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How To Fill Out 1040ez 2012

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How To Fill Out 1040ez 2012

How to fill out 1040ez 2012 9. How to fill out 1040ez 2012   Education Exception to Additional Tax on Early IRA Distributions Table of Contents Introduction Who Is Eligible Figuring the Amount Not Subject to the 10% Tax Reporting Early Distributions Introduction Generally, if you take a distribution from your IRA before you reach age 59½, you must pay a 10% additional tax on the early distribution. How to fill out 1040ez 2012 This applies to any IRA you own, whether it is a traditional IRA (including a SEP-IRA), a Roth IRA, or a SIMPLE IRA. How to fill out 1040ez 2012 The additional tax on an early distribution from a SIMPLE IRA may be as high as 25%. How to fill out 1040ez 2012 See Publication 560, Retirement Plans for Small Business, for information on SEP-IRAs, and Publication 590, for information about all other IRAs. How to fill out 1040ez 2012 However, you can take distributions from your IRAs for qualified higher education expenses without having to pay the 10% additional tax. How to fill out 1040ez 2012 You may owe income tax on at least part of the amount distributed, but you may not have to pay the 10% additional tax. How to fill out 1040ez 2012 Generally, if the taxable part of the distribution is less than or equal to the adjusted qualified education expenses (AQEE), none of the distribution is subject to the additional tax. How to fill out 1040ez 2012 If the taxable part of the distribution is more than the AQEE, only the excess is subject to the additional tax. How to fill out 1040ez 2012 Who Is Eligible You can take a distribution from your IRA before you reach age 59½ and not have to pay the 10% additional tax if, for the year of the distribution, you pay qualified education expenses for: yourself, your spouse, or your or your spouse's child, foster child, adopted child, or descendant of any of them. How to fill out 1040ez 2012 Qualified education expenses. How to fill out 1040ez 2012   For purposes of the 10% additional tax, these expenses are tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. How to fill out 1040ez 2012 They also include expenses for special needs services incurred by or for special needs students in connection with their enrollment or attendance. How to fill out 1040ez 2012   In addition, if the student is at least a half-time student, room and board are qualified education expenses. How to fill out 1040ez 2012   The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. How to fill out 1040ez 2012 The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. How to fill out 1040ez 2012 The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. How to fill out 1040ez 2012 You will need to contact the eligible educational institution for qualified room and board costs. How to fill out 1040ez 2012 Eligible educational institution. How to fill out 1040ez 2012   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. How to fill out 1040ez 2012 S. How to fill out 1040ez 2012 Department of Education. How to fill out 1040ez 2012 It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. How to fill out 1040ez 2012 The educational institution should be able to tell you if it is an eligible educational institution. How to fill out 1040ez 2012   Certain educational institutions located outside the United States also participate in the U. How to fill out 1040ez 2012 S. How to fill out 1040ez 2012 Department of Education's Federal Student Aid (FSA) programs. How to fill out 1040ez 2012 Half-time student. How to fill out 1040ez 2012   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing as determined under the standards of the school where the student is enrolled. How to fill out 1040ez 2012 Figuring the Amount Not Subject to the 10% Tax To determine the amount of your distribution that is not subject to the 10% additional tax, first figure your adjusted qualified education expenses. How to fill out 1040ez 2012 You do this by reducing your total qualified education expenses by any tax-free educational assistance, which includes: Expenses used to figure the tax-free portion of distributions from a Coverdell education savings account (ESA) (see Distributions in chapter 7, Coverdell Education Savings Account), The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. How to fill out 1040ez 2012 Do not reduce the qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance given to either the student or the individual making the withdrawal, or A withdrawal from personal savings (including savings from a qualified tuition program (QTP)). How to fill out 1040ez 2012 If your IRA distribution is equal to or less than your adjusted qualified education expenses, you are not subject to the 10% additional tax. How to fill out 1040ez 2012 Example 1. How to fill out 1040ez 2012 In 2013, Erin (age 32) took a year off from teaching to attend graduate school full-time. How to fill out 1040ez 2012 She paid $5,800 of qualified education expenses from the following sources. How to fill out 1040ez 2012   Employer-provided educational assistance  (tax free) $5,000     Early distribution from IRA (includes $500 taxable earnings) 3,200           Before Erin can determine if she must pay the 10% additional tax on her IRA distribution, she must reduce her total qualified education expenses. How to fill out 1040ez 2012   Total qualified education expenses $5,800     Minus: Tax-free educational assistance −5,000     Equals: Adjusted qualified  education expenses (AQEE) $ 800   Because Erin's AQEE ($800) are more than the taxable portion of her IRA distribution ($500), she does not have to pay the 10% additional tax on any part of this distribution. How to fill out 1040ez 2012 However, she must include the $500 taxable earnings in her gross income subject to income tax. How to fill out 1040ez 2012 Example 2. How to fill out 1040ez 2012 Assume the same facts as in Example 1 , except that Erin deducted some of the contributions to her IRA, so the taxable part of her early distribution is higher by $1,000. How to fill out 1040ez 2012 This must be included in her income subject to income tax. How to fill out 1040ez 2012 The taxable part of Erin's IRA distribution ($1,000) is larger than her $800 AQEE. How to fill out 1040ez 2012 Therefore, she must pay the 10% additional tax on $200, the taxable part of her distribution ($1,000) that is more than her qualified education expenses ($800). How to fill out 1040ez 2012 She does not have to pay the 10% additional tax on the remaining $800 of her taxable distribution. How to fill out 1040ez 2012 Reporting Early Distributions By January 31, 2014, the payer of your IRA distribution should send you Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. How to fill out 1040ez 2012 The information on this form will help you determine how much of your distribution is taxable for income tax purposes and how much is subject to the 10% additional tax. How to fill out 1040ez 2012 If you received an early distribution from your IRA, you must report the taxable earnings on Form 1040, line 15b (Form 1040NR, line 16b). How to fill out 1040ez 2012 Then, if you qualify for an exception for qualified higher education expenses, you must file Form 5329 to show how much, if any, of your early distribution is subject to the 10% additional tax. How to fill out 1040ez 2012 See the Instructions for Form 5329, Part I, for help in completing the form and entering the results on Form 1040 or 1040NR. How to fill out 1040ez 2012 There are many other situations in which Form 5329 is required. How to fill out 1040ez 2012 If, during 2013, you had other distributions from IRAs or qualified retirement plans, or have made excess contributions to certain tax-favored accounts, see the instructions for line 58 (Form 1040) or line 56 (Form 1040NR) to determine if you must file Form 5329. How to fill out 1040ez 2012 Prev  Up  Next   Home   More Online Publications
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The How To Fill Out 1040ez 2012

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