File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

2011 1040 Ez

Tax 2011File State Taxes Only FreeEfile 1040x Form2011 Income Tax Forms IndividualHow To Amend A Tax Return 20132013 Tax Form 1040ezCan I Efile My State Taxes For FreeHow Do I Amend My 2012 Tax Return OnlineStudent Tax Form 1098 TH&r Block TaxcutH&rblockonline2010 Amended Tax Return InstructionsInstructions For Form 1040ezAmended Tax Return FormFile 2007 Fed Income TaxDo Students Need To File A Tax ReturnTurbo TaxCan I File My 2012 Taxes Now1040 Ez Online1040ez Instructions 2011Amend 2013 Tax ReturnHow To Amend 1040ez Tax FormFree Online Tax 20101040ez Forms And InstructionsMyfreetaxesCan I File My 2012 TaxesAmended Tax ReturnHow To Refile Your Taxes1040ez Form InstructionsIrs Free File 2012Amend 1040xFree Online State Tax Filing OnlyH&r Block LoginAmend Tax ReturnPrint 1040ez2011 Tax Forms 1040ez2012 Ez FormE File 1040x FreeHow Do I File My Taxes For 2011Can I File My 2012 Taxes Late

2011 1040 Ez

2011 1040 ez 28. 2011 1040 ez   Miscellaneous Deductions Table of Contents What's New Introduction Useful Items - You may want to see: Deductions Subject to the 2% LimitUnreimbursed Employee Expenses (Line 21) Tax Preparation Fees (Line 22) Other Expenses (Line 23) Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses What's New Standard mileage rate. 2011 1040 ez  The 2013 rate for business use of a vehicle is 56½ cents per mile. 2011 1040 ez Introduction This chapter explains which expenses you can claim as miscellaneous itemized deductions on Schedule A (Form 1040). 2011 1040 ez You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. 2011 1040 ez This chapter covers the following topics. 2011 1040 ez Deductions subject to the 2% limit. 2011 1040 ez Deductions not subject to the 2% limit. 2011 1040 ez Expenses you cannot deduct. 2011 1040 ez You must keep records to verify your deductions. 2011 1040 ez You should keep receipts, canceled checks, substitute checks, financial account statements, and other documentary evidence. 2011 1040 ez For more information on recordkeeping, get Publication 552, Record- keeping for Individuals. 2011 1040 ez Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) 946 How To Depreciate Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040). 2011 1040 ez You can claim the amount of expenses that is more than 2% of your adjusted gross income. 2011 1040 ez You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. 2011 1040 ez Your adjusted gross income is the amount on Form 1040, line 38. 2011 1040 ez Generally, you apply the 2% limit after you apply any other deduction limit. 2011 1040 ez For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed in chapter 26) before you apply the 2% limit. 2011 1040 ez Deductions subject to the 2% limit are discussed in the three categories in which you report them on Schedule A (Form 1040). 2011 1040 ez Unreimbursed employee expenses (line 21). 2011 1040 ez Tax preparation fees (line 22). 2011 1040 ez Other expenses (line 23). 2011 1040 ez Unreimbursed Employee Expenses (Line 21) Generally, you can deduct on Schedule A (Form 1040), line 21, unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. 2011 1040 ez An expense is ordinary if it is common and accepted in your trade, business, or profession. 2011 1040 ez An expense is necessary if it is appropriate and helpful to your business. 2011 1040 ez An expense does not have to be required to be considered necessary. 2011 1040 ez Examples of unreimbursed employee expenses are listed next. 2011 1040 ez The list is followed by discussions of additional unreimbursed employee expenses. 2011 1040 ez Business bad debt of an employee. 2011 1040 ez Education that is work related. 2011 1040 ez (See chapter 27. 2011 1040 ez ) Legal fees related to your job. 2011 1040 ez Licenses and regulatory fees. 2011 1040 ez Malpractice insurance premiums. 2011 1040 ez Medical examinations required by an employer. 2011 1040 ez Occupational taxes. 2011 1040 ez Passport for a business trip. 2011 1040 ez Subscriptions to professional journals and trade magazines related to your work. 2011 1040 ez Travel, transportation, entertainment, and gifts related to your work. 2011 1040 ez (See chapter 26. 2011 1040 ez ) Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. 2011 1040 ez Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer that are attributable to the pay you received from that employer. 2011 1040 ez Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. 2011 1040 ez For more information about the rules and exceptions to the rules affecting the allowable deductions for a home computer, see Publication 529. 2011 1040 ez Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. 2011 1040 ez Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. 2011 1040 ez Lobbying and political activities. 2011 1040 ez   You may not be able to deduct that part of your dues that is for certain lobbying and political activities. 2011 1040 ez See Dues used for lobbying under Nondeductible Expenses, later. 2011 1040 ez Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. 2011 1040 ez If you file Form 1040A, you can deduct these expenses on line 16. 2011 1040 ez If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. 2011 1040 ez However, neither spouse can deduct more than $250 of his or her qualified expenses. 2011 1040 ez Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. 2011 1040 ez You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. 2011 1040 ez The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. 2011 1040 ez See Publication 587 for more detailed information and a worksheet. 2011 1040 ez Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. 2011 1040 ez You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. 2011 1040 ez Employment and outplacement agency fees. 2011 1040 ez   You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. 2011 1040 ez Employer pays you back. 2011 1040 ez   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. 2011 1040 ez (See Recoveries in chapter 12. 2011 1040 ez ) Employer pays the employment agency. 2011 1040 ez   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. 2011 1040 ez Résumé. 2011 1040 ez   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. 2011 1040 ez Travel and transportation expenses. 2011 1040 ez   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. 2011 1040 ez You can deduct the travel expenses if the trip is primarily to look for a new job. 2011 1040 ez The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. 2011 1040 ez   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. 2011 1040 ez   You can choose to use the standard mileage rate to figure your car expenses. 2011 1040 ez The 2013 rate for business use of a vehicle is 56½ cents per mile. 2011 1040 ez See chapter 26 for more information. 2011 1040 ez Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. 2011 1040 ez Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. 2011 1040 ez If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. 2011 1040 ez Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. 2011 1040 ez If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. 2011 1040 ez Research Expenses of a College Professor If you are a college professor, you can deduct research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. 2011 1040 ez You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. 2011 1040 ez However, you cannot deduct the cost of travel as a form of education. 2011 1040 ez Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. 2011 1040 ez You can depreciate the cost of tools that have a useful life substantially beyond the tax year. 2011 1040 ez For more information about depreciation, see Publication 946. 2011 1040 ez Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. 2011 1040 ez You can also deduct assessments for benefit payments to unemployed union members. 2011 1040 ez However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. 2011 1040 ez Also, you cannot deduct contributions to a pension fund, even if the union requires you to make the contributions. 2011 1040 ez You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. 2011 1040 ez See Lobbying Expenses under Nondeductible Expenses, later. 2011 1040 ez Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. 2011 1040 ez You must wear them as a condition of your employment. 2011 1040 ez The clothes are not suitable for everyday wear. 2011 1040 ez It is not enough that you wear distinctive clothing. 2011 1040 ez The clothing must be specifically required by your employer. 2011 1040 ez Nor is it enough that you do not, in fact, wear your work clothes away from work. 2011 1040 ez The clothing must not be suitable for taking the place of your regular clothing. 2011 1040 ez Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. 2011 1040 ez ). 2011 1040 ez Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. 2011 1040 ez However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. 2011 1040 ez Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. 2011 1040 ez Protective clothing. 2011 1040 ez   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. 2011 1040 ez   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. 2011 1040 ez Military uniforms. 2011 1040 ez   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. 2011 1040 ez However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. 2011 1040 ez In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. 2011 1040 ez   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. 2011 1040 ez   You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. 2011 1040 ez Tax Preparation Fees (Line 22) You can usually deduct tax preparation fees in the year you pay them. 2011 1040 ez Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. 2011 1040 ez These fees include the cost of tax preparation software programs and tax publications. 2011 1040 ez They also include any fee you paid for electronic filing of your return. 2011 1040 ez Other Expenses (Line 23) You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2% limit. 2011 1040 ez On Schedule A (Form 1040), line 23, you can deduct expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. 2011 1040 ez You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonably and closely related to these purposes. 2011 1040 ez Some of these other expenses are explained in the following discussions. 2011 1040 ez If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses , later, under Nondeductible Expenses. 2011 1040 ez Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. 2011 1040 ez Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. 2011 1040 ez First report the loss in Section B of Form 4684, Casualties and Thefts. 2011 1040 ez You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. 2011 1040 ez To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. 2011 1040 ez For other casualty and theft losses, see chapter 25. 2011 1040 ez Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. 2011 1040 ez Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. 2011 1040 ez The fees are deductible in the year paid. 2011 1040 ez Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). 2011 1040 ez You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. 2011 1040 ez But if you work as an employee and also use the computer in that work, see Publication 946. 2011 1040 ez Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. 2011 1040 ez Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. 2011 1040 ez The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. 2011 1040 ez For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. 2011 1040 ez Fees to Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. 2011 1040 ez But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. 2011 1040 ez You must add the fee to the cost of the property. 2011 1040 ez You cannot deduct the fee you pay to a broker to sell securities. 2011 1040 ez You can use the fee only to figure gain or loss from the sale. 2011 1040 ez See the Instructions for Form 8949 for information on how to report the fee. 2011 1040 ez Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. 2011 1040 ez A hobby is not a business because it is not carried on to make a profit. 2011 1040 ez See Activity not for profit in chapter 12 under Other Income. 2011 1040 ez Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. 2011 1040 ez Deductions of pass-through entities are passed through to the partners or shareholders. 2011 1040 ez The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. 2011 1040 ez Example. 2011 1040 ez You are a member of an investment club that is formed solely to invest in securities. 2011 1040 ez The club is treated as a partnership. 2011 1040 ez The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. 2011 1040 ez In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. 2011 1040 ez However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. 2011 1040 ez Publicly offered mutual funds. 2011 1040 ez   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. 2011 1040 ez A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. 2011 1040 ez   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). 2011 1040 ez This net figure is the amount you report on your return as income. 2011 1040 ez You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. 2011 1040 ez Information returns. 2011 1040 ez   You should receive information returns from pass-through entities. 2011 1040 ez Partnerships and S corporations. 2011 1040 ez   These entities issue Schedule K-1, which lists the items and amounts you must report and identifies the tax return schedules and lines to use. 2011 1040 ez Nonpublicly offered mutual funds. 2011 1040 ez   These funds will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing your share of gross income and investment expenses. 2011 1040 ez You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. 2011 1040 ez Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. 2011 1040 ez Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. 2011 1040 ez You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce, if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. 2011 1040 ez You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F), on the appropriate schedule. 2011 1040 ez You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040). 2011 1040 ez See Tax Preparation Fees , earlier. 2011 1040 ez Loss on Deposits For information on whether, and if so, how, you may deduct a loss on your deposit in a qualified financial institution, see Loss on Deposits in chapter 25. 2011 1040 ez Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. 2011 1040 ez If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. 2011 1040 ez If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. 2011 1040 ez Repayments of Social Security Benefits For information on how to deduct your repayments of certain social security benefits, see Repayments More Than Gross Benefits in chapter 11. 2011 1040 ez Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. 2011 1040 ez You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. 2011 1040 ez Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. 2011 1040 ez These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. 2011 1040 ez Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your individual retirement arrangement (IRA) are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. 2011 1040 ez For more information about IRAs, see chapter 17. 2011 1040 ez Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. 2011 1040 ez They are not subject to the 2% limit. 2011 1040 ez Report these items on Schedule A (Form 1040), line 28. 2011 1040 ez List of Deductions Each of the following items is discussed in detail after the list (except where indicated). 2011 1040 ez Amortizable premium on taxable bonds. 2011 1040 ez Casualty and theft losses from income- producing property. 2011 1040 ez Federal estate tax on income in respect of a decedent. 2011 1040 ez Gambling losses up to the amount of gambling winnings. 2011 1040 ez Impairment-related work expenses of persons with disabilities. 2011 1040 ez Loss from other activities from Schedule K-1 (Form 1065-B), box 2. 2011 1040 ez Losses from Ponzi-type investment schemes. 2011 1040 ez See Losses from Ponzi-type investment schemes under Theft in chapter 25. 2011 1040 ez Repayments of more than $3,000 under a claim of right. 2011 1040 ez Unrecovered investment in an annuity. 2011 1040 ez Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. 2011 1040 ez You can elect to amortize the premium on taxable bonds. 2011 1040 ez The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. 2011 1040 ez Part of the premium on some bonds may be a miscellaneous deduction not subject to the 2% limit. 2011 1040 ez For more information, see Amortizable Premium on Taxable Bonds in Publication 529, and Bond Premium Amortization in chapter 3 of Publication 550, Investment Income and Expenses. 2011 1040 ez Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). 2011 1040 ez First, report the loss in Form 4684, Section B. 2011 1040 ez You may also have to include the loss on Form 4797, Sales of Business Property if you are otherwise required to file that form. 2011 1040 ez To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. 2011 1040 ez For more information on casualty and theft losses, see chapter 25. 2011 1040 ez Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. 2011 1040 ez Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. 2011 1040 ez See Publication 559 for more information. 2011 1040 ez Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. 2011 1040 ez You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. 2011 1040 ez You cannot deduct gambling losses that are more than your winnings. 2011 1040 ez You cannot reduce your gambling winnings by your gambling losses and report the difference. 2011 1040 ez You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. 2011 1040 ez Therefore, your records should show your winnings separately from your losses. 2011 1040 ez Diary of winnings and losses. 2011 1040 ez You must keep an accurate diary or similar record of your losses and winnings. 2011 1040 ez Your diary should contain at least the following information. 2011 1040 ez The date and type of your specific wager or wagering activity. 2011 1040 ez The name and address or location of the gambling establishment. 2011 1040 ez The names of other persons present with you at the gambling establishment. 2011 1040 ez The amount(s) you won or lost. 2011 1040 ez See Publication 529 for more information. 2011 1040 ez Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. 2011 1040 ez Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and for other expenses in connection with your place of work that are necessary for you to be able to work. 2011 1040 ez Self-employed. 2011 1040 ez   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. 2011 1040 ez Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28. 2011 1040 ez It is not subject to the passive activity limitations. 2011 1040 ez Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid or take a credit against your tax. 2011 1040 ez See Repayments in chapter 12 for more information. 2011 1040 ez Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. 2011 1040 ez If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. 2011 1040 ez See chapter 10 for more information about the tax treatment of pensions and annuities. 2011 1040 ez Nondeductible Expenses Examples of nondeductible expenses are listed next. 2011 1040 ez The list is followed by discussions of additional nondeductible expenses. 2011 1040 ez List of Nondeductible Expenses Broker's commissions that you paid in connection with your IRA or other investment property. 2011 1040 ez Burial or funeral expenses, including the cost of a cemetery lot. 2011 1040 ez Capital expenses. 2011 1040 ez Fees and licenses, such as car licenses, marriage licenses, and dog tags. 2011 1040 ez Hobby losses, but see Hobby Expenses , earlier. 2011 1040 ez Home repairs, insurance, and rent. 2011 1040 ez Illegal bribes and kickbacks. 2011 1040 ez See Bribes and kickbacks in chapter 11 of Publication 535. 2011 1040 ez Losses from the sale of your home, furniture, personal car, etc. 2011 1040 ez Personal disability insurance premiums. 2011 1040 ez Personal, living, or family expenses. 2011 1040 ez The value of wages never received or lost vacation time. 2011 1040 ez Adoption Expenses You cannot deduct the expenses of adopting a child, but you may be able to take a credit for those expenses. 2011 1040 ez See chapter 37. 2011 1040 ez Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. 2011 1040 ez These include qualification and registration fees for primary elections. 2011 1040 ez Legal fees. 2011 1040 ez   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. 2011 1040 ez Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. 2011 1040 ez Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. 2011 1040 ez This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. 2011 1040 ez You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. 2011 1040 ez Dues paid to airline, hotel, and luncheon clubs are not deductible. 2011 1040 ez Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). 2011 1040 ez If you haul tools, instruments, or other items, in your car to and from work, you can deduct only the additional cost of hauling the items such as the rent on a trailer to carry the items. 2011 1040 ez Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. 2011 1040 ez This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). 2011 1040 ez Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. 2011 1040 ez Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. 2011 1040 ez Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. 2011 1040 ez However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. 2011 1040 ez See Home Office under Unreimbursed Employee Expenses, earlier, and Security System under Deducting Expenses in Publication 587. 2011 1040 ez Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. 2011 1040 ez Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. 2011 1040 ez You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. 2011 1040 ez See chapter 18 for information on alimony. 2011 1040 ez Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. 2011 1040 ez These include expenses to: Influence legislation, Participate or intervene in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. 2011 1040 ez Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. 2011 1040 ez Dues used for lobbying. 2011 1040 ez   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. 2011 1040 ez See Lobbying Expenses in Publication 529 for information on exceptions. 2011 1040 ez Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. 2011 1040 ez 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. 2011 1040 ez See chapter 25. 2011 1040 ez Example. 2011 1040 ez A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. 2011 1040 ez The diamond falls from the ring and is never found. 2011 1040 ez The loss of the diamond is a casualty. 2011 1040 ez Lunches with Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. 2011 1040 ez See chapter 26 for information on deductible expenses while traveling away from home. 2011 1040 ez Meals While Working Late You cannot deduct the cost of meals while working late. 2011 1040 ez However, you may be able to claim a deduction if the cost of meals is a deductible entertainment expense, or if you are traveling away from home. 2011 1040 ez See chapter 26 for information on deductible entertainment expenses and expenses while traveling away from home. 2011 1040 ez Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. 2011 1040 ez Custody of children. 2011 1040 ez Breach of promise to marry suit. 2011 1040 ez Civil or criminal charges resulting from a personal relationship. 2011 1040 ez Damages for personal injury, except for certain unlawful discrimination and whistleblower claims. 2011 1040 ez Preparation of a title (or defense or perfection of a title). 2011 1040 ez Preparation of a will. 2011 1040 ez Property claims or property settlement in a divorce. 2011 1040 ez You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. 2011 1040 ez Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. 2011 1040 ez Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. 2011 1040 ez Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. 2011 1040 ez Accounting certificate fees paid for the initial right to practice accounting. 2011 1040 ez Bar exam fees and incidental expenses in securing initial admission to the bar. 2011 1040 ez Medical and dental license fees paid to get initial licensing. 2011 1040 ez Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. 2011 1040 ez Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. 2011 1040 ez Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. 2011 1040 ez Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. 2011 1040 ez You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. 2011 1040 ez Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. 2011 1040 ez You cannot deduct interest on a debt incurred or continued to buy or carry  tax-exempt securities. 2011 1040 ez If you have expenses to produce both taxable and tax-exempt income, but you cannot identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct. 2011 1040 ez Example. 2011 1040 ez During the year, you received taxable interest of $4,800 and tax-exempt interest of $1,200. 2011 1040 ez In earning this income, you had total expenses of $500 during the year. 2011 1040 ez You cannot identify the amount of each expense item that is for each income item. 2011 1040 ez Therefore, 80% ($4,800/$6,000) of the expense is for the taxable interest and 20% ($1,200/$6,000) is for the tax-exempt interest. 2011 1040 ez You can deduct, subject to the 2% limit, expenses of $400 (80% of $500). 2011 1040 ez Travel Expenses for Another Individual You generally cannot deduct travel expenses you pay or incur for a spouse, dependent, or other individual who accompanies you (or your employee) on business or personal travel unless the spouse, dependent, or other individual is an employee of the taxpayer, the travel is for a bona fide business purpose, and such expenses would otherwise be deductible by the spouse, dependent, or other individual. 2011 1040 ez See chapter 26 for more information on deductible travel expenses. 2011 1040 ez Voluntary Unemployment Benefit Fund Contributions You cannot deduct voluntary unemployment benefit fund contributions you make to a union fund or a private fund. 2011 1040 ez However, you can deduct contributions as taxes if state law requires you to make them to a state unemployment fund that covers you for the loss of wages from unemployment caused by business conditions. 2011 1040 ez Wristwatches You cannot deduct the cost of a wristwatch, even if there is a job requirement that you know the correct time to properly perform your duties. 2011 1040 ez Prev  Up  Next   Home   More Online Publications
Español

Money and Taxes: Online Services

Online government services including mortgage calculator, retirement estimator, auctions, currency exchange rates, e-file taxes and more.

The 2011 1040 Ez

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