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Taxact 1040x

Irs 2012 1040 Tax FormsTax Forms 1040ezIncome Tax Forms 20112010 Turbo TaxWhere To File 2012 Tax Return1040ez 2013 File OnlineHr Block 2012 Tax SoftwareTaxact 2010 ReturnFiling Tax Extension 2011Free State And Federal Tax Returns2010 Free Tax Software DownloadForm 1040ez2013 Income Tax Forms 1040ezFree E File State Taxes Only1040ez Income Tax Form1040x Instructions 20122009 Income Tax FormsHow To File 2012 Federal TaxesFile Past Years Tax ReturnIrs Efile 20121040x Tax FormFree Ez Tax Form2008 Federal Tax FormsFile An Amended Tax Return For 2011Can I Do My State Taxes Online For FreeIrs Com2012 Tax Filing OnlineH&r Block State TaxesIrs1040Free EfileDo I File Taxes Past YearsAmending 2009 Tax ReturnHow To Make An Amendment To TaxesHow To File Self Employed Income TaxFree File Form 48682012 Taxes OnlineWhere To Mail 1040xTaxact 2012 Tax ReturnState Tax Forms 2012Irs Tax Forms For 2012

Taxact 1040x

Taxact 1040x Publication 939 - Introductory Material Table of Contents What's New Future developments. Taxact 1040x IntroductionSimplified Method. Taxact 1040x Ordering forms and publications. Taxact 1040x Tax questions. Taxact 1040x Useful Items - You may want to see: What's New Beginning in 2013, distributions from an annuity under a nonqualified plan are considered net investment income for the purpose of figuring the net investment income tax (NIIT). Taxact 1040x For more information, see the instructions for Form 8960, Net Investment Income Tax – Individuals, Estates and Trusts. Taxact 1040x Future developments. Taxact 1040x For the latest information about developments related to Publication 939, such as legislation enacted after it was published, go to www. Taxact 1040x IRS. Taxact 1040x gov/pub939. Taxact 1040x Introduction This publication gives you the information you need to determine the tax treatment of your pension and annuity income under the General Rule. Taxact 1040x Generally, each of your monthly annuity payments is made up of two parts: the tax-free part that is a return of your net cost, and the taxable balance. Taxact 1040x What is the General Rule. Taxact 1040x   The General Rule is one of the two methods used to figure the tax-free part of each annuity payment based on the ratio of your investment in the contract to the total expected return. Taxact 1040x The other method is the Simplified Method, which is discussed in Publication 575, Pension and Annuity Income. Taxact 1040x Who must use the General Rule. Taxact 1040x   Use this publication if you receive pension or annuity payments from: A nonqualified plan (for example, a private annuity, a purchased commercial annuity, or a nonqualified employee plan), A qualified plan if: Your annuity starting date is before November 19, 1996 (and after July 1, 1986), and you do not qualify to use, or did not choose to use, the Simplified Method, or Your annuity starting date is after November 18, 1996, and as of that date you are age 75 or over and the annuity payments are guaranteed for at least 5 years. Taxact 1040x If your annuity starting date was between July 1, 1986 and November 19, 1996, you were able to elect to use the Simplified Method or the General Rule. Taxact 1040x This choice is irrevocable and applied to all later annuity payments. Taxact 1040x The following are qualified plans. Taxact 1040x A qualified employee plan. Taxact 1040x A qualified employee annuity. Taxact 1040x A tax-sheltered annuity (TSA) plan or contract. Taxact 1040x Simplified Method. Taxact 1040x   If you receive pension or annuity payments from a qualified plan and you are not required to use the General Rule, you must use the Simplified Method to determine the tax-free part of each annuity payment. Taxact 1040x This method is described in Publication 575, Pension and Annuity Income. Taxact 1040x   Also, if, at the time the annuity payments began, you were at least age 75 and were entitled to annuity payments from a qualified plan with fewer than 5 years of guaranteed payments, you must use the Simplified Method. Taxact 1040x Beginning in 2013, distributions from an annuity under a nonqualified plan are considered net investment income for the purpose of figuring the net investment income tax (NIIT). Taxact 1040x For more information, see the instructions for Form 8960, Net Investment Income Tax – Individuals, Estates and Trusts. Taxact 1040x Topics not covered in this publication. Taxact 1040x   Certain topics related to pensions and annuities are not covered in this publication. Taxact 1040x They include: Simplified Method. Taxact 1040x This method is covered in Publication 575. Taxact 1040x That publication also covers nonperiodic payments (amounts not received as an annuity) from a qualified pension or annuity plan, rollovers, special averaging and capital gain treatment of lump-sum distributions, and special additional taxes on early distributions, excess distributions, and excess accumulations (not making required minimum distributions). Taxact 1040x Individual retirement arrangements (IRAs). Taxact 1040x Information on the tax treatment of amounts you receive from an IRA is included in Publication 590, Individual Retirement Arrangements (IRAs). Taxact 1040x Life insurance payments. Taxact 1040x If you receive life insurance payments because of the death of the insured person, get Publication 525, Taxable and Nontaxable Income, for information on the tax treatment of the proceeds. Taxact 1040x Help from IRS. Taxact 1040x   If, after reading this publication, you need help to figure the taxable part of your pension or annuity, the IRS can do it for you for a fee. Taxact 1040x For information on this service, see Requesting a Ruling on Taxation of Annuity , later. Taxact 1040x Comments and suggestions. Taxact 1040x   We welcome your comments about this publication and your suggestions for future editions. Taxact 1040x   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Taxact 1040x NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Taxact 1040x Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Taxact 1040x   You can send your comments from www. Taxact 1040x irs. Taxact 1040x gov/formspubs/. Taxact 1040x Click on “More Information” and then on “Comment on Tax Forms and Publications”. Taxact 1040x   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Taxact 1040x Ordering forms and publications. Taxact 1040x   Visit www. Taxact 1040x irs. Taxact 1040x gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Taxact 1040x Internal Revenue Service 1201 N. Taxact 1040x Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Taxact 1040x   If you have a tax question, check the information available on IRS. Taxact 1040x gov or call 1-800-829-1040. Taxact 1040x We cannot answer tax questions sent to either of the above addresses. Taxact 1040x Useful Items - You may want to see: Publication 524 Credit for the Elderly or the Disabled 525 Taxable and Nontaxable Income 571 Tax-Sheltered Annuity Plans (403(b) Plans) 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) 721 Tax Guide to U. Taxact 1040x S. Taxact 1040x Civil Service Retirement Benefits 910 Guide To Free Tax Services Form (and Instructions) 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Taxact 1040x See How To Get Tax Help near the end of this publication for information about getting these publications and forms. Taxact 1040x Prev  Up  Next   Home   More Online Publications
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The Taxact 1040x

Taxact 1040x 4. Taxact 1040x   Special Situations Table of Contents Condominiums CooperativesDepreciation Property Changed to Rental UseBasis of Property Changed to Rental Use Figuring the Depreciation Deduction Renting Part of Property Not Rented for ProfitPostponing decision. Taxact 1040x Example—Property Changed to Rental Use This chapter discusses some rental real estate activities that are subject to additional rules. Taxact 1040x Condominiums A condominium is most often a dwelling unit in a multi-unit building, but can also take other forms, such as a townhouse or garden apartment. Taxact 1040x If you own a condominium, you also own a share of the common elements, such as land, lobbies, elevators, and service areas. Taxact 1040x You and the other condominium owners may pay dues or assessments to a special corporation that is organized to take care of the common elements. Taxact 1040x Special rules apply if you rent your condominium to others. Taxact 1040x You can deduct as rental expenses all the expenses discussed in chapters 1 and 2. Taxact 1040x In addition, you can deduct any dues or assessments paid for maintenance of the common elements. Taxact 1040x You cannot deduct special assessments you pay to a condominium management corporation for improvements. Taxact 1040x However, you may be able to recover your share of the cost of any improvement by taking depreciation. Taxact 1040x Cooperatives If you live in a cooperative, you do not own your apartment. Taxact 1040x Instead, a corporation owns the apartments and you are a tenant-stockholder in the cooperative housing corporation. Taxact 1040x If you rent your apartment to others, you usually can deduct, as a rental expense, all the maintenance fees you pay to the cooperative housing corporation. Taxact 1040x In addition to the maintenance fees paid to the cooperative housing corporation, you can deduct your direct payments for repairs, upkeep, and other rental expenses, including interest paid on a loan used to buy your stock in the corporation. Taxact 1040x Depreciation You will be depreciating your stock in the corporation rather than the apartment itself. Taxact 1040x Figure your depreciation deduction as follows. Taxact 1040x Figure the depreciation for all the depreciable real property owned by the corporation. Taxact 1040x (Depreciation methods are discussed in chapter 2 of this publication and Publication 946. Taxact 1040x ) If you bought your cooperative stock after its first offering, figure the depreciable basis of this property as follows. Taxact 1040x Multiply your cost per share by the total number of outstanding shares. Taxact 1040x Add to the amount figured in (a) any mortgage debt on the property on the date you bought the stock. Taxact 1040x Subtract from the amount figured in (b) any mortgage debt that is not for the depreciable real property, such as the part for the land. Taxact 1040x Subtract from the amount figured in (1) any depreciation for space owned by the corporation that can be rented but cannot be lived in by tenant-stockholders. Taxact 1040x Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. Taxact 1040x Multiply the result of (2) by the percentage you figured in (3). Taxact 1040x This is your depreciation on the stock. Taxact 1040x Your depreciation deduction for the year cannot be more than the part of your adjusted basis (defined in chapter 2) in the stock of the corporation that is allocable to your rental property. Taxact 1040x Payments added to capital account. Taxact 1040x   Payments earmarked for a capital asset or improvement, or otherwise charged to the corporation's capital account are added to the basis of your stock in the corporation. Taxact 1040x For example, you cannot deduct a payment used to pave a community parking lot, install a new roof, or pay the principal of the corporation's mortgage. Taxact 1040x   Treat as a capital cost the amount you were assessed for capital items. Taxact 1040x This cannot be more than the amount by which your payments to the corporation exceeded your share of the corporation's mortgage interest and real estate taxes. Taxact 1040x   Your share of interest and taxes is the amount the corporation elected to allocate to you, if it reasonably reflects those expenses for your apartment. Taxact 1040x Otherwise, figure your share in the following manner. Taxact 1040x Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. Taxact 1040x Multiply the corporation's deductible interest by the number you figured in (1). Taxact 1040x This is your share of the interest. Taxact 1040x Multiply the corporation's deductible taxes by the number you figured in (1). Taxact 1040x This is your share of the taxes. Taxact 1040x Property Changed to Rental Use If you change your home or other property (or a part of it) to rental use at any time other than the beginning of your tax year, you must divide yearly expenses, such as taxes and insurance, between rental use and personal use. Taxact 1040x You can deduct as rental expenses only the part of the expense that is for the part of the year the property was used or held for rental purposes. Taxact 1040x You cannot deduct depreciation or insurance for the part of the year the property was held for personal use. Taxact 1040x However, you can include the home mortgage interest, qualified mortgage insurance premiums, and real estate tax expenses for the part of the year the property was held for personal use as an itemized deduction on Schedule A (Form 1040). Taxact 1040x Example. Taxact 1040x Your tax year is the calendar year. Taxact 1040x You moved from your home in May and started renting it out on June 1. Taxact 1040x You can deduct as rental expenses seven-twelfths of your yearly expenses, such as taxes and insurance. Taxact 1040x Starting with June, you can deduct as rental expenses the amounts you pay for items generally billed monthly, such as utilities. Taxact 1040x When figuring depreciation, treat the property as placed in service on June 1. Taxact 1040x Basis of Property Changed to Rental Use When you change property you held for personal use to rental use (for example, you rent your former home), the basis for depreciation will be the lesser of fair market value or adjusted basis on the date of conversion. Taxact 1040x Fair market value. Taxact 1040x   This is the price at which the property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. Taxact 1040x Sales of similar property, on or about the same date, may be helpful in figuring the fair market value of the property. Taxact 1040x Figuring the basis. Taxact 1040x   The basis for depreciation is the lesser of: The fair market value of the property on the date you changed it to rental use, or Your adjusted basis on the date of the change—that is, your original cost or other basis of the property, plus the cost of permanent additions or improvements since you acquired it, minus deductions for any casualty or theft losses claimed on earlier years' income tax returns and other decreases to basis. Taxact 1040x For other increases and decreases to basis, see Adjusted Basis in chapter 2. Taxact 1040x Example. Taxact 1040x Several years ago you built your home for $140,000 on a lot that cost you $14,000. Taxact 1040x Before changing the property to rental use this year, you added $28,000 of permanent improvements to the house and claimed a $3,500 casualty loss deduction for damage to the house. Taxact 1040x Part of the improvements qualified for a $500 residential energy credit, which you claimed on your 2010 tax return. Taxact 1040x Because land is not depreciable, you can only include the cost of the house when figuring the basis for depreciation. Taxact 1040x The adjusted basis of the house at the time of the change in its use was $164,000 ($140,000 + $28,000 − $3,500 − $500). Taxact 1040x On the date of the change in use, your property had a fair market value of $168,000, of which $21,000 was for the land and $147,000 was for the house. Taxact 1040x The basis for depreciation on the house is the fair market value on the date of the change ($147,000), because it is less than your adjusted basis ($164,000). Taxact 1040x Cooperatives If you change your cooperative apartment to rental use, figure your allowable depreciation as explained earlier. Taxact 1040x (Depreciation methods are discussed in chapter 2 of this publication and Publication 946. Taxact 1040x ) The basis of all the depreciable real property owned by the cooperative housing corporation is the smaller of the following amounts. Taxact 1040x The fair market value of the property on the date you change your apartment to rental use. Taxact 1040x This is considered to be the same as the corporation's adjusted basis minus straight line depreciation, unless this value is unrealistic. Taxact 1040x The corporation's adjusted basis in the property on that date. Taxact 1040x Do not subtract depreciation when figuring the corporation's adjusted basis. Taxact 1040x If you bought the stock after its first offering, the corporation's adjusted basis in the property is the amount figured in (1) under Depreciation (under Cooperatives, near the beginning of this chapter). Taxact 1040x The fair market value of the property is considered to be the same as the corporation's adjusted basis figured in this way minus straight line depreciation, unless the value is unrealistic. Taxact 1040x Figuring the Depreciation Deduction To figure the deduction, use the depreciation system in effect when you convert your residence to rental use. Taxact 1040x Generally, that will be MACRS for any conversion after 1986. Taxact 1040x Treat the property as placed in service on the conversion date. Taxact 1040x Example. Taxact 1040x Your converted residence (see previous example under Figuring the basis) was available for rent on August 1. Taxact 1040x Using Table 2-2d (see chapter 2), the percentage for Year 1 beginning in August is 1. Taxact 1040x 364% and the depreciation deduction for Year 1 is $2,005 ($147,000 × . Taxact 1040x 01364). Taxact 1040x Renting Part of Property If you rent part of your property, you must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes, as though you actually had two separate pieces of property. Taxact 1040x You can deduct the expenses related to the part of the property used for rental purposes, such as home mortgage interest, qualified mortgage insurance premiums, and real estate taxes, as rental expenses on Schedule E (Form 1040). Taxact 1040x You can also deduct as rental expenses a portion of other expenses that normally are nondeductible personal expenses, such as expenses for electricity, or painting the outside of the house. Taxact 1040x There is no change in the types of expenses deductible for the personal-use part of your property. Taxact 1040x Generally, these expenses may be deducted only if you itemize your deductions on Schedule A (Form 1040). Taxact 1040x You cannot deduct any part of the cost of the first phone line even if your tenants have unlimited use of it. Taxact 1040x You do not have to divide the expenses that belong only to the rental part of your property. Taxact 1040x For example, if you paint a room that you rent, or if you pay premiums for liability insurance in connection with renting a room in your home, your entire cost is a rental expense. Taxact 1040x If you install a second phone line strictly for your tenant's use, all of the cost of the second line is deductible as a rental expense. Taxact 1040x You can deduct depreciation on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes. Taxact 1040x How to divide expenses. Taxact 1040x   If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between rental use and personal use. Taxact 1040x You can use any reasonable method for dividing the expense. Taxact 1040x It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. Taxact 1040x The two most common methods for dividing an expense are (1) the number of rooms in your home, and (2) the square footage of your home. Taxact 1040x Example. Taxact 1040x You rent a room in your house. Taxact 1040x The room is 12 × 15 feet, or 180 square feet. Taxact 1040x Your entire house has 1,800 square feet of floor space. Taxact 1040x You can deduct as a rental expense 10% of any expense that must be divided between rental use and personal use. Taxact 1040x If your heating bill for the year for the entire house was $600, $60 ($600 × . Taxact 1040x 10) is a rental expense. Taxact 1040x The balance, $540, is a personal expense that you cannot deduct. Taxact 1040x Duplex. Taxact 1040x   A common situation is the duplex where you live in one unit and rent out the other. Taxact 1040x Certain expenses apply to the entire property, such as mortgage interest and real estate taxes, and must be split to determine rental and personal expenses. Taxact 1040x Example. Taxact 1040x You own a duplex and live in one half, renting the other half. Taxact 1040x Both units are approximately the same size. Taxact 1040x Last year, you paid a total of $10,000 mortgage interest and $2,000 real estate taxes for the entire property. Taxact 1040x You can deduct $5,000 mortgage interest and $1,000 real estate taxes on Schedule E (Form 1040), and if you itemize your deductions, you can deduct the other $5,000 mortgage interest and $1,000 real estate taxes on Schedule A (Form 1040). Taxact 1040x Not Rented for Profit If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. Taxact 1040x You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year. Taxact 1040x Where to report. Taxact 1040x   Report your not-for-profit rental income on Form 1040 or 1040NR, line 21. Taxact 1040x For example, if you are filing Form 1040, you can include your mortgage interest and any qualified mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses on the appropriate lines of Schedule A (Form 1040) if you itemize your deductions. Taxact 1040x   If you itemize your deductions, claim your other rental expenses, subject to the rules explained in chapter 1 of Publication 535, as miscellaneous itemized deductions on Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9. Taxact 1040x You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income. Taxact 1040x Presumption of profit. Taxact 1040x   If your rental income is more than your rental expenses for at least 3 years out of a period of 5 consecutive years, you are presumed to be renting your property to make a profit. Taxact 1040x Postponing decision. Taxact 1040x   If you are starting your rental activity and do not have 3 years showing a profit, you can elect to have the presumption made after you have the 5 years of experience required by the test. Taxact 1040x You may choose to postpone the decision of whether the rental is for profit by filing Form 5213. Taxact 1040x You must file Form 5213 within 3 years after the due date of your return (determined without extensions) for the year in which you first carried on the activity or, if earlier, within 60 days after receiving written notice from the Internal Revenue Service proposing to disallow deductions attributable to the activity. Taxact 1040x More information. Taxact 1040x   For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Publication 535. Taxact 1040x Example—Property Changed to Rental Use In January, Eileen Johnson bought a condominium apartment to live in. Taxact 1040x Instead of selling the house she had been living in, she decided to change it to rental property. Taxact 1040x Eileen selected a tenant and started renting the house on February 1. Taxact 1040x Eileen charges $750 a month for rent and collects it herself. Taxact 1040x Eileen also received a $750 security deposit from her tenant. Taxact 1040x Because she plans to return it to her tenant at the end of the lease, she does not include it in her income. Taxact 1040x Her rental expenses for the year are as follows. Taxact 1040x   Mortgage interest $1,800     Fire insurance (1-year policy) 100     Miscellaneous repairs (after renting) 297     Real estate taxes imposed and paid 1,200   Eileen must divide the real estate taxes, mortgage interest, and fire insurance between the personal use of the property and the rental use of the property. Taxact 1040x She can deduct eleven-twelfths of these expenses as rental expenses. Taxact 1040x She can include the balance of the allowable taxes and mortgage interest on Schedule A (Form 1040) if she itemizes. Taxact 1040x She cannot deduct the balance of the fire insurance because it is a personal expense. Taxact 1040x Eileen bought this house in 1984 for $35,000. Taxact 1040x Her property tax was based on assessed values of $10,000 for the land and $25,000 for the house. Taxact 1040x Before changing it to rental property, Eileen added several improvements to the house. Taxact 1040x She figures her adjusted basis as follows:   Improvements Cost     House $25,000     Remodeled kitchen 4,200     Recreation room 5,800     New roof 1,600     Patio and deck 2,400     Adjusted basis $39,000   On February 1, when Eileen changed her house to rental property, the property had a fair market value of $152,000. Taxact 1040x Of this amount, $35,000 was for the land and $117,000 was for the house. Taxact 1040x Because Eileen's adjusted basis is less than the fair market value on the date of the change, Eileen uses $39,000 as her basis for depreciation. Taxact 1040x As specified for residential rental property, Eileen must use the straight line method of depreciation over the GDS or ADS recovery period. Taxact 1040x She chooses the GDS recovery period of 27. Taxact 1040x 5 years. Taxact 1040x She uses Table 2-2d to find her depreciation percentage. Taxact 1040x Since she placed the property in service in February, the percentage is 3. Taxact 1040x 182%. Taxact 1040x On April 1, Eileen bought a new dishwasher for the rental property at a cost of $425. Taxact 1040x The dishwasher is personal property used in a rental real estate activity, which has a 5-year recovery period. Taxact 1040x She uses Table 2-2a to find the percentage for Year 1 under “Half-year convention” (20%) to figure her depreciation deduction. Taxact 1040x On May 1, Eileen paid $4,000 to have a furnace installed in the house. Taxact 1040x The furnace is residential rental property. Taxact 1040x Because she placed the property in service in May, the percentage from Table 2-2d is 2. Taxact 1040x 273%. Taxact 1040x Eileen figures her net rental income or loss for the house as follows: Total rental income received  ($750 × 11) $8,250 Minus: Expenses     Mortgage interest ($1,800 × 11/12) $1,650   Fire insurance ($100 × 11/12) 92   Miscellaneous repairs 297   Real estate taxes ($1,200 × 11/12) 1,100   Total expenses 3,139 Balance $5,111 Minus: Depreciation     House ($39,000 × . Taxact 1040x 03182) $1,241   Dishwasher ($425 × . Taxact 1040x 20) 85   Furnace ($4,000 × . Taxact 1040x 02273) 91   Total depreciation 1,417 Net rental income for house   $3,694       Eileen uses Schedule E, Part I, to report her rental income and expenses. Taxact 1040x She enters her income, expenses, and depreciation for the house in the column for Property A. Taxact 1040x Since all property was placed in service this year, Eileen must use Form 4562 to figure the depreciation. Taxact 1040x See the Instructions for Form 4562 for more information on preparing the form. Taxact 1040x Prev  Up  Next   Home   More Online Publications