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Irs Free Tax FilingFiling State ReturnsFile An Amended Tax Return Online FreeIrs Form 1040How To File Tax AmendmentIrs Gov Form 1040a For 2012Where Can I File My State And Federal Taxes Online For FreeDid I File 2011 Taxes1040x HelpFree Taxes OnlineInstructions For 1040xForm 1040ezTax Act Online 2012Irs Extension Form 20111040 Ez 2011 FormFree 1040ez FilingTax Form 1040ez 20131040ez Income Tax FormTaxcut OnlineFree Federal And State Tax Filing 2012 OnlineTax Amend FormFilling Out 1040x OnlineTax AdmendmentWhen Amend Tax ReturnForm 1040 Ez 2012Soon Can I File My 2013 TaxesAmend 2009 TaxesH And R Block File For FreeIrs File 1040ezIrs Forms 2009 Form 1040Irs Gov Form 1040File Taxes 2010 FreeFile State Taxes Free OnlineTaxact 2012 Return UserIrs Forms Amended ReturnH&r Block Free TaxHow To File A 2012 Tax ReturnE Filing Income TaxH&r Block Tax CutI Need 2011 Tax Software

Aarp Tax Help

Aarp tax help Index A Assistance (see Tax help) F Free tax services, How To Get Tax Help H Help (see Tax help) High-low method: Introduction, High-low method. Aarp tax help October 1, 2010 (Table 1) (see List of states under October 1, 2010 (High-low method) ) Transition rules, High-low method. Aarp tax help I Internet: Per diem rates, Per diem rates on the Internet. Aarp tax help Introduction, Introduction M More information (see Tax help) O October 1, 2010 (High-low method): Arizona (AZ), Per Diem Rate Tables California (CA), Per Diem Rate Tables Colorado (CO), Per Diem Rate Tables District of Columbia (DC), Per Diem Rate Tables Florida (FL), Per Diem Rate Tables Illinois (IL), Per Diem Rate Tables Maryland (MD), Per Diem Rate Tables Massachusetts (MA), Per Diem Rate Tables New York (NY), Per Diem Rate Tables Pennsylvania (PA), Per Diem Rate Tables Rhode Island (RI), Per Diem Rate Tables Utah (UT), Per Diem Rate Tables Virginia (VA), Per Diem Rate Tables Washington (WA), Per Diem Rate Tables Wyoming (WY), Per Diem Rate Tables P Per diem rates: High-cost localities, High-low method. Aarp tax help High-low method, High-low method. Aarp tax help Internet, Per diem rates on the Internet. Aarp tax help Regular federal method, Regular federal per diem rate method. Aarp tax help Standard rate for unlisted localities, High-low method. Aarp tax help , Regular federal per diem rate method. Aarp tax help Transition rules, High-low method. Aarp tax help , Federal per diem rate method. Aarp tax help Publications (see Tax help) R Regular federal method: Introduction, Regular federal per diem rate method. Aarp tax help Transition rules, Federal per diem rate method. Aarp tax help T Table 2 (High-low method, October 1, 2010), Per Diem Rate Tables Tax help, How To Get Tax Help Taxpayer Advocate, Taxpayer Advocate Service. Aarp tax help Transition rules:, Transition Rules Example: High-low method, High-low method. Aarp tax help Regular federal method, Federal per diem rate method. Aarp tax help High-low method, High-low method. Aarp tax help Regular federal method, Federal per diem rate method. Aarp tax help TTY/TDD information, How To Get Tax Help Prev  Up     Home   More Online Publications
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Tax Information for Political Organizations

FEC Filing Required for Some 527 Organizations
Overview of FEC "electioneering communications" filings required for some section 527 exempt organizations.

Filing Requirements
Political parties; campaign committees for candidates for federal, state or local office; and political action committees are all political organizations subject to tax under IRC section 527 and may have filing requirements with the Service.

Political Organization Filing and Disclosure
File and search for notices and reports filed with the Service under IRC section 527.

Exemption Requirements - Political Organizations
A brief description of the requirements for exemption under IRC section 527.

Taxable Income - Political Organizations
A brief explanation of how political organizations are taxed under IRC section 527.

Solicitation Notice
A brief description of the solicitation notice requirements under IRC section 6113.

Employment Taxes for Exempt Organizations
Links to information about employment taxes for tax-exempt organizations.

Political organizations: Resource materials
Resources available on irs.gov concerning tax-exempt political organizations (section 527).

Page Last Reviewed or Updated: 12-Mar-2014

The Aarp Tax Help

Aarp tax help 23. Aarp tax help   Interest Expense Table of Contents Introduction Useful Items - You may want to see: Home Mortgage InterestAmount Deductible Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement Investment InterestInvestment Property Allocation of Interest Expense Limit on Deduction Items You Cannot DeductPersonal Interest Allocation of Interest How To ReportMore than one borrower. Aarp tax help Mortgage proceeds used for business or investment. Aarp tax help Introduction This chapter discusses what interest expenses you can deduct. Aarp tax help Interest is the amount you pay for the use of borrowed money. Aarp tax help The following are types of interest you can deduct as itemized deductions on Schedule A (Form 1040). Aarp tax help Home mortgage interest, including certain points and mortgage insurance premiums. Aarp tax help Investment interest. Aarp tax help This chapter explains these deductions. Aarp tax help It also explains where to deduct other types of interest and lists some types of interest you cannot deduct. Aarp tax help Use Table 23-1 to find out where to get more information on various types of interest, including investment interest. Aarp tax help Useful Items - You may want to see: Publication 936 Home Mortgage Interest Deduction 550 Investment Income and Expenses Home Mortgage Interest Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). Aarp tax help The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. Aarp tax help You can deduct home mortgage interest if all the following conditions are met. Aarp tax help You file Form 1040 and itemize deductions on Schedule A (Form 1040). Aarp tax help The mortgage is a secured debt on a qualified home in which you have an ownership interest. Aarp tax help (Generally, your mortgage is a secured debt if you put your home up as collateral to protect the interest of the lender. Aarp tax help The term “qualified home” means your main home or second home. Aarp tax help For details, see Publication 936. Aarp tax help )  Both you and the lender must intend that the loan be repaid. Aarp tax help Amount Deductible In most cases, you can deduct all of your home mortgage interest. Aarp tax help How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. Aarp tax help Fully deductible interest. Aarp tax help   If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. Aarp tax help (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category. Aarp tax help )   The three categories are as follows: Mortgages you took out on or before October 13, 1987 (called grandfathered debt). Aarp tax help Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2013 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately). Aarp tax help Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2013 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2). Aarp tax help The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. Aarp tax help   See Part II of Publication 936 for more detailed definitions of grandfathered, home acquisition, and home equity debt. Aarp tax help    You can use Figure 23-A to check whether your home mortgage interest is fully deductible. Aarp tax help Figure 23-A. Aarp tax help Is My Home Mortgage Interest Fully Deductible? Please click here for the text description of the image. Aarp tax help Figure 23-A. Aarp tax help Is My Interest Fully Deductible? Limits on deduction. Aarp tax help   You cannot fully deduct interest on a mortgage that does not fit into any of the three categories listed earlier. Aarp tax help If this applies to you, see Part II of Publication 936 to figure the amount of interest you can deduct. Aarp tax help Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. Aarp tax help It also describes certain special situations that may affect your deduction. Aarp tax help Late payment charge on mortgage payment. Aarp tax help   You can deduct as home mortgage interest a late payment charge if it was not for a specific service performed in connection with your mortgage loan. Aarp tax help Mortgage prepayment penalty. Aarp tax help   If you pay off your home mortgage early, you may have to pay a penalty. Aarp tax help You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. Aarp tax help Sale of home. Aarp tax help   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of sale. Aarp tax help Example. Aarp tax help John and Peggy Harris sold their home on May 7. Aarp tax help Through April 30, they made home mortgage interest payments of $1,220. Aarp tax help The settlement sheet for the sale of the home showed $50 interest for the 6-day period in May up to, but not including, the date of sale. Aarp tax help Their mortgage interest deduction is $1,270 ($1,220 + $50). Aarp tax help Prepaid interest. Aarp tax help   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. Aarp tax help You can deduct in each year only the interest that qualifies as home mortgage interest for that year. Aarp tax help However, there is an exception that applies to points, discussed later. Aarp tax help Mortgage interest credit. Aarp tax help   You may be able to claim a mortgage interest credit if you were issued a mortgage credit certificate (MCC) by a state or local government. Aarp tax help Figure the credit on Form 8396, Mortgage Interest Credit. Aarp tax help If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. Aarp tax help   For more information on the credit, see chapter 37. Aarp tax help Ministers' and military housing allowance. Aarp tax help   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you can still deduct your home mortgage interest. Aarp tax help Hardest Hit Fund and Emergency Homeowners' Loan Programs. Aarp tax help   You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. Aarp tax help You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. Aarp tax help You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. Aarp tax help If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098-MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received from payer(s) / borrower(s)), box 4 (mortgage insurance premiums) and box 5 (real property taxes). Aarp tax help However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. Aarp tax help Mortgage assistance payments under section 235 of the National Housing Act. Aarp tax help   If you qualify for mortgage assistance payments for lower-income families under section 235 of the National Housing Act, part or all of the interest on your mortgage may be paid for you. Aarp tax help You cannot deduct the interest that is paid for you. Aarp tax help No other effect on taxes. Aarp tax help   Do not include these mortgage assistance payments in your income. Aarp tax help Also, do not use these payments to reduce other deductions, such as real estate taxes. Aarp tax help Divorced or separated individuals. Aarp tax help   If a divorce or separation agreement requires you or your spouse or former spouse to pay home mortgage interest on a home owned by both of you, the payment of interest may be alimony. Aarp tax help See the discussion of Payments for jointly-owned home in chapter 18. Aarp tax help Redeemable ground rents. Aarp tax help   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. Aarp tax help   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. Aarp tax help For more information, see Publication 936. Aarp tax help Nonredeemable ground rents. Aarp tax help   Payments on a nonredeemable ground rent are not mortgage interest. Aarp tax help You can deduct them as rent if they are a business expense or if they are for rental property. Aarp tax help Reverse mortgages. Aarp tax help   A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. Aarp tax help With a reverse mortgage, you retain title to your home. Aarp tax help Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. Aarp tax help Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Aarp tax help Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until the loan is paid in full. Aarp tax help Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Publication 936. Aarp tax help Rental payments. Aarp tax help   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. Aarp tax help This is true even if the settlement papers call them interest. Aarp tax help You cannot deduct these payments as home mortgage interest. Aarp tax help Mortgage proceeds invested in tax-exempt securities. Aarp tax help   You cannot deduct the home mortgage interest on grandfathered debt or home equity debt if you used the proceeds of the mortgage to buy securities or certificates that produce tax-free income. Aarp tax help “Grandfathered debt” and “home equity debt” are defined earlier under Amount Deductible. Aarp tax help Refunds of interest. Aarp tax help   If you receive a refund of interest in the same tax year you paid it, you must reduce your interest expense by the amount refunded to you. Aarp tax help If you receive a refund of interest you deducted in an earlier year, you generally must include the refund in income in the year you receive it. Aarp tax help However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. Aarp tax help This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. Aarp tax help    If you received a refund of interest you overpaid in an earlier year, you generally will receive a Form 1098, Mortgage Interest Statement, showing the refund in box 3. Aarp tax help For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. Aarp tax help   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in chapter 12. Aarp tax help Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Aarp tax help Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Aarp tax help A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Aarp tax help See Points paid by the seller , later. Aarp tax help General Rule You generally cannot deduct the full amount of points in the year paid. Aarp tax help Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. Aarp tax help See Deduction Allowed Ratably , next. Aarp tax help For exceptions to the general rule, see Deduction Allowed in Year Paid , later. Aarp tax help Deduction Allowed Ratably If you do not meet the tests listed under Deduction Allowed in Year Paid , later, the loan is not a home improvement loan, or you choose not to deduct your points in full in the year paid, you can deduct the points ratably (equally) over the life of the loan if you meet all the following tests. Aarp tax help You use the cash method of accounting. Aarp tax help This means you report income in the year you receive it and deduct expenses in the year you pay them. Aarp tax help Most individuals use this method. Aarp tax help Your loan is secured by a home. Aarp tax help (The home does not need to be your main home. Aarp tax help ) Your loan period is not more than 30 years. Aarp tax help If your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period. Aarp tax help Either your loan amount is $250,000 or less, or the number of points is not more than: 4, if your loan period is 15 years or less, or 6, if your loan period is more than 15 years. Aarp tax help Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. Aarp tax help (You can use Figure 23-B as a quick guide to see whether your points are fully deductible in the year paid. Aarp tax help ) Your loan is secured by your main home. Aarp tax help (Your main home is the one you ordinarily live in most of the time. Aarp tax help ) Paying points is an established business practice in the area where the loan was made. Aarp tax help The points paid were not more than the points generally charged in that area. Aarp tax help You use the cash method of accounting. Aarp tax help This means you report income in the year you receive it and deduct expenses in the year you pay them. Aarp tax help (If you want more information about this method, see Accounting Methods in chapter 1. Aarp tax help ) The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. Aarp tax help The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Aarp tax help The funds you provided are not required to have been applied to the points. Aarp tax help They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Aarp tax help You cannot have borrowed these funds from your lender or mortgage broker. Aarp tax help You use your loan to buy or build your main home. Aarp tax help The points were computed as a percentage of the principal amount of the mortgage. Aarp tax help The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. Aarp tax help The points may be shown as paid from either your funds or the seller's. Aarp tax help Figure 23-B. Aarp tax help Are My Points Fully Deductible This Year? Please click here for the text description of the image. Aarp tax help Figure 23-B. Aarp tax help Are My Points Fully Deductible This Year? Note. Aarp tax help If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan. Aarp tax help Home improvement loan. Aarp tax help   You can also fully deduct in the year paid points paid on a loan to improve your main home, if tests (1) through (6) are met. Aarp tax help Second home. Aarp tax help You cannot fully deduct in the year paid points you pay on loans secured by your second home. Aarp tax help You can deduct these points only over the life of the loan. Aarp tax help Refinancing. Aarp tax help   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. Aarp tax help This is true even if the new mortgage is secured by your main home. Aarp tax help   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Aarp tax help You can deduct the rest of the points over the life of the loan. Aarp tax help Example 1. Aarp tax help In 1998, Bill Fields got a mortgage to buy a home. Aarp tax help In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. Aarp tax help The mortgage is secured by his home. Aarp tax help To get the new loan, he had to pay three points ($3,000). Aarp tax help Two points ($2,000) were for prepaid interest, and one point ($1,000) was charged for services, in place of amounts that ordinarily are stated separately on the settlement statement. Aarp tax help Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. Aarp tax help The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. Aarp tax help Bill's first payment on the new loan was due July 1. Aarp tax help He made six payments on the loan in 2013 and is a cash basis taxpayer. Aarp tax help Bill used the funds from the new mortgage to repay his existing mortgage. Aarp tax help Although the new mortgage loan was for Bill's continued ownership of his main home, it was not for the purchase or improvement of that home. Aarp tax help He cannot deduct all of the points in 2013. Aarp tax help He can deduct two points ($2,000) ratably over the life of the loan. Aarp tax help He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. Aarp tax help The other point ($1,000) was a fee for services and is not deductible. Aarp tax help Example 2. Aarp tax help The facts are the same as in Example 1, except that Bill used $25,000 of the loan proceeds to improve his home and $75,000 to repay his existing mortgage. Aarp tax help Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. Aarp tax help His deduction is $500 ($2,000 × 25%). Aarp tax help Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. Aarp tax help This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. Aarp tax help The total amount Bill deducts in 2013 is $550 ($500 + $50). Aarp tax help Special Situations This section describes certain special situations that may affect your deduction of points. Aarp tax help Original issue discount. Aarp tax help   If you do not qualify to either deduct the points in the year paid or deduct them ratably over the life of the loan, or if you choose not to use either of these methods, the points reduce the issue price of the loan. Aarp tax help This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. Aarp tax help Amounts charged for services. Aarp tax help   Amounts charged by the lender for specific services connected to the loan are not interest. Aarp tax help Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Aarp tax help You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Aarp tax help Points paid by the seller. Aarp tax help   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Aarp tax help Treatment by seller. Aarp tax help   The seller cannot deduct these fees as interest. Aarp tax help But they are a selling expense that reduces the amount realized by the seller. Aarp tax help See chapter 15 for information on selling your home. Aarp tax help Treatment by buyer. Aarp tax help    The buyer reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them. Aarp tax help If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. Aarp tax help If any of those tests are not met, the buyer deducts the points over the life of the loan. Aarp tax help   For information about basis, see chapter 13. Aarp tax help Funds provided are less than points. Aarp tax help   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the funds you provided were less than the points charged to you (test (6)), you can deduct the points in the year paid, up to the amount of funds you provided. Aarp tax help In addition, you can deduct any points paid by the seller. Aarp tax help Example 1. Aarp tax help When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Aarp tax help You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. Aarp tax help Of the $1,000 charged for points, you can deduct $750 in the year paid. Aarp tax help You spread the remaining $250 over the life of the mortgage. Aarp tax help Example 2. Aarp tax help The facts are the same as in Example 1, except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. Aarp tax help In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Aarp tax help You spread the remaining $250 over the life of the mortgage. Aarp tax help You must reduce the basis of your home by the $1,000 paid by the seller. Aarp tax help Excess points. Aarp tax help   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the points paid were more than generally paid in your area (test (3)), you deduct in the year paid only the points that are generally charged. Aarp tax help You must spread any additional points over the life of the mortgage. Aarp tax help Mortgage ending early. Aarp tax help   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. Aarp tax help However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. Aarp tax help Instead, deduct the remaining balance over the term of the new loan. Aarp tax help    A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Aarp tax help Example. Aarp tax help Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. Aarp tax help He deducts $200 points per year. Aarp tax help Through 2012, Dan has deducted $2,200 of the points. Aarp tax help Dan prepaid his mortgage in full in 2013. Aarp tax help He can deduct the remaining $800 of points in 2013. Aarp tax help Limits on deduction. Aarp tax help   You cannot fully deduct points paid on a mortgage unless the mortgage fits into one of the categories listed earlier under Fully deductible interest . Aarp tax help See Publication 936 for details. Aarp tax help Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. Aarp tax help The insurance must be in connection with home acquisition debt and the insurance contract must have been issued after 2006. Aarp tax help Qualified mortgage insurance. Aarp tax help   Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). Aarp tax help   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. Aarp tax help If provided by the Rural Housing Service, it is commonly known as a guarantee fee. Aarp tax help These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Aarp tax help Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. Aarp tax help Special rules for prepaid mortgage insurance. Aarp tax help   Generally, if you paid premiums for qualified mortgage insurance that are allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. Aarp tax help You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. Aarp tax help No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. Aarp tax help This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. Aarp tax help See the Example below. Aarp tax help Example. Aarp tax help Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. Aarp tax help Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Aarp tax help Since the $9,240 in private mortgage insurance is allocable to periods after 2012, Ryan must allocate the $9,240 over the shorter of the life of the mortgage or 84 months. Aarp tax help Ryan's adjusted gross income (AGI) for 2012 is $76,000. Aarp tax help Ryan can deduct $880 ($9,240 ÷ 84 × 8 months) for qualified mortgage insurance premiums in 2012. Aarp tax help For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 × 12 months) if his AGI is $100,000 or less. Aarp tax help In this example, the mortgage insurance premiums are allocated over 84 months, which is shorter than the life of the mortgage of 15 years (180 months). Aarp tax help Limit on deduction. Aarp tax help   If your adjusted gross income on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. Aarp tax help See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. Aarp tax help If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Aarp tax help Form 1098, Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage, you generally will receive a Form 1098 or a similar statement from the mortgage holder. Aarp tax help You will receive the statement if you pay interest to a person (including a financial institution or a cooperative housing corporation) in the course of that person's trade or business. Aarp tax help A governmental unit is a person for purposes of furnishing the statement. Aarp tax help The statement for each year should be sent to you by January 31 of the following year. Aarp tax help A copy of this form will also be sent to the IRS. Aarp tax help The statement will show the total interest you paid during the year, any mortgage insurance premiums you paid, and if you purchased a main home during the year, it also will show the deductible points paid during the year, including seller-paid points. Aarp tax help However, it should not show any interest that was paid for you by a government agency. Aarp tax help As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Aarp tax help However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. Aarp tax help See Points , earlier, to determine whether you can deduct points not shown on Form 1098. Aarp tax help Prepaid interest on Form 1098. Aarp tax help   If you prepaid interest in 2013 that accrued in full by January 15, 2014, this prepaid interest may be included in box 1 of Form 1098. Aarp tax help However, you cannot deduct the prepaid amount for January 2014 in 2013. Aarp tax help (See Prepaid interest , earlier. Aarp tax help ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. Aarp tax help You will include the interest for January 2014 with the other interest you pay for 2014. Aarp tax help See How To Report , later. Aarp tax help Refunded interest. Aarp tax help   If you received a refund of mortgage interest you overpaid in an earlier year, you generally will receive a Form 1098 showing the refund in box 3. Aarp tax help See Refunds of interest , earlier. Aarp tax help Mortgage insurance premiums. Aarp tax help   The amount of mortgage insurance premiums you paid during 2013 may be shown in box 4 of Form 1098. Aarp tax help See Mortgage Insurance Premiums, earlier. Aarp tax help Investment Interest This section discusses interest expenses you may be able to deduct as an investor. Aarp tax help If you borrow money to buy property you hold for investment, the interest you pay is investment interest. Aarp tax help You can deduct investment interest subject to the limit discussed later. Aarp tax help However, you cannot deduct interest you incurred to produce tax-exempt income. Aarp tax help Nor can you deduct interest expenses on straddles. Aarp tax help Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. Aarp tax help Investment Property Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. Aarp tax help It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). Aarp tax help Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). Aarp tax help Partners, shareholders, and beneficiaries. Aarp tax help   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. Aarp tax help Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. Aarp tax help Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. Aarp tax help The allocation is not affected by the use of property that secures the debt. Aarp tax help Limit on Deduction Generally, your deduction for investment interest expense is limited to the amount of your net investment income. Aarp tax help You can carry over the amount of investment interest that you could not deduct because of this limit to the next tax year. Aarp tax help The interest carried over is treated as investment interest paid or accrued in that next year. Aarp tax help You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. Aarp tax help Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. Aarp tax help Investment income. Aarp tax help    This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). Aarp tax help Investment income does not include Alaska Permanent Fund dividends. Aarp tax help It also does not include qualified dividends or net capital gain unless you choose to include them. Aarp tax help Choosing to include qualified dividends. Aarp tax help   Investment income generally does not include qualified dividends, discussed in chapter 8. Aarp tax help However, you can choose to include all or part of your qualified dividends in investment income. Aarp tax help   You make this choice by completing Form 4952, line 4g, according to its instructions. Aarp tax help   If you choose to include any amount of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. Aarp tax help Choosing to include net capital gain. Aarp tax help   Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). Aarp tax help However, you can choose to include all or part of your net capital gain in investment income. Aarp tax help    You make this choice by completing Form 4952, line 4g, according to its instructions. Aarp tax help   If you choose to include any amount of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. Aarp tax help    Before making either choice, consider the overall effect on your tax liability. Aarp tax help Compare your tax if you make one or both of these choices with your tax if you do not. Aarp tax help Investment income of child reported on parent's return. Aarp tax help    Investment income includes the part of your child's interest and dividend income that you choose to report on your return. Aarp tax help If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814, Parents' Election To Report Child's Interest and Dividends. Aarp tax help Child's qualified dividends. Aarp tax help   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. Aarp tax help However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. Aarp tax help   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). Aarp tax help Child's Alaska Permanent Fund dividends. Aarp tax help   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. Aarp tax help To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. Aarp tax help Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. Aarp tax help Subtract the result from the amount on Form 8814, line 12. Aarp tax help Child's capital gain distributions. Aarp tax help    If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D, line 13, or Form 1040, line 13) generally does not count as investment income. Aarp tax help However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. Aarp tax help   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). Aarp tax help Investment expenses. Aarp tax help   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. Aarp tax help Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. Aarp tax help Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A, line 27. Aarp tax help Losses from passive activities. Aarp tax help   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). Aarp tax help See Publication 925, Passive Activity and At-Risk Rules, for information about passive activities. Aarp tax help Form 4952 Use Form 4952, Investment Interest Expense Deduction, to figure your deduction for investment interest. Aarp tax help Exception to use of Form 4952. Aarp tax help   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. Aarp tax help Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. Aarp tax help You do not have any other deductible investment expenses. Aarp tax help You have no carryover of investment interest expense from 2012. Aarp tax help If you meet all of these tests, you can deduct all of your investment interest. Aarp tax help More Information For more information on investment interest, see Interest Expenses in chapter 3 of Publication 550. Aarp tax help Items You Cannot Deduct Some interest payments are not deductible. Aarp tax help Certain expenses similar to interest also are not deductible. Aarp tax help Nondeductible expenses include the following items. Aarp tax help Personal interest (discussed later). Aarp tax help Service charges (however, see Other Expenses (Line 23) in chapter 28). Aarp tax help Annual fees for credit cards. Aarp tax help Loan fees. Aarp tax help Credit investigation fees. Aarp tax help Interest to purchase or carry tax-exempt securities. Aarp tax help Penalties. Aarp tax help   You cannot deduct fines and penalties paid to a government for violations of law, regardless of their nature. Aarp tax help Personal Interest Personal interest is not deductible. Aarp tax help Personal interest is any interest that is not home mortgage interest, investment interest, business interest, or other deductible interest. Aarp tax help It includes the following items. Aarp tax help Interest on car loans (unless you use the car for business). Aarp tax help Interest on federal, state, or local income tax. Aarp tax help Finance charges on credit cards, retail installment contracts, and revolving charge accounts incurred for personal expenses. Aarp tax help Late payment charges by a public utility. Aarp tax help You may be able to deduct interest you pay on a qualified student loan. Aarp tax help For details, see Publication 970, Tax Benefits for Education. Aarp tax help Allocation of Interest If you use the proceeds of a loan for more than one purpose (for example, personal and business), you must allocate the interest on the loan to each use. Aarp tax help However, you do not have to allocate home mortgage interest if it is fully deductible, regardless of how the funds are used. Aarp tax help You allocate interest (other than fully deductible home mortgage interest) on a loan in the same way as the loan itself is allocated. Aarp tax help You do this by tracing disbursements of the debt proceeds to specific uses. Aarp tax help For details on how to do this, see chapter 4 of Publication 535. Aarp tax help How To Report You must file Form 1040 to deduct any home mortgage interest expense on your tax return. Aarp tax help Where you deduct your interest expense generally depends on how you use the loan proceeds. Aarp tax help See Table 23-1 for a summary of where to deduct your interest expense. Aarp tax help Home mortgage interest and points. Aarp tax help   Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. Aarp tax help If you paid more deductible interest to the financial institution than the amount shown on Form 1098, show the larger deductible amount on line 10. Aarp tax help Attach a statement explaining the difference and print “See attached” next to line 10. Aarp tax help    Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. Aarp tax help If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and taxpayer identification number (TIN) on the dotted lines next to line 11. Aarp tax help The seller must give you this number and you must give the seller your TIN. Aarp tax help A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Aarp tax help Failure to meet any of these requirements may result in a $50 penalty for each failure. Aarp tax help The TIN can be either a social security number, an individual taxpayer identification number (issued by the Internal Revenue Service), or an employer identification number. Aarp tax help See Social Security Number (SSN) in chapter 1 for more information about TINs. Aarp tax help    If you can take a deduction for points that were not reported to you on Form 1098, deduct those points on Schedule A (Form 1040), line 12. Aarp tax help   Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. Aarp tax help More than one borrower. Aarp tax help   If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Aarp tax help Show how much of the interest each of you paid, and give the name and address of the person who received the form. Aarp tax help Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Aarp tax help Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. Aarp tax help   Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Aarp tax help You should let each of the other borrowers know what his or her share is. Aarp tax help Mortgage proceeds used for business or investment. Aarp tax help    If your home mortgage interest deduction is limited, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 23-1. Aarp tax help It shows where to deduct the part of your excess interest that is for those activities. Aarp tax help Investment interest. Aarp tax help    Deduct investment interest, subject to certain limits discussed in Publication 550, on Schedule A (Form 1040), line 14. Aarp tax help Amortization of bond premium. Aarp tax help   There are various ways to treat the premium you pay to buy taxable bonds. Aarp tax help See Bond Premium Amortization in Publication 550. Aarp tax help Income-producing rental or royalty interest. Aarp tax help   Deduct interest on a loan for income-producing rental or royalty property that is not used in your business in Part I of Schedule E (Form 1040). Aarp tax help Example. Aarp tax help You rent out part of your home and borrow money to make repairs. Aarp tax help You can deduct only the interest payment for the rented part in Part I of Schedule E (Form 1040). Aarp tax help Deduct the rest of the interest payment on Schedule A (Form 1040) if it is deductible home mortgage interest. Aarp tax help Table 23-1. Aarp tax help Where To Deduct Your Interest Expense IF you have . Aarp tax help . Aarp tax help . Aarp tax help THEN deduct it on . Aarp tax help . Aarp tax help . Aarp tax help AND for more information go to . Aarp tax help . Aarp tax help . Aarp tax help deductible student loan interest Form 1040, line 33, or Form 1040A, line 18 Publication 970. Aarp tax help deductible home mortgage interest and points reported on Form 1098 Schedule A (Form 1040), line 10 Publication 936. Aarp tax help deductible home mortgage interest not reported on Form 1098 Schedule A (Form 1040), line 11 Publication 936. Aarp tax help deductible points not reported on Form 1098 Schedule A (Form 1040), line 12 Publication 936. Aarp tax help deductible mortgage insurance premiums Schedule A (Form 1040), line 13 Publication 936. Aarp tax help deductible investment interest (other than incurred to produce rents or royalties) Schedule A (Form 1040), line 14 Publication 550. Aarp tax help deductible business interest (non-farm) Schedule C or C-EZ (Form 1040) Publication 535. Aarp tax help deductible farm business interest Schedule F (Form 1040) Publications 225 and 535. Aarp tax help deductible interest incurred to produce rents or royalties Schedule E (Form 1040) Publications 527 and 535. Aarp tax help personal interest not deductible. Aarp tax help Prev  Up  Next   Home   More Online Publications