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H&rblock Online

H&rblock online Index A Acquisition indebtedness, Average acquisition indebtedness. H&rblock online Annuity obligations, Annuity obligation. H&rblock online By gift or bequest of mortgaged property, Exception for property acquired by gift, bequest, or devise. H&rblock online Change in property use, Change in use of property. H&rblock online Continued debt, Continued debt. H&rblock online Debt modifying existing, Modifying existing debt. H&rblock online Federal financing, Certain federal financing. H&rblock online For performing exempt purpose, Debt incurred in performing exempt purpose. H&rblock online Obligation to return collateral, Securities loans. H&rblock online Property subject to mortgage or lien, Property acquired subject to mortgage or lien. H&rblock online Real property, Real property debts of qualified organizations. H&rblock online Advertising income, Exploitation of Exempt Activity—Advertising Sales Agricultural organization dues, Dues of Agricultural Organizations and Business Leagues Assistance (see Tax help) B Business league dues, Dues of Agricultural Organizations and Business Leagues C Churches, Churches. H&rblock online Contributions deduction, Charitable contributions deduction. H&rblock online Convention or trade show activity, Convention or trade show activity. H&rblock online D Debt-financed property, Income From Debt-Financed Property Acquired in liquidation, Basis for debt-financed property acquired in corporate liquidation. H&rblock online Dues, agricultural organizations and business leagues, Dues of Agricultural Organizations and Business Leagues E Exchange or rental of member lists, Exchange or rental of member lists. H&rblock online Excluded trade or business activities, Excluded Trade or Business Activities Exclusions, Volunteer workforce. H&rblock online Sponsorship, Qualified sponsorship activities. H&rblock online Exempt function income, Exempt function income. H&rblock online Exploitation of exempt activity Advertising income, Exploitation of Exempt Activity—Advertising Sales Exploitation of exempt functions, Exploitation of exempt functions. H&rblock online F Form 990-T, Returns and Filing Requirements Free tax services, How to Get Tax Help H Help (see Tax help) I Income from research, Income from research. H&rblock online L Limits, Limits. H&rblock online M More information (see Tax help) N Net operating loss deduction, Modifications Nonrecognition of gain, Nonrecognition of gain. H&rblock online P Publications (see Tax help) R Rents, Rents. H&rblock online Return, Returns and Filing Requirements Royalties, Royalties. H&rblock online S Specific deduction, Specific deduction. H&rblock online T Tax, Organizations Subject to the Tax Alternative minimum, Alternative minimum tax. H&rblock online Colleges and universities, Colleges and universities. H&rblock online Deposits, Federal Tax Deposits Must be Made by Electronic Funds Transfer Estimated, Payment of Tax Organizations affected, Organizations Subject to the Tax Payment, Public Inspection Requirements of Section 501(c)(3) Organizations. H&rblock online Rates, The Tax and Filing Requirements Return, Returns and Filing Requirements Title-holding corporations, Title-holding corporations. H&rblock online U. H&rblock online S. H&rblock online instrumentalities, U. H&rblock online S. H&rblock online instrumentalities. H&rblock online Tax help, How to Get Tax Help Taxpayer Advocate, Contacting your Taxpayer Advocate. H&rblock online Title-holding corporations, Title-holding corporations. H&rblock online TTY/TDD information, How to Get Tax Help U Unrelated business Hospital laboratory, Nonpatient laboratory testing. H&rblock online Unrelated business income, Unrelated Business Taxable Income, Income Advertising income, Exploitation of Exempt Activity—Advertising Sales Certain trusts, Special Rules for Social Clubs, VEBAs, SUBs, and GLSOs Controlled organizations, Income From Controlled Organizations Debt-financed property, Income From Debt-Financed Property Deductions, Deductions Employees beneficiary associations, Special Rules for Social Clubs, VEBAs, SUBs, and GLSOs Exclusions, Exclusions Foreign organizations, Special Rules for Foreign Organizations Income from gambling activities, Legal definition. H&rblock online Income from lending securities, Income from lending securities. H&rblock online Modifications, Modifications Partnership income or loss, Partnership Income or Loss Products of exempt functions, Selling of products of exempt functions. H&rblock online S corporation income, S Corporation Income or Loss S corporation income or loss, S Corporation Income or Loss Social clubs, Special Rules for Social Clubs, VEBAs, SUBs, and GLSOs Veterans organizations, Special Rules for Veterans' Organizations Unrelated debt-financed income, Certain federal financing. H&rblock online Average acquisition indebtedness, Average acquisition indebtedness. H&rblock online Average adjusted basis, Average adjusted basis. H&rblock online Computation, Computation of Debt-Financed Income Debt/basis percentage, Computation of debt/basis percentage. H&rblock online Deductions, Deductions for Debt-Financed Property Gains from dispositions, Gain or loss from sale or other disposition of property. H&rblock online Indeterminate property price, Indeterminate price. H&rblock online Unrelated trade or business, Unrelated Trade or Business Artists facilities, Artists' facilities. H&rblock online Book publishing, Book publishing. H&rblock online Broadcasting rights, Broadcasting rights. H&rblock online Business league's parking and bus services, Business league's parking and bus services. H&rblock online Convenience of members, Convenience of members. H&rblock online Convention or trade show, Convention or trade show activity. H&rblock online Directory of members, Directory of members. H&rblock online Distribution of low cost articles, Distribution of low cost articles. H&rblock online Dual use facilities, etc. H&rblock online , Dual use of assets or facilities. H&rblock online Employees association sales, Employee association sales. H&rblock online Exclusions, Excluded Trade or Business Activities Exploitation of exempt functions, Exploitation of exempt functions. H&rblock online Gambling activities other than bingo, Gambling activities other than bingo. H&rblock online Halfway house, Halfway house workshop. H&rblock online Health club program, Health club program. H&rblock online Hearing aid sales, Sales of hearing aids. H&rblock online Hospital facilities, Hospital facilities. H&rblock online Hospital services, Hospital services. H&rblock online Insurance programs, Insurance programs. H&rblock online Magazine publishing, Magazine publishing. H&rblock online Member lists rentals, etc. H&rblock online , Exchange or rental of member lists. H&rblock online Membership list sales, Membership list sales. H&rblock online Miniature golf course, Miniature golf course. H&rblock online Museum eating facilities, Museum eating facilities. H&rblock online Museum greeting card sales, Museum greeting card sales. H&rblock online Pet boarding and grooming services, Pet boarding and grooming services. H&rblock online Pole rentals, Pole rentals. H&rblock online Public entertainment activity, Public entertainment activity. H&rblock online Publishing legal notices, Publishing legal notices. H&rblock online Regularly conducted, Regularly conducted. H&rblock online Sales commissions, Sales commissions. H&rblock online Sales of advertising space, Sales of advertising space. H&rblock online School facilities, School facilities. H&rblock online School handicraft shop, School handicraft shop. H&rblock online Selling donated merchandise, Selling donated merchandise. H&rblock online Selling endorsements, Selling endorsements. H&rblock online Sponsoring entertainment events, Sponsoring entertainment events. H&rblock online Substantially related, Not substantially related. H&rblock online Trade or business defined, Trade or business. H&rblock online Travel tour programs, Travel tour programs. H&rblock online Volunteer workforce, Volunteer workforce. H&rblock online Yearbook advertising, Yearbook advertising. H&rblock online Youth residence, Youth residence. H&rblock online Unstated trade or business Bingo games, Bingo games. H&rblock online V Volunteer fire company, Excluded Trade or Business Activities W When to file, When to file. 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Understanding Your CP297C Notice

We levied you for unpaid taxes. You have the right to a Collection Due
Process hearing.


What you need to do

  • Read your notice carefully — it explains our actions.
  • Pay what you owe.
  • Make a payment plan if you can’t pay the full amount you owe.

You may want to...


Answers to Common Questions

What should I do if I disagree with the notice?
Request a Collection Due Process hearing.

Why should I request a Collection Due Process hearing?
You can appeal the levy and other disagreements you have at a Collection Due Process hearing.

How can I request a Collection Due Process hearing?
Complete and send us a Form 12153, Request for a Collection Due Process or Equivalent Hearing.

Why didn't you tell me about my rights before you levied me?
Federal contractors do not have the right to a pre-levy hearing. We've already sent you several notices about the amount you owe.

What happens if I can't pay what I owe?
You can request a payment plan if you can't pay the full amount you owe.

How can I make a payment plan?
Call us at the toll free number on the top right corner of your notice to talk about payment plans or learn more about them here.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about how to file electronically.


Understanding your notice

Reading your notice
Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

Notice CP297C, Page 1

Notice CP297C, Page 2

Notice CP297C, Page 3

Notice CP297C, Page 4

Notice CP297C, Page 5

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 

Page Last Reviewed or Updated: 27-Jan-2014

The H&rblock Online

H&rblock online 9. H&rblock online   Rental Income and Expenses Table of Contents Introduction Useful Items - You may want to see: Rental Income Rental ExpensesVacant while listed for sale. H&rblock online Repairs and Improvements Other Expenses Property Changed to Rental Use Renting Part of Property Not Rented for Profit Personal Use of Dwelling Unit (Including Vacation Home)Example. H&rblock online Dividing Expenses Dwelling Unit Used as a Home Reporting Income and Deductions DepreciationChanging your accounting method to deduct unclaimed depreciation. H&rblock online Limits on Rental LossesAt-Risk Rules Passive Activity Limits How To Report Rental Income and ExpensesSchedule E (Form 1040) Introduction This chapter discusses rental income and expenses. H&rblock online It also covers the following topics. H&rblock online Personal use of dwelling unit (including vacation home). H&rblock online Depreciation. H&rblock online Limits on rental losses. H&rblock online How to report your rental income and expenses. H&rblock online If you sell or otherwise dispose of your rental property, see Publication 544, Sales and Other Dispositions of Assets. H&rblock online If you have a loss from damage to, or theft of, rental property, see Publication 547, Casualties, Disasters, and Thefts. H&rblock online If you rent a condominium or a cooperative apartment, some special rules apply to you even though you receive the same tax treatment as other owners of rental property. H&rblock online See Publication 527, Residential Rental Property, for more information. H&rblock online Useful Items - You may want to see: Publication 527 Residential Rental Property 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 925 Passive Activity and At-Risk Rules 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 6251 Alternative Minimum Tax—Individuals 8582 Passive Activity Loss Limitations Schedule E (Form 1040) Supplemental Income and Loss Rental Income In most cases, you must include in your gross income all amounts you receive as rent. H&rblock online Rental income is any payment you receive for the use or occupation of property. H&rblock online In addition to amounts you receive as normal rent payments, there are other amounts that may be rental income. H&rblock online When to report. H&rblock online   If you are a cash-basis taxpayer, you report rental income on your return for the year you actually or constructively receive it. H&rblock online You are a cash-basis taxpayer if you report income in the year you receive it, regardless of when it was earned. H&rblock online You constructively receive income when it is made available to you, for example, by being credited to your bank account. H&rblock online   For more information about when you constructively receive income, see Accounting Methods in chapter 1. H&rblock online Advance rent. H&rblock online   Advance rent is any amount you receive before the period that it covers. H&rblock online Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. H&rblock online Example. H&rblock online You sign a 10-year lease to rent your property. H&rblock online In the first year, you receive $5,000 for the first year's rent and $5,000 as rent for the last year of the lease. H&rblock online You must include $10,000 in your income in the first year. H&rblock online Canceling a lease. H&rblock online   If your tenant pays you to cancel a lease, the amount you receive is rent. H&rblock online Include the payment in your income in the year you receive it regardless of your method of accounting. H&rblock online Expenses paid by tenant. H&rblock online   If your tenant pays any of your expenses, the payments are rental income. H&rblock online Because you must include this amount in income, you can deduct the expenses if they are deductible rental expenses. H&rblock online See Rental Expenses , later, for more information. H&rblock online Property or services. H&rblock online   If you receive property or services, instead of money, as rent, include the fair market value of the property or services in your rental income. H&rblock online   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. H&rblock online Security deposits. H&rblock online   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. H&rblock online But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. H&rblock online   If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. H&rblock online Include it in your income when you receive it. H&rblock online Part interest. H&rblock online   If you own a part interest in rental property, you must report your part of the rental income from the property. H&rblock online Rental of property also used as your home. H&rblock online   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. H&rblock online However, you can deduct on Schedule A (Form 1040) the interest, taxes, and casualty and theft losses that are allowed for nonrental property. H&rblock online See Personal Use of Dwelling Unit (Including Vacation Home) , later. H&rblock online Rental Expenses This part discusses expenses of renting property that you ordinarily can deduct from your rental income. H&rblock online It includes information on the expenses you can deduct if you rent part of your property, or if you change your property to rental use. H&rblock online Depreciation , which you can also deduct from your rental income, is discussed later. H&rblock online Personal use of rental property. H&rblock online   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. H&rblock online Also, your rental expense deductions may be limited. H&rblock online See Personal Use of Dwelling Unit (Including Vacation Home) , later. H&rblock online Part interest. H&rblock online   If you own a part interest in rental property, you can deduct expenses that you paid according to your percentage of ownership. H&rblock online When to deduct. H&rblock online   If you are a cash-basis taxpayer, you generally deduct your rental expenses in the year you pay them. H&rblock online Depreciation. H&rblock online   You can begin to depreciate rental property when it is ready and available for rent. H&rblock online See Placed-in-Service under When Does Depreciation Begin and End in chapter 2 of Publication 527. H&rblock online Pre-rental expenses. H&rblock online   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. H&rblock online Uncollected rent. H&rblock online   If you are a cash-basis taxpayer, do not deduct uncollected rent. H&rblock online Because you have not included it in your income, it is not deductible. H&rblock online Vacant rental property. H&rblock online   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. H&rblock online However, you cannot deduct any loss of rental income for the period the property is vacant. H&rblock online Vacant while listed for sale. H&rblock online   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. H&rblock online If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. H&rblock online Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. H&rblock online Improvements. H&rblock online   You must capitalize any expense you pay to improve your rental property. H&rblock online An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. H&rblock online Betterments. H&rblock online   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. H&rblock online Restoration. H&rblock online   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. H&rblock online Adaptation. H&rblock online   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. H&rblock online Separate the costs of repairs and improvements, and keep accurate records. H&rblock online You will need to know the cost of improvements when you sell or depreciate your property. H&rblock online The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. H&rblock online Other Expenses Other expenses you can deduct from your rental income include advertising, cleaning and maintenance, utilities, fire and liability insurance, taxes, interest, commissions for the collection of rent, ordinary and necessary travel and transportation, and other expenses, discussed next. H&rblock online Insurance premiums paid in advance. H&rblock online   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. H&rblock online You cannot deduct the total premium in the year you pay it. H&rblock online Legal and other professional fees. H&rblock online   You can deduct, as a rental expense, legal and other professional expenses, such as tax return preparation fees you paid to prepare Schedule E (Form 1040), Part I. H&rblock online For example, on your 2013 Schedule E, you can deduct fees paid in 2013 to prepare your 2012 Schedule E, Part I. H&rblock online You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. H&rblock online Local benefit taxes. H&rblock online   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. H&rblock online These charges are nondepreciable capital expenditures, and must be added to the basis of your property. H&rblock online However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. H&rblock online Local transportation expenses. H&rblock online    You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. H&rblock online However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. H&rblock online See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. H&rblock online   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. H&rblock online For 2013, the standard mileage rate for business use is 56. H&rblock online 5 cents per mile. H&rblock online For more information, see chapter 26. H&rblock online    To deduct car expenses under either method, you must keep records that follow the rules in chapter 26. H&rblock online In addition, you must complete Form 4562, Part V, and attach it to your tax return. H&rblock online Rental of equipment. H&rblock online   You can deduct the rent you pay for equipment that you use for rental purposes. H&rblock online However, in some cases, lease contracts are actually purchase contracts. H&rblock online If so, you cannot deduct these payments. H&rblock online You can recover the cost of purchased equipment through depreciation. H&rblock online Rental of property. H&rblock online   You can deduct the rent you pay for property that you use for rental purposes. H&rblock online If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. H&rblock online Travel expenses. H&rblock online   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. H&rblock online You must properly allocate your expenses between rental and nonrental activities. H&rblock online You cannot deduct the cost of traveling away from home if the primary purpose of the trip was to improve your property. H&rblock online You recover the cost of improvements by taking depreciation. H&rblock online For information on travel expenses, see chapter 26. H&rblock online    To deduct travel expenses, you must keep records that follow the rules in chapter 26. H&rblock online   See Rental Expenses in Publication 527 for more information. H&rblock online Property Changed to Rental Use If you change your home or other property (or a part of it) to rental use at any time other than the beginning of your tax year, you must divide yearly expenses, such as taxes and insurance, between rental use and personal use. H&rblock online You can deduct as rental expenses only the part of the expense that is for the part of the year the property was used or held for rental purposes. H&rblock online You cannot deduct depreciation or insurance for the part of the year the property was held for personal use. H&rblock online However, you can include the home mortgage interest, qualified mortgage insurance premiums, and real estate tax expenses for the part of the year the property was held for personal use as an itemized deduction on Schedule A (Form 1040). H&rblock online Example. H&rblock online Your tax year is the calendar year. H&rblock online You moved from your home in May and started renting it out on June 1. H&rblock online You can deduct as rental expenses seven-twelfths of your yearly expenses, such as taxes and insurance. H&rblock online Starting with June, you can deduct as rental expenses the amounts you pay for items generally billed monthly, such as utilities. H&rblock online Renting Part of Property If you rent part of your property, you must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes, as though you actually had two separate pieces of property. H&rblock online You can deduct the expenses related to the part of the property used for rental purposes, such as home mortgage interest, qualified mortgage insurance premiums, and real estate taxes, as rental expenses on Schedule E (Form 1040). H&rblock online You can also deduct as rental expenses a portion of other expenses that normally are nondeductible personal expenses, such as expenses for electricity or painting the outside of your house. H&rblock online There is no change in the types of expenses deductible for the personal-use part of your property. H&rblock online Generally, these expenses may be deducted only if you itemize your deductions on Schedule A (Form 1040). H&rblock online You cannot deduct any part of the cost of the first phone line even if your tenants have unlimited use of it. H&rblock online You do not have to divide the expenses that belong only to the rental part of your property. H&rblock online For example, if you paint a room that you rent, or if you pay premiums for liability insurance in connection with renting a room in your home, your entire cost is a rental expense. H&rblock online If you install a second phone line strictly for your tenants' use, all of the cost of the second line is deductible as a rental expense. H&rblock online You can deduct depreciation, discussed later, on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes. H&rblock online How to divide expenses. H&rblock online   If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between the rental use and the personal use. H&rblock online You can use any reasonable method for dividing the expense. H&rblock online It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. H&rblock online The two most common methods for dividing an expense are based on (1) the number of rooms in your home, and (2) the square footage of your home. H&rblock online Not Rented for Profit If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. H&rblock online You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year. H&rblock online For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Publication 535. H&rblock online Where to report. H&rblock online   Report your not-for-profit rental income on Form 1040, line 21. H&rblock online For example, you can include your mortgage interest and any qualified mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses on the appropriate lines of Schedule A (Form 1040) if you itemize your deductions. H&rblock online   If you itemize your deductions, claim your other rental expenses, subject to the rules explained in chapter 1 of Publication 535, as miscellaneous itemized deductions on Form 1040, Schedule A, line 23. H&rblock online You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income. H&rblock online Personal Use of Dwelling Unit (Including Vacation Home) If you have any personal use of a dwelling unit (including a vacation home) that you rent, you must divide your expenses between rental use and personal use. H&rblock online In general, your rental expenses will be no more than your total expenses multiplied by a fraction; the denominator of which is the total number of days the dwelling unit is used and the numerator of which is the total number of days actually rented at a fair rental price. H&rblock online Only your rental expenses may be deducted on Schedule E (Form 1040). H&rblock online Some of your personal expenses may be deductible if you itemize your deductions on Schedule A (Form 1040). H&rblock online You must also determine if the dwelling unit is considered a home. H&rblock online The amount of rental expenses that you can deduct may be limited if the dwelling unit is considered a home. H&rblock online Whether a dwelling unit is considered a home depends on how many days during the year are considered to be days of personal use. H&rblock online There is a special rule if you used the dwelling unit as a home and you rented it for less than 15 days during the year. H&rblock online Dwelling unit. H&rblock online   A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. H&rblock online It also includes all structures or other property belonging to the dwelling unit. H&rblock online A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. H&rblock online   A dwelling unit does not include property used solely as a hotel, motel, inn, or similar establishment. H&rblock online Property is used solely as a hotel, motel, inn, or similar establishment if it is regularly available for occupancy by paying customers and is not used by an owner as a home during the year. H&rblock online Example. H&rblock online   You rent a room in your home that is always available for short-term occupancy by paying customers. H&rblock online You do not use the room yourself, and you allow only paying customers to use the room. H&rblock online The room is used solely as a hotel, motel, inn, or similar establishment and is not a dwelling unit. H&rblock online Dividing Expenses If you use a dwelling unit for both rental and personal purposes, divide your expenses between the rental use and the personal use based on the number of days used for each purpose. H&rblock online When dividing your expenses, follow these rules. H&rblock online Any day that the unit is rented at a fair rental price is a day of rental use even if you used the unit for personal purposes that day. H&rblock online This rule does not apply when determining whether you used the unit as a home. H&rblock online Any day that the unit is available for rent but not actually rented is not a day of rental use. H&rblock online Example. H&rblock online Your beach cottage was available for rent from June 1 through August 31 (92 days). H&rblock online During that time, except for the first week in August (7 days) when you were unable to find a renter, you rented the cottage at a fair rental price. H&rblock online The person who rented the cottage for July allowed you to use it over the weekend (2 days) without any reduction in or refund of rent. H&rblock online Your family also used the cottage during the last 2 weeks of May (14 days). H&rblock online The cottage was not used at all before May 17 or after August 31. H&rblock online You figure the part of the cottage expenses to treat as rental expenses as follows. H&rblock online The cottage was used for rental a total of 85 days (92 − 7). H&rblock online The days it was available for rent but not rented (7 days) are not days of rental use. H&rblock online The July weekend (2 days) you used it is rental use because you received a fair rental price for the weekend. H&rblock online You used the cottage for personal purposes for 14 days (the last 2 weeks in May). H&rblock online The total use of the cottage was 99 days (14 days personal use + 85 days rental use). H&rblock online Your rental expenses are 85/99 (86%) of the cottage expenses. H&rblock online Note. H&rblock online When determining whether you used the cottage as a home, the July weekend (2 days) you used it is considered personal use even though you received a fair rental price for the weekend. H&rblock online Therefore, you had 16 days of personal use and 83 days of rental use for this purpose. H&rblock online Because you used the cottage for personal purposes more than 14 days and more than 10% of the days of rental use (8 days), you used it as a home. H&rblock online If you have a net loss, you may not be able to deduct all of the rental expenses. H&rblock online See Dwelling Unit Used as a Home, next. H&rblock online Dwelling Unit Used as a Home If you use a dwelling unit for both rental and personal purposes, the tax treatment of the rental expenses you figured earlier under Dividing Expenses and rental income depends on whether you are considered to be using the dwelling unit as a home. H&rblock online You use a dwelling unit as a home during the tax year if you use it for personal purposes more than the greater of: 14 days, or 10% of the total days it is rented to others at a fair rental price. H&rblock online See What is a day of personal use , later. H&rblock online Fair rental price. H&rblock online   A fair rental price for your property generally is the amount of rent that a person who is not related to you would be willing to pay. H&rblock online The rent you charge is not a fair rental price if it is substantially less than the rents charged for other properties that are similar to your property in your area. H&rblock online   If a dwelling unit is used for personal purposes on a day it is rented at a fair rental price, do not count that day as a day of rental use in applying (2) above. H&rblock online Instead, count it as a day of personal use in applying both (1) and (2) above. H&rblock online What is a day of personal use?   A day of personal use of a dwelling unit is any day that the unit is used by any of the following persons. H&rblock online You or any other person who has an interest in the unit, unless you rent it to another owner as his or her main home under a shared equity financing agreement (defined later). H&rblock online However, see Days used as a main home before or after renting , later. H&rblock online A member of your family or a member of the family of any other person who owns an interest in the unit, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. H&rblock online Family includes only your spouse, brothers and sisters, half-brothers and half-sisters, ancestors (parents, grandparents, etc. H&rblock online ), and lineal descendants (children, grandchildren, etc. H&rblock online ). H&rblock online Anyone under an arrangement that lets you use some other dwelling unit. H&rblock online Anyone at less than a fair rental price. H&rblock online Main home. H&rblock online   If the other person or member of the family in (1) or (2) above has more than one home, his or her main home is ordinarily the one he or she lived in most of the time. H&rblock online Shared equity financing agreement. H&rblock online   This is an agreement under which two or more persons acquire undivided interests for more than 50 years in an entire dwelling unit, including the land, and one or more of the co-owners is entitled to occupy the unit as his or her main home upon payment of rent to the other co-owner or owners. H&rblock online Donation of use of property. H&rblock online   You use a dwelling unit for personal purposes if: You donate the use of the unit to a charitable organization, The organization sells the use of the unit at a fund-raising event, and The “purchaser” uses the unit. H&rblock online Examples. H&rblock online   The following examples show how to determine days of personal use. H&rblock online Example 1. H&rblock online You and your neighbor are co-owners of a condominium at the beach. H&rblock online Last year, you rented the unit to vacationers whenever possible. H&rblock online The unit was not used as a main home by anyone. H&rblock online Your neighbor used the unit for 2 weeks last year; you did not use it at all. H&rblock online Because your neighbor has an interest in the unit, both of you are considered to have used the unit for personal purposes during those 2 weeks. H&rblock online Example 2. H&rblock online You and your neighbors are co-owners of a house under a shared equity financing agreement. H&rblock online Your neighbors live in the house and pay you a fair rental price. H&rblock online Even though your neighbors have an interest in the house, the days your neighbors live there are not counted as days of personal use by you. H&rblock online This is because your neighbors rent the house as their main home under a shared equity financing agreement. H&rblock online Example 3. H&rblock online You own a rental property that you rent to your son. H&rblock online Your son does not own any interest in this property. H&rblock online He uses it as his main home and pays you a fair rental price. H&rblock online Your son's use of the property is not personal use by you because your son is using it as his main home, he owns no interest in the property, and he is paying you a fair rental price. H&rblock online Example 4. H&rblock online You rent your beach house to Joshua. H&rblock online Joshua rents his cabin in the mountains to you. H&rblock online You each pay a fair rental price. H&rblock online You are using your house for personal purposes on the days that Joshua uses it because your house is used by Joshua under an arrangement that allows you to use his house. H&rblock online Days used for repairs and maintenance. H&rblock online   Any day that you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. H&rblock online Do not count such a day as a day of personal use even if family members use the property for recreational purposes on the same day. H&rblock online Days used as a main home before or after renting. H&rblock online   For purposes of determining whether a dwelling unit was used as a home, you may not have to count days you used the property as your main home before or after renting it or offering it for rent as days of personal use. H&rblock online Do not count them as days of personal use if: You rented or tried to rent the property for 12 or more consecutive months. H&rblock online You rented or tried to rent the property for a period of less than 12 consecutive months and the period ended because you sold or exchanged the property. H&rblock online However, this special rule does not apply when dividing expenses between rental and personal use. H&rblock online Examples. H&rblock online   The following examples show how to determine whether you used your rental property as a home. H&rblock online Example 1. H&rblock online You converted the basement of your home into an apartment with a bedroom, a bathroom, and a small kitchen. H&rblock online You rented the basement apartment at a fair rental price to college students during the regular school year. H&rblock online You rented to them on a 9-month lease (273 days). H&rblock online You figured 10% of the total days rented to others at a fair rental price is 27 days. H&rblock online During June (30 days), your brothers stayed with you and lived in the basement apartment rent free. H&rblock online Your basement apartment was used as a home because you used it for personal purposes for 30 days. H&rblock online Rent-free use by your brothers is considered personal use. H&rblock online Your personal use (30 days) is more than the greater of 14 days or 10% of the total days it was rented (27 days). H&rblock online Example 2. H&rblock online You rented the guest bedroom in your home at a fair rental price during the local college's homecoming, commencement, and football weekends (a total of 27 days). H&rblock online Your sister-in-law stayed in the room, rent free, for the last 3 weeks (21 days) in July. H&rblock online You figured 10% of the total days rented to others at a fair rental price is 3 days. H&rblock online The room was used as a home because you used it for personal purposes for 21 days. H&rblock online That is more than the greater of 14 days or 10% of the 27 days it was rented (3 days). H&rblock online Example 3. H&rblock online You own a condominium apartment in a resort area. H&rblock online You rented it at a fair rental price for a total of 170 days during the year. H&rblock online For 12 of those days, the tenant was not able to use the apartment and allowed you to use it even though you did not refund any of the rent. H&rblock online Your family actually used the apartment for 10 of those days. H&rblock online Therefore, the apartment is treated as having been rented for 160 (170 − 10) days. H&rblock online You figured 10% of the total days rented to others at a fair rental price is 16 days. H&rblock online Your family also used the apartment for 7 other days during the year. H&rblock online You used the apartment as a home because you used it for personal purposes for 17 days. H&rblock online That is more than the greater of 14 days or 10% of the 160 days it was rented (16 days). H&rblock online Minimal rental use. H&rblock online   If you use the dwelling unit as a home and you rent it less than 15 days during the year, that period is not treated as rental activity. H&rblock online See Used as a home but rented less than 15 days , later, for more information. H&rblock online Limit on deductions. H&rblock online   Renting a dwelling unit that is considered a home is not a passive activity. H&rblock online Instead, if your rental expenses are more than your rental income, some or all of the excess expenses cannot be used to offset income from other sources. H&rblock online The excess expenses that cannot be used to offset income from other sources are carried forward to the next year and treated as rental expenses for the same property. H&rblock online Any expenses carried forward to the next year will be subject to any limits that apply for that year. H&rblock online This limitation will apply to expenses carried forward to another year even if you do not use the property as your home for that subsequent year. H&rblock online   To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 9-1. H&rblock online Reporting Income and Deductions Property not used for personal purposes. H&rblock online   If you do not use a dwelling unit for personal purposes, see How To Report Rental Income and Expenses , later, for how to report your rental income and expenses. H&rblock online Property used for personal purposes. H&rblock online   If you do use a dwelling unit for personal purposes, then how you report your rental income and expenses depends on whether you used the dwelling unit as a home. H&rblock online Not used as a home. H&rblock online   If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. H&rblock online Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in Dividing Expenses . H&rblock online The expenses for personal use are not deductible as rental expenses. H&rblock online   Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses , later. H&rblock online Used as a home but rented less than 15 days. H&rblock online   If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function is not considered to be rental and it should not be reported on Schedule E (Form 1040). H&rblock online You are not required to report the rental income and rental expenses from this activity. H&rblock online The expenses, including qualified mortgage interest, property taxes, and any qualified casualty loss will be reported as normally allowed on Schedule A (Form 1040). H&rblock online See the Instructions for Schedule A (Form 1040) for more information on deducting these expenses. H&rblock online Used as a home and rented 15 days or more. H&rblock online   If you use a dwelling unit as a home and rent it 15 days or more during the year, include all your rental income in your income. H&rblock online Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in Dividing Expenses . H&rblock online The expenses for personal use are not deductible as rental expenses. H&rblock online   If you had a net profit from renting the dwelling unit for the year (that is, if your rental income is more than the total of your rental expenses, including depreciation), deduct all of your rental expenses. H&rblock online You do not need to use Worksheet 9-1. H&rblock online   However, if you had a net loss from renting the dwelling unit for the year, your deduction for certain rental expenses is limited. H&rblock online To figure your deductible rental expenses and any carryover to next year, use Worksheet 9-1. H&rblock online Depreciation You recover the cost of income-producing property through yearly tax deductions. H&rblock online You do this by depreciating the property; that is, by deducting some of the cost each year on your tax return. H&rblock online Three factors determine how much depreciation you can deduct each year: (1) your basis in the property, (2) the recovery period for the property, and (3) the depreciation method used. H&rblock online You cannot simply deduct your mortgage or principal payments, or the cost of furniture, fixtures, and equipment, as an expense. H&rblock online You can deduct depreciation only on the part of your property used for rental purposes. H&rblock online Depreciation reduces your basis for figuring gain or loss on a later sale or exchange. H&rblock online You may have to use Form 4562 to figure and report your depreciation. H&rblock online See How To Report Rental Income and Expenses , later. H&rblock online Alternative minimum tax (AMT). H&rblock online    If you use accelerated depreciation, you may be subject to the AMT. H&rblock online Accelerated depreciation allows you to deduct more depreciation earlier in the recovery period than you could deduct using a straight line method (same deduction each year). H&rblock online Claiming the correct amount of depreciation. H&rblock online   You should claim the correct amount of depreciation each tax year. H&rblock online If you did not claim all the depreciation you were entitled to deduct, you must still reduce your basis in the property by the full amount of depreciation that you could have deducted. H&rblock online   If you deducted an incorrect amount of depreciation for property in any year, you may be able to make a correction by filing Form 1040X, Amended U. H&rblock online S Individual Income Tax Return. H&rblock online If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amount of depreciation. H&rblock online See Claiming the correct amount of depreciation in chapter 2 of Publication 527 for more information. H&rblock online Changing your accounting method to deduct unclaimed depreciation. H&rblock online   To change your accounting method, you generally must file Form 3115, Application for Change in Accounting Method, to get the consent of the IRS. H&rblock online In some instances, that consent is automatic. H&rblock online For more information, see chapter 1 of Publication 946. H&rblock online Land. H&rblock online   You cannot depreciate the cost of land because land generally does not wear out, become obsolete, or get used up. H&rblock online The costs of clearing, grading, planting, and landscaping are usually all part of the cost of land and cannot be depreciated. H&rblock online More information. H&rblock online   See Publication 527 for more information about depreciating rental property and see Publication 946 for more information about depreciation. H&rblock online Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. H&rblock online You must consider these rules in the order shown below. H&rblock online At-risk rules. H&rblock online These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. H&rblock online This applies only if the real property was placed in service after 1986. H&rblock online Passive activity limits. H&rblock online Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. H&rblock online However, there are exceptions. H&rblock online At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. H&rblock online Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. H&rblock online In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. H&rblock online You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. H&rblock online See Publication 925 for more information. H&rblock online Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. H&rblock online For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. H&rblock online Limits on passive activity deductions and credits. H&rblock online    Deductions or losses from passive activities are limited. H&rblock online You generally cannot offset income, other than passive income, with losses from passive activities. H&rblock online Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. H&rblock online Any excess loss or credit is carried forward to the next tax year. H&rblock online   For a detailed discussion of these rules, see Publication 925. H&rblock online    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. H&rblock online Real estate professionals. H&rblock online   Rental activities in which you materially participated during the year are not passive activities if, for that year, you were a real estate professional. H&rblock online For a detailed discussion of the requirements, see Publication 527. H&rblock online For a detailed discussion of material participation, see Publication 925. H&rblock online Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. H&rblock online Instead, follow the rules explained in Personal Use of Dwelling Unit (Including Vacation Home), earlier. H&rblock online Exception for Rental Real Estate Activities With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. H&rblock online This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. H&rblock online Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. H&rblock online Active participation. H&rblock online   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. H&rblock online Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions. H&rblock online Maximum special allowance. H&rblock online   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. H&rblock online   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. H&rblock online If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. H&rblock online   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. H&rblock online More information. H&rblock online   See Publication 925 for more information on the passive loss limits, including information on the treatment of unused disallowed passive losses and credits and the treatment of gains and losses realized on the disposition of a passive activity. H&rblock online How To Report Rental Income and Expenses The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). H&rblock online However, do not use that schedule to report a not-for-profit activity. H&rblock online See Not Rented for Profit, earlier. H&rblock online Providing substantial services. H&rblock online   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business (Sole Proprietorship). H&rblock online Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. H&rblock online For information, see Publication 334, Tax Guide for Small Business. H&rblock online You also may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. H&rblock online   Use Form 1065, U. H&rblock online S. H&rblock online Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). H&rblock online Qualified joint venture. H&rblock online   If you and your spouse each materially participate as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. H&rblock online This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. H&rblock online For more information, see Publication 527. H&rblock online Form 1098, Mortgage Interest Statement. H&rblock online    If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098, or similar statement showing the interest you paid for the year. H&rblock online If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. H&rblock online Attach a statement to your return showing the name and address of the other person. H&rblock online In the left margin of Schedule E, next to line 13, enter “See attached. H&rblock online ” Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. H&rblock online , you normally report your rental income and expenses on Schedule E, Part I. H&rblock online List your total income, expenses, and depreciation for each rental property. H&rblock online Be sure to enter the number of fair rental and personal use days on line 2. H&rblock online If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. H&rblock online Complete lines 1 and 2 for each property. H&rblock online However, fill in lines 23a through 26 on only one Schedule E. H&rblock online On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. H&rblock online To find out if you need to attach Form 4562, see Form 4562, in chapter 3 of Publication 527. H&rblock online If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. H&rblock online Form 6198, At-Risk Limitations. H&rblock online See At-Risk Rules , earlier. H&rblock online Also see Publication 925. H&rblock online Form 8582, Passive Activity Loss Limitations. H&rblock online See Passive Activity Limits , earlier. H&rblock online Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. H&rblock online If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. H&rblock online Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). H&rblock online Worksheet 9-1. H&rblock online Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Use this worksheet only if you answer “yes” to all of the following questions. H&rblock online Did you use the dwelling unit as a home this year? (See Dwelling Unit Used as a Home . H&rblock online ) Did you rent the dwelling unit at a fair rental price 15 days or more this year? Is the total of your rental expenses and depreciation more than your rental income? PART I. H&rblock online Rental Use Percentage A. H&rblock online Total days available for rent at fair rental price A. H&rblock online       B. H&rblock online Total days available for rent (line A) but not rented B. H&rblock online       C. H&rblock online Total days of rental use. H&rblock online Subtract line B from line A C. H&rblock online       D. H&rblock online Total days of personal use (including days rented at less than fair rental price) D. H&rblock online       E. H&rblock online Total days of rental and personal use. H&rblock online Add lines C and D E. H&rblock online       F. H&rblock online Percentage of expenses allowed for rental. H&rblock online Divide line C by line E     F. H&rblock online   PART II. H&rblock online Allowable Rental Expenses 1. H&rblock online Enter rents received 1. H&rblock online   2a. H&rblock online Enter the rental portion of deductible home mortgage interest and qualified mortgage insurance premiums (see instructions) 2a. H&rblock online       b. H&rblock online Enter the rental portion of real estate taxes b. H&rblock online       c. H&rblock online Enter the rental portion of deductible casualty and theft losses (see instructions) c. H&rblock online       d. H&rblock online Enter direct rental expenses (see instructions) d. H&rblock online       e. H&rblock online Fully deductible rental expenses. H&rblock online Add lines 2a–2d. H&rblock online Enter here and  on the appropriate lines on Schedule E (see instructions) 2e. H&rblock online   3. H&rblock online Subtract line 2e from line 1. H&rblock online If zero or less, enter -0- 3. H&rblock online   4a. H&rblock online Enter the rental portion of expenses directly related to operating or maintaining  the dwelling unit (such as repairs, insurance, and utilities) 4a. H&rblock online       b. H&rblock online Enter the rental portion of excess mortgage interest and qualified mortgage insurance premiums (see instructions) b. H&rblock online       c. H&rblock online Carryover of operating expenses from 2012 worksheet c. H&rblock online       d. H&rblock online Add lines 4a–4c d. H&rblock online       e. H&rblock online Allowable expenses. H&rblock online Enter the smaller of line 3 or line 4d (see instructions) 4e. H&rblock online   5. H&rblock online Subtract line 4e from line 3. H&rblock online If zero or less, enter -0- 5. H&rblock online   6a. H&rblock online Enter the rental portion of excess casualty and theft losses (see instructions) 6a. H&rblock online       b. H&rblock online Enter the rental portion of depreciation of the dwelling unit b. H&rblock online       c. H&rblock online Carryover of excess casualty losses and depreciation from 2012 worksheet c. H&rblock online       d. H&rblock online Add lines 6a–6c d. H&rblock online       e. H&rblock online Allowable excess casualty and theft losses and depreciation. H&rblock online Enter the smaller of  line 5 or line 6d (see instructions) 6e. H&rblock online   PART III. H&rblock online Carryover of Unallowed Expenses to Next Year 7a. H&rblock online Operating expenses to be carried over to next year. H&rblock online Subtract line 4e from line 4d 7a. H&rblock online   b. H&rblock online Excess casualty and theft losses and depreciation to be carried over to next year. H&rblock online  Subtract line 6e from line 6d b. H&rblock online   Worksheet 9-1 Instructions. H&rblock online Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Caution. H&rblock online Use the percentage determined in Part I, line F, to figure the rental portions to enter on lines 2a–2c, 4a–4b, and 6a–6b of  Part II. H&rblock online Line 2a. H&rblock online Figure the mortgage interest on the dwelling unit that you could deduct on Schedule A as if you had not rented the unit. H&rblock online Do not include interest on a loan that did not benefit the dwelling unit. H&rblock online For example, do not include interest on a home equity loan used to pay off credit cards or other personal loans, buy a car, or pay college tuition. H&rblock online Include interest on a loan used to buy, build, or improve the dwelling unit, or to refinance such a loan. H&rblock online Include the rental portion of this interest in the total you enter on line 2a of the worksheet. H&rblock online   Figure the qualified mortgage insurance premiums on the dwelling unit that you could deduct on line 13 of Schedule A as if you had not rented the unit. H&rblock online See the Schedule A instructions. H&rblock online However, figure your adjusted gross income (Form 1040, line 38) without your rental income and expenses from the dwelling unit. H&rblock online See Line 4b to deduct the part of the qualified mortgage insurance premiums not allowed because of the adjusted gross income limit. H&rblock online Include the rental portion of the amount from Schedule A, line 13, in the total you enter on line 2a of the worksheet. H&rblock online   Note. H&rblock online Do not file this Schedule A or use it to figure the amount to deduct on line 13 of that schedule. H&rblock online Instead, figure the personal portion on a separate Schedule A. H&rblock online If you have deducted mortgage interest or qualified mortgage insurance premiums on the dwelling unit on other forms, such as Schedule C or F, remember to reduce your Schedule A deduction by that amount. H&rblock online           Line 2c. H&rblock online Figure the casualty and theft losses related to the dwelling unit that you could deduct on Schedule A as if you had not rented the dwelling unit. H&rblock online To do this, complete Section A of Form 4684, Casualties and Thefts, treating the losses as personal losses. H&rblock online If any of the loss is due to a federally declared disaster, see the Instructions for Form 4684. H&rblock online On Form 4684, line 17, enter 10% of your adjusted gross income figured without your rental income and expenses from the dwelling unit. H&rblock online Enter the rental portion of the result from Form 4684, line 18, on line 2c of this worksheet. H&rblock online   Note. H&rblock online Do not file this Form 4684 or use it to figure your personal losses on Schedule A. H&rblock online Instead, figure the personal portion on a separate Form 4684. H&rblock online           Line 2d. H&rblock online Enter the total of your rental expenses that are directly related only to the rental activity. H&rblock online These include interest on loans used for rental activities other than to buy, build, or improve the dwelling unit. H&rblock online Also include rental agency fees, advertising, office supplies, and depreciation on office equipment used in your rental activity. H&rblock online           Line 2e. H&rblock online You can deduct the amounts on lines 2a, 2b, 2c, and 2d as rental expenses on Schedule E even if your rental expenses are more than your rental income. H&rblock online Enter the amounts on lines 2a, 2b, 2c, and 2d on the appropriate lines of Schedule E. H&rblock online           Line 4b. H&rblock online On line 2a, you entered the rental portion of the mortgage interest and qualified mortgage insurance premiums you could deduct on Schedule A if you had not rented the dwelling unit. H&rblock online If you had additional mortgage interest and qualified mortgage insurance premiums that would not be deductible on Schedule A because of limits imposed on them, enter on line 4b of this worksheet the rental portion of those excess amounts. H&rblock online Do not include interest on a loan that did not benefit the dwelling unit (as explained in the line 2a instructions). H&rblock online           Line 4e. H&rblock online You can deduct the amounts on lines 4a, 4b, and 4c as rental expenses on Schedule E only to the extent they are not more than the amount on line 4e. H&rblock online *           Line 6a. H&rblock online To find the rental portion of excess casualty and theft losses, use the Form 4684 you prepared for line 2c of this worksheet. H&rblock online   A. H&rblock online Enter the amount from Form 4684, line 10       B. H&rblock online Enter the rental portion of line A       C. H&rblock online Enter the amount from line 2c of this worksheet       D. H&rblock online Subtract line C from line B. H&rblock online Enter the result here and on line 6a of this worksheet               Line 6e. H&rblock online You can deduct the amounts on lines 6a, 6b, and 6c as rental expenses on Schedule E only to the extent they are not more than the amount on line 6e. H&rblock online * *Allocating the limited deduction. H&rblock online If you cannot deduct all of the amount on line 4d or 6d this year, you can allocate the allowable deduction in any way you wish among the expenses included on line 4d or 6d. H&rblock online Enter the amount you allocate to each expense on the appropriate line of Schedule E, Part I. H&rblock online Prev  Up  Next   Home   More Online Publications