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Free Tax Extension

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Free Tax Extension

Free tax extension 5. Free tax extension   Illustrated Examples Table of Contents Illustrated Example of Form 4563Line 1. Free tax extension Line 2. Free tax extension Lines 3a and 3b. Free tax extension Lines 4a and 4b. Free tax extension Line 5. Free tax extension Line 6. Free tax extension Line 7. Free tax extension Line 9. Free tax extension Line 15. Free tax extension Illustrated Example of Form 5074Part I. Free tax extension Part II. Free tax extension Part III. Free tax extension Illustrated Example of Form 8689Part I. Free tax extension Part II. Free tax extension Part III. Free tax extension Part IV. Free tax extension Use the following examples to help you complete the correct attachment to your Form 1040. Free tax extension The completed form for each example is shown on the pages that follow. Free tax extension Illustrated Example of Form 4563 John Black is a U. Free tax extension S. Free tax extension citizen, single, and under 65. Free tax extension He was a bona fide resident of American Samoa during all of 2013. Free tax extension John must file Form 1040 because his gross income from sources outside the possessions ($10,000 of dividends from U. Free tax extension S. Free tax extension corporations) is more than his adjusted filing requirement for single filers under 65. Free tax extension (See Filing Requirement if Possession Income Is Excluded in chapter 4. Free tax extension ) Because he must file Form 1040 (not illustrated), he fills out Form 4563 to determine the amount of income from American Samoa he can exclude. Free tax extension See Bona Fide Resident of American Samoa in chapter 3. Free tax extension Completing Form 4563. Free tax extension   John enters his name and social security number at the top of the form. Free tax extension Line 1. Free tax extension   On Form 4563 (see later), John enters the date his bona fide residence began in American Samoa, June 2, 2012. Free tax extension Because he is still a bona fide resident, he enters “not ended” in the second blank space. Free tax extension Line 2. Free tax extension   He checks the box labeled “Rented house or apartment” to describe his type of living quarters in American Samoa. Free tax extension Lines 3a and 3b. Free tax extension   He checks “No” on line 3a because no family members lived with him. Free tax extension He leaves line 3b blank. Free tax extension Lines 4a and 4b. Free tax extension   He checks “No” on line 4a because he did not maintain a home outside American Samoa. Free tax extension He leaves line 4b blank. Free tax extension Line 5. Free tax extension   He enters the name and address of his employer, Samoa Products Co. Free tax extension It is a private American Samoa corporation. Free tax extension Line 6. Free tax extension   He enters the dates of his 2-week vacation to New Zealand from November 11 to November 25. Free tax extension That was his only trip outside American Samoa during the year. Free tax extension Line 7. Free tax extension   He enters the $24,000 in wages he received from Samoa Products Co. Free tax extension Line 9. Free tax extension   He received $220 in dividends from an American Samoa corporation, which he enters here. Free tax extension He also received $10,000 of dividends from a U. Free tax extension S. Free tax extension corporation, but he will enter that amount only on his Form 1040 because the U. Free tax extension S. Free tax extension dividends do not qualify for the possession exclusion. Free tax extension Line 15. Free tax extension   John totals the amounts on lines 7 and 9 to get the amount he can exclude from his gross income in 2013. Free tax extension He will not enter his excluded income on Form 1040. Free tax extension However, he will attach his completed Form 4563 to his Form 1040. Free tax extension Illustrated Example of Form 5074 Tracy Grey is a U. Free tax extension S. Free tax extension citizen who is a self-employed fisheries consultant with a tax home in New York. Free tax extension Her only income for 2013 was net self-employment income of $80,000. Free tax extension Of the $80,000, $20,000 was from consulting work in Guam and the rest was earned in the United States. Free tax extension Thinking she would owe tax to Guam on the $20,000, Tracy made estimated tax payments of $1,409 to Guam. Free tax extension She was not a bona fide resident of Guam during 2013. Free tax extension Tracy completes Form 1040 (not illustrated), reporting her worldwide income. Free tax extension Because the adjusted gross income on her Form 1040 was $50,000 or more and at least $5,000 of her gross income is from Guam, Tracy must file Form 5074 with her Form 1040. Free tax extension All amounts reported on Form 5074 are also reported on her Form 1040. Free tax extension See U. Free tax extension S. Free tax extension Citizen or Resident Alien (Other Than a Bona Fide Resident of Guam) in chapter 3. Free tax extension Completing Form 5074. Free tax extension   Tracy enters her name and social security number at the top of the form. Free tax extension Part I. Free tax extension   On Form 5074 (see later), Tracy enters her self-employment income from Guam ($20,000) on line 6. Free tax extension She has no other income from Guam, so the total on line 16 is $20,000. Free tax extension Part II. Free tax extension   Tracy's only adjustment in Part II is the deductible part of the self-employment tax on her net income earned in Guam. Free tax extension She enters $1,413 on line 21 and line 28. Free tax extension Her adjusted gross income on line 29 is $18,587. Free tax extension Part III. Free tax extension   Tracy made estimated tax payments of $1,409. Free tax extension She enters this amount on line 30, and again on line 34 as the total payments. Free tax extension Illustrated Example of Form 8689 Juan and Carla Moreno live and work in the United States. Free tax extension In 2013, they received $14,400 in income from the rental of a condominium they own in the U. Free tax extension S. Free tax extension Virgin Islands (USVI). Free tax extension The rental income was deposited in a bank in the USVI and they received $500 of interest on this income. Free tax extension They were not bona fide residents of the USVI during the entire tax year. Free tax extension The Morenos complete Form 1040 (not illustrated), reporting their income from all sources, including their interest income and the income and expenses from their USVI rental property (reported on Schedule E (Form 1040)). Free tax extension The Morenos take the standard deduction for married filing jointly, both are under 65, and they have no dependents. Free tax extension The Morenos also complete Form 8689 to determine how much of their U. Free tax extension S. Free tax extension tax shown on Form 1040, line 61 (with certain adjustments), must be paid to the U. Free tax extension S. Free tax extension Virgin Islands. Free tax extension See U. Free tax extension S. Free tax extension Citizen or Resident Alien (Other Than a Bona Fide Resident of the USVI) in chapter 3. Free tax extension The Morenos file their Form 1040, attaching Form 8689 and all other schedules, with the Internal Revenue Service. Free tax extension At the same time, they send a copy of their Form 1040 with all attachments, including Form 8689, to the Virgin Islands Bureau of Internal Revenue. Free tax extension The Virgin Islands Bureau of Internal Revenue will process this copy. Free tax extension Completing Form 8689. Free tax extension   Juan and Carla enter their names and Juan's social security number at the top of the form. Free tax extension Part I. Free tax extension   The Morenos enter their income from the USVI in Part I (see later). Free tax extension The interest income is entered on line 2 and the net rental income of $6,200 ($14,400 of rental income minus $8,200 of rental expenses) is entered on line 11. Free tax extension The Morenos' total USVI income of $6,700 is entered on line 16. Free tax extension Part II. Free tax extension   The Morenos have no adjustments to their USVI income, so they enter zero (-0-) on line 28, and $6,700 on line 29. Free tax extension Their USVI adjusted gross income (AGI) is $6,700. Free tax extension Part III. Free tax extension   On line 30, the Morenos enter the amount from Form 1040, line 61 ($4,539). Free tax extension Their Form 1040 does not show any entries required on line 31, so they leave that line blank and enter $4,539 on line 32. Free tax extension   The Morenos enter their worldwide AGI, $54,901 (Form 1040, line 38), on line 33. Free tax extension Next, they find what percentage of their AGI is from USVI sources ($6,700 ÷ $54,901 = 0. Free tax extension 122) and enter that as a decimal on line 34. Free tax extension They then apply that percentage to the U. Free tax extension S. Free tax extension tax entered on line 32 to find the amount of U. Free tax extension S. Free tax extension tax allocated to USVI income ($4,539 x 0. Free tax extension 122 = $554), and enter that amount on line 35. Free tax extension Part IV. Free tax extension   Part IV is used to show payments of income tax to the USVI only. Free tax extension The Morenos had no tax withheld by the U. Free tax extension S. Free tax extension Virgin Islands, but made estimated tax payments to the USVI of $400, which they entered on lines 37 and 39. Free tax extension They include this amount ($400) in the total payments on Form 1040, line 72. Free tax extension On the dotted line next to the entry space for line 72, they enter “Form 8689” and show the amount. Free tax extension The Morenos do not complete Form 1116 because they receive credit on Form 1040, line 72, for the tax paid to the USVI. Free tax extension   The income tax they owe to the USVI ($154) is shown on Form 8689, line 44. Free tax extension They enter this amount on line 45. Free tax extension They also include this additional amount ($154) on the dotted line next to the entry space and in the total on Form 1040, line 72. Free tax extension The Morenos will pay their USVI tax at the same time they file the copy of their U. Free tax extension S. Free tax extension income tax return with the U. Free tax extension S. Free tax extension Virgin Islands. Free tax extension This image is too large to be displayed in the current screen. Free tax extension Please click the link to view the image. Free tax extension Form 4563, page 1 for John Black This image is too large to be displayed in the current screen. Free tax extension Please click the link to view the image. Free tax extension Form 5074, for Tracy Grey This image is too large to be displayed in the current screen. Free tax extension Please click the link to view the image. Free tax extension Form 8689, page 1 for Juan and Carla Moreno Prev  Up  Next   Home   More Online Publications
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Free tax extension 3. Free tax extension   Reporting Rental Income, Expenses, and Losses Table of Contents Which Forms To UseSchedule E (Form 1040) Schedule C (Form 1040), Profit or Loss From Business Qualified Joint Venture Limits on Rental LossesAt-Risk Rules Passive Activity Limits Casualties and Thefts Example Figuring the net income or loss for a residential rental activity may involve more than just listing the income and deductions on Schedule E (Form 1040). Free tax extension There are activities which do not qualify to use Schedule E, such as when the activity is not engaged in to make a profit or when you provide substantial services in conjunction with the property. Free tax extension There are also the limitations which may need to be applied if you have a net loss on Schedule E. Free tax extension There are two: (1) the limitation based on the amount of investment you have at risk in your rental activity, and (2) the special limits imposed on passive activities. Free tax extension You may also have a gain or loss related to your rental property from a casualty or theft. Free tax extension This is considered separately from the income and expense information you report on Schedule E. Free tax extension Which Forms To Use The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). Free tax extension However, do not use that schedule to report a not-for-profit activity. Free tax extension See Not Rented for Profit , in chapter 4. Free tax extension There are also other rental situations in which forms other than Schedule E would be used. Free tax extension Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. Free tax extension , you normally report your rental income and expenses on Schedule E, Part I. Free tax extension List your total income, expenses, and depreciation for each rental property. Free tax extension Be sure to enter the number of fair rental and personal use days on line 2. Free tax extension If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. Free tax extension Complete lines 1 and 2 for each property. Free tax extension However, fill in lines 23a through 26 on only one Schedule E. Free tax extension On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. Free tax extension To find out if you need to attach Form 4562, see Form 4562 , later. Free tax extension If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. Free tax extension Form 6198, At-Risk Limitations. Free tax extension See At-Risk Rules , later. Free tax extension Also see Publication 925. Free tax extension Form 8582, Passive Activity Loss Limitations. Free tax extension See Passive Activity Limits , later. Free tax extension Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. Free tax extension If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. Free tax extension Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). Free tax extension Form 4562. Free tax extension   You must complete and attach Form 4562 for rental activities only if you are claiming: Depreciation, including the special depreciation allowance, on property placed in service during 2013; Depreciation on listed property (such as a car), regardless of when it was placed in service; or Any other car expenses, including the standard mileage rate or lease expenses. Free tax extension Otherwise, figure your depreciation on your own worksheet. Free tax extension You do not have to attach these computations to your return, but you should keep them in your records for future reference. Free tax extension   See Publication 946 for information on preparing Form 4562. Free tax extension Schedule C (Form 1040), Profit or Loss From Business Generally, Schedule C is used when you provide substantial services in conjunction with the property or the rental is part of a trade or business as a real estate dealer. Free tax extension Providing substantial services. Free tax extension   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Free tax extension Use Form 1065, U. Free tax extension S. Free tax extension Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). Free tax extension Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. Free tax extension For information, see Publication 334, Tax Guide for Small Business. Free tax extension Also, you may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. Free tax extension For a discussion of “substantial services,” see Real Estate Rents in Publication 334, chapter 5. Free tax extension Qualified Joint Venture If you and your spouse each materially participate (see Material participation under Passive Activity Limits, later) as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Free tax extension This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. Free tax extension If you make this election, you must report rental real estate income on Schedule E (or Schedule C if you provide substantial services). Free tax extension You will not be required to file Form 1065 for any year the election is in effect. Free tax extension Rental real estate income generally is not included in net earnings from self-employment subject to self-employment tax and generally is subject to the passive activity limits. Free tax extension If you and your spouse filed a Form 1065 for the year prior to the election, the partnership terminates at the end of the tax year immediately preceding the year the election takes effect. Free tax extension For more information on qualified joint ventures, go to IRS. Free tax extension gov and enter “qualified joint venture” in the search box. Free tax extension Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. Free tax extension You must consider these rules in the order shown below. Free tax extension Both are discussed in this section. Free tax extension At-risk rules. Free tax extension These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. Free tax extension This applies only if the real property was placed in service after 1986. Free tax extension Passive activity limits. Free tax extension Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. Free tax extension However, there are exceptions. Free tax extension At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. Free tax extension Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. Free tax extension In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. Free tax extension You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. Free tax extension Any loss that is disallowed because of the at-risk limits is treated as a deduction from the same activity in the next tax year. Free tax extension See Publication 925 for a discussion of the at-risk rules. Free tax extension Form 6198. Free tax extension   If you are subject to the at-risk rules, file Form 6198, At-Risk Limitations, with your tax return. Free tax extension Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. Free tax extension For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. Free tax extension For a discussion of activities that are not considered rental activities, see Rental Activities in Publication 925. Free tax extension Deductions or losses from passive activities are limited. Free tax extension You generally cannot offset income, other than passive income, with losses from passive activities. Free tax extension Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. Free tax extension Any excess loss or credit is carried forward to the next tax year. Free tax extension Exceptions to the rules for figuring passive activity limits for personal use of a dwelling unit and for rental real estate with active participation are discussed later. Free tax extension For a detailed discussion of these rules, see Publication 925. Free tax extension Real estate professionals. Free tax extension   If you are a real estate professional, complete line 43 of Schedule E. Free tax extension      You qualify as a real estate professional for the tax year if you meet both of the following requirements. Free tax extension More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate. Free tax extension You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate. Free tax extension If you qualify as a real estate professional, rental real estate activities in which you materially participated are not passive activities. Free tax extension For purposes of determining whether you materially participated in your rental real estate activities, each interest in rental real estate is a separate activity unless you elect to treat all your interests in rental real estate as one activity. Free tax extension   Do not count personal services you perform as an employee in real property trades or businesses unless you are a 5% owner of your employer. Free tax extension You are a 5% owner if you own (or are considered to own) more than 5% of your employer's outstanding stock, or capital or profits interest. Free tax extension   Do not count your spouse's personal services to determine whether you met the requirements listed earlier to qualify as a real estate professional. Free tax extension However, you can count your spouse's participation in an activity in determining if you materially participated. Free tax extension Real property trades or businesses. Free tax extension   A real property trade or business is a trade or business that does any of the following with real property. Free tax extension Develops or redevelops it. Free tax extension Constructs or reconstructs it. Free tax extension Acquires it. Free tax extension Converts it. Free tax extension Rents or leases it. Free tax extension Operates or manages it. Free tax extension Brokers it. Free tax extension Choice to treat all interests as one activity. Free tax extension   If you were a real estate professional and had more than one rental real estate interest during the year, you can choose to treat all the interests as one activity. Free tax extension You can make this choice for any year that you qualify as a real estate professional. Free tax extension If you forgo making the choice for one year, you can still make it for a later year. Free tax extension   If you make the choice, it is binding for the tax year you make it and for any later year that you are a real estate professional. Free tax extension This is true even if you are not a real estate professional in any intervening year. Free tax extension (For that year, the exception for real estate professionals will not apply in determining whether your activity is subject to the passive activity rules. Free tax extension )   See the Instructions for Schedule E for information about making this choice. Free tax extension Material participation. Free tax extension   Generally, you materially participated in an activity for the tax year if you were involved in its operations on a regular, continuous, and substantial basis during the year. Free tax extension For details, see Publication 925 or the Instructions for Schedule C. Free tax extension Participating spouse. Free tax extension   If you are married, determine whether you materially participated in an activity by also counting any participation in the activity by your spouse during the year. Free tax extension Do this even if your spouse owns no interest in the activity or files a separate return for the year. Free tax extension Form 8582. Free tax extension    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. Free tax extension See Form 8582 not required , later in this chapter, to determine if you must complete Form 8582. Free tax extension   If you are required to complete Form 8582 and are also subject to the at-risk rules, include the amount from Form 6198, line 21 (deductible loss) in column (b) of Form 8582, Worksheet 1 or 3, as required. Free tax extension Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. Free tax extension Instead, follow the rules explained in chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Free tax extension Exception for Rental Real Estate With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. Free tax extension This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. Free tax extension Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. Free tax extension Example. Free tax extension Jane is single and has $40,000 in wages, $2,000 of passive income from a limited partnership, and $3,500 of passive loss from a rental real estate activity in which she actively participated. Free tax extension $2,000 of Jane's $3,500 loss offsets her passive income. Free tax extension The remaining $1,500 loss can be deducted from her $40,000 wages. Free tax extension The special allowance is not available if you were married, lived with your spouse at any time during the year, and are filing a separate return. Free tax extension Active participation. Free tax extension   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Free tax extension Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions. Free tax extension Example. Free tax extension Mike is single and had the following income and losses during the tax year:   Salary $42,300     Dividends 300     Interest 1,400     Rental loss (4,000)   The rental loss was from the rental of a house Mike owned. Free tax extension Mike had advertised and rented the house to the current tenant himself. Free tax extension He also collected the rents, which usually came by mail. Free tax extension All repairs were either made or contracted out by Mike. Free tax extension Although the rental loss is from a passive activity, because Mike actively participated in the rental property management he can use the entire $4,000 loss to offset his other income. Free tax extension Maximum special allowance. Free tax extension   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. Free tax extension   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. Free tax extension If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. Free tax extension   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. Free tax extension Modified adjusted gross income (MAGI). Free tax extension   This is your adjusted gross income from Form 1040, U. Free tax extension S. Free tax extension Individual Income Tax Return, line 38, or Form 1040NR, U. Free tax extension S. Free tax extension Nonresident Alien Income Tax Return, line 37, figured without taking into account: The taxable amount of social security or equivalent tier 1 railroad retirement benefits, The deductible contributions to traditional individual retirement accounts (IRAs) and section 501(c)(18) pension plans, The exclusion from income of interest from Series EE and I U. Free tax extension S. Free tax extension savings bonds used to pay higher educational expenses, The exclusion of amounts received under an employer's adoption assistance program, Any passive activity income or loss included on Form 8582, Any rental real estate loss allowed to real estate professionals, Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the Instructions for Form 8582), The deduction allowed for one-half of self-employment tax, The deduction allowed for interest paid on student loans, The deduction for qualified tuition and related fees, and The domestic production activities deduction (see the Instructions for Form 8903). Free tax extension Form 8582 not required. Free tax extension   Do not complete Form 8582 if you meet all of the following conditions. Free tax extension Your only passive activities were rental real estate activities in which you actively participated. Free tax extension Your overall net loss from these activities is $25,000 or less ($12,500 or less if married filing separately and you lived apart from your spouse all year). Free tax extension If married filing separately, you lived apart from your spouse all year. Free tax extension You have no prior year unallowed losses from these (or any other passive) activities. Free tax extension You have no current or prior year unallowed credits from passive activities. Free tax extension Your MAGI is $100,000 or less ($50,000 or less if married filing separately and you lived apart from your spouse all year). Free tax extension You do not hold any interest in a rental real estate activity as a limited partner or as a beneficiary of an estate or a trust. Free tax extension   If you meet all of the conditions listed above, your rental real estate activities are not limited by the passive activity rules and you do not have to complete Form 8582. Free tax extension On lines 23a through 23e of your Schedule E, enter the applicable amounts. Free tax extension Casualties and Thefts As a result of a casualty or theft, you may have a loss related to your rental property. Free tax extension You may be able to deduct the loss on your income tax return. Free tax extension Casualty. Free tax extension   This is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Free tax extension Such events include a storm, fire, or earthquake. Free tax extension Theft. Free tax extension   This is defined as the unlawful taking and removing of your money or property with the intent to deprive you of it. Free tax extension Gain from casualty or theft. Free tax extension   It is also possible to have a gain from a casualty or theft if you receive money, including insurance, that is more than your adjusted basis in the property. Free tax extension Generally, you must report this gain. Free tax extension However, under certain circumstances, you may defer paying tax by choosing to postpone reporting the gain. Free tax extension To do this, you generally must buy replacement property within 2 years after the close of the first tax year in which any part of your gain is realized. Free tax extension In certain circumstances, the replacement period can be greater than 2 years; see Replacement Period in Publication 547 for more information. Free tax extension The cost of the replacement property must be equal to or more than the net insurance or other payment you received. Free tax extension More information. Free tax extension   For information on business and nonbusiness casualty and theft losses, see Publication 547. Free tax extension How to report. Free tax extension    If you had a casualty or theft that involved property used in your rental activity, figure the net gain or loss in Section B of Form 4684, Casualties and Thefts. Free tax extension Follow the Instructions for Form 4684 for where to carry your net gain or loss. Free tax extension Example In February 2008, Marie Pfister bought a rental house for $135,000 (house $120,000 and land $15,000) and immediately began renting it out. Free tax extension In 2013, she rented it all 12 months for a monthly rental fee of $1,125. Free tax extension In addition to her rental income of $13,500 (12 x $1,125), Marie had the following expenses. Free tax extension Mortgage interest $8,000 Fire insurance (1-year policy) 250 Miscellaneous repairs 400 Real estate taxes imposed and paid 500 Maintenance 200 Marie depreciates the residential rental property under MACRS GDS. Free tax extension This means using the straight line method over a recovery period of 27. Free tax extension 5 years. Free tax extension She uses Table 2-2d to find her depreciation percentage. Free tax extension Because she placed the property in service in February 2008, she continues to use that row of Table 2-2d. Free tax extension For year 6, the rate is 3. Free tax extension 636%. Free tax extension Marie figures her net rental income or loss for the house as follows: Total rental income received  ($1,125 × 12) $13,500 Minus: Expenses     Mortgage interest $8,000   Fire insurance 250   Miscellaneous repairs 400   Real estate taxes 500   Maintenance 200   Total expenses 9,350 Balance $4,150 Minus: Depreciation ($120,000 x 3. Free tax extension 636%) 4,363 Net rental (loss) for house ($213)       Marie had a net loss for the year. Free tax extension Because she actively participated in her passive rental real estate activity and her loss was less than $25,000, she can deduct the loss on her return. Free tax extension Marie also meets all of the requirements for not having to file Form 8582. Free tax extension She uses Schedule E, Part I, to report her rental income and expenses. Free tax extension She enters her income, expenses, and depreciation for the house in the column for Property A and enters her loss on line 22. Free tax extension Form 4562 is not required. Free tax extension Prev  Up  Next   Home   More Online Publications