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

TurboTax Federal Free Edition - File Taxes Online

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

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


© 2012 - 2018 All rights reserved.

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

State Tax Free

Filing An Amended Tax Return For 2013Http Www Hrblock ComTaxact OnlineFile 2011 State Taxes FreeFiling Taxes For Students2011 Income Tax FormsIrs Gov Form 1040Irs 1040 Ez Form 2011Free Tax Act 2011Efile 1040 EzIrs 2012 Tax Forms 1040 EzElectronic 1040ezTax Return FormFree 1040x Tax FormsIrs Gov FreefilefillableformsFile 2007 Tax Return Online FreeCan You File 2011 Taxes With 2012Military Pay ScaleEfile TaxesHow To Fill Out The 1040ezTax Deductions2011 Tax Form 1040Irs TaxIrs Gov 1040ezFile State Return For FreeStatetaxreturnIrs Govefile2012 Tax Return Form 1040Where To File 2012 Taxes OnlineEz 1040 OnlineFile Taxes For 2012 FreeMy1040ezTax AmendmentsHow To Do Amended Tax Return2014 Tax FormsHow Do I File Taxes For 2010H&r Block On LineIrs Forms Amended Return InstructionsAmending 2011 TaxesWhere Can Ie File My State Taxes For Free

State Tax Free

State tax free Publication 3402 - Main Content Table of Contents What is a Limited Liability Company? Classification of an LLC LLCs Classified as Partnerships LLCs Classified as Disregarded Entities LLCs Classified as Corporations Subsequent Elections How To Get More InformationInternal Revenue Service Small Business Administration Other Federal Agencies What is a Limited Liability Company? For purposes of this publication, a limited liability company (LLC) is a business entity organized in the United States under state law. State tax free Unlike a partnership, all of the members of an LLC have limited personal liability for its debts. State tax free An LLC may be classified for federal income tax purposes as a partnership, corporation, or an entity disregarded as separate from its owner by applying the rules in Regulations section 301. State tax free 7701-3. State tax free The information in this publication applies to LLCs in general, and different rules may apply to special situations, including banks, insurance companies, or nonprofit organizations that are LLCs or that own LLCs. State tax free Check your state's requirements and the federal tax regulations for further information. State tax free Classification of an LLC Default classification rules. State tax free   An LLC with at least two members is classified as a partnership for federal income tax purposes. State tax free An LLC with only one member is treated as an entity disregarded as separate from its owner for income tax purposes (but as a separate entity for purposes of employment tax and certain excise taxes). State tax free Also, an LLC's federal tax classification can subsequently change under certain default rules discussed later. State tax free Elected classification. State tax free   If an LLC does not choose to be classified under the above default classifications, it can elect to be classified as an association taxable as a corporation or as an S corporation. State tax free After an LLC has determined its federal tax classification, it can later elect to change that classification. State tax free For details, see Subsequent Elections, later. State tax free LLCs Classified as Partnerships If an LLC has at least two members and is classified as a partnership, it generally must file Form 1065, U. State tax free S. State tax free Return of Partnership Income. State tax free Generally, an LLC classified as a partnership is subject to the same filing and reporting requirements as partnerships. State tax free For certain purposes, members of an LLC are treated as limited partners in a limited partnership. State tax free For example, LLC members are treated as limited partners for purposes of material participation under the passive activity limitation rules (see Temporary Regulation section 1. State tax free 469-5T(e)). State tax free See the Instructions for Form 1065 for reporting rules that apply specifically to LLCs. State tax free Member manager. State tax free   Only a member manager of an LLC can sign the partnership tax return. State tax free And only a member manager can represent the LLC as the tax matters partner under the consolidated audit proceedings in sections 6221 through 6234. State tax free A member manager is any owner of an interest in the LLC who, alone or together with others, has the continuing authority to make the management decisions necessary to conduct the business for which the LLC was formed. State tax free If there are no elected or designated member managers, each owner is treated as a member manager. State tax free Change in default classification. State tax free   If the number of members in an LLC classified as a partnership is reduced to only one member, it becomes an entity disregarded as separate from its owner under Regulations section 301. State tax free 7701-3(f)(2). State tax free However, if the LLC has made an election to be classified as a corporation (discussed later) and that elective classification is in effect at the time of the change in membership, the default classification as a disregarded entity will not apply. State tax free   Other tax consequences of a change in membership, such as recognition of gain or loss, are determined by the transactions through which an interest in the LLC is acquired or disposed of. State tax free If a partnership that becomes a disregarded entity as a result of a decrease in the number of members makes an election to be classified as a corporation, the applicable deemed transactions discussed under Subsequent Elections, later, apply. State tax free Example 1. State tax free Ethel and Francis are members of an LLC classified as a partnership for federal tax purposes. State tax free Each holds an equal membership interest. State tax free The LLC does not hold any unrealized receivables or substantially appreciated inventory. State tax free Ethel sells her entire interest in the LLC to Francis for $10,000. State tax free After the sale, the business is continued by the LLC, which is owned solely by Francis. State tax free No entity classification election is made after the sale to treat the LLC as a corporation for federal tax purposes. State tax free The partnership terminates when Francis buys Ethel's entire interest. State tax free Ethel must treat the transaction as the sale of a partnership interest and must report gain or loss, if any, resulting from the sale of her partnership interest. State tax free For purposes of determining the tax treatment of Francis, the partnership is deemed to make a liquidating distribution of all of its assets to Ethel and Francis, and after this distribution, Francis is treated as acquiring the assets deemed to have been distributed to Ethel in liquidation of Ethel's partnership interest. State tax free Francis's basis in the assets attributable to Ethel's one-half interest in the partnership is $10,000, the purchase price for Ethel's partnership interest. State tax free Upon the termination of the partnership, Francis is considered to receive a distribution of those assets attributable to Francis's former interest in the partnership. State tax free Francis must recognize gain or loss, if any, on the deemed distribution of the assets to the extent required by Internal Revenue Code section 731(a). State tax free See Partnership Distributions in Publication 541. State tax free Example 2. State tax free George and Henrietta are members of an LLC classified as a partnership for federal tax purposes. State tax free Each holds an equal membership interest. State tax free The LLC does not hold any unrealized receivables or substantially appreciated inventory. State tax free George and Henrietta each sell their entire interests in the LLC to Ian, an unrelated person, in exchange for $10,000. State tax free After the sale, the business is continued by the LLC, which is owned solely by Ian. State tax free No entity classification election is made after the sale to treat the LLC as a corporation for federal tax purposes. State tax free The partnership terminates when Ian purchases the entire interests of George and Henrietta in the LLC. State tax free George and Henrietta must report gain or loss, if any, resulting from the sale of their partnership interests. State tax free For purposes of classifying the acquisition by Ian, the partnership is deemed to make a liquidating distribution of its assets to George and Henrietta. State tax free Immediately following this distribution, Ian is deemed to acquire, by purchase, all of the former partnership's assets. State tax free   For more details on the preceding two examples, see Revenue Ruling 99-6, 1999-6 I. State tax free R. State tax free B. State tax free 6. State tax free You can find Revenue Ruling 99-6 at www. State tax free irs. State tax free gov/pub/irs-irbs/irb99-06. State tax free pdf. State tax free LLCs Classified as Disregarded Entities If an LLC has only one member and is classified as an entity disregarded as separate from its owner, its income, deductions, gains, losses, and credits are reported on the owner's income tax return. State tax free For example, if the owner of the LLC is an individual, the LLC's income and expenses would be reported on the following schedules filed with the owner's Form 1040: Schedule C, Profit or Loss from Business (Sole Proprietorship); Schedule C-EZ, Net Profit From Business (Sole Proprietorship); Schedule E, Supplemental Income and Loss; or Schedule F, Profit or Loss From Farming. State tax free Employment tax and certain excise taxes. State tax free   A single-member LLC that is classified as a disregarded entity for income tax purposes is treated as a separate entity for purposes of employment tax and certain excise taxes. State tax free For wages paid after January 1, 2009, the single-member LLC is required to use its name and employer identification number (EIN) for reporting and payment of employment taxes. State tax free A single-member LLC is also required to use its name and EIN to register for excise tax activities on Form 637; pay and report excise taxes reported on Forms 720, 730, 2290, and 11-C; and claim any refunds, credits, and payments on Form 8849. State tax free See the employment and excise tax returns for more information. State tax free Self-employment tax rule for disregarded entity LLCs. State tax free   An individual owner of a single-member LLC classified as a disregarded entity is not an employee of the LLC. State tax free Instead, the owner is subject to tax on the net earnings from self-employment of the LLC which is treated in the same manner as a sole-proprietorship. State tax free Example 3. State tax free LLC is a disregarded entity owned by Irene. State tax free LLC has three employees (Kent, Patricia, and Tex) and pays wages. State tax free LLC is treated as an entity separate from its owner for purposes of employment taxes. State tax free For the wages paid to Kent, Patricia, and Tex, LLC is liable for income tax withholding, Federal Insurance Contributions Act (FICA) taxes, and Federal Unemployment Tax Act (FUTA) taxes. State tax free In addition, LLC must file under its name and EIN the applicable employment tax returns; make timely employment tax deposits; and file with the Social Security Administration and furnish to LLC's employees (Kent, Patricia, and Tex) Forms W-2, Wage and Tax Statement. State tax free Irene is self-employed for purposes of the self-employment tax. State tax free Thus, Irene is subject to self-employment tax on her net earnings from self-employment with respect to LLC's activities. State tax free Irene is not an employee of LLC for purposes of employment taxes. State tax free Because LLC is treated as a sole proprietorship of Irene for income tax purposes, Irene must report the income and expenses from LLC on her Schedule C. State tax free Irene will figure the tax due on her net earnings from self-employment on Schedule SE. State tax free Irene can also deduct one-half of her self-employment tax on line 27 of her Form 1040. State tax free Taxpayer identification number. State tax free   For all income tax purposes, a single-member LLC classified as a disregarded entity must use the owner's social security number (SSN) or EIN. State tax free This includes all information returns and reporting related to income tax. State tax free For example, if a disregarded entity LLC that is owned by an individual is required to provide a Form W-9, Request for Taxpayer Identification Number and Certification, the LLC must provide the owner's SSN or EIN, not the LLC's EIN. State tax free   However, most new single-member LLCs classified as a disregarded entity will need to obtain an EIN for the LLC. State tax free An LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed above (see Employment tax and certain excise taxes earlier). State tax free See Form SS-4, Application for Employer Identification Number, for information on applying for an EIN. State tax free Change in default classification. State tax free   If a single-member LLC classified as a disregarded entity for income tax purposes acquires an additional member, it becomes a partnership under Regulations section 301. State tax free 7701-3(f)(2). State tax free However, if the LLC has made an election to be classified as a corporation (discussed later) and that elective classification is in effect at the time of the change in membership, the default classification as a partnership will not apply. State tax free   Other tax consequences of a change in membership, such as recognition of gain or loss, are determined by the transactions through which an interest in the LLC is acquired or disposed of. State tax free If a disregarded entity that becomes a partnership as a result of an increase in the number of members makes an election to be classified as a corporation, the applicable deemed transactions discussed in Subsequent Elections, later, apply. State tax free Example 4. State tax free Bart, who is not related to Alain, buys 50% of Alain's interest in an LLC that is a disregarded entity for $5,000. State tax free Alain does not contribute any portion of the $5,000 to the LLC. State tax free Alain and Bart continue to operate the business of the LLC as co-owners of the LLC. State tax free The LLC is converted to a partnership when the new member, Bart, buys an interest in the disregarded entity from the owner, Alain. State tax free Bart's buying a 50% interest in Alain's ownership interest in the LLC is treated as Bart's buying a 50% interest in each of the LLC's assets, which are treated as owned directly by Alain for federal income tax purposes. State tax free Immediately thereafter, Alain and Bart are treated as contributing their respective interests in those assets to a partnership in exchange for ownership interests in the partnership. State tax free Alain recognizes gain or loss from the deemed sale to Bart of the 50% interest in the assets. State tax free Neither Alain nor Bart recognizes any gain or loss as a result of the deemed contribution of the assets to the partnership. State tax free Example 5. State tax free Charles, who is not related to Danielle, contributes $10,000 to an LLC owned by Danielle for a 50% ownership interest in the LLC. State tax free The LLC uses all of the contributed cash in its business. State tax free Charles and Danielle continue to operate the business of the LLC as co-owners of the LLC. State tax free The LLC is converted from a disregarded entity to a partnership when Charles contributes cash to the LLC. State tax free Charles's contribution is treated as a contribution to a partnership in exchange for an ownership interest in the partnership. State tax free Danielle is treated as contributing all of the assets of the LLC to the partnership in exchange for a partnership interest. State tax free Neither Charles nor Danielle recognizes gain or loss as a result of the conversion of the disregarded entity to a partnership. State tax free   For more details on the preceding two examples, see Revenue Ruling 99-5, 1999-6 I. State tax free R. State tax free B. State tax free 8. State tax free You can find Revenue Ruling 99-5 at www. State tax free irs. State tax free gov/pub/irs-irbs/irb99-06. State tax free pdf. State tax free LLCs Classified as Corporations An LLC with either a single member or more than one member can elect to be classified as a corporation rather than be classified as a partnership or disregarded entity under the default rules discussed earlier. State tax free File Form 8832, Entity Classification Election, to elect classification as a C corporation. State tax free File Form 2553, Election by a Small Business Corporation, to elect classification as an S corporation. State tax free LLCs electing classification as an S corporation are not required to file Form 8832 to elect classification as a corporation before filing Form 2553. State tax free By filing Form 2553, an LLC is deemed to have elected classification as a corporation in addition to the S corporation classification. State tax free If the LLC elects to be classified as a corporation by filing Form 8832, a copy of the LLC's Form 8832 must be attached to the federal income tax return of each direct and indirect owner of the LLC for the tax year of the owner that includes the date on which the election took effect. State tax free Example 6. State tax free Classification as a corporation without an S election. State tax free Wanda and Sylvester are members of an LLC. State tax free They agree that the LLC should be classified as a corporation but do not want to elect to have the LLC be treated as an S corporation. State tax free The LLC must file Form 8832. State tax free Example 7. State tax free Classification as a corporation with an S election. State tax free Evelyn and Carol are members of an LLC. State tax free They agree that the LLC should be classified as an S corporation. State tax free The LLC must file Form 2553 instead of Form 8832. State tax free If the LLC is classified as a corporation, it must file a corporation income tax return. State tax free If it is a C corporation, it is taxed on its taxable income and distributions to the members are includible in the members' gross income to the extent of the corporation's earnings and profits (double taxation). State tax free If it is an S corporation, the corporation is generally not subject to any income tax and the income, deductions, gains, losses, and credits of the corporation “pass through” to the members. State tax free Corporations generally file either: Form 1120, U. State tax free S. State tax free Corporation Income Tax Return; or Form 1120S, U. State tax free S. State tax free Income Tax Return for an S Corporation. State tax free For more information on the income taxation of corporations and their shareholders, see Publication 542, Corporations. State tax free For more information on the income taxation of S corporations and their shareholders, see the Instructions for Form 1120S, U. State tax free S. State tax free Income Tax Return for an S Corporation. State tax free Subsequent Elections An LLC can elect to change its classification. State tax free Generally, once an LLC has elected to change its classification, it cannot elect again to change it classification during the 60 months after the effective date of the election. State tax free An election by a newly formed LLC that is effective on the date of formation is not considered a change for purposes of this limitation. State tax free For more information and exceptions, see Regulations section 301. State tax free 7701-3(c) and the Form 8832 instructions. State tax free An election to change classification can have significant tax consequences based on the following transactions that are deemed to occur as a result of the election. State tax free Partnership to corporation. State tax free   An election to change classification from a partnership to a corporation will be treated as if the partnership contributed all of its assets and liabilities to the corporation in exchange for stock and the partnership then immediately liquidated by distributing the stock to its partners. State tax free   For more information, see Partnership Distributions in Publication 541 and Property Exchanged for Stock in Publication 542. State tax free Corporation to partnership. State tax free   An election to change classification from a corporation to a partnership will be treated as if the corporation distributed all of its assets and liabilities to its shareholders in liquidation and the shareholders then immediately contributed all of the distributed assets and liabilities to a new partnership. State tax free   For more information, see Contribution of Property in Publication 541 and Distributions to Shareholders in Publication 542. State tax free Corporation to disregarded entity. State tax free   An election to change classification from a corporation to a disregarded entity will be treated as if the corporation distributed all of its assets and liabilities to its single owner in liquidation. State tax free   For more information, see Distributions to Shareholders in Publication 542. State tax free Disregarded entity to corporation. State tax free   An election to change classification from a disregarded entity to a corporation will be treated as if the owner of the disregarded entity contributed all of the assets and liabilities to the corporation in exchange for stock. State tax free   For more information, see Property Exchanged for Stock in Publication 542. State tax free How To Get More Information This section describes the help the IRS and other federal agencies offer to taxpayers who operate their own businesses. State tax free Internal Revenue Service You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. State tax free By selecting the method that is best for you, you will have quick and easy access to tax help. State tax free Contacting your Taxpayer Advocate. State tax free   The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should. State tax free   You can contact the TAS by calling the TAS toll-free case intake line at 1-877-777-4778 or TTY/TDD 1-800-829-4059 to see if you are eligible for assistance. State tax free You can also call or write to your local taxpayer advocate, whose phone number and address are listed in your local telephone directory and in Publication 1546, Taxpayer Advocate Service — Your Voice at the IRS. State tax free You can file Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), or ask an IRS employee to complete it on your behalf. State tax free For more information, go to www. State tax free irs. State tax free gov/advocate. State tax free Low Income Taxpayer Clinics (LITCs). State tax free   LITCs are independent organizations that provide low income taxpayers with representation in federal tax controversies with the IRS for free or for a nominal charge. State tax free The clinics also provide tax education and outreach for taxpayers with limited English proficiency or who speak English as a second language. State tax free Publication 4134, Low Income Taxpayer Clinic List, provides information on clinics in your area. State tax free It is available at www. State tax free irs. State tax free gov or at your local IRS office. State tax free Small business workshops. State tax free   Small business workshops are designed to help the small business owner understand and fulfill their federal tax responsibilities. State tax free Workshops are sponsored and presented by IRS partners who are federal tax specialists. State tax free Workshop topics vary from a general overview of taxes to more specific topics such as recordkeeping and retirement plans. State tax free Although most are free, some workshops have fees associated with them. State tax free Any fees charged for a workshop are paid to the sponsoring organization, not the IRS. State tax free   For more information, visit www. State tax free irs. State tax free gov/businesses/small. State tax free Subscribe to e-news for small businesses. State tax free   Join the e-News for Small Businesses mailing list to receive updates, reminders, and other information useful to small business owners and self employed individuals. State tax free Visit the website at www. State tax free irs. State tax free gov/businesses/small and click on “Subscribe to e-News. State tax free ” Free tax services. State tax free   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. State tax free It contains a list of free tax publications and describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. State tax free   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. State tax free Internet. State tax free You can access the IRS website at www. State tax free irs. State tax free gov 24 hours a day, 7 days a week, to: E-file your return. State tax free Find out about commercial tax preparation and e-file services available free to eligible taxpayers. State tax free Check the status of your refund. State tax free Go to www. State tax free irs. State tax free gov and click on Where's My Refund. State tax free Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. State tax free If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). State tax free Have your tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. State tax free Download forms, instructions, and publications. State tax free Order IRS products online. State tax free Research your tax questions online. State tax free Search publications online by topic or keyword. State tax free View Internal Revenue Bulletins (IRBs) published in the last few years. State tax free Figure your withholding allowances using the withholding calculator online at www. State tax free irs. State tax free gov/individuals. State tax free Determine if Form 6251 must be filed using our Alternative Minimum Tax (AMT) Assistant. State tax free Sign up to receive local and national tax news by email. State tax free Get information on starting and operating a small business. State tax free Phone. State tax free Many services are available by phone. State tax free Ordering forms, instructions, and publications. State tax free Call 1-800-829-3676 to order current-year forms, instructions, and publications, and prior-year forms and instructions. State tax free You should receive your order within 10 days. State tax free Asking tax questions. State tax free Call the IRS with your tax questions at 1-800-829-1040. State tax free Solving problems. State tax free You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. State tax free An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. State tax free Call your local Taxpayer Assistance Center for an appointment. State tax free To find the number, go to www. State tax free irs. State tax free gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. State tax free TTY/TDD equipment. State tax free If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. State tax free TeleTax topics. State tax free Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. State tax free Refund information. State tax free To check the status of your 2009 refund, call 1-800-829-1954 during business hours or 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). State tax free Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. State tax free If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). State tax free Have your 2009 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. State tax free Refunds are sent out weekly on Fridays. State tax free If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. State tax free Evaluating the quality of our telephone services. State tax free To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. State tax free One method is for a second IRS representative to listen in on or record random telephone calls. State tax free Another is to ask some callers to complete a short survey at the end of the call. State tax free Walk-in. State tax free Many products and services are available on a walk-in basis. State tax free Products. State tax free You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. State tax free Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. State tax free Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. State tax free Services. State tax free You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. State tax free An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. State tax free If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. State tax free No appointment is necessary—just walk in. State tax free If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. State tax free A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. State tax free If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. State tax free All other issues will be handled without an appointment. State tax free To find the number of your local office, go to www. State tax free irs. State tax free gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. State tax free Mail. State tax free You can send your order for forms, instructions, and publications to the address below. State tax free You should receive a response within 10 days after your request is received. State tax free Internal Revenue Service1201 N. State tax free Mitsubishi MotorwayBloomington, IL 61705–6613 DVD for tax products. State tax free You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. State tax free Prior-year forms, instructions, and publications. State tax free Tax Map: an electronic research tool and finding aid. State tax free Tax law frequently asked questions. State tax free Tax Topics from the IRS telephone response system. State tax free Internal Revenue Code—Title 26 of the U. State tax free S. State tax free Code. State tax free Fill-in, print, and save features for most tax forms. State tax free Internal Revenue Bulletins. State tax free Toll-free and email technical support. State tax free Two releases during the year. State tax free – The first release will ship the beginning of January. State tax free – The final release will ship the beginning of March. State tax free Purchase the DVD from National Technical Information Service (NTIS) at www. State tax free irs. State tax free gov/cdorders for $30 (no handling fee) or call 1-877-CDFORMS (1-877-233-6767) toll free to buy the DVD for $30 (plus a $6 handling fee). State tax free Small Business Administration The Small Business Administration (SBA) offers training and educational programs, counseling services, financial programs, and contract assistance for small business owners. State tax free The SBA also has publications and videos on a variety of business topics. State tax free The following briefly describes assistance provided by the SBA. State tax free Small Business Development Centers (SBDCs). State tax free   SBDCs provide counseling, training, and technical services to current and prospective small business owners who cannot afford the services of a private consultant. State tax free Help is available when beginning, improving, or expanding a small business. State tax free Business Information Centers (BICs). State tax free   BICs offer a small business reference library, management video tapes, and computer technology to help plan a business. State tax free BICs also offer one-on-one assistance. State tax free Individuals who are in business or are interested in starting a business can use BICs as often as they wish at no charge. State tax free Service Corps of Retired Executives (SCORE). State tax free   SCORE provides small business counseling and training to current and prospective small business owners. State tax free SCORE is made up of current and former business people who offer their expertise and knowledge to help people start, manage, and expand a small business. State tax free SCORE also offers a variety of small business workshops. State tax free    Internet. State tax free You can visit the SBA website at www. State tax free sba. State tax free gov. State tax free While visiting the SBA website, you can find a variety of information of interest to small business owners. State tax free    Phone. State tax free Call the SBA Answer Desk at 1-800-UASK-SBA (1-800-827-5722) for general information about programs available to assist small business owners. State tax free    Walk-in. State tax free You can walk in to a Small Business Development Center or Business Information Center to request assistance with your small business. State tax free To find the location nearest you, visit the SBA website or call the SBA Answer Desk. State tax free Other Federal Agencies Other federal agencies also publish publications and pamphlets to assist small businesses. State tax free Most of these are available from the Superintendent of Documents at the Government Printing Office. State tax free You can get information and order these publications and pamphlets in several ways. State tax free Internet. State tax free You can visit the GPO website at www. State tax free access. State tax free gpo. State tax free gov. State tax free Mail. State tax free Write to the GPO at the following address. State tax free Superintendent of DocumentsU. State tax free S. State tax free Government Printing OfficeP. State tax free O. State tax free Box 979050St. State tax free Louis, MO 63917-9000 Phone. State tax free Call the GPO toll-free at 1-866-512-1800 or at 202-512-1800 from the Washington, DC area. State tax free Prev  Up  Next   Home   More Online Publications
Español

Better Business Bureaus (BBBs) are nonprofit organizations that encourage honest advertising and selling practices and are supported primarily by local businesses. They offer a variety of consumer services, including consumer education materials; business reports, particularly unanswered or unsettled complaints or other problems; mediation and arbitration services; and information about charities and other organizations that are seeking public donations. They also provide ratings (A, B, C, D, or F) of local companies to express the BBB's confidence that the company operates in a trustworthy manner and demonstrates a willingness to resolve customer concerns.

Atlanta, GA

Website: Better Business Bureau Serving Metro Atlanta, Athens Northeast Georgia

Email: info@atlanta.bbb.org

Address: Better Business Bureau Serving Metro Atlanta, Athens Northeast Georgia
503 Oak Place, Suite 590
Atlanta, GA 30349

Phone Number: 404-766-0875

Augusta, GA

Website: Better Business Bureau

Email: info@centralgeorgia.bbb.org

Address: Better Business Bureau
1227 Augusta West Pkwy., Suite 15
Augusta, GA 30909

Phone Number: 706-210-7676

Columbus, GA

Website: Better Business Bureau

Email: info@columbus-ga.bbb.org

Address: Better Business Bureau
PO Box 2587
Columbus, GA 31902

Phone Number: 706-324-0712

Toll-free: 1-800-768-4222

Macon, GA

Website: Better Business Bureau

Email: info@centralgeorgia.bbb.org

Address: Better Business Bureau
277 Martin Luther King, Jr. Blvd., Suite 102
Macon, GA 31201

Phone Number: 478-742-7999

Savannah, GA

Website: Better Business Bureau

Email: info@bbb.nefla.org

Address: Better Business Bureau
6555 Abercorn St., Suite 120
Savannah, GA 31405-5817

Phone Number: 912-354-7521

The State Tax Free

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