. 1040ez tax form 2013 Dan prepaid his mortgage in full in 2013. 1040ez tax form 2013 He can deduct the remaining $1,600 of points in 2013. 1040ez tax form 2013 Exception. 1040ez tax form 2013   If you refinance the mortgage with the same lender, you cannot deduct any remaining points for the year. 1040ez tax form 2013 Instead, deduct them over the term of the new loan. 1040ez tax form 2013 Form 1098. 1040ez tax form 2013   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your deductible points paid during the year. 1040ez tax form 2013 See Mortgage Interest Statement , later. 1040ez tax form 2013 Where To Deduct Home Mortgage Interest Enter on Schedule A (Form 1040), line 10, the home mortgage interest and points reported to you on Form 1098 (discussed next). 1040ez tax form 2013 If you did not receive a Form 1098, enter your deductible interest on line 11, and any deductible points on line 12. 1040ez tax form 2013 See Table 1 below for a summary of where to deduct home mortgage interest and real estate taxes. 1040ez tax form 2013 If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and social security number (SSN) or employer identification number (EIN) on the dotted lines next to line 11. 1040ez tax form 2013 The seller must give you this number and you must give the seller your SSN. 1040ez tax form 2013 Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. 1040ez tax form 2013 Failure to meet either of these requirements may result in a $50 penalty for each failure. 1040ez tax form 2013 Table 1. 1040ez tax form 2013 Where To Deduct Interest and Taxes Paid on Your Home See the text for information on what expenses are eligible. 1040ez tax form 2013 IF you are eligible to deduct . 1040ez tax form 2013 . 1040ez tax form 2013 . 1040ez tax form 2013 THEN report the amount  on Schedule A (Form 1040) . 1040ez tax form 2013 . 1040ez tax form 2013 . 1040ez tax form 2013 real estate taxes line 6. 1040ez tax form 2013 home mortgage interest and points reported on Form 1098 line 10. 1040ez tax form 2013 home mortgage interest not reported on  Form 1098 line 11. 1040ez tax form 2013 points not reported on Form 1098 line 12. 1040ez tax form 2013 qualified mortgage insurance premiums line 13. 1040ez tax form 2013 Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage to a mortgage holder in the course of that holder's trade or business, you should receive a Form 1098 or similar statement from the mortgage holder. 1040ez tax form 2013 The statement will show the total interest paid on your mortgage during the year. 1040ez tax form 2013 If you bought a main home during the year, it also will show the deductible points you paid and any points you can deduct that were paid by the person who sold you your home. 1040ez tax form 2013 See Points , earlier. 1040ez tax form 2013 The interest you paid at settlement should be included on the statement. 1040ez tax form 2013 If it is not, add the interest from the settlement sheet that qualifies as home mortgage interest to the total shown on Form 1098 or similar statement. 1040ez tax form 2013 Put the total on Schedule A (Form 1040), line 10, and attach a statement to your return explaining the difference. 1040ez tax form 2013 Write “See attached” to the right of line 10. 1040ez tax form 2013 A mortgage holder can be a financial institution, a governmental unit, or a cooperative housing corporation. 1040ez tax form 2013 If a statement comes from a cooperative housing corporation, it generally will show your share of interest. 1040ez tax form 2013 Your mortgage interest statement for 2013 should be provided or sent to you by January 31, 2014. 1040ez tax form 2013 If it is mailed, you should allow adequate time to receive it before contacting the mortgage holder. 1040ez tax form 2013 A copy of this form will be sent to the IRS also. 1040ez tax form 2013 Example. 1040ez tax form 2013 You bought a new home on May 3. 1040ez tax form 2013 You paid no points on the purchase. 1040ez tax form 2013 During the year, you made mortgage payments which included $4,480 deductible interest on your new home. 1040ez tax form 2013 The settlement sheet for the purchase of the home included interest of $620 for 29 days in May. 1040ez tax form 2013 The mortgage statement you receive from the lender includes total interest of $5,100 ($4,480 + $620). 1040ez tax form 2013 You can deduct the $5,100 if you itemize your deductions. 1040ez tax form 2013 Refund of overpaid interest. 1040ez tax form 2013   If you receive a refund of mortgage interest you overpaid in a prior year, you generally will receive a Form 1098 showing the refund in box 3. 1040ez tax form 2013 Generally, you must include the refund in income in the year you receive it. 1040ez tax form 2013 See Refund of home mortgage interest , earlier, under Home Mortgage Interest. 1040ez tax form 2013 More than one borrower. 1040ez tax form 2013   If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. 1040ez tax form 2013 Show how much of the interest each of you paid, and give the name and address of the person who received the form. 1040ez tax form 2013 Deduct your share of the interest on Schedule A (Form 1040), line 11, and write “See attached” to the right of that line. 1040ez tax form 2013 Mortgage Insurance Premiums You may be able to take an itemized deduction on Schedule A (Form 1040), line 13, for premiums you pay or accrue during 2013 for qualified mortgage insurance in connection with home acquisition debt on your qualified home. 1040ez tax form 2013 Mortgage insurance premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as an itemized deduction. 1040ez tax form 2013 Qualified Mortgage Insurance Qualified mortgage insurance is mortgage insurance provided by the Veterans Administration, the Federal Housing Administration, or the Rural Housing Administration, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). 1040ez tax form 2013 Prepaid mortgage insurance premiums. 1040ez tax form 2013   If you paid premiums that are allocable to periods after 2013, you must allocate them over the shorter of: The stated term of the mortgage, or 84 months, beginning with the month the insurance was obtained. 1040ez tax form 2013 The premiums are treated as paid in the year to which they were allocated. 1040ez tax form 2013 If the mortgage is satisfied before its term, no deduction is allowed for the unamortized balance. 1040ez tax form 2013 See Publication 936 for details. 1040ez tax form 2013 Exception for certain mortgage insurance. 1040ez tax form 2013   The allocation rules, explained above, do not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Service. 1040ez tax form 2013 Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home. 1040ez tax form 2013 It also must be secured by that home. 1040ez tax form 2013 If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. 1040ez tax form 2013 Home acquisition debt limit. 1040ez tax form 2013   The total amount you can treat as home acquisition debt at any time on your home cannot be more than $1 million ($500,000 if married filing separately). 1040ez tax form 2013 Discharges of qualified principal residence indebtedness. 1040ez tax form 2013   You can exclude from gross income any discharges of qualified principal residence indebtedness made after 2006 and before 2014. 1040ez tax form 2013 You must reduce the basis of your principal residence (but not below zero) by the amount you exclude. 1040ez tax form 2013 Principal residence. 1040ez tax form 2013   Your principal residence is the home where you ordinarily live most of the time. 1040ez tax form 2013 You can have only one principal residence at any one time. 1040ez tax form 2013 Qualified principal residence indebtedness. 1040ez tax form 2013   This is a mortgage that you took out to buy, build, or substantially improve your principal residence and that is secured by that residence. 1040ez tax form 2013 If the amount of your original mortgage is more than the cost of your principal residence plus the cost of substantial improvements, qualified principal residence indebtedness cannot be more than the cost of your principal residence plus improvements. 1040ez tax form 2013   Any debt secured by your principal residence that you use to refinance qualified principal residence indebtedness is qualified principal residence indebtedness up to the amount of your old mortgage principal just before the refinancing. 1040ez tax form 2013 Additional debt incurred to substantially improve your principal residence is also qualified principal residence indebtedness. 1040ez tax form 2013 Amount you can exclude. 1040ez tax form 2013   You can only exclude debt discharged after 2006 and before 2014. 1040ez tax form 2013 The most you can exclude is $2 million ($1 million if married filing separately). 1040ez tax form 2013 You cannot exclude any amount that was discharged because of services performed for the lender or on account of any other factor not directly related either to a decline in the value of your residence or to your financial condition. 1040ez tax form 2013 Ordering rule. 1040ez tax form 2013   If only a part of a loan is qualified principal residence indebtedness, you can exclude only the amount of the discharge that is more than the amount of the loan (immediately before the discharge) that is not qualified principal residence indebtedness. 1040ez tax form 2013 Qualified Home This means your main home or your second home. 1040ez tax form 2013 A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. 1040ez tax form 2013 Main home. 1040ez tax form 2013   You can have only one main home at any one time. 1040ez tax form 2013 This is the home where you ordinarily live most of the time. 1040ez tax form 2013 Second home and other special situations. 1040ez tax form 2013   If you have a second home, use part of your home for other than residential living (such as a home office), rent out part of your home, or are having your home constructed, see Qualified Home in Publication 936. 1040ez tax form 2013 Limit on Deduction If your adjusted gross income (AGI) on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are deductible is reduced and may be eliminated. 1040ez tax form 2013 See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. 1040ez tax form 2013 If your AGI is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. 1040ez tax form 2013 Form 1098. 1040ez tax form 2013   The amount of mortgage insurance premiums you paid during 2013 should be reported in box 4. 1040ez tax form 2013 See Form 1098, Mortgage Interest Statement in Publication 936. 1040ez tax form 2013 Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals afford home ownership. 1040ez tax form 2013 If you qualify, you can claim the credit on Form 8396 each year for part of the home mortgage interest you pay. 1040ez tax form 2013 Who qualifies. 1040ez tax form 2013   You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate (MCC) from your state or local government. 1040ez tax form 2013 Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. 1040ez tax form 2013 The MCC will show the certificate credit rate you will use to figure your credit. 1040ez tax form 2013 It also will show the certified indebtedness amount. 1040ez tax form 2013 Only the interest on that amount qualifies for the credit. 1040ez tax form 2013 See Figuring the Credit , later. 1040ez tax form 2013 You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home. 1040ez tax form 2013 Contact your state or local housing finance agency for information about the availability of MCCs in your area. 1040ez tax form 2013 How to claim the credit. 1040ez tax form 2013   To claim the credit, complete Form 8396 and attach it to your Form 1040 or Form 1040NR, U. 1040ez tax form 2013 S. 1040ez tax form 2013 Nonresident Alien Income Tax Return. 1040ez tax form 2013 Include the credit in your total for Form 1040, line 53, or Form 1040NR, line 50; be sure to check box c and write “Form 8396” on that line. 1040ez tax form 2013 Reducing your home mortgage interest deduction. 1040ez tax form 2013   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. 1040ez tax form 2013 You must do this even if part of that amount is to be carried forward to 2014. 1040ez tax form 2013 Selling your home. 1040ez tax form 2013   If you purchase a home after 1990 using an MCC, and you sell that home within 9 years, you may have to recapture (repay) all or part of the benefit you received from the MCC program. 1040ez tax form 2013 For additional information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, in Publication 523. 1040ez tax form 2013 Figuring the Credit Figure your credit on Form 8396. 1040ez tax form 2013 Mortgage not more than certified indebtedness. 1040ez tax form 2013   If your mortgage loan amount is equal to (or smaller than) the certified indebtedness amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. 1040ez tax form 2013 Mortgage more than certified indebtedness. 1040ez tax form 2013   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. 1040ez tax form 2013 To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. 1040ez tax form 2013 Certified indebtedness amount on your MCC Original amount of your mortgage   The fraction will not change as long as you are entitled to take the mortgage interest credit. 1040ez tax form 2013 Example. 1040ez tax form 2013 Emily bought a home this year. 1040ez tax form 2013 Her mortgage loan is $125,000. 1040ez tax form 2013 The certified indebtedness amount on her MCC is $100,000. 1040ez tax form 2013 She paid $7,500 interest this year. 1040ez tax form 2013 Emily figures the interest to enter on Form 8396, line 1, as follows:   $100,000 = 80% (. 1040ez tax form 2013 80)       $125,000       $7,500 x . 1040ez tax form 2013 80 = $6,000   Emily enters $6,000 on Form 8396, line 1. 1040ez tax form 2013 In each later year, she will figure her credit using only 80% of the interest she pays for that year. 1040ez tax form 2013 Limits Two limits may apply to your credit. 1040ez tax form 2013 A limit based on the credit rate, and A limit based on your tax. 1040ez tax form 2013 Limit based on credit rate. 1040ez tax form 2013   If the certificate credit rate is higher than 20%, the credit you are allowed cannot be more than $2,000. 1040ez tax form 2013 Limit based on tax. 1040ez tax form 2013   After applying the limit based on the credit rate, your credit generally cannot be more than your tax liability. 1040ez tax form 2013 See the Credit Limit Worksheet in the Form 8396 instructions to calculate the limit based on tax. 1040ez tax form 2013 Dividing the Credit If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, the credit must be divided based on the interest held by each person. 1040ez tax form 2013 Example. 1040ez tax form 2013 John and his brother, George, were issued an MCC. 1040ez tax form 2013 They used it to get a mortgage on their main home. 1040ez tax form 2013 John has a 60% ownership interest in the home, and George has a 40% ownership interest in the home. 1040ez tax form 2013 John paid $5,400 mortgage interest this year and George paid $3,600. 1040ez tax form 2013 The MCC shows a credit rate of 25% and a certified indebtedness amount of $130,000. 1040ez tax form 2013 The loan amount (mortgage) on their home is $120,000. 1040ez tax form 2013 The credit is limited to $2,000 because the credit rate is more than 20%. 1040ez tax form 2013 John figures the credit by multiplying the mortgage interest he paid this year ($5,400) by the certificate credit rate (25%) for a total of $1,350. 1040ez tax form 2013 His credit is limited to $1,200 ($2,000 × 60%). 1040ez tax form 2013 George figures the credit by multiplying the mortgage interest he paid this year ($3,600) by the certificate credit rate (25%) for a total of $900. 1040ez tax form 2013 His credit is limited to $800 ($2,000 × 40%). 1040ez tax form 2013 Carryforward If your allowable credit is reduced because of the limit based on your tax, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. 1040ez tax form 2013 Example. 1040ez tax form 2013 You receive a mortgage credit certificate from State X. 1040ez tax form 2013 This year, your regular tax liability is $1,100, you owe no alternative minimum tax, and your mortgage interest credit is $1,700. 1040ez tax form 2013 You claim no other credits. 1040ez tax form 2013 Your unused mortgage interest credit for this year is $600 ($1,700 − $1,100). 1040ez tax form 2013 You can carry forward this amount to the next 3 years or until used, whichever comes first. 1040ez tax form 2013 Credit rate more than 20%. 1040ez tax form 2013   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). 1040ez tax form 2013 Example. 1040ez tax form 2013 In the earlier example under Dividing the Credit , John and George used the entire $2,000 credit. 1040ez tax form 2013 The excess   John $1,350 − $1,200 = $150     George $900 − $800 = $100   $150 for John ($1,350 − $1,200) and $100 for George ($900 − $800) cannot be carried forward to future years, despite the respective tax liabilities for John and George. 1040ez tax form 2013 Refinancing If you refinance your original mortgage loan on which you had been given an MCC, you must get a new MCC to be able to claim the credit on the new loan. 1040ez tax form 2013 The amount of credit you can claim on the new loan may change. 1040ez tax form 2013 Table 2 below summarizes how to figure your credit if you refinance your original mortgage loan. 1040ez tax form 2013 Table 2. 1040ez tax form 2013 Effect of Refinancing on Your Credit IF you get a new (reissued) MCC and the amount of your new mortgage is . 1040ez tax form 2013 . 1040ez tax form 2013 . 1040ez tax form 2013 THEN the interest you claim on Form 8396, line 1, is* . 1040ez tax form 2013 . 1040ez tax form 2013 . 1040ez tax form 2013 smaller than or equal to the certified indebtedness amount on the new MCC all the interest paid during the year on your new mortgage. 1040ez tax form 2013 larger than the certified indebtedness amount on the new MCC interest paid during the year on your new mortgage multiplied by the following fraction. 1040ez tax form 2013         certified indebtedness  amount on your new MCC       original amount of your  mortgage   *The credit using the new MCC cannot be more than the credit using the old MCC. 1040ez tax form 2013  See New MCC cannot increase your credit above. 1040ez tax form 2013 An issuer may reissue an MCC after you refinance your mortgage. 1040ez tax form 2013 If you did not get a new MCC, you may want to contact the state or local housing finance agency that issued your original MCC for information about whether you can get a reissued MCC. 1040ez tax form 2013 Year of refinancing. 1040ez tax form 2013   In the year of refinancing, add the applicable amount of interest paid on the old mortgage and the applicable amount of interest paid on the new mortgage, and enter the total on Form 8396, line 1. 1040ez tax form 2013   If your new MCC has a credit rate different from the rate on the old MCC, you must attach a statement to Form 8396. 1040ez tax form 2013 The statement must show the calculation for lines 1, 2, and 3 for the part of the year when the old MCC was in effect. 1040ez tax form 2013 It must show a separate calculation for the part of the year when the new MCC was in effect. 1040ez tax form 2013 Combine the amounts from both calculations for line 3, enter the total on line 3 of the form, and write “See attached” on the dotted line next to line 2. 1040ez tax form 2013 New MCC cannot increase your credit. 1040ez tax form 2013   The credit that you claim with your new MCC cannot be more than the credit that you could have claimed with your old MCC. 1040ez tax form 2013   In most cases, the agency that issues your new MCC will make sure that it does not increase your credit. 1040ez tax form 2013 However, if either your old loan or your new loan has a variable (adjustable) interest rate, you will need to check this yourself. 1040ez tax form 2013 In that case, you will need to know the amount of the credit you could have claimed using the old MCC. 1040ez tax form 2013   There are two methods for figuring the credit you could have claimed. 1040ez tax form 2013 Under one method, you figure the actual credit that would have been allowed. 1040ez tax form 2013 This means you use the credit rate on the old MCC and the interest you would have paid on the old loan. 1040ez tax form 2013   If your old loan was a variable rate mortgage, you can use another method to determine the credit that you could have claimed. 1040ez tax form 2013 Under this method, you figure the credit using a payment schedule of a hypothetical self-amortizing mortgage with level payments projected to the final maturity date of the old mortgage. 1040ez tax form 2013 The interest rate of the hypothetical mortgage is the annual percentage rate (APR) of the new mortgage for purposes of the Federal Truth in Lending Act. 1040ez tax form 2013 The principal of the hypothetical mortgage is the remaining outstanding balance of the certified mortgage indebtedness shown on the old MCC. 1040ez tax form 2013    You must choose one method and use it consistently beginning with the first tax year for which you claim the credit based on the new MCC. 1040ez tax form 2013    As part of your tax records, you should keep your old MCC and the schedule of payments for your old mortgage. 1040ez tax form 2013 Basis Basis is your starting point for figuring a gain or loss if you later sell your home, or for figuring depreciation if you later use part of your home for business purposes or for rent. 1040ez tax form 2013 While you own your home, you may add certain items to your basis. 1040ez tax form 2013 You may subtract certain other items from your basis. 1040ez tax form 2013 These items are called adjustments to basis and are explained later under Adjusted Basis . 1040ez tax form 2013 It is important that you understand these terms when you first acquire your home because you must keep track of your basis and adjusted basis during the period you own your home. 1040ez tax form 2013 You also must keep records of the events that affect basis or adjusted basis. 1040ez tax form 2013 See Keeping Records , below. 1040ez tax form 2013 Figuring Your Basis How you figure your basis depends on how you acquire your home. 1040ez tax form 2013 If you buy or build your home, your cost is your basis. 1040ez tax form 2013 If you receive your home as a gift, your basis is usually the same as the adjusted basis of the person who gave you the property. 1040ez tax form 2013 If you inherit your home from a decedent, different rules apply depending on the date of the decedent's death. 1040ez tax form 2013 Each of these topics is discussed later. 1040ez tax form 2013 Property transferred from a spouse. 1040ez tax form 2013   If your home is transferred to you from your spouse, or from your former spouse as a result of a divorce, your basis is the same as your spouse's (or former spouse's) adjusted basis just before the transfer. 1040ez tax form 2013 Publication 504, Divorced or Separated Individuals, fully discusses transfers between spouses. 1040ez tax form 2013 Cost as Basis The cost of your home, whether you purchased it or constructed it, is the amount you paid for it, including any debt you assumed. 1040ez tax form 2013 The cost of your home includes most settlement or closing costs you paid when you bought the home. 1040ez tax form 2013 If you built your home, your cost includes most closing costs paid when you bought the land or settled on your mortgage. 1040ez tax form 2013 See Settlement or closing costs , later. 1040ez tax form 2013 If you elect to deduct the sales taxes on the purchase or construction of your home as an itemized deduction on Schedule A (Form 1040), you cannot include the sales taxes as part of your cost basis in the home. 1040ez tax form 2013 Purchase. 1040ez tax form 2013   The basis of a home you bought is the amount you paid for it. 1040ez tax form 2013 This usually includes your down payment and any debt you assumed. 1040ez tax form 2013 The basis of a cooperative apartment is the amount you paid for your shares in the corporation that owns or controls the property. 1040ez tax form 2013 This amount includes any purchase commissions or other costs of acquiring the shares. 1040ez tax form 2013 Construction. 1040ez tax form 2013   If you contracted to have your home built on land that you own, your basis in the home is your basis in the land plus the amount you paid to have the home built. 1040ez tax form 2013 This includes the cost of labor and materials, the amount you paid the contractor, any architect's fees, building permit charges, utility meter and connection charges, and legal fees that are directly connected with building your home. 1040ez tax form 2013 If you built all or part of your home yourself, your basis is the total amount it cost you to build it. 1040ez tax form 2013 You cannot include in basis the value of your own labor or any other labor for which you did not pay. 1040ez tax form 2013 Real estate taxes. 1040ez tax form 2013   Real estate taxes are usually divided so that you and the seller each pay taxes for the part of the property tax year that each owned the home. 1040ez tax form 2013 See the earlier discussion of Real estate taxes paid at settlement or closing , under Real Estate Taxes, earlier, to figure the real estate taxes you paid or are considered to have paid. 1040ez tax form 2013   If you pay any part of the seller's share of the real estate taxes (the taxes up to the date of sale), and the seller did not reimburse you, add those taxes to your basis in the home. 1040ez tax form 2013 You cannot deduct them as taxes paid. 1040ez tax form 2013   If the seller paid any of your share of the real estate taxes (the taxes beginning with the date of sale), you can still deduct those taxes. 1040ez tax form 2013 Do not include those taxes in your basis. 1040ez tax form 2013 If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. 1040ez tax form 2013 Example 1. 1040ez tax form 2013 You bought your home on September 1. 1040ez tax form 2013 The property tax year in your area is the calendar year, and the tax is due on August 15. 1040ez tax form 2013 The real estate taxes on the home you bought were $1,275 for the year and had been paid by the seller on August 15. 1040ez tax form 2013 You did not reimburse the seller for your share of the real estate taxes from September 1 through December 31. 1040ez tax form 2013 You must reduce the basis of your home by the $426 [(122 ÷ 365) × $1,275] the seller paid for you. 1040ez tax form 2013 You can deduct your $426 share of real estate taxes on your return for the year you purchased your home. 1040ez tax form 2013 Example 2. 1040ez tax form 2013 You bought your home on May 3, 2013. 1040ez tax form 2013 The property tax year in your area is the calendar year. 1040ez tax form 2013 The taxes for the previous year are assessed on January 2 and are due on May 31 and November 30. 1040ez tax form 2013 Under state law, the taxes become a lien on May 31. 1040ez tax form 2013 You agreed to pay all taxes due after the date of sale. 1040ez tax form 2013 The taxes due in 2013 for 2012 were $1,375. 1040ez tax form 2013 The taxes due in 2014 for 2013 will be $1,425. 1040ez tax form 2013 You cannot deduct any of the taxes paid in 2013 because they relate to the 2012 property tax year and you did not own the home until 2013. 1040ez tax form 2013 Instead, you add the $1,375 to the cost (basis) of your home. 1040ez tax form 2013 You owned the home in 2013 for 243 days (May 3 to December 31), so you can take a tax deduction on your 2014 return of $949 [(243 ÷ 365) × $1,425] paid in 2014 for 2013. 1040ez tax form 2013 You add the remaining $476 ($1,425 − $949) of taxes paid in 2014 to the cost (basis) of your home. 1040ez tax form 2013 Settlement or closing costs. 1040ez tax form 2013   If you bought your home, you probably paid settlement or closing costs in addition to the contract price. 1040ez tax form 2013 These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. 1040ez tax form 2013 If you built your home, you probably paid these costs when you bought the land or settled on your mortgage. 1040ez tax form 2013   The only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. 1040ez tax form 2013 You deduct them in the year you buy your home if you itemize your deductions. 1040ez tax form 2013 You can add certain other settlement or closing costs to the basis of your home. 1040ez tax form 2013 Items added to basis. 1040ez tax form 2013   You can include in your basis the settlement fees and closing costs you paid for buying your home. 1040ez tax form 2013 A fee is for buying the home if you would have had to pay it even if you paid cash for the home. 1040ez tax form 2013   The following are some of the settlement fees and closing costs that you can include in the original basis of your home. 1040ez tax form 2013 Abstract fees (abstract of title fees). 1040ez tax form 2013 Charges for installing utility services. 1040ez tax form 2013 Legal fees (including fees for the title search and preparation of the sales contract and deed). 1040ez tax form 2013 Recording fees. 1040ez tax form 2013 Surveys. 1040ez tax form 2013 Transfer or stamp taxes. 1040ez tax form 2013 Owner's title insurance. 1040ez tax form 2013 Any amount the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, cost for improvements or repairs, and sales commissions. 1040ez tax form 2013   If the seller actually paid for any item for which you are liable and for which you can take a deduction (such as your share of the real estate taxes for the year of sale), you must reduce your basis by that amount unless you are charged for it in the settlement. 1040ez tax form 2013 Items not added to basis and not deductible. 1040ez tax form 2013   Here are some settlement and closing costs that you cannot deduct or add to your basis. 1040ez tax form 2013 Fire insurance premiums. 1040ez tax form 2013 Charges for using utilities or other services related to occupancy of the home before closing. 1040ez tax form 2013 Rent for occupying the home before closing. 1040ez tax form 2013 Charges connected with getting or refinancing a mortgage loan, such as: Loan assumption fees, Cost of a credit report, and Fee for an appraisal required by a lender. 1040ez tax form 2013 Points paid by seller. 1040ez tax form 2013   If you bought your home after April 3, 1994, you must reduce your basis by any points paid for your mortgage by the person who sold you your home. 1040ez tax form 2013   If you bought your home after 1990 but before April 4, 1994, you must reduce your basis by seller-paid points only if you deducted them. 1040ez tax form 2013 See Points , earlier, for the rules on deducting points. 1040ez tax form 2013 Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined later) to the donor just before it was given to you, its fair market value (FMV) at the time it was given to you, and any gift tax paid on it. 1040ez tax form 2013 Fair market value. 1040ez tax form 2013   Fair market value (FMV) is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and who both have a reasonable knowledge of all the necessary facts. 1040ez tax form 2013 Donor's adjusted basis is more than FMV. 1040ez tax form 2013   If someone gave you your home and the donor's adjusted basis, when it was given to you, was more than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis. 1040ez tax form 2013 Disposition basis. 1040ez tax form 2013   If the donor's adjusted basis at the time of the gift is more than the FMV, your basis (plus or minus any required adjustments, see Adjusted Basis , later) when you dispose of the property will depend on whether you have a gain or a loss. 1040ez tax form 2013 Your basis for figuring a gain is the same as the donor's adjusted basis. 1040ez tax form 2013 Your basis for figuring a loss is the FMV when you received the gift. 1040ez tax form 2013 If you use the donor's adjusted basis to figure a gain and it results in a loss, then you must use the FMV (at the time of the gift) to refigure the loss. 1040ez tax form 2013 However, if using the FMV results in a gain, then you neither have a gain nor a loss. 1040ez tax form 2013 Example 1. 1040ez tax form 2013 Andrew received a house as a gift from Ishmael (the donor). 1040ez tax form 2013 At the time of the gift, the home had an FMV of $80,000. 1040ez tax form 2013 Ishmael's adjusted basis was $100,000. 1040ez tax form 2013 After he received the house, no events occurred to increase or decrease the basis. 1040ez tax form 2013 If Andrew sells the house for $120,000, he will have a $20,000 gain because he must use the donor's adjusted basis ($100,000) at the time of the gift as his basis to figure the gain. 1040ez tax form 2013 Example 2. 1040ez tax form 2013 Same facts as Example 1 , except this time Andrew sells the house for $70,000. 1040ez tax form 2013 He will have a loss of $10,000 because he must use the FMV ($80,000) at the time of the gift as his basis to figure the loss. 1040ez tax form 2013 Example 3. 1040ez tax form 2013 Same facts as Example 1 , except this time Andrew sells the house for $90,000. 1040ez tax form 2013 Initially, he figures the gain using Ishmael's adjusted basis ($100,000), which results in a loss of $10,000. 1040ez tax form 2013 Since it is a loss, Andrew must now recalculate the loss using the FMV ($80,000), which results in a gain of $10,000. 1040ez tax form 2013 So in this situation, Andrew will neither have a gain nor a loss. 1040ez tax form 2013 Donor's adjusted basis equal to or less than the FMV. 1040ez tax form 2013   If someone gave you your home after 1976 and the donor's adjusted basis, when it was given to you, was equal to or less than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home. 1040ez tax form 2013 Part of federal gift tax due to net increase in value. 1040ez tax form 2013   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. 1040ez tax form 2013 The numerator (top part) of the fraction is the net increase in the value of the home, and the denominator (bottom part) is the value of the home for gift tax purposes after reduction for any annual exclusion and marital or charitable deduction that applies to the gift. 1040ez tax form 2013 The net increase in the value of the home is its FMV minus the adjusted basis of the donor. 1040ez tax form 2013 Publication 551 gives more information, including examples, on figuring your basis when you receive property as a gift. 1040ez tax form 2013 Inheritance Your basis in a home you inherited is generally the fair market value of the home on the date of the decedent's death or on the alternative valuation date if the personal representative for the estate chooses to use alternative valuation. 1040ez tax form 2013 If an estate tax return was filed, your basis is generally the value of the home listed on the estate tax return. 1040ez tax form 2013 If an estate tax return was not filed, your basis is the appraised value of the home at the decedent's date of death for state inheritance or transmission taxes. 1040ez tax form 2013 Publication 551 and Publication 559, Survivors, Executors, and Administrators, have more information on the basis of inherited property. 1040ez tax form 2013 If you inherited your home from someone who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. 1040ez tax form 2013 Adjusted Basis While you own your home, various events may take place that can change the original basis of your home. 1040ez tax form 2013 These events can increase or decrease your original basis. 1040ez tax form 2013 The result is called adjusted basis. 1040ez tax form 2013 See Table 3, on this page, for a list of some of the items that can adjust your basis. 1040ez tax form 2013 Table 3. 1040ez tax form 2013 Adjusted Basis This table lists examples of some items that generally will increase or decrease your basis in your home. 1040ez tax form 2013 It is not intended to be all-inclusive. 1040ez tax form 2013 Increases to Basis Decreases to Basis Improvements: Putting an addition on your home Replacing an entire roof Paving your driveway Installing central air conditioning Rewiring your home Assessments for local improvements (see Assessments for local benefits , under What You Can and Cannot Deduct, earlier) Amounts spent to restore damaged property Insurance or other reimbursement for casualty losses Deductible casualty loss not covered by insurance Payments received for easement or right-of-way granted Depreciation allowed or allowable if home is used for business or rental purposes Value of subsidy for energy conservation measure excluded from income Improvements. 1040ez tax form 2013   An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. 1040ez tax form 2013 You must add the cost of any improvements to the basis of your home. 1040ez tax form 2013 You cannot deduct these costs. 1040ez tax form 2013   Improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, and paving your driveway. 1040ez tax form 2013 Amount added to basis. 1040ez tax form 2013   The amount you add to your basis for improvements is your actual cost. 1040ez tax form 2013 This includes all costs for material and labor, except your own labor, and all expenses related to the improvement. 1040ez tax form 2013 For example, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. 1040ez tax form 2013   You also must add to your basis state and local assessments for improvements such as streets and sidewalks if they increase the value of the property. 1040ez tax form 2013 These assessments are discussed earlier under Real Estate Taxes . 1040ez tax form 2013 Improvements no longer part of home. 1040ez tax form 2013    Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. 1040ez tax form 2013 Example. 1040ez tax form 2013 You put wall-to-wall carpeting in your home 15 years ago. 1040ez tax form 2013 Later, you replaced that carpeting with new wall-to-wall carpeting. 1040ez tax form 2013 The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. 1040ez tax form 2013 Repairs versus improvements. 1040ez tax form 2013   A repair keeps your home in an ordinary, efficient operating condition. 1040ez tax form 2013 It does not add to the value of your home or prolong its life. 1040ez tax form 2013 Repairs include repainting your home inside or outside, fixing your gutters or floors, fixing leaks or plastering, and replacing broken window panes. 1040ez tax form 2013 You cannot deduct repair costs and generally cannot add them to the basis of your home. 1040ez tax form 2013   However, repairs that are done as part of an extensive remodeling or restoration of your home are considered improvements. 1040ez tax form 2013 You add them to the basis of your home. 1040ez tax form 2013 Records to keep. 1040ez tax form 2013   You can use Table 4 (at the end of the publication) as a guide to help you keep track of improvements to your home. 1040ez tax form 2013 Also see Keeping Records , below. 1040ez tax form 2013 Energy conservation subsidy. 1040ez tax form 2013   If a public utility gives you (directly or indirectly) a subsidy for the purchase or installation of an energy conservation measure for your home, do not include the value of that subsidy in your income. 1040ez tax form 2013 You must reduce the basis of your home by that value. 1040ez tax form 2013   An energy conservation measure is an installation or modification primarily designed to reduce consumption of electricity or natural gas or to improve the management of energy demand. 1040ez tax form 2013 Keeping Records Keeping full and accurate records is vital to properly report your income and expenses, to support your deductions and credits, and to know the basis or adjusted basis of your home. 1040ez tax form 2013 These records include your purchase contract and settlement papers if you bought the property, or other objective evidence if you acquired it by gift, inheritance, or similar means. 1040ez tax form 2013 You should keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. 1040ez tax form 2013 In addition, you should keep track of any decreases to the basis such as those listed in Table 3, earlier. 1040ez tax form 2013 How to keep records. 1040ez tax form 2013   How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. 1040ez tax form 2013 How long to keep records. 1040ez tax form 2013   You must keep your records for as long as they are important for meeting any provision of the federal tax law. 1040ez tax form 2013   Keep records that support an item of income, a deduction, or a credit appearing on a return until the period of limitations for the return runs out. 1040ez tax form 2013 (A period of limitations is the period of time after which no legal action can be brought. 1040ez tax form 2013 ) For assessment of tax you owe, this is generally 3 years from the date you filed the return. 1040ez tax form 2013 For filing a claim for credit or refund, this is generally 3 years from the date you filed the original return, or 2 years from the date you paid the tax, whichever is later. 1040ez tax form 2013 Returns filed before the due date are treated as filed on the due date. 1040ez tax form 2013   You may need to keep records relating to the basis of property (discussed earlier) for longer than the period of limitations. 1040ez tax form 2013 Keep those records as long as they are important in figuring the basis of the original or replacement property. 1040ez tax form 2013 Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. 1040ez tax form 2013 Table 4. 1040ez tax form 2013 Record of Home Improvements Keep this for your records. 1040ez tax form 2013 Also, keep receipts or other proof of improvements. 1040ez tax form 2013 Remove from this record any improvements that are no longer part of your main home. 1040ez tax form 2013 For example, if you put wall-to-wall carpeting in your home and later replace it with new wall-to-wall carpeting, remove the cost of the first carpeting. 1040ez tax form 2013 (a) Type of Improvement (b) Date (c) Amount   (a) Type of Improvement (b) Date (c) Amount Additions:       Heating & Air  Conditioning:     Bedroom       Heating system     Bathroom       Central air conditioning     Deck       Furnace     Garage       Duct work     Porch       Central humidifier     Patio       Filtration system     Storage shed       Other     Fireplace       Electrical:     Other           Lawn & Grounds:       Lighting fixtures           Wiring upgrades     Landscaping       Other     Driveway       Plumbing:     Walkway           Fences       Water heater     Retaining wall       Soft water system     Sprinkler system       Filtration system     Swimming pool       Other     Exterior lighting       Insulation:     Other           Communications:       Attic           Walls     Satellite dish       Floors     Intercom       Pipes and duct work     Security system       Other     Other             Miscellaneous:       Interior  Improvements:     Storm windows and doors       Built-in appliances     Roof       Kitchen modernization     Central vacuum       Bathroom modernization     Other       Flooring             Wall-to-wall carpeting             Other     How To