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Filing An Amended Tax Return

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Filing An Amended Tax Return

Filing an amended tax return Part One -   Fuel Taxes and Fuel Tax Credits and Refunds Chapter 1 defines the types of fuel, taxable events, and exemptions or exceptions to the fuel taxes. Filing an amended tax return Chapter 2 provides information on, and definitions of, the nontaxable uses and explains how to make a claim. Filing an amended tax return Table of Contents 1. Filing an amended tax return   Fuel TaxesDefinitions Information Returns Registration RequirementsAdditional information. Filing an amended tax return Gasoline and Aviation GasolineTaxable Events Gasoline Blendstocks Diesel Fuel and KeroseneTaxable Events Dyed Diesel Fuel and Dyed Kerosene Alaska and Feedstocks Back-up Tax Diesel-Water Fuel Emulsion Kerosene for Use in AviationTaxable Events Liability For Tax Surtax on any liquid used in a fractional ownership program aircraft as fuel Certificate for Commercial Aviation and Exempt UsesExempt use. Filing an amended tax return Reseller statement. Filing an amended tax return Other Fuels (Including Alternative Fuels)Taxable Events Compressed Natural Gas (CNG)Taxable Events Fuels Used on Inland WaterwaysFishing vessels. Filing an amended tax return Deep-draft ocean-going vessels. Filing an amended tax return Passenger vessels. Filing an amended tax return Ocean-going barges. Filing an amended tax return State or local governments. Filing an amended tax return Cellulosic or Second Generation Biofuel Not Used as Fuel Biodiesel Sold as But Not Used as Fuel 2. Filing an amended tax return   Fuel Tax Credits and RefundsGasoline and Aviation Gasoline Undyed Diesel Fuel and Undyed Kerosene (Other Than Kerosene Used in Aviation)Sales by Registered Ultimate Vendors Diesel-Water Fuel Emulsion Kerosene for Use in AviationSales by Registered Ultimate Vendors Other Fuels (Including Alternative Fuels) Refunds of Second TaxOptional reporting. Filing an amended tax return Providing information. Filing an amended tax return Definitions of Nontaxable UsesCustom application of fertilizer and pesticide. Filing an amended tax return Fuel used between airfield and farm. Filing an amended tax return Fuel not used for farming. Filing an amended tax return Vehicles not considered highway vehicles. Filing an amended tax return Biodiesel or Renewable Diesel Mixture Credit, Alternative Fuel Credit, and Alternative Fuel Mixture CreditHow to Claim the Credit Filing Claims Claiming A Refund Claiming a Credit on Form 4136 Including the Credit or Refund in Income Prev  Up  Next   Home   More Online Publications
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Tax Relief for Victims of the Remnants of Tropical Storm Lee in New York

IRS e-File to Remain Open through Oct. 31 for Victims of Tropical Storm Lee

Updated 10/24/11 to add Herkimer and Schoharie counties.
Updated 10/11/11 to add Fulton county.
Updated 10/5/11 to add Oneida, Orange and Ulster counties.
Updated 9/20/11 to add Chemung and Schenectady counties.

NY-2011-36, Sept. 14, 2011

NEW YORK — Victims of the remnants of Tropical Storm Lee that began on Sept. 7, 2011 in parts of New York State may qualify for tax relief from the Internal Revenue Service.

The President has declared the following counties a federal disaster area: Broome, Chemung, Chenango, Delaware, Fulton, Herkimer Oneida, Orange, Otsego, Schenectady, Schoharie, Tioga and Ulster. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Sept. 7, and on or before Oct. 31, have been postponed to Oct. 31, 2011. This includes corporations and other businesses that previously obtained an extension until Sept. 15 to file their 2010 returns, and individuals and businesses that received a similar extension until Oct. 17. It also includes the estimated tax payment for the third quarter, normally due Sept. 15.

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Sept. 7, and on or before Sept. 22, as long as the deposits are made by Sept. 22, 2011.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

Covered Disaster Area

The counties listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Oct. 31 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Sept. 7 and on or before Oct. 31.

The IRS also gives affected taxpayers until Oct. 31 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Sept. 7 and on or before Oct. 31.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Sept. 7 and on or before Sept. 22 provided the taxpayer makes these deposits by Sept. 22.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “New York/Remnants of Tropical Storm Lee” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, irs.gov, or order them by calling 1-800-TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1-800-829-1040.

Related Information

Page Last Reviewed or Updated: 26-Mar-2014

The Filing An Amended Tax Return

Filing an amended tax return 1. Filing an amended tax return   Rental Income and Expenses (If No Personal Use of Dwelling) Table of Contents Rental IncomeWhen To Report Types of Income Rental ExpensesWhen To Deduct Types of Expenses This chapter discusses the various types of rental income and expenses for a residential rental activity with no personal use of the dwelling. Filing an amended tax return Generally, each year you will report all income and deduct all out-of-pocket expenses in full. Filing an amended tax return The deduction to recover the cost of your rental property—depreciation—is taken over a prescribed number of years, and is discussed in chapter 2, Depreciation of Rental Property. Filing an amended tax return If your rental income is from property you also use personally or rent to someone at less than a fair rental price, first read the information in chapter 5 , Personal Use of Dwelling Unit (Including Vacation Home). Filing an amended tax return Rental Income In most cases, you must include in your gross income all amounts you receive as rent. Filing an amended tax return Rental income is any payment you receive for the use or occupation of property. Filing an amended tax return In addition to amounts you receive as normal rental payments, there are other amounts that may be rental income. Filing an amended tax return When To Report When you report rental income on your tax return generally depends on whether you are a cash basis taxpayer or use an accrual method. Filing an amended tax return Most individual taxpayers use the cash method. Filing an amended tax return Cash method. Filing an amended tax return   You are a cash basis taxpayer if you report income on your return in the year you actually or constructively receive it, regardless of when it was earned. Filing an amended tax return You constructively receive income when it is made available to you, for example, by being credited to your bank account. Filing an amended tax return Accrual method. Filing an amended tax return    If you are an accrual basis taxpayer, you generally report income when you earn it, rather than when you receive it. Filing an amended tax return You generally deduct your expenses when you incur them, rather than when you pay them. Filing an amended tax return More information. Filing an amended tax return   See Publication 538, Accounting Periods and Methods, for more information about when you constructively receive income and accrual methods of accounting. Filing an amended tax return Types of Income The following are common types of rental income. Filing an amended tax return Advance rent. Filing an amended tax return   Advance rent is any amount you receive before the period that it covers. Filing an amended tax return Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. Filing an amended tax return Example. Filing an amended tax return On March 18, 2013, you signed a 10-year lease to rent your property. Filing an amended tax return During 2013, you received $9,600 for the first year's rent and $9,600 as rent for the last year of the lease. Filing an amended tax return You must include $19,200 in your rental income in the first year. Filing an amended tax return Canceling a lease. Filing an amended tax return   If your tenant pays you to cancel a lease, the amount you receive is rent. Filing an amended tax return Include the payment in your income in the year you receive it regardless of your method of accounting. Filing an amended tax return Expenses paid by tenant. Filing an amended tax return   If your tenant pays any of your expenses, those payments are rental income. Filing an amended tax return Because you must include this amount in income, you can also deduct the expenses if they are deductible rental expenses. Filing an amended tax return For more information, see Rental Expenses , later. Filing an amended tax return Example 1. Filing an amended tax return Your tenant pays the water and sewage bill for your rental property and deducts the amount from the normal rent payment. Filing an amended tax return Under the terms of the lease, your tenant does not have to pay this bill. Filing an amended tax return Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income. Filing an amended tax return You can deduct the utility payment made by your tenant as a rental expense. Filing an amended tax return Example 2. Filing an amended tax return While you are out of town, the furnace in your rental property stops working. Filing an amended tax return Your tenant pays for the necessary repairs and deducts the repair bill from the rent payment. Filing an amended tax return Include the repair bill paid by the tenant and any amount received as a rent payment in your rental income. Filing an amended tax return You can deduct the repair payment made by your tenant as a rental expense. Filing an amended tax return Property or services. Filing an amended tax return   If you receive property or services as rent, instead of money, include the fair market value of the property or services in your rental income. Filing an amended tax return   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. Filing an amended tax return Example. Filing an amended tax return Your tenant is a house painter. Filing an amended tax return He offers to paint your rental property instead of paying 2 months rent. Filing an amended tax return You accept his offer. Filing an amended tax return Include in your rental income the amount the tenant would have paid for 2 months rent. Filing an amended tax return You can deduct that same amount as a rental expense for painting your property. Filing an amended tax return Security deposits. Filing an amended tax return   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. Filing an amended tax return But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. Filing an amended tax return    If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Filing an amended tax return Include it in your income when you receive it. Filing an amended tax return Other Sources of Rental Income Lease with option to buy. Filing an amended tax return   If the rental agreement gives your tenant the right to buy your rental property, the payments you receive under the agreement are generally rental income. Filing an amended tax return If your tenant exercises the right to buy the property, the payments you receive for the period after the date of sale are considered part of the selling price. Filing an amended tax return Part interest. Filing an amended tax return   If you own a part interest in rental property, you must report your part of the rental income from the property. Filing an amended tax return Rental of property also used as your home. Filing an amended tax return   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. Filing an amended tax return However, you can deduct on Schedule A (Form 1040), Itemized Deductions, the interest, taxes, and casualty and theft losses that are allowed for nonrental property. Filing an amended tax return See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Filing an amended tax return Rental Expenses In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. Filing an amended tax return Personal use of rental property. Filing an amended tax return   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. Filing an amended tax return Also, your rental expense deductions may be limited. Filing an amended tax return See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Filing an amended tax return Part interest. Filing an amended tax return   If you own a part interest in rental property, you can deduct expenses you paid according to your percentage of ownership. Filing an amended tax return Example. Filing an amended tax return Roger owns a one-half undivided interest in a rental house. Filing an amended tax return Last year he paid $968 for necessary repairs on the property. Filing an amended tax return Roger can deduct $484 (50% × $968) as a rental expense. Filing an amended tax return He is entitled to reimbursement for the remaining half from the co-owner. Filing an amended tax return When To Deduct You generally deduct your rental expenses in the year you pay them. Filing an amended tax return If you use the accrual method, see Publication 538 for more information. Filing an amended tax return Types of Expenses Listed below are the most common rental expenses. Filing an amended tax return Advertising. Filing an amended tax return Auto and travel expenses. Filing an amended tax return Cleaning and maintenance. Filing an amended tax return Commissions. Filing an amended tax return Depreciation. Filing an amended tax return Insurance. Filing an amended tax return Interest (other). Filing an amended tax return Legal and other professional fees. Filing an amended tax return Local transportation expenses. Filing an amended tax return Management fees. Filing an amended tax return Mortgage interest paid to banks, etc. Filing an amended tax return Points. Filing an amended tax return Rental payments. Filing an amended tax return Repairs. Filing an amended tax return Taxes. Filing an amended tax return Utilities. Filing an amended tax return Some of these expenses, as well as other less common ones, are discussed below. Filing an amended tax return Depreciation. Filing an amended tax return   Depreciation is a capital expense. Filing an amended tax return It is the mechanism for recovering your cost in an income producing property and must be taken over the expected life of the property. Filing an amended tax return   You can begin to depreciate rental property when it is ready and available for rent. Filing an amended tax return See Placed in Service under When Does Depreciation Begin and End in chapter 2. Filing an amended tax return Insurance premiums paid in advance. Filing an amended tax return   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. Filing an amended tax return You cannot deduct the total premium in the year you pay it. Filing an amended tax return See chapter 6 of Publication 535 for information on deductible premiums. Filing an amended tax return Interest expense. Filing an amended tax return   You can deduct mortgage interest you pay on your rental property. Filing an amended tax return When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Filing an amended tax return Chapter 4 of Publication 535 explains mortgage interest in detail. Filing an amended tax return Expenses paid to obtain a mortgage. Filing an amended tax return   Certain expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. Filing an amended tax return These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property. Filing an amended tax return Form 1098, Mortgage Interest Statement. Filing an amended tax return   If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098 or similar statement showing the interest you paid for the year. Filing an amended tax return 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, the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. Filing an amended tax return Attach a statement to your return showing the name and address of the other person. Filing an amended tax return On the dotted line next to line 13, enter “See attached. Filing an amended tax return ” Legal and other professional fees. Filing an amended tax return   You can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. Filing an amended tax return For example, on your 2013 Schedule E you can deduct fees paid in 2013 to prepare Part I of your 2012 Schedule E. Filing an amended tax return You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. Filing an amended tax return Local benefit taxes. Filing an amended tax return   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. Filing an amended tax return These charges are nondepreciable capital expenditures and must be added to the basis of your property. Filing an amended tax return However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. Filing an amended tax return Local transportation expenses. Filing an amended tax return   You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. Filing an amended tax return However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. Filing an amended tax return See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Filing an amended tax return   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. Filing an amended tax return For 2013, the standard mileage rate for business use is 56. Filing an amended tax return 5 cents per mile. Filing an amended tax return For more information, see chapter 4 of Publication 463. Filing an amended tax return    To deduct car expenses under either method, you must keep records that follow the rules in chapter 5 of Publication 463. Filing an amended tax return In addition, you must complete Form 4562, Part V, and attach it to your tax return. Filing an amended tax return Pre-rental expenses. Filing an amended tax return   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. Filing an amended tax return Rental of equipment. Filing an amended tax return   You can deduct the rent you pay for equipment that you use for rental purposes. Filing an amended tax return However, in some cases, lease contracts are actually purchase contracts. Filing an amended tax return If so, you cannot deduct these payments. Filing an amended tax return You can recover the cost of purchased equipment through depreciation. Filing an amended tax return Rental of property. Filing an amended tax return   You can deduct the rent you pay for property that you use for rental purposes. Filing an amended tax return If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. Filing an amended tax return Travel expenses. Filing an amended tax return   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. Filing an amended tax return You must properly allocate your expenses between rental and nonrental activities. Filing an amended tax return You cannot deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. Filing an amended tax return The cost of improvements is recovered by taking depreciation. Filing an amended tax return For information on travel expenses, see chapter 1 of Publication 463. Filing an amended tax return    To deduct travel expenses, you must keep records that follow the rules in chapter 5 of Publication 463. Filing an amended tax return Uncollected rent. Filing an amended tax return   If you are a cash basis taxpayer, do not deduct uncollected rent. Filing an amended tax return Because you have not included it in your income, it is not deductible. Filing an amended tax return   If you use an accrual method, report income when you earn it. Filing an amended tax return If you are unable to collect the rent, you may be able to deduct it as a business bad debt. Filing an amended tax return See chapter 10 of Publication 535 for more information about business bad debts. Filing an amended tax return Vacant rental property. Filing an amended tax return   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. Filing an amended tax return However, you cannot deduct any loss of rental income for the period the property is vacant. Filing an amended tax return Vacant while listed for sale. Filing an amended tax return   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. Filing an amended tax return If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. Filing an amended tax return Points The term “points” is often used to describe some of the charges paid, or treated as paid, by a borrower to take out a loan or a mortgage. Filing an amended tax return These charges are also called loan origination fees, maximum loan charges, or premium charges. Filing an amended tax return Any of these charges (points) that are solely for the use of money are interest. Filing an amended tax return Because points are prepaid interest, you generally cannot deduct the full amount in the year paid, but must deduct the interest over the term of the loan. Filing an amended tax return The method used to figure the amount of points you can deduct each year follows the original issue discount (OID) rules. Filing an amended tax return In this case, points are equivalent to OID, which is the difference between: The amount borrowed (redemption price at maturity, or principal) and The proceeds (issue price). Filing an amended tax return The first step is to determine whether your total OID (which you may have on bonds or other investments in addition to the mortgage loan), including the OID resulting from the points, is insignificant or de minimis. Filing an amended tax return If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct. Filing an amended tax return De minimis OID. Filing an amended tax return   The OID is de minimis if it is less than one-fourth of 1% (. Filing an amended tax return 0025) of the stated redemption price at maturity (principal amount of the loan) multiplied by the number of full years from the date of original issue to maturity (term of the loan). Filing an amended tax return   If the OID is de minimis, you can choose one of the following ways to figure the amount of points you can deduct each year. Filing an amended tax return On a constant-yield basis over the term of the loan. Filing an amended tax return On a straight line basis over the term of the loan. Filing an amended tax return In proportion to stated interest payments. Filing an amended tax return In its entirety at maturity of the loan. Filing an amended tax return You make this choice by deducting the OID (points) in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued. Filing an amended tax return Example. Filing an amended tax return Carol Madison took out a $100,000 mortgage loan on January 1, 2013, to buy a house she will use as a rental during 2013. Filing an amended tax return The loan is to be repaid over 30 years. Filing an amended tax return During 2013, Carol paid $10,000 of mortgage interest (stated interest) to the lender. Filing an amended tax return When the loan was made, she paid $1,500 in points to the lender. Filing an amended tax return The points reduced the principal amount of the loan from $100,000 to $98,500, resulting in $1,500 of OID. Filing an amended tax return Carol determines that the points (OID) she paid are de minimis based on the following computation. Filing an amended tax return Redemption price at maturity (principal amount of the loan) $100,000 Multiplied by: The term of the  loan in complete years ×30 Multiplied by ×. Filing an amended tax return 0025 De minimis amount $7,500 The points (OID) she paid ($1,500) are less than the de minimis amount ($7,500). Filing an amended tax return Therefore, Carol has de minimis OID and she can choose one of the four ways discussed earlier to figure the amount she can deduct each year. Filing an amended tax return Under the straight line method, she can deduct $50 each year for 30 years. Filing an amended tax return Constant-yield method. Filing an amended tax return   If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. Filing an amended tax return   You figure your deduction for the first year in the following manner. Filing an amended tax return Determine the issue price of the loan. Filing an amended tax return If you paid points on the loan, the issue price generally is the difference between the principal and the points. Filing an amended tax return Multiply the result in (1) by the yield to maturity (defined later). Filing an amended tax return Subtract any qualified stated interest payments (defined later) from the result in (2). Filing an amended tax return This is the OID you can deduct in the first year. Filing an amended tax return Yield to maturity (YTM). Filing an amended tax return   This rate is generally shown in the literature you receive from your lender. Filing an amended tax return If you do not have this information, consult your lender or tax advisor. Filing an amended tax return In general, the YTM is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan. Filing an amended tax return Qualified stated interest (QSI). Filing an amended tax return   In general, this is the stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a fixed rate. Filing an amended tax return Example—Year 1. Filing an amended tax return The facts are the same as in the previous example. Filing an amended tax return The yield to maturity on Carol's loan is 10. Filing an amended tax return 2467%, compounded annually. Filing an amended tax return She figured the amount of points (OID) she could deduct in 2013 as follows. Filing an amended tax return Principal amount of the loan $100,000 Minus: Points (OID) –1,500 Issue price of the loan $98,500 Multiplied by: YTM × . Filing an amended tax return 102467 Total 10,093 Minus: QSI –10,000 Points (OID) deductible in 2013 $93 To figure your deduction in any subsequent year, you start with the adjusted issue price. Filing an amended tax return To get the adjusted issue price, add to the issue price figured in Year 1 any OID previously deducted. Filing an amended tax return Then follow steps (2) and (3), earlier. Filing an amended tax return Example—Year 2. Filing an amended tax return Carol figured the deduction for 2014 as follows. Filing an amended tax return Issue price $98,500 Plus: Points (OID) deducted  in 2013 +93 Adjusted issue price $98,593 Multiplied by: YTM × . Filing an amended tax return 102467 Total 10,103 Minus: QSI –10,000 Points (OID) deductible in 2014 $103 Loan or mortgage ends. Filing an amended tax return    If your loan or mortgage ends, you may be able to deduct any remaining points (OID) in the tax year in which the loan or mortgage ends. Filing an amended tax return A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event. Filing an amended tax return However, if the refinancing is with the same lender, the remaining points (OID) generally are not deductible in the year in which the refinancing occurs, but may be deductible over the term of the new mortgage or loan. Filing an amended tax return Points when loan refinance is more than the previous outstanding balance. Filing an amended tax return   When you refinance a rental property for more than the previous outstanding balance, the portion of the points allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Filing an amended tax return For example, if an individual refinanced a loan with a balance of $100,000, the amount of the new loan was $120,000, and the taxpayer used $20,000 to purchase a car, points allocable to the $20,000 would be treated as nondeductible personal interest. Filing an amended tax return Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. Filing an amended tax return Improvements. Filing an amended tax return   You must capitalize any expense you pay to improve your rental property. Filing an amended tax return An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. Filing an amended tax return Betterments. Filing an amended tax return   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. Filing an amended tax return Restoration. Filing an amended tax return   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. Filing an amended tax return Adaptation. Filing an amended tax return   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. Filing an amended tax return Separate the costs of repairs and improvements, and keep accurate records. Filing an amended tax return You will need to know the cost of improvements when you sell or depreciate your property. Filing an amended tax return The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. Filing an amended tax return Table 1-1. Filing an amended tax return Examples of Improvements Additions Bedroom Bathroom Deck Garage Porch Patio  Lawn & Grounds Landscaping Driveway Walkway Fence Retaining wall Sprinkler system Swimming pool Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system   Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances Kitchen modernization Flooring Wall-to-wall carpeting  Insulation Attic Walls, floor Pipes, duct work Prev  Up  Next   Home   More Online Publications