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Www irs gov efile 9. Www irs gov efile   Rental Income and Expenses Table of Contents Introduction Useful Items - You may want to see: Rental Income Rental ExpensesVacant while listed for sale. Www irs gov efile Repairs and Improvements Other Expenses Property Changed to Rental Use Renting Part of Property Not Rented for Profit Personal Use of Dwelling Unit (Including Vacation Home)Example. Www irs gov efile Dividing Expenses Dwelling Unit Used as a Home Reporting Income and Deductions DepreciationChanging your accounting method to deduct unclaimed depreciation. Www irs gov efile Limits on Rental LossesAt-Risk Rules Passive Activity Limits How To Report Rental Income and ExpensesSchedule E (Form 1040) Introduction This chapter discusses rental income and expenses. Www irs gov efile It also covers the following topics. Www irs gov efile Personal use of dwelling unit (including vacation home). Www irs gov efile Depreciation. Www irs gov efile Limits on rental losses. Www irs gov efile How to report your rental income and expenses. Www irs gov efile If you sell or otherwise dispose of your rental property, see Publication 544, Sales and Other Dispositions of Assets. Www irs gov efile If you have a loss from damage to, or theft of, rental property, see Publication 547, Casualties, Disasters, and Thefts. Www irs gov efile If you rent a condominium or a cooperative apartment, some special rules apply to you even though you receive the same tax treatment as other owners of rental property. Www irs gov efile See Publication 527, Residential Rental Property, for more information. Www irs gov efile Useful Items - You may want to see: Publication 527 Residential Rental Property 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 925 Passive Activity and At-Risk Rules 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 6251 Alternative Minimum Tax—Individuals 8582 Passive Activity Loss Limitations Schedule E (Form 1040) Supplemental Income and Loss Rental Income In most cases, you must include in your gross income all amounts you receive as rent. Www irs gov efile Rental income is any payment you receive for the use or occupation of property. Www irs gov efile In addition to amounts you receive as normal rent payments, there are other amounts that may be rental income. Www irs gov efile When to report. Www irs gov efile   If you are a cash-basis taxpayer, you report rental income on your return for the year you actually or constructively receive it. Www irs gov efile You are a cash-basis taxpayer if you report income in the year you receive it, regardless of when it was earned. Www irs gov efile You constructively receive income when it is made available to you, for example, by being credited to your bank account. Www irs gov efile   For more information about when you constructively receive income, see Accounting Methods in chapter 1. Www irs gov efile Advance rent. Www irs gov efile   Advance rent is any amount you receive before the period that it covers. Www irs gov efile Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. Www irs gov efile Example. Www irs gov efile You sign a 10-year lease to rent your property. Www irs gov efile In the first year, you receive $5,000 for the first year's rent and $5,000 as rent for the last year of the lease. Www irs gov efile You must include $10,000 in your income in the first year. Www irs gov efile Canceling a lease. Www irs gov efile   If your tenant pays you to cancel a lease, the amount you receive is rent. Www irs gov efile Include the payment in your income in the year you receive it regardless of your method of accounting. Www irs gov efile Expenses paid by tenant. Www irs gov efile   If your tenant pays any of your expenses, the payments are rental income. Www irs gov efile Because you must include this amount in income, you can deduct the expenses if they are deductible rental expenses. Www irs gov efile See Rental Expenses , later, for more information. Www irs gov efile Property or services. Www irs gov efile   If you receive property or services, instead of money, as rent, include the fair market value of the property or services in your rental income. Www irs gov efile   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. Www irs gov efile Security deposits. Www irs gov efile   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. Www irs gov efile But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. Www irs gov efile   If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Www irs gov efile Include it in your income when you receive it. Www irs gov efile Part interest. Www irs gov efile   If you own a part interest in rental property, you must report your part of the rental income from the property. Www irs gov efile Rental of property also used as your home. Www irs gov efile   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. Www irs gov efile However, you can deduct on Schedule A (Form 1040) the interest, taxes, and casualty and theft losses that are allowed for nonrental property. Www irs gov efile See Personal Use of Dwelling Unit (Including Vacation Home) , later. Www irs gov efile Rental Expenses This part discusses expenses of renting property that you ordinarily can deduct from your rental income. Www irs gov efile It includes information on the expenses you can deduct if you rent part of your property, or if you change your property to rental use. Www irs gov efile Depreciation , which you can also deduct from your rental income, is discussed later. Www irs gov efile Personal use of rental property. Www irs gov efile   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. Www irs gov efile Also, your rental expense deductions may be limited. Www irs gov efile See Personal Use of Dwelling Unit (Including Vacation Home) , later. Www irs gov efile Part interest. Www irs gov efile   If you own a part interest in rental property, you can deduct expenses that you paid according to your percentage of ownership. Www irs gov efile When to deduct. Www irs gov efile   If you are a cash-basis taxpayer, you generally deduct your rental expenses in the year you pay them. Www irs gov efile Depreciation. Www irs gov efile   You can begin to depreciate rental property when it is ready and available for rent. Www irs gov efile See Placed-in-Service under When Does Depreciation Begin and End in chapter 2 of Publication 527. Www irs gov efile Pre-rental expenses. Www irs gov efile   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. Www irs gov efile Uncollected rent. Www irs gov efile   If you are a cash-basis taxpayer, do not deduct uncollected rent. Www irs gov efile Because you have not included it in your income, it is not deductible. Www irs gov efile Vacant rental property. Www irs gov efile   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. Www irs gov efile However, you cannot deduct any loss of rental income for the period the property is vacant. Www irs gov efile Vacant while listed for sale. Www irs gov efile   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. Www irs gov efile If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. Www irs gov efile Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. Www irs gov efile Improvements. Www irs gov efile   You must capitalize any expense you pay to improve your rental property. Www irs gov efile An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. Www irs gov efile Betterments. Www irs gov efile   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. Www irs gov efile Restoration. Www irs gov efile   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. Www irs gov efile Adaptation. Www irs gov efile   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. Www irs gov efile Separate the costs of repairs and improvements, and keep accurate records. Www irs gov efile You will need to know the cost of improvements when you sell or depreciate your property. Www irs gov efile The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. Www irs gov efile Other Expenses Other expenses you can deduct from your rental income include advertising, cleaning and maintenance, utilities, fire and liability insurance, taxes, interest, commissions for the collection of rent, ordinary and necessary travel and transportation, and other expenses, discussed next. Www irs gov efile Insurance premiums paid in advance. Www irs gov efile   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. Www irs gov efile You cannot deduct the total premium in the year you pay it. Www irs gov efile Legal and other professional fees. Www irs gov efile   You can deduct, as a rental expense, legal and other professional expenses, such as tax return preparation fees you paid to prepare Schedule E (Form 1040), Part I. Www irs gov efile For example, on your 2013 Schedule E, you can deduct fees paid in 2013 to prepare your 2012 Schedule E, Part I. Www irs gov efile You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. Www irs gov efile Local benefit taxes. Www irs gov efile   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. Www irs gov efile These charges are nondepreciable capital expenditures, and must be added to the basis of your property. Www irs gov efile However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. Www irs gov efile Local transportation expenses. Www irs gov efile    You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. Www irs gov efile However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. Www irs gov efile See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Www irs gov efile   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. Www irs gov efile For 2013, the standard mileage rate for business use is 56. Www irs gov efile 5 cents per mile. Www irs gov efile For more information, see chapter 26. Www irs gov efile    To deduct car expenses under either method, you must keep records that follow the rules in chapter 26. Www irs gov efile In addition, you must complete Form 4562, Part V, and attach it to your tax return. Www irs gov efile Rental of equipment. Www irs gov efile   You can deduct the rent you pay for equipment that you use for rental purposes. Www irs gov efile However, in some cases, lease contracts are actually purchase contracts. Www irs gov efile If so, you cannot deduct these payments. Www irs gov efile You can recover the cost of purchased equipment through depreciation. Www irs gov efile Rental of property. Www irs gov efile   You can deduct the rent you pay for property that you use for rental purposes. Www irs gov efile If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. Www irs gov efile Travel expenses. Www irs gov efile   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. Www irs gov efile You must properly allocate your expenses between rental and nonrental activities. Www irs gov efile You cannot deduct the cost of traveling away from home if the primary purpose of the trip was to improve your property. Www irs gov efile You recover the cost of improvements by taking depreciation. Www irs gov efile For information on travel expenses, see chapter 26. Www irs gov efile    To deduct travel expenses, you must keep records that follow the rules in chapter 26. Www irs gov efile   See Rental Expenses in Publication 527 for more information. Www irs gov efile 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. Www irs gov efile 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. Www irs gov efile You cannot deduct depreciation or insurance for the part of the year the property was held for personal use. Www irs gov efile 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). Www irs gov efile Example. Www irs gov efile Your tax year is the calendar year. Www irs gov efile You moved from your home in May and started renting it out on June 1. Www irs gov efile You can deduct as rental expenses seven-twelfths of your yearly expenses, such as taxes and insurance. Www irs gov efile Starting with June, you can deduct as rental expenses the amounts you pay for items generally billed monthly, such as utilities. Www irs gov efile 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. Www irs gov efile 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). Www irs gov efile 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 your house. Www irs gov efile There is no change in the types of expenses deductible for the personal-use part of your property. Www irs gov efile Generally, these expenses may be deducted only if you itemize your deductions on Schedule A (Form 1040). Www irs gov efile You cannot deduct any part of the cost of the first phone line even if your tenants have unlimited use of it. Www irs gov efile You do not have to divide the expenses that belong only to the rental part of your property. Www irs gov efile 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. Www irs gov efile If you install a second phone line strictly for your tenants' use, all of the cost of the second line is deductible as a rental expense. Www irs gov efile You can deduct depreciation, discussed later, on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes. Www irs gov efile How to divide expenses. Www irs gov efile   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 the rental use and the personal use. Www irs gov efile You can use any reasonable method for dividing the expense. Www irs gov efile It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. Www irs gov efile The two most common methods for dividing an expense are based on (1) the number of rooms in your home, and (2) the square footage of your home. Www irs gov efile 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. Www irs gov efile 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. Www irs gov efile 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. Www irs gov efile Where to report. Www irs gov efile   Report your not-for-profit rental income on Form 1040, line 21. Www irs gov efile For example, 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. Www irs gov efile   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 Form 1040, Schedule A, line 23. Www irs gov efile You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income. Www irs gov efile Personal Use of Dwelling Unit (Including Vacation Home) If you have any personal use of a dwelling unit (including a vacation home) that you rent, you must divide your expenses between rental use and personal use. Www irs gov efile In general, your rental expenses will be no more than your total expenses multiplied by a fraction; the denominator of which is the total number of days the dwelling unit is used and the numerator of which is the total number of days actually rented at a fair rental price. Www irs gov efile Only your rental expenses may be deducted on Schedule E (Form 1040). Www irs gov efile Some of your personal expenses may be deductible if you itemize your deductions on Schedule A (Form 1040). Www irs gov efile You must also determine if the dwelling unit is considered a home. Www irs gov efile The amount of rental expenses that you can deduct may be limited if the dwelling unit is considered a home. Www irs gov efile Whether a dwelling unit is considered a home depends on how many days during the year are considered to be days of personal use. Www irs gov efile There is a special rule if you used the dwelling unit as a home and you rented it for less than 15 days during the year. Www irs gov efile Dwelling unit. Www irs gov efile   A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. Www irs gov efile It also includes all structures or other property belonging to the dwelling unit. Www irs gov efile A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. Www irs gov efile   A dwelling unit does not include property used solely as a hotel, motel, inn, or similar establishment. Www irs gov efile Property is used solely as a hotel, motel, inn, or similar establishment if it is regularly available for occupancy by paying customers and is not used by an owner as a home during the year. Www irs gov efile Example. Www irs gov efile   You rent a room in your home that is always available for short-term occupancy by paying customers. Www irs gov efile You do not use the room yourself, and you allow only paying customers to use the room. Www irs gov efile The room is used solely as a hotel, motel, inn, or similar establishment and is not a dwelling unit. Www irs gov efile Dividing Expenses If you use a dwelling unit for both rental and personal purposes, divide your expenses between the rental use and the personal use based on the number of days used for each purpose. Www irs gov efile When dividing your expenses, follow these rules. Www irs gov efile Any day that the unit is rented at a fair rental price is a day of rental use even if you used the unit for personal purposes that day. Www irs gov efile This rule does not apply when determining whether you used the unit as a home. Www irs gov efile Any day that the unit is available for rent but not actually rented is not a day of rental use. Www irs gov efile Example. Www irs gov efile Your beach cottage was available for rent from June 1 through August 31 (92 days). Www irs gov efile During that time, except for the first week in August (7 days) when you were unable to find a renter, you rented the cottage at a fair rental price. Www irs gov efile The person who rented the cottage for July allowed you to use it over the weekend (2 days) without any reduction in or refund of rent. Www irs gov efile Your family also used the cottage during the last 2 weeks of May (14 days). Www irs gov efile The cottage was not used at all before May 17 or after August 31. Www irs gov efile You figure the part of the cottage expenses to treat as rental expenses as follows. Www irs gov efile The cottage was used for rental a total of 85 days (92 − 7). Www irs gov efile The days it was available for rent but not rented (7 days) are not days of rental use. Www irs gov efile The July weekend (2 days) you used it is rental use because you received a fair rental price for the weekend. Www irs gov efile You used the cottage for personal purposes for 14 days (the last 2 weeks in May). Www irs gov efile The total use of the cottage was 99 days (14 days personal use + 85 days rental use). Www irs gov efile Your rental expenses are 85/99 (86%) of the cottage expenses. Www irs gov efile Note. Www irs gov efile When determining whether you used the cottage as a home, the July weekend (2 days) you used it is considered personal use even though you received a fair rental price for the weekend. Www irs gov efile Therefore, you had 16 days of personal use and 83 days of rental use for this purpose. Www irs gov efile Because you used the cottage for personal purposes more than 14 days and more than 10% of the days of rental use (8 days), you used it as a home. Www irs gov efile If you have a net loss, you may not be able to deduct all of the rental expenses. Www irs gov efile See Dwelling Unit Used as a Home, next. Www irs gov efile Dwelling Unit Used as a Home If you use a dwelling unit for both rental and personal purposes, the tax treatment of the rental expenses you figured earlier under Dividing Expenses and rental income depends on whether you are considered to be using the dwelling unit as a home. Www irs gov efile You use a dwelling unit as a home during the tax year if you use it for personal purposes more than the greater of: 14 days, or 10% of the total days it is rented to others at a fair rental price. Www irs gov efile See What is a day of personal use , later. Www irs gov efile Fair rental price. Www irs gov efile   A fair rental price for your property generally is the amount of rent that a person who is not related to you would be willing to pay. Www irs gov efile The rent you charge is not a fair rental price if it is substantially less than the rents charged for other properties that are similar to your property in your area. Www irs gov efile   If a dwelling unit is used for personal purposes on a day it is rented at a fair rental price, do not count that day as a day of rental use in applying (2) above. Www irs gov efile Instead, count it as a day of personal use in applying both (1) and (2) above. Www irs gov efile What is a day of personal use?   A day of personal use of a dwelling unit is any day that the unit is used by any of the following persons. Www irs gov efile You or any other person who has an interest in the unit, unless you rent it to another owner as his or her main home under a shared equity financing agreement (defined later). Www irs gov efile However, see Days used as a main home before or after renting , later. Www irs gov efile A member of your family or a member of the family of any other person who owns an interest in the unit, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. Www irs gov efile Family includes only your spouse, brothers and sisters, half-brothers and half-sisters, ancestors (parents, grandparents, etc. Www irs gov efile ), and lineal descendants (children, grandchildren, etc. Www irs gov efile ). Www irs gov efile Anyone under an arrangement that lets you use some other dwelling unit. Www irs gov efile Anyone at less than a fair rental price. Www irs gov efile Main home. Www irs gov efile   If the other person or member of the family in (1) or (2) above has more than one home, his or her main home is ordinarily the one he or she lived in most of the time. Www irs gov efile Shared equity financing agreement. Www irs gov efile   This is an agreement under which two or more persons acquire undivided interests for more than 50 years in an entire dwelling unit, including the land, and one or more of the co-owners is entitled to occupy the unit as his or her main home upon payment of rent to the other co-owner or owners. Www irs gov efile Donation of use of property. Www irs gov efile   You use a dwelling unit for personal purposes if: You donate the use of the unit to a charitable organization, The organization sells the use of the unit at a fund-raising event, and The “purchaser” uses the unit. Www irs gov efile Examples. Www irs gov efile   The following examples show how to determine days of personal use. Www irs gov efile Example 1. Www irs gov efile You and your neighbor are co-owners of a condominium at the beach. Www irs gov efile Last year, you rented the unit to vacationers whenever possible. Www irs gov efile The unit was not used as a main home by anyone. Www irs gov efile Your neighbor used the unit for 2 weeks last year; you did not use it at all. Www irs gov efile Because your neighbor has an interest in the unit, both of you are considered to have used the unit for personal purposes during those 2 weeks. Www irs gov efile Example 2. Www irs gov efile You and your neighbors are co-owners of a house under a shared equity financing agreement. Www irs gov efile Your neighbors live in the house and pay you a fair rental price. Www irs gov efile Even though your neighbors have an interest in the house, the days your neighbors live there are not counted as days of personal use by you. Www irs gov efile This is because your neighbors rent the house as their main home under a shared equity financing agreement. Www irs gov efile Example 3. Www irs gov efile You own a rental property that you rent to your son. Www irs gov efile Your son does not own any interest in this property. Www irs gov efile He uses it as his main home and pays you a fair rental price. Www irs gov efile Your son's use of the property is not personal use by you because your son is using it as his main home, he owns no interest in the property, and he is paying you a fair rental price. Www irs gov efile Example 4. Www irs gov efile You rent your beach house to Joshua. Www irs gov efile Joshua rents his cabin in the mountains to you. Www irs gov efile You each pay a fair rental price. Www irs gov efile You are using your house for personal purposes on the days that Joshua uses it because your house is used by Joshua under an arrangement that allows you to use his house. Www irs gov efile Days used for repairs and maintenance. Www irs gov efile   Any day that you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. Www irs gov efile Do not count such a day as a day of personal use even if family members use the property for recreational purposes on the same day. Www irs gov efile Days used as a main home before or after renting. Www irs gov efile   For purposes of determining whether a dwelling unit was used as a home, you may not have to count days you used the property as your main home before or after renting it or offering it for rent as days of personal use. Www irs gov efile Do not count them as days of personal use if: You rented or tried to rent the property for 12 or more consecutive months. Www irs gov efile You rented or tried to rent the property for a period of less than 12 consecutive months and the period ended because you sold or exchanged the property. Www irs gov efile However, this special rule does not apply when dividing expenses between rental and personal use. Www irs gov efile Examples. Www irs gov efile   The following examples show how to determine whether you used your rental property as a home. Www irs gov efile Example 1. Www irs gov efile You converted the basement of your home into an apartment with a bedroom, a bathroom, and a small kitchen. Www irs gov efile You rented the basement apartment at a fair rental price to college students during the regular school year. Www irs gov efile You rented to them on a 9-month lease (273 days). Www irs gov efile You figured 10% of the total days rented to others at a fair rental price is 27 days. Www irs gov efile During June (30 days), your brothers stayed with you and lived in the basement apartment rent free. Www irs gov efile Your basement apartment was used as a home because you used it for personal purposes for 30 days. Www irs gov efile Rent-free use by your brothers is considered personal use. Www irs gov efile Your personal use (30 days) is more than the greater of 14 days or 10% of the total days it was rented (27 days). Www irs gov efile Example 2. Www irs gov efile You rented the guest bedroom in your home at a fair rental price during the local college's homecoming, commencement, and football weekends (a total of 27 days). Www irs gov efile Your sister-in-law stayed in the room, rent free, for the last 3 weeks (21 days) in July. Www irs gov efile You figured 10% of the total days rented to others at a fair rental price is 3 days. Www irs gov efile The room was used as a home because you used it for personal purposes for 21 days. Www irs gov efile That is more than the greater of 14 days or 10% of the 27 days it was rented (3 days). Www irs gov efile Example 3. Www irs gov efile You own a condominium apartment in a resort area. Www irs gov efile You rented it at a fair rental price for a total of 170 days during the year. Www irs gov efile For 12 of those days, the tenant was not able to use the apartment and allowed you to use it even though you did not refund any of the rent. Www irs gov efile Your family actually used the apartment for 10 of those days. Www irs gov efile Therefore, the apartment is treated as having been rented for 160 (170 − 10) days. Www irs gov efile You figured 10% of the total days rented to others at a fair rental price is 16 days. Www irs gov efile Your family also used the apartment for 7 other days during the year. Www irs gov efile You used the apartment as a home because you used it for personal purposes for 17 days. Www irs gov efile That is more than the greater of 14 days or 10% of the 160 days it was rented (16 days). Www irs gov efile Minimal rental use. Www irs gov efile   If you use the dwelling unit as a home and you rent it less than 15 days during the year, that period is not treated as rental activity. Www irs gov efile See Used as a home but rented less than 15 days , later, for more information. Www irs gov efile Limit on deductions. Www irs gov efile   Renting a dwelling unit that is considered a home is not a passive activity. Www irs gov efile Instead, if your rental expenses are more than your rental income, some or all of the excess expenses cannot be used to offset income from other sources. Www irs gov efile The excess expenses that cannot be used to offset income from other sources are carried forward to the next year and treated as rental expenses for the same property. Www irs gov efile Any expenses carried forward to the next year will be subject to any limits that apply for that year. Www irs gov efile This limitation will apply to expenses carried forward to another year even if you do not use the property as your home for that subsequent year. Www irs gov efile   To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 9-1. Www irs gov efile Reporting Income and Deductions Property not used for personal purposes. Www irs gov efile   If you do not use a dwelling unit for personal purposes, see How To Report Rental Income and Expenses , later, for how to report your rental income and expenses. Www irs gov efile Property used for personal purposes. Www irs gov efile   If you do use a dwelling unit for personal purposes, then how you report your rental income and expenses depends on whether you used the dwelling unit as a home. Www irs gov efile Not used as a home. Www irs gov efile   If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. Www irs gov efile Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in Dividing Expenses . Www irs gov efile The expenses for personal use are not deductible as rental expenses. Www irs gov efile   Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses , later. Www irs gov efile Used as a home but rented less than 15 days. Www irs gov efile   If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function is not considered to be rental and it should not be reported on Schedule E (Form 1040). Www irs gov efile You are not required to report the rental income and rental expenses from this activity. Www irs gov efile The expenses, including qualified mortgage interest, property taxes, and any qualified casualty loss will be reported as normally allowed on Schedule A (Form 1040). Www irs gov efile See the Instructions for Schedule A (Form 1040) for more information on deducting these expenses. Www irs gov efile Used as a home and rented 15 days or more. Www irs gov efile   If you use a dwelling unit as a home and rent it 15 days or more during the year, include all your rental income in your income. Www irs gov efile Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in Dividing Expenses . Www irs gov efile The expenses for personal use are not deductible as rental expenses. Www irs gov efile   If you had a net profit from renting the dwelling unit for the year (that is, if your rental income is more than the total of your rental expenses, including depreciation), deduct all of your rental expenses. Www irs gov efile You do not need to use Worksheet 9-1. Www irs gov efile   However, if you had a net loss from renting the dwelling unit for the year, your deduction for certain rental expenses is limited. Www irs gov efile To figure your deductible rental expenses and any carryover to next year, use Worksheet 9-1. Www irs gov efile Depreciation You recover the cost of income-producing property through yearly tax deductions. Www irs gov efile You do this by depreciating the property; that is, by deducting some of the cost each year on your tax return. Www irs gov efile Three factors determine how much depreciation you can deduct each year: (1) your basis in the property, (2) the recovery period for the property, and (3) the depreciation method used. Www irs gov efile You cannot simply deduct your mortgage or principal payments, or the cost of furniture, fixtures, and equipment, as an expense. Www irs gov efile You can deduct depreciation only on the part of your property used for rental purposes. Www irs gov efile Depreciation reduces your basis for figuring gain or loss on a later sale or exchange. Www irs gov efile You may have to use Form 4562 to figure and report your depreciation. Www irs gov efile See How To Report Rental Income and Expenses , later. Www irs gov efile Alternative minimum tax (AMT). Www irs gov efile    If you use accelerated depreciation, you may be subject to the AMT. Www irs gov efile Accelerated depreciation allows you to deduct more depreciation earlier in the recovery period than you could deduct using a straight line method (same deduction each year). Www irs gov efile Claiming the correct amount of depreciation. Www irs gov efile   You should claim the correct amount of depreciation each tax year. Www irs gov efile If you did not claim all the depreciation you were entitled to deduct, you must still reduce your basis in the property by the full amount of depreciation that you could have deducted. Www irs gov efile   If you deducted an incorrect amount of depreciation for property in any year, you may be able to make a correction by filing Form 1040X, Amended U. Www irs gov efile S Individual Income Tax Return. Www irs gov efile If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amount of depreciation. Www irs gov efile See Claiming the correct amount of depreciation in chapter 2 of Publication 527 for more information. Www irs gov efile Changing your accounting method to deduct unclaimed depreciation. Www irs gov efile   To change your accounting method, you generally must file Form 3115, Application for Change in Accounting Method, to get the consent of the IRS. Www irs gov efile In some instances, that consent is automatic. Www irs gov efile For more information, see chapter 1 of Publication 946. Www irs gov efile Land. Www irs gov efile   You cannot depreciate the cost of land because land generally does not wear out, become obsolete, or get used up. Www irs gov efile The costs of clearing, grading, planting, and landscaping are usually all part of the cost of land and cannot be depreciated. Www irs gov efile More information. Www irs gov efile   See Publication 527 for more information about depreciating rental property and see Publication 946 for more information about depreciation. Www irs gov efile Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. Www irs gov efile You must consider these rules in the order shown below. Www irs gov efile At-risk rules. Www irs gov efile These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. Www irs gov efile This applies only if the real property was placed in service after 1986. Www irs gov efile Passive activity limits. Www irs gov efile Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. Www irs gov efile However, there are exceptions. Www irs gov efile At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. Www irs gov efile Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. Www irs gov efile In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. Www irs gov efile You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. Www irs gov efile See Publication 925 for more information. Www irs gov efile Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. Www irs gov efile For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. Www irs gov efile Limits on passive activity deductions and credits. Www irs gov efile    Deductions or losses from passive activities are limited. Www irs gov efile You generally cannot offset income, other than passive income, with losses from passive activities. Www irs gov efile Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. Www irs gov efile Any excess loss or credit is carried forward to the next tax year. Www irs gov efile   For a detailed discussion of these rules, see Publication 925. Www irs gov efile    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. Www irs gov efile Real estate professionals. Www irs gov efile   Rental activities in which you materially participated during the year are not passive activities if, for that year, you were a real estate professional. Www irs gov efile For a detailed discussion of the requirements, see Publication 527. Www irs gov efile For a detailed discussion of material participation, see Publication 925. Www irs gov efile Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. Www irs gov efile Instead, follow the rules explained in Personal Use of Dwelling Unit (Including Vacation Home), earlier. Www irs gov efile Exception for Rental Real Estate Activities With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. Www irs gov efile This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. Www irs gov efile Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. Www irs gov efile Active participation. Www irs gov efile   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Www irs gov efile Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions. Www irs gov efile Maximum special allowance. Www irs gov efile   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. Www irs gov efile   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. Www irs gov efile If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. Www irs gov efile   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. Www irs gov efile More information. Www irs gov efile   See Publication 925 for more information on the passive loss limits, including information on the treatment of unused disallowed passive losses and credits and the treatment of gains and losses realized on the disposition of a passive activity. Www irs gov efile How To Report Rental Income and Expenses The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). Www irs gov efile However, do not use that schedule to report a not-for-profit activity. Www irs gov efile See Not Rented for Profit, earlier. Www irs gov efile Providing substantial services. Www irs gov efile   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business (Sole Proprietorship). Www irs gov efile Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. Www irs gov efile For information, see Publication 334, Tax Guide for Small Business. Www irs gov efile You also may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. Www irs gov efile   Use Form 1065, U. Www irs gov efile S. Www irs gov efile Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). Www irs gov efile Qualified joint venture. Www irs gov efile   If you and your spouse each materially participate as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Www irs gov efile This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. Www irs gov efile For more information, see Publication 527. Www irs gov efile Form 1098, Mortgage Interest Statement. Www irs gov efile    If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098, or similar statement showing the interest you paid for the year. Www irs gov efile If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. Www irs gov efile Attach a statement to your return showing the name and address of the other person. Www irs gov efile In the left margin of Schedule E, next to line 13, enter “See attached. Www irs gov efile ” Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. Www irs gov efile , you normally report your rental income and expenses on Schedule E, Part I. Www irs gov efile List your total income, expenses, and depreciation for each rental property. Www irs gov efile Be sure to enter the number of fair rental and personal use days on line 2. Www irs gov efile If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. Www irs gov efile Complete lines 1 and 2 for each property. Www irs gov efile However, fill in lines 23a through 26 on only one Schedule E. Www irs gov efile On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. Www irs gov efile To find out if you need to attach Form 4562, see Form 4562, in chapter 3 of Publication 527. Www irs gov efile If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. Www irs gov efile Form 6198, At-Risk Limitations. Www irs gov efile See At-Risk Rules , earlier. Www irs gov efile Also see Publication 925. Www irs gov efile Form 8582, Passive Activity Loss Limitations. Www irs gov efile See Passive Activity Limits , earlier. Www irs gov efile Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. Www irs gov efile If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. Www irs gov efile Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). Www irs gov efile Worksheet 9-1. Www irs gov efile Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Use this worksheet only if you answer “yes” to all of the following questions. Www irs gov efile Did you use the dwelling unit as a home this year? (See Dwelling Unit Used as a Home . Www irs gov efile ) Did you rent the dwelling unit at a fair rental price 15 days or more this year? Is the total of your rental expenses and depreciation more than your rental income? PART I. Www irs gov efile Rental Use Percentage A. Www irs gov efile Total days available for rent at fair rental price A. Www irs gov efile       B. Www irs gov efile Total days available for rent (line A) but not rented B. Www irs gov efile       C. Www irs gov efile Total days of rental use. Www irs gov efile Subtract line B from line A C. Www irs gov efile       D. Www irs gov efile Total days of personal use (including days rented at less than fair rental price) D. Www irs gov efile       E. Www irs gov efile Total days of rental and personal use. Www irs gov efile Add lines C and D E. Www irs gov efile       F. Www irs gov efile Percentage of expenses allowed for rental. Www irs gov efile Divide line C by line E     F. Www irs gov efile   PART II. Www irs gov efile Allowable Rental Expenses 1. Www irs gov efile Enter rents received 1. Www irs gov efile   2a. Www irs gov efile Enter the rental portion of deductible home mortgage interest and qualified mortgage insurance premiums (see instructions) 2a. Www irs gov efile       b. Www irs gov efile Enter the rental portion of real estate taxes b. Www irs gov efile       c. Www irs gov efile Enter the rental portion of deductible casualty and theft losses (see instructions) c. Www irs gov efile       d. Www irs gov efile Enter direct rental expenses (see instructions) d. Www irs gov efile       e. Www irs gov efile Fully deductible rental expenses. Www irs gov efile Add lines 2a–2d. Www irs gov efile Enter here and  on the appropriate lines on Schedule E (see instructions) 2e. Www irs gov efile   3. Www irs gov efile Subtract line 2e from line 1. Www irs gov efile If zero or less, enter -0- 3. Www irs gov efile   4a. Www irs gov efile Enter the rental portion of expenses directly related to operating or maintaining  the dwelling unit (such as repairs, insurance, and utilities) 4a. Www irs gov efile       b. Www irs gov efile Enter the rental portion of excess mortgage interest and qualified mortgage insurance premiums (see instructions) b. Www irs gov efile       c. Www irs gov efile Carryover of operating expenses from 2012 worksheet c. Www irs gov efile       d. Www irs gov efile Add lines 4a–4c d. Www irs gov efile       e. Www irs gov efile Allowable expenses. Www irs gov efile Enter the smaller of line 3 or line 4d (see instructions) 4e. Www irs gov efile   5. Www irs gov efile Subtract line 4e from line 3. Www irs gov efile If zero or less, enter -0- 5. Www irs gov efile   6a. Www irs gov efile Enter the rental portion of excess casualty and theft losses (see instructions) 6a. Www irs gov efile       b. Www irs gov efile Enter the rental portion of depreciation of the dwelling unit b. Www irs gov efile       c. Www irs gov efile Carryover of excess casualty losses and depreciation from 2012 worksheet c. Www irs gov efile       d. Www irs gov efile Add lines 6a–6c d. Www irs gov efile       e. Www irs gov efile Allowable excess casualty and theft losses and depreciation. Www irs gov efile Enter the smaller of  line 5 or line 6d (see instructions) 6e. Www irs gov efile   PART III. Www irs gov efile Carryover of Unallowed Expenses to Next Year 7a. Www irs gov efile Operating expenses to be carried over to next year. Www irs gov efile Subtract line 4e from line 4d 7a. Www irs gov efile   b. Www irs gov efile Excess casualty and theft losses and depreciation to be carried over to next year. Www irs gov efile  Subtract line 6e from line 6d b. Www irs gov efile   Worksheet 9-1 Instructions. Www irs gov efile Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Caution. Www irs gov efile Use the percentage determined in Part I, line F, to figure the rental portions to enter on lines 2a–2c, 4a–4b, and 6a–6b of  Part II. Www irs gov efile Line 2a. Www irs gov efile Figure the mortgage interest on the dwelling unit that you could deduct on Schedule A as if you had not rented the unit. Www irs gov efile Do not include interest on a loan that did not benefit the dwelling unit. Www irs gov efile For example, do not include interest on a home equity loan used to pay off credit cards or other personal loans, buy a car, or pay college tuition. Www irs gov efile Include interest on a loan used to buy, build, or improve the dwelling unit, or to refinance such a loan. Www irs gov efile Include the rental portion of this interest in the total you enter on line 2a of the worksheet. Www irs gov efile   Figure the qualified mortgage insurance premiums on the dwelling unit that you could deduct on line 13 of Schedule A as if you had not rented the unit. Www irs gov efile See the Schedule A instructions. Www irs gov efile However, figure your adjusted gross income (Form 1040, line 38) without your rental income and expenses from the dwelling unit. Www irs gov efile See Line 4b to deduct the part of the qualified mortgage insurance premiums not allowed because of the adjusted gross income limit. Www irs gov efile Include the rental portion of the amount from Schedule A, line 13, in the total you enter on line 2a of the worksheet. Www irs gov efile   Note. Www irs gov efile Do not file this Schedule A or use it to figure the amount to deduct on line 13 of that schedule. Www irs gov efile Instead, figure the personal portion on a separate Schedule A. Www irs gov efile If you have deducted mortgage interest or qualified mortgage insurance premiums on the dwelling unit on other forms, such as Schedule C or F, remember to reduce your Schedule A deduction by that amount. Www irs gov efile           Line 2c. Www irs gov efile Figure the casualty and theft losses related to the dwelling unit that you could deduct on Schedule A as if you had not rented the dwelling unit. Www irs gov efile To do this, complete Section A of Form 4684, Casualties and Thefts, treating the losses as personal losses. Www irs gov efile If any of the loss is due to a federally declared disaster, see the Instructions for Form 4684. Www irs gov efile On Form 4684, line 17, enter 10% of your adjusted gross income figured without your rental income and expenses from the dwelling unit. Www irs gov efile Enter the rental portion of the result from Form 4684, line 18, on line 2c of this worksheet. Www irs gov efile   Note. Www irs gov efile Do not file this Form 4684 or use it to figure your personal losses on Schedule A. Www irs gov efile Instead, figure the personal portion on a separate Form 4684. Www irs gov efile           Line 2d. Www irs gov efile Enter the total of your rental expenses that are directly related only to the rental activity. Www irs gov efile These include interest on loans used for rental activities other than to buy, build, or improve the dwelling unit. Www irs gov efile Also include rental agency fees, advertising, office supplies, and depreciation on office equipment used in your rental activity. Www irs gov efile           Line 2e. Www irs gov efile You can deduct the amounts on lines 2a, 2b, 2c, and 2d as rental expenses on Schedule E even if your rental expenses are more than your rental income. Www irs gov efile Enter the amounts on lines 2a, 2b, 2c, and 2d on the appropriate lines of Schedule E. Www irs gov efile           Line 4b. Www irs gov efile On line 2a, you entered the rental portion of the mortgage interest and qualified mortgage insurance premiums you could deduct on Schedule A if you had not rented the dwelling unit. Www irs gov efile If you had additional mortgage interest and qualified mortgage insurance premiums that would not be deductible on Schedule A because of limits imposed on them, enter on line 4b of this worksheet the rental portion of those excess amounts. Www irs gov efile Do not include interest on a loan that did not benefit the dwelling unit (as explained in the line 2a instructions). Www irs gov efile           Line 4e. Www irs gov efile You can deduct the amounts on lines 4a, 4b, and 4c as rental expenses on Schedule E only to the extent they are not more than the amount on line 4e. Www irs gov efile *           Line 6a. Www irs gov efile To find the rental portion of excess casualty and theft losses, use the Form 4684 you prepared for line 2c of this worksheet. Www irs gov efile   A. Www irs gov efile Enter the amount from Form 4684, line 10       B. Www irs gov efile Enter the rental portion of line A       C. Www irs gov efile Enter the amount from line 2c of this worksheet       D. Www irs gov efile Subtract line C from line B. Www irs gov efile Enter the result here and on line 6a of this worksheet               Line 6e. Www irs gov efile You can deduct the amounts on lines 6a, 6b, and 6c as rental expenses on Schedule E only to the extent they are not more than the amount on line 6e. Www irs gov efile * *Allocating the limited deduction. Www irs gov efile If you cannot deduct all of the amount on line 4d or 6d this year, you can allocate the allowable deduction in any way you wish among the expenses included on line 4d or 6d. Www irs gov efile Enter the amount you allocate to each expense on the appropriate line of Schedule E, Part I. Www irs gov efile Prev  Up  Next   Home   More Online Publications
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Tax Information for Private Foundations

Life Cycle of a Private Foundation
During its existence, a private foundation has numerous interactions with the IRS - from filing an application for recognition of tax-exempt status, to filing required annual information returns, to making changes in its mission and purpose.

Exemption Requirements - 501(c)(3) Organizations
A brief description of the requirements for exemption under IRC Section 501(c)(3).

Private Foundations
A brief explanation of the rules for classifying charitable organizations as private foundations, and the effect of private foundation classification.

Life Cycle of a Private Foundation - Required Filings
Annual filings required to be made by private foundations.

The Restriction of Political Campaign Intervention by Section 501(c)(3) Tax-Exempt Organizations
Political Campaign Activity by section 501(c)(3) tax-exempt organizations

Unrelated Business Income Defined
A general description of the unrelated business income tax requirements for tax-exempt organizations.

Tax Information for Charitable Organizations
Tax information for charitable, religious, scientific, literary, and other organizations exempt under Internal Revenue Code ("IRC") section 501(c)(3)

Private Foundations Manual
Scroll down the table of contents for the Internal Revenue Manual to reach the Private Foundations Manual, procedures the IRS uses to administer the tax law rules that apply to private foundations.

Employment Taxes for Exempt Organizations
Links to information about employment taxes for tax-exempt organizations.

Page Last Reviewed or Updated: 13-Mar-2014

The Www Irs Gov Efile

Www irs gov efile Publication 575 - Additional Material Table of Contents Worksheet A. Www irs gov efile Simplified Method 1. Www irs gov efile Enter the total pension or annuity payments received this year. Www irs gov efile Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. Www irs gov efile   2. Www irs gov efile Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion. Www irs gov efile * See Cost (Investment in the Contract) , earlier 2. Www irs gov efile   Note: If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Www irs gov efile Otherwise, go to line 3. Www irs gov efile   3. Www irs gov efile Enter the appropriate number from Table 1 below. Www irs gov efile But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below. Www irs gov efile 3. Www irs gov efile   4. Www irs gov efile Divide line 2 by the number on line 3 4. Www irs gov efile   5. Www irs gov efile Multiply line 4 by the number of months for which this year's payments were made. Www irs gov efile If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Www irs gov efile Otherwise, go to line 6 5. Www irs gov efile   6. Www irs gov efile Enter any amounts previously recovered tax free in years after 1986. Www irs gov efile This is the amount shown on line 10 of your worksheet for last year 6. Www irs gov efile   7. Www irs gov efile Subtract line 6 from line 2 7. Www irs gov efile   8. Www irs gov efile Enter the smaller of line 5 or line 7 8. Www irs gov efile   9. Www irs gov efile Taxable amount for year. Www irs gov efile Subtract line 8 from line 1. Www irs gov efile Enter the result, but not less than zero. Www irs gov efile Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Www irs gov efile  Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. Www irs gov efile If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers , earlier, before entering an amount on your tax return 9. Www irs gov efile   10. Www irs gov efile Was your annuity starting date before 1987? □ Yes. Www irs gov efile STOP. Www irs gov efile Do not complete the rest of this worksheet. Www irs gov efile  □ No. Www irs gov efile Add lines 6 and 8. Www irs gov efile This is the amount you have recovered tax free through 2013. Www irs gov efile You will need this number if you need to fill out this worksheet next year 10. Www irs gov efile   11. Www irs gov efile Balance of cost to be recovered. Www irs gov efile Subtract line 10 from line 2. Www irs gov efile If zero, you will not have to complete this worksheet next year. Www irs gov efile The payments you receive next year will generally be fully taxable 11. Www irs gov efile   * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. Www irs gov efile Table 1 for Line 3 Above   IF the age at  annuity starting date was . Www irs gov efile . Www irs gov efile . Www irs gov efile         AND your annuity starting date was—     BEFORE November 19, 1996,  enter on line 3 . Www irs gov efile . Www irs gov efile . Www irs gov efile AFTER November 18, 1996,  enter on line 3 . Www irs gov efile . Www irs gov efile . Www irs gov efile   55 or under 300 360   56-60 260 310   61-65 240 260   66-70 170 210   71 or over 120 160 Table 2 for Line 3 Above   IF the combined ages at annuity starting date were . Www irs gov efile . Www irs gov efile . Www irs gov efile   THEN enter on line 3 . Www irs gov efile . Www irs gov efile . Www irs gov efile         110 or under   410         111-120   360         121-130   310         131-140   260         141 or over   210       Prev  Up  Next   Home   More Online Publications