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Free Tax Filing State

Free tax filing state 2. Free tax filing state   Employees' Pay Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Tests for Deducting PayTest 1—Reasonableness Test 2—For Services Performed Kinds of PayAwards Bonuses Education Expenses Fringe Benefits Loans or Advances Property Reimbursements for Business Expenses Sick and Vacation Pay Introduction You can generally deduct the amount you pay your employees for the services they perform. Free tax filing state The pay may be in cash, property, or services. Free tax filing state It may include wages, salaries, bonuses, commissions, or other non-cash compensation such as vacation allowances and fringe benefits. Free tax filing state For information about deducting employment taxes, see chapter 5. Free tax filing state You can claim employment credits, such as the following, if you hire individuals who meet certain requirements. Free tax filing state Empowerment zone employment credit (Form 8844). Free tax filing state Indian employment credit (Form 8845). Free tax filing state Work opportunity credit (Form 5884). Free tax filing state Credit for employer differential wage payments (Form 8932). Free tax filing state Reduce your deduction for employee wages by the amount of employment credits you claim. Free tax filing state For more information about these credits, see the form on which the credit is claimed. Free tax filing state Topics - This chapter discusses: Tests for deducting pay Kinds of pay Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits See chapter 12 for information about getting publications and forms. Free tax filing state Tests for Deducting Pay To be deductible, your employees' pay must be an ordinary and necessary business expense and you must pay or incur it. Free tax filing state These and other requirements that apply to all business expenses are explained in chapter 1. Free tax filing state In addition, the pay must meet both of the following tests. Free tax filing state Test 1. Free tax filing state It must be reasonable. Free tax filing state Test 2. Free tax filing state It must be for services performed. Free tax filing state The form or method of figuring the pay does not affect its deductibility. Free tax filing state For example, bonuses and commissions based on sales or earnings, and paid under an agreement made before the services were performed, are both deductible. Free tax filing state Test 1—Reasonableness You must be able to prove that the pay is reasonable. Free tax filing state Whether the pay is reasonable depends on the circumstances that existed when you contracted for the services, not those that exist when reasonableness is questioned. Free tax filing state If the pay is excessive, the excess pay is disallowed as a deduction. Free tax filing state Factors to consider. Free tax filing state   Determine the reasonableness of pay by the facts and circumstances. Free tax filing state Generally, reasonable pay is the amount that a similar business would pay for the same or similar services. Free tax filing state   To determine if pay is reasonable, also consider the following items and any other pertinent facts. Free tax filing state The duties performed by the employee. Free tax filing state The volume of business handled. Free tax filing state The character and amount of responsibility. Free tax filing state The complexities of your business. Free tax filing state The amount of time required. Free tax filing state The cost of living in the locality. Free tax filing state The ability and achievements of the individual employee performing the service. Free tax filing state The pay compared with the gross and net income of the business, as well as with distributions to shareholders if the business is a corporation. Free tax filing state Your policy regarding pay for all your employees. Free tax filing state The history of pay for each employee. Free tax filing state Test 2—For Services Performed You must be able to prove the payment was made for services actually performed. Free tax filing state Employee-shareholder salaries. Free tax filing state   If a corporation pays an employee who is also a shareholder a salary that is unreasonably high considering the services actually performed, the excessive part of the salary may be treated as a constructive dividend to the employee-shareholder. Free tax filing state The excessive part of the salary would not be allowed as a salary deduction by the corporation. Free tax filing state For more information on corporate distributions to shareholders, see Publication 542, Corporations. Free tax filing state Kinds of Pay Some of the ways you may provide pay to your employees in addition to regular wages or salaries are discussed next. Free tax filing state For specialized and detailed information on employees' pay and the employment tax treatment of employees' pay, see Publications 15, 15-A, and 15-B. Free tax filing state Awards You can generally deduct amounts you pay to your employees as awards, whether paid in cash or property. Free tax filing state If you give property to an employee as an employee achievement award, your deduction may be limited. Free tax filing state Achievement awards. Free tax filing state   An achievement award is an item of tangible personal property that meets all the following requirements. Free tax filing state It is given to an employee for length of service or safety achievement. Free tax filing state It is awarded as part of a meaningful presentation. Free tax filing state It is awarded under conditions and circumstances that do not create a significant likelihood of disguised pay. Free tax filing state Length-of-service award. Free tax filing state    An award will qualify as a length-of-service award only if either of the following applies. Free tax filing state The employee receives the award after his or her first 5 years of employment. Free tax filing state The employee did not receive another length-of-service award (other than one of very small value) during the same year or in any of the prior 4 years. Free tax filing state Safety achievement award. Free tax filing state    An award for safety achievement will qualify as an achievement award unless one of the following applies. Free tax filing state It is given to a manager, administrator, clerical employee, or other professional employee. Free tax filing state During the tax year, more than 10% of your employees, excluding those listed in (1), have already received a safety achievement award (other than one of very small value). Free tax filing state Deduction limit. Free tax filing state   Your deduction for the cost of employee achievement awards given to any one employee during the tax year is limited to the following. Free tax filing state $400 for awards that are not qualified plan awards. Free tax filing state $1,600 for all awards, whether or not qualified plan awards. Free tax filing state   A qualified plan award is an achievement award given as part of an established written plan or program that does not favor highly compensated employees as to eligibility or benefits. Free tax filing state   A highly compensated employee is an employee who meets either of the following tests. Free tax filing state The employee was a 5% owner at any time during the year or the preceding year. Free tax filing state The employee received more than $115,000 in pay for the preceding year. Free tax filing state You can choose to ignore test (2) if the employee was not also in the top 20% of employees ranked by pay for the preceding year. Free tax filing state   An award is not a qualified plan award if the average cost of all the employee achievement awards given during the tax year (that would be qualified plan awards except for this limit) is more than $400. Free tax filing state To figure this average cost, ignore awards of nominal value. Free tax filing state Deduct achievement awards as a nonwage business expense on your return or business schedule. Free tax filing state You may not owe employment taxes on the value of some achievement awards you provide to an employee. Free tax filing state See Publication 15-B. Free tax filing state Bonuses You can generally deduct a bonus paid to an employee if you intended the bonus as additional pay for services, not as a gift, and the services were performed. Free tax filing state However, the total bonuses, salaries, and other pay must be reasonable for the services performed. Free tax filing state If the bonus is paid in property, see Property , later. Free tax filing state Gifts of nominal value. Free tax filing state    If, to promote employee goodwill, you distribute food or merchandise of nominal value to your employees at holidays, you can deduct the cost of these items as a nonwage business expense. Free tax filing state Your deduction for de minimis gifts of food or drink are not subject to the 50% deduction limit that generally applies to meals. Free tax filing state For more information on this deduction limit, see Meals and lodging , later. Free tax filing state Education Expenses If you pay or reimburse education expenses for an employee, you can deduct the payments if they are part of a qualified educational assistance program. Free tax filing state Deduct them on the “Employee benefit programs” or other appropriate line of your tax return. Free tax filing state For information on educational assistance programs, see Educational Assistance in section 2 of Publication 15-B. Free tax filing state Fringe Benefits A fringe benefit is a form of pay for the performance of services. Free tax filing state You can generally deduct the cost of fringe benefits. Free tax filing state You may be able to exclude all or part of the value of some fringe benefits from your employees' pay. Free tax filing state You also may not owe employment taxes on the value of the fringe benefits. Free tax filing state See Table 2-1, Special Rules for Various Types of Fringe Benefits, in Publication 15-B for details. Free tax filing state Your deduction for the cost of fringe benefits for activities generally considered entertainment, amusement, or recreation, or for a facility used in connection with such an activity (for example, a company aircraft) for certain officers, directors, and more-than-10% shareholders is limited. Free tax filing state Certain fringe benefits are discussed next. Free tax filing state See Publication 15-B for more details on these and other fringe benefits. Free tax filing state Meals and lodging. Free tax filing state   You can usually deduct the cost of furnishing meals and lodging to your employees. Free tax filing state Deduct the cost in whatever category the expense falls. Free tax filing state For example, if you operate a restaurant, deduct the cost of the meals you furnish to employees as part of the cost of goods sold. Free tax filing state If you operate a nursing home, motel, or rental property, deduct the cost of furnishing lodging to an employee as expenses for utilities, linen service, salaries, depreciation, etc. Free tax filing state Deduction limit on meals. Free tax filing state   You can generally deduct only 50% of the cost of furnishing meals to your employees. Free tax filing state However, you can deduct the full cost of the following meals. Free tax filing state Meals whose value you include in an employee's wages. Free tax filing state Meals that qualify as a de minimis fringe benefit as discussed in section 2 of Publication 15-B. Free tax filing state This generally includes meals you furnish to employees at your place of business if more than half of these employees are provided the meals for your convenience. Free tax filing state Meals you furnish to your employees at the work site when you operate a restaurant or catering service. Free tax filing state Meals you furnish to your employees as part of the expense of providing recreational or social activities, such as a company picnic. Free tax filing state Meals you are required by federal law to furnish to crew members of certain commercial vessels (or would be required to furnish if the vessels were operated at sea). Free tax filing state This does not include meals you furnish on vessels primarily providing luxury water transportation. Free tax filing state Meals you furnish on an oil or gas platform or drilling rig located offshore or in Alaska. Free tax filing state This includes meals you furnish at a support camp that is near and integral to an oil or gas drilling rig located in Alaska. Free tax filing state Employee benefit programs. Free tax filing state   Employee benefit programs include the following. Free tax filing state Accident and health plans. Free tax filing state Adoption assistance. Free tax filing state Cafeteria plans. Free tax filing state Dependent care assistance. Free tax filing state Education assistance. Free tax filing state Life insurance coverage. Free tax filing state Welfare benefit funds. Free tax filing state   You can generally deduct amounts you spend on employee benefit programs on the applicable line of your tax return. Free tax filing state For example, if you provide dependent care by operating a dependent care facility for your employees, deduct your costs in whatever categories they fall (utilities, salaries, etc. Free tax filing state ). Free tax filing state Life insurance coverage. Free tax filing state   You cannot deduct the cost of life insurance coverage for you, an employee, or any person with a financial interest in your business, if you are directly or indirectly the beneficiary of the policy. Free tax filing state See Regulations section 1. Free tax filing state 264-1 for more information. Free tax filing state Welfare benefit funds. Free tax filing state   A welfare benefit fund is a funded plan (or a funded arrangement having the effect of a plan) that provides welfare benefits to your employees, independent contractors, or their beneficiaries. Free tax filing state Welfare benefits are any benefits other than deferred compensation or transfers of restricted property. Free tax filing state   Your deduction for contributions to a welfare benefit fund is limited to the fund's qualified cost for the tax year. Free tax filing state If your contributions to the fund are more than its qualified cost, carry the excess over to the next tax year. Free tax filing state   Generally, the fund's “qualified cost” is the total of the following amounts, reduced by the after-tax income of the fund. Free tax filing state The cost you would have been able to deduct using the cash method of accounting if you had paid for the benefits directly. Free tax filing state The contributions added to a reserve account that are needed to fund claims incurred but not paid as of the end of the year. Free tax filing state These claims can be for supplemental unemployment benefits, severance pay, or disability, medical, or life insurance benefits. Free tax filing state   For more information, see sections 419(c) and 419A of the Internal Revenue Code and the related regulations. Free tax filing state Loans or Advances You generally can deduct as wages an advance you make to an employee for services performed if you do not expect the employee to repay the advance. Free tax filing state However, if the employee performs no services, treat the amount you advanced as a loan. Free tax filing state If the employee does not repay the loan, treat it as income to the employee. Free tax filing state Below-market interest rate loans. Free tax filing state   On certain loans you make to an employee or shareholder, you are treated as having received interest income and as having paid compensation or dividends equal to that interest. Free tax filing state See Below-Market Loans in chapter 4. Free tax filing state Property If you transfer property (including your company's stock) to an employee as payment for services, you can generally deduct it as wages. Free tax filing state The amount you can deduct is the property's fair market value on the date of the transfer less any amount the employee paid for the property. Free tax filing state You can claim the deduction only for the tax year in which your employee includes the property's value in income. Free tax filing state Your employee is deemed to have included the value in income if you report it on Form W-2, Wage and Tax Statement, in a timely manner. Free tax filing state You treat the deductible amount as received in exchange for the property, and you must recognize any gain or loss realized on the transfer, unless it is the company's stock transferred as payment for services. Free tax filing state Your gain or loss is the difference between the fair market value of the property and its adjusted basis on the date of transfer. Free tax filing state These rules also apply to property transferred to an independent contractor for services, generally reported on Form 1099-MISC, Miscellaneous Income. Free tax filing state Restricted property. Free tax filing state   If the property you transfer for services is subject to restrictions that affect its value, you generally cannot deduct it and do not report gain or loss until it is substantially vested in the recipient. Free tax filing state However, if the recipient pays for the property, you must report any gain at the time of the transfer up to the amount paid. Free tax filing state    “Substantially vested” means the property is not subject to a substantial risk of forfeiture. Free tax filing state This means that the recipient is not likely to have to give up his or her rights in the property in the future. Free tax filing state Reimbursements for Business Expenses You can generally deduct the amount you pay or reimburse employees for business expenses incurred for your business. Free tax filing state However, your deduction may be limited. Free tax filing state If you make the payment under an accountable plan, deduct it in the category of the expense paid. Free tax filing state For example, if you pay an employee for travel expenses incurred on your behalf, deduct this payment as a travel expense. Free tax filing state If you make the payment under a nonaccountable plan, deduct it as wages and include it in the employee's Form W-2. Free tax filing state See Reimbursement of Travel, Meals, and Entertainment in chapter 11 for more information about deducting reimbursements and an explanation of accountable and nonaccountable plans. Free tax filing state Sick and Vacation Pay Sick pay. Free tax filing state   You can deduct amounts you pay to your employees for sickness and injury, including lump-sum amounts, as wages. Free tax filing state However, your deduction is limited to amounts not compensated by insurance or other means. Free tax filing state Vacation pay. Free tax filing state   Vacation pay is an employee benefit. Free tax filing state It includes amounts paid for unused vacation leave. Free tax filing state You can deduct vacation pay only in the tax year in which the employee actually receives it. Free tax filing state This rule applies regardless of whether you use the cash or accrual method of accounting. Free tax filing state Prev  Up  Next   Home   More Online Publications
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Alternative Motor Vehicle Credit

The Alternative Fuel Motor Vehicle Credit was enacted by the Energy Policy Act of 2005 and includes separate credits for four distinct categories of vehicles: 

  1. Qualified Hybrid Vehicles, - expired
  2. Qualified Fuel Cell Vehicles,
  3. Qualified Alternative Fuel Motor Vehicles (QAFMV) and Heavy Hybrids, expired
  4. Advanced Lean-Burn Technology Vehicles.  expired

The amount of the potential credit varies by type of vehicle and which of the four credits applies.

Internal Revenue Code Section 30B provides for the Alternative Motor Vehicle Credit. Notice 2006-9 provides procedures for manufacturers to certify passenger auto and light trucks as Qualified Hybrid Vehicles and Advance Lean Burn Vehicles and Notice 2007-46 provides procedures for heavy hybrid vehicles. Notice 2006-54 provides procedures for manufacturers to certify vehicles as Qualified Alternative Fuel Motor Vehicles (QAFMV). Notice 2008-33 provides procedures for manufacturers to certify Fuel Cell Vehicles.

Each of the four credits under the Alternative Motor Vehicle Credit is addressed individually below.

Qualified Fuel Cell Vehicles

A qualified fuel cell motor vehicle is a vehicle that is propelled by power derived from one or more cells which convert chemical energy directly into electricity.

The base amount of the new qualified fuel cell motor vehicle credit varies with the gross vehicle weight rating of the vehicle. Passenger automobiles and light trucks are eligible for an additional fuel economy amount that varies with the rated fuel economy of a qualifying vehicle. A list of qualifying cell vehicles is available.

 

Page Last Reviewed or Updated: 11-Feb-2014

The Free Tax Filing State

Free tax filing state Publication 530 - Main Content Table of Contents What You Can and Cannot DeductHardest Hit Fund and Emergency Homeowners' Loan Programs Real Estate Taxes Sales Taxes Home Mortgage Interest Mortgage Insurance Premiums Mortgage Interest CreditFiguring the Credit BasisFiguring Your Basis Adjusted Basis Keeping Records How To Get Tax HelpLow Income Taxpayer Clinics What You Can and Cannot Deduct To deduct expenses of owning a home, you must file Form 1040, U. Free tax filing state S. Free tax filing state Individual Income Tax Return, and itemize your deductions on Schedule A (Form 1040). Free tax filing state If you itemize, you cannot take the standard deduction. Free tax filing state This section explains what expenses you can deduct as a homeowner. Free tax filing state It also points out expenses that you cannot deduct. Free tax filing state There are four primary discussions: real estate taxes, sales taxes, home mortgage interest, and mortgage insurance premiums. Free tax filing state Generally, your real estate taxes, home mortgage interest, and mortgage insurance premiums are included in your house payment. Free tax filing state Your house payment. Free tax filing state   If you took out a mortgage (loan) to finance the purchase of your home, you probably have to make monthly house payments. Free tax filing state Your house payment may include several costs of owning a home. Free tax filing state The only costs you can deduct are real estate taxes actually paid to the taxing authority, interest that qualifies as home mortgage interest, and mortgage insurance premiums. Free tax filing state These are discussed in more detail later. Free tax filing state   Some nondeductible expenses that may be included in your house payment include: Fire or homeowner's insurance premiums, and The amount applied to reduce the principal of the mortgage. Free tax filing state Minister's or military housing allowance. Free tax filing state   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you still can deduct your real estate taxes and your home mortgage interest. Free tax filing state You do not have to reduce your deductions by your nontaxable allowance. Free tax filing state For more information see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers, and Publication 3, Armed Forces' Tax Guide. Free tax filing state Nondeductible payments. Free tax filing state   You cannot deduct any of the following items. Free tax filing state Insurance (other than mortgage insurance premiums), including fire and comprehensive coverage, and title insurance. Free tax filing state Wages you pay for domestic help. Free tax filing state Depreciation. Free tax filing state The cost of utilities, such as gas, electricity, or water. Free tax filing state Most settlement costs. Free tax filing state See Settlement or closing costs under Cost as Basis, later, for more information. Free tax filing state Forfeited deposits, down payments, or earnest money. Free tax filing state Hardest Hit Fund and Emergency Homeowners' Loan Programs 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. Free tax filing state 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. Free tax filing state 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. Free tax filing state 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), box 4 (mortgage insurance premiums) and box 5 (real property taxes). Free tax filing state 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. Free tax filing state Real Estate Taxes Most state and local governments charge an annual tax on the value of real property. Free tax filing state This is called a real estate tax. Free tax filing state You can deduct the tax if it is assessed uniformly at a like rate on all real property throughout the community. Free tax filing state The proceeds must be for general community or governmental purposes and not be a payment for a special privilege granted or service rendered to you. Free tax filing state Deductible Real Estate Taxes You can deduct real estate taxes imposed on you. Free tax filing state You must have paid them either at settlement or closing, or to a taxing authority (either directly or through an escrow account) during the year. Free tax filing state If you own a cooperative apartment, see Special Rules for Cooperatives , later. Free tax filing state Where to deduct real estate taxes. Free tax filing state   Enter the amount of your deductible real estate taxes on Schedule A (Form 1040), line 6. Free tax filing state Real estate taxes paid at settlement or closing. Free tax filing state   Real estate taxes are generally divided so that you and the seller each pay taxes for the part of the property tax year you owned the home. Free tax filing state Your share of these taxes is fully deductible if you itemize your deductions. Free tax filing state Division of real estate taxes. Free tax filing state   For federal income tax purposes, the seller is treated as paying the property taxes up to, but not including, the date of sale. Free tax filing state You (the buyer) are treated as paying the taxes beginning with the date of sale. Free tax filing state This applies regardless of the lien dates under local law. Free tax filing state Generally, this information is included on the settlement statement you get at closing. Free tax filing state   You and the seller each are considered to have paid your own share of the taxes, even if one or the other paid the entire amount. Free tax filing state You each can deduct your own share, if you itemize deductions, for the year the property is sold. Free tax filing state Example. Free tax filing state You bought your home on September 1. Free tax filing state The property tax year (the period to which the tax relates) in your area is the calendar year. Free tax filing state The tax for the year was $730 and was due and paid by the seller on August 15. Free tax filing state You owned your new home during the property tax year for 122 days (September 1 to December 31, including your date of purchase). Free tax filing state You figure your deduction for real estate taxes on your home as follows. Free tax filing state 1. Free tax filing state Enter the total real estate taxes for the real property tax year $730 2. Free tax filing state Enter the number of days in the property tax year that you owned the property 122 3. Free tax filing state Divide line 2 by 365 . Free tax filing state 3342 4. Free tax filing state Multiply line 1 by line 3. Free tax filing state This is your deduction. Free tax filing state Enter it on Schedule A (Form 1040), line 6 $244   You can deduct $244 on your return for the year if you itemize your deductions. Free tax filing state You are considered to have paid this amount and can deduct it on your return even if, under the contract, you did not have to reimburse the seller. Free tax filing state Delinquent taxes. Free tax filing state   Delinquent taxes are unpaid taxes that were imposed on the seller for an earlier tax year. Free tax filing state If you agree to pay delinquent taxes when you buy your home, you cannot deduct them. Free tax filing state You treat them as part of the cost of your home. Free tax filing state See Real estate taxes , later, under Basis. Free tax filing state Escrow accounts. Free tax filing state   Many monthly house payments include an amount placed in escrow (put in the care of a third party) for real estate taxes. Free tax filing state You may not be able to deduct the total you pay into the escrow account. Free tax filing state You can deduct only the real estate taxes that the lender actually paid from escrow to the taxing authority. Free tax filing state Your real estate tax bill will show this amount. Free tax filing state Refund or rebate of real estate taxes. Free tax filing state   If you receive a refund or rebate of real estate taxes this year for amounts you paid this year, you must reduce your real estate tax deduction by the amount refunded to you. Free tax filing state If the refund or rebate was for real estate taxes paid for a prior year, you may have to include some or all of the refund in your income. Free tax filing state For more information, see Recoveries in Publication 525, Taxable and Nontaxable Income. Free tax filing state Items You Cannot Deduct as Real Estate Taxes The following items are not deductible as real estate taxes. Free tax filing state Charges for services. Free tax filing state   An itemized charge for services to specific property or people is not a tax, even if the charge is paid to the taxing authority. Free tax filing state You cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged for trash collection), or A flat fee charged for a single service provided by your local government (such as a $30 charge for mowing your lawn because it had grown higher than permitted under a local ordinance). Free tax filing state    You must look at your real estate tax bill to decide if any nondeductible itemized charges, such as those listed above, are included in the bill. Free tax filing state If your taxing authority (or lender) does not furnish you a copy of your real estate tax bill, ask for it. Free tax filing state Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. Free tax filing state Assessments for local benefits. Free tax filing state   You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. Free tax filing state Local benefits include the construction of streets, sidewalks, or water and sewer systems. Free tax filing state You must add these amounts to the basis of your property. Free tax filing state   You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. Free tax filing state An example is a charge to repair an existing sidewalk and any interest included in that charge. Free tax filing state   If only a part of the assessment is for maintenance, repair, or interest charges, you must be able to show the amount of that part to claim the deduction. Free tax filing state If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. Free tax filing state   An assessment for a local benefit may be listed as an item in your real estate tax bill. Free tax filing state If so, use the rules in this section to find how much of it, if any, you can deduct. Free tax filing state Transfer taxes (or stamp taxes). Free tax filing state   You cannot deduct transfer taxes and similar taxes and charges on the sale of a personal home. Free tax filing state If you are the buyer and you pay them, include them in the cost basis of the property. Free tax filing state If you are the seller and you pay them, they are expenses of the sale and reduce the amount realized on the sale. Free tax filing state Homeowners association assessments. Free tax filing state   You cannot deduct these assessments because the homeowners association, rather than a state or local government, imposes them. Free tax filing state Special Rules for Cooperatives If you own a cooperative apartment, some special rules apply to you, though you generally receive the same tax treatment as other homeowners. Free tax filing state As an owner of a cooperative apartment, you own shares of stock in a corporation that owns or leases housing facilities. Free tax filing state You can deduct your share of the corporation's deductible real estate taxes if the cooperative housing corporation meets the following conditions: The corporation has only one class of stock outstanding, Each stockholder, solely because of ownership of the stock, can live in a house, apartment, or house trailer owned or leased by the corporation, No stockholder can receive any distribution out of capital, except on a partial or complete liquidation of the corporation, and At least one of the following: At least 80% of the corporation's gross income for the tax year was paid by the tenant-stockholders. Free tax filing state For this purpose, gross income means all income received during the entire tax year, including any received before the corporation changed to cooperative ownership. Free tax filing state At least 80% of the total square footage of the corporation's property must be available for use by the tenant-stockholders during the entire tax year. Free tax filing state At least 90% of the expenditures paid or incurred by the corporation were used for the acquisition, construction, management, maintenance, or care of the property for the benefit of the tenant-shareholders during the entire tax year. Free tax filing state Tenant-stockholders. Free tax filing state   A tenant-stockholder can be any entity (such as a corporation, trust, estate, partnership, or association) as well as an individual. Free tax filing state The tenant-stockholder does not have to live in any of the cooperative's dwelling units. Free tax filing state The units that the tenant-stockholder has the right to occupy can be rented to others. Free tax filing state Deductible taxes. Free tax filing state   You figure your share of real estate taxes in the following way. Free tax filing state Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. Free tax filing state Multiply the corporation's deductible real estate taxes by the number you figured in (1). Free tax filing state This is your share of the real estate taxes. Free tax filing state   Generally, the corporation will tell you your share of its real estate tax. Free tax filing state This is the amount you can deduct if it reasonably reflects the cost of real estate taxes for your dwelling unit. Free tax filing state Refund of real estate taxes. Free tax filing state   If the corporation receives a refund of real estate taxes it paid in an earlier year, it must reduce the amount of real estate taxes paid this year when it allocates the tax expense to you. Free tax filing state Your deduction for real estate taxes the corporation paid this year is reduced by your share of the refund the corporation received. Free tax filing state Sales Taxes Generally, you can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040). Free tax filing state Deductible sales taxes may include sales taxes paid on your home (including mobile and prefabricated), or home building materials if the tax rate was the same as the general sales tax rate. Free tax filing state For information on figuring your deduction, see the Instructions for Schedule A (Form 1040). Free tax filing state If you elect to deduct the sales taxes paid on your home, or home building materials, you cannot include them as part of your cost basis in the home. Free tax filing state Home Mortgage Interest This section of the publication gives you basic information about home mortgage interest, including information on interest paid at settlement, points, and Form 1098, Mortgage Interest Statement. Free tax filing state Most home buyers take out a mortgage (loan) to buy their home. Free tax filing state They then make monthly payments to either the mortgage holder or someone collecting the payments for the mortgage holder. Free tax filing state Usually, you can deduct the entire part of your payment that is for mortgage interest, if you itemize your deductions on Schedule A (Form 1040). Free tax filing state However, your deduction may be limited if: Your total mortgage balance is more than $1 million ($500,000 if married filing separately), or You took out a mortgage for reasons other than to buy, build, or improve your home. Free tax filing state If either of these situations applies to you, see Publication 936 for more information. Free tax filing state Also see Publication 936 if you later refinance your mortgage or buy a second home. Free tax filing state Refund of home mortgage interest. Free tax filing state   If you receive a refund of home mortgage interest that you deducted in an earlier year and that reduced your tax, you generally must include the refund in income in the year you receive it. Free tax filing state For more information, see Recoveries in Publication 525. Free tax filing state The amount of the refund will usually be shown on the mortgage interest statement you receive from your mortgage lender. Free tax filing state See Mortgage Interest Statement , later. Free tax filing state Deductible Mortgage Interest To be deductible, the interest you pay must be on a loan secured by your main home or a second home. Free tax filing state The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. Free tax filing state Prepaid interest. Free tax filing state   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. Free tax filing state Generally, you can deduct in each year only the interest that qualifies as home mortgage interest for that year. Free tax filing state An exception (discussed later) applies to points. Free tax filing state Late payment charge on mortgage payment. Free tax filing state   You can deduct as home mortgage interest a late payment charge if it was not for a specific service in connection with your mortgage loan. Free tax filing state Mortgage prepayment penalty. Free tax filing state   If you pay off your home mortgage early, you may have to pay a penalty. Free tax filing state 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. Free tax filing state Ground rent. Free tax filing state   In some states (such as Maryland), you may buy your home subject to a ground rent. Free tax filing state A ground rent is an obligation you assume to pay a fixed amount per year on the property. Free tax filing state Under this arrangement, you are leasing (rather than buying) the land on which your home is located. Free tax filing state Redeemable ground rents. Free tax filing state   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. Free tax filing state The ground rent is a redeemable ground rent only if all of the following are true. Free tax filing state Your lease, including renewal periods, is for more than 15 years. Free tax filing state You can freely assign the lease. Free tax filing state You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specified amount. Free tax filing state The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. Free tax filing state   Payments made to end the lease and buy the lessor's entire interest in the land are not redeemable ground rents. Free tax filing state You cannot deduct them. Free tax filing state Nonredeemable ground rents. Free tax filing state   Payments on a nonredeemable ground rent are not mortgage interest. Free tax filing state You can deduct them as rent only if they are a business expense or if they are for rental property. Free tax filing state Cooperative apartment. Free tax filing state   You can usually treat the interest on a loan you took out to buy stock in a cooperative housing corporation as home mortgage interest if you own a cooperative apartment, and the cooperative housing corporation meets the conditions described earlier under Special Rules for Cooperatives . Free tax filing state In addition, you can treat as home mortgage interest your share of the corporation's deductible mortgage interest. Free tax filing state Figure your share of mortgage interest the same way that is shown for figuring your share of real estate taxes in the Example under Division of real estate taxes, earlier. Free tax filing state For more information on cooperatives, see Special Rule for Tenant-Stockholders in Cooperative Housing Corporations in Publication 936. Free tax filing state Refund of cooperative's mortgage interest. Free tax filing state   You must reduce your mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. Free tax filing state The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. Free tax filing state   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. Free tax filing state Mortgage Interest Paid at Settlement One item that normally appears on a settlement or closing statement is home mortgage interest. Free tax filing state You can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). Free tax filing state This amount should be included in the mortgage interest statement provided by your lender. Free tax filing state See the discussion under Mortgage Interest Statement , later. Free tax filing state Also, if you pay interest in advance, see Prepaid interest , earlier, and Points , next. Free tax filing state Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Free tax filing state Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points. Free tax filing state A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Free tax filing state See Points paid by the seller , later. Free tax filing state General rule. Free tax filing state   You cannot deduct the full amount of points in the year paid. Free tax filing state They are prepaid interest, so you generally must deduct them over the life (term) of the mortgage. Free tax filing state Exception. Free tax filing state   You can deduct the full amount of points in the year paid if you meet all the following tests. Free tax filing state Your loan is secured by your main home. Free tax filing state (Generally, your main home is the one you live in most of the time. Free tax filing state ) Paying points is an established business practice in the area where the loan was made. Free tax filing state The points paid were not more than the points generally charged in that area. Free tax filing state You use the cash method of accounting. Free tax filing state This means you report income in the year you receive it and deduct expenses in the year you pay them. Free tax filing state Most individuals use this method. Free tax filing state 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. Free tax filing state The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Free tax filing state The funds you provided are not required to have been applied to the points. Free tax filing state They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Free tax filing state You cannot have borrowed these funds. Free tax filing state You use your loan to buy or build your main home. Free tax filing state The points were computed as a percentage of the principal amount of the mortgage. Free tax filing state The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. Free tax filing state The points may be shown as paid from either your funds or the seller's. Free tax filing state Note. Free tax filing state If you meet all of the tests listed above and you itemize your deductions in the year you get the loan, you can either deduct the full amount of points in the year paid or deduct them over the life of the loan, beginning in the year you get the loan. Free tax filing state If you do not itemize your deductions in the year you get the loan, you can spread the points over the life of the loan and deduct the appropriate amount in each future year, if any, when you do itemize your deductions. Free tax filing state Home improvement loan. Free tax filing state   You can also fully deduct in the year paid points paid on a loan to improve your main home, if you meet the first six tests listed earlier. Free tax filing state Refinanced loan. Free tax filing state   If you use part of the refinanced mortgage proceeds to improve your main home and you meet the first six tests listed earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Free tax filing state You can deduct the rest of the points over the life of the loan. Free tax filing state Points not fully deductible in year paid. Free tax filing state    If you do not qualify under the exception to deduct the full amount of points in the year paid (or choose not to do so), see Points in Publication 936 for the rules on when and how much you can deduct. Free tax filing state Figure A. Free tax filing state   You can use Figure A, next, as a quick guide to see whether your points are fully deductible in the year paid. Free tax filing state    Please click here for the text description of the image. Free tax filing state Figure A. Free tax filing state Are my points fully deductible this year? Amounts charged for services. Free tax filing state   Amounts charged by the lender for specific services connected to the loan are not interest. Free tax filing state Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Free tax filing state You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Free tax filing state For information about the tax treatment of these amounts and other settlement fees and closing costs, see Basis , later. Free tax filing state Points paid by the seller. Free tax filing state   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Free tax filing state Treatment by seller. Free tax filing state   The seller cannot deduct these fees as interest. Free tax filing state However, they are a selling expense that reduces the seller's amount realized. Free tax filing state See Publication 523 for more information. Free tax filing state Treatment by buyer. Free tax filing state   The buyer treats seller-paid points as if he or she had paid them. Free tax filing state If all the tests listed earlier under Exception are met, the buyer can deduct the points in the year paid. Free tax filing state If any of those tests are not met, the buyer must deduct the points over the life of the loan. Free tax filing state   The buyer must also reduce the basis of the home by the amount of the seller-paid points. Free tax filing state For more information about the basis of your home, see Basis , later. Free tax filing state Funds provided are less than points. Free tax filing state   If you meet all the tests listed earlier under Exception 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. Free tax filing state In addition, you can deduct any points paid by the seller. Free tax filing state Example 1. Free tax filing state When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Free tax filing state You meet all the tests for deducting points in the year paid (see Exception , earlier), except the only funds you provided were a $750 down payment. Free tax filing state Of the $1,000 you were charged for points, you can deduct $750 in the year paid. Free tax filing state You spread the remaining $250 over the life of the mortgage. Free tax filing state Example 2. Free tax filing state 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. Free tax filing state In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Free tax filing state You spread the remaining $250 over the life of the mortgage. Free tax filing state You must reduce the basis of your home by the $1,000 paid by the seller. Free tax filing state Excess points. Free tax filing state   If you meet all the tests under Exception , earlier, except that the points paid were more than are generally charged in your area (test 3), you can deduct in the year paid only the points that are generally charged. Free tax filing state You must spread any additional points over the life of the mortgage. Free tax filing state Mortgage ending early. Free tax filing state   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. Free tax filing state A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Free tax filing state Example. Free tax filing state Dan paid $3,000 in points in 2006 that he had to spread out over the 15-year life of the mortgage. Free tax filing state He had deducted $1,400 of these points through 2012. Free tax filing state Dan prepaid his mortgage in full in 2013. Free tax filing state He can deduct the remaining $1,600 of points in 2013. Free tax filing state Exception. Free tax filing state   If you refinance the mortgage with the same lender, you cannot deduct any remaining points for the year. Free tax filing state Instead, deduct them over the term of the new loan. Free tax filing state Form 1098. Free tax filing state   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your deductible points paid during the year. Free tax filing state See Mortgage Interest Statement , later. Free tax filing state Where To Deduct Home Mortgage Interest Enter on Schedule A (Form 1040), line 10, the home mortgage interest and points reported to you on Form 1098 (discussed next). Free tax filing state If you did not receive a Form 1098, enter your deductible interest on line 11, and any deductible points on line 12. Free tax filing state See Table 1 below for a summary of where to deduct home mortgage interest and real estate taxes. Free tax filing state If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and social security number (SSN) or employer identification number (EIN) on the dotted lines next to line 11. Free tax filing state The seller must give you this number and you must give the seller your SSN. Free tax filing state Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Free tax filing state Failure to meet either of these requirements may result in a $50 penalty for each failure. Free tax filing state Table 1. Free tax filing state Where To Deduct Interest and Taxes Paid on Your Home See the text for information on what expenses are eligible. Free tax filing state IF you are eligible to deduct . Free tax filing state . Free tax filing state . Free tax filing state THEN report the amount  on Schedule A (Form 1040) . Free tax filing state . Free tax filing state . Free tax filing state real estate taxes line 6. Free tax filing state home mortgage interest and points reported on Form 1098 line 10. Free tax filing state home mortgage interest not reported on  Form 1098 line 11. Free tax filing state points not reported on Form 1098 line 12. Free tax filing state qualified mortgage insurance premiums line 13. Free tax filing state 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 to a mortgage holder in the course of that holder's trade or business, you should receive a Form 1098 or similar statement from the mortgage holder. Free tax filing state The statement will show the total interest paid on your mortgage during the year. Free tax filing state If you bought a main home during the year, it also will show the deductible points you paid and any points you can deduct that were paid by the person who sold you your home. Free tax filing state See Points , earlier. Free tax filing state The interest you paid at settlement should be included on the statement. Free tax filing state If it is not, add the interest from the settlement sheet that qualifies as home mortgage interest to the total shown on Form 1098 or similar statement. Free tax filing state Put the total on Schedule A (Form 1040), line 10, and attach a statement to your return explaining the difference. Free tax filing state Write “See attached” to the right of line 10. Free tax filing state A mortgage holder can be a financial institution, a governmental unit, or a cooperative housing corporation. Free tax filing state If a statement comes from a cooperative housing corporation, it generally will show your share of interest. Free tax filing state Your mortgage interest statement for 2013 should be provided or sent to you by January 31, 2014. Free tax filing state If it is mailed, you should allow adequate time to receive it before contacting the mortgage holder. Free tax filing state A copy of this form will be sent to the IRS also. Free tax filing state Example. Free tax filing state You bought a new home on May 3. Free tax filing state You paid no points on the purchase. Free tax filing state During the year, you made mortgage payments which included $4,480 deductible interest on your new home. Free tax filing state The settlement sheet for the purchase of the home included interest of $620 for 29 days in May. Free tax filing state The mortgage statement you receive from the lender includes total interest of $5,100 ($4,480 + $620). Free tax filing state You can deduct the $5,100 if you itemize your deductions. Free tax filing state Refund of overpaid interest. Free tax filing state   If you receive a refund of mortgage interest you overpaid in a prior year, you generally will receive a Form 1098 showing the refund in box 3. Free tax filing state Generally, you must include the refund in income in the year you receive it. Free tax filing state See Refund of home mortgage interest , earlier, under Home Mortgage Interest. Free tax filing state More than one borrower. Free tax filing state   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. Free tax filing state Show how much of the interest each of you paid, and give the name and address of the person who received the form. Free tax filing state Deduct your share of the interest on Schedule A (Form 1040), line 11, and write “See attached” to the right of that line. Free tax filing state Mortgage Insurance Premiums You may be able to take an itemized deduction on Schedule A (Form 1040), line 13, for premiums you pay or accrue during 2013 for qualified mortgage insurance in connection with home acquisition debt on your qualified home. Free tax filing state Mortgage insurance premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as an itemized deduction. Free tax filing state Qualified Mortgage Insurance Qualified mortgage insurance is mortgage insurance provided by the Veterans Administration, the Federal Housing Administration, or the Rural Housing Administration, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). Free tax filing state Prepaid mortgage insurance premiums. Free tax filing state   If you paid premiums that are allocable to periods after 2013, you must allocate them over the shorter of: The stated term of the mortgage, or 84 months, beginning with the month the insurance was obtained. Free tax filing state The premiums are treated as paid in the year to which they were allocated. Free tax filing state If the mortgage is satisfied before its term, no deduction is allowed for the unamortized balance. Free tax filing state See Publication 936 for details. Free tax filing state Exception for certain mortgage insurance. Free tax filing state   The allocation rules, explained above, do not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Service. Free tax filing state Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home. Free tax filing state It also must be secured by that home. Free tax filing state If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. Free tax filing state Home acquisition debt limit. Free tax filing state   The total amount you can treat as home acquisition debt at any time on your home cannot be more than $1 million ($500,000 if married filing separately). Free tax filing state Discharges of qualified principal residence indebtedness. Free tax filing state   You can exclude from gross income any discharges of qualified principal residence indebtedness made after 2006 and before 2014. Free tax filing state You must reduce the basis of your principal residence (but not below zero) by the amount you exclude. Free tax filing state Principal residence. Free tax filing state   Your principal residence is the home where you ordinarily live most of the time. Free tax filing state You can have only one principal residence at any one time. Free tax filing state Qualified principal residence indebtedness. Free tax filing state   This is a mortgage that you took out to buy, build, or substantially improve your principal residence and that is secured by that residence. Free tax filing state If the amount of your original mortgage is more than the cost of your principal residence plus the cost of substantial improvements, qualified principal residence indebtedness cannot be more than the cost of your principal residence plus improvements. Free tax filing state   Any debt secured by your principal residence that you use to refinance qualified principal residence indebtedness is qualified principal residence indebtedness up to the amount of your old mortgage principal just before the refinancing. Free tax filing state Additional debt incurred to substantially improve your principal residence is also qualified principal residence indebtedness. Free tax filing state Amount you can exclude. Free tax filing state   You can only exclude debt discharged after 2006 and before 2014. Free tax filing state The most you can exclude is $2 million ($1 million if married filing separately). Free tax filing state You cannot exclude any amount that was discharged because of services performed for the lender or on account of any other factor not directly related either to a decline in the value of your residence or to your financial condition. Free tax filing state Ordering rule. Free tax filing state   If only a part of a loan is qualified principal residence indebtedness, you can exclude only the amount of the discharge that is more than the amount of the loan (immediately before the discharge) that is not qualified principal residence indebtedness. Free tax filing state Qualified Home This means your main home or your second home. Free tax filing state A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. Free tax filing state Main home. Free tax filing state   You can have only one main home at any one time. Free tax filing state This is the home where you ordinarily live most of the time. Free tax filing state Second home and other special situations. Free tax filing state   If you have a second home, use part of your home for other than residential living (such as a home office), rent out part of your home, or are having your home constructed, see Qualified Home in Publication 936. Free tax filing state Limit on Deduction If your adjusted gross income (AGI) 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 deductible is reduced and may be eliminated. Free tax filing state 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. Free tax filing state If your AGI is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Free tax filing state Form 1098. Free tax filing state   The amount of mortgage insurance premiums you paid during 2013 should be reported in box 4. Free tax filing state See Form 1098, Mortgage Interest Statement in Publication 936. Free tax filing state Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals afford home ownership. Free tax filing state If you qualify, you can claim the credit on Form 8396 each year for part of the home mortgage interest you pay. Free tax filing state Who qualifies. Free tax filing state   You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate (MCC) from your state or local government. Free tax filing state Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. Free tax filing state The MCC will show the certificate credit rate you will use to figure your credit. Free tax filing state It also will show the certified indebtedness amount. Free tax filing state Only the interest on that amount qualifies for the credit. Free tax filing state See Figuring the Credit , later. Free tax filing state You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home. Free tax filing state Contact your state or local housing finance agency for information about the availability of MCCs in your area. Free tax filing state How to claim the credit. Free tax filing state   To claim the credit, complete Form 8396 and attach it to your Form 1040 or Form 1040NR, U. Free tax filing state S. Free tax filing state Nonresident Alien Income Tax Return. Free tax filing state Include the credit in your total for Form 1040, line 53, or Form 1040NR, line 50; be sure to check box c and write “Form 8396” on that line. Free tax filing state Reducing your home mortgage interest deduction. Free tax filing state   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. Free tax filing state You must do this even if part of that amount is to be carried forward to 2014. Free tax filing state Selling your home. Free tax filing state   If you purchase a home after 1990 using an MCC, and you sell that home within 9 years, you may have to recapture (repay) all or part of the benefit you received from the MCC program. Free tax filing state For additional information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, in Publication 523. Free tax filing state Figuring the Credit Figure your credit on Form 8396. Free tax filing state Mortgage not more than certified indebtedness. Free tax filing state   If your mortgage loan amount is equal to (or smaller than) the certified indebtedness amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. Free tax filing state Mortgage more than certified indebtedness. Free tax filing state   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. Free tax filing state To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. Free tax filing state Certified indebtedness amount on your MCC Original amount of your mortgage   The fraction will not change as long as you are entitled to take the mortgage interest credit. Free tax filing state Example. Free tax filing state Emily bought a home this year. Free tax filing state Her mortgage loan is $125,000. Free tax filing state The certified indebtedness amount on her MCC is $100,000. Free tax filing state She paid $7,500 interest this year. Free tax filing state Emily figures the interest to enter on Form 8396, line 1, as follows:   $100,000 = 80% (. Free tax filing state 80)       $125,000       $7,500 x . Free tax filing state 80 = $6,000   Emily enters $6,000 on Form 8396, line 1. Free tax filing state In each later year, she will figure her credit using only 80% of the interest she pays for that year. Free tax filing state Limits Two limits may apply to your credit. Free tax filing state A limit based on the credit rate, and A limit based on your tax. Free tax filing state Limit based on credit rate. Free tax filing state   If the certificate credit rate is higher than 20%, the credit you are allowed cannot be more than $2,000. Free tax filing state Limit based on tax. Free tax filing state   After applying the limit based on the credit rate, your credit generally cannot be more than your tax liability. Free tax filing state See the Credit Limit Worksheet in the Form 8396 instructions to calculate the limit based on tax. Free tax filing state Dividing the Credit If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, the credit must be divided based on the interest held by each person. Free tax filing state Example. Free tax filing state John and his brother, George, were issued an MCC. Free tax filing state They used it to get a mortgage on their main home. Free tax filing state John has a 60% ownership interest in the home, and George has a 40% ownership interest in the home. Free tax filing state John paid $5,400 mortgage interest this year and George paid $3,600. Free tax filing state The MCC shows a credit rate of 25% and a certified indebtedness amount of $130,000. Free tax filing state The loan amount (mortgage) on their home is $120,000. Free tax filing state The credit is limited to $2,000 because the credit rate is more than 20%. Free tax filing state John figures the credit by multiplying the mortgage interest he paid this year ($5,400) by the certificate credit rate (25%) for a total of $1,350. Free tax filing state His credit is limited to $1,200 ($2,000 × 60%). Free tax filing state George figures the credit by multiplying the mortgage interest he paid this year ($3,600) by the certificate credit rate (25%) for a total of $900. Free tax filing state His credit is limited to $800 ($2,000 × 40%). Free tax filing state Carryforward If your allowable credit is reduced because of the limit based on your tax, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. Free tax filing state Example. Free tax filing state You receive a mortgage credit certificate from State X. Free tax filing state This year, your regular tax liability is $1,100, you owe no alternative minimum tax, and your mortgage interest credit is $1,700. Free tax filing state You claim no other credits. Free tax filing state Your unused mortgage interest credit for this year is $600 ($1,700 − $1,100). Free tax filing state You can carry forward this amount to the next 3 years or until used, whichever comes first. Free tax filing state Credit rate more than 20%. Free tax filing state   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). Free tax filing state Example. Free tax filing state In the earlier example under Dividing the Credit , John and George used the entire $2,000 credit. Free tax filing state The excess   John $1,350 − $1,200 = $150     George $900 − $800 = $100   $150 for John ($1,350 − $1,200) and $100 for George ($900 − $800) cannot be carried forward to future years, despite the respective tax liabilities for John and George. Free tax filing state Refinancing If you refinance your original mortgage loan on which you had been given an MCC, you must get a new MCC to be able to claim the credit on the new loan. Free tax filing state The amount of credit you can claim on the new loan may change. Free tax filing state Table 2 below summarizes how to figure your credit if you refinance your original mortgage loan. Free tax filing state Table 2. Free tax filing state Effect of Refinancing on Your Credit IF you get a new (reissued) MCC and the amount of your new mortgage is . Free tax filing state . Free tax filing state . Free tax filing state THEN the interest you claim on Form 8396, line 1, is* . Free tax filing state . Free tax filing state . Free tax filing state smaller than or equal to the certified indebtedness amount on the new MCC all the interest paid during the year on your new mortgage. Free tax filing state larger than the certified indebtedness amount on the new MCC interest paid during the year on your new mortgage multiplied by the following fraction. Free tax filing state         certified indebtedness  amount on your new MCC       original amount of your  mortgage   *The credit using the new MCC cannot be more than the credit using the old MCC. Free tax filing state  See New MCC cannot increase your credit above. Free tax filing state An issuer may reissue an MCC after you refinance your mortgage. Free tax filing state If you did not get a new MCC, you may want to contact the state or local housing finance agency that issued your original MCC for information about whether you can get a reissued MCC. Free tax filing state Year of refinancing. Free tax filing state   In the year of refinancing, add the applicable amount of interest paid on the old mortgage and the applicable amount of interest paid on the new mortgage, and enter the total on Form 8396, line 1. Free tax filing state   If your new MCC has a credit rate different from the rate on the old MCC, you must attach a statement to Form 8396. Free tax filing state The statement must show the calculation for lines 1, 2, and 3 for the part of the year when the old MCC was in effect. Free tax filing state It must show a separate calculation for the part of the year when the new MCC was in effect. Free tax filing state Combine the amounts from both calculations for line 3, enter the total on line 3 of the form, and write “See attached” on the dotted line next to line 2. Free tax filing state New MCC cannot increase your credit. Free tax filing state   The credit that you claim with your new MCC cannot be more than the credit that you could have claimed with your old MCC. Free tax filing state   In most cases, the agency that issues your new MCC will make sure that it does not increase your credit. Free tax filing state However, if either your old loan or your new loan has a variable (adjustable) interest rate, you will need to check this yourself. Free tax filing state In that case, you will need to know the amount of the credit you could have claimed using the old MCC. Free tax filing state   There are two methods for figuring the credit you could have claimed. Free tax filing state Under one method, you figure the actual credit that would have been allowed. Free tax filing state This means you use the credit rate on the old MCC and the interest you would have paid on the old loan. Free tax filing state   If your old loan was a variable rate mortgage, you can use another method to determine the credit that you could have claimed. Free tax filing state Under this method, you figure the credit using a payment schedule of a hypothetical self-amortizing mortgage with level payments projected to the final maturity date of the old mortgage. Free tax filing state The interest rate of the hypothetical mortgage is the annual percentage rate (APR) of the new mortgage for purposes of the Federal Truth in Lending Act. Free tax filing state The principal of the hypothetical mortgage is the remaining outstanding balance of the certified mortgage indebtedness shown on the old MCC. Free tax filing state    You must choose one method and use it consistently beginning with the first tax year for which you claim the credit based on the new MCC. Free tax filing state    As part of your tax records, you should keep your old MCC and the schedule of payments for your old mortgage. Free tax filing state Basis Basis is your starting point for figuring a gain or loss if you later sell your home, or for figuring depreciation if you later use part of your home for business purposes or for rent. Free tax filing state While you own your home, you may add certain items to your basis. Free tax filing state You may subtract certain other items from your basis. Free tax filing state These items are called adjustments to basis and are explained later under Adjusted Basis . Free tax filing state It is important that you understand these terms when you first acquire your home because you must keep track of your basis and adjusted basis during the period you own your home. Free tax filing state You also must keep records of the events that affect basis or adjusted basis. Free tax filing state See Keeping Records , below. Free tax filing state Figuring Your Basis How you figure your basis depends on how you acquire your home. Free tax filing state If you buy or build your home, your cost is your basis. Free tax filing state If you receive your home as a gift, your basis is usually the same as the adjusted basis of the person who gave you the property. Free tax filing state If you inherit your home from a decedent, different rules apply depending on the date of the decedent's death. Free tax filing state Each of these topics is discussed later. Free tax filing state Property transferred from a spouse. Free tax filing state   If your home is transferred to you from your spouse, or from your former spouse as a result of a divorce, your basis is the same as your spouse's (or former spouse's) adjusted basis just before the transfer. Free tax filing state Publication 504, Divorced or Separated Individuals, fully discusses transfers between spouses. Free tax filing state Cost as Basis The cost of your home, whether you purchased it or constructed it, is the amount you paid for it, including any debt you assumed. Free tax filing state The cost of your home includes most settlement or closing costs you paid when you bought the home. Free tax filing state If you built your home, your cost includes most closing costs paid when you bought the land or settled on your mortgage. Free tax filing state See Settlement or closing costs , later. Free tax filing state If you elect to deduct the sales taxes on the purchase or construction of your home as an itemized deduction on Schedule A (Form 1040), you cannot include the sales taxes as part of your cost basis in the home. Free tax filing state Purchase. Free tax filing state   The basis of a home you bought is the amount you paid for it. Free tax filing state This usually includes your down payment and any debt you assumed. Free tax filing state The basis of a cooperative apartment is the amount you paid for your shares in the corporation that owns or controls the property. Free tax filing state This amount includes any purchase commissions or other costs of acquiring the shares. Free tax filing state Construction. Free tax filing state   If you contracted to have your home built on land that you own, your basis in the home is your basis in the land plus the amount you paid to have the home built. Free tax filing state This includes the cost of labor and materials, the amount you paid the contractor, any architect's fees, building permit charges, utility meter and connection charges, and legal fees that are directly connected with building your home. Free tax filing state If you built all or part of your home yourself, your basis is the total amount it cost you to build it. Free tax filing state You cannot include in basis the value of your own labor or any other labor for which you did not pay. Free tax filing state Real estate taxes. Free tax filing state   Real estate taxes are usually divided so that you and the seller each pay taxes for the part of the property tax year that each owned the home. Free tax filing state See the earlier discussion of Real estate taxes paid at settlement or closing , under Real Estate Taxes, earlier, to figure the real estate taxes you paid or are considered to have paid. Free tax filing state   If you pay any part of the seller's share of the real estate taxes (the taxes up to the date of sale), and the seller did not reimburse you, add those taxes to your basis in the home. Free tax filing state You cannot deduct them as taxes paid. Free tax filing state   If the seller paid any of your share of the real estate taxes (the taxes beginning with the date of sale), you can still deduct those taxes. Free tax filing state Do not include those taxes in your basis. Free tax filing state If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Free tax filing state Example 1. Free tax filing state You bought your home on September 1. Free tax filing state The property tax year in your area is the calendar year, and the tax is due on August 15. Free tax filing state The real estate taxes on the home you bought were $1,275 for the year and had been paid by the seller on August 15. Free tax filing state You did not reimburse the seller for your share of the real estate taxes from September 1 through December 31. Free tax filing state You must reduce the basis of your home by the $426 [(122 ÷ 365) × $1,275] the seller paid for you. Free tax filing state You can deduct your $426 share of real estate taxes on your return for the year you purchased your home. Free tax filing state Example 2. Free tax filing state You bought your home on May 3, 2013. Free tax filing state The property tax year in your area is the calendar year. Free tax filing state The taxes for the previous year are assessed on January 2 and are due on May 31 and November 30. Free tax filing state Under state law, the taxes become a lien on May 31. Free tax filing state You agreed to pay all taxes due after the date of sale. Free tax filing state The taxes due in 2013 for 2012 were $1,375. Free tax filing state The taxes due in 2014 for 2013 will be $1,425. Free tax filing state You cannot deduct any of the taxes paid in 2013 because they relate to the 2012 property tax year and you did not own the home until 2013. Free tax filing state Instead, you add the $1,375 to the cost (basis) of your home. Free tax filing state You owned the home in 2013 for 243 days (May 3 to December 31), so you can take a tax deduction on your 2014 return of $949 [(243 ÷ 365) × $1,425] paid in 2014 for 2013. Free tax filing state You add the remaining $476 ($1,425 − $949) of taxes paid in 2014 to the cost (basis) of your home. Free tax filing state Settlement or closing costs. Free tax filing state   If you bought your home, you probably paid settlement or closing costs in addition to the contract price. Free tax filing state These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. Free tax filing state If you built your home, you probably paid these costs when you bought the land or settled on your mortgage. Free tax filing state   The only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. Free tax filing state You deduct them in the year you buy your home if you itemize your deductions. Free tax filing state You can add certain other settlement or closing costs to the basis of your home. Free tax filing state Items added to basis. Free tax filing state   You can include in your basis the settlement fees and closing costs you paid for buying your home. Free tax filing state A fee is for buying the home if you would have had to pay it even if you paid cash for the home. Free tax filing state   The following are some of the settlement fees and closing costs that you can include in the original basis of your home. Free tax filing state Abstract fees (abstract of title fees). Free tax filing state Charges for installing utility services. Free tax filing state Legal fees (including fees for the title search and preparation of the sales contract and deed). Free tax filing state Recording fees. Free tax filing state Surveys. Free tax filing state Transfer or stamp taxes. Free tax filing state Owner's title insurance. Free tax filing state Any amount the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, cost for improvements or repairs, and sales commissions. Free tax filing state   If the seller actually paid for any item for which you are liable and for which you can take a deduction (such as your share of the real estate taxes for the year of sale), you must reduce your basis by that amount unless you are charged for it in the settlement. Free tax filing state Items not added to basis and not deductible. Free tax filing state   Here are some settlement and closing costs that you cannot deduct or add to your basis. Free tax filing state Fire insurance premiums. Free tax filing state Charges for using utilities or other services related to occupancy of the home before closing. Free tax filing state Rent for occupying the home before closing. Free tax filing state Charges connected with getting or refinancing a mortgage loan, such as: Loan assumption fees, Cost of a credit report, and Fee for an appraisal required by a lender. Free tax filing state Points paid by seller. Free tax filing state   If you bought your home after April 3, 1994, you must reduce your basis by any points paid for your mortgage by the person who sold you your home. Free tax filing state   If you bought your home after 1990 but before April 4, 1994, you must reduce your basis by seller-paid points only if you deducted them. Free tax filing state See Points , earlier, for the rules on deducting points. Free tax filing state Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined later) to the donor just before it was given to you, its fair market value (FMV) at the time it was given to you, and any gift tax paid on it. Free tax filing state Fair market value. Free tax filing state   Fair market value (FMV) is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and who both have a reasonable knowledge of all the necessary facts. Free tax filing state Donor's adjusted basis is more than FMV. Free tax filing state   If someone gave you your home and the donor's adjusted basis, when it was given to you, was more than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis. Free tax filing state Disposition basis. Free tax filing state   If the donor's adjusted basis at the time of the gift is more than the FMV, your basis (plus or minus any required adjustments, see Adjusted Basis , later) when you dispose of the property will depend on whether you have a gain or a loss. Free tax filing state Your basis for figuring a gain is the same as the donor's adjusted basis. Free tax filing state Your basis for figuring a loss is the FMV when you received the gift. Free tax filing state If you use the donor's adjusted basis to figure a gain and it results in a loss, then you must use the FMV (at the time of the gift) to refigure the loss. Free tax filing state However, if using the FMV results in a gain, then you neither have a gain nor a loss. Free tax filing state Example 1. Free tax filing state Andrew received a house as a gift from Ishmael (the donor). Free tax filing state At the time of the gift, the home had an FMV of $80,000. Free tax filing state Ishmael's adjusted basis was $100,000. Free tax filing state After he received the house, no events occurred to increase or decrease the basis. Free tax filing state If Andrew sells the house for $120,000, he will have a $20,000 gain because he must use the donor's adjusted basis ($100,000) at the time of the gift as his basis to figure the gain. Free tax filing state Example 2. Free tax filing state Same facts as Example 1 , except this time Andrew sells the house for $70,000. Free tax filing state He will have a loss of $10,000 because he must use the FMV ($80,000) at the time of the gift as his basis to figure the loss. Free tax filing state Example 3. Free tax filing state Same facts as Example 1 , except this time Andrew sells the house for $90,000. Free tax filing state Initially, he figures the gain using Ishmael's adjusted basis ($100,000), which results in a loss of $10,000. Free tax filing state Since it is a loss, Andrew must now recalculate the loss using the FMV ($80,000), which results in a gain of $10,000. Free tax filing state So in this situation, Andrew will neither have a gain nor a loss. Free tax filing state Donor's adjusted basis equal to or less than the FMV. Free tax filing state   If someone gave you your home after 1976 and the donor's adjusted basis, when it was given to you, was equal to or less than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home. Free tax filing state Part of federal gift tax due to net increase in value. Free tax filing state   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. Free tax filing state The numerator (top part) of the fraction is the net increase in the value of the home, and the denominator (bottom part) is the value of the home for gift tax purposes after reduction for any annual exclusion and marital or charitable deduction that applies to the gift. Free tax filing state The net increase in the value of the home is its FMV minus the adjusted basis of the donor. Free tax filing state Publication 551 gives more information, including examples, on figuring your basis when you receive property as a gift. Free tax filing state Inheritance Your basis in a home you inherited is generally the fair market value of the home on the date of the decedent's death or on the alternative valuation date if the personal representative for the estate chooses to use alternative valuation. Free tax filing state If an estate tax return was filed, your basis is generally the value of the home listed on the estate tax return. Free tax filing state If an estate tax return was not filed, your basis is the appraised value of the home at the decedent's date of death for state inheritance or transmission taxes. Free tax filing state Publication 551 and Publication 559, Survivors, Executors, and Administrators, have more information on the basis of inherited property. Free tax filing state If you inherited your home from someone who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Free tax filing state Adjusted Basis While you own your home, various events may take place that can change the original basis of your home. Free tax filing state These events can increase or decrease your original basis. Free tax filing state The result is called adjusted basis. Free tax filing state See Table 3, on this page, for a list of some of the items that can adjust your basis. Free tax filing state Table 3. Free tax filing state Adjusted Basis This table lists examples of some items that generally will increase or decrease your basis in your home. Free tax filing state It is not intended to be all-inclusive. Free tax filing state Increases to Basis Decreases to Basis Improvements: Putting an addition on your home Replacing an entire roof Paving your driveway Installing central air conditioning Rewiring your home Assessments for local improvements (see Assessments for local benefits , under What You Can and Cannot Deduct, earlier) Amounts spent to restore damaged property Insurance or other reimbursement for casualty losses Deductible casualty loss not covered by insurance Payments received for easement or right-of-way granted Depreciation allowed or allowable if home is used for business or rental purposes Value of subsidy for energy conservation measure excluded from income Improvements. Free tax filing state   An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. Free tax filing state You must add the cost of any improvements to the basis of your home. Free tax filing state You cannot deduct these costs. Free tax filing state   Improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, and paving your driveway. Free tax filing state Amount added to basis. Free tax filing state   The amount you add to your basis for improvements is your actual cost. Free tax filing state This includes all costs for material and labor, except your own labor, and all expenses related to the improvement. Free tax filing state For example, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. Free tax filing state   You also must add to your basis state and local assessments for improvements such as streets and sidewalks if they increase the value of the property. Free tax filing state These assessments are discussed earlier under Real Estate Taxes . Free tax filing state Improvements no longer part of home. Free tax filing state    Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. Free tax filing state Example. Free tax filing state You put wall-to-wall carpeting in your home 15 years ago. Free tax filing state Later, you replaced that carpeting with new wall-to-wall carpeting. Free tax filing state The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. Free tax filing state Repairs versus improvements. Free tax filing state   A repair keeps your home in an ordinary, efficient operating condition. Free tax filing state It does not add to the value of your home or prolong its life. Free tax filing state Repairs include repainting your home inside or outside, fixing your gutters or floors, fixing leaks or plastering, and replacing broken window panes. Free tax filing state You cannot deduct repair costs and generally cannot add them to the basis of your home. Free tax filing state   However, repairs that are done as part of an extensive remodeling or restoration of your home are considered improvements. Free tax filing state You add them to the basis of your home. Free tax filing state Records to keep. Free tax filing state   You can use Table 4 (at the end of the publication) as a guide to help you keep track of improvements to your home. Free tax filing state Also see Keeping Records , below. Free tax filing state Energy conservation subsidy. Free tax filing state   If a public utility gives you (directly or indirectly) a subsidy for the purchase or installation of an energy conservation measure for your home, do not include the value of that subsidy in your income. Free tax filing state You must reduce the basis of your home by that value. Free tax filing state   An energy conservation measure is an installation or modification primarily designed to reduce consumption of electricity or natural gas or to improve the management of energy demand. Free tax filing state Keeping Records Keeping full and accurate records is vital to properly report your income and expenses, to support your deductions and credits, and to know the basis or adjusted basis of your home. Free tax filing state These records include your purchase contract and settlement papers if you bought the property, or other objective evidence if you acquired it by gift, inheritance, or similar means. Free tax filing state You should keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. Free tax filing state In addition, you should keep track of any decreases to the basis such as those listed in Table 3, earlier. Free tax filing state How to keep records. Free tax filing state   How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. Free tax filing state How long to keep records. Free tax filing state   You must keep your records for as long as they are important for meeting any provision of the federal tax law. Free tax filing state   Keep records that support an item of income, a deduction, or a credit appearing on a return until the period of limitations for the return runs out. Free tax filing state (A period of limitations is the period of time after which no legal action can be brought. Free tax filing state ) For assessment of tax you owe, this is generally 3 years from the date you filed the return. Free tax filing state For filing a claim for credit or refund, this is generally 3 years from the date you filed the original return, or 2 years from the date you paid the tax, whichever is later. Free tax filing state Returns filed before the due date are treated as filed on the due date. Free tax filing state   You may need to keep records relating to the basis of property (discussed earlier) for longer than the period of limitations. Free tax filing state Keep those records as long as they are important in figuring the basis of the original or replacement property. Free tax filing state Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. Free tax filing state Table 4. Free tax filing state Record of Home Improvements Keep this for your records. Free tax filing state Also, keep receipts or other proof of improvements. Free tax filing state Remove from this record any improvements that are no longer part of your main home. Free tax filing state For example, if you put wall-to-wall carpeting in your home and later replace it with new wall-to-wall carpeting, remove the cost of the first carpeting. Free tax filing state (a) Type of Improvement (b) Date (c) Amount   (a) Type of Improvement (b) Date (c) Amount Additions:       Heating & Air  Conditioning:     Bedroom       Heating system     Bathroom       Central air conditioning     Deck       Furnace     Garage       Duct work     Porch       Central humidifier     Patio       Filtration system     Storage shed       Other     Fireplace       Electrical:     Other           Lawn & Grounds:       Lighting fixtures           Wiring upgrades     Landscaping       Other     Driveway       Plumbing:     Walkway           Fences       Water heater     Retaining wall       Soft water system     Sprinkler system       Filtration system     Swimming pool       Other     Exterior lighting       Insulation:     Other           Communications:       Attic           Walls     Satellite dish       Floors     Intercom       Pipes and duct work     Security system       Other     Other             Miscellaneous:       Interior  Improvements:     Storm windows and doors       Built-in appliances     Roof       Kitchen modernization     Central vacuum       Bathroom modernization     Other       Flooring             Wall-to-wall carpeting             Other     How To