Self Employment Tax FilingIrs Tax Filing Online1040x Forms To PrintTurbo TaxCan I File My 2012 Taxes With My 2013 TaxesFree 1040x Tax FormsFree Tax Preparation Software1040x Amendment FormForm 1040 Es2010 1040 Tax FormsIrs FormsH&r Block 1040x Online1040x Amended Return FormHow To File 2009 TaxesFree E Filing For State TaxesIrs Online 1040ezTax Return For UnemployedIrs 2011 Taxes OnlineFree Tax Filing 2012 OnlineEz Form OnlineFree Tax Filing 2011Federal Income Tax FormIncome Tax Forms 1040Irs Ez FormFederal Tax Forms 1040xRefile Taxes 2012Tax AmendedTax Preparation For Military MembersIrs Gov 1040 EzH&r Block Home EditionHand R Block TaxesWhere To File A 2011 Tax Return2012 Income Tax FormsFree Turbo Tax 2013How To File A 2011 Tax ReturnWww Irs Gov Efile ComPrint Tax Form 1040x2011 Tax Forms 10401040ez 2011 OnlineHow To File A Revised Tax Return
Wwwhrblock com Publication 971 - Introductory Material Table of Contents What's New IntroductionOrdering forms and publications. Wwwhrblock com Questions about innocent spouse relief. Wwwhrblock com Useful Items - You may want to see: What's New Expanded filing deadline for equitable relief. Wwwhrblock com The period of time in which you may request equitable relief has been expanded. Wwwhrblock com See How To Request Relief later. Wwwhrblock com More information. Wwwhrblock com For more information about the latest developments on Publication 971, go to www. Wwwhrblock com irs. Wwwhrblock com gov/pub971. Wwwhrblock com Introduction When you file a joint income tax return, the law makes both you and your spouse responsible for the entire tax liability. Wwwhrblock com This is called joint and several liability. Wwwhrblock com Joint and several liability applies not only to the tax liability you show on the return but also to any additional tax liability the IRS determines to be due, even if the additional tax is due to income, deductions, or credits of your spouse or former spouse. Wwwhrblock com You remain jointly and severally liable for the taxes, and the IRS still can collect from you, even if you later divorce and the divorce decree states that your former spouse will be solely responsible for the tax. Wwwhrblock com In some cases, a spouse (or former spouse) will be relieved of the tax, interest, and penalties on a joint tax return. Wwwhrblock com Three types of relief are available to married persons who filed joint returns. Wwwhrblock com Innocent spouse relief. Wwwhrblock com Separation of liability relief. Wwwhrblock com Equitable relief. Wwwhrblock com Married persons who did not file joint returns, but who live in community property states, may also qualify for relief. Wwwhrblock com See Community Property Laws , later. Wwwhrblock com This publication explains these types of relief, who may qualify for them, and how to get them. Wwwhrblock com You can also use the Innocent Spouse Tax Relief Eligibility Explorer at IRS. Wwwhrblock com gov by entering “Innocent Spouse” in the search box. Wwwhrblock com What this publication does not cover. Wwwhrblock com This publication does not discuss injured spouse relief. Wwwhrblock com You are an injured spouse if your share of the overpayment shown on your joint return was, or is expected to be, applied (offset) against your spouse's legally enforceable past-due federal taxes, state income taxes, state unemployment compensation debts, child or spousal support payments, or a federal nontax debt, such as a student loan. Wwwhrblock com If you are an injured spouse, you may be entitled to receive a refund of your share of the overpayment. Wwwhrblock com For more information, see Form 8379, Injured Spouse Allocation. Wwwhrblock com Comments and suggestions. Wwwhrblock com We welcome your comments about this publication and your suggestions for future editions. Wwwhrblock com You can write to us at the following address: Internal Revenue Service Individual Forms and Publications Branch SE:W:CAR:MP:T:I 1111 Constitution Ave. Wwwhrblock com NW, IR-6526 Washington, DC 20224 We respond to many letters by telephone. Wwwhrblock com Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Wwwhrblock com You can email us at taxforms@irs. Wwwhrblock com gov. Wwwhrblock com Please put “Publications Comment” on the subject line. Wwwhrblock com You can also send us comments from www. Wwwhrblock com irs. Wwwhrblock com gov/formspubs/, select “Comment on Tax Forms and Publications” under “Information about. Wwwhrblock com ” Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products. Wwwhrblock com Ordering forms and publications. Wwwhrblock com Visit www. Wwwhrblock com irs. Wwwhrblock com gov/formspubs to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. Wwwhrblock com Internal Revenue Service 1201 N. Wwwhrblock com Mitsubishi Motorway Bloomington, IL 61705-6613 Questions about innocent spouse relief. Wwwhrblock com The IRS can help you with your request for innocent spouse relief. Wwwhrblock com If you are working with an IRS employee, you can ask that employee, or you can call 866-897-4270. Wwwhrblock com Useful Items - You may want to see: Publications 504 Divorced or Separated Individuals 555 Community Property 556 Examination of Returns, Appeal Rights, and Claims for Refund 594 The IRS Collection Process Forms (and Instructions) 8857 Request for Innocent Spouse Relief Prev Up Next Home More Online Publications
Terms of Service for Developer Resources
The following terms of service govern the USA.gov Developer Resources web pages and services, from the U.S. General Services Administration (GSA). These are offered subject to your acceptance of the terms and conditions contained herein as well as any relevant sections of the USA.gov Site Policies (collectively, the "Agreement").
All of the content, documentation, code and related materials made available to you through USA.gov is subject to these terms. Access to or use of USA.gov services or its content constitutes acceptance to this Agreement.
Data accessed through USA.gov do not, and should not, include controls over its end use. However, as the data owners or authoritative sources, the Departments and Agencies providing the data retain version control. Once the data has been downloaded from USA.gov, the U.S. Government cannot vouch for the quality and timeliness of any analyses conducted with data retrieved.
Users of publicly-available APIs should cite the date that data were accessed or retrieved using the APIs. Finally, users must clearly state that "USA.gov and the federal government cannot vouch for the data or analyses derived from these data after the data have been retrieved from USA.gov." GSA or USA.gov logos may not be used by persons who are not GSA employees or on products (including Web pages) that are not GSA-sponsored.
In support of the Transparency and Open Government Initiative, recommendations from individuals, groups, and organizations regarding the presentation of data, data types, and metadata will contribute to the evolution of USA.gov’s publicly-accessible APIs.
Modification or False Representation of Content
You may not modify or falsely represent content accessed through USA.gov and still claim the source is USA.gov.
Right to Limit
Use of the APIs may be subject to certain limitations on access, calls, or use as set forth within this Agreement or otherwise provided by GSA. If GSA reasonably believes that you have attempted to exceed or circumvent these limits, your ability to use the API may be permanently or temporarily blocked.
GSA may monitor your use of its services to improve the service or to insure compliance with this Agreement.
If you wish to terminate this Agreement, you may do so by refraining from further use of the services. GSA reserves the right (though not the obligation) to (1) refuse to provide the services to you, if it is GSA’s opinion that use violates any GSA policy, or (2) terminate or deny you access to and use of all or part of the services at any time for any other reason in its sole discretion. Any hosted applications may also be shutdown or removed. All provisions of this Agreement which by their nature should survive termination shall survive termination including, without limitation, warranty disclaimers, indemnity, and limitations of liability.
GSA reserves the right, at its sole discretion, to modify or replace this Agreement, in whole or in part. Your continued use of or access to the USA.gov services following posting of any changes to this Agreement constitutes acceptance of those modified terms. GSA may, in the future, offer new services and/or features. Such new features and/or services shall be subject to the terms and conditions of this Agreement.
Disclaimer of Warranties
USA.gov services are provided “as is” and on an “as-available” basis. GSA hereby disclaims all warranties of any kind, express or implied, including without limitation the warranties of merchantability, fitness for a particular purpose, and non-infringement. GSA makes no warranty that the services will be error free or that access thereto will be continuous or uninterrupted.
Limitations on Liability
In no event will GSA be liable with to respect to any subject matter of this Agreement under any contract, negligence, strict liability or other legal or equitable theory for: (1) any special, incidental, or consequential damages; (2) the cost of procurement of substitute products or services; or (3) for interruption of use or loss or corruption of data.
You agree to indemnify and hold harmless GSA, its contractors, employees, agents, and the like from and against any and all claims and expenses including attorney’s fees, arising out of your use of the APIs, including but not limited to violation of this Agreement. This Indemnification clause shall not apply to government entities.
This Agreement constitutes the entire Agreement between GSA and you concerning the subject matter hereof, and may only be modified by the posting of a revised version on this page by GSA.
Any disputes arising out of this Agreement and access to or use of the services shall be governed by federal law.
No Waiver of Rights
GSA’s failure to exercise or enforce any right or provision of this Agreement shall not constitute waiver of such right or provision.
Back to Top
The Wwwhrblock Com
Wwwhrblock com 1. Wwwhrblock com Rental Income and Expenses (If No Personal Use of Dwelling) Table of Contents Rental IncomeWhen To Report Types of Income Rental ExpensesWhen To Deduct Types of Expenses This chapter discusses the various types of rental income and expenses for a residential rental activity with no personal use of the dwelling. Wwwhrblock com Generally, each year you will report all income and deduct all out-of-pocket expenses in full. Wwwhrblock com The deduction to recover the cost of your rental property—depreciation—is taken over a prescribed number of years, and is discussed in chapter 2, Depreciation of Rental Property. Wwwhrblock com If your rental income is from property you also use personally or rent to someone at less than a fair rental price, first read the information in chapter 5 , Personal Use of Dwelling Unit (Including Vacation Home). Wwwhrblock com Rental Income In most cases, you must include in your gross income all amounts you receive as rent. Wwwhrblock com Rental income is any payment you receive for the use or occupation of property. Wwwhrblock com In addition to amounts you receive as normal rental payments, there are other amounts that may be rental income. Wwwhrblock com When To Report When you report rental income on your tax return generally depends on whether you are a cash basis taxpayer or use an accrual method. Wwwhrblock com Most individual taxpayers use the cash method. Wwwhrblock com Cash method. Wwwhrblock com You are a cash basis taxpayer if you report income on your return in the year you actually or constructively receive it, regardless of when it was earned. Wwwhrblock com You constructively receive income when it is made available to you, for example, by being credited to your bank account. Wwwhrblock com Accrual method. Wwwhrblock com If you are an accrual basis taxpayer, you generally report income when you earn it, rather than when you receive it. Wwwhrblock com You generally deduct your expenses when you incur them, rather than when you pay them. Wwwhrblock com More information. Wwwhrblock com See Publication 538, Accounting Periods and Methods, for more information about when you constructively receive income and accrual methods of accounting. Wwwhrblock com Types of Income The following are common types of rental income. Wwwhrblock com Advance rent. Wwwhrblock com Advance rent is any amount you receive before the period that it covers. Wwwhrblock com 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. Wwwhrblock com Example. Wwwhrblock com On March 18, 2013, you signed a 10-year lease to rent your property. Wwwhrblock com During 2013, you received $9,600 for the first year's rent and $9,600 as rent for the last year of the lease. Wwwhrblock com You must include $19,200 in your rental income in the first year. Wwwhrblock com Canceling a lease. Wwwhrblock com If your tenant pays you to cancel a lease, the amount you receive is rent. Wwwhrblock com Include the payment in your income in the year you receive it regardless of your method of accounting. Wwwhrblock com Expenses paid by tenant. Wwwhrblock com If your tenant pays any of your expenses, those payments are rental income. Wwwhrblock com Because you must include this amount in income, you can also deduct the expenses if they are deductible rental expenses. Wwwhrblock com For more information, see Rental Expenses , later. Wwwhrblock com Example 1. Wwwhrblock com Your tenant pays the water and sewage bill for your rental property and deducts the amount from the normal rent payment. Wwwhrblock com Under the terms of the lease, your tenant does not have to pay this bill. Wwwhrblock com Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income. Wwwhrblock com You can deduct the utility payment made by your tenant as a rental expense. Wwwhrblock com Example 2. Wwwhrblock com While you are out of town, the furnace in your rental property stops working. Wwwhrblock com Your tenant pays for the necessary repairs and deducts the repair bill from the rent payment. Wwwhrblock com Include the repair bill paid by the tenant and any amount received as a rent payment in your rental income. Wwwhrblock com You can deduct the repair payment made by your tenant as a rental expense. Wwwhrblock com Property or services. Wwwhrblock com If you receive property or services as rent, instead of money, include the fair market value of the property or services in your rental income. Wwwhrblock com 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. Wwwhrblock com Example. Wwwhrblock com Your tenant is a house painter. Wwwhrblock com He offers to paint your rental property instead of paying 2 months rent. Wwwhrblock com You accept his offer. Wwwhrblock com Include in your rental income the amount the tenant would have paid for 2 months rent. Wwwhrblock com You can deduct that same amount as a rental expense for painting your property. Wwwhrblock com Security deposits. Wwwhrblock com 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. Wwwhrblock com 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. Wwwhrblock com If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Wwwhrblock com Include it in your income when you receive it. Wwwhrblock com Other Sources of Rental Income Lease with option to buy. Wwwhrblock com If the rental agreement gives your tenant the right to buy your rental property, the payments you receive under the agreement are generally rental income. Wwwhrblock com If your tenant exercises the right to buy the property, the payments you receive for the period after the date of sale are considered part of the selling price. Wwwhrblock com Part interest. Wwwhrblock com If you own a part interest in rental property, you must report your part of the rental income from the property. Wwwhrblock com Rental of property also used as your home. Wwwhrblock com 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. Wwwhrblock com However, you can deduct on Schedule A (Form 1040), Itemized Deductions, the interest, taxes, and casualty and theft losses that are allowed for nonrental property. Wwwhrblock com See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Wwwhrblock com Rental Expenses In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. Wwwhrblock com Personal use of rental property. Wwwhrblock com If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. Wwwhrblock com Also, your rental expense deductions may be limited. Wwwhrblock com See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Wwwhrblock com Part interest. Wwwhrblock com If you own a part interest in rental property, you can deduct expenses you paid according to your percentage of ownership. Wwwhrblock com Example. Wwwhrblock com Roger owns a one-half undivided interest in a rental house. Wwwhrblock com Last year he paid $968 for necessary repairs on the property. Wwwhrblock com Roger can deduct $484 (50% × $968) as a rental expense. Wwwhrblock com He is entitled to reimbursement for the remaining half from the co-owner. Wwwhrblock com When To Deduct You generally deduct your rental expenses in the year you pay them. Wwwhrblock com If you use the accrual method, see Publication 538 for more information. Wwwhrblock com Types of Expenses Listed below are the most common rental expenses. Wwwhrblock com Advertising. Wwwhrblock com Auto and travel expenses. Wwwhrblock com Cleaning and maintenance. Wwwhrblock com Commissions. Wwwhrblock com Depreciation. Wwwhrblock com Insurance. Wwwhrblock com Interest (other). Wwwhrblock com Legal and other professional fees. Wwwhrblock com Local transportation expenses. Wwwhrblock com Management fees. Wwwhrblock com Mortgage interest paid to banks, etc. Wwwhrblock com Points. Wwwhrblock com Rental payments. Wwwhrblock com Repairs. Wwwhrblock com Taxes. Wwwhrblock com Utilities. Wwwhrblock com Some of these expenses, as well as other less common ones, are discussed below. Wwwhrblock com Depreciation. Wwwhrblock com Depreciation is a capital expense. Wwwhrblock com It is the mechanism for recovering your cost in an income producing property and must be taken over the expected life of the property. Wwwhrblock com You can begin to depreciate rental property when it is ready and available for rent. Wwwhrblock com See Placed in Service under When Does Depreciation Begin and End in chapter 2. Wwwhrblock com Insurance premiums paid in advance. Wwwhrblock com 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. Wwwhrblock com You cannot deduct the total premium in the year you pay it. Wwwhrblock com See chapter 6 of Publication 535 for information on deductible premiums. Wwwhrblock com Interest expense. Wwwhrblock com You can deduct mortgage interest you pay on your rental property. Wwwhrblock com When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Wwwhrblock com Chapter 4 of Publication 535 explains mortgage interest in detail. Wwwhrblock com Expenses paid to obtain a mortgage. Wwwhrblock com Certain expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. Wwwhrblock com These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property. Wwwhrblock com Form 1098, Mortgage Interest Statement. Wwwhrblock com 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. Wwwhrblock com 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. Wwwhrblock com Attach a statement to your return showing the name and address of the other person. Wwwhrblock com On the dotted line next to line 13, enter “See attached. Wwwhrblock com ” Legal and other professional fees. Wwwhrblock com You can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. Wwwhrblock com For example, on your 2013 Schedule E you can deduct fees paid in 2013 to prepare Part I of your 2012 Schedule E. Wwwhrblock com 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. Wwwhrblock com Local benefit taxes. Wwwhrblock com 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. Wwwhrblock com These charges are nondepreciable capital expenditures and must be added to the basis of your property. Wwwhrblock com However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. Wwwhrblock com Local transportation expenses. Wwwhrblock com 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. Wwwhrblock com 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. Wwwhrblock com See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Wwwhrblock com 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. Wwwhrblock com For 2013, the standard mileage rate for business use is 56. Wwwhrblock com 5 cents per mile. Wwwhrblock com For more information, see chapter 4 of Publication 463. Wwwhrblock com To deduct car expenses under either method, you must keep records that follow the rules in chapter 5 of Publication 463. Wwwhrblock com In addition, you must complete Form 4562, Part V, and attach it to your tax return. Wwwhrblock com Pre-rental expenses. Wwwhrblock com You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. Wwwhrblock com Rental of equipment. Wwwhrblock com You can deduct the rent you pay for equipment that you use for rental purposes. Wwwhrblock com However, in some cases, lease contracts are actually purchase contracts. Wwwhrblock com If so, you cannot deduct these payments. Wwwhrblock com You can recover the cost of purchased equipment through depreciation. Wwwhrblock com Rental of property. Wwwhrblock com You can deduct the rent you pay for property that you use for rental purposes. Wwwhrblock com 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. Wwwhrblock com Travel expenses. Wwwhrblock com 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. Wwwhrblock com You must properly allocate your expenses between rental and nonrental activities. Wwwhrblock com You cannot deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. Wwwhrblock com The cost of improvements is recovered by taking depreciation. Wwwhrblock com For information on travel expenses, see chapter 1 of Publication 463. Wwwhrblock com To deduct travel expenses, you must keep records that follow the rules in chapter 5 of Publication 463. Wwwhrblock com Uncollected rent. Wwwhrblock com If you are a cash basis taxpayer, do not deduct uncollected rent. Wwwhrblock com Because you have not included it in your income, it is not deductible. Wwwhrblock com If you use an accrual method, report income when you earn it. Wwwhrblock com If you are unable to collect the rent, you may be able to deduct it as a business bad debt. Wwwhrblock com See chapter 10 of Publication 535 for more information about business bad debts. Wwwhrblock com Vacant rental property. Wwwhrblock com 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. Wwwhrblock com However, you cannot deduct any loss of rental income for the period the property is vacant. Wwwhrblock com Vacant while listed for sale. Wwwhrblock com 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. Wwwhrblock com If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. Wwwhrblock com Points The term “points” is often used to describe some of the charges paid, or treated as paid, by a borrower to take out a loan or a mortgage. Wwwhrblock com These charges are also called loan origination fees, maximum loan charges, or premium charges. Wwwhrblock com Any of these charges (points) that are solely for the use of money are interest. Wwwhrblock com Because points are prepaid interest, you generally cannot deduct the full amount in the year paid, but must deduct the interest over the term of the loan. Wwwhrblock com The method used to figure the amount of points you can deduct each year follows the original issue discount (OID) rules. Wwwhrblock com In this case, points are equivalent to OID, which is the difference between: The amount borrowed (redemption price at maturity, or principal) and The proceeds (issue price). Wwwhrblock com The first step is to determine whether your total OID (which you may have on bonds or other investments in addition to the mortgage loan), including the OID resulting from the points, is insignificant or de minimis. Wwwhrblock com If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct. Wwwhrblock com De minimis OID. Wwwhrblock com The OID is de minimis if it is less than one-fourth of 1% (. Wwwhrblock com 0025) of the stated redemption price at maturity (principal amount of the loan) multiplied by the number of full years from the date of original issue to maturity (term of the loan). Wwwhrblock com If the OID is de minimis, you can choose one of the following ways to figure the amount of points you can deduct each year. Wwwhrblock com On a constant-yield basis over the term of the loan. Wwwhrblock com On a straight line basis over the term of the loan. Wwwhrblock com In proportion to stated interest payments. Wwwhrblock com In its entirety at maturity of the loan. Wwwhrblock com You make this choice by deducting the OID (points) in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued. Wwwhrblock com Example. Wwwhrblock com Carol Madison took out a $100,000 mortgage loan on January 1, 2013, to buy a house she will use as a rental during 2013. Wwwhrblock com The loan is to be repaid over 30 years. Wwwhrblock com During 2013, Carol paid $10,000 of mortgage interest (stated interest) to the lender. Wwwhrblock com When the loan was made, she paid $1,500 in points to the lender. Wwwhrblock com The points reduced the principal amount of the loan from $100,000 to $98,500, resulting in $1,500 of OID. Wwwhrblock com Carol determines that the points (OID) she paid are de minimis based on the following computation. Wwwhrblock com Redemption price at maturity (principal amount of the loan) $100,000 Multiplied by: The term of the loan in complete years ×30 Multiplied by ×. Wwwhrblock com 0025 De minimis amount $7,500 The points (OID) she paid ($1,500) are less than the de minimis amount ($7,500). Wwwhrblock com Therefore, Carol has de minimis OID and she can choose one of the four ways discussed earlier to figure the amount she can deduct each year. Wwwhrblock com Under the straight line method, she can deduct $50 each year for 30 years. Wwwhrblock com Constant-yield method. Wwwhrblock com If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. Wwwhrblock com You figure your deduction for the first year in the following manner. Wwwhrblock com Determine the issue price of the loan. Wwwhrblock com If you paid points on the loan, the issue price generally is the difference between the principal and the points. Wwwhrblock com Multiply the result in (1) by the yield to maturity (defined later). Wwwhrblock com Subtract any qualified stated interest payments (defined later) from the result in (2). Wwwhrblock com This is the OID you can deduct in the first year. Wwwhrblock com Yield to maturity (YTM). Wwwhrblock com This rate is generally shown in the literature you receive from your lender. Wwwhrblock com If you do not have this information, consult your lender or tax advisor. Wwwhrblock com In general, the YTM is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan. Wwwhrblock com Qualified stated interest (QSI). Wwwhrblock com In general, this is the stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a fixed rate. Wwwhrblock com Example—Year 1. Wwwhrblock com The facts are the same as in the previous example. Wwwhrblock com The yield to maturity on Carol's loan is 10. Wwwhrblock com 2467%, compounded annually. Wwwhrblock com She figured the amount of points (OID) she could deduct in 2013 as follows. Wwwhrblock com Principal amount of the loan $100,000 Minus: Points (OID) –1,500 Issue price of the loan $98,500 Multiplied by: YTM × . Wwwhrblock com 102467 Total 10,093 Minus: QSI –10,000 Points (OID) deductible in 2013 $93 To figure your deduction in any subsequent year, you start with the adjusted issue price. Wwwhrblock com To get the adjusted issue price, add to the issue price figured in Year 1 any OID previously deducted. Wwwhrblock com Then follow steps (2) and (3), earlier. Wwwhrblock com Example—Year 2. Wwwhrblock com Carol figured the deduction for 2014 as follows. Wwwhrblock com Issue price $98,500 Plus: Points (OID) deducted in 2013 +93 Adjusted issue price $98,593 Multiplied by: YTM × . Wwwhrblock com 102467 Total 10,103 Minus: QSI –10,000 Points (OID) deductible in 2014 $103 Loan or mortgage ends. Wwwhrblock com If your loan or mortgage ends, you may be able to deduct any remaining points (OID) in the tax year in which the loan or mortgage ends. Wwwhrblock com A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event. Wwwhrblock com However, if the refinancing is with the same lender, the remaining points (OID) generally are not deductible in the year in which the refinancing occurs, but may be deductible over the term of the new mortgage or loan. Wwwhrblock com Points when loan refinance is more than the previous outstanding balance. Wwwhrblock com When you refinance a rental property for more than the previous outstanding balance, the portion of the points allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Wwwhrblock com For example, if an individual refinanced a loan with a balance of $100,000, the amount of the new loan was $120,000, and the taxpayer used $20,000 to purchase a car, points allocable to the $20,000 would be treated as nondeductible personal interest. Wwwhrblock com 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. Wwwhrblock com Improvements. Wwwhrblock com You must capitalize any expense you pay to improve your rental property. Wwwhrblock com 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. Wwwhrblock com Betterments. Wwwhrblock com 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. Wwwhrblock com Restoration. Wwwhrblock com 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. Wwwhrblock com Adaptation. Wwwhrblock com 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. Wwwhrblock com Separate the costs of repairs and improvements, and keep accurate records. Wwwhrblock com You will need to know the cost of improvements when you sell or depreciate your property. Wwwhrblock com The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. Wwwhrblock com Table 1-1. Wwwhrblock com Examples of Improvements Additions Bedroom Bathroom Deck Garage Porch Patio Lawn & Grounds Landscaping Driveway Walkway Fence Retaining wall Sprinkler system Swimming pool Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Plumbing Septic system Water heater Soft water system Filtration system Interior Improvements Built-in appliances Kitchen modernization Flooring Wall-to-wall carpeting Insulation Attic Walls, floor Pipes, duct work Prev Up Next Home More Online Publications