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Revised Tax Return

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Revised Tax Return

Revised tax return Index A Accounting method Accrual, Accrual Method, Accrual method. Revised tax return Automatic procedures, Automatic change procedures. Revised tax return Cash, Cash Method, Cash method. Revised tax return Change in, Change in Accounting Method Combination, Combination Method Special, Special Methods Accounting periods, Accounting Periods Accrual method Income - general rule, Income—General Rule Income - special rules, Income—Special Rules Of accounting, Accrual Method Adjusted basis, Adjusted basis. Revised tax return Administrator, Executor or administrator. Revised tax return Alternative fuel vehicle refueling property credit, Alternative fuel vehicle refueling property credit (Form 8911). Revised tax return Alternative motor vehicle credit, Alternative motor vehicle credit (Form 8910). Revised tax return Appeal rights, Appeals. Revised tax return Appreciation, Appreciation. Revised tax return Audits, Examinations (audits). Revised tax return Automobile (see Car expenses) B Bad debts, Bad Debts Barter income, Bartering for Property or Services Basis of property, Basis. Revised tax return Bribes, Expenses You Cannot Deduct Business expenses, Business Expenses Business income, Business Income Business use of your home, Business Use of Your Home C Canceled debt, Canceled Debt Cancellation of qualified real property business debt, Cancellation of qualified real property business debt. Revised tax return Capital gain or loss, Is My Gain or Loss Ordinary or Capital? Car expenses, Car and Truck Expenses, Methods for Deducting Car and Truck Expenses Carbon dioxide sequestration credit, Carbon dioxide sequestration credit (Form 8933). Revised tax return Cash discount, Cash discounts. Revised tax return , Cash discounts. Revised tax return Cash method Expenses, Expenses Income, Income Changing accounting method, Changing accounting method. Revised tax return Charitable contributions, Expenses You Cannot Deduct Child employed by parent, Child employed by parent. Revised tax return Claim for refund, Refunds. Revised tax return Collection of tax, Collections. Revised tax return Combination method of accounting, Combination Method Comments on publication, Comments and suggestions. Revised tax return Condemned property, Condemned property. Revised tax return Consignments, Consignments. Revised tax return Construction allowances, Construction allowances. Revised tax return Cost of goods sold, How To Figure Cost of Goods Sold Credit Alternative fuel vehicle refueling property, Alternative fuel vehicle refueling property credit (Form 8911). Revised tax return Alternative motor vehicle, Alternative motor vehicle credit (Form 8910). Revised tax return Carbon dioxide sequestration, Carbon dioxide sequestration credit (Form 8933). Revised tax return Disabled access, Disabled access credit (Form 8826). Revised tax return Distilled spirits, Distilled spirits credit (Form 8906). Revised tax return Employer-provided childcare, Credit for employer-provided childcare facilities and services (Form 8882). Revised tax return How to claim, How To Claim the Credit Indian coal, Renewable electricity, refined coal, and Indian coal production credit (Form 8835). Revised tax return Investment, Investment credit (Form 3468). Revised tax return Low sulfur diesel fuel production, Low sulfur diesel fuel production credit (Form 8896). Revised tax return Low-income housing, Low-income housing credit (Form 8586). Revised tax return New markets, New markets credit (Form 8874). Revised tax return Nonconventional source fuel, Nonconventional source fuel credit (Form 8907). Revised tax return Orphan drug, Orphan drug credit (Form 8820). Revised tax return Qualified plug-in electric drive motor vehicle, Qualified plug-in electric drive motor vehicle credit (Form 8936). Revised tax return Refined coal, Renewable electricity, refined coal, and Indian coal production credit (Form 8835). Revised tax return Renewable electricity, Renewable electricity, refined coal, and Indian coal production credit (Form 8835). Revised tax return Small employer health insurance premiums, Credit for small employer health insurance premiums (Form 8941). Revised tax return Small employer pension plan startup costs, Credit for small employer pension plan startup costs (Form 8881). Revised tax return Taxes paid on certain employee tips, Credit for employer social security and Medicare taxes paid on certain employee tips (Form 8846). Revised tax return Work opportunity, Work opportunity credit (Form 5884). Revised tax return D Damages, Damages. Revised tax return Debt Bad, Bad Debts Canceled, Canceled Debt Qualified real property business, Qualified real property business debt. Revised tax return Refund offset against, Offset against debts. Revised tax return Definitions Accounting methods, Accounting Methods Accounting periods, Accounting Periods Barter, Bartering for Property or Services Basis, Basis. Revised tax return Business bad debt, Business bad debt. Revised tax return Calendar tax year, Calendar tax year. Revised tax return Cash discount, Cash discounts. Revised tax return , Cash discounts. Revised tax return Disposition of property, What Is a Disposition of Property? Drawing account, Merchandise withdrawn from sale. Revised tax return Entertainment expenses, Entertainment expenses. Revised tax return Fair market value, Fair market value. Revised tax return Fiscal tax year, Fiscal tax year. Revised tax return Fringe benefit, Fringe benefits. Revised tax return Local transportation expenses, Local transportation expenses. Revised tax return Necessary expense, Introduction Net operating loss, Net Operating Losses (NOLs) Nonbusiness bad debt, Nonbusiness bad debts. Revised tax return Ordinary expense, Introduction Principal place of business, Principal place of business. Revised tax return Qualified long-term real property, Qualified long-term real property. Revised tax return Qualified real property business debt, Cancellation of qualified real property business debt. Revised tax return Rent, Rent Expense Restricted property, Other Income Retail space, Retail space. Revised tax return Self-employment (SE) tax, Self-Employment (SE) Tax Sole proprietor, Sole proprietor. Revised tax return Tax home, Local transportation expenses. Revised tax return Trade discount, Trade discounts. Revised tax return , Cash discounts. Revised tax return Travel expenses, Travel, Meals, and Entertainment Depreciation Deduction, Depreciation Listed property, Listed property. Revised tax return Depreciation, recapture, Recapture of depreciation. Revised tax return Direct seller, Direct seller. Revised tax return , Real estate agent or direct seller. Revised tax return Disabled access credit, Disabled access credit (Form 8826). Revised tax return Disposition of property Business property, Introduction Installment sale, Installment sales. Revised tax return , Installment sales. Revised tax return Like-kind exchange, Like-kind exchanges. Revised tax return , Like-kind exchanges. Revised tax return , Exchange of like-kind property. Revised tax return Nontaxable exchange, Nontaxable exchanges. Revised tax return Sale of a business, Sale of a business. Revised tax return Distilled spirits credit, Distilled spirits credit (Form 8906). Revised tax return Dividend income, Interest and Dividend Income Donation of inventory, Donation of inventory. Revised tax return Drawing account, Merchandise withdrawn from sale. Revised tax return Due date of return, When Is My Tax Return Due? E e-file, IRS e-file (Electronic Filing) Economic injury, Economic injury. Revised tax return EFTPS, EFTPS Electronic filing, IRS e-file (Electronic Filing) Employee, Employee. Revised tax return Employee benefit programs, Fringe benefits. Revised tax return Employees' pay, Employees' Pay Employer identification number (EIN), Employer identification number (EIN). Revised tax return Employment taxes About, Employment Taxes Deduction for, Employment taxes. Revised tax return Entertainment expenses, Entertainment expenses. Revised tax return (see Travel expenses) Escrow, payments placed in, Payment placed in escrow. Revised tax return Estimated tax, How Do I Pay Income Tax? Examinations (audits), Examinations (audits). Revised tax return Excise taxes About, Excise Taxes Deduction for, Excise taxes. Revised tax return Executor, Executor or administrator. Revised tax return Expenses, Business Expenses Bad debts, Bad Debts Car, Car and Truck Expenses Depreciation, Depreciation Employees' pay, Employees' Pay Entertainment, Travel, Meals, and Entertainment Home, business use, Business Use of Your Home Insurance, Insurance Interest, Interest Legal and professional fees, Legal and Professional Fees Meals, Travel, Meals, and Entertainment Nondeductible, Expenses You Cannot Deduct Other, Other Expenses You Can Deduct Pension plans, Pension Plans Rent, Rent Expense Taxes, Taxes Travel, Travel, Meals, and Entertainment Truck, Car and Truck Expenses F Fair market value, Fair market value. Revised tax return Filing business taxes, Filing and Paying Business Taxes Fishing crew member, Fishing crew member. Revised tax return , Fishing crew member. Revised tax return Form 1040 (tax return), How Do I File? 1040-ES (estimated tax), How Do I Pay Income Tax? 1040-V (voucher), Balance due. Revised tax return 1099-B (barter), Information returns. Revised tax return 1099-MISC (miscellaneous), Form 1099-MISC. Revised tax return , Information returns. Revised tax return 1128 (change tax year), Change in tax year. Revised tax return 2210 (underpayment of estimated tax), Penalty for underpayment of tax. Revised tax return 2290 (excise tax for heavy trucks), Form 2290. Revised tax return 3115 (change accounting method), Change in Accounting Method 3468 (investment credit), Investment credit (Form 3468). Revised tax return 3800 (general business credit), Useful Items - You may want to see: 4562 (depreciation), Form 4562. Revised tax return 4684 (casualty and theft), Casualties and thefts. Revised tax return 4797 (sale of business property), Dispositions of business property and depreciable property. Revised tax return , Condemned property. Revised tax return , Listed property. Revised tax return 4868 (extension), When Is My Tax Return Due? 5884 (work opportunity credit), Work opportunity credit (Form 5884). Revised tax return 6251 (alternative minimum tax), Useful Items - You may want to see: 6252 (installment sale), Installment sales. Revised tax return 720 (excise tax return), Form 720. Revised tax return 8300 (cash payments over $10,000), Form 8300. Revised tax return 8586 (low-income housing), Low-income housing credit (Form 8586). Revised tax return 8594 (asset acquisition), Sale of a business. Revised tax return 8820 (orphan drug credit), Orphan drug credit (Form 8820). Revised tax return 8824 (like-kind exchange), Like-kind exchanges. Revised tax return , Like-kind exchanges. Revised tax return 8826 (disabled access credit), Disabled access credit (Form 8826). Revised tax return 8829 (business in home), Deduction limit. Revised tax return 8835 (renewable electricity, coal credit), Renewable electricity, refined coal, and Indian coal production credit (Form 8835). Revised tax return 8846 (credit for social security on tip income), Credit for employer social security and Medicare taxes paid on certain employee tips (Form 8846). Revised tax return 8857 (innocent spouse), Innocent spouse relief. Revised tax return 8874 (new markets credit), New markets credit (Form 8874). Revised tax return 8879 (self-selected PIN), Using an Authorized IRS e-file Provider 8881 (pension plan startup costs credit), Credit for small employer pension plan startup costs (Form 8881). Revised tax return 8882 (employer-provided childcare credit), Credit for employer-provided childcare facilities and services (Form 8882). Revised tax return 8886 (transaction statement), Reminders 8896 (low sulfur diesel fuel production credit), Low sulfur diesel fuel production credit (Form 8896). Revised tax return 8906 (distilled spirits credit), Distilled spirits credit (Form 8906). Revised tax return 8907 (nonconventional fuel credit), Nonconventional source fuel credit (Form 8907). Revised tax return 8910 (alternative vehicle credit), Alternative motor vehicle credit (Form 8910). Revised tax return , Car and Truck Expenses 8911 (alternative fuel refueling property credit), Alternative fuel vehicle refueling property credit (Form 8911). Revised tax return 8933 (carbon dioxide sequestration credit), Carbon dioxide sequestration credit (Form 8933). Revised tax return 8936 (qualified plug-in electric drive motor vehicle), Qualified plug-in electric drive motor vehicle credit (Form 8936). Revised tax return 8941 (small employer health insurance premiums), Credit for small employer health insurance premiums (Form 8941). Revised tax return 982 (discharge of indebtedness), Exclusions Schedule C (sole proprietor), How Do I File? Schedule C-EZ (sole proprietor), How Do I File? Schedule SE (self-employment tax), Who must pay self-employment tax. Revised tax return SS-4 (application for EIN), Employer identification number (EIN). Revised tax return SS-5 (application for SSN), Social security number (SSN). Revised tax return W-2 (report wages), Form W-2. Revised tax return W-4 (employee withholding), Employee. Revised tax return W-7 (application for ITIN), Individual taxpayer identification number (ITIN). Revised tax return W-9 (request for TIN), Other payee. Revised tax return Fringe benefits, Fringe benefits. Revised tax return Fuel taxes, Fuel taxes. Revised tax return G Gains and losses, Gains and losses. Revised tax return General business credits, General Business Credits, Business Credits Gross profit Accuracy, Testing Gross Profit Accuracy Additions to, Additions to Gross Profit Guidelines for selected occupations, Guidelines for Selected Occupations (see also Occupations, selected) H Health insurance, deduction for self-employed, Self-employed health insurance deduction. Revised tax return Home, business use of, Business Use of Your Home Hotels, boarding houses, and apartments, Hotels, boarding houses, and apartments. Revised tax return Husband and wife business, Business owned and operated by spouses. Revised tax return I Identification numbers, Identification Numbers Income, Items That Are Not Income (see also Not income) Accounting for your, Accounting for Your Income Barter, Bartering for Property or Services Business, Business Income Damages, Damages. Revised tax return Gains and losses, Gains and losses. Revised tax return Kickbacks, Kickbacks. Revised tax return Kinds of income, Kinds of Income Lost income payments, Lost income payments. Revised tax return Other, Other Income Paid to a third party, Income paid to a third party. Revised tax return Personal property rent, Personal Property Rents Promissory notes, Promissory notes. Revised tax return Recapture of depreciation, Recapture of depreciation. Revised tax return Recovery of items previously deducted, Recovery of items previously deducted. Revised tax return Rental, Real Estate Rents, Personal Property Rents Restricted property, Restricted property. Revised tax return Income tax About, Income Tax Deduction for, Income taxes. Revised tax return How to pay, How Do I Pay Income Tax? Underpayment penalty, Penalty for underpayment of tax. Revised tax return Income tax return, who must file, Do I Have To File an Income Tax Return? Independent contractor, Independent contractor. Revised tax return , Employment Taxes, Sole proprietor or independent contractor. Revised tax return Individual taxpayer identification number (ITIN), Individual taxpayer identification number (ITIN). Revised tax return Information returns, Information Returns Information, How to get more, How To Get More Information Innocent spouse relief, Innocent spouse relief. Revised tax return Installment sales, Installment sales. Revised tax return Insurance Expense, Insurance Nondeductible premiums, Nondeductible premiums. Revised tax return Prepayment, Prepayment. Revised tax return Proceeds, Insurance proceeds. Revised tax return Self-employed health, Self-employed health insurance deduction. Revised tax return Insurance agent Former, Insurance agent, former. Revised tax return Retired, Insurance agent, retired. Revised tax return Interest Expenses, Interest Income, Interest and Dividend Income Inventories, Inventories Investment credit, Investment credit (Form 3468). Revised tax return K Kickbacks, Kickbacks. Revised tax return , Expenses You Cannot Deduct L Lease bonus, Lease bonus. Revised tax return Lease cancellation payments, Lease cancellation payments. Revised tax return Legal fees, Legal and Professional Fees Like-kind exchanges, Like-kind exchanges. Revised tax return , Exchange of like-kind property. Revised tax return Limited liability company, Limited liability company (LLC). Revised tax return Listed property, Listed property. Revised tax return Lobbying expense, Expenses You Cannot Deduct Local transportation expenses, Local transportation expenses. Revised tax return Lodging, Meals and lodging. Revised tax return Long-term capital gain or loss, Is My Capital Gain or Loss Short Term or Long Term? Lost income payments, Lost income payments. Revised tax return Low sulfur diesel fuel production credit, Low sulfur diesel fuel production credit (Form 8896). Revised tax return Low-income housing credit, Low-income housing credit (Form 8586). Revised tax return M Meals, Meals and lodging. Revised tax return (see Travel expenses) Methods for figuring net earnings, Methods for Figuring Net Earnings Mileage rate for vehicles, Standard mileage rate. Revised tax return Motor vehicle, alternative credit, Alternative motor vehicle credit (Form 8910). Revised tax return N Net operating losses, Net Operating Losses (NOLs) Net profit or loss, Introduction New markets credit, New markets credit (Form 8874). Revised tax return Newspaper carrier or distributor, Newspaper carrier or distributor. Revised tax return Newspaper or magazine vendor, Newspaper or magazine vendor. Revised tax return Nonbusiness bad debt, Nonbusiness bad debts. Revised tax return Nonconventional source fuel credit, Nonconventional source fuel credit (Form 8907). Revised tax return Nondeductible insurance premiums, Nondeductible premiums. Revised tax return Nonemployee compensation, Introduction Nontaxable exchanges, Nontaxable exchanges. Revised tax return Not income Appreciation, Appreciation. Revised tax return Consignments, Consignments. Revised tax return Constructions allowances, Construction allowances. Revised tax return Exchange of like-kind property, Exchange of like-kind property. Revised tax return Leasehold improvements, Leasehold improvements. Revised tax return Loans, Loans. Revised tax return Sales tax, Sales tax. Revised tax return Not-for-profit activities, Not-for-Profit Activities Notary public, Notary public. Revised tax return , Notary public. Revised tax return O Occupations, selected Administrator, Executor or administrator. Revised tax return Direct seller, Direct seller. Revised tax return , Real estate agent or direct seller. Revised tax return Executor, Executor or administrator. Revised tax return Fishing crew member, Fishing crew member. Revised tax return Insurance agent, former, Insurance agent, former. Revised tax return Insurance agent, retired, Insurance agent, retired. Revised tax return Newspaper carrier or distributor, Newspaper carrier or distributor. Revised tax return Newspaper or magazine vendor, Newspaper or magazine vendor. Revised tax return Notary public, Notary public. Revised tax return Public official, Public official. Revised tax return Real estate agent, Real estate agent or direct seller. Revised tax return Securities dealer, Securities dealer. Revised tax return Securities trader, Securities trader. Revised tax return Office in the home, Office in the home. Revised tax return (see also Business use of your home) Optional methods, using both, Using Both Optional Methods Ordinary gain or loss, Is My Gain or Loss Ordinary or Capital? Orphan drug credit, Orphan drug credit (Form 8820). Revised tax return P Parking fees, Parking fees and tolls. Revised tax return Partners, husband and wife, Business owned and operated by spouses. Revised tax return Pay, kinds of, Kinds of pay. Revised tax return Paying Business taxes, Filing and Paying Business Taxes Income tax, How Do I Pay Income Tax? Payments to third parties, Payments to third parties. Revised tax return Penalties and fines, Expenses You Cannot Deduct Penalty Failure to file Form 8300, Penalties. Revised tax return Failure to file information returns, Penalties. Revised tax return Failure to furnish correct payee statements, Penalties. Revised tax return Underpayment of tax, Penalty for underpayment of tax. Revised tax return Waiver of, Waiver of penalties. Revised tax return Pension plans, Pension Plans Personal property tax, Personal property tax. Revised tax return Prepaid expense Extends useful life, Prepayment. Revised tax return Rent, Rent paid in advance. Revised tax return Professional fees, Legal and Professional Fees Promissory notes, Promissory notes. Revised tax return Public official, Public official. Revised tax return Punitive damages, Punitive damages. Revised tax return Q Qualified plug-in electric drive motor vehicle credit, Qualified plug-in electric drive motor vehicle credit (Form 8936). Revised tax return Qualified real property business debt, Qualified real property business debt. Revised tax return R Real estate Agent, Real estate agent or direct seller. Revised tax return Dealer, Real estate dealer. Revised tax return Rent, Real Estate Rents Taxes, Real estate taxes. Revised tax return Recovery of items previously deducted, Recovery of items previously deducted. Revised tax return Refund Inquiries, Refund inquiries. Revised tax return Offsets against debts, Offset against debts. Revised tax return Related persons Unreasonable rent, Unreasonable rent. Revised tax return Renewable electricity, refined coal, and Indian coal production credit, Renewable electricity, refined coal, and Indian coal production credit (Form 8835). Revised tax return Rent expense, Rent Expense Rental income, Real Estate Rents Repayment of income, Repayment of income. Revised tax return Reportable transaction disclosure statement, Reminders Reporting self-employment tax, Reporting Self-Employment Tax Restricted property, Restricted property. Revised tax return Retirement plans (see Pension plans) S Salaries, Employees' Pay Sale of a business, Sale of a business. Revised tax return Sale of property, What Is a Disposition of Property? (see also Disposition of property) Sales of assets, Introduction Sales tax, Sales tax. Revised tax return Schedule C, How Do I File? Schedule C-EZ, How Do I File? Schedule SE (Form 1040), Who must pay self-employment tax. Revised tax return Schedule SE, filing requirement, Reporting Self-Employment Tax SE tax About, Self-Employment (SE) Tax Aliens, Aliens. Revised tax return Child employed by parent, Child employed by parent. Revised tax return Church employee, Church employee. Revised tax return Community property income, Community Property Income Deduction for, Self-employment tax. Revised tax return Earning credits, Earning credits in 2013 and 2014. Revised tax return Effects of using an optional method, Effects of using an optional method. Revised tax return Farm optional method, Farm Optional Method Fiscal year filer, Fiscal Year Filer Fishing crew member, Fishing crew member. Revised tax return Gain or loss, Gain or Loss Government employee, State or local government employee. Revised tax return , Foreign government or international organization employee. Revised tax return Joint return, Joint return. Revised tax return Lost income payments, Lost Income Payments Maximum earnings For 2011, What's New for 2013, Maximum earnings subject to SE tax. Revised tax return Subject to, Maximum earnings subject to self-employment tax. Revised tax return Methods for figuring net earnings, Methods for Figuring Net Earnings More than one business, More Than One Business, More than one business. Revised tax return Nonfarm optional method, Nonfarm Optional Method Notary public, Notary public. Revised tax return Optional methods Farm, Farm Optional Method Nonfarm, Nonfarm Optional Method Rate, SE tax rate. Revised tax return Regular method, Regular Method Residing abroad, U. Revised tax return S. Revised tax return citizen or resident alien residing abroad. Revised tax return Special rules and exceptions, Special Rules and Exceptions Tax rate, SE tax rate. Revised tax return Time limit for posting income, The Social Security Administration (SSA) time limit for posting self-employment income. Revised tax return Who must pay, Who Must Pay SE Tax? Why use an optional method, Why use an optional method? Section 179 Deduction, Section 179 deduction. Revised tax return Property, Section 179 property. Revised tax return Securities Dealer, Securities dealer. Revised tax return Trader, Securities trader. Revised tax return Self-employed health insurance deduction, Self-employed health insurance deduction. Revised tax return Self-employment tax (see SE tax) Settlement payments, Settlement payments. Revised tax return Short-term capital gain or loss, Is My Capital Gain or Loss Short Term or Long Term? Signature, electronic, Electronic signatures. Revised tax return Small Business Administration, Small Business Administration Small employer health insurance premiums credit, Credit for small employer health insurance premiums (Form 8941). Revised tax return Social security coverage, Social security coverage. Revised tax return Social security number (SSN), Social security number (SSN). Revised tax return Sole proprietor, Sole proprietor. Revised tax return , Sole proprietor or independent contractor. Revised tax return Sport utility vehicle, Section 179 deduction. Revised tax return Standard mileage rate, Standard mileage rate. Revised tax return For 2011, What's New for 2013 Statutory employee, Statutory employee. Revised tax return Suggestions for publication, Comments and suggestions. Revised tax return SUV, Section 179 deduction. Revised tax return T Tax home, Local transportation expenses. Revised tax return , Travel expenses. Revised tax return Tax preparation fees, Tax preparation fees. Revised tax return Tax refund Claim for, Refunds. Revised tax return Offset against debts, Offset against debts. Revised tax return Tax return How to file, How Do I File? Who must file, Do I Have To File an Income Tax Return? Tax year, Accounting Periods Calendar, Calendar tax year. Revised tax return Change in, Change in tax year. Revised tax return Fiscal, Fiscal tax year. Revised tax return Taxes Deduction for, Taxes Employment, Employment Taxes, Employment taxes. Revised tax return Excise, Excise Taxes, Excise taxes. Revised tax return Fuel, Fuel taxes. Revised tax return Income, Income Tax, Income taxes. Revised tax return Paid on certain employee tips, Credit for employer social security and Medicare taxes paid on certain employee tips (Form 8846). Revised tax return Personal property, Personal property tax. Revised tax return Real estate, Real estate taxes. Revised tax return Sales, Sales tax. Revised tax return Self-employment, Self-Employment (SE) Tax, Self-employment tax. Revised tax return Taxpayer rights, Declaration of Taxpayer Rights Third parties, Payments to, Payments to third parties. Revised tax return Tolls, Parking fees and tolls. Revised tax return Trade discount, Trade discounts. Revised tax return , Trade discounts. Revised tax return Trade or business, Trade or business. Revised tax return Trailer park owner, Trailer park owner. Revised tax return Transportation expenses, Local transportation expenses. Revised tax return Travel expenses, Travel expenses. Revised tax return U Underpayment of tax penalty, Penalty for underpayment of tax. Revised tax return Uniform capitalization rules, Uniform Capitalization Rules W Wages, Employees' Pay Work opportunity credit, Work opportunity credit (Form 5884). Revised tax return Prev  Up     Home   More Online Publications
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The Revised Tax Return

Revised tax return Publication 936 - Main Content Table of Contents Part I. Revised tax return Home Mortgage InterestSecured Debt Qualified Home Special Situations Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement How To Report Special Rule for Tenant-Stockholders in Cooperative Housing Corporations Part II. Revised tax return Limits on Home Mortgage Interest DeductionHome Acquisition Debt Home Equity Debt Grandfathered Debt Table 1 Instructions How To Get Tax HelpLow Income Taxpayer Clinics Part I. Revised tax return Home Mortgage Interest This part explains what you can deduct as home mortgage interest. Revised tax return It includes discussions on points, mortgage insurance premiums, and how to report deductible interest on your tax return. Revised tax return Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). Revised tax return The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. Revised tax return You can deduct home mortgage interest if all the following conditions are met. Revised tax return You file Form 1040 and itemize deductions on Schedule A (Form 1040). Revised tax return The mortgage is a secured debt on a qualified home in which you have an ownership interest. Revised tax return Secured Debt and Qualified Home are explained later. Revised tax return  Both you and the lender must intend that the loan be repaid. Revised tax return Fully deductible interest. Revised tax return   In most cases, you can deduct all of your home mortgage interest. Revised tax return How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. Revised tax return   If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. Revised tax return (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category. Revised tax return ) If one or more of your mortgages does not fit into any of these categories, use Part II of this publication to figure the amount of interest you can deduct. Revised tax return   The three categories are as follows. Revised tax return Mortgages you took out on or before October 13, 1987 (called grandfathered debt). Revised tax return Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2013 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately). Revised tax return Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2013 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2). Revised tax return The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. Revised tax return   See Part II for more detailed definitions of grandfathered, home acquisition, and home equity debt. Revised tax return    You can use Figure A to check whether your home mortgage interest is fully deductible. Revised tax return This image is too large to be displayed in the current screen. Revised tax return Please click the link to view the image. Revised tax return Figure A. Revised tax return Is My Home Mortgage Interest Fully Deductible? Secured Debt You can deduct your home mortgage interest only if your mortgage is a secured debt. Revised tax return A secured debt is one in which you sign an instrument (such as a mortgage, deed of trust, or land contract) that: Makes your ownership in a qualified home security for payment of the debt, Provides, in case of default, that your home could satisfy the debt, and Is recorded or is otherwise perfected under any state or local law that applies. Revised tax return In other words, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. Revised tax return If you cannot pay the debt, your home can then serve as payment to the lender to satisfy (pay) the debt. Revised tax return In this publication, mortgage will refer to secured debt. Revised tax return Debt not secured by home. Revised tax return   A debt is not secured by your home if it is secured solely because of a lien on your general assets or if it is a security interest that attaches to the property without your consent (such as a mechanic's lien or judgment lien). Revised tax return   A debt is not secured by your home if it once was, but is no longer secured by your home. Revised tax return Wraparound mortgage. Revised tax return   This is not a secured debt unless it is recorded or otherwise perfected under state law. Revised tax return Example. Revised tax return Beth owns a home subject to a mortgage of $40,000. Revised tax return She sells the home for $100,000 to John, who takes it subject to the $40,000 mortgage. Revised tax return Beth continues to make the payments on the $40,000 note. Revised tax return John pays $10,000 down and gives Beth a $90,000 note secured by a wraparound mortgage on the home. Revised tax return Beth does not record or otherwise perfect the $90,000 mortgage under the state law that applies. Revised tax return Therefore, the mortgage is not a secured debt and John cannot deduct any of the interest he pays on it as home mortgage interest. Revised tax return Choice to treat the debt as not secured by your home. Revised tax return   You can choose to treat any debt secured by your qualified home as not secured by the home. Revised tax return This treatment begins with the tax year for which you make the choice and continues for all later tax years. Revised tax return You can revoke your choice only with the consent of the Internal Revenue Service (IRS). Revised tax return   You may want to treat a debt as not secured by your home if the interest on that debt is fully deductible (for example, as a business expense) whether or not it qualifies as home mortgage interest. Revised tax return This may allow you, if the limits in Part II apply, more of a deduction for interest on other debts that are deductible only as home mortgage interest. Revised tax return Cooperative apartment owner. Revised tax return   If you own stock in a cooperative housing corporation, see the Special Rule for Tenant-Stockholders in Cooperative Housing Corporations , near the end of this Part I. Revised tax return Qualified Home For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. Revised tax return This means your main home or your second home. Revised tax return A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. Revised tax return The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Revised tax return Otherwise, it is considered personal interest and is not deductible. Revised tax return Main home. Revised tax return   You can have only one main home at any one time. Revised tax return This is the home where you ordinarily live most of the time. Revised tax return Second home. Revised tax return   A second home is a home that you choose to treat as your second home. Revised tax return Second home not rented out. Revised tax return   If you have a second home that you do not hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. Revised tax return You do not have to use the home during the year. Revised tax return Second home rented out. Revised tax return   If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. Revised tax return You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer. Revised tax return If you do not use the home long enough, it is considered rental property and not a second home. Revised tax return For information on residential rental property, see Publication 527. Revised tax return More than one second home. Revised tax return   If you have more than one second home, you can treat only one as the qualified second home during any year. Revised tax return However, you can change the home you treat as a second home during the year in the following situations. Revised tax return If you get a new home during the year, you can choose to treat the new home as your second home as of the day you buy it. Revised tax return If your main home no longer qualifies as your main home, you can choose to treat it as your second home as of the day you stop using it as your main home. Revised tax return If your second home is sold during the year or becomes your main home, you can choose a new second home as of the day you sell the old one or begin using it as your main home. Revised tax return Divided use of your home. Revised tax return   The only part of your home that is considered a qualified home is the part you use for residential living. Revised tax return If you use part of your home for other than residential living, such as a home office, you must allocate the use of your home. Revised tax return You must then divide both the cost and fair market value of your home between the part that is a qualified home and the part that is not. Revised tax return Dividing the cost may affect the amount of your home acquisition debt, which is limited to the cost of your home plus the cost of any improvements. Revised tax return (See Home Acquisition Debt in Part II. Revised tax return ) Dividing the fair market value may affect your home equity debt limit, also explained in Part II . Revised tax return Renting out part of home. Revised tax return   If you rent out part of a qualified home to another person (tenant), you can treat the rented part as being used by you for residential living only if all of the following conditions apply. Revised tax return The rented part of your home is used by the tenant primarily for residential living. Revised tax return The rented part of your home is not a self-contained residential unit having separate sleeping, cooking, and toilet facilities. Revised tax return You do not rent (directly or by sublease) the same or different parts of your home to more than two tenants at any time during the tax year. Revised tax return If two persons (and dependents of either) share the same sleeping quarters, they are treated as one tenant. Revised tax return Office in home. Revised tax return   If you have an office in your home that you use in your business, see Publication 587, Business Use of Your Home. Revised tax return It explains how to figure your deduction for the business use of your home, which includes the business part of your home mortgage interest. Revised tax return Home under construction. Revised tax return   You can treat a home under construction as a qualified home for a period of up to 24 months, but only if it becomes your qualified home at the time it is ready for occupancy. Revised tax return   The 24-month period can start any time on or after the day construction begins. Revised tax return Home destroyed. Revised tax return   You may be able to continue treating your home as a qualified home even after it is destroyed in a fire, storm, tornado, earthquake, or other casualty. Revised tax return This means you can continue to deduct the interest you pay on your home mortgage, subject to the limits described in this publication. Revised tax return   You can continue treating a destroyed home as a qualified home if, within a reasonable period of time after the home is destroyed, you: Rebuild the destroyed home and move into it, or Sell the land on which the home was located. Revised tax return   This rule applies to your main home and to a second home that you treat as a qualified home. Revised tax return Time-sharing arrangements. Revised tax return   You can treat a home you own under a time-sharing plan as a qualified home if it meets all the requirements. Revised tax return A time-sharing plan is an arrangement between two or more people that limits each person's interest in the home or right to use it to a certain part of the year. Revised tax return Rental of time-share. Revised tax return   If you rent out your time-share, it qualifies as a second home only if you also use it as a home during the year. Revised tax return See Second home rented out , earlier, for the use requirement. Revised tax return To know whether you meet that requirement, count your days of use and rental of the home only during the time you have a right to use it or to receive any benefits from the rental of it. Revised tax return Married taxpayers. Revised tax return   If you are married and file a joint return, your qualified home(s) can be owned either jointly or by only one spouse. Revised tax return Separate returns. Revised tax return   If you are married filing separately and you and your spouse own more than one home, you can each take into account only one home as a qualified home. Revised tax return However, if you both consent in writing, then one spouse can take both the main home and a second home into account. Revised tax return Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. Revised tax return It also describes certain special situations that may affect your deduction. Revised tax return Late payment charge on mortgage payment. Revised tax return   You can deduct as home mortgage interest a late payment charge if it was not for a specific service performed in connection with your mortgage loan. Revised tax return Mortgage prepayment penalty. Revised tax return   If you pay off your home mortgage early, you may have to pay a penalty. Revised tax return You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. Revised tax return Sale of home. Revised tax return   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of the sale. Revised tax return Example. Revised tax return John and Peggy Harris sold their home on May 7. Revised tax return Through April 30, they made home mortgage interest payments of $1,220. Revised tax return The settlement sheet for the sale of the home showed $50 interest for the 6-day period in May up to, but not including, the date of sale. Revised tax return Their mortgage interest deduction is $1,270 ($1,220 + $50). Revised tax return Prepaid interest. Revised tax return   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. Revised tax return You can deduct in each year only the interest that qualifies as home mortgage interest for that year. Revised tax return However, there is an exception that applies to points, discussed later. Revised tax return Mortgage interest credit. Revised tax return    You may be able to claim a mortgage interest credit if you were issued a mortgage credit certificate (MCC) by a state or local government. Revised tax return Figure the credit on Form 8396, Mortgage Interest Credit. Revised tax return If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. Revised tax return   See Form 8396 and Publication 530 for more information on the mortgage interest credit. Revised tax return Ministers' and military housing allowance. Revised tax return   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you can still deduct your home mortgage interest. Revised tax return Hardest Hit Fund and Emergency Homeowners' Loan Programs. Revised tax return   You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. Revised tax return You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. Revised tax return You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. Revised tax return If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098–MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received from payer(s) / borrower(s)), box 4 (mortgage insurance premiums), and box 5 (other information including real property taxes paid). Revised tax return However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. Revised tax return Mortgage assistance payments under section 235 of the National Housing Act. Revised tax return   If you qualify for mortgage assistance payments for lower-income families under section 235 of the National Housing Act, part or all of the interest on your mortgage may be paid for you. Revised tax return You cannot deduct the interest that is paid for you. Revised tax return No other effect on taxes. Revised tax return   Do not include these mortgage assistance payments in your income. Revised tax return Also, do not use these payments to reduce other deductions, such as real estate taxes. Revised tax return Divorced or separated individuals. Revised tax return   If a divorce or separation agreement requires you or your spouse or former spouse to pay home mortgage interest on a home owned by both of you, the payment of interest may be alimony. Revised tax return See the discussion of Payments for jointly-owned home under Alimony in Publication 504, Divorced or Separated Individuals. Revised tax return Redeemable ground rents. Revised tax return   In some states (such as Maryland), you can buy your home subject to a ground rent. Revised tax return A ground rent is an obligation you assume to pay a fixed amount per year on the property. Revised tax return Under this arrangement, you are leasing (rather than buying) the land on which your home is located. Revised tax return   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. Revised tax return   A ground rent is a redeemable ground rent if all of the following are true. Revised tax return Your lease, including renewal periods, is for more than 15 years. Revised tax return You can freely assign the lease. Revised tax return You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specific amount. Revised tax return The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. Revised tax return   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. Revised tax return Nonredeemable ground rents. Revised tax return   Payments on a nonredeemable ground rent are not mortgage interest. Revised tax return You can deduct them as rent if they are a business expense or if they are for rental property. Revised tax return Reverse mortgages. Revised tax return   A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. Revised tax return With a reverse mortgage, you retain title to your home. Revised tax return Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. Revised tax return Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Revised tax return Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until you actually pay it, which is usually when you pay off the loan in full. Revised tax return Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Part II. Revised tax return Rental payments. Revised tax return   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. Revised tax return This is true even if the settlement papers call them interest. Revised tax return You cannot deduct these payments as home mortgage interest. Revised tax return Mortgage proceeds invested in tax-exempt securities. Revised tax return   You cannot deduct the home mortgage interest on grandfathered debt or home equity debt if you used the proceeds of the mortgage to buy securities or certificates that produce tax-free income. Revised tax return “Grandfathered debt” and “home equity debt” are defined in Part II of this publication. Revised tax return Refunds of interest. Revised tax return   If you receive a refund of interest in the same tax year you paid it, you must reduce your interest expense by the amount refunded to you. Revised tax return If you receive a refund of interest you deducted in an earlier year, you generally must include the refund in income in the year you receive it. Revised tax return However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. Revised tax return This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. Revised tax return If you need to include the refund in income, report it on Form 1040, line 21. Revised tax return   If you received a refund of interest you overpaid in an earlier year, you generally will receive a Form 1098, Mortgage Interest Statement, showing the refund in box 3. Revised tax return For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. Revised tax return   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in Publication 525, Taxable and Nontaxable Income. Revised tax return Cooperative apartment owner. Revised tax return   If you own a cooperative apartment, you must reduce your home mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. Revised tax return The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. Revised tax return   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. Revised tax return Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Revised tax return Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Revised tax return This image is too large to be displayed in the current screen. Revised tax return Please click the link to view the image. Revised tax return Figure B. Revised tax return Are My Points Fully Deductible This Year? A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Revised tax return See Points paid by the seller , later. Revised tax return General Rule You generally cannot deduct the full amount of points in the year paid. Revised tax return Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. Revised tax return See Deduction Allowed Ratably , next. Revised tax return For exceptions to the general rule, see Deduction Allowed in Year Paid , later. Revised tax return Deduction Allowed Ratably If you do not meet the tests listed under Deduction Allowed in Year Paid , later, the loan is not a home improvement loan, or you choose not to deduct your points in full in the year paid, you can deduct the points ratably (equally) over the life of the loan if you meet all the following tests. Revised tax return You use the cash method of accounting. Revised tax return This means you report income in the year you receive it and deduct expenses in the year you pay them. Revised tax return Most individuals use this method. Revised tax return Your loan is secured by a home. Revised tax return (The home does not need to be your main home. Revised tax return ) Your loan period is not more than 30 years. Revised tax return If your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period. Revised tax return Either your loan amount is $250,000 or less, or the number of points is not more than: 4, if your loan period is 15 years or less, or 6, if your loan period is more than 15 years. Revised tax return Example. Revised tax return You use the cash method of accounting. Revised tax return In 2013, you took out a $100,000 loan payable over 20 years. Revised tax return The terms of the loan are the same as for other 20-year loans offered in your area. Revised tax return You paid $4,800 in points. Revised tax return You made 3 monthly payments on the loan in 2013. Revised tax return You can deduct $60 [($4,800 ÷ 240 months) x 3 payments] in 2013. Revised tax return In 2014, if you make all twelve payments, you will be able to deduct $240 ($20 x 12). Revised tax return Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. Revised tax return (You can use Figure B as a quick guide to see whether your points are fully deductible in the year paid. Revised tax return ) Your loan is secured by your main home. Revised tax return (Your main home is the one you ordinarily live in most of the time. Revised tax return ) Paying points is an established business practice in the area where the loan was made. Revised tax return The points paid were not more than the points generally charged in that area. Revised tax return You use the cash method of accounting. Revised tax return This means you report income in the year you receive it and deduct expenses in the year you pay them. Revised tax return Most individuals use this method. Revised tax return The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. Revised tax return The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Revised tax return The funds you provided are not required to have been applied to the points. Revised tax return They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Revised tax return You cannot have borrowed these funds from your lender or mortgage broker. Revised tax return You use your loan to buy or build your main home. Revised tax return The points were computed as a percentage of the principal amount of the mortgage. Revised tax return The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. Revised tax return The points may be shown as paid from either your funds or the seller's. Revised tax return Note. Revised tax return If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan. Revised tax return Home improvement loan. Revised tax return   You can also fully deduct in the year paid points paid on a loan to improve your main home, if tests (1) through (6) are met. Revised tax return Second home. Revised tax return You cannot fully deduct in the year paid points you pay on loans secured by your second home. Revised tax return You can deduct these points only over the life of the loan. Revised tax return Refinancing. Revised tax return   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. Revised tax return This is true even if the new mortgage is secured by your main home. Revised tax return   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Revised tax return You can deduct the rest of the points over the life of the loan. Revised tax return Example 1. Revised tax return In 1998, Bill Fields got a mortgage to buy a home. Revised tax return In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. Revised tax return The mortgage is secured by his home. Revised tax return To get the new loan, he had to pay three points ($3,000). Revised tax return Two points ($2,000) were for prepaid interest, and one point ($1,000) was charged for services, in place of amounts that ordinarily are stated separately on the settlement statement. Revised tax return Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. Revised tax return The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. Revised tax return Bill's first payment on the new loan was due July 1. Revised tax return He made six payments on the loan in 2013 and is a cash basis taxpayer. Revised tax return Bill used the funds from the new mortgage to repay his existing mortgage. Revised tax return Although the new mortgage loan was for Bill's continued ownership of his main home, it was not for the purchase or improvement of that home. Revised tax return He cannot deduct all of the points in 2013. Revised tax return He can deduct two points ($2,000) ratably over the life of the loan. Revised tax return He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. Revised tax return The other point ($1,000) was a fee for services and is not deductible. Revised tax return Example 2. Revised tax return The facts are the same as in Example 1, except that Bill used $25,000 of the loan proceeds to improve his home and $75,000 to repay his existing mortgage. Revised tax return Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. Revised tax return His deduction is $500 ($2,000 × 25%). Revised tax return Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. Revised tax return This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. Revised tax return The total amount Bill deducts in 2013 is $550 ($500 + $50). Revised tax return Special Situations This section describes certain special situations that may affect your deduction of points. Revised tax return Original issue discount. Revised tax return   If you do not qualify to either deduct the points in the year paid or deduct them ratably over the life of the loan, or if you choose not to use either of these methods, the points reduce the issue price of the loan. Revised tax return This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. Revised tax return Amounts charged for services. Revised tax return    Amounts charged by the lender for specific services connected to the loan are not interest. Revised tax return Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Revised tax return  You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Revised tax return Points paid by the seller. Revised tax return   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Revised tax return Treatment by seller. Revised tax return   The seller cannot deduct these fees as interest. Revised tax return But they are a selling expense that reduces the amount realized by the seller. Revised tax return See Publication 523 for information on selling your home. Revised tax return Treatment by buyer. Revised tax return   The buyer reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them. Revised tax return If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. Revised tax return If any of those tests are not met, the buyer deducts the points over the life of the loan. Revised tax return   If you need information about the basis of your home, see Publication 523 or Publication 530. Revised tax return Funds provided are less than points. Revised tax return   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the funds you provided were less than the points charged to you (test (6)), you can deduct the points in the year paid, up to the amount of funds you provided. Revised tax return In addition, you can deduct any points paid by the seller. Revised tax return Example 1. Revised tax return When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Revised tax return You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. Revised tax return Of the $1,000 charged for points, you can deduct $750 in the year paid. Revised tax return You spread the remaining $250 over the life of the mortgage. Revised tax return Example 2. Revised tax return The facts are the same as in Example 1, except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. Revised tax return In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Revised tax return You spread the remaining $250 over the life of the mortgage. Revised tax return You must reduce the basis of your home by the $1,000 paid by the seller. Revised tax return Excess points. Revised tax return   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the points paid were more than generally paid in your area (test (3)), you deduct in the year paid only the points that are generally charged. Revised tax return You must spread any additional points over the life of the mortgage. Revised tax return Mortgage ending early. Revised tax return   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. Revised tax return However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. Revised tax return Instead, deduct the remaining balance over the term of the new loan. Revised tax return   A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Revised tax return Example. Revised tax return Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. Revised tax return He deducts $200 points per year. Revised tax return Through 2012, Dan has deducted $2,200 of the points. Revised tax return Dan prepaid his mortgage in full in 2013. Revised tax return He can deduct the remaining $800 of points in 2013. Revised tax return Limits on deduction. Revised tax return   You cannot fully deduct points paid on a mortgage that exceeds the limits discussed in Part II . Revised tax return See the Table 1 Instructions for line 10. Revised tax return Form 1098. Revised tax return    The mortgage interest statement you receive should show not only the total interest paid during the year, but also your deductible points paid during the year. Revised tax return See Form 1098, Mortgage Interest Statement , later. Revised tax return Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. Revised tax return The insurance must be in connection with home acquisition debt, and the insurance contract must have been issued after 2006. Revised tax return Qualified mortgage insurance. Revised tax return   Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). Revised tax return   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. Revised tax return If provided by the Rural Housing Service, it is commonly known as a guarantee fee. Revised tax return The funding fee and guarantee fee can either be included in the amount of the loan or paid in full at the time of closing. Revised tax return These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Revised tax return Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. Revised tax return Special rules for prepaid mortgage insurance. Revised tax return   Generally, if you paid premiums for qualified mortgage insurance that are properly allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. Revised tax return You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. Revised tax return No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. Revised tax return This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. Revised tax return Example. Revised tax return Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. Revised tax return Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Revised tax return Since the $9,240 in private mortgage insurance is allocable to periods after 2012, Ryan must allocate the $9,240 over the shorter of the life of the mortgage or 84 months. Revised tax return Ryan's adjusted gross income (AGI) for 2012 is $76,000. Revised tax return Ryan can deduct $880 ($9,240 ÷ 84 x 8 months) for qualified mortgage insurance premiums in 2012. Revised tax return For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 x 12 months) if his AGI is $100,000 or less. Revised tax return In this example, the mortgage insurance premiums are allocated over 84 months, which is shorter than the life of the mortgage of 15 years (180 months). Revised tax return Limit on deduction. Revised tax return   If your adjusted gross income on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. Revised tax return See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. Revised tax return If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Revised tax return Form 1098. Revised tax return   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your mortgage insurance premiums paid during the year, which may qualify to be treated as deductible mortgage interest. Revised tax return See Form 1098, Mortgage Interest Statement, next. Revised tax return Form 1098, Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage, you generally will receive a Form 1098 or a similar statement from the mortgage holder. Revised tax return You will receive the statement if you pay interest to a person (including a financial institution or cooperative housing corporation) in the course of that person's trade or business. Revised tax return A governmental unit is a person for purposes of furnishing the statement. Revised tax return The statement for each year should be sent to you by January 31 of the following year. Revised tax return A copy of this form will also be sent to the IRS. Revised tax return The statement will show the total interest you paid during the year, any mortgage insurance premiums you paid, and if you purchased a main home during the year, it also will show the deductible points paid during the year, including seller-paid points. Revised tax return However, it should not show any interest that was paid for you by a government agency. Revised tax return As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Revised tax return However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. Revised tax return See the earlier discussion of Points to determine whether you can deduct points not shown on Form 1098. Revised tax return Prepaid interest on Form 1098. Revised tax return   If you prepaid interest in 2013 that accrued in full by January 15, 2014, this prepaid interest may be included in box 1 of Form 1098. Revised tax return However, you cannot deduct the prepaid amount for January 2014 in 2013. Revised tax return (See Prepaid interest , earlier. Revised tax return ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. Revised tax return You will include the interest for January 2014 with other interest you pay for 2014. Revised tax return Refunded interest. Revised tax return   If you received a refund of mortgage interest you overpaid in an earlier year, you generally will receive a Form 1098 showing the refund in box 3. Revised tax return See Refunds of interest , earlier. Revised tax return Mortgage insurance premiums. Revised tax return   The amount of mortgage insurance premiums you paid during 2013 may be shown in Box 4 of Form 1098. Revised tax return See Mortgage Insurance Premiums , earlier. Revised tax return How To Report Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. Revised tax return If you paid more deductible interest to the financial institution than the amount shown on Form 1098, show the larger deductible amount on line 10. Revised tax return Attach a statement explaining the difference and print “See attached” next to line 10. Revised tax return Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. Revised tax return If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and taxpayer identification number (TIN) on the dotted lines next to line 11. Revised tax return The seller must give you this number and you must give the seller your TIN. Revised tax return A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Revised tax return Failure to meet any of these requirements may result in a $50 penalty for each failure. Revised tax return The TIN can be either a social security number, an individual taxpayer identification number (issued by the Internal Revenue Service), or an employer identification number. Revised tax return If you can take a deduction for points that were not reported to you on Form 1098, deduct those points on Schedule A (Form 1040), line 12. Revised tax return Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. Revised tax return More than one borrower. Revised tax return   If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Revised tax return Show how much of the interest each of you paid, and give the name and address of the person who received the form. Revised tax return Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Revised tax return Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. Revised tax return   Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Revised tax return Let each of the other borrowers know what his or her share is. Revised tax return Mortgage proceeds used for business or investment. Revised tax return   If your home mortgage interest deduction is limited under the rules explained in Part II , but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 2 near the end of this publication. Revised tax return It shows where to deduct the part of your excess interest that is for those activities. Revised tax return The Table 1 Instructions for line 13 in Part II explain how to divide the excess interest among the activities for which the mortgage proceeds were used. Revised tax return Special Rule for Tenant-Stockholders in Cooperative Housing Corporations A qualified home includes stock in a cooperative housing corporation owned by a tenant-stockholder. Revised tax return This applies only if the tenant-stockholder is entitled to live in the house or apartment because of owning stock in the cooperative. Revised tax return Cooperative housing corporation. Revised tax return   This is a corporation that meets all of the following conditions. Revised tax return Has only one class of stock outstanding, Has no stockholders other than those who own the stock that can live in a house, apartment, or house trailer owned or leased by the corporation, Has no stockholders who can receive any distribution out of capital other than on a liquidation of the corporation, and Meets at least one of the following requirements. Revised tax return Receives at least 80% of its gross income for the year in which the mortgage interest is paid or incurred from tenant-stockholders. Revised tax return For this purpose, gross income is all income received during the entire year, including amounts received before the corporation changed to cooperative ownership. Revised tax return At all times during the year, at least 80% of the total square footage of the corporation's property is used or available for use by the tenant-stockholders for residential or residential-related use. Revised tax return At least 90% of the corporation's expenditures paid or incurred during the year are for the acquisition, construction, management, maintenance, or care of corporate property for the benefit of the tenant-stockholders. Revised tax return Stock used to secure debt. Revised tax return   In some cases, you cannot use your cooperative housing stock to secure a debt because of either: Restrictions under local or state law, or Restrictions in the cooperative agreement (other than restrictions in which the main purpose is to permit the tenant- stockholder to treat unsecured debt as secured debt). Revised tax return However, you can treat a debt as secured by the stock to the extent that the proceeds are used to buy the stock under the allocation of interest rules. Revised tax return See chapter 4 of Publication 535 for details on these rules. Revised tax return Figuring deductible home mortgage interest. Revised tax return   Generally, if you are a tenant-stockholder, you can deduct payments you make for your share of the interest paid or incurred by the cooperative. Revised tax return The interest must be on a debt to buy, build, change, improve, or maintain the cooperative's housing, or on a debt to buy the land. Revised tax return   Figure your share of this interest by multiplying the total by the following fraction. Revised tax return      Your shares of stock in the cooperative   The total shares of stock in the cooperative Limits on deduction. Revised tax return   To figure how the limits discussed in Part II apply to you, treat your share of the cooperative's debt as debt incurred by you. Revised tax return The cooperative should determine your share of its grandfathered debt, its home acquisition debt, and its home equity debt. Revised tax return (Your share of each of these types of debt is equal to the average balance of each debt multiplied by the fraction just given. Revised tax return ) After your share of the average balance of each type of debt is determined, you include it with the average balance of that type of debt secured by your stock. Revised tax return Form 1098. Revised tax return    The cooperative should give you a Form 1098 showing your share of the interest. Revised tax return Use the rules in this publication to determine your deductible mortgage interest. Revised tax return Part II. Revised tax return Limits on Home Mortgage Interest Deduction This part of the publication discusses the limits on deductible home mortgage interest. Revised tax return These limits apply to your home mortgage interest expense if you have a home mortgage that does not fit into any of the three categories listed at the beginning of Part I under Fully deductible interest . Revised tax return Your home mortgage interest deduction is limited to the interest on the part of your home mortgage debt that is not more than your qualified loan limit. Revised tax return This is the part of your home mortgage debt that is grandfathered debt or that is not more than the limits for home acquisition debt and home equity debt. Revised tax return Table 1 can help you figure your qualified loan limit and your deductible home mortgage interest. Revised tax return Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home (your main or second home). Revised tax return It also must be secured by that home. Revised tax return If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. Revised tax return The additional debt may qualify as home equity debt (discussed later). Revised tax return Home acquisition debt limit. Revised tax return   The total amount you can treat as home acquisition debt at any time on your main home and second home cannot be more than $1 million ($500,000 if married filing separately). Revised tax return This limit is reduced (but not below zero) by the amount of your grandfathered debt (discussed later). Revised tax return Debt over this limit may qualify as home equity debt (also discussed later). Revised tax return Refinanced home acquisition debt. Revised tax return   Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt. Revised tax return However, the new debt will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing. Revised tax return Any additional debt not used to buy, build, or substantially improve a qualified home is not home acquisition debt, but may qualify as home equity debt (discussed later). Revised tax return Mortgage that qualifies later. Revised tax return   A mortgage that does not qualify as home acquisition debt because it does not meet all the requirements may qualify at a later time. Revised tax return For example, a debt that you use to buy your home may not qualify as home acquisition debt because it is not secured by the home. Revised tax return However, if the debt is later secured by the home, it may qualify as home acquisition debt after that time. Revised tax return Similarly, a debt that you use to buy property may not qualify because the property is not a qualified home. Revised tax return However, if the property later becomes a qualified home, the debt may qualify after that time. Revised tax return Mortgage treated as used to buy, build, or improve home. Revised tax return   A mortgage secured by a qualified home may be treated as home acquisition debt, even if you do not actually use the proceeds to buy, build, or substantially improve the home. Revised tax return This applies in the following situations. Revised tax return You buy your home within 90 days before or after the date you take out the mortgage. Revised tax return The home acquisition debt is limited to the home's cost, plus the cost of any substantial improvements within the limit described below in (2) or (3). Revised tax return (See Example 1 later. Revised tax return ) You build or improve your home and take out the mortgage before the work is completed. Revised tax return The home acquisition debt is limited to the amount of the expenses incurred within 24 months before the date of the mortgage. Revised tax return You build or improve your home and take out the mortgage within 90 days after the work is completed. Revised tax return The home acquisition debt is limited to the amount of the expenses incurred within the period beginning 24 months before the work is completed and ending on the date of the mortgage. Revised tax return (See Example 2 later. Revised tax return ) Example 1. Revised tax return You bought your main home on June 3 for $175,000. Revised tax return You paid for the home with cash you got from the sale of your old home. Revised tax return On July 15, you took out a mortgage of $150,000 secured by your main home. Revised tax return You used the $150,000 to invest in stocks. Revised tax return You can treat the mortgage as taken out to buy your home because you bought the home within 90 days before you took out the mortgage. Revised tax return The entire mortgage qualifies as home acquisition debt because it was not more than the home's cost. Revised tax return Example 2. Revised tax return On January 31, John began building a home on the lot that he owned. Revised tax return He used $45,000 of his personal funds to build the home. Revised tax return The home was completed on October 31. Revised tax return On November 21, John took out a $36,000 mortgage that was secured by the home. Revised tax return The mortgage can be treated as used to build the home because it was taken out within 90 days after the home was completed. Revised tax return The entire mortgage qualifies as home acquisition debt because it was not more than the expenses incurred within the period beginning 24 months before the home was completed. Revised tax return This is illustrated by Figure C. Revised tax return   Please click here for the text description of the image. Revised tax return Figure C. Revised tax return John's example Date of the mortgage. Revised tax return   The date you take out your mortgage is the day the loan proceeds are disbursed. Revised tax return This is generally the closing date. Revised tax return You can treat the day you apply in writing for your mortgage as the date you take it out. Revised tax return However, this applies only if you receive the loan proceeds within a reasonable time (such as within 30 days) after your application is approved. Revised tax return If a timely application you make is rejected, a reasonable additional time will be allowed to make a new application. Revised tax return Cost of home or improvements. Revised tax return   To determine your cost, include amounts paid to acquire any interest in a qualified home or to substantially improve the home. Revised tax return   The cost of building or substantially improving a qualified home includes the costs to acquire real property and building materials, fees for architects and design plans, and required building permits. Revised tax return Substantial improvement. Revised tax return   An improvement is substantial if it: Adds to the value of your home, Prolongs your home's useful life, or Adapts your home to new uses. Revised tax return    Repairs that maintain your home in good condition, such as repainting your home, are not substantial improvements. Revised tax return However, if you paint your home as part of a renovation that substantially improves your qualified home, you can include the painting costs in the cost of the improvements. Revised tax return Acquiring an interest in a home because of a divorce. Revised tax return   If you incur debt to acquire the interest of a spouse or former spouse in a home, because of a divorce or legal separation, you can treat that debt as home acquisition debt. Revised tax return Part of home not a qualified home. Revised tax return    To figure your home acquisition debt, you must divide the cost of your home and improvements between the part of your home that is a qualified home and any part that is not a qualified home. Revised tax return See Divided use of your home under Qualified Home in Part I. Revised tax return Home Equity Debt If you took out a loan for reasons other than to buy, build, or substantially improve your home, it may qualify as home equity debt. Revised tax return In addition, debt you incurred to buy, build, or substantially improve your home, to the extent it is more than the home acquisition debt limit (discussed earlier), may qualify as home equity debt. Revised tax return Home equity debt is a mortgage you took out after October 13, 1987, that: Does not qualify as home acquisition debt or as grandfathered debt, and Is secured by your qualified home. Revised tax return Example. Revised tax return You bought your home for cash 10 years ago. Revised tax return You did not have a mortgage on your home until last year, when you took out a $50,000 loan, secured by your home, to pay for your daughter's college tuition and your father's medical bills. Revised tax return This loan is home equity debt. Revised tax return Home equity debt limit. Revised tax return   There is a limit on the amount of debt that can be treated as home equity debt. Revised tax return The total home equity debt on your main home and second home is limited to the smaller of: $100,000 ($50,000 if married filing separately), or The total of each home's fair market value (FMV) reduced (but not below zero) by the amount of its home acquisition debt and grandfathered debt. Revised tax return Determine the FMV and the outstanding home acquisition and grandfathered debt for each home on the date that the last debt was secured by the home. Revised tax return Example. Revised tax return You own one home that you bought in 2000. Revised tax return Its FMV now is $110,000, and the current balance on your original mortgage (home acquisition debt) is $95,000. Revised tax return Bank M offers you a home mortgage loan of 125% of the FMV of the home less any outstanding mortgages or other liens. Revised tax return To consolidate some of your other debts, you take out a $42,500 home mortgage loan [(125% × $110,000) − $95,000] with Bank M. Revised tax return Your home equity debt is limited to $15,000. Revised tax return This is the smaller of: $100,000, the maximum limit, or $15,000, the amount that the FMV of $110,000 exceeds the amount of home acquisition debt of $95,000. Revised tax return Debt higher than limit. Revised tax return   Interest on amounts over the home equity debt limit (such as the interest on $27,500 [$42,500 − $15,000] in the preceding example) generally is treated as personal interest and is not deductible. Revised tax return But if the proceeds of the loan were used for investment, business, or other deductible purposes, the interest may be deductible. Revised tax return If it is, see the Table 1 Instructions for line 13 for an explanation of how to allocate the excess interest. Revised tax return Part of home not a qualified home. Revised tax return   To figure the limit on your home equity debt, you must divide the FMV of your home between the part that is a qualified home and any part that is not a qualified home. Revised tax return See Divided use of your home under Qualified Home in Part I. Revised tax return Fair market value (FMV). Revised tax return    This is the price at which the home would change hands between you and a buyer, neither having to sell or buy, and both having reasonable knowledge of all relevant facts. Revised tax return Sales of similar homes in your area, on about the same date your last debt was secured by the home, may be helpful in figuring the FMV. Revised tax return Grandfathered Debt If you took out a mortgage on your home before October 14, 1987, or you refinanced such a mortgage, it may qualify as grandfathered debt. Revised tax return To qualify, it must have been secured by your qualified home on October 13, 1987, and at all times after that date. Revised tax return How you used the proceeds does not matter. Revised tax return Grandfathered debt is not limited. Revised tax return All of the interest you paid on grandfathered debt is fully deductible home mortgage interest. Revised tax return However, the amount of your grandfathered debt reduces the $1 million limit for home acquisition debt and the limit based on your home's fair market value for home equity debt. Revised tax return Refinanced grandfathered debt. Revised tax return   If you refinanced grandfathered debt after October 13, 1987, for an amount that was not more than the mortgage principal left on the debt, then you still treat it as grandfathered debt. Revised tax return To the extent the new debt is more than that mortgage principal, it is treated as home acquisition or home equity debt, and the mortgage is a mixed-use mortgage (discussed later under Average Mortgage Balance in the Table 1 instructions). Revised tax return The debt must be secured by the qualified home. Revised tax return   You treat grandfathered debt that was refinanced after October 13, 1987, as grandfathered debt only for the term left on the debt that was refinanced. Revised tax return After that, you treat it as home acquisition debt or home equity debt, depending on how you used the proceeds. Revised tax return Exception. Revised tax return   If the debt before refinancing was like a balloon note (the principal on the debt was not amortized over the term of the debt), then you treat the refinanced debt as grandfathered debt for the term of the first refinancing. Revised tax return This term cannot be more than 30 years. Revised tax return Example. Revised tax return Chester took out a $200,000 first mortgage on his home in 1986. Revised tax return The mortgage was a five-year balloon note and the entire balance on the note was due in 1991. Revised tax return Chester refinanced the debt in 1991 with a new 20-year mortgage. Revised tax return The refinanced debt is treated as grandfathered debt for its entire term (20 years). Revised tax return Line-of-credit mortgage. Revised tax return    If you had a line-of-credit mortgage on October 13, 1987, and borrowed additional amounts against it after that date, then the additional amounts are either home acquisition debt or home equity debt depending on how you used the proceeds. Revised tax return The balance on the mortgage before you borrowed the additional amounts is grandfathered debt. Revised tax return The newly borrowed amounts are not grandfathered debt because the funds were borrowed after October 13, 1987. Revised tax return See Average Mortgage Balance in the Table 1 Instructions that follow. Revised tax return Table 1 Instructions Unless you are subject to the overall limit on itemized deductions, you can deduct all of the interest you paid during the year on mortgages secured by your main home or second home in either of the following two situations. Revised tax return All the mortgages are grandfathered debt. Revised tax return The total of the mortgage balances for the entire year is within the limits discussed earlier under Home Acquisition Debt and Home Equity Debt . Revised tax return In either of those cases, you do not need Table 1. Revised tax return Otherwise, you can use Table 1 to determine your qualified loan limit and deductible home mortgage interest. Revised tax return Fill out only one Table 1 for both your main and second home regardless of how many mortgages you have. Revised tax return Table 1. Revised tax return Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. Revised tax return Part I Qualified Loan Limit 1. Revised tax return Enter the average balance of all your grandfathered debt. Revised tax return See line 1 instructions 1. Revised tax return   2. Revised tax return Enter the average balance of all your home acquisition debt. Revised tax return See line 2 instructions 2. Revised tax return   3. Revised tax return Enter $1,000,000 ($500,000 if married filing separately) 3. Revised tax return   4. Revised tax return Enter the larger of the amount on line 1 or the amount on line 3 4. Revised tax return   5. Revised tax return Add the amounts on lines 1 and 2. Revised tax return Enter the total here 5. Revised tax return   6. Revised tax return Enter the smaller of the amount on line 4 or the amount on line 5 6. Revised tax return   7. Revised tax return If you have home equity debt, enter the smaller of $100,000 ($50,000 if married filing separately) or your limited amount. Revised tax return See the line 7 instructions for the limit which may apply to you. Revised tax return 7. Revised tax return   8. Revised tax return Add the amounts on lines 6 and 7. Revised tax return Enter the total. Revised tax return This is your qualified loan limit. Revised tax return 8. Revised tax return   Part II Deductible Home Mortgage Interest 9. Revised tax return Enter the total of the average balances of all mortgages on all qualified homes. Revised tax return  See line 9 instructions 9. Revised tax return     If line 8 is less than line 9, go on to line 10. Revised tax return If line 8 is equal to or more than line 9, stop here. Revised tax return All of your interest on all the mortgages included on line 9 is deductible as home mortgage interest on Schedule A (Form 1040). Revised tax return     10. Revised tax return Enter the total amount of interest that you paid. Revised tax return See line 10 instructions 10. Revised tax return   11. Revised tax return Divide the amount on line 8 by the amount on line 9. Revised tax return Enter the result as a decimal amount (rounded to three places) 11. Revised tax return × . Revised tax return 12. Revised tax return Multiply the amount on line 10 by the decimal amount on line 11. Revised tax return Enter the result. Revised tax return This is your deductible home mortgage interest. Revised tax return Enter this amount on Schedule A (Form 1040) 12. Revised tax return   13. Revised tax return Subtract the amount on line 12 from the amount on line 10. Revised tax return Enter the result. Revised tax return This is not home mortgage interest. Revised tax return See line 13 instructions 13. Revised tax return   Home equity debt only. Revised tax return   If all of your mortgages are home equity debt, do not fill in lines 1 through 5. Revised tax return Enter zero on line 6 and complete the rest of Table 1. Revised tax return Average Mortgage Balance You have to figure the average balance of each mortgage to determine your qualified loan limit. Revised tax return You need these amounts to complete lines 1, 2, and 9 of Table 1. Revised tax return You can use the highest mortgage balances during the year, but you may benefit most by using the average balances. Revised tax return The following are methods you can use to figure your average mortgage balances. Revised tax return However, if a mortgage has more than one category of debt, see Mixed-use mortgages , later, in this section. Revised tax return Average of first and last balance method. Revised tax return   You can use this method if all the following apply. Revised tax return You did not borrow any new amounts on the mortgage during the year. Revised tax return (This does not include borrowing the original mortgage amount. Revised tax return ) You did not prepay more than one month's principal during the year. Revised tax return (This includes prepayment by refinancing your home or by applying proceeds from its sale. Revised tax return ) You had to make level payments at fixed equal intervals on at least a semi-annual basis. Revised tax return You treat your payments as level even if they were adjusted from time to time because of changes in the interest rate. Revised tax return    To figure your average balance, complete the following worksheet. Revised tax return    1. Revised tax return Enter the balance as of the first day of the year that the mortgage was secured by your qualified home during the year (generally January 1)   2. Revised tax return Enter the balance as of the last day of the year that the mortgage was secured by your qualified home during the year (generally December 31)   3. Revised tax return Add amounts on lines 1 and 2   4. Revised tax return Divide the amount on line 3 by 2. Revised tax return Enter the result   Interest paid divided by interest rate method. Revised tax return   You can use this method if at all times in 2013 the mortgage was secured by your qualified home and the interest was paid at least monthly. Revised tax return    Complete the following worksheet to figure your average balance. Revised tax return    1. Revised tax return Enter the interest paid in 2013. Revised tax return Do not include points, mortgage insurance premiums, or any interest paid in 2013 that is for a year after 2013. Revised tax return However, do include interest that is for 2013 but was paid in an earlier year   2. Revised tax return Enter the annual interest rate on the mortgage. Revised tax return If the interest rate varied in 2013, use the lowest rate for the year   3. Revised tax return Divide the amount on line 1 by the amount on line 2. Revised tax return Enter the result   Example. Revised tax return Mr. Revised tax return Blue had a line of credit secured by his main home all year. Revised tax return He paid interest of $2,500 on this loan. Revised tax return The interest rate on the loan was 9% (. Revised tax return 09) all year. Revised tax return His average balance using this method is $27,778, figured as follows. Revised tax return 1. Revised tax return Enter the interest paid in 2013. Revised tax return Do not include points, mortgage insurance premiums, or any interest paid in 2013 that is for a year after 2013. Revised tax return However, do include interest that is for 2013 but was paid in an earlier year $2,500 2. Revised tax return Enter the annual interest rate on the mortgage. Revised tax return If the interest rate varied in 2013, use the lowest rate for the year . Revised tax return 09 3. Revised tax return Divide the amount on line 1 by the amount on line 2. Revised tax return Enter the result $27,778 Statements provided by your lender. Revised tax return   If you receive monthly statements showing the closing balance or the average balance for the month, you can use either to figure your average balance for the year. Revised tax return You can treat the balance as zero for any month the mortgage was not secured by your qualified home. Revised tax return   For each mortgage, figure your average balance by adding your monthly closing or average balances and dividing that total by the number of months the home secured by that mortgage was a qualified home during the year. Revised tax return   If your lender can give you your average balance for the year, you can use that amount. Revised tax return Example. Revised tax return Ms. Revised tax return Brown had a home equity loan secured by her main home all year. Revised tax return She received monthly statements showing her average balance for each month. Revised tax return She can figure her average balance for the year by adding her monthly average balances and dividing the total by 12. Revised tax return Mixed-use mortgages. Revised tax return   A mixed-use mortgage is a loan that consists of more than one of the three categories of debt (grandfathered debt, home acquisition debt, and home equity debt). Revised tax return For example, a mortgage you took out during the year is a mixed-use mortgage if you used its proceeds partly to refinance a mortgage that you took out in an earlier year to buy your home (home acquisition debt) and partly to buy a car (home equity debt). Revised tax return   Complete lines 1 and 2 of Table 1 by including the separate average balances of any grandfathered debt and home acquisition debt in your mixed-use mortgage. Revised tax return Do not use the methods described earlier in this section to figure the average balance of either category. Revised tax return Instead, for each category, use the following method. Revised tax return Figure the balance of that category of debt for each month. Revised tax return This is the amount of the loan proceeds allocated to that category, reduced by your principal payments on the mortgage previously applied to that category. Revised tax return Principal payments on a mixed-use mortgage are applied in full to each category of debt, until its balance is zero, in the following order: First, any home equity debt, Next, any grandfathered debt, and Finally, any home acquisition debt. Revised tax return Add together the monthly balances figured in (1). Revised tax return Divide the result in (2) by 12. Revised tax return   Complete line 9 of Table 1 by including the average balance of the entire mixed-use mortgage, figured under one of the methods described earlier in this section. Revised tax return Example 1. Revised tax return In 1986, Sharon took out a $1,400,000 mortgage to buy her main home (grandfathered debt). Revised tax return On March 2, 2013, when the home had a fair market value of $1,700,000 and she owed $1,100,000 on the mortgage, Sharon took out a second mortgage for $200,000. Revised tax return She used $180,000 of the proceeds to make substantial improvements to her home (home acquisition debt) and the remaining $20,000 to buy a car (home equity debt). Revised tax return Under the loan agreement, Sharon must make principal payments of $1,000 at the end of each month. Revised tax return During 2013, her principal payments on the second mortgage totaled $10,000. Revised tax return To complete Table 1, line 2, Sharon must figure a separate average balance for the part of her second mortgage that is home acquisition debt. Revised tax return The January and February balances were zero. Revised tax return The March through December balances were all $180,000, because none of her principal payments are applied to the home acquisition debt. Revised tax return (They are all applied to the home equity debt, reducing it to $10,000 [$20,000 − $10,000]. Revised tax return ) The monthly balances of the home acquisition debt total $1,800,000 ($180,000 × 10). Revised tax return Therefore, the average balance of the home acquisition debt for 2013 was $150,000 ($1,800,000 ÷ 12). Revised tax return Example 2. Revised tax return The facts are the same as in Example 1. Revised tax return In 2014, Sharon's January through October principal payments on her second mortgage are applied to the home equity debt, reducing it to zero. Revised tax return The balance of the home acquisition debt remains $180,000 for each of those months. Revised tax return Because her November and December principal payments are applied to the home acquisition debt, the November balance is $179,000 ($180,000 − $1,000) and the December balance is $178,000 ($180,000 − $2,000). Revised tax return The monthly balances total $2,157,000 [($180,000 × 10) + $179,000 + $178,000]. Revised tax return Therefore, the average balance of the home acquisition debt for 2014 is $179,750 ($2,157,000 ÷ 12). Revised tax return L