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State Tax Form 2013

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State Tax Form 2013

State tax form 2013 It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors. State tax form 2013 Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors. State tax form 2013 Select the Scenario that Applies to You: State tax form 2013 I am an independent contractor or in business for myself State tax form 2013 If you are a business owner or contractor who provides services to other businesses, then you are generally considered self-employed. For more information on your tax obligations if you are self-employed (an independent contractor), see our Self-Employed Tax Center. State tax form 2013 I hire or contract with individuals to provide services to my business State tax form 2013 If you are a business owner hiring or contracting with other individuals to provide services, you must determine whether the individuals providing services are employees or independent contractors. Follow the rest of this page to find out more about this topic and what your responsibilities are. State tax form 2013 Determining Whether the Individuals Providing Services are Employees or Independent Contractors State tax form 2013 Before you can determine how to treat payments you make for services, you must first know the business relationship that exists between you and the person performing the services. The person performing the services may be - State tax form 2013 An independent contractor State tax form 2013 An employee (common-law employee) State tax form 2013 A statutory employee State tax form 2013 A statutory nonemployee State tax form 2013 In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered. State tax form 2013 Common Law Rules State tax form 2013 Facts that provide evidence of the degree of control and independence fall into three categories: State tax form 2013 Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job? State tax form 2013 Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.) State tax form 2013 Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business? State tax form 2013 Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another. State tax form 2013 The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination. State tax form 2013 Form SS-8 State tax form 2013 If, after reviewing the three categories of evidence, it is still unclear whether a worker is an employee or an independent contractor, Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding (PDF) can be filed with the IRS. The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker’s status. State tax form 2013 Be aware that it can take at least six months to get a determination, but a business that continually hires the same types of workers to perform particular services may want to consider filing the Form SS-8 (PDF).
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The State Tax Form 2013

State tax form 2013 Publication 523 - Main Content Table of Contents Main HomeVacant land. State tax form 2013 Factors used to determine main home. State tax form 2013 Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining BasisCost As Basis Basis Other Than Cost Adjusted Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Nonqualified Use Business Use or Rental of HomeUnrecaptured section 1250 gain. State tax form 2013 Property Used Partly for Business or Rental Reporting the SaleSeller-financed mortgage. State tax form 2013 Individual taxpayer identification number (ITIN). State tax form 2013 More information. State tax form 2013 Comprehensive Examples Special SituationsException for sales to related persons. State tax form 2013 Deducting Taxes in the Year of SaleForm 1099-S. State tax form 2013 More information. State tax form 2013 Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of First-Time Homebuyer CreditExample. State tax form 2013 Worksheets How To Get Tax HelpLow Income Taxpayer Clinics Main Home This section explains the term “main home. State tax form 2013 ” Usually, the home you live in most of the time is your main home and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. State tax form 2013 To exclude gain under the rules in this publication, you in most cases must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. State tax form 2013 Land. State tax form 2013   If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land. State tax form 2013 Example. State tax form 2013 You buy a piece of land and move your main home to it. State tax form 2013 Then, you sell the land on which your main home was located. State tax form 2013 This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. State tax form 2013 Vacant land. State tax form 2013   The sale of vacant land is not a sale of your main home unless: The vacant land is adjacent to land containing your home, You owned and used the vacant land as part of your main home, The separate sale of your home satisfies the requirements for exclusion and occurs within 2 years before or 2 years after the date of the sale of the vacant land, and The other requirements for excluding gain from the sale of a main home have been satisfied with respect to the vacant land. State tax form 2013 If these requirements are met, the sale of the home and the sale of the vacant land are treated as one sale and only one maximum exclusion can be applied to any gain. State tax form 2013 See Excluding the Gain , later. State tax form 2013 The destruction of your home is treated as a sale of your home. State tax form 2013 As a result, you may be able to meet these requirements if you sell vacant land used as a part of your main home within 2 years from the date of the destruction of your main home. State tax form 2013 For information, see Publication 547. State tax form 2013 More than one home. State tax form 2013   If you have more than one home, you can exclude gain only from the sale of your main home. State tax form 2013 You must include in income the gain from the sale of any other home. State tax form 2013 If you have two homes and live in each of them, your main home is ordinarily the one you live in most of the time during the year. State tax form 2013 Example 1. State tax form 2013 You own two homes, one in New York and one in Florida. State tax form 2013 From 2009 through 2013, you live in the New York home for 7 months and in the Florida residence for 5 months of each year. State tax form 2013 In the absence of facts and circumstances indicating otherwise, the New York home is your main home. State tax form 2013 You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. State tax form 2013 Example 2. State tax form 2013 You own a house, but you live in another house that you rent. State tax form 2013 The rented house is your main home. State tax form 2013 Example 3. State tax form 2013 You own two homes, one in Virginia and one in New Hampshire. State tax form 2013 In 2009 and 2010, you lived in the Virginia home. State tax form 2013 In 2011 and 2012, you lived in the New Hampshire home. State tax form 2013 In 2013, you lived again in the Virginia home. State tax form 2013 Your main home in 2009, 2010, and 2013 is the Virginia home. State tax form 2013 Your main home in 2011 and 2012 is the New Hampshire home. State tax form 2013 You would be eligible to exclude gain from the sale of either home (but not both) in 2013. State tax form 2013 Factors used to determine main home. State tax form 2013   In addition to the amount of time you live in each home, other factors are relevant in determining which home is your main home. State tax form 2013 Those factors include the following. State tax form 2013 Your place of employment. State tax form 2013 The location of your family members' main home. State tax form 2013 Your mailing address for bills and correspondence. State tax form 2013 The address listed on your: Federal and state tax returns, Driver's license, Car registration, and Voter registration card. State tax form 2013 The location of the banks you use. State tax form 2013 The location of recreational clubs and religious organizations of which you are a member. State tax form 2013 Property used partly as your main home. State tax form 2013   If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. State tax form 2013 For details, see Business Use or Rental of Home , later. State tax form 2013 Figuring Gain or Loss To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. State tax form 2013 Subtract the adjusted basis from the amount realized to get your gain or loss. State tax form 2013     Selling price     − Selling expenses       Amount realized     − Adjusted basis       Gain or loss   Gain. State tax form 2013   Gain is the excess of the amount realized over the adjusted basis of the property. State tax form 2013 Loss. State tax form 2013   Loss is the excess of the adjusted basis over the amount realized for the property. State tax form 2013 Selling Price The selling price is the total amount you receive for your home. State tax form 2013 It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale. State tax form 2013 Personal property. State tax form 2013   The selling price of your home does not include amounts you received for personal property sold with your home. State tax form 2013 Personal property is property that is not a permanent part of the home. State tax form 2013 Examples are furniture, draperies, rugs, a washer and dryer, and lawn equipment. State tax form 2013 Separately stated amounts you received for these items should not be shown on Form 1099-S (discussed later). State tax form 2013 Any gains from sales of personal property must be included in your income, but not as part of the sale of your home. State tax form 2013 Payment by employer. State tax form 2013   You may have to sell your home because of a job transfer. State tax form 2013 If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. State tax form 2013 Your employer will include it as wages in box 1 of your Form W-2 and you will include it in your income on Form 1040, line 7, or on Form 1040NR, line 8. State tax form 2013 Option to buy. State tax form 2013   If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. State tax form 2013 If the option is not exercised, you must report the amount as ordinary income in the year the option expires. State tax form 2013 Report this amount on Form 1040, line 21, or on Form 1040NR, line 21. State tax form 2013 Form 1099-S. State tax form 2013   If you received Form 1099-S, box 2 (gross proceeds) should show the total amount you received for your home. State tax form 2013   However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. State tax form 2013 Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. State tax form 2013 Amount Realized The amount realized is the selling price minus selling expenses. State tax form 2013 Selling expenses. State tax form 2013   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. State tax form 2013 ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. State tax form 2013 This adjusted basis must be determined before you can figure gain or loss on the sale of your home. State tax form 2013 For information on how to figure your home's adjusted basis, see Determining Basis , later. State tax form 2013 Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. State tax form 2013 Gain on sale. State tax form 2013   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, generally is taxable. State tax form 2013 Loss on sale. State tax form 2013   If the amount realized is less than the adjusted basis, the difference is a loss. State tax form 2013 Generally, a loss on the sale of your main home cannot be deducted. State tax form 2013 Jointly owned home. State tax form 2013   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. State tax form 2013 Separate returns. State tax form 2013   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. State tax form 2013 Your ownership interest is generally determined by state law. State tax form 2013 Joint owners not married. State tax form 2013   If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. State tax form 2013 Each of you applies the rules discussed in this publication on an individual basis. State tax form 2013 Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. State tax form 2013 Foreclosure or repossession. State tax form 2013   If your home was foreclosed on or repossessed, you have a disposition. State tax form 2013 See Publication 4681 to determine if you have ordinary income, gain, or loss. State tax form 2013 More information. State tax form 2013   If part of a home is used for business or rental purposes, see Foreclosures and Repossessions in chapter 1 of Publication 544 for more information. State tax form 2013 Publication 544 has examples of how to figure gain or loss on a foreclosure or repossession. State tax form 2013 Abandonment. State tax form 2013   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. State tax form 2013 Trading (exchanging) homes. State tax form 2013   If you trade your home for another home, treat the trade as a sale and a purchase. State tax form 2013 Example. State tax form 2013 You owned and lived in a home with an adjusted basis of $41,000. State tax form 2013 A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. State tax form 2013 This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 − $41,000). State tax form 2013 If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed). State tax form 2013 Transfer to spouse. State tax form 2013   If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss (unless the Exception, discussed next, applies). State tax form 2013 This is true even if you receive cash or other consideration for the home. State tax form 2013 As a result, the rules explained in this publication do not apply. State tax form 2013   If you owned your home jointly with your spouse and transfer your interest in the home to your spouse, or to your former spouse incident to your divorce, the same rule applies. State tax form 2013 You have no gain or loss. State tax form 2013 Exception. State tax form 2013   These transfer rules do not apply if your spouse or former spouse is a nonresident alien. State tax form 2013 In that case, you generally will have a gain or loss. State tax form 2013 More information. State tax form 2013    See Property Settlements in Publication 504, Divorced or Separated Individuals, for more information. State tax form 2013 Involuntary conversion. State tax form 2013   You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. State tax form 2013 This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations (see Home destroyed or condemned ). State tax form 2013 Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. State tax form 2013 Your basis in your home is determined by how you got the home. State tax form 2013 Generally, your basis is its cost if you bought it or built it. State tax form 2013 If you got it in some other way (inheritance, gift, etc. State tax form 2013 ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. State tax form 2013 While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. State tax form 2013 The result of these adjustments is your home's adjusted basis, which is used to figure gain or loss on the sale of your home. State tax form 2013 To figure your adjusted basis, you can use Worksheet 1, near the end of this publication. State tax form 2013 Filled-in examples of that worksheet are included in the Comprehensive Examples , later. State tax form 2013 Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. State tax form 2013 Purchase. State tax form 2013   If you bought your home, your basis is its cost to you. State tax form 2013 This includes the purchase price and certain settlement or closing costs. State tax form 2013 In most cases, your purchase price includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home. State tax form 2013 If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed later. State tax form 2013 Seller-paid points. State tax form 2013   If the person who sold you your home paid points on your loan, you may have to reduce your home's basis by the amount of the points, as shown in the following chart. State tax form 2013    IF you bought your home. State tax form 2013 . State tax form 2013 . State tax form 2013 THEN reduce your home's basis by the seller-paid points. State tax form 2013 . State tax form 2013 . State tax form 2013 after 1990 but before April 4, 1994 only if you deducted them as home mortgage interest in the year paid. State tax form 2013 after April 3, 1994 even if you did not deduct them. State tax form 2013 Settlement fees or closing costs. State tax form 2013   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. State tax form 2013 You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. State tax form 2013 A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing). State tax form 2013   Settlement fees do not include amounts placed in escrow for the future payment of items such as taxes and insurance. State tax form 2013   Some of the settlement fees or closing costs that you can include in your basis are: Abstract fees (abstract of title fees), Charges for installing utility services, Legal fees (including fees for the title search and preparing the sales contract and deed), Recording fees, Survey fees, Transfer or stamp taxes, Owner's title insurance, and Any amounts the seller owes that you agree to pay, such as: Certain real estate taxes (discussed later), Back interest, Recording or mortgage fees, Charges for improvements or repairs, and Sales commissions. State tax form 2013   Some settlement fees and closing costs you cannot include in your basis are: Fire insurance premiums, Rent for occupancy of the house before closing, Charges for utilities or other services related to occupancy of the house before closing, Any fee or cost that you deducted as a moving expense (allowed for certain fees and costs before 1994), Charges connected with getting a mortgage loan, such as: Mortgage insurance premiums (including funding fees connected with loans guaranteed by the Department of Veterans Affairs), Loan assumption fees, Cost of a credit report, Fee for an appraisal required by a lender, and Fees for refinancing a mortgage. State tax form 2013 Real estate taxes. State tax form 2013   Real estate taxes for the year you bought your home may affect your basis, as shown in the following chart. State tax form 2013    IF. State tax form 2013 . State tax form 2013 . State tax form 2013 AND. State tax form 2013 . State tax form 2013 . State tax form 2013 THEN the taxes. State tax form 2013 . State tax form 2013 . State tax form 2013 you pay taxes that the seller owed on the home up to the date of sale the seller does not reimburse you are added to the basis of your home. State tax form 2013 the seller reimburses you do not affect the basis of your home. State tax form 2013 the seller pays taxes for you (taxes owed beginning on the date of sale) you do not reimburse the seller are subtracted from the basis of your home. State tax form 2013 you reimburse the seller do not affect the basis of your home. State tax form 2013 Construction. State tax form 2013   If you contracted to have your house built on land you own, your basis is: The cost of the land, plus The amount it cost you to complete the house, including: The cost of labor and materials, Any amounts paid to a contractor, Any architect's fees, Building permit charges, Utility meter and connection charges, and Legal fees directly connected with building the house. State tax form 2013   Your cost includes your down payment and any debt such as a first or second mortgage or notes you gave the seller or builder. State tax form 2013 It also includes certain settlement or closing costs. State tax form 2013 You may have to reduce your basis by points the seller paid for you. State tax form 2013 For more information, see Seller-paid points and Settlement fees or closing costs , earlier. State tax form 2013 Built by you. State tax form 2013   If you built all or part of your house yourself, its basis is the total amount it cost you to complete it. State tax form 2013 Do not include in the cost of the house: The value of your own labor, or The value of any other labor you did not pay for. State tax form 2013 Temporary housing. State tax form 2013   If a builder gave you temporary housing while your home was being finished, you must reduce your basis by the part of the contract price that was for the temporary housing. State tax form 2013 To figure the amount of the reduction, multiply the contract price by a fraction. State tax form 2013 The numerator is the value of the temporary housing, and the denominator is the sum of the value of the temporary housing plus the value of the new home. State tax form 2013 Cooperative apartment. State tax form 2013   If you are a tenant-stockholder in a cooperative housing corporation, your basis in the cooperative apartment used as your home is usually the cost of your stock in the corporation. State tax form 2013 This may include your share of a mortgage on the apartment building. State tax form 2013 Condominium. State tax form 2013   To determine your basis in a condominium apartment used as your home, use the same rules as for any other home. State tax form 2013 Basis Other Than Cost You must use a basis other than cost, such as adjusted basis or fair market value, if you received your home as a gift, inheritance, a trade, or from your spouse. State tax form 2013 These situations are discussed in the following pages. State tax form 2013 Also, the instructions for Worksheet 1 (near the end of the publication) address each of these issues. State tax form 2013 Other special rules may apply in certain situations. State tax form 2013 If you converted the property, or some part of it, to business or rental use, see Property Changed to Business or Rental Use, in Publication 551. State tax form 2013 Home received as gift. State tax form 2013   Use the following chart to find the basis of a home you received as a gift. State tax form 2013 IF the donor's adjusted basis at the time of the gift was. State tax form 2013 . State tax form 2013 . State tax form 2013 THEN your basis is. State tax form 2013 . State tax form 2013 . State tax form 2013 more than the fair market value of the home at that time the same as the donor's adjusted basis at the time of the gift. State tax form 2013   Exception: If using the donor's adjusted basis results in a loss when you sell the home, you must use the fair market value of the home at the time of the gift as your basis. State tax form 2013 If using the fair market value results in a gain, you have neither gain nor loss. State tax form 2013 equal to or less than the fair market value at that time, and you received the gift before 1977 the smaller of the: • donor's adjusted basis, plus  any federal gift tax paid on  the gift, or • the home's fair market value  at the time of the gift. State tax form 2013 equal to or less than the fair market value at that time, and you received the gift after 1976 the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home (explained next). State tax form 2013 Fair market value. State tax form 2013   The fair market value of property at the time of the gift is the value of the property as appraised for purposes of the federal gift tax. State tax form 2013 If the gift was not subject to the federal gift tax, the fair market value is the value as appraised for the purposes of a state gift tax. State tax form 2013 Part of federal gift tax due to net increase in value. State tax form 2013   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. State tax form 2013 The numerator of the fraction is the net increase in the value of the home, and the denominator is the value of the home for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. State tax form 2013 The net increase in the value of the home is its fair market value minus the donor's adjusted basis immediately before the gift. State tax form 2013 Home acquired from a decedent who died before or after 2010. State tax form 2013   If you inherited your home from a decedent who died before or after 2010, your basis is the fair market value of the property on the date of the decedent's death (or the later alternate valuation date chosen by the personal representative of the estate). State tax form 2013 If an estate tax return was filed or required to be filed, the value of the property listed on the estate tax return is your basis. State tax form 2013 If a federal estate tax return did not have to be filed, your basis in the home is the same as its appraised value at the date of death, for purposes of state inheritance or transmission taxes. State tax form 2013 Surviving spouse. State tax form 2013   If you are a surviving spouse and you owned your home jointly, your basis in the home will change. State tax form 2013 The new basis for the interest your spouse owned will be its fair market value on the date of death (or alternate valuation date). State tax form 2013 The basis in your interest will remain the same. State tax form 2013 Your new basis in the home is the total of these two amounts. State tax form 2013   If you and your spouse owned the home either as tenants by the entirety or as joint tenants with right of survivorship, you will each be considered to have owned one-half of the home. State tax form 2013 Example. State tax form 2013 Your jointly owned home (owned as joint tenants with right of survivorship) had an adjusted basis of $50,000 on the date of your spouse's death, and the fair market value on that date was $100,000. State tax form 2013 Your new basis in the home is $75,000 ($25,000 for one-half of the adjusted basis plus $50,000 for one-half of the fair market value). State tax form 2013 Community property. State tax form 2013   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), each spouse is usually considered to own half of the community property. State tax form 2013 When either spouse dies, the total fair market value of the community property becomes the basis of the entire property, including the part belonging to the surviving spouse. State tax form 2013 For this to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. State tax form 2013   For more information about community property, see Publication 555, Community Property. State tax form 2013    If you are selling a home in which you acquired an interest from a decedent who died in 2010, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your basis. State tax form 2013 Home received as trade. State tax form 2013   If you acquired your home as a trade for other property, in most cases, the basis of your home is the fair market value (at the time of the trade) of the property you gave up. State tax form 2013 If you traded one home for another, you have made a sale and purchase. State tax form 2013 In that case, you may have a gain. State tax form 2013 See Trading (exchanging) homes under Dispositions Other Than Sales, earlier, for an example of figuring the gain. State tax form 2013 Home received from spouse. State tax form 2013   If you received your home from your spouse or from your former spouse incident to your divorce, your basis in the home depends on the date of the transfer. State tax form 2013 Transfers after July 18, 1984. State tax form 2013   If you received the home after July 18, 1984, there was no gain or loss on the transfer. State tax form 2013 In most cases, your basis in this home is the same as your spouse's (or former spouse's) adjusted basis just before you received it. State tax form 2013 This rule applies even if you received the home in exchange for cash, the release of marital rights, the assumption of liabilities, or other considerations. State tax form 2013   If you owned a home jointly with your spouse and your spouse transferred his or her interest in the home to you, in most cases, your basis in the half interest received from your spouse is the same as your spouse's adjusted basis just before the transfer. State tax form 2013 This also applies if your former spouse transferred his or her interest in the home to you incident to your divorce. State tax form 2013 Your basis in the half interest you already owned does not change. State tax form 2013 Your new basis in the home is the total of these two amounts. State tax form 2013 Transfers before July 19, 1984. State tax form 2013   If you received your home before July 19, 1984, in exchange for your release of marital rights, in most cases, your basis in the home is generally its fair market value at the time you received it. State tax form 2013 More information. State tax form 2013   For more information on property received from a spouse or former spouse, see Property Settlements in Publication 504. State tax form 2013 Involuntary conversion. State tax form 2013   If your home is destroyed or condemned, you may receive insurance proceeds or a condemnation award. State tax form 2013 If you acquired a replacement home with these proceeds, the basis is its cost decreased by any gain not recognized on the conversion under the rules explained in: Publication 547, in the case of a home that was destroyed, or Chapter 1 of Publication 544, in the case of a home that was condemned. State tax form 2013 Example. State tax form 2013 A fire destroyed your home that you owned and used for only 6 months. State tax form 2013 The home had an adjusted basis of $80,000 and the insurance company paid you $130,000 for the loss. State tax form 2013 Your gain is $50,000 ($130,000 − $80,000). State tax form 2013 You bought a replacement home for $100,000. State tax form 2013 The part of your gain that is taxable is $30,000 ($130,000 − $100,000), the unspent part of the payment from the insurance company. State tax form 2013 The rest of the gain ($20,000) is not taxable, so that amount reduces your basis in the new home. State tax form 2013 The basis of the new home is figured as follows. State tax form 2013 Cost of replacement home $100,000 Minus: Gain not recognized 20,000 Basis of the replacement home $80,000 More information. State tax form 2013   For more information about basis, see Publication 551. State tax form 2013 Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. State tax form 2013 To figure your adjusted basis, you can use Worksheet 1, found toward the end of this publication. State tax form 2013 Filled-in examples of that worksheet are included in Comprehensive Examples , later. State tax form 2013 Recordkeeping. State tax form 2013 You should keep records to prove your home's adjusted basis. State tax form 2013 Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. State tax form 2013 But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. State tax form 2013 Keep records proving the basis of both homes as long as they are needed for tax purposes. State tax form 2013 The records you should keep include: Proof of the home's purchase price and purchase expenses; Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis; Any worksheets or other computations you used to figure the adjusted basis of the home you sold, the gain or loss on the sale, the exclusion, and the taxable gain; Any Form 982 you filed to exclude any discharge of qualified principal residence indebtedness; Any Form 2119, Sale of Your Home, you filed to postpone gain from the sale of a previous home before May 7, 1997; and Any worksheets you used to prepare Form 2119, such as the Adjusted Basis of Home Sold Worksheet or the Capital Improvements Worksheet from the Form 2119 instructions, or other source of computations. State tax form 2013 Increases to Basis These include the following. State tax form 2013 Additions and other improvements that have a useful life of more than 1 year. State tax form 2013 Special assessments for local improvements. State tax form 2013 Amounts you spent after a casualty to restore damaged property. State tax form 2013 Improvements. State tax form 2013   These add to the value of your home, prolong its useful life, or adapt it to new uses. State tax form 2013 You add the cost of additions and other improvements to the basis of your property. State tax form 2013   The following chart lists some other examples of improvements. State tax form 2013 Examples of Improvements That Increase Basis Additions Bedroom Bathroom Deck Garage Porch Patio Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Lawn & Grounds Landscaping Driveway Walkway Fence  Retaining wall Sprinkler system Swimming pool  Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system  Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances  Kitchen modernization  Flooring Wall-to-wall carpeting  Insulation Attic Walls Floors Pipes and duct work Improvements no longer part of home. State tax form 2013   Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. State tax form 2013 Example. State tax form 2013 You put wall-to-wall carpeting in your home 15 years ago. State tax form 2013 Later, you replaced that carpeting with new wall-to-wall carpeting. State tax form 2013 The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. State tax form 2013 Repairs. State tax form 2013   These maintain your home in good condition but do not add to its value or prolong its life. State tax form 2013 You do not add their cost to the basis of your property. State tax form 2013 Examples. State tax form 2013 Repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes are examples of repairs. State tax form 2013 Exception. State tax form 2013   The entire job is considered an improvement if items that would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home. State tax form 2013 For example, if you have a casualty and your home is damaged, increase your basis by the amount you spend on repairs that restore the property to its pre-casualty condition. State tax form 2013 Decreases to Basis These include the following. State tax form 2013 Discharge of qualified principal residence indebtedness that was excluded from income (but not below zero). State tax form 2013 For details, see Publication 4681. State tax form 2013 Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. State tax form 2013 For details, see Publication 4681. State tax form 2013 Gain you postponed from the sale of a previous home before May 7, 1997. State tax form 2013 Deductible casualty losses. State tax form 2013 Insurance payments you received or expect to receive for casualty losses. State tax form 2013 Payments you received for granting an easement or right-of-way. State tax form 2013 Depreciation allowed or allowable if you used your home for business or rental purposes. State tax form 2013 Energy-related credits allowed for expenditures made on the residence. State tax form 2013 (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. State tax form 2013 ) Adoption credit you claimed for improvements added to the basis of your home. State tax form 2013 Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. State tax form 2013 Energy conservation subsidy excluded from your gross income because you received it (directly or indirectly) from a public utility after 1992 to buy or install any energy conservation measure. State tax form 2013 An energy conservation measure is an installation or modification primarily designed either to reduce consumption of electricity or natural gas or to improve the management of energy demand for a home. State tax form 2013 District of Columbia first-time homebuyer credit allowed on the purchase of a principal residence in the District of Columbia. State tax form 2013 General sales taxes claimed as an itemized deduction on Schedule A (Form 1040) that were imposed on the purchase of personal property, such as a houseboat used as your home or a mobile home. State tax form 2013 Discharges of qualified principal residence indebtedness. State tax form 2013   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. State tax form 2013 This exclusion applies to discharges made after 2006 and before 2014. State tax form 2013 If you choose to exclude this income, you must reduce (but not below zero) the basis of your principal residence by the amount excluded from gross income. State tax form 2013   File Form 982 with your tax return. State tax form 2013 See the form's instructions for detailed information. State tax form 2013    A decrease in basis due to a discharge of qualified principal residence indebtedness that is excluded from income occurs only if you retain ownership of the principal residence after a discharge. State tax form 2013 In most cases, this would occur in a refinancing or a restructuring of the mortgage. State tax form 2013 Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. State tax form 2013 This means that, if you qualify, you will not have to pay tax on the gain up to the limit described under Maximum Exclusion , next. State tax form 2013 To qualify, you must meet the ownership and use tests described later. State tax form 2013 You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. State tax form 2013 This choice can be made (or revoked) at any time before the expiration of a 3-year period beginning on the due date of your return (not including extensions) for the year of the sale. State tax form 2013 You can use Worksheet 2 (near the end of this publication) to figure the amount of your exclusion and your taxable gain, if any. State tax form 2013 If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. State tax form 2013 See Publication 505, Tax Withholding and Estimated Tax. State tax form 2013 Maximum Exclusion You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. State tax form 2013 You meet the ownership test. State tax form 2013 You meet the use test. State tax form 2013 During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. State tax form 2013 For details on gain allocated to periods of nonqualified use, see Nonqualified Use , later. State tax form 2013 If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed. State tax form 2013 You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . State tax form 2013 Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. State tax form 2013 This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). State tax form 2013 Exception. State tax form 2013   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. State tax form 2013 However, the maximum amount you may be able to exclude will be reduced. State tax form 2013 See Reduced Maximum Exclusion , later. State tax form 2013 Example 1—home owned and occupied for at least 2 years. State tax form 2013 Mya bought and moved into her main home in September 2011. State tax form 2013 She sold the home at a gain in October 2013. State tax form 2013 During the 5-year period ending on the date of sale in October 2013, she owned and lived in the home for more than 2 years. State tax form 2013 She meets the ownership and use tests. State tax form 2013 Example 2—ownership test met but use test not met. State tax form 2013 Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. State tax form 2013 He later sold the home for a gain in June 2013. State tax form 2013 He owned the home during the entire 5-year period ending on the date of sale. State tax form 2013 He meets the ownership test but not the use test. State tax form 2013 He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). State tax form 2013 Period of Ownership and Use The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time. State tax form 2013 You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale. State tax form 2013 Example. State tax form 2013 Naomi bought and moved into a house in July 2009. State tax form 2013 She lived there for 13 months and then moved in with a friend. State tax form 2013 She later moved back into her house and lived there for 12 months until she sold it in August 2013. State tax form 2013 Naomi meets the ownership and use tests because, during the 5-year period ending on the date of sale, she owned the house for more than 2 years and lived in it for a total of 25 (13 + 12) months. State tax form 2013 Temporary absence. State tax form 2013   Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. State tax form 2013 The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. State tax form 2013 Example 1. State tax form 2013 David Johnson, who is single, bought and moved into his home on February 1, 2011. State tax form 2013 Each year during 2011 and 2012, David left his home for a 2-month summer vacation. State tax form 2013 David sold the house on March 1, 2013. State tax form 2013 Although the total time David lived in his home is less than 2 years (21 months), he meets the use requirement and may exclude gain. State tax form 2013 The 2-month vacations are short temporary absences and are counted as periods of use in determining whether David used the home for the required 2 years. State tax form 2013 Example 2. State tax form 2013 Professor Paul Beard, who is single, bought and moved into a house in December 2010, went abroad for a 1-year sabbatical leave in January 2012, returned to the house in January 2013, and sold it at a gain in February 2013. State tax form 2013 Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. State tax form 2013 He cannot exclude any part of his gain because he did not use the residence for the required 2 years. State tax form 2013 Ownership and use tests met at different times. State tax form 2013   You can meet the ownership and use tests during different 2-year periods. State tax form 2013 However, you must meet both tests during the 5-year period ending on the date of the sale. State tax form 2013 Example. State tax form 2013 Beginning in 2002, Helen Jones lived in a rented apartment. State tax form 2013 The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. State tax form 2013 In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. State tax form 2013 On July 12, 2013, while still living in her daughter's home, she sold her condominium. State tax form 2013 Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 13, 2008, to July 12, 2013, the date she sold the condominium. State tax form 2013 She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). State tax form 2013 She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). State tax form 2013 The time Helen lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use. State tax form 2013 Cooperative apartment. State tax form 2013   If you sold stock as a tenant-shareholder in a cooperative housing corporation, the ownership and use tests are met if, during the 5-year period ending on the date of sale, you: Owned the stock for at least 2 years, and Lived in the house or apartment that the stock entitled you to occupy as your main home for at least 2 years. State tax form 2013 Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. State tax form 2013 Exception for individuals with a disability. State tax form 2013   There is an exception to the use test if: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home. State tax form 2013 Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. State tax form 2013   If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. State tax form 2013 Previous home destroyed or condemned. State tax form 2013   For the ownership and use tests, you add the time you owned and lived in a previous home that was destroyed or condemned to the time you owned and lived in the replacement home on whose sale you wish to exclude gain. State tax form 2013 This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home (see Involuntary Conversions in Publication 551). State tax form 2013 Otherwise, you must have owned and lived in the same home for 2 of the 5 years before the sale to qualify for the exclusion. State tax form 2013 Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. State tax form 2013   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty (defined later) as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. State tax form 2013 You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve outside the United States either as an employee of the Peace Corps on qualified official extended duty (defined later) or as an enrolled volunteer or volunteer leader of the Peace Corps. State tax form 2013 This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. State tax form 2013   If this helps you qualify to exclude gain, you can choose to have the 5-year test period suspended by filing a return for the year of sale that does not include the gain. State tax form 2013 Example. State tax form 2013 John bought and moved into a home in 2005. State tax form 2013 He lived in it as his main home for 2½ years. State tax form 2013 For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. State tax form 2013 He then sold the home at a gain in 2013. State tax form 2013 To meet the use test, John chooses to suspend the 5-year test period for the 6 years he was on qualified official extended duty. State tax form 2013 This means he can disregard those 6 years. State tax form 2013 Therefore, John's 5-year test period consists of the 5 years before he went on qualified official extended duty. State tax form 2013 He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. State tax form 2013 Period of suspension. State tax form 2013   The period of suspension cannot last more than 10 years. State tax form 2013 Together, the 10-year suspension period and the 5-year test period can be as long as, but no more than, 15 years. State tax form 2013 You cannot suspend the 5-year period for more than one property at a time. State tax form 2013 You can revoke your choice to suspend the 5-year period at any time. State tax form 2013 Example. State tax form 2013 Mary bought a home on April 1, 1997. State tax form 2013 She used it as her main home until August 31, 2000. State tax form 2013 On September 1, 2000, she went on qualified official extended duty with the Navy. State tax form 2013 She did not live in the house again before selling it on July 31, 2013. State tax form 2013 Mary chooses to use the entire 10-year suspension period. State tax form 2013 Therefore, the suspension period would extend back from July 31, 2013, to August 1, 2003, and the 5-year test period would extend back to August 1, 1998. State tax form 2013 During that period, Mary owned the house all 5 years and lived in it as her main home from August 1, 1998, until August 31, 2000, a period of more than 24 months. State tax form 2013 She meets the ownership and use tests because she owned and lived in the home for at least 2 years during this test period. State tax form 2013 Uniformed services. State tax form 2013   The uniformed services are: The Armed Forces (the Army, Navy, Air Force, Marine Corps, and Coast Guard), The commissioned corps of the National Oceanic and Atmospheric Administration, and The commissioned corps of the Public Health Service. State tax form 2013 Foreign Service member. State tax form 2013   For purposes of the choice to suspend the 5-year test period for ownership and use, you are a member of the Foreign Service if you are any of the following. State tax form 2013 A Chief of mission. State tax form 2013 An Ambassador at large. State tax form 2013 A member of the Senior Foreign Service. State tax form 2013 A Foreign Service officer. State tax form 2013 Part of the Foreign Service personnel. State tax form 2013 Employee of the intelligence community. State tax form 2013   For purposes of the choice to suspend the 5-year test period for ownership and use, you are an employee of the intelligence community if you are an employee of any of the following. State tax form 2013 The Office of the Director of National Intelligence. State tax form 2013 The Central Intelligence Agency. State tax form 2013 The National Security Agency. State tax form 2013 The Defense Intelligence Agency. State tax form 2013 The National Geospatial-Intelligence Agency. State tax form 2013 The National Reconnaissance Office and any other office within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs. State tax form 2013 Any of the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, the Department of Treasury, the Department of Energy, and the Coast Guard. State tax form 2013 The Bureau of Intelligence and Research of the Department of State. State tax form 2013 Any of the elements of the Department of Homeland Security concerned with the analyses of foreign intelligence information. State tax form 2013 Qualified official extended duty. State tax form 2013   You are on qualified official extended duty if you are on extended duty while: Serving at a duty station at least 50 miles from your main home, or Living in Government quarters under Government orders. State tax form 2013   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. State tax form 2013 Married Persons If you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use tests, you can exclude up to $250,000 of the gain. State tax form 2013 (But see Special rules for joint returns, next. State tax form 2013 ) Special rules for joint returns. State tax form 2013   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. State tax form 2013 You are married and file a joint return for the year. State tax form 2013 Either you or your spouse meets the ownership test. State tax form 2013 Both you and your spouse meet the use test. State tax form 2013 During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. State tax form 2013 If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. State tax form 2013 For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. State tax form 2013 Example 1—one spouse sells a home. State tax form 2013 Emily sells her home in June 2013 for a gain of $300,000. State tax form 2013 She marries Jamie later in the year. State tax form 2013 She meets the ownership and use tests, but Jamie does not. State tax form 2013 Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. State tax form 2013 The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. State tax form 2013 Example 2—each spouse sells a home. State tax form 2013 The facts are the same as in Example 1 except that Jamie also sells a home in 2013 for a gain of $200,000 before he marries Emily. State tax form 2013 He meets the ownership and use tests on his home, but Emily does not. State tax form 2013 Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. State tax form 2013 However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. State tax form 2013 Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. State tax form 2013 The $500,000 maximum exclusion for certain joint returns does not apply because Emily and Jamie do not both meet the use test for the same home. State tax form 2013 Sale of main home by surviving spouse. State tax form 2013   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. State tax form 2013   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. State tax form 2013 The sale or exchange took place after 2008. State tax form 2013 The sale or exchange took place no more than 2 years after the date of death of your spouse. State tax form 2013 You have not remarried. State tax form 2013 You and your spouse met the use test at the time of your spouse's death. State tax form 2013 You or your spouse met the ownership test at the time of your spouse's death. State tax form 2013 Neither you nor your spouse excluded gain from the sale of another home during the last 2 years before the date of death. State tax form 2013 The ownership and use tests were described earlier. State tax form 2013 Example. State tax form 2013 Harry owned and used a house as his main home since 2009. State tax form 2013 Harry and Wilma married on July 1, 2013, and from that date they used Harry's house as their main home. State tax form 2013 Harry died on August 15, 2013, and Wilma inherited the property. State tax form 2013 Wilma sold the property on September 1, 2013, at which time she had not remarried. State tax form 2013 Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Harry owned and used the property before death. State tax form 2013 Home transferred from spouse. State tax form 2013   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. State tax form 2013 Use of home after divorce. State tax form 2013   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. State tax form 2013 Reduced Maximum Exclusion If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. State tax form 2013 This applies to those who: Fail to meet the ownership and use tests, or Have used the exclusion within 2 years of selling their current home. State tax form 2013 In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. State tax form 2013 A change in place of employment. State tax form 2013 Health. State tax form 2013 Unforeseen circumstances. State tax form 2013 Qualified individual. State tax form 2013   For purposes of the reduced maximum exclusion, a qualified individual is any of the following. State tax form 2013 You. State tax form 2013 Your spouse. State tax form 2013 A co-owner of the home. State tax form 2013 A person whose main home is the same as yours. State tax form 2013 Primary reason for sale. State tax form 2013   One of the three reasons above will be considered to be the primary reason you sold your home if either (1) or (2) is true. State tax form 2013 You qualify under a “safe harbor. State tax form 2013 ” This is a specific set of facts and circumstances that, if applicable, qualifies you to claim a reduced maximum exclusion. State tax form 2013 Safe harbors corresponding to the reasons listed above are described later. State tax form 2013 A safe harbor does not apply, but you can establish, based on facts and circumstances, that the primary reason for the sale is a change in place of employment, health, or unforeseen circumstances. State tax form 2013  Factors that may be relevant in determining your primary reason for sale include whether: Your sale and the circumstances causing it were close in time, The circumstances causing your sale occurred during the time you owned and used the property as your main home, The circumstances causing your sale were not reasonably foreseeable when you began using the property as your main home, Your financial ability to maintain the property became materially impaired, The suitability of the property as your main home materially changed, and During the time you owned the property, you used it as your home. State tax form 2013 Change in Place of Employment You may qualify for a reduced exclusion if the primary reason for the sale of your main home is a change in the location of employment of a qualified individual. State tax form 2013 Employment. State tax form 2013   For this purpose, employment includes the start of work with a new employer or continuation of work with the same employer. State tax form 2013 It also includes the start or continuation of self-employment. State tax form 2013 Distance safe harbor. State tax form 2013   A change in place of employment is considered to be the reason you sold your home if: The change occurred during the period you owned and used the property as your main home, and The new place of employment is at least 50 miles farther from the home you sold than was the former place of employment (or, if there was no former place of employment, the distance between your new place of employment and the home sold is at least 50 miles). State tax form 2013 Example. State tax form 2013 Justin was unemployed and living in a townhouse in Florida he had owned and used as his main home since 2012. State tax form 2013 He got a job in North Carolina and sold his townhouse in 2013. State tax form 2013 Because the distance between Justin's new place of employment and the home he sold is at least 50 miles, the sale satisfies the conditions of the distance safe harbor. State tax form 2013 Justin's sale of his home is considered to be because of a change in place of employment, and he is entitled to claim a reduced maximum exclusion of gain from the sale. State tax form 2013 Health The sale of your main home is because of health if your primary reason for the sale is: To obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual, or To obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury. State tax form 2013 The sale of your home is not because of health if the sale merely benefits a qualified individual's general health or well-being. State tax form 2013 For purposes of this reason, a qualified individual includes, in addition to the individuals listed earlier under Qualified individual , any of the following family members of these individuals. State tax form 2013 Parent, grandparent, stepmother, stepfather. State tax form 2013 Child, grandchild, stepchild, adopted child, eligible foster child. State tax form 2013 Brother, sister, stepbrother, stepsister, half-brother, half-sister. State tax form 2013 Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law. State tax form 2013 Uncle, aunt, nephew, niece, or cousin. State tax form 2013 Example. State tax form 2013 In 2012, Chase and Lauren, spouses, bought a house that they used as their main home. State tax form 2013 Lauren's father has a chronic disease and is unable to care for himself. State tax form 2013 In 2013, Chase and Lauren sold their home in order to move into Lauren's father's house to provide care for him. State tax form 2013 Because the primary reason for the sale of their home was to provide care for Lauren's father, Chase and Lauren are entitled to a reduced maximum exclusion. State tax form 2013 Doctor's recommendation safe harbor. State tax form 2013   Health is considered to be the reason you sold your home if, for one or more of the reasons listed at the beginning of this discussion, a doctor recommends a change of residence. State tax form 2013 Unforeseen Circumstances The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying that home. State tax form 2013 You are not considered to have an unforeseen circumstance if the primary reason you sold your home was that you preferred to get a different home or because your finances improved. State tax form 2013 Specific event safe harbors. State tax form 2013   Unforeseen circumstances are considered to be the reason for selling your home if any of the following events occurred while you owned and used the property as your main home. State tax form 2013 An involuntary conversion of your home, such as when your home is destroyed or condemned. State tax form 2013 Natural or man-made disasters or acts of war or terrorism resulting in a casualty to your home, whether or not your loss is deductible. State tax form 2013 In the case of qualified individuals (listed earlier under Qualified individual ): Death, Unemployment (if the individual is eligible for unemployment compensation), A change in employment or self-employment status that results in the individual's inability to pay reasonable basic living expenses (listed under Reasonable basic living expenses , later) for his or her household, Divorce or legal separation under a decree of divorce or separate maintenance, or Multiple births resulting from the same pregnancy. State tax form 2013 An event the IRS determined to be an unforeseen circumstance in published guidance of general applicability. State tax form 2013 For example, the IRS determined the September 11, 2001, terrorist attacks to be an unforeseen circumstance. State tax form 2013 Reasonable basic living expenses. State tax form 2013   Reasonable basic living expenses for your household include the following. State tax form 2013 Amounts spent for food. State tax form 2013 Amounts spent for clothing. State tax form 2013 Housing and related expenses. State tax form 2013 Medical expenses. State tax form 2013 Transportation expenses. State tax form 2013 Tax payments. State tax form 2013 Court-ordered payments. State tax form 2013 Expenses reasonably necessary to produce income. State tax form 2013   Any of these amounts spent to maintain an affluent or luxurious standard of living are not reasonable basic living expenses. State tax form 2013 Nonqualified Use Gain from the sale or exchange of the main home is not excludable from income if it is allocable to periods of nonqualified use. State tax form 2013 Nonqualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions (see next). State tax form 2013 Exceptions. State tax form 2013   A period of nonqualified use does not include: Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home; Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty: As a member of the uniformed services; As a member of the Foreign Service of the United States; or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. State tax form 2013 Calculation. State tax form 2013   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain (net of any depreciation allowed or allowable on the property for periods after May 6, 1997) by the following fraction:   Total nonqualified use during the period of ownership after 2008     Total period of ownership     This calculation can be found in Worksheet 2, line 10, later in this publication. State tax form 2013   For examples of this calculation, see Business Use or Rental of Home , next. State tax form 2013 Business Use or Rental of Home You may be able to exclude gain from the sale of a home you have used for business or to produce rental income if you meet the ownership and use tests. State tax form 2013 Example 1. State tax form 2013 On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. State tax form 2013 She moved in on that date and lived in it until May 31, 2009, when she moved out of the house and put it up for rent. State tax form 2013 The house was rented from June 1, 2009, to March 31, 2011. State tax form 2013 Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. State tax form 2013 Amy moved back into the house on April 1, 2011, and lived there until she sold it on January 31, 2013, for a gain of $200,000. State tax form 2013 During the 5-year period ending on the date of the sale (January 31, 2008–January 31, 2013), Amy owned and lived in the house for more than 2 years as shown in the following table. State tax form 2013 Five-Year Period Used as Home Used as Rental 1/31/08 – 5/31/09 16 months   6/01/09 – 3/31/11   22 months 4/01/11 – 1/31/13 22 months     38 months 22 months       During the period Amy owned the house (2,080 days), her period of nonqualified use was 668 days. State tax form 2013 Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain, as shown on Worksheet 2. State tax form 2013 Example 2. State tax form 2013 William owned and used a house as his main home from 2007 through 2010. State tax form 2013 On January 1, 2011, he moved to another state. State tax form 2013 He rented his house from that date until April 30, 2013, when he sold it. State tax form 2013 During the 5-year period ending on the date of sale (May 1, 2008-April 30, 2013), William owned and lived in the house for more than 2 years. State tax form 2013 Because it was rental property at the time of the sale, he must report the sale on Form 4797. State tax form 2013 Because the period of nonqualified use does not include any part of the 5-year period after the last date William lived in the house, he has no period of nonqualified use. State tax form 2013 Because he met the ownership and use tests, he can exclude gain up to $250,000. State tax form 2013 However, he cannot exclude the part of the gain equal to the depreciation he claimed or could have claimed for renting the house, as explained next. State tax form 2013 Depreciation after May 6, 1997. State tax form 2013   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. State tax form 2013 If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed. State tax form 2013 Unrecaptured section 1250 gain. State tax form 2013   This is the part of any long-term capital gain from the sale of your home that is due to depreciation and cannot be excluded. State tax form 2013 To figure the amount of unrecaptured section 1250 gain to be reported on Schedule D (Form 1040), you must also take into account certain gains or losses from the sale of property other than your home. State tax form 2013 Use the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions for this purpose. State tax form 2013 Worksheet 2. State tax form 2013 Taxable Gain on Sale of Home—Completed Example 1 for Amy Part 1. State tax form 2013 Gain or (Loss) on Sale       1. State tax form 2013   Selling price of home 1. State tax form 2013     2. State tax form 2013   Selling expenses (including commissions, advertising and legal fees, and seller-paid loan charges) 2. State tax form 2013     3. State tax form 2013   Subtract line 2 from line 1. State tax form 2013 This is the amount realized 3. State tax form 2013     4. State tax form 2013   Adjusted basis of home sold (from Worksheet 1, line 13) 4. State tax form 2013     5. State tax form 2013   Gain or (loss) on the sale. State tax form 2013 Subtract line 4 from line 3. State tax form 2013 If this is a loss, stop here 5. State tax form 2013 200,000   Part 2. State tax form 2013 Exclusion and Taxable Gain       6. State tax form 2013   Enter any depreciation allowed or allowable on the property for periods after May 6, 1997. State tax form 2013 If none, enter -0- 6. State tax form 2013 10,000   7. State tax form 2013   Subtract line 6 from line 5. State tax form 2013 If the result is less than zero, enter -0- 7. State tax form 2013 190,000   8. State tax form 2013   Aggregate number of days of nonqualified use after 2008. State tax form 2013 If none, enter -0-. State tax form 2013  If line 8 is equal to zero, skip to line 12 and enter the amount from line 7 on line 12 8. State tax form 2013 668   9. State tax form 2013   Number of days taxpayer owned the property 9. State tax form 2013 2,080   10. State tax form 2013   Divide the amount on line 8 by the amount on line 9. State tax form 2013 Enter the result as a decimal (rounded to at least 3 places). State tax form 2013 But do not enter an amount greater than 1. State tax form 2013 00 10. State tax form 2013 0. State tax form 2013 321   11. State tax form 2013   Gain allocated to nonqualified use. State tax form 2013 (Line 7 multiplied by line 10) 11. State tax form 2013 60,990   12. State tax form 2013   Gain eligible for exclusion. State tax form 2013 Subtract line 11 from line 7 12. State tax form 2013 129,010   13. State tax form 2013   If you qualify to exclude gain on the sale, enter your maximum exclusion (see Maximum Exclusion ). State tax form 2013  If you qualify for a reduced maximum exclusion, enter the amount from Worksheet 3, line 7. State tax form 2013 If you do  not qualify to exclude gain, enter -0- 13. State tax form 2013 250,000   14. State tax form 2013   Exclusion. State tax form 2013 Enter the smaller of line 12 or line 13 14. State tax form 2013 129,010   15. State tax form 2013   Taxable gain. State tax form 2013 Subtract line 14 from line 5. State tax form 2013 Report your taxable gain as described under Reporting the Sale . State tax form 2013 If the amount on line 6 is more than zero, complete line 16 15. State tax form 2013 70,990   16. State tax form 2013   Enter the smaller of line 6 or line 15. State tax form 2013 Enter this amount on line 12 of the Unrecaptured Section 1250 Gain  Worksheet in the instructions for Schedule D (Form 1040) 16. State tax form 2013 10,000 Property Used Partly for Business or Rental If you use property partly as a home and partly for business or to produce rental income, the treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. State tax form 2013 Part of Home Used for Business or Rental If the part of your property used for business or to produce rental income is within your home, such as a room used as a home office for a business, you do not need to allocate gain on the sale of the property between the business part of the property and the part used as a home. State tax form 2013 In addition, you do not need to report the sale of the business or rental part on Form 4797. State tax form 2013 This is true whether or not you were entitled to claim any depreciation. State tax form 2013 However, you cannot exclude the part of any gain equal to any depreciation allowed or allowable after May 6, 1997. State tax form 2013 See Depreciation after May 6, 1997, earlier. State tax form 2013 Example 1. State tax form 2013 Ray sold his main home in 2013 at a $30,000 gain. State tax form 2013 He has no gains or losses from the sale of property other than the gain from the sale of his home. State tax form 2013 He meets the ownership and use tests to exclude the gain from his income. State tax form 2013 However, he used part of the home as a business office in 2012 and claimed $500 depreciation. State tax form 2013 Because the business office was part of his home (not separate from it), he does not have to allocate the gain on the sale between the business part of the property and the part used as a home. State tax form 2013 In addition, he does not have to report any part of the gain on Form 4797. State tax form 2013 Because Ray was entitled to take a depreciation deduction, he must recognize $500 of the gain as unrecaptured section 1250 gain. State tax form 2013 He reports his gain, exclusion, and the taxable gain of $500 on Form 8949 and Schedule D (Form 1040). State tax form 2013 Example 2. State tax form 2013 The facts are the same as in Example 1 except that Ray was not entitled to claim depreciation for the business use of his home. State tax form 2013 Since Ray did not claim any depreciation, he can exclude the entire $30,000 gain. State tax form 2013 Separate Part of Property Used for Business or Rental You may have used part of your property as your home and a separate part of it for business or to produce rental income. State tax form 2013 Examples are: A working farm on which your house was located, A duplex in w