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File My 2009 Taxes Online Free

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File My 2009 Taxes Online Free

File my 2009 taxes online free 23. File my 2009 taxes online free   Interest Expense Table of Contents Introduction Useful Items - You may want to see: Home Mortgage InterestAmount Deductible Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement Investment InterestInvestment Property Allocation of Interest Expense Limit on Deduction Items You Cannot DeductPersonal Interest Allocation of Interest How To ReportMore than one borrower. File my 2009 taxes online free Mortgage proceeds used for business or investment. File my 2009 taxes online free Introduction This chapter discusses what interest expenses you can deduct. File my 2009 taxes online free Interest is the amount you pay for the use of borrowed money. File my 2009 taxes online free The following are types of interest you can deduct as itemized deductions on Schedule A (Form 1040). File my 2009 taxes online free Home mortgage interest, including certain points and mortgage insurance premiums. File my 2009 taxes online free Investment interest. File my 2009 taxes online free This chapter explains these deductions. File my 2009 taxes online free It also explains where to deduct other types of interest and lists some types of interest you cannot deduct. File my 2009 taxes online free Use Table 23-1 to find out where to get more information on various types of interest, including investment interest. File my 2009 taxes online free Useful Items - You may want to see: Publication 936 Home Mortgage Interest Deduction 550 Investment Income and Expenses Home Mortgage Interest Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). File my 2009 taxes online free The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. File my 2009 taxes online free You can deduct home mortgage interest if all the following conditions are met. File my 2009 taxes online free You file Form 1040 and itemize deductions on Schedule A (Form 1040). File my 2009 taxes online free The mortgage is a secured debt on a qualified home in which you have an ownership interest. File my 2009 taxes online free (Generally, your mortgage is a secured debt if you put your home up as collateral to protect the interest of the lender. File my 2009 taxes online free The term “qualified home” means your main home or second home. File my 2009 taxes online free For details, see Publication 936. File my 2009 taxes online free )  Both you and the lender must intend that the loan be repaid. File my 2009 taxes online free Amount Deductible In most cases, you can deduct all of your home mortgage interest. File my 2009 taxes online free How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. File my 2009 taxes online free Fully deductible interest. File my 2009 taxes online free   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. File my 2009 taxes online free (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. File my 2009 taxes online free )   The three categories are as follows: Mortgages you took out on or before October 13, 1987 (called grandfathered debt). File my 2009 taxes online free 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). File my 2009 taxes online free 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). File my 2009 taxes online free The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. File my 2009 taxes online free   See Part II of Publication 936 for more detailed definitions of grandfathered, home acquisition, and home equity debt. File my 2009 taxes online free    You can use Figure 23-A to check whether your home mortgage interest is fully deductible. File my 2009 taxes online free Figure 23-A. File my 2009 taxes online free Is My Home Mortgage Interest Fully Deductible? Please click here for the text description of the image. File my 2009 taxes online free Figure 23-A. File my 2009 taxes online free Is My Interest Fully Deductible? Limits on deduction. File my 2009 taxes online free   You cannot fully deduct interest on a mortgage that does not fit into any of the three categories listed earlier. File my 2009 taxes online free If this applies to you, see Part II of Publication 936 to figure the amount of interest you can deduct. File my 2009 taxes online free Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. File my 2009 taxes online free It also describes certain special situations that may affect your deduction. File my 2009 taxes online free Late payment charge on mortgage payment. File my 2009 taxes online free   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. File my 2009 taxes online free Mortgage prepayment penalty. File my 2009 taxes online free   If you pay off your home mortgage early, you may have to pay a penalty. File my 2009 taxes online free 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. File my 2009 taxes online free Sale of home. File my 2009 taxes online free   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of sale. File my 2009 taxes online free Example. File my 2009 taxes online free John and Peggy Harris sold their home on May 7. File my 2009 taxes online free Through April 30, they made home mortgage interest payments of $1,220. File my 2009 taxes online free 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. File my 2009 taxes online free Their mortgage interest deduction is $1,270 ($1,220 + $50). File my 2009 taxes online free Prepaid interest. File my 2009 taxes online free   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. File my 2009 taxes online free You can deduct in each year only the interest that qualifies as home mortgage interest for that year. File my 2009 taxes online free However, there is an exception that applies to points, discussed later. File my 2009 taxes online free Mortgage interest credit. File my 2009 taxes online free   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. File my 2009 taxes online free Figure the credit on Form 8396, Mortgage Interest Credit. File my 2009 taxes online free If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. File my 2009 taxes online free   For more information on the credit, see chapter 37. File my 2009 taxes online free Ministers' and military housing allowance. File my 2009 taxes online free   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. File my 2009 taxes online free Hardest Hit Fund and Emergency Homeowners' Loan Programs. File my 2009 taxes online free   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. File my 2009 taxes online free 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. File my 2009 taxes online free 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. File my 2009 taxes online free If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098-MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received from payer(s) / borrower(s)), box 4 (mortgage insurance premiums) and box 5 (real property taxes). File my 2009 taxes online free 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. File my 2009 taxes online free Mortgage assistance payments under section 235 of the National Housing Act. File my 2009 taxes online free   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. File my 2009 taxes online free You cannot deduct the interest that is paid for you. File my 2009 taxes online free No other effect on taxes. File my 2009 taxes online free   Do not include these mortgage assistance payments in your income. File my 2009 taxes online free Also, do not use these payments to reduce other deductions, such as real estate taxes. File my 2009 taxes online free Divorced or separated individuals. File my 2009 taxes online free   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. File my 2009 taxes online free See the discussion of Payments for jointly-owned home in chapter 18. File my 2009 taxes online free Redeemable ground rents. File my 2009 taxes online free   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. File my 2009 taxes online free   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. File my 2009 taxes online free For more information, see Publication 936. File my 2009 taxes online free Nonredeemable ground rents. File my 2009 taxes online free   Payments on a nonredeemable ground rent are not mortgage interest. File my 2009 taxes online free You can deduct them as rent if they are a business expense or if they are for rental property. File my 2009 taxes online free Reverse mortgages. File my 2009 taxes online free   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. File my 2009 taxes online free With a reverse mortgage, you retain title to your home. File my 2009 taxes online free 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. File my 2009 taxes online free Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. File my 2009 taxes online free Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until the loan is paid in full. File my 2009 taxes online free Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Publication 936. File my 2009 taxes online free Rental payments. File my 2009 taxes online free   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. File my 2009 taxes online free This is true even if the settlement papers call them interest. File my 2009 taxes online free You cannot deduct these payments as home mortgage interest. File my 2009 taxes online free Mortgage proceeds invested in tax-exempt securities. File my 2009 taxes online free   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. File my 2009 taxes online free “Grandfathered debt” and “home equity debt” are defined earlier under Amount Deductible. File my 2009 taxes online free Refunds of interest. File my 2009 taxes online free   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. File my 2009 taxes online free 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. File my 2009 taxes online free However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. File my 2009 taxes online free This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. File my 2009 taxes online free    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. File my 2009 taxes online free For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. File my 2009 taxes online free   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in chapter 12. File my 2009 taxes online free Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. File my 2009 taxes online free Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. File my 2009 taxes online free A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. File my 2009 taxes online free See Points paid by the seller , later. File my 2009 taxes online free General Rule You generally cannot deduct the full amount of points in the year paid. File my 2009 taxes online free Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. File my 2009 taxes online free See Deduction Allowed Ratably , next. File my 2009 taxes online free For exceptions to the general rule, see Deduction Allowed in Year Paid , later. File my 2009 taxes online free 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. File my 2009 taxes online free You use the cash method of accounting. File my 2009 taxes online free This means you report income in the year you receive it and deduct expenses in the year you pay them. File my 2009 taxes online free Most individuals use this method. File my 2009 taxes online free Your loan is secured by a home. File my 2009 taxes online free (The home does not need to be your main home. File my 2009 taxes online free ) Your loan period is not more than 30 years. File my 2009 taxes online free 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. File my 2009 taxes online free 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. File my 2009 taxes online free Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. File my 2009 taxes online free (You can use Figure 23-B as a quick guide to see whether your points are fully deductible in the year paid. File my 2009 taxes online free ) Your loan is secured by your main home. File my 2009 taxes online free (Your main home is the one you ordinarily live in most of the time. File my 2009 taxes online free ) Paying points is an established business practice in the area where the loan was made. File my 2009 taxes online free The points paid were not more than the points generally charged in that area. File my 2009 taxes online free You use the cash method of accounting. File my 2009 taxes online free This means you report income in the year you receive it and deduct expenses in the year you pay them. File my 2009 taxes online free (If you want more information about this method, see Accounting Methods in chapter 1. File my 2009 taxes online free ) 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. File my 2009 taxes online free The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. File my 2009 taxes online free The funds you provided are not required to have been applied to the points. File my 2009 taxes online free They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. File my 2009 taxes online free You cannot have borrowed these funds from your lender or mortgage broker. File my 2009 taxes online free You use your loan to buy or build your main home. File my 2009 taxes online free The points were computed as a percentage of the principal amount of the mortgage. File my 2009 taxes online free The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. File my 2009 taxes online free The points may be shown as paid from either your funds or the seller's. File my 2009 taxes online free Figure 23-B. File my 2009 taxes online free Are My Points Fully Deductible This Year? Please click here for the text description of the image. File my 2009 taxes online free Figure 23-B. File my 2009 taxes online free Are My Points Fully Deductible This Year? Note. File my 2009 taxes online free 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. File my 2009 taxes online free Home improvement loan. File my 2009 taxes online free   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. File my 2009 taxes online free Second home. File my 2009 taxes online free You cannot fully deduct in the year paid points you pay on loans secured by your second home. File my 2009 taxes online free You can deduct these points only over the life of the loan. File my 2009 taxes online free Refinancing. File my 2009 taxes online free   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. File my 2009 taxes online free This is true even if the new mortgage is secured by your main home. File my 2009 taxes online free   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. File my 2009 taxes online free You can deduct the rest of the points over the life of the loan. File my 2009 taxes online free Example 1. File my 2009 taxes online free In 1998, Bill Fields got a mortgage to buy a home. File my 2009 taxes online free In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. File my 2009 taxes online free The mortgage is secured by his home. File my 2009 taxes online free To get the new loan, he had to pay three points ($3,000). File my 2009 taxes online free 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. File my 2009 taxes online free Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. File my 2009 taxes online free The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. File my 2009 taxes online free Bill's first payment on the new loan was due July 1. File my 2009 taxes online free He made six payments on the loan in 2013 and is a cash basis taxpayer. File my 2009 taxes online free Bill used the funds from the new mortgage to repay his existing mortgage. File my 2009 taxes online free 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. File my 2009 taxes online free He cannot deduct all of the points in 2013. File my 2009 taxes online free He can deduct two points ($2,000) ratably over the life of the loan. File my 2009 taxes online free He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. File my 2009 taxes online free The other point ($1,000) was a fee for services and is not deductible. File my 2009 taxes online free Example 2. File my 2009 taxes online free 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. File my 2009 taxes online free Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. File my 2009 taxes online free His deduction is $500 ($2,000 × 25%). File my 2009 taxes online free Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. File my 2009 taxes online free This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. File my 2009 taxes online free The total amount Bill deducts in 2013 is $550 ($500 + $50). File my 2009 taxes online free Special Situations This section describes certain special situations that may affect your deduction of points. File my 2009 taxes online free Original issue discount. File my 2009 taxes online free   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. File my 2009 taxes online free This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. File my 2009 taxes online free Amounts charged for services. File my 2009 taxes online free   Amounts charged by the lender for specific services connected to the loan are not interest. File my 2009 taxes online free Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. File my 2009 taxes online free You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. File my 2009 taxes online free Points paid by the seller. File my 2009 taxes online free   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. File my 2009 taxes online free Treatment by seller. File my 2009 taxes online free   The seller cannot deduct these fees as interest. File my 2009 taxes online free But they are a selling expense that reduces the amount realized by the seller. File my 2009 taxes online free See chapter 15 for information on selling your home. File my 2009 taxes online free Treatment by buyer. File my 2009 taxes online free    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. File my 2009 taxes online free If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. File my 2009 taxes online free If any of those tests are not met, the buyer deducts the points over the life of the loan. File my 2009 taxes online free   For information about basis, see chapter 13. File my 2009 taxes online free Funds provided are less than points. File my 2009 taxes online free   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. File my 2009 taxes online free In addition, you can deduct any points paid by the seller. File my 2009 taxes online free Example 1. File my 2009 taxes online free When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). File my 2009 taxes online free You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. File my 2009 taxes online free Of the $1,000 charged for points, you can deduct $750 in the year paid. File my 2009 taxes online free You spread the remaining $250 over the life of the mortgage. File my 2009 taxes online free Example 2. File my 2009 taxes online free 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. File my 2009 taxes online free In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). File my 2009 taxes online free You spread the remaining $250 over the life of the mortgage. File my 2009 taxes online free You must reduce the basis of your home by the $1,000 paid by the seller. File my 2009 taxes online free Excess points. File my 2009 taxes online free   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. File my 2009 taxes online free You must spread any additional points over the life of the mortgage. File my 2009 taxes online free Mortgage ending early. File my 2009 taxes online free   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. File my 2009 taxes online free However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. File my 2009 taxes online free Instead, deduct the remaining balance over the term of the new loan. File my 2009 taxes online free    A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. File my 2009 taxes online free Example. File my 2009 taxes online free Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. File my 2009 taxes online free He deducts $200 points per year. File my 2009 taxes online free Through 2012, Dan has deducted $2,200 of the points. File my 2009 taxes online free Dan prepaid his mortgage in full in 2013. File my 2009 taxes online free He can deduct the remaining $800 of points in 2013. File my 2009 taxes online free Limits on deduction. File my 2009 taxes online free   You cannot fully deduct points paid on a mortgage unless the mortgage fits into one of the categories listed earlier under Fully deductible interest . File my 2009 taxes online free See Publication 936 for details. File my 2009 taxes online free Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. File my 2009 taxes online free The insurance must be in connection with home acquisition debt and the insurance contract must have been issued after 2006. File my 2009 taxes online free Qualified mortgage insurance. File my 2009 taxes online free   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). File my 2009 taxes online free   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. File my 2009 taxes online free If provided by the Rural Housing Service, it is commonly known as a guarantee fee. File my 2009 taxes online free These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. File my 2009 taxes online free Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. File my 2009 taxes online free Special rules for prepaid mortgage insurance. File my 2009 taxes online free   Generally, if you paid premiums for qualified mortgage insurance that are allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. File my 2009 taxes online free 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. File my 2009 taxes online free No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. File my 2009 taxes online free This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. File my 2009 taxes online free See the Example below. File my 2009 taxes online free Example. File my 2009 taxes online free Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. File my 2009 taxes online free Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. File my 2009 taxes online free 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. File my 2009 taxes online free Ryan's adjusted gross income (AGI) for 2012 is $76,000. File my 2009 taxes online free Ryan can deduct $880 ($9,240 ÷ 84 × 8 months) for qualified mortgage insurance premiums in 2012. File my 2009 taxes online free For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 × 12 months) if his AGI is $100,000 or less. File my 2009 taxes online free 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). File my 2009 taxes online free Limit on deduction. File my 2009 taxes online free   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. File my 2009 taxes online free 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. File my 2009 taxes online free If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. File my 2009 taxes online free 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. File my 2009 taxes online free You will receive the statement if you pay interest to a person (including a financial institution or a cooperative housing corporation) in the course of that person's trade or business. File my 2009 taxes online free A governmental unit is a person for purposes of furnishing the statement. File my 2009 taxes online free The statement for each year should be sent to you by January 31 of the following year. File my 2009 taxes online free A copy of this form will also be sent to the IRS. File my 2009 taxes online free 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. File my 2009 taxes online free However, it should not show any interest that was paid for you by a government agency. File my 2009 taxes online free As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. File my 2009 taxes online free However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. File my 2009 taxes online free See Points , earlier, to determine whether you can deduct points not shown on Form 1098. File my 2009 taxes online free Prepaid interest on Form 1098. File my 2009 taxes online free   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. File my 2009 taxes online free However, you cannot deduct the prepaid amount for January 2014 in 2013. File my 2009 taxes online free (See Prepaid interest , earlier. File my 2009 taxes online free ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. File my 2009 taxes online free You will include the interest for January 2014 with the other interest you pay for 2014. File my 2009 taxes online free See How To Report , later. File my 2009 taxes online free Refunded interest. File my 2009 taxes online free   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. File my 2009 taxes online free See Refunds of interest , earlier. File my 2009 taxes online free Mortgage insurance premiums. File my 2009 taxes online free   The amount of mortgage insurance premiums you paid during 2013 may be shown in box 4 of Form 1098. File my 2009 taxes online free See Mortgage Insurance Premiums, earlier. File my 2009 taxes online free Investment Interest This section discusses interest expenses you may be able to deduct as an investor. File my 2009 taxes online free If you borrow money to buy property you hold for investment, the interest you pay is investment interest. File my 2009 taxes online free You can deduct investment interest subject to the limit discussed later. File my 2009 taxes online free However, you cannot deduct interest you incurred to produce tax-exempt income. File my 2009 taxes online free Nor can you deduct interest expenses on straddles. File my 2009 taxes online free Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. File my 2009 taxes online free Investment Property Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. File my 2009 taxes online free It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). File my 2009 taxes online free Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). File my 2009 taxes online free Partners, shareholders, and beneficiaries. File my 2009 taxes online free   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. File my 2009 taxes online free Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. File my 2009 taxes online free Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. File my 2009 taxes online free The allocation is not affected by the use of property that secures the debt. File my 2009 taxes online free Limit on Deduction Generally, your deduction for investment interest expense is limited to the amount of your net investment income. File my 2009 taxes online free You can carry over the amount of investment interest that you could not deduct because of this limit to the next tax year. File my 2009 taxes online free The interest carried over is treated as investment interest paid or accrued in that next year. File my 2009 taxes online free You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. File my 2009 taxes online free Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. File my 2009 taxes online free Investment income. File my 2009 taxes online free    This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). File my 2009 taxes online free Investment income does not include Alaska Permanent Fund dividends. File my 2009 taxes online free It also does not include qualified dividends or net capital gain unless you choose to include them. File my 2009 taxes online free Choosing to include qualified dividends. File my 2009 taxes online free   Investment income generally does not include qualified dividends, discussed in chapter 8. File my 2009 taxes online free However, you can choose to include all or part of your qualified dividends in investment income. File my 2009 taxes online free   You make this choice by completing Form 4952, line 4g, according to its instructions. File my 2009 taxes online free   If you choose to include any amount of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. File my 2009 taxes online free Choosing to include net capital gain. File my 2009 taxes online free   Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). File my 2009 taxes online free However, you can choose to include all or part of your net capital gain in investment income. File my 2009 taxes online free    You make this choice by completing Form 4952, line 4g, according to its instructions. File my 2009 taxes online free   If you choose to include any amount of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. File my 2009 taxes online free    Before making either choice, consider the overall effect on your tax liability. File my 2009 taxes online free Compare your tax if you make one or both of these choices with your tax if you do not. File my 2009 taxes online free Investment income of child reported on parent's return. File my 2009 taxes online free    Investment income includes the part of your child's interest and dividend income that you choose to report on your return. File my 2009 taxes online free If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814, Parents' Election To Report Child's Interest and Dividends. File my 2009 taxes online free Child's qualified dividends. File my 2009 taxes online free   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. File my 2009 taxes online free However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. File my 2009 taxes online free   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). File my 2009 taxes online free Child's Alaska Permanent Fund dividends. File my 2009 taxes online free   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. File my 2009 taxes online free To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. File my 2009 taxes online free Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. File my 2009 taxes online free Subtract the result from the amount on Form 8814, line 12. File my 2009 taxes online free Child's capital gain distributions. File my 2009 taxes online free    If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D, line 13, or Form 1040, line 13) generally does not count as investment income. File my 2009 taxes online free However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. File my 2009 taxes online free   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). File my 2009 taxes online free Investment expenses. File my 2009 taxes online free   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. File my 2009 taxes online free Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. File my 2009 taxes online free Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A, line 27. File my 2009 taxes online free Losses from passive activities. File my 2009 taxes online free   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). File my 2009 taxes online free See Publication 925, Passive Activity and At-Risk Rules, for information about passive activities. File my 2009 taxes online free Form 4952 Use Form 4952, Investment Interest Expense Deduction, to figure your deduction for investment interest. File my 2009 taxes online free Exception to use of Form 4952. File my 2009 taxes online free   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. File my 2009 taxes online free Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. File my 2009 taxes online free You do not have any other deductible investment expenses. File my 2009 taxes online free You have no carryover of investment interest expense from 2012. File my 2009 taxes online free If you meet all of these tests, you can deduct all of your investment interest. File my 2009 taxes online free More Information For more information on investment interest, see Interest Expenses in chapter 3 of Publication 550. File my 2009 taxes online free Items You Cannot Deduct Some interest payments are not deductible. File my 2009 taxes online free Certain expenses similar to interest also are not deductible. File my 2009 taxes online free Nondeductible expenses include the following items. File my 2009 taxes online free Personal interest (discussed later). File my 2009 taxes online free Service charges (however, see Other Expenses (Line 23) in chapter 28). File my 2009 taxes online free Annual fees for credit cards. File my 2009 taxes online free Loan fees. File my 2009 taxes online free Credit investigation fees. File my 2009 taxes online free Interest to purchase or carry tax-exempt securities. File my 2009 taxes online free Penalties. File my 2009 taxes online free   You cannot deduct fines and penalties paid to a government for violations of law, regardless of their nature. File my 2009 taxes online free Personal Interest Personal interest is not deductible. File my 2009 taxes online free Personal interest is any interest that is not home mortgage interest, investment interest, business interest, or other deductible interest. File my 2009 taxes online free It includes the following items. File my 2009 taxes online free Interest on car loans (unless you use the car for business). File my 2009 taxes online free Interest on federal, state, or local income tax. File my 2009 taxes online free Finance charges on credit cards, retail installment contracts, and revolving charge accounts incurred for personal expenses. File my 2009 taxes online free Late payment charges by a public utility. File my 2009 taxes online free You may be able to deduct interest you pay on a qualified student loan. File my 2009 taxes online free For details, see Publication 970, Tax Benefits for Education. File my 2009 taxes online free Allocation of Interest If you use the proceeds of a loan for more than one purpose (for example, personal and business), you must allocate the interest on the loan to each use. File my 2009 taxes online free However, you do not have to allocate home mortgage interest if it is fully deductible, regardless of how the funds are used. File my 2009 taxes online free You allocate interest (other than fully deductible home mortgage interest) on a loan in the same way as the loan itself is allocated. File my 2009 taxes online free You do this by tracing disbursements of the debt proceeds to specific uses. File my 2009 taxes online free For details on how to do this, see chapter 4 of Publication 535. File my 2009 taxes online free How To Report You must file Form 1040 to deduct any home mortgage interest expense on your tax return. File my 2009 taxes online free Where you deduct your interest expense generally depends on how you use the loan proceeds. File my 2009 taxes online free See Table 23-1 for a summary of where to deduct your interest expense. File my 2009 taxes online free Home mortgage interest and points. File my 2009 taxes online free   Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. File my 2009 taxes online free 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. File my 2009 taxes online free Attach a statement explaining the difference and print “See attached” next to line 10. File my 2009 taxes online free    Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. File my 2009 taxes online free 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. File my 2009 taxes online free The seller must give you this number and you must give the seller your TIN. File my 2009 taxes online free A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. File my 2009 taxes online free Failure to meet any of these requirements may result in a $50 penalty for each failure. File my 2009 taxes online free 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. File my 2009 taxes online free See Social Security Number (SSN) in chapter 1 for more information about TINs. File my 2009 taxes online free    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. File my 2009 taxes online free   Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. File my 2009 taxes online free More than one borrower. File my 2009 taxes online free   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. File my 2009 taxes online free Show how much of the interest each of you paid, and give the name and address of the person who received the form. File my 2009 taxes online free Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. File my 2009 taxes online free Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. File my 2009 taxes online free   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. File my 2009 taxes online free You should let each of the other borrowers know what his or her share is. File my 2009 taxes online free Mortgage proceeds used for business or investment. File my 2009 taxes online free    If your home mortgage interest deduction is limited, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 23-1. File my 2009 taxes online free It shows where to deduct the part of your excess interest that is for those activities. File my 2009 taxes online free Investment interest. File my 2009 taxes online free    Deduct investment interest, subject to certain limits discussed in Publication 550, on Schedule A (Form 1040), line 14. File my 2009 taxes online free Amortization of bond premium. File my 2009 taxes online free   There are various ways to treat the premium you pay to buy taxable bonds. File my 2009 taxes online free See Bond Premium Amortization in Publication 550. File my 2009 taxes online free Income-producing rental or royalty interest. File my 2009 taxes online free   Deduct interest on a loan for income-producing rental or royalty property that is not used in your business in Part I of Schedule E (Form 1040). File my 2009 taxes online free Example. File my 2009 taxes online free You rent out part of your home and borrow money to make repairs. File my 2009 taxes online free You can deduct only the interest payment for the rented part in Part I of Schedule E (Form 1040). File my 2009 taxes online free Deduct the rest of the interest payment on Schedule A (Form 1040) if it is deductible home mortgage interest. File my 2009 taxes online free Table 23-1. File my 2009 taxes online free Where To Deduct Your Interest Expense IF you have . File my 2009 taxes online free . File my 2009 taxes online free . File my 2009 taxes online free THEN deduct it on . File my 2009 taxes online free . File my 2009 taxes online free . File my 2009 taxes online free AND for more information go to . File my 2009 taxes online free . File my 2009 taxes online free . File my 2009 taxes online free deductible student loan interest Form 1040, line 33, or Form 1040A, line 18 Publication 970. File my 2009 taxes online free deductible home mortgage interest and points reported on Form 1098 Schedule A (Form 1040), line 10 Publication 936. File my 2009 taxes online free deductible home mortgage interest not reported on Form 1098 Schedule A (Form 1040), line 11 Publication 936. File my 2009 taxes online free deductible points not reported on Form 1098 Schedule A (Form 1040), line 12 Publication 936. File my 2009 taxes online free deductible mortgage insurance premiums Schedule A (Form 1040), line 13 Publication 936. File my 2009 taxes online free deductible investment interest (other than incurred to produce rents or royalties) Schedule A (Form 1040), line 14 Publication 550. File my 2009 taxes online free deductible business interest (non-farm) Schedule C or C-EZ (Form 1040) Publication 535. File my 2009 taxes online free deductible farm business interest Schedule F (Form 1040) Publications 225 and 535. File my 2009 taxes online free deductible interest incurred to produce rents or royalties Schedule E (Form 1040) Publications 527 and 535. File my 2009 taxes online free personal interest not deductible. 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BusinessUSA Resource Access API
BusinessUSA connects businesses to government services and information. The API provides access to resource abstracts including programs, services, data, events, and more.
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Citizen Topics API
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Federal Agency Directory API
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Go.USA.gov API
Go.USA.gov is a URL shortener for government employees. The API can shorten, preview, and show clicks on short URLs.
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Government Jobs API
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Social Media Registry API
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We search across all federal, state, local, tribal, and territorial government websites. Most government websites end in .gov or .mil, but many do not. This is a list of all government URLs that do not end in .gov or .mil.
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The File My 2009 Taxes Online Free

File my 2009 taxes online free 2. File my 2009 taxes online free   Accounting Methods Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Accounting MethodsCash Method Accrual Method Farm Inventory Cash Versus Accrual Method Special Methods of Accounting Combination Method Changes in Methods of Accounting Introduction You must use an accounting method that clearly shows your income and expenses. File my 2009 taxes online free You must also figure your taxable income and file an income tax return for an annual accounting period called a tax year. File my 2009 taxes online free This chapter discusses accounting methods. File my 2009 taxes online free For information on accounting periods, see Publication 538, Accounting Periods and Methods, and the Instructions for Form 1128, Application To Adopt, Change, or Retain a Tax Year. File my 2009 taxes online free Topics - This chapter discusses: Cash method Accrual method Farm inventory Special methods of accounting Changes in methods of accounting Useful Items - You may want to see: Publication 538 Accounting Periods and Methods 535 Business Expenses Form (and Instructions) 1128 Application To Adopt, Change, or Retain a Tax Year 3115 Application for Change in Accounting Method See chapter 16 for information about getting publications and forms. File my 2009 taxes online free Accounting Methods An accounting method is a set of rules used to determine when and how your income and expenses are reported on your tax return. File my 2009 taxes online free Your accounting method includes not only your overall method of accounting, but also the accounting treatment you use for any material item. File my 2009 taxes online free A material item is one that affects the proper time for inclusion of income or allowance of a deduction. File my 2009 taxes online free An item considered material for financial statement purposes is generally also considered material for income tax purposes. File my 2009 taxes online free See Publication 538 for more information. File my 2009 taxes online free You generally choose an accounting method for your farm business when you file your first income tax return that includes a Schedule F (Form 1040), Profit or Loss From Farming. File my 2009 taxes online free If you later want to change your accounting method, you generally must get IRS approval. File my 2009 taxes online free How to obtain IRS approval is discussed later under Changes in Methods of Accounting . File my 2009 taxes online free Types of accounting methods. File my 2009 taxes online free   Generally, you can use any of the following accounting methods. File my 2009 taxes online free Each method is discussed in detail below. File my 2009 taxes online free Cash method. File my 2009 taxes online free Accrual method. File my 2009 taxes online free Special methods of accounting for certain items of income and expenses. File my 2009 taxes online free Combination (hybrid) method using elements of two or more of the above. File my 2009 taxes online free Business and other items. File my 2009 taxes online free   You can account for business and personal items using different accounting methods. File my 2009 taxes online free For example, you can figure your business income under an accrual method, even if you use the cash method to figure personal items. File my 2009 taxes online free Two or more businesses. File my 2009 taxes online free   If you operate two or more separate and distinct businesses, you can use a different accounting method for each business. File my 2009 taxes online free Generally, no business is separate and distinct unless a complete and separate set of books and records is maintained for each business. File my 2009 taxes online free Cash Method Most farmers use the cash method because they find it easier to keep records using the cash method. File my 2009 taxes online free However, certain farm corporations and partnerships and all tax shelters must use an accrual method of accounting. File my 2009 taxes online free See Accrual Method Required , later. File my 2009 taxes online free Income Under the cash method, include in your gross income all items of income you actually or constructively received during the tax year. File my 2009 taxes online free Items of income include money received as well as property or services received. File my 2009 taxes online free If you receive property or services, you must include the fair market value (FMV) of the property or services in income. File my 2009 taxes online free See chapter 3 for information on how to report farm income on your income tax return. File my 2009 taxes online free Constructive receipt. File my 2009 taxes online free   Income is constructively received when an amount is credited to your account or made available to you without restriction. File my 2009 taxes online free You do not need to have possession of the income for it to be treated as income for the tax year. File my 2009 taxes online free If you authorize someone to be your agent and receive income for you, you are considered to have received the income when your agent receives it. File my 2009 taxes online free Income is not constructively received if your receipt of the income is subject to substantial restrictions or limitations. File my 2009 taxes online free Direct payments and counter-cyclical payments. File my 2009 taxes online free   If you received direct payments or counter-cyclical payments under Subtitle A or C of the Farm Security and Rural Investment Act of 2002, you will not be considered to have constructively received a payment merely because you had the option to receive it in the year before it is required to be paid. File my 2009 taxes online free Delaying receipt of income. File my 2009 taxes online free   You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income. File my 2009 taxes online free You must report the income in the year the money or property is received or made available to you without restriction. File my 2009 taxes online free Example. File my 2009 taxes online free Frances Jones, a farmer, was entitled to receive a $10,000 payment on a grain contract in December 2013. File my 2009 taxes online free She was told in December that her payment was available. File my 2009 taxes online free She requested not to be paid until January 2014. File my 2009 taxes online free However, she must still include this payment in her 2013 income because it was made available to her in 2013. File my 2009 taxes online free Debts paid by another person or canceled. File my 2009 taxes online free   If your debts are paid by another person or are canceled by your creditors, you may have to report part or all of this debt relief as income. File my 2009 taxes online free If you receive income in this way, you constructively receive the income when the debt is canceled or paid. File my 2009 taxes online free See Cancellation of Debt in chapter 3. File my 2009 taxes online free Deferred payment contract. File my 2009 taxes online free   If you sell an item under a deferred payment contract that calls for payment in a future year, there is no constructive receipt in the year of sale. File my 2009 taxes online free However, if the sales contract states that you have the right to the proceeds of the sale from the buyer at any time after delivery of the item, then you must include the sales price in income in the year of the sale, regardless of when you actually receive payment. File my 2009 taxes online free Example. File my 2009 taxes online free You are a farmer who uses the cash method and a calendar tax year. File my 2009 taxes online free You sell grain in December 2013 under a bona fide arm's-length contract that calls for payment in 2014. File my 2009 taxes online free You include the proceeds from the sale in your 2014 gross income since that is the year payment is received. File my 2009 taxes online free However, if the contract states that you have the right to the proceeds from the buyer at any time after the grain is delivered, you must include the sales price in your 2013 income, regardless of when you actually receive payment. File my 2009 taxes online free Repayment of income. File my 2009 taxes online free   If you include an amount in income and in a later year you have to repay all or part of it, then you can usually deduct the repayment in the year repaid. File my 2009 taxes online free If the repayment is more than $3,000, a special rule applies. File my 2009 taxes online free For details, see Repayments in chapter 11 of Publication 535, Business Expenses. File my 2009 taxes online free Expenses Under the cash method, generally you deduct expenses in the tax year you pay them. File my 2009 taxes online free This includes business expenses for which you contest liability. File my 2009 taxes online free However, you may not be able to deduct an expense paid in advance or you may be required to capitalize certain costs, as explained under Uniform Capitalization Rules in chapter 6. File my 2009 taxes online free See chapter 4 for information on how to deduct farm business expenses on your income tax return. File my 2009 taxes online free Prepayment. File my 2009 taxes online free   Generally, you cannot deduct expenses paid in advance. File my 2009 taxes online free This rule applies to any expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. File my 2009 taxes online free Example. File my 2009 taxes online free On November 1, 2013, you signed and paid $3,600 for a 3-year (36-month) insurance contract for equipment. File my 2009 taxes online free In 2013, you are allowed to deduct only $200 (2/36 x $3,600) of the cost of the policy that is attributable to 2013. File my 2009 taxes online free In 2014, you'll be able to deduct $1,200 (12/36 x $3,600); in 2015, you'll be able to deduct $1,200 (12/36 x $3,600); and in 2016 you'll be able to deduct the remaining balance of $1,000. File my 2009 taxes online free An exception applies if the expense qualifies for the 12-month rule. File my 2009 taxes online free See Publication 538 for more information and examples. File my 2009 taxes online free See chapter 4 for special rules for prepaid farm supplies and prepaid livestock feed. File my 2009 taxes online free Accrual Method Under an accrual method of accounting, you generally report income in the year earned and deduct or capitalize expenses in the year incurred. File my 2009 taxes online free The purpose of an accrual method of accounting is to correctly match income and expenses. File my 2009 taxes online free Certain businesses engaged in farming must use an accrual method of accounting for its farm business and for sales and purchases of inventory items. File my 2009 taxes online free See Accrual Method Required and Farm Inventory , later. File my 2009 taxes online free Income Generally, you include an amount in income for the tax year in which all events that fix your right to receive the income have occurred, and you can determine the amount with reasonable accuracy. File my 2009 taxes online free Under this rule, include an amount in income on the earliest of the following dates. File my 2009 taxes online free When you receive payment. File my 2009 taxes online free When the income amount is due to you. File my 2009 taxes online free When you earn the income. File my 2009 taxes online free When title passes. File my 2009 taxes online free If you use an accrual method of accounting, complete Part III of Schedule F (Form 1040) to report your income. File my 2009 taxes online free Inventory. File my 2009 taxes online free   If you keep an inventory, generally you must use an accrual method of accounting to determine your gross income. File my 2009 taxes online free An inventory is necessary to clearly show income when the production, purchase, or sale of merchandise is an income-producing factor. File my 2009 taxes online free See Publication 538 for more information. File my 2009 taxes online free Also see Farm Inventory , later, for more information on items that must be included in inventory by farmers and inventory valuation methods for farmers. File my 2009 taxes online free Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both of the following apply. File my 2009 taxes online free The all-events test has been met. File my 2009 taxes online free This test is met when: All events have occurred that fix the fact that you have a liability, and The amount of the liability can be determined with reasonable accuracy. File my 2009 taxes online free Economic performance has occurred. File my 2009 taxes online free Economic performance. File my 2009 taxes online free   Generally, you cannot deduct or capitalize a business expense until economic performance occurs. File my 2009 taxes online free If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided or as the property is used. File my 2009 taxes online free If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. File my 2009 taxes online free Example. File my 2009 taxes online free Jane, who is a farmer, uses a calendar tax year and an accrual method of accounting. File my 2009 taxes online free She entered into a contract with ABC Farm Consulting in 2012. File my 2009 taxes online free The contract stated that Jane pay ABC Farm Consulting $2,000 in December 2012. File my 2009 taxes online free It further stipulates that ABC Farm Consulting will develop a plan for integrating her farm with a larger farm operation based in a neighboring state by March 1, 2013. File my 2009 taxes online free Jane paid ABC Farm Consulting $2,000 in December 2012. File my 2009 taxes online free Integration of operations according to the plan began in May 2013 and they completed the integration in December 2013. File my 2009 taxes online free Economic performance for Jane's liability in the contract occurs as the services are provided. File my 2009 taxes online free Jane incurs the $2,000 cost in 2013. File my 2009 taxes online free An exception to the economic performance rule allows certain recurring items to be treated as incurred during a tax year even though economic performance has not occurred. File my 2009 taxes online free For more information, see Economic Performance in Publication 538. File my 2009 taxes online free Special rule for related persons. File my 2009 taxes online free   Business expenses and interest owed to a related person who uses the cash method of accounting are not deductible until you make the payment and the corresponding amount is includible in the related person's gross income. File my 2009 taxes online free Determine the relationship for this rule as of the end of the tax year for which the expense or interest would otherwise be deductible. File my 2009 taxes online free For more information, see Internal Revenue Code section 267. File my 2009 taxes online free Accrual Method Required Generally, the following businesses, if engaged in farming, must use an accrual method of accounting. File my 2009 taxes online free A corporation (other than a family corporation) that had gross receipts of more than $1,000,000 for any tax year beginning after 1975. File my 2009 taxes online free A family corporation that had gross receipts of more than $25,000,000 for any tax year beginning after 1985. File my 2009 taxes online free A partnership with a corporation as a partner, if that corporation meets the requirements of (1) or (2) above. File my 2009 taxes online free A tax shelter. File my 2009 taxes online free Note. File my 2009 taxes online free Items (1), (2), and (3) above do not apply to an S corporation or a business operating a nursery or sod farm, or the raising or harvesting of trees (other than fruit and nut trees). File my 2009 taxes online free Family corporation. File my 2009 taxes online free   A family corporation is generally a corporation that meets one of the following ownership requirements. File my 2009 taxes online free Members of the same family own at least 50% of the total combined voting power of all classes of stock entitled to vote and at least 50% of the total shares of all other classes of stock of the corporation. File my 2009 taxes online free Members of two families have owned, directly or indirectly, since October 4, 1976, at least 65% of the total combined voting power of all classes of voting stock and at least 65% of the total shares of all other classes of the corporation's stock. File my 2009 taxes online free Members of three families have owned, directly or indirectly, since October 4, 1976, at least 50% of the total combined voting power of all classes of voting stock and at least 50% of the total shares of all other classes of the corporation's stock. File my 2009 taxes online free For more information on family corporations, see Internal Revenue Code section 447. File my 2009 taxes online free Tax shelter. File my 2009 taxes online free   A tax shelter is a partnership, noncorporate enterprise, or S corporation that meets either of the following tests. File my 2009 taxes online free Its principal purpose is the avoidance or evasion of federal income tax. File my 2009 taxes online free It is a farming syndicate. File my 2009 taxes online free A farming syndicate is an entity that meets either of the following tests. File my 2009 taxes online free Interests in the activity have been offered for sale in an offering required to be registered with a federal or state agency with the authority to regulate the offering of securities for sale. File my 2009 taxes online free More than 35% of the losses during the tax year are allocable to limited partners or limited entrepreneurs. File my 2009 taxes online free   A “limited partner” is one whose personal liability for partnership debts is limited to the money or other property the partner contributed or is required to contribute to the partnership. File my 2009 taxes online free   A “limited entrepreneur” is one who has an interest in an enterprise other than as a limited partner and does not actively participate in the management of the enterprise. File my 2009 taxes online free Farm Inventory If you are required to keep an inventory, you should keep a complete record of your inventory as part of your farm records. File my 2009 taxes online free This record should show the actual count or measurement of the inventory. File my 2009 taxes online free It should also show all factors that enter into its valuation, including quality and weight, if applicable. File my 2009 taxes online free Hatchery business. File my 2009 taxes online free   If you are in the hatchery business, and use an accrual method of accounting, you must include in inventory eggs in the process of incubation. File my 2009 taxes online free Products held for sale. File my 2009 taxes online free   All harvested and purchased farm products held for sale or for feed or seed, such as grain, hay, silage, concentrates, cotton, tobacco, etc. File my 2009 taxes online free , must be included in inventory. File my 2009 taxes online free Supplies. File my 2009 taxes online free   Supplies acquired for sale or that become a physical part of items held for sale must be included in inventory. File my 2009 taxes online free Deduct the cost of supplies in the year used or consumed in operations. File my 2009 taxes online free Do not include incidental supplies in inventory as these are deductible in the year of purchase. File my 2009 taxes online free Livestock. File my 2009 taxes online free   Livestock held primarily for sale must be included in inventory. File my 2009 taxes online free Livestock held for draft, breeding, or dairy purposes can either be depreciated or included in inventory. File my 2009 taxes online free See also Unit-livestock-price method , later. File my 2009 taxes online free If you are in the business of breeding and raising chinchillas, mink, foxes, or other fur-bearing animals, these animals are livestock for inventory purposes. File my 2009 taxes online free Growing crops. File my 2009 taxes online free   Generally, growing crops are not required to be included in inventory. File my 2009 taxes online free However, if the crop has a preproductive period of more than 2 years, you may have to capitalize (or include in inventory) costs associated with the crop. File my 2009 taxes online free See Uniform capitalization rules below. File my 2009 taxes online free Also see Uniform Capitalization Rules in  chapter 6. File my 2009 taxes online free Items to include in inventory. File my 2009 taxes online free   Your inventory should include all items held for sale, or for use as feed, seed, etc. File my 2009 taxes online free , whether raised or purchased, that are unsold at the end of the year. File my 2009 taxes online free Uniform capitalization rules. File my 2009 taxes online free   The following applies if you are required to use an accrual method of accounting. File my 2009 taxes online free The uniform capitalization rules apply to all costs of raising a plant, even if the preproductive period of raising a plant is 2 years or less. File my 2009 taxes online free The costs of animals are subject to the uniform capitalization rules. File my 2009 taxes online free Inventory valuation methods. File my 2009 taxes online free   The following methods, described below, are those generally available for valuing inventory. File my 2009 taxes online free The method you use must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. File my 2009 taxes online free Cost. File my 2009 taxes online free Lower of cost or market. File my 2009 taxes online free Farm-price method. File my 2009 taxes online free Unit-livestock-price method. File my 2009 taxes online free Cost and lower of cost or market methods. File my 2009 taxes online free   See Publication 538 for information on these valuation methods. File my 2009 taxes online free If you value your livestock inventory at cost or the lower of cost or market, you do not need IRS approval to change to the unit-livestock-price method. File my 2009 taxes online free However, if you value your livestock inventory using the farm-price method, then you must obtain permission from the IRS to change to the unit-livestock-price method. File my 2009 taxes online free Farm-price method. File my 2009 taxes online free   Under this method, each item, whether raised or purchased, is valued at its market price less the direct cost of disposition. File my 2009 taxes online free Market price is the current price at the nearest market in the quantities you usually sell. File my 2009 taxes online free Cost of disposition includes broker's commissions, freight, hauling to market, and other marketing costs. File my 2009 taxes online free If you use this method, you must use it for your entire inventory, except that livestock can be inventoried under the unit-livestock-price method. File my 2009 taxes online free Unit-livestock-price method. File my 2009 taxes online free   This method recognizes the difficulty of establishing the exact costs of producing and raising each animal. File my 2009 taxes online free You group or classify livestock according to type and age and use a standard unit price for each animal within a class or group. File my 2009 taxes online free The unit price you assign should reasonably approximate the normal costs incurred in producing the animals in such classes. File my 2009 taxes online free Unit prices and classifications are subject to approval by the IRS on examination of your return. File my 2009 taxes online free You must annually reevaluate your unit livestock prices and adjust the prices upward or downward to reflect increases or decreases in the costs of raising livestock. File my 2009 taxes online free IRS approval is not required for these adjustments. File my 2009 taxes online free Any other changes in unit prices or classifications do require IRS approval. File my 2009 taxes online free   If you use this method, include all raised livestock in inventory, regardless of whether they are held for sale or for draft, breeding, sport, or dairy purposes. File my 2009 taxes online free This method accounts only for the increase in cost of raising an animal to maturity. File my 2009 taxes online free It does not provide for any decrease in the animal's market value after it reaches maturity. File my 2009 taxes online free Also, if you raise cattle, you are not required to inventory hay you grow to feed your herd. File my 2009 taxes online free   Do not include sold or lost animals in the year-end inventory. File my 2009 taxes online free If your records do not show which animals were sold or lost, treat the first animals acquired as sold or lost. File my 2009 taxes online free The animals on hand at the end of the year are considered those most recently acquired. File my 2009 taxes online free   You must include in inventory all livestock purchased primarily for sale. File my 2009 taxes online free You can choose either to include in inventory or depreciate livestock purchased for draft, breeding, sport or dairy purposes. File my 2009 taxes online free However, you must be consistent from year to year, regardless of the method you have chosen. File my 2009 taxes online free You cannot change your method without obtaining approval from the IRS. File my 2009 taxes online free   You must include in inventory animals purchased after maturity or capitalize them at their purchase price. File my 2009 taxes online free If the animals are not mature at purchase, increase the cost at the end of each tax year according to the established unit price. File my 2009 taxes online free However, in the year of purchase, do not increase the cost of any animal purchased during the last 6 months of the year. File my 2009 taxes online free This “no increase” rule does not apply to tax shelters which must make an adjustment for any animal purchased during the year. File my 2009 taxes online free It also does not apply to taxpayers that must make an adjustment to reasonably reflect the particular period in the year in which animals are purchased, if necessary to avoid significant distortions in income. File my 2009 taxes online free Uniform capitalization rules. File my 2009 taxes online free   A farmer can determine costs required to be allocated under the uniform capitalization rules by using the farm-price or unit-livestock-price inventory method. File my 2009 taxes online free This applies to any plant or animal, even if the farmer does not hold or treat the plant or animal as inventory property. File my 2009 taxes online free Cash Versus Accrual Method The following examples compare the cash and accrual methods of accounting. File my 2009 taxes online free Example 1. File my 2009 taxes online free You are a farmer who uses an accrual method of accounting. File my 2009 taxes online free You keep your books on the calendar year basis. File my 2009 taxes online free You sell grain in December 2013 but you are not paid until January 2014. File my 2009 taxes online free Because the accrual method was used and 2013 was the tax year in which the grain was sold, you must both include the sales proceeds and deduct the costs incurred in producing the grain on your 2013 tax return. File my 2009 taxes online free Example 2. File my 2009 taxes online free Assume the same facts as in Example 1 except that you use the cash method and there was no constructive receipt of the sales proceeds in 2013. File my 2009 taxes online free Under this method, you include the sales proceeds in income for 2014, the year you receive payment. File my 2009 taxes online free Deduct the costs of producing the grain in the year you pay for them. File my 2009 taxes online free Special Methods of Accounting There are special methods of accounting for certain items of income and expense. File my 2009 taxes online free Crop method. File my 2009 taxes online free   If you do not harvest and dispose of your crop in the same tax year that you plant it, you can, with IRS approval, use the crop method of accounting. File my 2009 taxes online free You cannot use the crop method for any tax return, including your first tax return, unless you receive approval from the IRS. File my 2009 taxes online free Under this method, you deduct the entire cost of producing the crop, including the expense of seed or young plants, in the year you realize income from the crop. File my 2009 taxes online free    See chapter 4 for details on deducting the costs of operating a farm. File my 2009 taxes online free Also see Regulations section 1. File my 2009 taxes online free 162-12. File my 2009 taxes online free Other special methods. File my 2009 taxes online free   Other special methods of accounting apply to the following items. File my 2009 taxes online free Amortization, see chapter 7. File my 2009 taxes online free Casualties, see chapter 11. File my 2009 taxes online free Condemnations, see chapter 11. File my 2009 taxes online free Depletion, see chapter 7. File my 2009 taxes online free Depreciation, see chapter 7. File my 2009 taxes online free Farm business expenses, see chapter 4. File my 2009 taxes online free Farm income, see chapter 3. File my 2009 taxes online free Installment sales, see chapter 10. File my 2009 taxes online free Soil and water conservation expenses, see chapter 5. File my 2009 taxes online free Thefts, see chapter 11. File my 2009 taxes online free Combination Method Generally, you can use any combination of cash, accrual, and special methods of accounting if the combination clearly shows your income and expenses and you use it consistently. File my 2009 taxes online free However, the following restrictions apply. File my 2009 taxes online free If you use the cash method for figuring your income, you must use the cash method for reporting your expenses. File my 2009 taxes online free If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. File my 2009 taxes online free Changes in Methods of Accounting A change in your method of accounting includes a change in: Your overall method, such as from the cash method to an accrual method, and Your treatment of any material item, such as a change in your method of valuing inventory (for example, a change from the farm-price method to the unit-livestock-price method, discussed earlier). File my 2009 taxes online free Generally, once you have set up your accounting method, you must receive approval from the IRS before you can change to another method of accounting. File my 2009 taxes online free You may also have to pay a fee. File my 2009 taxes online free To obtain approval, you must generally file Form 3115. File my 2009 taxes online free There are instances when you can obtain automatic consent to change certain methods of accounting. File my 2009 taxes online free See the List of Automatic Accounting Method Changes located in the Instructions for Form 3115. File my 2009 taxes online free For more information on changes in methods of accounting, see Form 3115 and the Instructions for Form 3115. File my 2009 taxes online free Also see Publication 538. File my 2009 taxes online free Prev  Up  Next   Home   More Online Publications