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

Federal Tax 2012 Form 1040

Online State Tax FilingIrs Gov Form 1040ez1040 ComFile 2012 Taxes Tax PreparerAmend 2011 Federal ReturnFile 1040ez1040 Forms1040nr InstructionsTurbotax Free EditionFile My 2011 Tax ReturnH&r Block Free TaxPrint Free 1040ez Tax FormState Income Tax Filing1040ez Tax Form 2010Taxes 1040ezHow To Amend A Tax Return 2010Free 2012 Tax Filing OnlineHow To Complete A 1040xFile 2012 Income TaxFile 2007 TaxesMilitary Tax ServiceFiling Taxes Unemployed1040 2012 Tax FormTax Form 1040nrFreefilefillableforms ComFile 2009 Taxes Online Free State And Federal1040ez 2012How Much Does H And R Block Charge For TaxesAmended Returns1040nr SoftwareState Tax Return Free E-fileIrs.gov 1040xWww Irs Gov Form1040xFiling Your State Taxes Free2011 1040 Ez FormTax Forms 1040ez 20142011 EfileHow To Amend Taxes OnlineH&r Block Tax CutFree E-file For 2011

Federal Tax 2012 Form 1040

Federal tax 2012 form 1040 Publication 936 - Main Content Table of Contents Part I. Federal tax 2012 form 1040 Home Mortgage InterestSecured Debt Qualified Home Special Situations Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement How To Report Special Rule for Tenant-Stockholders in Cooperative Housing Corporations Part II. Federal tax 2012 form 1040 Limits on Home Mortgage Interest DeductionHome Acquisition Debt Home Equity Debt Grandfathered Debt Table 1 Instructions How To Get Tax HelpLow Income Taxpayer Clinics Part I. Federal tax 2012 form 1040 Home Mortgage Interest This part explains what you can deduct as home mortgage interest. Federal tax 2012 form 1040 It includes discussions on points, mortgage insurance premiums, and how to report deductible interest on your tax return. Federal tax 2012 form 1040 Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). Federal tax 2012 form 1040 The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. Federal tax 2012 form 1040 You can deduct home mortgage interest if all the following conditions are met. Federal tax 2012 form 1040 You file Form 1040 and itemize deductions on Schedule A (Form 1040). Federal tax 2012 form 1040 The mortgage is a secured debt on a qualified home in which you have an ownership interest. Federal tax 2012 form 1040 Secured Debt and Qualified Home are explained later. Federal tax 2012 form 1040  Both you and the lender must intend that the loan be repaid. Federal tax 2012 form 1040 Fully deductible interest. Federal tax 2012 form 1040   In most cases, you can deduct all of your home mortgage interest. Federal tax 2012 form 1040 How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 (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. Federal tax 2012 form 1040 ) If one or more of your mortgages does not fit into any of these categories, use Part II of this publication to figure the amount of interest you can deduct. Federal tax 2012 form 1040   The three categories are as follows. Federal tax 2012 form 1040 Mortgages you took out on or before October 13, 1987 (called grandfathered debt). Federal tax 2012 form 1040 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). Federal tax 2012 form 1040 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). Federal tax 2012 form 1040 The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. Federal tax 2012 form 1040   See Part II for more detailed definitions of grandfathered, home acquisition, and home equity debt. Federal tax 2012 form 1040    You can use Figure A to check whether your home mortgage interest is fully deductible. Federal tax 2012 form 1040 This image is too large to be displayed in the current screen. Federal tax 2012 form 1040 Please click the link to view the image. Federal tax 2012 form 1040 Figure A. Federal tax 2012 form 1040 Is My Home Mortgage Interest Fully Deductible? Secured Debt You can deduct your home mortgage interest only if your mortgage is a secured debt. Federal tax 2012 form 1040 A secured debt is one in which you sign an instrument (such as a mortgage, deed of trust, or land contract) that: Makes your ownership in a qualified home security for payment of the debt, Provides, in case of default, that your home could satisfy the debt, and Is recorded or is otherwise perfected under any state or local law that applies. Federal tax 2012 form 1040 In other words, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. Federal tax 2012 form 1040 If you cannot pay the debt, your home can then serve as payment to the lender to satisfy (pay) the debt. Federal tax 2012 form 1040 In this publication, mortgage will refer to secured debt. Federal tax 2012 form 1040 Debt not secured by home. Federal tax 2012 form 1040   A debt is not secured by your home if it is secured solely because of a lien on your general assets or if it is a security interest that attaches to the property without your consent (such as a mechanic's lien or judgment lien). Federal tax 2012 form 1040   A debt is not secured by your home if it once was, but is no longer secured by your home. Federal tax 2012 form 1040 Wraparound mortgage. Federal tax 2012 form 1040   This is not a secured debt unless it is recorded or otherwise perfected under state law. Federal tax 2012 form 1040 Example. Federal tax 2012 form 1040 Beth owns a home subject to a mortgage of $40,000. Federal tax 2012 form 1040 She sells the home for $100,000 to John, who takes it subject to the $40,000 mortgage. Federal tax 2012 form 1040 Beth continues to make the payments on the $40,000 note. Federal tax 2012 form 1040 John pays $10,000 down and gives Beth a $90,000 note secured by a wraparound mortgage on the home. Federal tax 2012 form 1040 Beth does not record or otherwise perfect the $90,000 mortgage under the state law that applies. Federal tax 2012 form 1040 Therefore, the mortgage is not a secured debt and John cannot deduct any of the interest he pays on it as home mortgage interest. Federal tax 2012 form 1040 Choice to treat the debt as not secured by your home. Federal tax 2012 form 1040   You can choose to treat any debt secured by your qualified home as not secured by the home. Federal tax 2012 form 1040 This treatment begins with the tax year for which you make the choice and continues for all later tax years. Federal tax 2012 form 1040 You can revoke your choice only with the consent of the Internal Revenue Service (IRS). Federal tax 2012 form 1040   You may want to treat a debt as not secured by your home if the interest on that debt is fully deductible (for example, as a business expense) whether or not it qualifies as home mortgage interest. Federal tax 2012 form 1040 This may allow you, if the limits in Part II apply, more of a deduction for interest on other debts that are deductible only as home mortgage interest. Federal tax 2012 form 1040 Cooperative apartment owner. Federal tax 2012 form 1040   If you own stock in a cooperative housing corporation, see the Special Rule for Tenant-Stockholders in Cooperative Housing Corporations , near the end of this Part I. Federal tax 2012 form 1040 Qualified Home For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. Federal tax 2012 form 1040 This means your main home or your second home. Federal tax 2012 form 1040 A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. Federal tax 2012 form 1040 The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Federal tax 2012 form 1040 Otherwise, it is considered personal interest and is not deductible. Federal tax 2012 form 1040 Main home. Federal tax 2012 form 1040   You can have only one main home at any one time. Federal tax 2012 form 1040 This is the home where you ordinarily live most of the time. Federal tax 2012 form 1040 Second home. Federal tax 2012 form 1040   A second home is a home that you choose to treat as your second home. Federal tax 2012 form 1040 Second home not rented out. Federal tax 2012 form 1040   If you have a second home that you do not hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. Federal tax 2012 form 1040 You do not have to use the home during the year. Federal tax 2012 form 1040 Second home rented out. Federal tax 2012 form 1040   If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. Federal tax 2012 form 1040 You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer. Federal tax 2012 form 1040 If you do not use the home long enough, it is considered rental property and not a second home. Federal tax 2012 form 1040 For information on residential rental property, see Publication 527. Federal tax 2012 form 1040 More than one second home. Federal tax 2012 form 1040   If you have more than one second home, you can treat only one as the qualified second home during any year. Federal tax 2012 form 1040 However, you can change the home you treat as a second home during the year in the following situations. Federal tax 2012 form 1040 If you get a new home during the year, you can choose to treat the new home as your second home as of the day you buy it. Federal tax 2012 form 1040 If your main home no longer qualifies as your main home, you can choose to treat it as your second home as of the day you stop using it as your main home. Federal tax 2012 form 1040 If your second home is sold during the year or becomes your main home, you can choose a new second home as of the day you sell the old one or begin using it as your main home. Federal tax 2012 form 1040 Divided use of your home. Federal tax 2012 form 1040   The only part of your home that is considered a qualified home is the part you use for residential living. Federal tax 2012 form 1040 If you use part of your home for other than residential living, such as a home office, you must allocate the use of your home. Federal tax 2012 form 1040 You must then divide both the cost and fair market value of your home between the part that is a qualified home and the part that is not. Federal tax 2012 form 1040 Dividing the cost may affect the amount of your home acquisition debt, which is limited to the cost of your home plus the cost of any improvements. Federal tax 2012 form 1040 (See Home Acquisition Debt in Part II. Federal tax 2012 form 1040 ) Dividing the fair market value may affect your home equity debt limit, also explained in Part II . Federal tax 2012 form 1040 Renting out part of home. Federal tax 2012 form 1040   If you rent out part of a qualified home to another person (tenant), you can treat the rented part as being used by you for residential living only if all of the following conditions apply. Federal tax 2012 form 1040 The rented part of your home is used by the tenant primarily for residential living. Federal tax 2012 form 1040 The rented part of your home is not a self-contained residential unit having separate sleeping, cooking, and toilet facilities. Federal tax 2012 form 1040 You do not rent (directly or by sublease) the same or different parts of your home to more than two tenants at any time during the tax year. Federal tax 2012 form 1040 If two persons (and dependents of either) share the same sleeping quarters, they are treated as one tenant. Federal tax 2012 form 1040 Office in home. Federal tax 2012 form 1040   If you have an office in your home that you use in your business, see Publication 587, Business Use of Your Home. Federal tax 2012 form 1040 It explains how to figure your deduction for the business use of your home, which includes the business part of your home mortgage interest. Federal tax 2012 form 1040 Home under construction. Federal tax 2012 form 1040   You can treat a home under construction as a qualified home for a period of up to 24 months, but only if it becomes your qualified home at the time it is ready for occupancy. Federal tax 2012 form 1040   The 24-month period can start any time on or after the day construction begins. Federal tax 2012 form 1040 Home destroyed. Federal tax 2012 form 1040   You may be able to continue treating your home as a qualified home even after it is destroyed in a fire, storm, tornado, earthquake, or other casualty. Federal tax 2012 form 1040 This means you can continue to deduct the interest you pay on your home mortgage, subject to the limits described in this publication. Federal tax 2012 form 1040   You can continue treating a destroyed home as a qualified home if, within a reasonable period of time after the home is destroyed, you: Rebuild the destroyed home and move into it, or Sell the land on which the home was located. Federal tax 2012 form 1040   This rule applies to your main home and to a second home that you treat as a qualified home. Federal tax 2012 form 1040 Time-sharing arrangements. Federal tax 2012 form 1040   You can treat a home you own under a time-sharing plan as a qualified home if it meets all the requirements. Federal tax 2012 form 1040 A time-sharing plan is an arrangement between two or more people that limits each person's interest in the home or right to use it to a certain part of the year. Federal tax 2012 form 1040 Rental of time-share. Federal tax 2012 form 1040   If you rent out your time-share, it qualifies as a second home only if you also use it as a home during the year. Federal tax 2012 form 1040 See Second home rented out , earlier, for the use requirement. Federal tax 2012 form 1040 To know whether you meet that requirement, count your days of use and rental of the home only during the time you have a right to use it or to receive any benefits from the rental of it. Federal tax 2012 form 1040 Married taxpayers. Federal tax 2012 form 1040   If you are married and file a joint return, your qualified home(s) can be owned either jointly or by only one spouse. Federal tax 2012 form 1040 Separate returns. Federal tax 2012 form 1040   If you are married filing separately and you and your spouse own more than one home, you can each take into account only one home as a qualified home. Federal tax 2012 form 1040 However, if you both consent in writing, then one spouse can take both the main home and a second home into account. Federal tax 2012 form 1040 Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. Federal tax 2012 form 1040 It also describes certain special situations that may affect your deduction. Federal tax 2012 form 1040 Late payment charge on mortgage payment. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 Mortgage prepayment penalty. Federal tax 2012 form 1040   If you pay off your home mortgage early, you may have to pay a penalty. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 Sale of home. Federal tax 2012 form 1040   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 the sale. Federal tax 2012 form 1040 Example. Federal tax 2012 form 1040 John and Peggy Harris sold their home on May 7. Federal tax 2012 form 1040 Through April 30, they made home mortgage interest payments of $1,220. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 Their mortgage interest deduction is $1,270 ($1,220 + $50). Federal tax 2012 form 1040 Prepaid interest. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 You can deduct in each year only the interest that qualifies as home mortgage interest for that year. Federal tax 2012 form 1040 However, there is an exception that applies to points, discussed later. Federal tax 2012 form 1040 Mortgage interest credit. Federal tax 2012 form 1040    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. Federal tax 2012 form 1040 Figure the credit on Form 8396, Mortgage Interest Credit. Federal tax 2012 form 1040 If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. Federal tax 2012 form 1040   See Form 8396 and Publication 530 for more information on the mortgage interest credit. Federal tax 2012 form 1040 Ministers' and military housing allowance. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 Hardest Hit Fund and Emergency Homeowners' Loan Programs. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 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 (other information including real property taxes paid). Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 Mortgage assistance payments under section 235 of the National Housing Act. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 You cannot deduct the interest that is paid for you. Federal tax 2012 form 1040 No other effect on taxes. Federal tax 2012 form 1040   Do not include these mortgage assistance payments in your income. Federal tax 2012 form 1040 Also, do not use these payments to reduce other deductions, such as real estate taxes. Federal tax 2012 form 1040 Divorced or separated individuals. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 See the discussion of Payments for jointly-owned home under Alimony in Publication 504, Divorced or Separated Individuals. Federal tax 2012 form 1040 Redeemable ground rents. Federal tax 2012 form 1040   In some states (such as Maryland), you can buy your home subject to a ground rent. Federal tax 2012 form 1040 A ground rent is an obligation you assume to pay a fixed amount per year on the property. Federal tax 2012 form 1040 Under this arrangement, you are leasing (rather than buying) the land on which your home is located. Federal tax 2012 form 1040   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. Federal tax 2012 form 1040   A ground rent is a redeemable ground rent if all of the following are true. Federal tax 2012 form 1040 Your lease, including renewal periods, is for more than 15 years. Federal tax 2012 form 1040 You can freely assign the lease. Federal tax 2012 form 1040 You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specific amount. Federal tax 2012 form 1040 The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. Federal tax 2012 form 1040   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. Federal tax 2012 form 1040 Nonredeemable ground rents. Federal tax 2012 form 1040   Payments on a nonredeemable ground rent are not mortgage interest. Federal tax 2012 form 1040 You can deduct them as rent if they are a business expense or if they are for rental property. Federal tax 2012 form 1040 Reverse mortgages. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 With a reverse mortgage, you retain title to your home. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Federal tax 2012 form 1040 Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until you actually pay it, which is usually when you pay off the loan in full. Federal tax 2012 form 1040 Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Part II. Federal tax 2012 form 1040 Rental payments. Federal tax 2012 form 1040   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. Federal tax 2012 form 1040 This is true even if the settlement papers call them interest. Federal tax 2012 form 1040 You cannot deduct these payments as home mortgage interest. Federal tax 2012 form 1040 Mortgage proceeds invested in tax-exempt securities. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 “Grandfathered debt” and “home equity debt” are defined in Part II of this publication. Federal tax 2012 form 1040 Refunds of interest. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. Federal tax 2012 form 1040 This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. Federal tax 2012 form 1040 If you need to include the refund in income, report it on Form 1040, line 21. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. Federal tax 2012 form 1040   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in Publication 525, Taxable and Nontaxable Income. Federal tax 2012 form 1040 Cooperative apartment owner. Federal tax 2012 form 1040   If you own a cooperative apartment, you must reduce your home mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. Federal tax 2012 form 1040 The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. Federal tax 2012 form 1040   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. Federal tax 2012 form 1040 Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Federal tax 2012 form 1040 Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Federal tax 2012 form 1040 This image is too large to be displayed in the current screen. Federal tax 2012 form 1040 Please click the link to view the image. Federal tax 2012 form 1040 Figure B. Federal tax 2012 form 1040 Are My Points Fully Deductible This Year? A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Federal tax 2012 form 1040 See Points paid by the seller , later. Federal tax 2012 form 1040 General Rule You generally cannot deduct the full amount of points in the year paid. Federal tax 2012 form 1040 Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. Federal tax 2012 form 1040 See Deduction Allowed Ratably , next. Federal tax 2012 form 1040 For exceptions to the general rule, see Deduction Allowed in Year Paid , later. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 You use the cash method of accounting. Federal tax 2012 form 1040 This means you report income in the year you receive it and deduct expenses in the year you pay them. Federal tax 2012 form 1040 Most individuals use this method. Federal tax 2012 form 1040 Your loan is secured by a home. Federal tax 2012 form 1040 (The home does not need to be your main home. Federal tax 2012 form 1040 ) Your loan period is not more than 30 years. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 Example. Federal tax 2012 form 1040 You use the cash method of accounting. Federal tax 2012 form 1040 In 2013, you took out a $100,000 loan payable over 20 years. Federal tax 2012 form 1040 The terms of the loan are the same as for other 20-year loans offered in your area. Federal tax 2012 form 1040 You paid $4,800 in points. Federal tax 2012 form 1040 You made 3 monthly payments on the loan in 2013. Federal tax 2012 form 1040 You can deduct $60 [($4,800 ÷ 240 months) x 3 payments] in 2013. Federal tax 2012 form 1040 In 2014, if you make all twelve payments, you will be able to deduct $240 ($20 x 12). Federal tax 2012 form 1040 Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. Federal tax 2012 form 1040 (You can use Figure B as a quick guide to see whether your points are fully deductible in the year paid. Federal tax 2012 form 1040 ) Your loan is secured by your main home. Federal tax 2012 form 1040 (Your main home is the one you ordinarily live in most of the time. Federal tax 2012 form 1040 ) Paying points is an established business practice in the area where the loan was made. Federal tax 2012 form 1040 The points paid were not more than the points generally charged in that area. Federal tax 2012 form 1040 You use the cash method of accounting. Federal tax 2012 form 1040 This means you report income in the year you receive it and deduct expenses in the year you pay them. Federal tax 2012 form 1040 Most individuals use this method. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Federal tax 2012 form 1040 The funds you provided are not required to have been applied to the points. Federal tax 2012 form 1040 They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Federal tax 2012 form 1040 You cannot have borrowed these funds from your lender or mortgage broker. Federal tax 2012 form 1040 You use your loan to buy or build your main home. Federal tax 2012 form 1040 The points were computed as a percentage of the principal amount of the mortgage. Federal tax 2012 form 1040 The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. Federal tax 2012 form 1040 The points may be shown as paid from either your funds or the seller's. Federal tax 2012 form 1040 Note. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 Home improvement loan. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 Second home. Federal tax 2012 form 1040 You cannot fully deduct in the year paid points you pay on loans secured by your second home. Federal tax 2012 form 1040 You can deduct these points only over the life of the loan. Federal tax 2012 form 1040 Refinancing. Federal tax 2012 form 1040   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. Federal tax 2012 form 1040 This is true even if the new mortgage is secured by your main home. Federal tax 2012 form 1040   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 , you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Federal tax 2012 form 1040 You can deduct the rest of the points over the life of the loan. Federal tax 2012 form 1040 Example 1. Federal tax 2012 form 1040 In 1998, Bill Fields got a mortgage to buy a home. Federal tax 2012 form 1040 In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. Federal tax 2012 form 1040 The mortgage is secured by his home. Federal tax 2012 form 1040 To get the new loan, he had to pay three points ($3,000). Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. Federal tax 2012 form 1040 The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. Federal tax 2012 form 1040 Bill's first payment on the new loan was due July 1. Federal tax 2012 form 1040 He made six payments on the loan in 2013 and is a cash basis taxpayer. Federal tax 2012 form 1040 Bill used the funds from the new mortgage to repay his existing mortgage. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 He cannot deduct all of the points in 2013. Federal tax 2012 form 1040 He can deduct two points ($2,000) ratably over the life of the loan. Federal tax 2012 form 1040 He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. Federal tax 2012 form 1040 The other point ($1,000) was a fee for services and is not deductible. Federal tax 2012 form 1040 Example 2. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. Federal tax 2012 form 1040 His deduction is $500 ($2,000 × 25%). Federal tax 2012 form 1040 Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. Federal tax 2012 form 1040 This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. Federal tax 2012 form 1040 The total amount Bill deducts in 2013 is $550 ($500 + $50). Federal tax 2012 form 1040 Special Situations This section describes certain special situations that may affect your deduction of points. Federal tax 2012 form 1040 Original issue discount. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. Federal tax 2012 form 1040 Amounts charged for services. Federal tax 2012 form 1040    Amounts charged by the lender for specific services connected to the loan are not interest. Federal tax 2012 form 1040 Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Federal tax 2012 form 1040  You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Federal tax 2012 form 1040 Points paid by the seller. Federal tax 2012 form 1040   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Federal tax 2012 form 1040 Treatment by seller. Federal tax 2012 form 1040   The seller cannot deduct these fees as interest. Federal tax 2012 form 1040 But they are a selling expense that reduces the amount realized by the seller. Federal tax 2012 form 1040 See Publication 523 for information on selling your home. Federal tax 2012 form 1040 Treatment by buyer. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. Federal tax 2012 form 1040 If any of those tests are not met, the buyer deducts the points over the life of the loan. Federal tax 2012 form 1040   If you need information about the basis of your home, see Publication 523 or Publication 530. Federal tax 2012 form 1040 Funds provided are less than points. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 In addition, you can deduct any points paid by the seller. Federal tax 2012 form 1040 Example 1. Federal tax 2012 form 1040 When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Federal tax 2012 form 1040 You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. Federal tax 2012 form 1040 Of the $1,000 charged for points, you can deduct $750 in the year paid. Federal tax 2012 form 1040 You spread the remaining $250 over the life of the mortgage. Federal tax 2012 form 1040 Example 2. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Federal tax 2012 form 1040 You spread the remaining $250 over the life of the mortgage. Federal tax 2012 form 1040 You must reduce the basis of your home by the $1,000 paid by the seller. Federal tax 2012 form 1040 Excess points. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 You must spread any additional points over the life of the mortgage. Federal tax 2012 form 1040 Mortgage ending early. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. Federal tax 2012 form 1040 Instead, deduct the remaining balance over the term of the new loan. Federal tax 2012 form 1040   A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Federal tax 2012 form 1040 Example. Federal tax 2012 form 1040 Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. Federal tax 2012 form 1040 He deducts $200 points per year. Federal tax 2012 form 1040 Through 2012, Dan has deducted $2,200 of the points. Federal tax 2012 form 1040 Dan prepaid his mortgage in full in 2013. Federal tax 2012 form 1040 He can deduct the remaining $800 of points in 2013. Federal tax 2012 form 1040 Limits on deduction. Federal tax 2012 form 1040   You cannot fully deduct points paid on a mortgage that exceeds the limits discussed in Part II . Federal tax 2012 form 1040 See the Table 1 Instructions for line 10. Federal tax 2012 form 1040 Form 1098. Federal tax 2012 form 1040    The mortgage interest statement you receive should show not only the total interest paid during the year, but also your deductible points paid during the year. Federal tax 2012 form 1040 See Form 1098, Mortgage Interest Statement , later. Federal tax 2012 form 1040 Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. Federal tax 2012 form 1040 The insurance must be in connection with home acquisition debt, and the insurance contract must have been issued after 2006. Federal tax 2012 form 1040 Qualified mortgage insurance. Federal tax 2012 form 1040   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). Federal tax 2012 form 1040   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. Federal tax 2012 form 1040 If provided by the Rural Housing Service, it is commonly known as a guarantee fee. Federal tax 2012 form 1040 The funding fee and guarantee fee can either be included in the amount of the loan or paid in full at the time of closing. Federal tax 2012 form 1040 These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Federal tax 2012 form 1040 Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. Federal tax 2012 form 1040 Special rules for prepaid mortgage insurance. Federal tax 2012 form 1040   Generally, if you paid premiums for qualified mortgage insurance that are properly allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. Federal tax 2012 form 1040 This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. Federal tax 2012 form 1040 Example. Federal tax 2012 form 1040 Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. Federal tax 2012 form 1040 Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 Ryan's adjusted gross income (AGI) for 2012 is $76,000. Federal tax 2012 form 1040 Ryan can deduct $880 ($9,240 ÷ 84 x 8 months) for qualified mortgage insurance premiums in 2012. Federal tax 2012 form 1040 For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 x 12 months) if his AGI is $100,000 or less. Federal tax 2012 form 1040 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). Federal tax 2012 form 1040 Limit on deduction. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Federal tax 2012 form 1040 Form 1098. Federal tax 2012 form 1040   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your mortgage insurance premiums paid during the year, which may qualify to be treated as deductible mortgage interest. Federal tax 2012 form 1040 See Form 1098, Mortgage Interest Statement, next. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 You will receive the statement if you pay interest to a person (including a financial institution or cooperative housing corporation) in the course of that person's trade or business. Federal tax 2012 form 1040 A governmental unit is a person for purposes of furnishing the statement. Federal tax 2012 form 1040 The statement for each year should be sent to you by January 31 of the following year. Federal tax 2012 form 1040 A copy of this form will also be sent to the IRS. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 However, it should not show any interest that was paid for you by a government agency. Federal tax 2012 form 1040 As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Federal tax 2012 form 1040 However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. Federal tax 2012 form 1040 See the earlier discussion of Points to determine whether you can deduct points not shown on Form 1098. Federal tax 2012 form 1040 Prepaid interest on Form 1098. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 However, you cannot deduct the prepaid amount for January 2014 in 2013. Federal tax 2012 form 1040 (See Prepaid interest , earlier. Federal tax 2012 form 1040 ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. Federal tax 2012 form 1040 You will include the interest for January 2014 with other interest you pay for 2014. Federal tax 2012 form 1040 Refunded interest. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 See Refunds of interest , earlier. Federal tax 2012 form 1040 Mortgage insurance premiums. Federal tax 2012 form 1040   The amount of mortgage insurance premiums you paid during 2013 may be shown in Box 4 of Form 1098. Federal tax 2012 form 1040 See Mortgage Insurance Premiums , earlier. Federal tax 2012 form 1040 How To Report Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 Attach a statement explaining the difference and print “See attached” next to line 10. Federal tax 2012 form 1040 Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 The seller must give you this number and you must give the seller your TIN. Federal tax 2012 form 1040 A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Federal tax 2012 form 1040 Failure to meet any of these requirements may result in a $50 penalty for each failure. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 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. Federal tax 2012 form 1040 Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. Federal tax 2012 form 1040 More than one borrower. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 Show how much of the interest each of you paid, and give the name and address of the person who received the form. Federal tax 2012 form 1040 Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Federal tax 2012 form 1040 Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. Federal tax 2012 form 1040   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. Federal tax 2012 form 1040 Let each of the other borrowers know what his or her share is. Federal tax 2012 form 1040 Mortgage proceeds used for business or investment. Federal tax 2012 form 1040   If your home mortgage interest deduction is limited under the rules explained in Part II , but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 2 near the end of this publication. Federal tax 2012 form 1040 It shows where to deduct the part of your excess interest that is for those activities. Federal tax 2012 form 1040 The Table 1 Instructions for line 13 in Part II explain how to divide the excess interest among the activities for which the mortgage proceeds were used. Federal tax 2012 form 1040 Special Rule for Tenant-Stockholders in Cooperative Housing Corporations A qualified home includes stock in a cooperative housing corporation owned by a tenant-stockholder. Federal tax 2012 form 1040 This applies only if the tenant-stockholder is entitled to live in the house or apartment because of owning stock in the cooperative. Federal tax 2012 form 1040 Cooperative housing corporation. Federal tax 2012 form 1040   This is a corporation that meets all of the following conditions. Federal tax 2012 form 1040 Has only one class of stock outstanding, Has no stockholders other than those who own the stock that can live in a house, apartment, or house trailer owned or leased by the corporation, Has no stockholders who can receive any distribution out of capital other than on a liquidation of the corporation, and Meets at least one of the following requirements. Federal tax 2012 form 1040 Receives at least 80% of its gross income for the year in which the mortgage interest is paid or incurred from tenant-stockholders. Federal tax 2012 form 1040 For this purpose, gross income is all income received during the entire year, including amounts received before the corporation changed to cooperative ownership. Federal tax 2012 form 1040 At all times during the year, at least 80% of the total square footage of the corporation's property is used or available for use by the tenant-stockholders for residential or residential-related use. Federal tax 2012 form 1040 At least 90% of the corporation's expenditures paid or incurred during the year are for the acquisition, construction, management, maintenance, or care of corporate property for the benefit of the tenant-stockholders. Federal tax 2012 form 1040 Stock used to secure debt. Federal tax 2012 form 1040   In some cases, you cannot use your cooperative housing stock to secure a debt because of either: Restrictions under local or state law, or Restrictions in the cooperative agreement (other than restrictions in which the main purpose is to permit the tenant- stockholder to treat unsecured debt as secured debt). Federal tax 2012 form 1040 However, you can treat a debt as secured by the stock to the extent that the proceeds are used to buy the stock under the allocation of interest rules. Federal tax 2012 form 1040 See chapter 4 of Publication 535 for details on these rules. Federal tax 2012 form 1040 Figuring deductible home mortgage interest. Federal tax 2012 form 1040   Generally, if you are a tenant-stockholder, you can deduct payments you make for your share of the interest paid or incurred by the cooperative. Federal tax 2012 form 1040 The interest must be on a debt to buy, build, change, improve, or maintain the cooperative's housing, or on a debt to buy the land. Federal tax 2012 form 1040   Figure your share of this interest by multiplying the total by the following fraction. Federal tax 2012 form 1040      Your shares of stock in the cooperative   The total shares of stock in the cooperative Limits on deduction. Federal tax 2012 form 1040   To figure how the limits discussed in Part II apply to you, treat your share of the cooperative's debt as debt incurred by you. Federal tax 2012 form 1040 The cooperative should determine your share of its grandfathered debt, its home acquisition debt, and its home equity debt. Federal tax 2012 form 1040 (Your share of each of these types of debt is equal to the average balance of each debt multiplied by the fraction just given. Federal tax 2012 form 1040 ) After your share of the average balance of each type of debt is determined, you include it with the average balance of that type of debt secured by your stock. Federal tax 2012 form 1040 Form 1098. Federal tax 2012 form 1040    The cooperative should give you a Form 1098 showing your share of the interest. Federal tax 2012 form 1040 Use the rules in this publication to determine your deductible mortgage interest. Federal tax 2012 form 1040 Part II. Federal tax 2012 form 1040 Limits on Home Mortgage Interest Deduction This part of the publication discusses the limits on deductible home mortgage interest. Federal tax 2012 form 1040 These limits apply to your home mortgage interest expense if you have a home mortgage that does not fit into any of the three categories listed at the beginning of Part I under Fully deductible interest . Federal tax 2012 form 1040 Your home mortgage interest deduction is limited to the interest on the part of your home mortgage debt that is not more than your qualified loan limit. Federal tax 2012 form 1040 This is the part of your home mortgage debt that is grandfathered debt or that is not more than the limits for home acquisition debt and home equity debt. Federal tax 2012 form 1040 Table 1 can help you figure your qualified loan limit and your deductible home mortgage interest. Federal tax 2012 form 1040 Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home (your main or second home). Federal tax 2012 form 1040 It also must be secured by that home. Federal tax 2012 form 1040 If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. Federal tax 2012 form 1040 The additional debt may qualify as home equity debt (discussed later). Federal tax 2012 form 1040 Home acquisition debt limit. Federal tax 2012 form 1040   The total amount you can treat as home acquisition debt at any time on your main home and second home cannot be more than $1 million ($500,000 if married filing separately). Federal tax 2012 form 1040 This limit is reduced (but not below zero) by the amount of your grandfathered debt (discussed later). Federal tax 2012 form 1040 Debt over this limit may qualify as home equity debt (also discussed later). Federal tax 2012 form 1040 Refinanced home acquisition debt. Federal tax 2012 form 1040   Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt. Federal tax 2012 form 1040 However, the new debt will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing. Federal tax 2012 form 1040 Any additional debt not used to buy, build, or substantially improve a qualified home is not home acquisition debt, but may qualify as home equity debt (discussed later). Federal tax 2012 form 1040 Mortgage that qualifies later. Federal tax 2012 form 1040   A mortgage that does not qualify as home acquisition debt because it does not meet all the requirements may qualify at a later time. Federal tax 2012 form 1040 For example, a debt that you use to buy your home may not qualify as home acquisition debt because it is not secured by the home. Federal tax 2012 form 1040 However, if the debt is later secured by the home, it may qualify as home acquisition debt after that time. Federal tax 2012 form 1040 Similarly, a debt that you use to buy property may not qualify because the property is not a qualified home. Federal tax 2012 form 1040 However, if the property later becomes a qualified home, the debt may qualify after that time. Federal tax 2012 form 1040 Mortgage treated as used to buy, build, or improve home. Federal tax 2012 form 1040   A mortgage secured by a qualified home may be treated as home acquisition debt, even if you do not actually use the proceeds to buy, build, or substantially improve the home. Federal tax 2012 form 1040 This applies in the following situations. Federal tax 2012 form 1040 You buy your home within 90 days before or after the date you take out the mortgage. Federal tax 2012 form 1040 The home acquisition debt is limited to the home's cost, plus the cost of any substantial improvements within the limit described below in (2) or (3). Federal tax 2012 form 1040 (See Example 1 later. Federal tax 2012 form 1040 ) You build or improve your home and take out the mortgage before the work is completed. Federal tax 2012 form 1040 The home acquisition debt is limited to the amount of the expenses incurred within 24 months before the date of the mortgage. Federal tax 2012 form 1040 You build or improve your home and take out the mortgage within 90 days after the work is completed. Federal tax 2012 form 1040 The home acquisition debt is limited to the amount of the expenses incurred within the period beginning 24 months before the work is completed and ending on the date of the mortgage. Federal tax 2012 form 1040 (See Example 2 later. Federal tax 2012 form 1040 ) Example 1. Federal tax 2012 form 1040 You bought your main home on June 3 for $175,000. Federal tax 2012 form 1040 You paid for the home with cash you got from the sale of your old home. Federal tax 2012 form 1040 On July 15, you took out a mortgage of $150,000 secured by your main home. Federal tax 2012 form 1040 You used the $150,000 to invest in stocks. Federal tax 2012 form 1040 You can treat the mortgage as taken out to buy your home because you bought the home within 90 days before you took out the mortgage. Federal tax 2012 form 1040 The entire mortgage qualifies as home acquisition debt because it was not more than the home's cost. Federal tax 2012 form 1040 Example 2. Federal tax 2012 form 1040 On January 31, John began building a home on the lot that he owned. Federal tax 2012 form 1040 He used $45,000 of his personal funds to build the home. Federal tax 2012 form 1040 The home was completed on October 31. Federal tax 2012 form 1040 On November 21, John took out a $36,000 mortgage that was secured by the home. Federal tax 2012 form 1040 The mortgage can be treated as used to build the home because it was taken out within 90 days after the home was completed. Federal tax 2012 form 1040 The entire mortgage qualifies as home acquisition debt because it was not more than the expenses incurred within the period beginning 24 months before the home was completed. Federal tax 2012 form 1040 This is illustrated by Figure C. Federal tax 2012 form 1040   Please click here for the text description of the image. Federal tax 2012 form 1040 Figure C. Federal tax 2012 form 1040 John's example Date of the mortgage. Federal tax 2012 form 1040   The date you take out your mortgage is the day the loan proceeds are disbursed. Federal tax 2012 form 1040 This is generally the closing date. Federal tax 2012 form 1040 You can treat the day you apply in writing for your mortgage as the date you take it out. Federal tax 2012 form 1040 However, this applies only if you receive the loan proceeds within a reasonable time (such as within 30 days) after your application is approved. Federal tax 2012 form 1040 If a timely application you make is rejected, a reasonable additional time will be allowed to make a new application. Federal tax 2012 form 1040 Cost of home or improvements. Federal tax 2012 form 1040   To determine your cost, include amounts paid to acquire any interest in a qualified home or to substantially improve the home. Federal tax 2012 form 1040   The cost of building or substantially improving a qualified home includes the costs to acquire real property and building materials, fees for architects and design plans, and required building permits. Federal tax 2012 form 1040 Substantial improvement. Federal tax 2012 form 1040   An improvement is substantial if it: Adds to the value of your home, Prolongs your home's useful life, or Adapts your home to new uses. Federal tax 2012 form 1040    Repairs that maintain your home in good condition, such as repainting your home, are not substantial improvements. Federal tax 2012 form 1040 However, if you paint your home as part of a renovation that substantially improves your qualified home, you can include the painting costs in the cost of the improvements. Federal tax 2012 form 1040 Acquiring an interest in a home because of a divorce. Federal tax 2012 form 1040   If you incur debt to acquire the interest of a spouse or former spouse in a home, because of a divorce or legal separation, you can treat that debt as home acquisition debt. Federal tax 2012 form 1040 Part of home not a qualified home. Federal tax 2012 form 1040    To figure your home acquisition debt, you must divide the cost of your home and improvements between the part of your home that is a qualified home and any part that is not a qualified home. Federal tax 2012 form 1040 See Divided use of your home under Qualified Home in Part I. Federal tax 2012 form 1040 Home Equity Debt If you took out a loan for reasons other than to buy, build, or substantially improve your home, it may qualify as home equity debt. Federal tax 2012 form 1040 In addition, debt you incurred to buy, build, or substantially improve your home, to the extent it is more than the home acquisition debt limit (discussed earlier), may qualify as home equity debt. Federal tax 2012 form 1040 Home equity debt is a mortgage you took out after October 13, 1987, that: Does not qualify as home acquisition debt or as grandfathered debt, and Is secured by your qualified home. Federal tax 2012 form 1040 Example. Federal tax 2012 form 1040 You bought your home for cash 10 years ago. Federal tax 2012 form 1040 You did not have a mortgage on your home until last year, when you took out a $50,000 loan, secured by your home, to pay for your daughter's college tuition and your father's medical bills. Federal tax 2012 form 1040 This loan is home equity debt. Federal tax 2012 form 1040 Home equity debt limit. Federal tax 2012 form 1040   There is a limit on the amount of debt that can be treated as home equity debt. Federal tax 2012 form 1040 The total home equity debt on your main home and second home is limited to the smaller of: $100,000 ($50,000 if married filing separately), or The total of each home's fair market value (FMV) reduced (but not below zero) by the amount of its home acquisition debt and grandfathered debt. Federal tax 2012 form 1040 Determine the FMV and the outstanding home acquisition and grandfathered debt for each home on the date that the last debt was secured by the home. Federal tax 2012 form 1040 Example. Federal tax 2012 form 1040 You own one home that you bought in 2000. Federal tax 2012 form 1040 Its FMV now is $110,000, and the current balance on your original mortgage (home acquisition debt) is $95,000. Federal tax 2012 form 1040 Bank M offers you a home mortgage loan of 125% of the FMV of the home less any outstanding mortgages or other liens. Federal tax 2012 form 1040 To consolidate some of your other debts, you take out a $42,500 home mortgage loan [(125% × $110,000) − $95,000] with Bank M. Federal tax 2012 form 1040 Your home equity debt is limited to $15,000. Federal tax 2012 form 1040 This is the smaller of: $100,000, the maximum limit, or $15,000, the amount that the FMV of $110,000 exceeds the amount of home acquisition debt of $95,000. Federal tax 2012 form 1040 Debt higher than limit. Federal tax 2012 form 1040   Interest on amounts over the home equity debt limit (such as the interest on $27,500 [$42,500 − $15,000] in the preceding example) generally is treated as personal interest and is not deductible. Federal tax 2012 form 1040 But if the proceeds of the loan were used for investment, business, or other deductible purposes, the interest may be deductible. Federal tax 2012 form 1040 If it is, see the Table 1 Instructions for line 13 for an explanation of how to allocate the excess interest. Federal tax 2012 form 1040 Part of home not a qualified home. Federal tax 2012 form 1040   To figure the limit on your home equity debt, you must divide the FMV of your home between the part that is a qualified home and any part that is not a qualified home. Federal tax 2012 form 1040 See Divided use of your home under Qualified Home in Part I. Federal tax 2012 form 1040 Fair market value (FMV). Federal tax 2012 form 1040    This is the price at which the home would change hands between you and a buyer, neither having to sell or buy, and both having reasonable knowledge of all relevant facts. Federal tax 2012 form 1040 Sales of similar homes in your area, on about the same date your last debt was secured by the home, may be helpful in figuring the FMV. Federal tax 2012 form 1040 Grandfathered Debt If you took out a mortgage on your home before October 14, 1987, or you refinanced such a mortgage, it may qualify as grandfathered debt. Federal tax 2012 form 1040 To qualify, it must have been secured by your qualified home on October 13, 1987, and at all times after that date. Federal tax 2012 form 1040 How you used the proceeds does not matter. Federal tax 2012 form 1040 Grandfathered debt is not limited. Federal tax 2012 form 1040 All of the interest you paid on grandfathered debt is fully deductible home mortgage interest. Federal tax 2012 form 1040 However, the amount of your grandfathered debt reduces the $1 million limit for home acquisition debt and the limit based on your home's fair market value for home equity debt. Federal tax 2012 form 1040 Refinanced grandfathered debt. Federal tax 2012 form 1040   If you refinanced grandfathered debt after October 13, 1987, for an amount that was not more than the mortgage principal left on the debt, then you still treat it as grandfathered debt. Federal tax 2012 form 1040 To the extent the new debt is more than that mortgage principal, it is treated as home acquisition or home equity debt, and the mortgage is a mixed-use mortgage (discussed later under Average Mortgage Balance in the Table 1 instructions). Federal tax 2012 form 1040 The debt must be secured by the qualified home. Federal tax 2012 form 1040   You treat grandfathered debt that was refinanced after October 13, 1987, as grandfathered debt only for the term left on the debt that was refinanced. Federal tax 2012 form 1040 After that, you treat it as home acquisition debt or home equity debt, depending on how you used the proceeds. Federal tax 2012 form 1040 Exception. Federal tax 2012 form 1040   If the debt before refinancing was like a balloon note (the principal on the debt was not amortized over the term of the debt), then you treat the refinanced debt as grandfathered debt for the term of the first refinancing. Federal tax 2012 form 1040 This term cannot be more than 30 years. Federal tax 2012 form 1040 Example. Federal tax 2012 form 1040 Chester took out a $200,000 first mortgage on his home in 1986. Federal tax 2012 form 1040 The mortgage was a five-year balloon note and the entire balance on the note was due in 1991. Federal tax 2012 form 1040 Chester refinanced the debt in 1991 with a new 20-year mortgage. Federal tax 2012 form 1040 The refinanced debt is treated as grandfathered debt for its entire term (20 years). Federal tax 2012 form 1040 Line-of-credit mortgage. Federal tax 2012 form 1040    If you had a line-of-credit mortgage on October 13, 1987, and borrowed additional amounts against it after that date, then the additional amounts are either home acquisition debt or home equity debt depending on how you used the proceeds. Federal tax 2012 form 1040 The balance on the mortgage before you borrowed the additional amounts is grandfathered debt. Federal tax 2012 form 1040 The newly borrowed amounts are not grandfathered debt because the funds were borrowed after October 13, 1987. Federal tax 2012 form 1040 See Average Mortgage Balance in the Table 1 Instructions that follow. Federal tax 2012 form 1040 Table 1 Instructions Unless you are subject to the overall limit on itemized deductions, you can deduct all of the interest you paid during the year on mortgages secured by your main home or second home in either of the following two situations. Federal tax 2012 form 1040 All the mortgages are grandfathered debt. Federal tax 2012 form 1040 The total of the mortgage balances for the entire year is within the limits discussed earlier under Home Acquisition Debt and Home Equity Debt . Federal tax 2012 form 1040 In either of those cases, you do not need Table 1. Federal tax 2012 form 1040 Otherwise, you can use Table 1 to determine your qualified loan limit and deductible home mortgage interest. Federal tax 2012 form 1040 Fill out only one Table 1 for both your main and second home regardless of how many mortgages you have. Federal tax 2012 form 1040 Table 1. Federal tax 2012 form 1040 Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. Federal tax 2012 form 1040 Part I Qualified Loan Limit 1. Federal tax 2012 form 1040 Enter the average balance of all your grandfathered debt. Federal tax 2012 form 1040 See line 1 instructions 1. Federal tax 2012 form 1040   2. Federal tax 2012 form 1040 Enter the average balance of all your home acquisition debt. Federal tax 2012 form 1040 See line 2 instructions 2. Federal tax 2012 form 1040   3. Federal tax 2012 form 1040 Enter $1,000,000 ($500,000 if married filing separately) 3. Federal tax 2012 form 1040   4. Federal tax 2012 form 1040 Enter the larger of the amount on line 1 or the amount on line 3 4. Federal tax 2012 form 1040   5. Federal tax 2012 form 1040 Add the amounts on lines 1 and 2. Federal tax 2012 form 1040 Enter the total here 5. Federal tax 2012 form 1040   6. Federal tax 2012 form 1040 Enter the smaller of the amount on line 4 or the amount on line 5 6. Federal tax 2012 form 1040   7. Federal tax 2012 form 1040 If you have home equity debt, enter the smaller of $100,000 ($50,000 if married filing separately) or your limited amount. Federal tax 2012 form 1040 See the line 7 instructions for the limit which may apply to you. Federal tax 2012 form 1040 7. Federal tax 2012 form 1040   8. Federal tax 2012 form 1040 Add the amounts on lines 6 and 7. Federal tax 2012 form 1040 Enter the total. Federal tax 2012 form 1040 This is your qualified loan limit. Federal tax 2012 form 1040 8. Federal tax 2012 form 1040   Part II Deductible Home Mortgage Interest 9. Federal tax 2012 form 1040 Enter the total of the average balances of all mortgages on all qualified homes. Federal tax 2012 form 1040  See line 9 instructions 9. Federal tax 2012 form 1040     If line 8 is less than line 9, go on to line 10. Federal tax 2012 form 1040 If line 8 is equal to or more than line 9, stop here. Federal tax 2012 form 1040 All of your interest on all the mortgages included on line 9 is deductible as home mortgage interest on Schedule A (Form 1040). Federal tax 2012 form 1040     10. Federal tax 2012 form 1040 Enter the total amount of interest that you paid. Federal tax 2012 form 1040 See line 10 instructions 10. Federal tax 2012 form 1040   11. Federal tax 2012 form 1040 Divide the amount on line 8 by the amount on line 9. Federal tax 2012 form 1040 Enter the result as a decimal amount (rounded to three places) 11. Federal tax 2012 form 1040 × . Federal tax 2012 form 1040 12. Federal tax 2012 form 1040 Multiply the amount on line 10 by the decimal amount on line 11. Federal tax 2012 form 1040 Enter the result. Federal tax 2012 form 1040 This is your deductible home mortgage interest. Federal tax 2012 form 1040 Enter this amount on Schedule A (Form 1040) 12. Federal tax 2012 form 1040   13. Federal tax 2012 form 1040 Subtract the amount on line 12 from the amount on line 10. Federal tax 2012 form 1040 Enter the result. Federal tax 2012 form 1040 This is not home mortgage interest. Federal tax 2012 form 1040 See line 13 instructions 13. Federal tax 2012 form 1040   Home equity debt only. Federal tax 2012 form 1040   If all of your mortgages are home equity debt, do not fill in lines 1 through 5. Federal tax 2012 form 1040 Enter zero on line 6 and complete the rest of Table 1. Federal tax 2012 form 1040 Average Mortgage Balance You have to figure the average balance of each mortgage to determine your qualified loan limit. Federal tax 2012 form 1040 You need these amounts to complete lines 1, 2, and 9 of Table 1. Federal tax 2012 form 1040 You can use the highest mortgage balances during the year, but you may benefit most by using the average balances. Federal tax 2012 form 1040 The following are methods you can use to figure your average mortgage balances. Federal tax 2012 form 1040 However, if a mortgage has more than one category of debt, see Mixed-use mortgages , later, in this section. Federal tax 2012 form 1040 Average of first and last balance method. Federal tax 2012 form 1040   You can use this method if all the following apply. Federal tax 2012 form 1040 You did not borrow any new amounts on the mortgage during the year. Federal tax 2012 form 1040 (This does not include borrowing the original mortgage amount. Federal tax 2012 form 1040 ) You did not prepay more than one month's principal during the year. Federal tax 2012 form 1040 (This includes prepayment by refinancing your home or by applying proceeds from its sale. Federal tax 2012 form 1040 ) You had to make level payments at fixed equal intervals on at least a semi-annual basis. Federal tax 2012 form 1040 You treat your payments as level even if they were adjusted from time to time because of changes in the interest rate. Federal tax 2012 form 1040    To figure your average balance, complete the following worksheet. Federal tax 2012 form 1040    1. Federal tax 2012 form 1040 Enter the balance as of the first day of the year that the mortgage was secured by your qualified home during the year (generally January 1)   2. Federal tax 2012 form 1040 Enter the balance as of the last day of the year that the mortgage was secured by your qualified home during the year (generally December 31)   3. Federal tax 2012 form 1040 Add amounts on lines 1 and 2   4. Federal tax 2012 form 1040 Divide the amount on line 3 by 2. Federal tax 2012 form 1040 Enter the result   Interest paid divided by interest rate method. Federal tax 2012 form 1040   You can use this method if at all times in 2013 the mortgage was secured by your qualified home and the interest was paid at least monthly. Federal tax 2012 form 1040    Complete the following worksheet to figure your average balance. Federal tax 2012 form 1040    1. Federal tax 2012 form 1040 Enter the interest paid in 2013. Federal tax 2012 form 1040 Do not include points, mortgage insurance premiums, or any interest paid in 2013 that is for a year after 2013. Federal tax 2012 form 1040 However, do include interest that is for 2013 but was paid in an earlier year   2. Federal tax 2012 form 1040 Enter the annual interest rate on the mortgage. Federal tax 2012 form 1040 If the interest rate varied in 2013, use the lowest rate for the year   3. Federal tax 2012 form 1040 Divide the amount on line 1 by the amount on line 2. Federal tax 2012 form 1040 Enter the result   Example. Federal tax 2012 form 1040 Mr. Federal tax 2012 form 1040 Blue had a line of credit secured by his main home all year. Federal tax 2012 form 1040 He paid interest of $2,500 on this loan. Federal tax 2012 form 1040 The interest rate on the loan was 9% (. Federal tax 2012 form 1040 09) all year. Federal tax 2012 form 1040 His average balance using this method is $27,778, figured as follows. Federal tax 2012 form 1040 1. Federal tax 2012 form 1040 Enter the interest paid in 2013. Federal tax 2012 form 1040 Do not include points, mortgage insurance premiums, or any interest paid in 2013 that is for a year after 2013. Federal tax 2012 form 1040 However, do include interest that is for 2013 but was paid in an earlier year $2,500 2. Federal tax 2012 form 1040 Enter the annual interest rate on the mortgage. Federal tax 2012 form 1040 If the interest rate varied in 2013, use the lowest rate for the year . Federal tax 2012 form 1040 09 3. Federal tax 2012 form 1040 Divide the amount on line 1 by the amount on line 2. Federal tax 2012 form 1040 Enter the result $27,778 Statements provided by your lender. Federal tax 2012 form 1040   If you receive monthly statements showing the closing balance or the average balance for the month, you can use either to figure your average balance for the year. Federal tax 2012 form 1040 You can treat the balance as zero for any month the mortgage was not secured by your qualified home. Federal tax 2012 form 1040   For each mortgage, figure your average balance by adding your monthly closing or average balances and dividing that total by the number of months the home secured by that mortgage was a qualified home during the year. Federal tax 2012 form 1040   If your lender can give you your average balance for the year, you can use that amount. Federal tax 2012 form 1040 Example. Federal tax 2012 form 1040 Ms. Federal tax 2012 form 1040 Brown had a home equity loan secured by her main home all year. Federal tax 2012 form 1040 She received monthly statements showing her average balance for each month. Federal tax 2012 form 1040 She can figure her average balance for the year by adding her monthly average balances and dividing the total by 12. Federal tax 2012 form 1040 Mixed-use mortgages. Federal tax 2012 form 1040   A mixed-use mortgage is a loan that consists of more than one of the three categories of debt (grandfathered debt, home acquisition debt, and home equity debt). Federal tax 2012 form 1040 For example, a mortgage you took out during the year is a mixed-use mortgage if you used its proceeds partly to refinance a mortgage that you took out in an earlier year to buy your home (home acquisition debt) and partly to buy a car (home equity debt). Federal tax 2012 form 1040   Complete lines 1 and 2 of Table 1 by including the separate average balances of any grandfathered debt and home acquisition debt in your mixed-use mortgage. Federal tax 2012 form 1040 Do not use the methods described earlier in this section to figure the average balance of either category. Federal tax 2012 form 1040 Instead, for each category, use the following method. Federal tax 2012 form 1040 Figure the balance of that category of debt for each month. Federal tax 2012 form 1040 This is the amount of the loan proceeds allocated to that category, reduced by your principal payments on the mortgage previously applied to that category. Federal tax 2012 form 1040 Principal payments on a mixed-use mortgage are applied in full to each category of debt, until its balance is zero, in the following order: First, any home equity debt, Next, any grandfathered debt, and Finally, any home acquisition debt. Federal tax 2012 form 1040 Add together the monthly balances figured in (1). Federal tax 2012 form 1040 Divide the result in (2) by 12. Federal tax 2012 form 1040   Complete line 9 of Table 1 by including the average balance of the entire mixed-use mortgage, figured under one of the methods described earlier in this section. Federal tax 2012 form 1040 Example 1. Federal tax 2012 form 1040 In 1986, Sharon took out a $1,400,000 mortgage to buy her main home (grandfathered debt). Federal tax 2012 form 1040 On March 2, 2013, when the home had a fair market value of $1,700,000 and she owed $1,100,000 on the mortgage, Sharon took out a second mortgage for $200,000. Federal tax 2012 form 1040 She used $180,000 of the proceeds to make substantial improvements to her home (home acquisition debt) and the remaining $20,000 to buy a car (home equity debt). Federal tax 2012 form 1040 Under the loan agreement, Sharon must make principal payments of $1,000 at the end of each month. Federal tax 2012 form 1040 During 2013, her principal payments on the second mortgage totaled $10,000. Federal tax 2012 form 1040 To complete Table 1, line 2, Sharon must figure a separate average balance for the part of her second mortgage that is home acquisition debt. Federal tax 2012 form 1040 The January and February balances were zero. Federal tax 2012 form 1040 The March through December balances were all $180,000, because none of her principal payments are applied to the home acquisition debt. Federal tax 2012 form 1040 (They are all applied to the home equity debt, reducing it to $10,000 [$20,000 − $10,000]. Federal tax 2012 form 1040 ) The monthly balances of the home acquisition debt total $1,800,000 ($180,000 × 10). Federal tax 2012 form 1040 Therefore, the average balance of the home acquisition debt for 2013 was $150,000 ($1,800,000 ÷ 12). Federal tax 2012 form 1040 Example 2. Federal tax 2012 form 1040 The facts are the same as in Example 1. Federal tax 2012 form 1040 In 2014, Sharon's January through October principal payments on her second mortgage are applied to the home equity debt, reducing it to zero. Federal tax 2012 form 1040 The balance of the home acquisition debt remains $180,000 for each of those months. Federal tax 2012 form 1040 Because her November and December principal payments are applied to the home acquisition debt, the November balance is $179,000 ($180,000 − $1,000) and the December balance is $178,000 ($180,000 − $2,000). Federal tax 2012 form 1040 The monthly balances total $2,157,000 [($180,000 × 10) + $179,000 + $178,000]. Federal tax 2012 form 1040 Therefore, the average balance of the home acquisition debt for 2014 is $179,750 ($2,157,000 ÷ 12). Federal tax 2012 form 1040 L
Print - Click this link to Print this page

SOI Tax Stats - Migration Data

Back to Tax Stats


There is a delay in the release of  the 2010–2011 state and county level migration data. During the review process, we identified some discrepancies in the data. The data are being corrected and will be released as soon as possible. We apologize for any inconvenience this delay causes to users of the information.


U.S. Population Migration Data

Migration data for the United States are based on year-to-year address changes reported on individual income tax returns filed with the IRS. They present migration patterns by State or by county for the entire United States and are available for inflows—the number of new residents who moved to a State or county and where they migrated from, and outflows—the number of residents leaving a State or county and where they went. The data are available for Filing Years 1991 through 2010 and include:

  • Number of returns filed, which approximates the number of households that migrated
  • Number of personal exemptions claimed, which approximates the number of individuals
  • Total adjusted gross income, starting with Filing Year 1995.

Important: The data used to produce migration data products come from individual income tax returns filed prior to late September of each calendar year and represent between 95 and 98 percent of total annual filings. However, since returns filed after September are not included, totals shown in migration data tables will not match analogous totals reported in other IRS statistical data products. For more information, see U.S. Population Migration Data: Strengths and Limitations

Migration Data Users Guides


Migration Data 2005–2010

Migration Data 1990–2004

Migration data for years 1990 to 2004 are available as single Zip files containing all State Excel files. Both migration inflow and outflow files are included for each state. The files are compressed using the WinZip utility and must be downloaded and extracted before viewing or loading into any application. A free WinZip utility is available, if needed.

County-to-County Migration Data

1990 to 1991  1991 to 1992  1992 to 1993  1993 to 1994  1994 to 1995  1995 to 1996  1996 to 1997  1997 to 1998  1998 to 1999  1999 to 2000  2000 to 2001  2001 to 2002  2002 to 2003  2003 to 2004

State-to-State Migration Data

1990 to 1991  1991 to 1992  1992 to 1993  1993 to 1994  1994 to 1995  1995 to 1996  1996 to 1997  1997 to 1998  1998 to 1999  1999 to 2000  2000 to 2001  2001 to 2002  2002 to 2003  2003 to 2004

Follow these steps to extract files for the entire year (all States) or for an individual State.

To extract an entire year (all States) using WinZip:

  1. Double click the Zip file to open the WinZip utility.
  2. Double click the folder.
  3. Click and drag either the Inflow and/or Outflow folder to your desktop.

OR

  1. Double click the Zip file to open the WinZip utility (NOTE: SecureZIP users should follow the following steps).
  2. Click the ‘Extract’ button. Ensure that the radio button, ‘All Files in Archive Selected’, is selected.
  3. Select a destination folder.
  4. Click the ‘Extract’ button.

To extract an individual State using WinZip:

  1. Double click the Zip file to open the WinZip utility.
  2. Double click the folder.
  3. Double click either the Inflow or Outflow folder.
  4. Click and drag the desired Excel file(s) to your desktop.

OR

  1. Double click the Zip file to open the WinZip utility (NOTE: SecureZIP users should follow the following steps).
  2. Highlight the desired Excel file(s).
  3. Click the ‘Extract’ button. Ensure that radio button, ‘Selected Files/Folder’, is selected.
  4. Select a destination folder.
  5. Click the ‘Extract’ button.


Return to the Tax Stats home page

Page Last Reviewed or Updated: 18-Dec-2013

The Federal Tax 2012 Form 1040

Federal tax 2012 form 1040 Publication 971 - Main Content Table of Contents How To Request ReliefException for agreements relating to TEFRA partnership proceedings. Federal tax 2012 form 1040 The IRS Must Contact Your Spouse or Former Spouse Tax Court Review of Request Community Property LawsRelief for Married Persons Who Did Not File Joint Returns Innocent Spouse ReliefUnderstated Tax Erroneous Items Actual Knowledge or Reason To Know Indications of Unfairness for Innocent Spouse Relief Separation of Liability ReliefLimitations on Relief Equitable ReliefConditions for Getting Equitable Relief Factors for Determining Whether To Grant Equitable Relief RefundsProof Required Refunds Under Equitable Relief Limit on Amount of Refund Filled-in Form 8857 Flowcharts How To Request Relief File Form 8857 to ask the IRS for the types of relief discussed in this publication. Federal tax 2012 form 1040 If you are requesting relief for more than three tax years, you must file an additional Form 8857. Federal tax 2012 form 1040 The IRS will review your Form 8857 and let you know if you qualify. Federal tax 2012 form 1040 A completed Form 8857 is shown later. Federal tax 2012 form 1040 When to file Form 8857. Federal tax 2012 form 1040   You should file Form 8857 as soon as you become aware of a tax liability for which you believe only your spouse or former spouse should be held responsible. Federal tax 2012 form 1040 The following are some of the ways you may become aware of such a liability. Federal tax 2012 form 1040 The IRS is examining your tax return and proposing to increase your tax liability. Federal tax 2012 form 1040 The IRS sends you a notice. Federal tax 2012 form 1040   You must file Form 8857 no later than two years after the date on which the IRS first attempted to collect the tax from you that occurs after July 22, 1998. Federal tax 2012 form 1040 (But see the exceptions below for different filing deadlines that apply. Federal tax 2012 form 1040 ) For this reason, do not delay filing because you do not have all the documentation. Federal tax 2012 form 1040   Collection activities that may start the 2-year period are: The IRS offset your income tax refund against an amount you owed on a joint return for another year and the IRS informed you about your right to file Form 8857. Federal tax 2012 form 1040 The filing of a claim by the IRS in a court proceeding in which you were a party or the filing of a claim in a proceeding that involves your property. Federal tax 2012 form 1040 This includes the filing of a proof of claim in a bankruptcy proceeding. Federal tax 2012 form 1040 The filing of a suit by the United States against you to collect the joint liability. Federal tax 2012 form 1040 The issuance of a section 6330 notice, which notifies you of the IRS' intent to levy and your right to a collection due process (CDP) hearing. Federal tax 2012 form 1040 The collection-related notices include, but are not limited to, Letter 11 and Letter 1058. Federal tax 2012 form 1040 Exception for equitable relief. Federal tax 2012 form 1040   On July 25, 2011, the IRS issued Notice 2011-70 (available at www. Federal tax 2012 form 1040 irs. Federal tax 2012 form 1040 gov/irb/2011-32_IRB/ar11. Federal tax 2012 form 1040 html) expanding the amount of time to request equitable relief. Federal tax 2012 form 1040 The amount of time to request equitable relief depends on whether you are seeking relief from a balance due, seeking a credit or refund, or both: Balance Due – Generally, you must file your request within the time period the IRS has to collect the tax. Federal tax 2012 form 1040 Generally, the IRS has 10 years from the date the tax liability was assessed to collect the tax. Federal tax 2012 form 1040 In certain cases, the 10-year period is suspended. Federal tax 2012 form 1040 The amount of time the suspension is in effect will extend the time the IRS has to collect the tax. Federal tax 2012 form 1040 See Pub. Federal tax 2012 form 1040 594, The IRS Collection Process, for details. Federal tax 2012 form 1040 Credit or Refund – Generally, you must file your request within 3 years after the date the original return was filed or within 2 years after the date the tax was paid, whichever is later. Federal tax 2012 form 1040 But you may have more time to file if you live in a federally declared disaster area or you are physically or mentally unable to manage your financial affairs. Federal tax 2012 form 1040 See Pub. Federal tax 2012 form 1040 556, Examination of Returns, Appeal Rights, and Claims for Refund, for details. Federal tax 2012 form 1040 Both a Balance Due and a Credit or Refund – If you are seeking a refund of amounts you paid and relief from a balance due over and above what you have paid, the time period for credit or refund will apply to any payments you have made, and the time period for collection of a balance due amount will apply to any unpaid liability. Federal tax 2012 form 1040 Exception for relief based on community property laws. Federal tax 2012 form 1040   If you are requesting relief based on community property laws, a different filing deadline applies. Federal tax 2012 form 1040 See Relief from liability arising from community property law discussed later under Community Property Laws . Federal tax 2012 form 1040 Form 8857 filed by or on behalf of a decedent. Federal tax 2012 form 1040   An executor (including any other duly appointed representative) may pursue a Form 8857 filed during the decedent's lifetime. Federal tax 2012 form 1040 An executor (including any other duly appointed representative) may also file Form 8857 as long as the decedent satisfied the eligibility requirements while alive. Federal tax 2012 form 1040 For purposes of separation of liability relief (discussed later), the decedent's marital status is determined on the earlier of the date relief was requested or the date of death. Federal tax 2012 form 1040 Situations in which you are not entitled to relief. Federal tax 2012 form 1040   You are not entitled to innocent spouse relief for any tax year to which the following situations apply. Federal tax 2012 form 1040 In a final decision dated after July 22, 1998, a court considered whether to grant you relief from joint liability and decided not to do so. Federal tax 2012 form 1040 In a final decision dated after July 22, 1998, a court did not consider whether to grant you relief from joint liability, but you meaningfully participated in the proceeding and could have asked for relief. Federal tax 2012 form 1040 You entered into an offer in compromise with the IRS. Federal tax 2012 form 1040 You entered into a closing agreement with the IRS that disposed of the same liability for which you want to seek relief. Federal tax 2012 form 1040 Exception for agreements relating to TEFRA partnership proceedings. Federal tax 2012 form 1040   You may be entitled to relief, discussed in (4) earlier, if you entered into a closing agreement for both partnership items and nonpartnership items, while you were a party to a pending TEFRA partnership proceeding. Federal tax 2012 form 1040 (TEFRA is an acronym that refers to the “Tax Equity and Fiscal Responsibility Act of 1982” that prescribed the tax treatment of partnership items. Federal tax 2012 form 1040 ) You are not entitled to relief for the nonpartnership items, but you will be entitled to relief for the partnership items (if you otherwise qualify). Federal tax 2012 form 1040 Transferee liability not affected by innocent spouse relief provisions. Federal tax 2012 form 1040   The innocent spouse relief provisions do not affect tax liabilities that arise under federal or state transferee liability or property laws. Federal tax 2012 form 1040 Therefore, even if you are relieved of the tax liability under the innocent spouse relief provisions, you may remain liable for the unpaid tax, interest, and penalties to the extent provided by these laws. Federal tax 2012 form 1040 Example. Federal tax 2012 form 1040 Herb and Wanda timely filed their 2008 joint income tax return on April 15, 2009. Federal tax 2012 form 1040 Herb died in March 2010, and the executor of Herb's will transferred all of the estate's assets to Wanda. Federal tax 2012 form 1040 In August 2010, the IRS assessed a deficiency for the 2008 return. Federal tax 2012 form 1040 The items causing the deficiency belong to Herb. Federal tax 2012 form 1040 Wanda is relieved of the deficiency under the innocent spouse relief provisions, and Herb's estate remains solely liable for it. Federal tax 2012 form 1040 However, the IRS may collect the deficiency from Wanda to the extent permitted under federal or state transferee liability or property laws. Federal tax 2012 form 1040 The IRS Must Contact Your Spouse or Former Spouse By law, the IRS must contact your spouse or former spouse. Federal tax 2012 form 1040 There are no exceptions, even for victims of spousal abuse or domestic violence. Federal tax 2012 form 1040 We will inform your spouse or former spouse that you filed Form 8857 and will allow him or her to participate in the process. Federal tax 2012 form 1040 If you are requesting relief from joint and several liability on a joint return, the IRS must also inform him or her of its preliminary and final determinations regarding your request for relief. Federal tax 2012 form 1040 However, to protect your privacy, the IRS will not disclose your personal information (for example, your current name, address, phone number(s), information about your employer, your income or assets) or any other information that does not relate to making a determination about your request for relief from liability. Federal tax 2012 form 1040 If you petition the Tax Court (explained below), your spouse or former spouse may see your personal information. Federal tax 2012 form 1040 Tax Court Review of Request After you file Form 8857, you may be able to petition (ask) the United States Tax Court to review your request for relief in the following two situations. Federal tax 2012 form 1040 The IRS sends you a final determination letter regarding your request for relief. Federal tax 2012 form 1040 You do not receive a final determination letter from the IRS within six months from the date you filed Form 8857. Federal tax 2012 form 1040 If you seek equitable relief for an underpaid tax, you will be able to get a Tax Court review of your request only if the tax arose or remained unpaid on or after December 20, 2006. Federal tax 2012 form 1040 The United States Tax Court is an independent judicial body and is not part of the IRS. Federal tax 2012 form 1040 You must file a petition with the United States Tax Court in order for it to review your request for relief. Federal tax 2012 form 1040 You must file the petition no later than the 90th day after the date the IRS mails its final determination notice to you. Federal tax 2012 form 1040 If you do not file a petition, or you file it late, the Tax Court cannot review your request for relief. Federal tax 2012 form 1040 You can get a copy of the rules for filing a petition by writing to the Tax Court at the following address:    United States Tax Court 400 Second Street, NW Washington, DC 20217 Or you can visit the Tax Court's website at www. Federal tax 2012 form 1040 ustaxcourt. Federal tax 2012 form 1040 gov Community Property Laws You must generally follow community property laws when filing a tax return if you are married and live in a community property state. Federal tax 2012 form 1040 Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Federal tax 2012 form 1040 Generally, community property laws require you to allocate community income and expenses equally between both spouses. Federal tax 2012 form 1040 However, community property laws are not taken into account in determining whether an item belongs to you or to your spouse (or former spouse) for purposes of requesting any relief from liability. Federal tax 2012 form 1040 Relief for Married Persons Who Did Not File Joint Returns Married persons who live in community property states, but who did not file joint returns, have two ways to get relief. Federal tax 2012 form 1040 Relief From Liability Arising From Community Property Law You are not responsible for the tax relating to an item of community income if all the following conditions exist. Federal tax 2012 form 1040 You did not file a joint return for the tax year. Federal tax 2012 form 1040 You did not include the item of community income in gross income. Federal tax 2012 form 1040 The item of community income you did not include is one of the following: Wages, salaries, and other compensation your spouse (or former spouse) received for services he or she performed as an employee. Federal tax 2012 form 1040 Income your spouse (or former spouse) derived from a trade or business he or she operated as a sole proprietor. Federal tax 2012 form 1040 Your spouse's (or former spouse's) distributive share of partnership income. Federal tax 2012 form 1040 Income from your spouse's (or former spouse's) separate property (other than income described in (a), (b), or (c)). Federal tax 2012 form 1040 Use the appropriate community property law to determine what is separate property. Federal tax 2012 form 1040 Any other income that belongs to your spouse (or former spouse) under community property law. Federal tax 2012 form 1040 You establish that you did not know of, and had no reason to know of, that community income. Federal tax 2012 form 1040 See  Actual Knowledge or Reason To Know , below. Federal tax 2012 form 1040 Under all facts and circumstances, it would not be fair to include the item of community income in your gross income. Federal tax 2012 form 1040 See Indications of unfairness for liability arising from community property law, later. Federal tax 2012 form 1040 Actual knowledge or reason to know. Federal tax 2012 form 1040   You knew or had reason to know of an item of community income if: You actually knew of the item of community income, or A reasonable person in similar circumstances would have known of the item of community income. Federal tax 2012 form 1040 Amount of community income unknown. Federal tax 2012 form 1040   If you are aware of the source of the item of community income or the income-producing activity, but are unaware of the specific amount, you are considered to know or have reason to know of the item of community income. Federal tax 2012 form 1040 Not knowing the specific amount is not a basis for relief. Federal tax 2012 form 1040 Reason to know. Federal tax 2012 form 1040   The IRS will consider all facts and circumstances in determining whether you had reason to know of an item of community income. Federal tax 2012 form 1040 The facts and circumstances include: The nature of the item of community income and the amount of the item relative to other income items. Federal tax 2012 form 1040 The financial situation of you and your spouse (or former spouse). Federal tax 2012 form 1040 Your educational background and business experience. Federal tax 2012 form 1040 Whether the item of community income represented a departure from a recurring pattern reflected in prior years' returns (for example, omitted income from an investment regularly reported on prior years' returns). Federal tax 2012 form 1040 Indications of unfairness for liability arising from community property law. Federal tax 2012 form 1040   The IRS will consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold you responsible for the understated tax due to the item of community income. Federal tax 2012 form 1040   The following are examples of factors the IRS will consider. Federal tax 2012 form 1040 Whether you received a benefit, either directly or indirectly, from the omitted item of community income (defined below). Federal tax 2012 form 1040 Whether your spouse (or former spouse) deserted you. Federal tax 2012 form 1040 Whether you and your spouse have been divorced or separated. Federal tax 2012 form 1040  For other factors see Factors for Determining Whether To Grant Equitable Relief later. Federal tax 2012 form 1040 Benefit from omitted item of community income. Federal tax 2012 form 1040   A benefit includes normal support, but does not include de minimis (small) amounts. Federal tax 2012 form 1040 Evidence of a direct or indirect benefit may consist of transfers of property or rights to property, including transfers received several years after the filing of the return. Federal tax 2012 form 1040   For example, if you receive property, including life insurance proceeds, from your spouse (or former spouse) and the property is traceable to omitted items of community income attributable to your spouse (or former spouse), you are considered to have benefitted from those omitted items of community income. Federal tax 2012 form 1040 Equitable Relief If you do not qualify for the relief described above and are now liable for an underpaid or understated tax you believe should be paid only by your spouse (or former spouse), you may request equitable relief (discussed later). Federal tax 2012 form 1040 How and When To Request Relief You request relief by filing Form 8857, as discussed earlier. Federal tax 2012 form 1040 Fill in Form 8857 according to the instructions. Federal tax 2012 form 1040 For relief from liability arising from community property law, you must file Form 8857 no later than 6 months before the expiration of the period of limitations on assessment (including extensions) against your spouse for the tax year for which you are requesting relief. Federal tax 2012 form 1040 However, if the IRS begins an examination of your return during that 6-month period, the latest time for requesting relief is 30 days after the date the IRS' initial contact letter to you. Federal tax 2012 form 1040 The period of limitation on assessment is the amount of time, generally three years, that the IRS has from the date you filed the return to assess taxes that you owe. Federal tax 2012 form 1040 Innocent Spouse Relief By requesting innocent spouse relief, you can be relieved of responsibility for paying tax, interest, and penalties if your spouse (or former spouse) improperly reported items or omitted items on your tax return. Federal tax 2012 form 1040 Generally, the tax, interest, and penalties that qualify for relief can only be collected from your spouse (or former spouse). Federal tax 2012 form 1040 However, you are jointly and individually responsible for any tax, interest, and penalties that do not qualify for relief. Federal tax 2012 form 1040 The IRS can collect these amounts from either you or your spouse (or former spouse). Federal tax 2012 form 1040 You must meet all of the following conditions to qualify for innocent spouse relief. Federal tax 2012 form 1040 You filed a joint return. Federal tax 2012 form 1040 There is an understated tax on the return that is due to erroneous items (defined later) of your spouse (or former spouse). Federal tax 2012 form 1040 You can show that when you signed the joint return you did not know, and had no reason to know, that the understated tax existed (or the extent to which the understated tax existed). Federal tax 2012 form 1040 See Actual Knowledge or Reason To Know, later. Federal tax 2012 form 1040 Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated tax. Federal tax 2012 form 1040 See Indications of Unfairness for Innocent Spouse Relief , later. Federal tax 2012 form 1040 Innocent spouse relief will not be granted if the IRS proves that you and your spouse (or former spouse) transferred property to one another as part of a fraudulent scheme. Federal tax 2012 form 1040 A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. Federal tax 2012 form 1040 Understated Tax You have an understated tax if the IRS determined that your total tax should be more than the amount that was actually shown on your return. Federal tax 2012 form 1040 Erroneous Items Erroneous items are either of the following. Federal tax 2012 form 1040 Unreported income. Federal tax 2012 form 1040 This is any gross income item received by your spouse (or former spouse) that is not reported. Federal tax 2012 form 1040 Incorrect deduction, credit, or basis. Federal tax 2012 form 1040 This is any improper deduction, credit, or property basis claimed by your spouse (or former spouse). Federal tax 2012 form 1040 The following are examples of erroneous items. Federal tax 2012 form 1040 The expense for which the deduction is taken was never paid or incurred. Federal tax 2012 form 1040 For example, your spouse, a cash-basis taxpayer, deducted $10,000 of advertising expenses on Schedule C of your joint Form 1040, but never paid for any advertising. Federal tax 2012 form 1040 The expense does not qualify as a deductible expense. Federal tax 2012 form 1040 For example, your spouse claimed a business fee deduction of $10,000 that was for the payment of state fines. Federal tax 2012 form 1040 Fines are not deductible. Federal tax 2012 form 1040 No factual argument can be made to support the deductibility of the expense. Federal tax 2012 form 1040 For example, your spouse claimed $4,000 for security costs related to a home office, which were actually veterinary and food costs for your family's two dogs. Federal tax 2012 form 1040 Actual Knowledge or Reason To Know You knew or had reason to know of an understated tax if: You actually knew of the understated tax, or A reasonable person in similar circumstances would have known of the understated tax. Federal tax 2012 form 1040 Actual knowledge. Federal tax 2012 form 1040   If you actually knew about an erroneous item that belongs to your spouse (or former spouse), the relief discussed here does not apply to any part of the understated tax due to that item. Federal tax 2012 form 1040 You and your spouse (or former spouse) remain jointly liable for that part of the understated tax. Federal tax 2012 form 1040 For information about the criteria for determining whether you actually knew about an erroneous item, see Actual Knowledge later under Separation of Liability Relief. Federal tax 2012 form 1040 Reason to know. Federal tax 2012 form 1040   If you had reason to know about an erroneous item that belongs to your spouse (or former spouse), the relief discussed here does not apply to any part of the understated tax due to that item. Federal tax 2012 form 1040 You and your spouse (or former spouse) remain jointly liable for that part of the understated tax. Federal tax 2012 form 1040   The IRS will consider all facts and circumstances in determining whether you had reason to know of an understated tax due to an erroneous item. Federal tax 2012 form 1040 The facts and circumstances include: The nature of the erroneous item and the amount of the erroneous item relative to other items. Federal tax 2012 form 1040 The financial situation of you and your spouse (or former spouse). Federal tax 2012 form 1040 Your educational background and business experience. Federal tax 2012 form 1040 The extent of your participation in the activity that resulted in the erroneous item. Federal tax 2012 form 1040 Whether you failed to ask, at or before the time the return was signed, about items on the return or omitted from the return that a reasonable person would question. Federal tax 2012 form 1040 Whether the erroneous item represented a departure from a recurring pattern reflected in prior years' returns (for example, omitted income from an investment regularly reported on prior years' returns). Federal tax 2012 form 1040 Partial relief when a portion of erroneous item is unknown. Federal tax 2012 form 1040   You may qualify for partial relief if, at the time you filed your return, you had no knowledge or reason to know of only a portion of an erroneous item. Federal tax 2012 form 1040 You will be relieved of the understated tax due to that portion of the item if all other requirements are met for that portion. Federal tax 2012 form 1040 Example. Federal tax 2012 form 1040 At the time you signed your joint return, you knew that your spouse did not report $5,000 of gambling winnings. Federal tax 2012 form 1040 The IRS examined your tax return several months after you filed it and determined that your spouse's unreported gambling winnings were actually $25,000. Federal tax 2012 form 1040 You established that you did not know about, and had no reason to know about, the additional $20,000 because of the way your spouse handled gambling winnings. Federal tax 2012 form 1040 The understated tax due to the $20,000 will qualify for innocent spouse relief if you meet the other requirements. Federal tax 2012 form 1040 The understated tax due to the $5,000 of gambling winnings you knew about will not qualify for relief. Federal tax 2012 form 1040 Indications of Unfairness for Innocent Spouse Relief The IRS will consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold you responsible for the understated tax. Federal tax 2012 form 1040 The following are examples of factors the IRS will consider. Federal tax 2012 form 1040 Whether you received a significant benefit (defined below), either directly or indirectly, from the understated tax. Federal tax 2012 form 1040 Whether your spouse (or former spouse) deserted you. Federal tax 2012 form 1040 Whether you and your spouse have been divorced or separated. Federal tax 2012 form 1040 Whether you received a benefit on the return from the understated tax. Federal tax 2012 form 1040 For other factors, see Factors for Determining Whether To Grant Equitable Relief later under Equitable Relief. Federal tax 2012 form 1040 Significant benefit. Federal tax 2012 form 1040   A significant benefit is any benefit in excess of normal support. Federal tax 2012 form 1040 Normal support depends on your particular circumstances. Federal tax 2012 form 1040 Evidence of a direct or indirect benefit may consist of transfers of property or rights to property, including transfers that may be received several years after the year of the understated tax. Federal tax 2012 form 1040 Example. Federal tax 2012 form 1040 You receive money from your spouse that is beyond normal support. Federal tax 2012 form 1040 The money can be traced to your spouse's lottery winnings that were not reported on your joint return. Federal tax 2012 form 1040 You will be considered to have received a significant benefit from that income. Federal tax 2012 form 1040 This is true even if your spouse gives you the money several years after he or she received it. Federal tax 2012 form 1040 Separation of Liability Relief Under this type of relief, the understated tax (plus interest and penalties) on your joint return is allocated between you and your spouse (or former spouse). Federal tax 2012 form 1040 The understated tax allocated to you is generally the amount you are responsible for. Federal tax 2012 form 1040 This type of relief is available only for unpaid liabilities resulting from the understated tax. Federal tax 2012 form 1040 Refunds are not allowed. Federal tax 2012 form 1040 To request separation of liability relief, you must have filed a joint return and meet either of the following requirements at the time you file Form 8857. Federal tax 2012 form 1040 You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. Federal tax 2012 form 1040 (Under this rule, you are no longer married if you are widowed. Federal tax 2012 form 1040 ) You were not a member of the same household (explained below) as the spouse with whom you filed the joint return at any time during the 12-month per- iod ending on the date you file Form 8857. Federal tax 2012 form 1040 Members of the same household. Federal tax 2012 form 1040   You and your spouse are not members of the same household if you are living apart and are estranged. Federal tax 2012 form 1040 However, you and your spouse are considered members of the same household if any of the following conditions are met. Federal tax 2012 form 1040 You and your spouse reside in the same dwelling. Federal tax 2012 form 1040 You and your spouse reside in separate dwellings but are not estranged, and one of you is temporarily absent from the other's household as explained in (3) below. Federal tax 2012 form 1040 Either spouse is temporarily absent from the household and it is reasonable to assume that the absent spouse will return to the household, and the household or a substantially equivalent household is maintained in anticipation of the absent spouse's return. Federal tax 2012 form 1040 Examples of temporary absences include absence due to imprisonment, illness, business, vacation, military service, or education. Federal tax 2012 form 1040 Burden of proof. Federal tax 2012 form 1040   You must be able to prove that you meet all of the requirements for separation of liability relief (except actual knowledge) and that you did not transfer property to avoid tax (discussed later). Federal tax 2012 form 1040 You must also establish the basis for allocating the erroneous items. Federal tax 2012 form 1040 Limitations on Relief Even if you meet the requirements discussed previously, separation of liability relief will not be granted in the following situations. Federal tax 2012 form 1040 The IRS proves that you and your spouse (or former spouse) transferred assets to one another as part of a fraudulent scheme. Federal tax 2012 form 1040 A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. Federal tax 2012 form 1040 The IRS proves that at the time you signed your joint return, you had actual knowledge (explained below) of any erroneous items giving rise to the deficiency that were allocable to your spouse (or former spouse). Federal tax 2012 form 1040 For the definition of erroneous items, see Erroneous Items earlier under Innocent Spouse Relief. Federal tax 2012 form 1040 Your spouse (or former spouse) transferred property to you to avoid tax or the payment of tax. Federal tax 2012 form 1040 See Transfers of Property To Avoid Tax , later. Federal tax 2012 form 1040 Actual Knowledge The relief discussed here does not apply to any part of the understated tax due to your spouse's (or former spouse's) erroneous items of which you had actual knowledge. Federal tax 2012 form 1040 You and your spouse (or former spouse) remain jointly and severally liable for this part of the understated tax. Federal tax 2012 form 1040 If you had actual knowledge of only a portion of an erroneous item, the IRS will not grant relief for that portion of the item. Federal tax 2012 form 1040 You had actual knowledge of an erroneous item if: You knew that an item of unreported income was received. Federal tax 2012 form 1040 (This rule applies whether or not there was a receipt of cash. Federal tax 2012 form 1040 ) You knew of the facts that made an incorrect deduction or credit unallowable. Federal tax 2012 form 1040 For a false or inflated deduction, you knew that the expense was not incurred, or not incurred to the extent shown on the tax return. Federal tax 2012 form 1040 Knowledge of the source of an erroneous item is not sufficient to establish actual knowledge. Federal tax 2012 form 1040 Also, your actual knowledge may not be inferred when you merely had a reason to know of the erroneous item. Federal tax 2012 form 1040 Similarly, the IRS does not have to establish that you knew of the source of an erroneous item in order to establish that you had actual knowledge of the item itself. Federal tax 2012 form 1040 Your actual knowledge of the proper tax treatment of an erroneous item is not relevant for purposes of demonstrating that you had actual knowledge of that item. Federal tax 2012 form 1040 Neither is your actual knowledge of how the erroneous item was treated on the tax return. Federal tax 2012 form 1040 For example, if you knew that your spouse received dividend income, relief is not available for that income even if you did not know it was taxable. Federal tax 2012 form 1040 Example. Federal tax 2012 form 1040 Bill and Karen Green filed a joint return showing Karen's wages of $50,000 and Bill's self-employment income of $10,000. Federal tax 2012 form 1040 The IRS audited their return and found that Bill did not report $20,000 of self-employment income. Federal tax 2012 form 1040 The additional income resulted in a $6,000 understated tax, plus interest and penalties. Federal tax 2012 form 1040 After obtaining a legal separation from Bill, Karen filed Form 8857 to request separation of liability relief. Federal tax 2012 form 1040 The IRS proved that Karen actually knew about the $20,000 of additional income at the time she signed the joint return. Federal tax 2012 form 1040 Bill is liable for all of the understated tax, interest, and penalties because all of it was due to his unreported income. Federal tax 2012 form 1040 Karen is also liable for the understated tax, interest, and penalties due to the $20,000 of unreported income because she actually knew of the item. Federal tax 2012 form 1040 The IRS can collect the entire $6,000 plus interest and penalties from either Karen or Bill because they are jointly and individually liable for it. Federal tax 2012 form 1040 Factors supporting actual knowledge. Federal tax 2012 form 1040   The IRS may rely on all facts and circumstances in determining whether you actually knew of an erroneous item at the time you signed the return. Federal tax 2012 form 1040 The following are examples of factors the IRS may use. Federal tax 2012 form 1040 Whether you made a deliberate effort to avoid learning about the item in order to be shielded from liability. Federal tax 2012 form 1040 Whether you and your spouse (or former spouse) jointly owned the property that resulted in the erroneous item. Federal tax 2012 form 1040 Exception for spousal abuse or domestic violence. Federal tax 2012 form 1040   Even if you had actual knowledge, you may still qualify for relief if you establish that: You were the victim of spousal abuse or domestic violence before signing the return, and Because of that abuse, you did not challenge the treatment of any items on the return because you were afraid your spouse (or former spouse) would retaliate against you. Federal tax 2012 form 1040   If you establish that you signed your joint return under duress (threat of harm or other form of coercion), then it is not a joint return, and you are not liable for any tax shown on that return or any tax deficiency for that return. Federal tax 2012 form 1040 However, you may be required to file a separate return for that tax year. Federal tax 2012 form 1040 For more information about duress, see the instructions for Form 8857. Federal tax 2012 form 1040 Transfers of Property To Avoid Tax If your spouse (or former spouse) transfers property (or the right to property) to you for the main purpose of avoiding tax or payment of tax, the tax liability allocated to you will be increased by the fair market value of the property on the date of the transfer. Federal tax 2012 form 1040 The increase may not be more than the entire amount of the liability. Federal tax 2012 form 1040 A transfer will be presumed to have as its main purpose the avoidance of tax or payment of tax if the transfer is made after the date that is 1 year before the date on which the IRS sent its first letter of proposed deficiency. Federal tax 2012 form 1040 This presumption will not apply if: The transfer was made under a divorce decree, separate maintenance agreement, or a written instrument incident to such an agreement, or You establish that the transfer did not have as its main purpose the avoidance of tax or payment of tax. Federal tax 2012 form 1040 If the presumption does not apply, but the IRS can establish that the purpose of the transfer was the avoidance of tax or payment of tax, the tax liability allocated to you will be increased as explained above. Federal tax 2012 form 1040 Equitable Relief If you do not qualify for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law, you may still be relieved of responsibility for tax, interest, and penalties through equitable relief. Federal tax 2012 form 1040 Unlike innocent spouse relief or separation of liability relief, you can get equitable relief from an understated tax (defined earlier under Innocent Spouse Relief ) or an underpaid tax. Federal tax 2012 form 1040 An underpaid tax is an amount of tax you properly reported on your return but you have not paid. Federal tax 2012 form 1040 For example, your joint 2009 return shows that you and your spouse owed $5,000. Federal tax 2012 form 1040 You paid $2,000 with the return. Federal tax 2012 form 1040 You have an underpaid tax of $3,000. Federal tax 2012 form 1040 Conditions for Getting Equitable Relief You may qualify for equitable relief if you meet all of the following conditions. Federal tax 2012 form 1040 You are not eligible for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law. Federal tax 2012 form 1040 You have an understated tax or an underpaid tax. Federal tax 2012 form 1040 You did not pay the tax. Federal tax 2012 form 1040 However, see Refunds , later, for situations in which you are entitled to a refund of payments you made. Federal tax 2012 form 1040 You establish that, taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated or underpaid tax. Federal tax 2012 form 1040 See Factors for Determining Whether To Grant Equitable Relief, later. Federal tax 2012 form 1040 You and your spouse (or former spouse) did not transfer assets to one another as a part of a fraudulent scheme. Federal tax 2012 form 1040 A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. Federal tax 2012 form 1040 Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax. Federal tax 2012 form 1040 See Transfers of Property To Avoid Tax, earlier, under Separation of Liability Relief. Federal tax 2012 form 1040 You did not file or fail to file your return with the intent to commit fraud. Federal tax 2012 form 1040 The income tax liability from which you seek relief must be attributable to an item of the spouse (or former spouse) with whom you filed the joint return, unless one of the following exceptions applies: The item is attributable or partially attributable to you solely due to the operation of community property law. Federal tax 2012 form 1040 If you meet this exception, that item will be considered attributable to your spouse (or former spouse) for purposes of equitable relief. Federal tax 2012 form 1040 If the item is titled in your name, the item is presumed to be attributable to you. Federal tax 2012 form 1040 However, you can rebut this presumption based on the facts and circumstances. Federal tax 2012 form 1040 You did not know, and had no reason to know, that funds intended for the payment of tax were misappropriated by your spouse (or former spouse) for his or her benefit. Federal tax 2012 form 1040 If you meet this exception, the IRS will consider granting equitable relief although the underpaid tax may be attributable in part or in full to your item, and only to the extent the funds intended for payment were taken by your spouse (or former spouse). Federal tax 2012 form 1040 You establish that you were the victim of spousal abuse or domestic violence before signing the return, and that, as a result of the prior abuse, you did not challenge the treatment of any items on the return for fear of your spouse's (or former spouse's) retaliation. Federal tax 2012 form 1040 If you meet this exception, relief will be considered although the understated tax or underpaid tax may be attributable in part or in full to your item. Federal tax 2012 form 1040 Factors for Determining Whether To Grant Equitable Relief The IRS will consider all of the facts and circumstances in order to determine whether it is unfair to hold you responsible for the understated or underpaid tax. Federal tax 2012 form 1040 The following are examples of factors that the IRS will consider to determine whether to grant equitable relief. Federal tax 2012 form 1040 The IRS will consider all factors and weigh them appropriately. Federal tax 2012 form 1040 Relevant Factors The following are examples of factors that may be relevant to whether the IRS will grant equitable relief. Federal tax 2012 form 1040 Whether you are separated (whether legally or not) or divorced from your spouse. Federal tax 2012 form 1040 A temporary absence, such as an absence due to imprisonment, illness, business, vacation, military service, or education, is not considered separation for this purpose. Federal tax 2012 form 1040 A temporary absence is one where it is reasonable to assume that the absent spouse will return to the household, and the household or a substantially equivalent household is maintained in anticipation of the absent spouse's return. Federal tax 2012 form 1040 Whether you would suffer a significant economic hardship if relief is not granted. Federal tax 2012 form 1040 (In other words, you would not be able to pay your reasonable basic living expenses. Federal tax 2012 form 1040 ) Whether you have a legal obligation under a divorce decree or agreement to pay the tax. Federal tax 2012 form 1040 This factor will not weigh in favor of relief if you knew or had reason to know, when entering into the divorce decree or agreement, that your former spouse would not pay the income tax liability. Federal tax 2012 form 1040 Whether you received a significant benefit (beyond normal support) from the underpaid tax or item causing the understated tax. Federal tax 2012 form 1040 (For a definition of significant benefit, see Indications of Unfairness for Innocent Spouse Relief earlier. Federal tax 2012 form 1040 ) Whether you have made a good faith effort to comply with federal income tax laws for the tax year for which you are requesting relief or the following years. Federal tax 2012 form 1040 Whether you knew or had reason to know about the items causing the understated tax or that the tax would not be paid, as explained next. Federal tax 2012 form 1040 Knowledge or reason to know. Federal tax 2012 form 1040   In the case of an underpaid tax, the IRS will consider whether you did not know and had no reason to know that your spouse (or former spouse) would not pay the income tax liability. Federal tax 2012 form 1040   In the case of an income tax liability that arose from an understated tax, the IRS will consider whether you did not know and had no reason to know of the item causing the understated tax. Federal tax 2012 form 1040 Reason to know of the item giving rise to the understated tax will not be weighed more heavily than other factors. Federal tax 2012 form 1040 Actual knowledge of the item giving rise to the understated tax, however, is a strong factor weighing against relief. Federal tax 2012 form 1040 This strong factor may be overcome if the factors in favor of equitable relief are particularly compelling. Federal tax 2012 form 1040 Reason to know. Federal tax 2012 form 1040   In determining whether you had reason to know, the IRS will consider your level of education, any deceit or evasiveness of your spouse (or former spouse), your degree of involvement in the activity generating the income tax liability, your involvement in business and household financial matters, your business or financial expertise, and any lavish or unusual expenditures compared with past spending levels. Federal tax 2012 form 1040 Example. Federal tax 2012 form 1040 You and your spouse filed a joint 2009 return. Federal tax 2012 form 1040 That return showed you owed $10,000. Federal tax 2012 form 1040 You had $5,000 of your own money and you took out a loan to pay the other $5,000. Federal tax 2012 form 1040 You gave 2 checks for $5,000 each to your spouse to pay the $10,000 liability. Federal tax 2012 form 1040 Without telling you, your spouse took the $5,000 loan and spent it on himself. Federal tax 2012 form 1040 You and your spouse were divorced in 2010. Federal tax 2012 form 1040 In addition, you had no knowledge or reason to know at the time you signed the return that the tax would not be paid. Federal tax 2012 form 1040 These facts indicate to the IRS that it may be unfair to hold you liable for the $5,000 underpaid tax. Federal tax 2012 form 1040 The IRS will consider these facts, together with all of the other facts and circumstances, to determine whether to grant you equitable relief from the $5,000 underpaid tax. Federal tax 2012 form 1040 Factors Weighing in Favor of Equitable Relief The following are examples of factors that will weigh in favor of equitable relief, but will not weigh against equitable relief. Federal tax 2012 form 1040 Whether your spouse (or former spouse) abused you. Federal tax 2012 form 1040 Whether you were in poor mental or physical health on the date you signed the return or at the time you requested relief. Federal tax 2012 form 1040 Refunds If you are granted relief, refunds are: Permitted under innocent spouse relief as explained later under Limit on Amount of Refund . Federal tax 2012 form 1040 Not permitted under separation of liability relief. Federal tax 2012 form 1040 Permitted in limited circumstances under equitable relief, as explained under Refunds Under Equitable Relief. Federal tax 2012 form 1040 Proof Required The IRS will only refund payments you made with your own money. Federal tax 2012 form 1040 However, you must provide proof that you made the payments with your own money. Federal tax 2012 form 1040 Examples of proof are a copy of your bank statement or a canceled check. Federal tax 2012 form 1040 No proof is required if your individual refund was used by the IRS to pay a tax you owed on a joint tax return for another year. Federal tax 2012 form 1040 Refunds Under Equitable Relief In the following situations, you are eligible to receive a refund of certain payments you made. Federal tax 2012 form 1040 Underpaid tax. Federal tax 2012 form 1040   If you are granted relief for an underpaid tax, you are eligible for a refund of separate payments that you made after July 22, 1998. Federal tax 2012 form 1040 However, you are not eligible for refunds of payments made with the joint return, joint payments, or payments that your spouse (or former spouse) made. Federal tax 2012 form 1040 For example, withholding tax and estimated tax payments cannot be refunded because they are considered made with the joint return. Federal tax 2012 form 1040   The amount of the refund is subject to the limit discussed later under Limit on Amount of Refund. Federal tax 2012 form 1040 Understated tax. Federal tax 2012 form 1040   If you are granted relief for an understated tax, you are eligible for a refund of certain payments made under an installment agreement that you entered into with the IRS, if you have not defaulted on the installment agreement. Federal tax 2012 form 1040 You are not in default if the IRS did not issue you a notice of default or take any action to end the installment agreement. Federal tax 2012 form 1040 Only installment payments made after the date you filed Form 8857 are eligible for a refund. Federal tax 2012 form 1040   The amount of the refund is subject to the limit discussed next. Federal tax 2012 form 1040 Limit on Amount of Refund The amount of your refund is limited. Federal tax 2012 form 1040 Read the following chart to find out the limit. Federal tax 2012 form 1040 IF you file Form 8857. Federal tax 2012 form 1040 . Federal tax 2012 form 1040 . Federal tax 2012 form 1040 THEN the refund cannot be more than. Federal tax 2012 form 1040 . Federal tax 2012 form 1040 . Federal tax 2012 form 1040 Within 3 years after filing your return The part of the tax paid within 3 years (plus any extension of time for filing your return) before you filed Form 8857. Federal tax 2012 form 1040 After the 3-year period, but within 2 years from the time you paid the tax The tax you paid within 2 years immediately before you filed Form 8857. Federal tax 2012 form 1040 Filled-in Form 8857 This part explains how Janie Boulder fills out Form 8857 to request innocent spouse relief. Federal tax 2012 form 1040 Janie and Joe Boulder filed a joint tax return for 2007. Federal tax 2012 form 1040 They claimed one dependency exemption for their son Michael. Federal tax 2012 form 1040 Their return was adjusted by the IRS because Joe did not report a $5,000 award he won that year. Federal tax 2012 form 1040 Janie did not know about the award when the return was filed. Federal tax 2012 form 1040 They agreed to the adjustment but could not pay the additional amount due of $815 ($650 tax + $165 penalty and interest). Federal tax 2012 form 1040 Janie and Joe were divorced on May 13, 2009. Federal tax 2012 form 1040 In February 2010, Janie filed her 2009 federal income tax return as head of household. Federal tax 2012 form 1040 She expected a refund of $1,203. Federal tax 2012 form 1040 In May 2010, she received a notice informing her that the IRS had offset her refund against the $815 owed on her joint 2007 income tax return and that she had a right to file Form 8857. Federal tax 2012 form 1040 Janie applies the conditions listed earlier under Innocent Spouse Relief to see if she qualifies for relief. Federal tax 2012 form 1040 Janie meets the first and second conditions because the joint tax return they filed has an understated tax due to Joe's erroneous item. Federal tax 2012 form 1040 Janie believes she meets the third condition. Federal tax 2012 form 1040 She did not know about the award and had no reason to know about it because of the secretive way Joe conducted his financial affairs. Federal tax 2012 form 1040 Janie believes she meets the fourth condition. Federal tax 2012 form 1040 She believes it would be unfair to be held liable for the tax because she did not benefit from the award. Federal tax 2012 form 1040 Joe spent it on personal items for his use only. Federal tax 2012 form 1040 Because Janie believes she qualifies for innocent spouse relief, she first completes Part I of Form 8857 to determine if she should file the form. Federal tax 2012 form 1040 In Part I, she makes all entries under the Tax Year 1 column because she is requesting relief for only one year. Federal tax 2012 form 1040 Part I Line 1. Federal tax 2012 form 1040   She enters “2007” on line 1 because this is the tax year for which she is requesting relief. Federal tax 2012 form 1040 Line 2. Federal tax 2012 form 1040   She checks the box because she wants a refund. Federal tax 2012 form 1040 Note. Federal tax 2012 form 1040 Because the IRS used her individual refund to pay the tax owed on the joint tax return, she does not need to provide proof of payment. Federal tax 2012 form 1040 Line 3. Federal tax 2012 form 1040   She checks the “No” box because the IRS did not use her share of a joint refund to pay Joe's past-due debts. Federal tax 2012 form 1040 Line 4. Federal tax 2012 form 1040   She checks the “Yes” box because she filed a joint tax return for tax year 2007. Federal tax 2012 form 1040 Line 5. Federal tax 2012 form 1040   She skips this line because she checked the “Yes” box on line 4. Federal tax 2012 form 1040 Part II Line 6. Federal tax 2012 form 1040   She enters her name, address, social security number, county, and best daytime phone number. Federal tax 2012 form 1040 Part III Line 7. Federal tax 2012 form 1040   She enters Joe's name, address, social security number, and best daytime phone number. Federal tax 2012 form 1040 Line 8. Federal tax 2012 form 1040   She checks the “divorced since” box and enters the date she was divorced as “05/13/2009. Federal tax 2012 form 1040 ” She attaches a copy of her entire divorce decree (not Illustrated) to the form. Federal tax 2012 form 1040 Line 9. Federal tax 2012 form 1040   She checks the box for “High school diploma, equivalent, or less,” because she had completed high school when her 2007 joint tax return was filed. Federal tax 2012 form 1040 Line 10. Federal tax 2012 form 1040   She checks the “No” box because she was not a victim of spousal abuse or domestic violence. Federal tax 2012 form 1040 Line 11. Federal tax 2012 form 1040   She checks the “No” box because neither she nor Joe incurred any large expenses during the year for which she wants relief. Federal tax 2012 form 1040 Line 12. Federal tax 2012 form 1040   She checks the “Yes” box because she signed the 2007 joint tax return. Federal tax 2012 form 1040 Line 13. Federal tax 2012 form 1040   She checks the “No” box because she did not have a mental or physical condition when the return was filed and does not have one now. Federal tax 2012 form 1040 Part IV Line 14. Federal tax 2012 form 1040   Because she was not involved in preparing the return, she checks the box, “You were not involved in preparing the returns. Federal tax 2012 form 1040 ” Line 15. Federal tax 2012 form 1040   She checks the box, “You did not know anything was incorrect or missing” because she did not know that Joe had received a $5,000 award. Federal tax 2012 form 1040 She explains this in the space provided. Federal tax 2012 form 1040 Line 16. Federal tax 2012 form 1040   She checks the box, “You knew that person had income” because she knew Joe had income from wages. Federal tax 2012 form 1040 She also lists Joe's income. Federal tax 2012 form 1040 Under “Type of Income” she enters “wages. Federal tax 2012 form 1040 ” Under “Who paid it to that person,” she enters the name of Joe's employer, “Allied. Federal tax 2012 form 1040 ” Under “Tax Year 1” she enters the amount of Joe's wages, “$40,000. Federal tax 2012 form 1040 ” Because she is only requesting relief for one tax year, she leaves the entry spaces for “Tax Year 2” and “Tax Year 3” blank. Federal tax 2012 form 1040 Line 17. Federal tax 2012 form 1040   She checks the “No” box because she did not know any amount was owed to the IRS when the 2007 return was signed. Federal tax 2012 form 1040 Line 18. Federal tax 2012 form 1040   She checks the “No” box because, when the return was signed, she was not having financial problems. Federal tax 2012 form 1040 Line 19. Federal tax 2012 form 1040   She checks the box, “You were not involved in handling money for the household” because Joe handled all the money for the household. Federal tax 2012 form 1040 She provides additional information in the space provided. Federal tax 2012 form 1040 Line 20. Federal tax 2012 form 1040   She checks the “No” box because Joe has never transferred money or property to her. Federal tax 2012 form 1040 Part V Line 21. Federal tax 2012 form 1040   She enters the number “1” on both the line for “Adults” and the line for “Children” because her current household consists of herself and her son. Federal tax 2012 form 1040 Line 22. Federal tax 2012 form 1040   She enters her average monthly income for her entire household. Federal tax 2012 form 1040 Line 23. Federal tax 2012 form 1040   She lists her assets, which are $500 for the fair market value of a car, $450 in her checking account, and $100 in her savings account. Federal tax 2012 form 1040 Signing and mailing Form 8857. Federal tax 2012 form 1040    Janie signs and dates the form. Federal tax 2012 form 1040 She attaches the copy of her divorce decree (not illustrated) required by line 8. Federal tax 2012 form 1040 Finally, she sends the form to the IRS address or fax number shown in the instructions for Form 8857. Federal tax 2012 form 1040 This image is too large to be displayed in the current screen. Federal tax 2012 form 1040 Please click the link to view the image. Federal tax 2012 form 1040 Boulder's filled-in Form 8857 page 1 This image is too large to be displayed in the current screen. Federal tax 2012 form 1040 Please click the link to view the image. Federal tax 2012 form 1040 Boulder's filled-in Form 8857 page 2 This image is too large to be displayed in the current screen. Federal tax 2012 form 1040 Please click the link to view the image. Federal tax 2012 form 1040 Boulder's filled-in Form 8857 page 3 This image is too large to be displayed in the current screen. Federal tax 2012 form 1040 Please click the link to view the image. Federal tax 2012 form 1040 Boulder's filled-in Form 8857 page 4 Flowcharts The following flowcharts provide a quick way for determining whether you may qualify for relief. Federal tax 2012 form 1040 But do not rely on these flowcharts alone. Federal tax 2012 form 1040 Also read the earlier discussions. Federal tax 2012 form 1040 Figure A. Federal tax 2012 form 1040 Do You Qualify for Innocent Spouse Relief? Please click here for the text description of the image. Federal tax 2012 form 1040 "Do You Qualify for Innocent Spouse Relief?" Figure B. Federal tax 2012 form 1040 Do You Qualify for Separation of Liability Relief? Please click here for the text description of the image. Federal tax 2012 form 1040 "Do You Qualify for Separation of Liability Relief?" Figure C. Federal tax 2012 form 1040 Do You Qualify for Equitable Relief? This image is too large to be displayed in the current screen. Federal tax 2012 form 1040 Please click the link to view the image. Federal tax 2012 form 1040 "Do You Qualify for Equitable Relief?" Prev  Up  Next   Home   More Online Publications