File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

H&r Block Taxes

File State Taxes Free 2013Efile Tax Return Online Free Federal And State1040ez2012Irs Tax Extension 20112006 Taxes OnlineE-file Tax Extension Free1040 Ez Tax Return FormFree Tax Filing Online StateFile 2006 Taxes Online FreeHow To File 2010 Taxes Late1040ez File OnlineHow Do I File My Taxes For Last YearTurbotax Free MilitaryFree State TaxesMypay Dfas Mil MypayWww Irs Gov Form 1040xAmendIrs1040Tax Act 2012 Free Download2011 Income Tax Forms 1040ezFree Electronic Federal Tax FilingTax Return MilitaryNeed To File My 2012 TaxesWhere File Amended 1040xFree 2011 TaxesHow Do I File Taxes For 2012Ez 1040Can Amended Returns Be E FiledHow Do You Fill Out A 1040x FormAmend Federal Tax ReturnStudents And TaxesFile Tax Extension For 2011 FreeFree Tax Preparation ServicesH&r Block Free Online Tax1040ez Online Filing2006 Tax ReturnCan You File 1040x Online1040 20102010 Federal Tax Form 1040Turbotax Free State File

H&r Block Taxes

H&r block taxes 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. H&r block taxes S. H&r block taxes Individual Income Tax Return, and itemize your deductions on Schedule A (Form 1040). H&r block taxes If you itemize, you cannot take the standard deduction. H&r block taxes This section explains what expenses you can deduct as a homeowner. H&r block taxes It also points out expenses that you cannot deduct. H&r block taxes There are four primary discussions: real estate taxes, sales taxes, home mortgage interest, and mortgage insurance premiums. H&r block taxes Generally, your real estate taxes, home mortgage interest, and mortgage insurance premiums are included in your house payment. H&r block taxes Your house payment. H&r block taxes   If you took out a mortgage (loan) to finance the purchase of your home, you probably have to make monthly house payments. H&r block taxes Your house payment may include several costs of owning a home. H&r block taxes 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. H&r block taxes These are discussed in more detail later. H&r block taxes   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. H&r block taxes Minister's or military housing allowance. H&r block taxes   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. H&r block taxes You do not have to reduce your deductions by your nontaxable allowance. H&r block taxes 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. H&r block taxes Nondeductible payments. H&r block taxes   You cannot deduct any of the following items. H&r block taxes Insurance (other than mortgage insurance premiums), including fire and comprehensive coverage, and title insurance. H&r block taxes Wages you pay for domestic help. H&r block taxes Depreciation. H&r block taxes The cost of utilities, such as gas, electricity, or water. H&r block taxes Most settlement costs. H&r block taxes See Settlement or closing costs under Cost as Basis, later, for more information. H&r block taxes Forfeited deposits, down payments, or earnest money. H&r block taxes 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. H&r block taxes 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. H&r block taxes 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. H&r block taxes 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). H&r block taxes 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. H&r block taxes Real Estate Taxes Most state and local governments charge an annual tax on the value of real property. H&r block taxes This is called a real estate tax. H&r block taxes You can deduct the tax if it is assessed uniformly at a like rate on all real property throughout the community. H&r block taxes 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. H&r block taxes Deductible Real Estate Taxes You can deduct real estate taxes imposed on you. H&r block taxes 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. H&r block taxes If you own a cooperative apartment, see Special Rules for Cooperatives , later. H&r block taxes Where to deduct real estate taxes. H&r block taxes   Enter the amount of your deductible real estate taxes on Schedule A (Form 1040), line 6. H&r block taxes Real estate taxes paid at settlement or closing. H&r block taxes   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. H&r block taxes Your share of these taxes is fully deductible if you itemize your deductions. H&r block taxes Division of real estate taxes. H&r block taxes   For federal income tax purposes, the seller is treated as paying the property taxes up to, but not including, the date of sale. H&r block taxes You (the buyer) are treated as paying the taxes beginning with the date of sale. H&r block taxes This applies regardless of the lien dates under local law. H&r block taxes Generally, this information is included on the settlement statement you get at closing. H&r block taxes   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. H&r block taxes You each can deduct your own share, if you itemize deductions, for the year the property is sold. H&r block taxes Example. H&r block taxes You bought your home on September 1. H&r block taxes The property tax year (the period to which the tax relates) in your area is the calendar year. H&r block taxes The tax for the year was $730 and was due and paid by the seller on August 15. H&r block taxes You owned your new home during the property tax year for 122 days (September 1 to December 31, including your date of purchase). H&r block taxes You figure your deduction for real estate taxes on your home as follows. H&r block taxes 1. H&r block taxes Enter the total real estate taxes for the real property tax year $730 2. H&r block taxes Enter the number of days in the property tax year that you owned the property 122 3. H&r block taxes Divide line 2 by 365 . H&r block taxes 3342 4. H&r block taxes Multiply line 1 by line 3. H&r block taxes This is your deduction. H&r block taxes 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. H&r block taxes 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. H&r block taxes Delinquent taxes. H&r block taxes   Delinquent taxes are unpaid taxes that were imposed on the seller for an earlier tax year. H&r block taxes If you agree to pay delinquent taxes when you buy your home, you cannot deduct them. H&r block taxes You treat them as part of the cost of your home. H&r block taxes See Real estate taxes , later, under Basis. H&r block taxes Escrow accounts. H&r block taxes   Many monthly house payments include an amount placed in escrow (put in the care of a third party) for real estate taxes. H&r block taxes You may not be able to deduct the total you pay into the escrow account. H&r block taxes You can deduct only the real estate taxes that the lender actually paid from escrow to the taxing authority. H&r block taxes Your real estate tax bill will show this amount. H&r block taxes Refund or rebate of real estate taxes. H&r block taxes   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. H&r block taxes 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. H&r block taxes For more information, see Recoveries in Publication 525, Taxable and Nontaxable Income. H&r block taxes Items You Cannot Deduct as Real Estate Taxes The following items are not deductible as real estate taxes. H&r block taxes Charges for services. H&r block taxes   An itemized charge for services to specific property or people is not a tax, even if the charge is paid to the taxing authority. H&r block taxes 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). H&r block taxes    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. H&r block taxes If your taxing authority (or lender) does not furnish you a copy of your real estate tax bill, ask for it. H&r block taxes Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. H&r block taxes Assessments for local benefits. H&r block taxes   You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. H&r block taxes Local benefits include the construction of streets, sidewalks, or water and sewer systems. H&r block taxes You must add these amounts to the basis of your property. H&r block taxes   You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. H&r block taxes An example is a charge to repair an existing sidewalk and any interest included in that charge. H&r block taxes   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. H&r block taxes If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. H&r block taxes   An assessment for a local benefit may be listed as an item in your real estate tax bill. H&r block taxes If so, use the rules in this section to find how much of it, if any, you can deduct. H&r block taxes Transfer taxes (or stamp taxes). H&r block taxes   You cannot deduct transfer taxes and similar taxes and charges on the sale of a personal home. H&r block taxes If you are the buyer and you pay them, include them in the cost basis of the property. H&r block taxes If you are the seller and you pay them, they are expenses of the sale and reduce the amount realized on the sale. H&r block taxes Homeowners association assessments. H&r block taxes   You cannot deduct these assessments because the homeowners association, rather than a state or local government, imposes them. H&r block taxes 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. H&r block taxes As an owner of a cooperative apartment, you own shares of stock in a corporation that owns or leases housing facilities. H&r block taxes 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. H&r block taxes For this purpose, gross income means all income received during the entire tax year, including any received before the corporation changed to cooperative ownership. H&r block taxes 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. H&r block taxes 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. H&r block taxes Tenant-stockholders. H&r block taxes   A tenant-stockholder can be any entity (such as a corporation, trust, estate, partnership, or association) as well as an individual. H&r block taxes The tenant-stockholder does not have to live in any of the cooperative's dwelling units. H&r block taxes The units that the tenant-stockholder has the right to occupy can be rented to others. H&r block taxes Deductible taxes. H&r block taxes   You figure your share of real estate taxes in the following way. H&r block taxes Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. H&r block taxes Multiply the corporation's deductible real estate taxes by the number you figured in (1). H&r block taxes This is your share of the real estate taxes. H&r block taxes   Generally, the corporation will tell you your share of its real estate tax. H&r block taxes This is the amount you can deduct if it reasonably reflects the cost of real estate taxes for your dwelling unit. H&r block taxes Refund of real estate taxes. H&r block taxes   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. H&r block taxes Your deduction for real estate taxes the corporation paid this year is reduced by your share of the refund the corporation received. H&r block taxes 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). H&r block taxes 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. H&r block taxes For information on figuring your deduction, see the Instructions for Schedule A (Form 1040). H&r block taxes 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. H&r block taxes 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. H&r block taxes Most home buyers take out a mortgage (loan) to buy their home. H&r block taxes They then make monthly payments to either the mortgage holder or someone collecting the payments for the mortgage holder. H&r block taxes 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). H&r block taxes 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. H&r block taxes If either of these situations applies to you, see Publication 936 for more information. H&r block taxes Also see Publication 936 if you later refinance your mortgage or buy a second home. H&r block taxes Refund of home mortgage interest. H&r block taxes   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. H&r block taxes For more information, see Recoveries in Publication 525. H&r block taxes The amount of the refund will usually be shown on the mortgage interest statement you receive from your mortgage lender. H&r block taxes See Mortgage Interest Statement , later. H&r block taxes Deductible Mortgage Interest To be deductible, the interest you pay must be on a loan secured by your main home or a second home. H&r block taxes The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. H&r block taxes Prepaid interest. H&r block taxes   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. H&r block taxes Generally, you can deduct in each year only the interest that qualifies as home mortgage interest for that year. H&r block taxes An exception (discussed later) applies to points. H&r block taxes Late payment charge on mortgage payment. H&r block taxes   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. H&r block taxes Mortgage prepayment penalty. H&r block taxes   If you pay off your home mortgage early, you may have to pay a penalty. H&r block taxes 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. H&r block taxes Ground rent. H&r block taxes   In some states (such as Maryland), you may buy your home subject to a ground rent. H&r block taxes A ground rent is an obligation you assume to pay a fixed amount per year on the property. H&r block taxes Under this arrangement, you are leasing (rather than buying) the land on which your home is located. H&r block taxes Redeemable ground rents. H&r block taxes   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. H&r block taxes The ground rent is a redeemable ground rent only if all of the following are true. H&r block taxes Your lease, including renewal periods, is for more than 15 years. H&r block taxes You can freely assign the lease. H&r block taxes 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. H&r block taxes The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. H&r block taxes   Payments made to end the lease and buy the lessor's entire interest in the land are not redeemable ground rents. H&r block taxes You cannot deduct them. H&r block taxes Nonredeemable ground rents. H&r block taxes   Payments on a nonredeemable ground rent are not mortgage interest. H&r block taxes You can deduct them as rent only if they are a business expense or if they are for rental property. H&r block taxes Cooperative apartment. H&r block taxes   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 . H&r block taxes In addition, you can treat as home mortgage interest your share of the corporation's deductible mortgage interest. H&r block taxes 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. H&r block taxes For more information on cooperatives, see Special Rule for Tenant-Stockholders in Cooperative Housing Corporations in Publication 936. H&r block taxes Refund of cooperative's mortgage interest. H&r block taxes   You must reduce your mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. H&r block taxes The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. H&r block taxes   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. H&r block taxes Mortgage Interest Paid at Settlement One item that normally appears on a settlement or closing statement is home mortgage interest. H&r block taxes You can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). H&r block taxes This amount should be included in the mortgage interest statement provided by your lender. H&r block taxes See the discussion under Mortgage Interest Statement , later. H&r block taxes Also, if you pay interest in advance, see Prepaid interest , earlier, and Points , next. H&r block taxes Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. H&r block taxes Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points. H&r block taxes A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. H&r block taxes See Points paid by the seller , later. H&r block taxes General rule. H&r block taxes   You cannot deduct the full amount of points in the year paid. H&r block taxes They are prepaid interest, so you generally must deduct them over the life (term) of the mortgage. H&r block taxes Exception. H&r block taxes   You can deduct the full amount of points in the year paid if you meet all the following tests. H&r block taxes Your loan is secured by your main home. H&r block taxes (Generally, your main home is the one you live in most of the time. H&r block taxes ) Paying points is an established business practice in the area where the loan was made. H&r block taxes The points paid were not more than the points generally charged in that area. H&r block taxes You use the cash method of accounting. H&r block taxes This means you report income in the year you receive it and deduct expenses in the year you pay them. H&r block taxes Most individuals use this method. H&r block taxes 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. H&r block taxes The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. H&r block taxes The funds you provided are not required to have been applied to the points. H&r block taxes They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. H&r block taxes You cannot have borrowed these funds. H&r block taxes You use your loan to buy or build your main home. H&r block taxes The points were computed as a percentage of the principal amount of the mortgage. H&r block taxes The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. H&r block taxes The points may be shown as paid from either your funds or the seller's. H&r block taxes Note. H&r block taxes 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. H&r block taxes 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. H&r block taxes Home improvement loan. H&r block taxes   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. H&r block taxes Refinanced loan. H&r block taxes   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. H&r block taxes You can deduct the rest of the points over the life of the loan. H&r block taxes Points not fully deductible in year paid. H&r block taxes    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. H&r block taxes Figure A. H&r block taxes   You can use Figure A, next, as a quick guide to see whether your points are fully deductible in the year paid. H&r block taxes    Please click here for the text description of the image. H&r block taxes Figure A. H&r block taxes Are my points fully deductible this year? Amounts charged for services. H&r block taxes   Amounts charged by the lender for specific services connected to the loan are not interest. H&r block taxes Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. H&r block taxes You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. H&r block taxes For information about the tax treatment of these amounts and other settlement fees and closing costs, see Basis , later. H&r block taxes Points paid by the seller. H&r block taxes   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. H&r block taxes Treatment by seller. H&r block taxes   The seller cannot deduct these fees as interest. H&r block taxes However, they are a selling expense that reduces the seller's amount realized. H&r block taxes See Publication 523 for more information. H&r block taxes Treatment by buyer. H&r block taxes   The buyer treats seller-paid points as if he or she had paid them. H&r block taxes If all the tests listed earlier under Exception are met, the buyer can deduct the points in the year paid. H&r block taxes If any of those tests are not met, the buyer must deduct the points over the life of the loan. H&r block taxes   The buyer must also reduce the basis of the home by the amount of the seller-paid points. H&r block taxes For more information about the basis of your home, see Basis , later. H&r block taxes Funds provided are less than points. H&r block taxes   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. H&r block taxes In addition, you can deduct any points paid by the seller. H&r block taxes Example 1. H&r block taxes When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). H&r block taxes 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. H&r block taxes Of the $1,000 you were charged for points, you can deduct $750 in the year paid. H&r block taxes You spread the remaining $250 over the life of the mortgage. H&r block taxes Example 2. H&r block taxes 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. H&r block taxes In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). H&r block taxes You spread the remaining $250 over the life of the mortgage. H&r block taxes You must reduce the basis of your home by the $1,000 paid by the seller. H&r block taxes Excess points. H&r block taxes   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. H&r block taxes You must spread any additional points over the life of the mortgage. H&r block taxes Mortgage ending early. H&r block taxes   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. H&r block taxes A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. H&r block taxes Example. H&r block taxes Dan paid $3,000 in points in 2006 that he had to spread out over the 15-year life of the mortgage. H&r block taxes He had deducted $1,400 of these points through 2012. H&r block taxes Dan prepaid his mortgage in full in 2013. H&r block taxes He can deduct the remaining $1,600 of points in 2013. H&r block taxes Exception. H&r block taxes   If you refinance the mortgage with the same lender, you cannot deduct any remaining points for the year. H&r block taxes Instead, deduct them over the term of the new loan. H&r block taxes Form 1098. H&r block taxes   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. H&r block taxes See Mortgage Interest Statement , later. H&r block taxes 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). H&r block taxes If you did not receive a Form 1098, enter your deductible interest on line 11, and any deductible points on line 12. H&r block taxes See Table 1 below for a summary of where to deduct home mortgage interest and real estate taxes. H&r block taxes 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. H&r block taxes The seller must give you this number and you must give the seller your SSN. H&r block taxes Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. H&r block taxes Failure to meet either of these requirements may result in a $50 penalty for each failure. H&r block taxes Table 1. H&r block taxes Where To Deduct Interest and Taxes Paid on Your Home See the text for information on what expenses are eligible. H&r block taxes IF you are eligible to deduct . H&r block taxes . H&r block taxes . H&r block taxes THEN report the amount  on Schedule A (Form 1040) . H&r block taxes . H&r block taxes . H&r block taxes real estate taxes line 6. H&r block taxes home mortgage interest and points reported on Form 1098 line 10. H&r block taxes home mortgage interest not reported on  Form 1098 line 11. H&r block taxes points not reported on Form 1098 line 12. H&r block taxes qualified mortgage insurance premiums line 13. H&r block taxes 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. H&r block taxes The statement will show the total interest paid on your mortgage during the year. H&r block taxes 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. H&r block taxes See Points , earlier. H&r block taxes The interest you paid at settlement should be included on the statement. H&r block taxes 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. H&r block taxes Put the total on Schedule A (Form 1040), line 10, and attach a statement to your return explaining the difference. H&r block taxes Write “See attached” to the right of line 10. H&r block taxes A mortgage holder can be a financial institution, a governmental unit, or a cooperative housing corporation. H&r block taxes If a statement comes from a cooperative housing corporation, it generally will show your share of interest. H&r block taxes Your mortgage interest statement for 2013 should be provided or sent to you by January 31, 2014. H&r block taxes If it is mailed, you should allow adequate time to receive it before contacting the mortgage holder. H&r block taxes A copy of this form will be sent to the IRS also. H&r block taxes Example. H&r block taxes You bought a new home on May 3. H&r block taxes You paid no points on the purchase. H&r block taxes During the year, you made mortgage payments which included $4,480 deductible interest on your new home. H&r block taxes The settlement sheet for the purchase of the home included interest of $620 for 29 days in May. H&r block taxes The mortgage statement you receive from the lender includes total interest of $5,100 ($4,480 + $620). H&r block taxes You can deduct the $5,100 if you itemize your deductions. H&r block taxes Refund of overpaid interest. H&r block taxes   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. H&r block taxes Generally, you must include the refund in income in the year you receive it. H&r block taxes See Refund of home mortgage interest , earlier, under Home Mortgage Interest. H&r block taxes More than one borrower. H&r block taxes   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. H&r block taxes Show how much of the interest each of you paid, and give the name and address of the person who received the form. H&r block taxes Deduct your share of the interest on Schedule A (Form 1040), line 11, and write “See attached” to the right of that line. H&r block taxes 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. H&r block taxes Mortgage insurance premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as an itemized deduction. H&r block taxes 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). H&r block taxes Prepaid mortgage insurance premiums. H&r block taxes   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. H&r block taxes The premiums are treated as paid in the year to which they were allocated. H&r block taxes If the mortgage is satisfied before its term, no deduction is allowed for the unamortized balance. H&r block taxes See Publication 936 for details. H&r block taxes Exception for certain mortgage insurance. H&r block taxes   The allocation rules, explained above, do not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Service. H&r block taxes 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. H&r block taxes It also must be secured by that home. H&r block taxes 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. H&r block taxes Home acquisition debt limit. H&r block taxes   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). H&r block taxes Discharges of qualified principal residence indebtedness. H&r block taxes   You can exclude from gross income any discharges of qualified principal residence indebtedness made after 2006 and before 2014. H&r block taxes You must reduce the basis of your principal residence (but not below zero) by the amount you exclude. H&r block taxes Principal residence. H&r block taxes   Your principal residence is the home where you ordinarily live most of the time. H&r block taxes You can have only one principal residence at any one time. H&r block taxes Qualified principal residence indebtedness. H&r block taxes   This is a mortgage that you took out to buy, build, or substantially improve your principal residence and that is secured by that residence. H&r block taxes 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. H&r block taxes   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. H&r block taxes Additional debt incurred to substantially improve your principal residence is also qualified principal residence indebtedness. H&r block taxes Amount you can exclude. H&r block taxes   You can only exclude debt discharged after 2006 and before 2014. H&r block taxes The most you can exclude is $2 million ($1 million if married filing separately). H&r block taxes 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. H&r block taxes Ordering rule. H&r block taxes   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. H&r block taxes Qualified Home This means your main home or your second home. H&r block taxes A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. H&r block taxes Main home. H&r block taxes   You can have only one main home at any one time. H&r block taxes This is the home where you ordinarily live most of the time. H&r block taxes Second home and other special situations. H&r block taxes   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. H&r block taxes 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. H&r block taxes 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. H&r block taxes If your AGI is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. H&r block taxes Form 1098. H&r block taxes   The amount of mortgage insurance premiums you paid during 2013 should be reported in box 4. H&r block taxes See Form 1098, Mortgage Interest Statement in Publication 936. H&r block taxes Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals afford home ownership. H&r block taxes If you qualify, you can claim the credit on Form 8396 each year for part of the home mortgage interest you pay. H&r block taxes Who qualifies. H&r block taxes   You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate (MCC) from your state or local government. H&r block taxes Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. H&r block taxes The MCC will show the certificate credit rate you will use to figure your credit. H&r block taxes It also will show the certified indebtedness amount. H&r block taxes Only the interest on that amount qualifies for the credit. H&r block taxes See Figuring the Credit , later. H&r block taxes You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home. H&r block taxes Contact your state or local housing finance agency for information about the availability of MCCs in your area. H&r block taxes How to claim the credit. H&r block taxes   To claim the credit, complete Form 8396 and attach it to your Form 1040 or Form 1040NR, U. H&r block taxes S. H&r block taxes Nonresident Alien Income Tax Return. H&r block taxes 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. H&r block taxes Reducing your home mortgage interest deduction. H&r block taxes   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. H&r block taxes You must do this even if part of that amount is to be carried forward to 2014. H&r block taxes Selling your home. H&r block taxes   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. H&r block taxes For additional information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, in Publication 523. H&r block taxes Figuring the Credit Figure your credit on Form 8396. H&r block taxes Mortgage not more than certified indebtedness. H&r block taxes   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. H&r block taxes Mortgage more than certified indebtedness. H&r block taxes   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. H&r block taxes 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. H&r block taxes 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. H&r block taxes Example. H&r block taxes Emily bought a home this year. H&r block taxes Her mortgage loan is $125,000. H&r block taxes The certified indebtedness amount on her MCC is $100,000. H&r block taxes She paid $7,500 interest this year. H&r block taxes Emily figures the interest to enter on Form 8396, line 1, as follows:   $100,000 = 80% (. H&r block taxes 80)       $125,000       $7,500 x . H&r block taxes 80 = $6,000   Emily enters $6,000 on Form 8396, line 1. H&r block taxes In each later year, she will figure her credit using only 80% of the interest she pays for that year. H&r block taxes Limits Two limits may apply to your credit. H&r block taxes A limit based on the credit rate, and A limit based on your tax. H&r block taxes Limit based on credit rate. H&r block taxes   If the certificate credit rate is higher than 20%, the credit you are allowed cannot be more than $2,000. H&r block taxes Limit based on tax. H&r block taxes   After applying the limit based on the credit rate, your credit generally cannot be more than your tax liability. H&r block taxes See the Credit Limit Worksheet in the Form 8396 instructions to calculate the limit based on tax. H&r block taxes 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. H&r block taxes Example. H&r block taxes John and his brother, George, were issued an MCC. H&r block taxes They used it to get a mortgage on their main home. H&r block taxes John has a 60% ownership interest in the home, and George has a 40% ownership interest in the home. H&r block taxes John paid $5,400 mortgage interest this year and George paid $3,600. H&r block taxes The MCC shows a credit rate of 25% and a certified indebtedness amount of $130,000. H&r block taxes The loan amount (mortgage) on their home is $120,000. H&r block taxes The credit is limited to $2,000 because the credit rate is more than 20%. H&r block taxes 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. H&r block taxes His credit is limited to $1,200 ($2,000 × 60%). H&r block taxes 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. H&r block taxes His credit is limited to $800 ($2,000 × 40%). H&r block taxes 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. H&r block taxes Example. H&r block taxes You receive a mortgage credit certificate from State X. H&r block taxes This year, your regular tax liability is $1,100, you owe no alternative minimum tax, and your mortgage interest credit is $1,700. H&r block taxes You claim no other credits. H&r block taxes Your unused mortgage interest credit for this year is $600 ($1,700 − $1,100). H&r block taxes You can carry forward this amount to the next 3 years or until used, whichever comes first. H&r block taxes Credit rate more than 20%. H&r block taxes   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). H&r block taxes Example. H&r block taxes In the earlier example under Dividing the Credit , John and George used the entire $2,000 credit. H&r block taxes 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. H&r block taxes 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. H&r block taxes The amount of credit you can claim on the new loan may change. H&r block taxes Table 2 below summarizes how to figure your credit if you refinance your original mortgage loan. H&r block taxes Table 2. H&r block taxes Effect of Refinancing on Your Credit IF you get a new (reissued) MCC and the amount of your new mortgage is . H&r block taxes . H&r block taxes . H&r block taxes THEN the interest you claim on Form 8396, line 1, is* . H&r block taxes . H&r block taxes . H&r block taxes smaller than or equal to the certified indebtedness amount on the new MCC all the interest paid during the year on your new mortgage. H&r block taxes larger than the certified indebtedness amount on the new MCC interest paid during the year on your new mortgage multiplied by the following fraction. H&r block taxes         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. H&r block taxes  See New MCC cannot increase your credit above. H&r block taxes An issuer may reissue an MCC after you refinance your mortgage. H&r block taxes 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. H&r block taxes Year of refinancing. H&r block taxes   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. H&r block taxes   If your new MCC has a credit rate different from the rate on the old MCC, you must attach a statement to Form 8396. H&r block taxes 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. H&r block taxes It must show a separate calculation for the part of the year when the new MCC was in effect. H&r block taxes 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. H&r block taxes New MCC cannot increase your credit. H&r block taxes   The credit that you claim with your new MCC cannot be more than the credit that you could have claimed with your old MCC. H&r block taxes   In most cases, the agency that issues your new MCC will make sure that it does not increase your credit. H&r block taxes However, if either your old loan or your new loan has a variable (adjustable) interest rate, you will need to check this yourself. H&r block taxes In that case, you will need to know the amount of the credit you could have claimed using the old MCC. H&r block taxes   There are two methods for figuring the credit you could have claimed. H&r block taxes Under one method, you figure the actual credit that would have been allowed. H&r block taxes This means you use the credit rate on the old MCC and the interest you would have paid on the old loan. H&r block taxes   If your old loan was a variable rate mortgage, you can use another method to determine the credit that you could have claimed. H&r block taxes 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. H&r block taxes 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. H&r block taxes The principal of the hypothetical mortgage is the remaining outstanding balance of the certified mortgage indebtedness shown on the old MCC. H&r block taxes    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. H&r block taxes    As part of your tax records, you should keep your old MCC and the schedule of payments for your old mortgage. H&r block taxes 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. H&r block taxes While you own your home, you may add certain items to your basis. H&r block taxes You may subtract certain other items from your basis. H&r block taxes These items are called adjustments to basis and are explained later under Adjusted Basis . H&r block taxes 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. H&r block taxes You also must keep records of the events that affect basis or adjusted basis. H&r block taxes See Keeping Records , below. H&r block taxes Figuring Your Basis How you figure your basis depends on how you acquire your home. H&r block taxes If you buy or build your home, your cost is your basis. H&r block taxes 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. H&r block taxes If you inherit your home from a decedent, different rules apply depending on the date of the decedent's death. H&r block taxes Each of these topics is discussed later. H&r block taxes Property transferred from a spouse. H&r block taxes   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. H&r block taxes Publication 504, Divorced or Separated Individuals, fully discusses transfers between spouses. H&r block taxes 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. H&r block taxes The cost of your home includes most settlement or closing costs you paid when you bought the home. H&r block taxes If you built your home, your cost includes most closing costs paid when you bought the land or settled on your mortgage. H&r block taxes See Settlement or closing costs , later. H&r block taxes 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. H&r block taxes Purchase. H&r block taxes   The basis of a home you bought is the amount you paid for it. H&r block taxes This usually includes your down payment and any debt you assumed. H&r block taxes The basis of a cooperative apartment is the amount you paid for your shares in the corporation that owns or controls the property. H&r block taxes This amount includes any purchase commissions or other costs of acquiring the shares. H&r block taxes Construction. H&r block taxes   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. H&r block taxes 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. H&r block taxes If you built all or part of your home yourself, your basis is the total amount it cost you to build it. H&r block taxes You cannot include in basis the value of your own labor or any other labor for which you did not pay. H&r block taxes Real estate taxes. H&r block taxes   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. H&r block taxes 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. H&r block taxes   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. H&r block taxes You cannot deduct them as taxes paid. H&r block taxes   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. H&r block taxes Do not include those taxes in your basis. H&r block taxes If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. H&r block taxes Example 1. H&r block taxes You bought your home on September 1. H&r block taxes The property tax year in your area is the calendar year, and the tax is due on August 15. H&r block taxes 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. H&r block taxes You did not reimburse the seller for your share of the real estate taxes from September 1 through December 31. H&r block taxes You must reduce the basis of your home by the $426 [(122 ÷ 365) × $1,275] the seller paid for you. H&r block taxes You can deduct your $426 share of real estate taxes on your return for the year you purchased your home. H&r block taxes Example 2. H&r block taxes You bought your home on May 3, 2013. H&r block taxes The property tax year in your area is the calendar year. H&r block taxes The taxes for the previous year are assessed on January 2 and are due on May 31 and November 30. H&r block taxes Under state law, the taxes become a lien on May 31. H&r block taxes You agreed to pay all taxes due after the date of sale. H&r block taxes The taxes due in 2013 for 2012 were $1,375. H&r block taxes The taxes due in 2014 for 2013 will be $1,425. H&r block taxes 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. H&r block taxes Instead, you add the $1,375 to the cost (basis) of your home. H&r block taxes 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. H&r block taxes You add the remaining $476 ($1,425 − $949) of taxes paid in 2014 to the cost (basis) of your home. H&r block taxes Settlement or closing costs. H&r block taxes   If you bought your home, you probably paid settlement or closing costs in addition to the contract price. H&r block taxes These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. H&r block taxes If you built your home, you probably paid these costs when you bought the land or settled on your mortgage. H&r block taxes   The only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. H&r block taxes You deduct them in the year you buy your home if you itemize your deductions. H&r block taxes You can add certain other settlement or closing costs to the basis of your home. H&r block taxes Items added to basis. H&r block taxes   You can include in your basis the settlement fees and closing costs you paid for buying your home. H&r block taxes A fee is for buying the home if you would have had to pay it even if you paid cash for the home. H&r block taxes   The following are some of the settlement fees and closing costs that you can include in the original basis of your home. H&r block taxes Abstract fees (abstract of title fees). H&r block taxes Charges for installing utility services. H&r block taxes Legal fees (including fees for the title search and preparation of the sales contract and deed). H&r block taxes Recording fees. H&r block taxes Surveys. H&r block taxes Transfer or stamp taxes. H&r block taxes Owner's title insurance. H&r block taxes 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. H&r block taxes   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. H&r block taxes Items not added to basis and not deductible. H&r block taxes   Here are some settlement and closing costs that you cannot deduct or add to your basis. H&r block taxes Fire insurance premiums. H&r block taxes Charges for using utilities or other services related to occupancy of the home before closing. H&r block taxes Rent for occupying the home before closing. H&r block taxes 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. H&r block taxes Points paid by seller. H&r block taxes   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. H&r block taxes   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. H&r block taxes See Points , earlier, for the rules on deducting points. H&r block taxes 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. H&r block taxes Fair market value. H&r block taxes   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. H&r block taxes Donor's adjusted basis is more than FMV. H&r block taxes   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. H&r block taxes Disposition basis. H&r block taxes   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. H&r block taxes Your basis for figuring a gain is the same as the donor's adjusted basis. H&r block taxes Your basis for figuring a loss is the FMV when you received the gift. H&r block taxes 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. H&r block taxes However, if using the FMV results in a gain, then you neither have a gain nor a loss. H&r block taxes Example 1. H&r block taxes Andrew received a house as a gift from Ishmael (the donor). H&r block taxes At the time of the gift, the home had an FMV of $80,000. H&r block taxes Ishmael's adjusted basis was $100,000. H&r block taxes After he received the house, no events occurred to increase or decrease the basis. H&r block taxes 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. H&r block taxes Example 2. H&r block taxes Same facts as Example 1 , except this time Andrew sells the house for $70,000. H&r block taxes 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. H&r block taxes Example 3. H&r block taxes Same facts as Example 1 , except this time Andrew sells the house for $90,000. H&r block taxes Initially, he figures the gain using Ishmael's adjusted basis ($100,000), which results in a loss of $10,000. H&r block taxes Since it is a loss, Andrew must now recalculate the loss using the FMV ($80,000), which results in a gain of $10,000. H&r block taxes So in this situation, Andrew will neither have a gain nor a loss. H&r block taxes Donor's adjusted basis equal to or less than the FMV. H&r block taxes   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. H&r block taxes Part of federal gift tax due to net increase in value. H&r block taxes   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. H&r block taxes 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. H&r block taxes The net increase in the value of the home is its FMV minus the adjusted basis of the donor. H&r block taxes Publication 551 gives more information, including examples, on figuring your basis when you receive property as a gift. H&r block taxes 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. H&r block taxes If an estate tax return was filed, your basis is generally the value of the home listed on the estate tax return. H&r block taxes 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. H&r block taxes Publication 551 and Publication 559, Survivors, Executors, and Administrators, have more information on the basis of inherited property. H&r block taxes 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. H&r block taxes Adjusted Basis While you own your home, various events may take place that can change the original basis of your home. H&r block taxes These events can increase or decrease your original basis. H&r block taxes The result is called adjusted basis. H&r block taxes See Table 3, on this page, for a list of some of the items that can adjust your basis. H&r block taxes Table 3. H&r block taxes Adjusted Basis This table lists examples of some items that generally will increase or decrease your basis in your home. H&r block taxes It is not intended to be all-inclusive. H&r block taxes 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. H&r block taxes   An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. H&r block taxes You must add the cost of any improvements to the basis of your home. H&r block taxes You cannot deduct these costs. H&r block taxes   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. H&r block taxes Amount added to basis. H&r block taxes   The amount you add to your basis for improvements is your actual cost. H&r block taxes This includes all costs for material and labor, except your own labor, and all expenses related to the improvement. H&r block taxes 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. H&r block taxes   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. H&r block taxes These assessments are discussed earlier under Real Estate Taxes . H&r block taxes Improvements no longer part of home. H&r block taxes    Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. H&r block taxes Example. H&r block taxes You put wall-to-wall carpeting in your home 15 years ago. H&r block taxes Later, you replaced that carpeting with new wall-to-wall carpeting. H&r block taxes The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. H&r block taxes Repairs versus improvements. H&r block taxes   A repair keeps your home in an ordinary, efficient operating condition. H&r block taxes It does not add to the value of your home or prolong its life. H&r block taxes Repairs include repainting your home inside or outside, fixing your gutters or floors, fixing leaks or plastering, and replacing broken window panes. H&r block taxes You cannot deduct repair costs and generally cannot add them to the basis of your home. H&r block taxes   However, repairs that are done as part of an extensive remodeling or restoration of your home are considered improvements. H&r block taxes You add them to the basis of your home. H&r block taxes Records to keep. H&r block taxes   You can use Table 4 (at the end of the publication) as a guide to help you keep track of improvements to your home. H&r block taxes Also see Keeping Records , below. H&r block taxes Energy conservation subsidy. H&r block taxes   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. H&r block taxes You must reduce the basis of your home by that value. H&r block taxes   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. H&r block taxes 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. H&r block taxes 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. H&r block taxes You should keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. H&r block taxes In addition, you should keep track of any decreases to the basis such as those listed in Table 3, earlier. H&r block taxes How to keep records. H&r block taxes   How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. H&r block taxes How long to keep records. H&r block taxes   You must keep your records for as long as they are important for meeting any provision of the federal tax law. H&r block taxes   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. H&r block taxes (A period of limitations is the period of time after which no legal action can be brought. H&r block taxes ) For assessment of tax you owe, this is generally 3 years from the date you filed the return. H&r block taxes 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. H&r block taxes Returns filed before the due date are treated as filed on the due date. H&r block taxes   You may need to keep records relating to the basis of property (discussed earlier) for longer than the period of limitations. H&r block taxes Keep those records as long as they are important in figuring the basis of the original or replacement property. H&r block taxes 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. H&r block taxes Table 4. H&r block taxes Record of Home Improvements Keep this for your records. H&r block taxes Also, keep receipts or other proof of improvements. H&r block taxes Remove from this record any improvements that are no longer part of your main home. H&r block taxes 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. H&r block taxes (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
Print - Click this link to Print this page

Subscribe to Schedule M-3 E-mail Service

Subscribe to Schedule M-3 E-mail Service and receive e-mail alerts when updates are available on the Schedule M-3 page of the IRS.gov Web site.

Subscribe / Unsubscribe

Page Last Reviewed or Updated: 13-Mar-2014

The H&r Block Taxes

H&r block taxes Publication 525 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionAssignment of income. H&r block taxes Ordering forms and publications. H&r block taxes Tax questions. H&r block taxes Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 525, such as legislation enacted after it was published, go to www. H&r block taxes irs. H&r block taxes gov/pub525. H&r block taxes What's New Health flexible spending arrangements (health FSAs) under cafeteria plans. H&r block taxes  For plan years beginning after 2012, health FSAs are subject to a $2,500 limit on salary reduction contributions. H&r block taxes For plan years beginning after 2013, the $2,500 limit is subject to an inflation adjustment. H&r block taxes Itemized deduction for medical expenses. H&r block taxes  Beginning in 2013, an itemized deduction is generally allowed for uncompensated medical expenses that exceed 10% of adjusted gross income (AGI). H&r block taxes If an individual or an individual’s spouse was born before January 2, 1949, the deduction is allowed for expenses that exceed 7. H&r block taxes 5% of AGI. H&r block taxes Additional Medicare Tax. H&r block taxes  Beginning in 2013, a 0. H&r block taxes 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 if single, head of household, or qualifying widow(er). H&r block taxes For more information, see Form 8959 and its instructions. H&r block taxes Net Investment Income Tax (NIIT). H&r block taxes  Beginning in 2013, the NIIT applies at a rate of 3. H&r block taxes 8% to certain net investment income of individuals, estates and trusts that have income above the threshold amounts. H&r block taxes Individuals will owe the tax if they have net investment income and also have modified adjusted gross income over the following thresholds for their filing status: Married filing jointly, $250,000; Married filing separately, $125,000; Single, $200,000; Head of household (with qualifying person), $200,000; Qualifying widow(er) with dependent child, $250,000. H&r block taxes For more information, see Form 8960 and its instructions. H&r block taxes Reminders Terrorist attacks. H&r block taxes  You can exclude from income certain disaster assistance, disability, and death payments received as a result of a terrorist or military action. H&r block taxes For more information, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. H&r block taxes Gulf oil spill. H&r block taxes  You are required to include in your gross income payments you received for lost wages, lost business income, or lost profits. H&r block taxes See Gulf oil spill under Other Income, later. H&r block taxes Qualified settlement income. H&r block taxes . H&r block taxes  If you are a qualified taxpayer, you can contribute all or part of your qualified settlement income, up to $100,000, to an eligible retirement plan, including an IRA. H&r block taxes Contributions to eligible retirement plans, other than a Roth IRA or a designated Roth contribution, reduce the qualified settlement income that you must include in income. H&r block taxes See Exxon Valdez settlement income under Other Income, later. H&r block taxes Foreign income. H&r block taxes  If you are a U. H&r block taxes S. H&r block taxes citizen or resident alien, you must report income from sources outside the United States (foreign income) on your tax return unless it is exempt by U. H&r block taxes S. H&r block taxes law. H&r block taxes This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2, Wage and Tax Statement, or Form 1099 from the foreign payer. H&r block taxes This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties). H&r block taxes If you reside outside the United States, you may be able to exclude part or all of your foreign source earned income. H&r block taxes For details, see Publication 54, Tax Guide for U. H&r block taxes S. H&r block taxes Citizens and Resident Aliens Abroad. H&r block taxes Disaster mitigation payments. H&r block taxes . H&r block taxes  You can exclude from income grants you use to mitigate (reduce the severity of) potential damage from future natural disasters that are paid to you through state and local governments. H&r block taxes For more information, see Disaster mitigation payments under Welfare and Other Public Assistance Benefits, later. H&r block taxes Qualified joint venture. H&r block taxes  A qualified joint venture conducted by you and your spouse may not be treated as a partnership if you file a joint return for the tax year. H&r block taxes See Partnership Income under Business and Investment Income, later. H&r block taxes Photographs of missing children. H&r block taxes  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. H&r block taxes Photographs of missing children selected by the Center may appear in this publication on pages that otherwise would be blank. H&r block taxes You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. H&r block taxes Introduction You can receive income in the form of money, property, or services. H&r block taxes This publication discusses many kinds of income and explains whether they are taxable or nontaxable. H&r block taxes It includes discussions on employee wages and fringe benefits, and income from bartering, partnerships, S corporations, and royalties. H&r block taxes It also includes information on disability pensions, life insurance proceeds, and welfare and other public assistance benefits. H&r block taxes Check the index for the location of a specific subject. H&r block taxes In most cases, an amount included in your income is taxable unless it is specifically exempted by law. H&r block taxes Income that is taxable must be reported on your return and is subject to tax. H&r block taxes Income that is nontaxable may have to be shown on your tax return but is not taxable. H&r block taxes Constructively received income. H&r block taxes   You are generally taxed on income that is available to you, regardless of whether it is actually in your possession. H&r block taxes    A valid check that you received or that was made available to you before the end of the tax year is considered income constructively received in that year, even if you do not cash the check or deposit it to your account until the next year. H&r block taxes For example, if the postal service tries to deliver a check to you on the last day of the tax year but you are not at home to receive it, you must include the amount in your income for that tax year. H&r block taxes If the check was mailed so that it could not possibly reach you until after the end of the tax year, and you otherwise could not get the funds before the end of the year, you include the amount in your income for the next tax year. H&r block taxes Assignment of income. H&r block taxes   Income received by an agent for you is income you constructively received in the year the agent received it. H&r block taxes If you agree by contract that a third party is to receive income for you, you must include the amount in your income when the third party receives it. H&r block taxes Example. H&r block taxes You and your employer agree that part of your salary is to be paid directly to one of your creditors. H&r block taxes You must include that amount in your income when your creditor receives it. H&r block taxes Prepaid income. H&r block taxes   In most cases, prepaid income, such as compensation for future services, is included in your income in the year you receive it. H&r block taxes However, if you use an accrual method of accounting, you can defer prepaid income you receive for services to be performed before the end of the next tax year. H&r block taxes In this case, you include the payment in your income as you earn it by performing the services. H&r block taxes Comments and suggestions. H&r block taxes   We welcome your comments about this publication and your suggestions for future editions. H&r block taxes   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. H&r block taxes NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. H&r block taxes Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. H&r block taxes   You can send your comments from www. H&r block taxes irs. H&r block taxes gov/formspubs/. H&r block taxes Click on “More Information” and then on “Comment on Tax Forms and Publications. H&r block taxes ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. H&r block taxes Ordering forms and publications. H&r block taxes   Visit www. H&r block taxes irs. H&r block taxes gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. H&r block taxes Internal Revenue Service 1201 N. H&r block taxes Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. H&r block taxes   If you have a tax question, check the information available on IRS. H&r block taxes gov or call 1-800-829-1040. H&r block taxes We cannot answer tax questions sent to either of the above addresses. H&r block taxes Useful Items - You may want to see: Publication 334 Tax Guide for Small Business 523 Selling Your Home 527 Residential Rental Property 541 Partnerships 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 559 Survivors, Executors, and Administrators 575 Pension and Annuity Income 915 Social Security and Equivalent Railroad Retirement Benefits 970 Tax Benefits for Education 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) 1040 U. H&r block taxes S. H&r block taxes Individual Income Tax Return 1040A U. H&r block taxes S. H&r block taxes Individual Income Tax Return 1040EZ Income Tax Return for Single and Joint Filers With No Dependents 1040NR U. H&r block taxes S. H&r block taxes Nonresident Alien Income Tax Return 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. H&r block taxes W-2 Wage and Tax Statement  See How To Get Tax Help , near the end of this publication, for information about getting these publications. H&r block taxes Prev  Up  Next   Home   More Online Publications