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1040nr Ez Software

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1040nr Ez Software

1040nr ez software 16. 1040nr ez software   Reporting Gains and Losses Table of Contents What's New Introduction Useful Items - You may want to see: Reporting Capital Gains and Losses Exception 1. 1040nr ez software Exception 2. 1040nr ez software File Form 1099-B or Form 1099-S with the IRS. 1040nr ez software Capital Losses Capital Gain Tax Rates What's New Maximum capital gain rates. 1040nr ez software . 1040nr ez software  For 2013, the maximum capital gain rates are 0%, 15%, 20%, 25%, and 28%. 1040nr ez software Introduction This chapter discusses how to report capital gains and losses from sales, exchanges, and other dispositions of investment property on Form 8949 and Schedule D (Form 1040). 1040nr ez software The discussion includes the following topics. 1040nr ez software How to report short-term gains and losses. 1040nr ez software How to report long-term gains and losses. 1040nr ez software How to figure capital loss carryovers. 1040nr ez software How to figure your tax on a net capital gain. 1040nr ez software If you sell or otherwise dispose of property used in a trade or business or for the production of income, see Publication 544, Sales and Other Dispositions of Assets, before completing Schedule D (Form 1040). 1040nr ez software Useful Items - You may want to see: Publication 537 Installment Sales 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses Form (and Instructions) 4797 Sales of Business Property 6252 Installment Sale Income 8582 Passive Activity Loss Limitations 8949 Sales and Other Dispositions of Capital Assets Schedule D (Form 1040) Capital Gains and Losses Reporting Capital Gains and Losses Generally, report capital gains and losses on Form 8949. 1040nr ez software Complete Form 8949 before you complete line 1b, 2, 3, 8b, 9, or 10 of Schedule D (Form 1040). 1040nr ez software Use Form 8949 to report: The sale or exchange of a capital asset not reported on another form or schedule; Gains from involuntary conversions (other than from casualty or theft) of capital assets not held for business or profit; and Nonbusiness bad debts. 1040nr ez software Use Schedule D (Form 1040): To figure the overall gain or loss from transactions reported on Form 8949; To report a gain from Form 6252 or Part I of Form 4797; To report a gain or loss from Form 4684, 6781, or 8824; To report capital gain distributions not reported directly on Form 1040 or Form 1040A; To report a capital loss carryover from the previous tax year to the current tax year; To report your share of a gain or (loss) from a partnership, S corporation, estate, or trust; To report transactions reported to you on a Form 1099-B (or substitute statement) showing basis was reported to the IRS and to which none of the Form 8949 adjustments or codes apply; and To report undistributed long-term capital gains from Form 2439. 1040nr ez software On Form 8949, enter all sales and exchanges of capital assets, including stocks, bonds, etc. 1040nr ez software , and real estate (if not reported on Form 4684, 4797, 6252, 6781, 8824, or line 1a or 8a of Schedule D). 1040nr ez software Include these transactions even if you did not receive a Form 1099-B or 1099-S (or substitute statement) for the transaction. 1040nr ez software Report short-term gains or losses in Part I. 1040nr ez software Report long-term gains or losses in Part II. 1040nr ez software Use as many Forms 8949 as you need. 1040nr ez software Exceptions to filing Form 8949 and Schedule D (Form 1040). 1040nr ez software   There are certain situations where you may not have to file Form 8949 and/or Schedule D (Form 1040). 1040nr ez software Exception 1. 1040nr ez software   You do not have to file Form 8949 or Schedule D (Form 1040) if you have no capital losses and your only capital gains are capital gain distributions from Form(s) 1099-DIV, box 2a (or substitute statements). 1040nr ez software (If any Form(s) 1099-DIV (or substitute statements) you receive have an amount in box 2b (unrecaptured section 1250 gain), box 2c (section 1202 gain), or box 2d (collectibles (28%) gain), you do not qualify for this exception. 1040nr ez software ) If you qualify for this exception, report your capital gain distributions directly on line 13 of Form 1040 (and check the box on line 13). 1040nr ez software Also use the Qualified Dividends and Capital Gain Tax Worksheet in the Form 1040 instructions to figure your tax. 1040nr ez software You can report your capital gain distributions on line 10 of Form 1040A, instead of on Form 1040, if none of the Forms 1099-DIV (or substitute statements) you received have an amount in box 2b, 2c, or 2d, and you do not have to file Form 1040. 1040nr ez software Exception 2. 1040nr ez software   You must file Schedule D (Form 1040), but generally do not have to file Form 8949, if Exception 1 does not apply and your only capital gains and losses are: Capital gain distributions; A capital loss carryover; A gain from Form 2439 or 6252 or Part I of Form 4797; A gain or loss from Form 4684, 6781, or 8824; A gain or loss from a partnership, S corporation, estate, or trust; or Gains and losses from transactions for which you received a Form 1099-B (or substitute statement) that shows the basis was reported to the IRS and for which you do not need to make any adjustments in column (g) of Form 8949 or enter any codes in column (f) of Form 8949. 1040nr ez software Installment sales. 1040nr ez software   You cannot use the installment method to report a gain from the sale of stock or securities traded on an established securities market. 1040nr ez software You must report the entire gain in the year of sale (the year in which the trade date occurs). 1040nr ez software Passive activity gains and losses. 1040nr ez software    If you have gains or losses from a passive activity, you may also have to report them on Form 8582. 1040nr ez software In some cases, the loss may be limited under the passive activity rules. 1040nr ez software Refer to Form 8582 and its instructions for more information about reporting capital gains and losses from a passive activity. 1040nr ez software Form 1099-B transactions. 1040nr ez software   If you sold property, such as stocks, bonds, or certain commodities, through a broker, you should receive Form 1099-B or substitute statement from the broker. 1040nr ez software Use the Form 1099-B or the substitute statement to complete Form 8949. 1040nr ez software If you sold a covered security in 2013, your broker should send you a Form 1099-B (or substitute statement) that shows your basis. 1040nr ez software This will help you complete Form 8949. 1040nr ez software Generally, a covered security is a security you acquired after 2010. 1040nr ez software   Report the gross proceeds shown in box 2a of Form 1099-B as the sales price in column (d) of either Part I or Part II of Form 8949, whichever applies. 1040nr ez software However, if the broker advises you, in box 2a of Form 1099-B, that gross proceeds (sales price) less commissions and option premiums were reported to the IRS, enter that net sales price in column (d) of either Part I or Part II of Form 8949, whichever applies. 1040nr ez software    Include in column (g) any expense of sale, such as broker's fees, commissions, state and local transfer taxes, and option premiums, unless you reported the net sales price in column (d). 1040nr ez software If you include an expense of sale in column (g), enter “E” in column (f). 1040nr ez software Form 1099-CAP transactions. 1040nr ez software   If a corporation in which you own stock has had a change in control or a substantial change in capital structure, you should receive Form 1099-CAP or a substitute statement from the corporation. 1040nr ez software Use the Form 1099-CAP or substitute statement to fill in Form 8949. 1040nr ez software If your computations show that you would have a loss because of the change, do not enter any amounts on Form 8949 or Schedule D (Form 1040). 1040nr ez software You cannot claim a loss on Schedule D (Form 1040) as a result of this transaction. 1040nr ez software   Report the aggregate amount received shown in box 2 of Form 1099-CAP as the sales price in column (d) of either Part I or Part II of Form 8949, whichever applies. 1040nr ez software Form 1099-S transactions. 1040nr ez software   If you sold or traded reportable real estate, you generally should receive from the real estate reporting person a Form 1099-S showing the gross proceeds. 1040nr ez software    “Reportable real estate” is defined as any present or future ownership interest in any of the following: Improved or unimproved land, including air space; Inherently permanent structures, including any residential, commercial, or industrial building; A condominium unit and its accessory fixtures and common elements, including land; and Stock in a cooperative housing corporation (as defined in section 216 of the Internal Revenue Code). 1040nr ez software   A “real estate reporting person” could include the buyer's attorney, your attorney, the title or escrow company, a mortgage lender, your broker, the buyer's broker, or the person acquiring the biggest interest in the property. 1040nr ez software   Your Form 1099-S will show the gross proceeds from the sale or exchange in box 2. 1040nr ez software See the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040) for how to report these transactions and include them in Part I or Part II of Form 8949 as appropriate. 1040nr ez software However, report like-kind exchanges on Form 8824 instead. 1040nr ez software   It is unlawful for any real estate reporting person to separately charge you for complying with the requirement to file Form 1099-S. 1040nr ez software Nominees. 1040nr ez software   If you receive gross proceeds as a nominee (that is, the gross proceeds are in your name but actually belong to someone else), see the Instructions for Form 8949 for how to report these amounts on Form 8949. 1040nr ez software File Form 1099-B or Form 1099-S with the IRS. 1040nr ez software   If you received gross proceeds as a nominee in 2013, you must file a Form 1099-B or Form 1099-S for those proceeds with the IRS. 1040nr ez software Send the Form 1099-B or Form 1099-S with a Form 1096, Annual Summary and Transmittal of U. 1040nr ez software S. 1040nr ez software Information Returns, to your Internal Revenue Service Center by February 28, 2014 (March 31, 2014, if you file Form 1099-B or Form 1099-S electronically). 1040nr ez software Give the actual owner of the proceeds Copy B of the Form 1099-B or Form 1099-S by February 18, 2014. 1040nr ez software On Form 1099-B, you should be listed as the “Payer. 1040nr ez software ” The other owner should be listed as the “Recipient. 1040nr ez software ” On Form 1099-S, you should be listed as the “Filer. 1040nr ez software ” The other owner should be listed as the “Transferor. 1040nr ez software ” You do not have to file a Form 1099-B or Form 1099-S to show proceeds for your spouse. 1040nr ez software For more information about the reporting requirements and the penalties for failure to file (or furnish) certain information returns, see the General Instructions for Certain Information Returns. 1040nr ez software If you are filing electronically see Publication 1220. 1040nr ez software Sale of property bought at various times. 1040nr ez software   If you sell a block of stock or other property that you bought at various times, report the short-term gain or loss from the sale on one row in Part I of Form 8949, and the long-term gain or loss on one row in Part II of Form 8949. 1040nr ez software Write “Various” in column (b) for the “Date acquired. 1040nr ez software ” Sale expenses. 1040nr ez software    On Form 8949, include in column (g) any expense of sale, such as broker's fees, commissions, state and local transfer taxes, and option premiums, unless you reported the net sales price in column (d). 1040nr ez software If you include an expense of sale in column (g), enter “E” in column (f). 1040nr ez software   For more information about adjustments to basis, see chapter 13. 1040nr ez software Short-term gains and losses. 1040nr ez software   Capital gain or loss on the sale or trade of investment property held 1 year or less is a short-term capital gain or loss. 1040nr ez software You report it in Part I of Form 8949. 1040nr ez software   You combine your share of short-term capital gain or loss from partnerships, S corporations, estates, and trusts, and any short-term capital loss carryover, with your other short-term capital gains and losses to figure your net short-term capital gain or loss on line 7 of Schedule D (Form 1040). 1040nr ez software Long-term gains and losses. 1040nr ez software    A capital gain or loss on the sale or trade of investment property held more than 1 year is a long-term capital gain or loss. 1040nr ez software You report it in Part II of Form 8949. 1040nr ez software   You report the following in Part II of Schedule D (Form 1040): Undistributed long-term capital gains from a mutual fund (or other regulated investment company) or real estate investment trust (REIT); Your share of long-term capital gains or losses from partnerships, S corporations, estates, and trusts; All capital gain distributions from mutual funds and REITs not reported directly on line 10 of Form 1040A or line 13 of Form 1040; and Long-term capital loss carryovers. 1040nr ez software    The result after combining these items with your other long-term capital gains and losses is your net long-term capital gain or loss (Schedule D (Form 1040), line 15). 1040nr ez software Total net gain or loss. 1040nr ez software   To figure your total net gain or loss, combine your net short-term capital gain or loss (Schedule D (Form 1040), line 7) with your net long-term capital gain or loss (Schedule D (Form 1040), line 15). 1040nr ez software Enter the result on Schedule D (Form 1040), Part III, line 16. 1040nr ez software If your losses are more than your gains, see Capital Losses , next. 1040nr ez software If both lines 15 and 16 of your Schedule D (Form 1040) are gains and your taxable income on your Form 1040 is more than zero, see Capital Gain Tax Rates , later. 1040nr ez software Capital Losses If your capital losses are more than your capital gains, you can claim a capital loss deduction. 1040nr ez software Report the amount of the deduction on line 13 of Form 1040, in parentheses. 1040nr ez software Limit on deduction. 1040nr ez software   Your allowable capital loss deduction, figured on Schedule D (Form 1040), is the lesser of: $3,000 ($1,500 if you are married and file a separate return); or Your total net loss as shown on line 16 of Schedule D (Form 1040). 1040nr ez software   You can use your total net loss to reduce your income dollar for dollar, up to the $3,000 limit. 1040nr ez software Capital loss carryover. 1040nr ez software   If you have a total net loss on line 16 of Schedule D (Form 1040) that is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you had incurred it in that next year. 1040nr ez software If part of the loss is still unused, you can carry it over to later years until it is completely used up. 1040nr ez software   When you figure the amount of any capital loss carryover to the next year, you must take the current year's allowable deduction into account, whether or not you claimed it and whether or not you filed a return for the current year. 1040nr ez software   When you carry over a loss, it remains long term or short term. 1040nr ez software A long-term capital loss you carry over to the next tax year will reduce that year's long-term capital gains before it reduces that year's short-term capital gains. 1040nr ez software Figuring your carryover. 1040nr ez software   The amount of your capital loss carryover is the amount of your total net loss that is more than the lesser of: Your allowable capital loss deduction for the year; or Your taxable income increased by your allowable capital loss deduction for the year and your deduction for personal exemptions. 1040nr ez software   If your deductions are more than your gross income for the tax year, use your negative taxable income in computing the amount in item (2). 1040nr ez software    Complete the Capital Loss Carryover Worksheet in the Instructions for Schedule D or Publication 550 to determine the part of your capital loss that you can carry over. 1040nr ez software Example. 1040nr ez software Bob and Gloria sold securities in 2013. 1040nr ez software The sales resulted in a capital loss of $7,000. 1040nr ez software They had no other capital transactions. 1040nr ez software Their taxable income was $26,000. 1040nr ez software On their joint 2013 return, they can deduct $3,000. 1040nr ez software The unused part of the loss, $4,000 ($7,000 − $3,000), can be carried over to 2014. 1040nr ez software If their capital loss had been $2,000, their capital loss deduction would have been $2,000. 1040nr ez software They would have no carryover. 1040nr ez software Use short-term losses first. 1040nr ez software   When you figure your capital loss carryover, use your short-term capital losses first, even if you incurred them after a long-term capital loss. 1040nr ez software If you have not reached the limit on the capital loss deduction after using the short-term capital losses, use the long-term capital losses until you reach the limit. 1040nr ez software Decedent's capital loss. 1040nr ez software    A capital loss sustained by a decedent during his or her last tax year (or carried over to that year from an earlier year) can be deducted only on the final income tax return filed for the decedent. 1040nr ez software The capital loss limits discussed earlier still apply in this situation. 1040nr ez software The decedent's estate cannot deduct any of the loss or carry it over to following years. 1040nr ez software Joint and separate returns. 1040nr ez software   If you and your spouse once filed separate returns and are now filing a joint return, combine your separate capital loss carryovers. 1040nr ez software However, if you and your spouse once filed a joint return and are now filing separate returns, any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss. 1040nr ez software Capital Gain Tax Rates The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income. 1040nr ez software These lower rates are called the maximum capital gain rates. 1040nr ez software The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. 1040nr ez software For 2013, the maximum capital gain rates are 0%, 15%, 20%, 25%, and 28%. 1040nr ez software See Table 16-1 for details. 1040nr ez software If you figure your tax using the maximum capital gain rate and the regular tax computation results in a lower tax, the regular tax computation applies. 1040nr ez software Example. 1040nr ez software All of your net capital gain is from selling collectibles, so the capital gain rate would be 28%. 1040nr ez software If you are otherwise subject to a rate lower than 28%, the 28% rate does not apply. 1040nr ez software Investment interest deducted. 1040nr ez software   If you claim a deduction for investment interest, you may have to reduce the amount of your net capital gain that is eligible for the capital gain tax rates. 1040nr ez software Reduce it by the amount of the net capital gain you choose to include in investment income when figuring the limit on your investment interest deduction. 1040nr ez software This is done on the Schedule D Tax Worksheet or the Qualified Dividends and Capital Gain Tax Worksheet. 1040nr ez software For more information about the limit on investment interest, see Interest Expenses in chapter 3 of Publication 550. 1040nr ez software Table 16-1. 1040nr ez software What Is Your Maximum Capital Gain Rate? IF your net capital gain is from . 1040nr ez software . 1040nr ez software . 1040nr ez software THEN your  maximum capital gain rate is . 1040nr ez software . 1040nr ez software . 1040nr ez software a collectibles gain 28% an eligible gain on qualified small business stock minus the section 1202 exclusion 28% an unrecaptured section 1250 gain 25% other gain1 and the regular tax rate that would apply is 39. 1040nr ez software 6% 20% other gain1 and the regular tax rate that would apply is 25%, 28%, 33%, or 35% 15% other gain1 and the regular tax rate that would apply is 10% or 15% 0% 1 Other gain means any gain that is not collectibles gain, gain on qualified small business stock, or unrecaptured section 1250 gain. 1040nr ez software     Collectibles gain or loss. 1040nr ez software   This is gain or loss from the sale or trade of a work of art, rug, antique, metal (such as gold, silver, and platinum bullion), gem, stamp, coin, or alcoholic beverage held more than 1 year. 1040nr ez software   Collectibles gain includes gain from sale of an interest in a partnership, S corporation, or trust due to unrealized appreciation of collectibles. 1040nr ez software Gain on qualified small business stock. 1040nr ez software    If you realized a gain from qualified small business stock that you held more than 5 years, you generally can exclude some or all of your gain under section 1202. 1040nr ez software The eligible gain minus your section 1202 exclusion is a 28% rate gain. 1040nr ez software See Gains on Qualified Small Business Stock in chapter 4 of Publication 550. 1040nr ez software Unrecaptured section 1250 gain. 1040nr ez software    Generally, this is any part of your capital gain from selling section 1250 property (real property) that is due to depreciation (but not more than your net section 1231 gain), reduced by any net loss in the 28% group. 1040nr ez software Use the Unrecaptured Section 1250 Gain Worksheet in the Schedule D (Form 1040) instructions to figure your unrecaptured section 1250 gain. 1040nr ez software For more information about section 1250 property and section 1231 gain, see chapter 3 of Publication 544. 1040nr ez software Tax computation using maximum capital gain rates. 1040nr ez software   Use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet (whichever applies) to figure your tax if you have qualified dividends or net capital gain. 1040nr ez software You have net capital gain if Schedule D (Form 1040), lines 15 and 16, are both gains. 1040nr ez software Schedule D Tax Worksheet. 1040nr ez software   Use the Schedule D Tax Worksheet in the Schedule D (Form 1040) instructions to figure your tax if: You have to file Schedule D (Form 1040); and Schedule D (Form 1040), line 18 (28% rate gain) or line 19 (unrecaptured section 1250 gain), is more than zero. 1040nr ez software Qualified Dividends and Capital Gain Tax Worksheet. 1040nr ez software   If you do not have to use the Schedule D Tax Worksheet (as explained above) and any of the following apply, use the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040 or Form 1040A (whichever you file) to figure your tax. 1040nr ez software You received qualified dividends. 1040nr ez software (See Qualified Dividends in chapter 8. 1040nr ez software ) You do not have to file Schedule D (Form 1040) and you received capital gain distributions. 1040nr ez software (See Exceptions to filing Form 8949 and Schedule D (Form 1040) , earlier. 1040nr ez software ) Schedule D (Form 1040), lines 15 and 16, are both more than zero. 1040nr ez software Alternative minimum tax. 1040nr ez software   These capital gain rates are also used in figuring alternative minimum tax. 1040nr ez software Prev  Up  Next   Home   More Online Publications
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The 1040nr Ez Software

1040nr ez software 15. 1040nr ez software   Selling Your Home Table of Contents Reminder Introduction Useful Items - You may want to see: Main Home Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Business Use or Rental of Home Reporting the SaleSeller-financed mortgage. 1040nr ez software More information. 1040nr ez software Special SituationsException for sales to related persons. 1040nr ez software Recapturing (Paying Back) a Federal Mortgage Subsidy Reminder Home sold with undeducted points. 1040nr ez software  If you have not deducted all the points you paid to secure a mortgage on your old home, you may be able to deduct the remaining points in the year of the sale. 1040nr ez software See Mortgage ending early under Points in chapter 23. 1040nr ez software Introduction This chapter explains the tax rules that apply when you sell your main home. 1040nr ez software In most cases, your main home is the one in which you live most of the time. 1040nr ez software If you sold your main home in 2013, you may be able to exclude from income any gain up to a limit of $250,000 ($500,000 on a joint return in most cases). 1040nr ez software See Excluding the Gain , later. 1040nr ez software Generally, if you can exclude all the gain, you do not need to report the sale on your tax return. 1040nr ez software If you have gain that cannot be excluded, it is taxable. 1040nr ez software Report it on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D (Form 1040). 1040nr ez software You may also have to complete Form 4797, Sales of Business Property. 1040nr ez software See Reporting the Sale , later. 1040nr ez software If you have a loss on the sale, you generally cannot deduct it on your return. 1040nr ez software However, you may need to report it. 1040nr ez software See Reporting the Sale , later. 1040nr ez software The following are main topics in this chapter. 1040nr ez software Figuring gain or loss. 1040nr ez software Basis. 1040nr ez software Excluding the gain. 1040nr ez software Ownership and use tests. 1040nr ez software Reporting the sale. 1040nr ez software Other topics include the following. 1040nr ez software Business use or rental of home. 1040nr ez software Recapturing a federal mortgage subsidy. 1040nr ez software Useful Items - You may want to see: Publication 523 Selling Your Home 530 Tax Information for Homeowners 547 Casualties, Disasters, and Thefts Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 982 Reduction of Tax Attributes Due to Discharge of Indebtedness 8828 Recapture of Federal Mortgage Subsidy 8949 Sales and Other Dispositions of Capital Assets Main Home This section explains the term “main home. 1040nr ez software ” Usually, the home you live in most of the time is your main home and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. 1040nr ez software To exclude gain under the rules of this chapter, you in most cases must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. 1040nr ez software Land. 1040nr ez software   If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land. 1040nr ez software However, if you sell vacant land used as part of your main home and that is adjacent to it, you may be able to exclude the gain from the sale under certain circumstances. 1040nr ez software See Vacant land under Main Home in Publication 523 for more information. 1040nr ez software Example. 1040nr ez software You buy a piece of land and move your main home to it. 1040nr ez software Then you sell the land on which your main home was located. 1040nr ez software This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. 1040nr ez software More than one home. 1040nr ez software   If you have more than one home, you can exclude gain only from the sale of your main home. 1040nr ez software You must include in income gain from the sale of any other home. 1040nr ez software If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time during the year. 1040nr ez software Example 1. 1040nr ez software You own two homes, one in New York and one in Florida. 1040nr ez software From 2009 through 2013, you live in the New York home for 7 months and in the Florida residence for 5 months of each year. 1040nr ez software In the absence of facts and circumstances indicating otherwise, the New York home is your main home. 1040nr ez software You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. 1040nr ez software Example 2. 1040nr ez software You own a house, but you live in another house that you rent. 1040nr ez software The rented house is your main home. 1040nr ez software Example 3. 1040nr ez software You own two homes, one in Virginia and one in New Hampshire. 1040nr ez software In 2009 and 2010, you lived in the Virginia home. 1040nr ez software In 2011 and 2012, you lived in the New Hampshire home. 1040nr ez software In 2013, you lived again in the Virginia home. 1040nr ez software Your main home in 2009, 2010, and 2013 is the Virginia home. 1040nr ez software Your main home in 2011 and 2012 is the New Hampshire home. 1040nr ez software You would be eligible to exclude gain from the sale of either home (but not both) in 2013. 1040nr ez software Property used partly as your main home. 1040nr ez software   If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. 1040nr ez software For details, see Business Use or Rental of Home , later. 1040nr ez software Figuring Gain or Loss To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. 1040nr ez software Subtract the adjusted basis from the amount realized to get your gain or loss. 1040nr ez software     Selling price     − Selling expenses       Amount realized       Amount realized     − Adjusted basis       Gain or loss   Selling Price The selling price is the total amount you receive for your home. 1040nr ez software It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale. 1040nr ez software Payment by employer. 1040nr ez software   You may have to sell your home because of a job transfer. 1040nr ez software If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. 1040nr ez software Your employer will include it as wages in box 1 of your Form W-2, and you will include it in your income on Form 1040, line 7. 1040nr ez software Option to buy. 1040nr ez software   If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. 1040nr ez software If the option is not exercised, you must report the amount as ordinary income in the year the option expires. 1040nr ez software Report this amount on Form 1040, line 21. 1040nr ez software Form 1099-S. 1040nr ez software   If you received Form 1099-S, Proceeds From Real Estate Transactions, box 2 (Gross proceeds) should show the total amount you received for your home. 1040nr ez software   However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. 1040nr ez software Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. 1040nr ez software Amount Realized The amount realized is the selling price minus selling expenses. 1040nr ez software Selling expenses. 1040nr ez software   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. 1040nr ez software ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. 1040nr ez software This adjusted basis must be determined before you can figure gain or loss on the sale of your home. 1040nr ez software For information on how to figure your home's adjusted basis, see Determining Basis , later. 1040nr ez software Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. 1040nr ez software Gain on sale. 1040nr ez software   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, in most cases is taxable. 1040nr ez software Loss on sale. 1040nr ez software   If the amount realized is less than the adjusted basis, the difference is a loss. 1040nr ez software A loss on the sale of your main home cannot be deducted. 1040nr ez software Jointly owned home. 1040nr ez software   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. 1040nr ez software Separate returns. 1040nr ez software   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. 1040nr ez software Your ownership interest is generally determined by state law. 1040nr ez software Joint owners not married. 1040nr ez software   If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. 1040nr ez software Each of you applies the rules discussed in this chapter on an individual basis. 1040nr ez software Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. 1040nr ez software Foreclosure or repossession. 1040nr ez software   If your home was foreclosed on or repossessed, you have a disposition. 1040nr ez software See Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments, to determine if you have ordinary income, gain, or loss. 1040nr ez software Abandonment. 1040nr ez software   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. 1040nr ez software Trading (exchanging) homes. 1040nr ez software   If you trade your old home for another home, treat the trade as a sale and a purchase. 1040nr ez software Example. 1040nr ez software You owned and lived in a home with an adjusted basis of $41,000. 1040nr ez software A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. 1040nr ez software This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 – $41,000). 1040nr ez software If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed). 1040nr ez software Transfer to spouse. 1040nr ez software   If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss. 1040nr ez software This is true even if you receive cash or other consideration for the home. 1040nr ez software As a result, the rules in this chapter do not apply. 1040nr ez software More information. 1040nr ez software   If you need more information, see Transfer to spouse in Publication 523 and Property Settlements in Publication 504, Divorced or Separated Individuals. 1040nr ez software Involuntary conversion. 1040nr ez software   You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. 1040nr ez software This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations . 1040nr ez software Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. 1040nr ez software Your basis in your home is determined by how you got the home. 1040nr ez software Generally, your basis is its cost if you bought it or built it. 1040nr ez software If you got it in some other way (inheritance, gift, etc. 1040nr ez software ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. 1040nr ez software While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. 1040nr ez software The result of these adjustments is your home's adjusted basis, which is used to figure gain or loss on the sale of your home. 1040nr ez software See Adjusted Basis , later. 1040nr ez software You can find more information on basis and adjusted basis in chapter 13 of this publication and in Publication 523. 1040nr ez software Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. 1040nr ez software Purchase. 1040nr ez software   If you bought your home, your basis is its cost to you. 1040nr ez software This includes the purchase price and certain settlement or closing costs. 1040nr ez software In most cases, your purchase price includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home. 1040nr ez software If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed in Publication 523. 1040nr ez software Settlement fees or closing costs. 1040nr ez software   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. 1040nr ez software You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. 1040nr ez software A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing). 1040nr ez software    Chapter 13 lists some of the settlement fees and closing costs that you can include in the basis of property, including your home. 1040nr ez software It also lists some settlement costs that cannot be included in basis. 1040nr ez software   Also see Publication 523 for additional items and a discussion of basis other than cost. 1040nr ez software Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. 1040nr ez software To figure your adjusted basis, you can use Worksheet 1 in Publication 523. 1040nr ez software Do not use Worksheet 1 if you acquired an interest in your home from a decedent who died in 2010 and whose executor filed Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent. 1040nr ez software Increases to basis. 1040nr ez software   These include the following. 1040nr ez software Additions and other improvements that have a useful life of more than 1 year. 1040nr ez software Special assessments for local improvements. 1040nr ez software Amounts you spent after a casualty to restore damaged property. 1040nr ez software Improvements. 1040nr ez software   These add to the value of your home, prolong its useful life, or adapt it to new uses. 1040nr ez software You add the cost of additions and other improvements to the basis of your property. 1040nr ez software   For example, putting a recreation room or another bathroom in your unfinished basement, putting up a new fence, putting in new plumbing or wiring, putting on a new roof, or paving your unpaved driveway are improvements. 1040nr ez software An addition to your house, such as a new deck, a sunroom, or a new garage, is also an improvement. 1040nr ez software Repairs. 1040nr ez software   These maintain your home in good condition but do not add to its value or prolong its life. 1040nr ez software You do not add their cost to the basis of your property. 1040nr ez software   Examples of repairs include repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes. 1040nr ez software Decreases to basis. 1040nr ez software   These include the following. 1040nr ez software Discharge of qualified principal residence indebtedness that was excluded from income. 1040nr ez software Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. 1040nr ez software For details, see Publication 4681. 1040nr ez software Gain you postponed from the sale of a previous home before May 7, 1997. 1040nr ez software Deductible casualty losses. 1040nr ez software Insurance payments you received or expect to receive for casualty losses. 1040nr ez software Payments you received for granting an easement or right-of-way. 1040nr ez software Depreciation allowed or allowable if you used your home for business or rental purposes. 1040nr ez software Energy-related credits allowed for expenditures made on the residence. 1040nr ez software (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. 1040nr ez software ) Adoption credit you claimed for improvements added to the basis of your home. 1040nr ez software Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. 1040nr ez software Energy conservation subsidy excluded from your gross income because you received it (directly or indirectly) from a public utility after 1992 to buy or install any energy conservation measure. 1040nr ez software An energy conservation measure is an installation or modification primarily designed either to reduce consumption of electricity or natural gas or to improve the management of energy demand for a home. 1040nr ez software District of Columbia first-time homebuyer credit (allowed on the purchase of a principal residence in the District of Columbia beginning on August 5, 1997 and before January 1, 2012). 1040nr ez software General sales taxes (allowed beginning 2004 and ending before 2014) claimed as an itemized deduction on Schedule A (Form 1040) that were imposed on the purchase of personal property, such as a houseboat used as your home or a mobile home. 1040nr ez software Discharges of qualified principal residence indebtedness. 1040nr ez software   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. 1040nr ez software This exclusion applies to discharges made after 2006 and before 2014. 1040nr ez software If you choose to exclude this income, you must reduce (but not below zero) the basis of the principal residence by the amount excluded from your gross income. 1040nr ez software   File Form 982 with your tax return. 1040nr ez software See the form's instructions for detailed information. 1040nr ez software Recordkeeping. 1040nr ez software You should keep records to prove your home's adjusted basis. 1040nr ez software Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. 1040nr ez software But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. 1040nr ez software Keep records proving the basis of both homes as long as they are needed for tax purposes. 1040nr ez software The records you should keep include: Proof of the home's purchase price and purchase expenses, Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis, Any worksheets or other computations you used to figure the adjusted basis of the home you sold, the gain or loss on the sale, the exclusion, and the taxable gain, Any Form 982 you filed to report any discharge of qualified principal residence indebtedness, Any Form 2119, Sale of Your Home, you filed to postpone gain from the sale of a previous home before May 7, 1997, and Any worksheets you used to prepare Form 2119, such as the Adjusted Basis of Home Sold Worksheet or the Capital Improvements Worksheet from the Form 2119 instructions, or other source of computations. 1040nr ez software Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. 1040nr ez software This means that, if you qualify, you will not have to pay tax on the gain up to the limit described under Maximum Exclusion , next. 1040nr ez software To qualify, you must meet the ownership and use tests described later. 1040nr ez software You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. 1040nr ez software You can use Worksheet 2 in Publication 523 to figure the amount of your exclusion and your taxable gain, if any. 1040nr ez software If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. 1040nr ez software See Publication 505, Tax Withholding and Estimated Tax. 1040nr ez software Maximum Exclusion You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. 1040nr ez software You meet the ownership test. 1040nr ez software You meet the use test. 1040nr ez software During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. 1040nr ez software For details on gain allocated to periods of nonqualified use, see Periods of nonqualified use , later. 1040nr ez software You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . 1040nr ez software Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. 1040nr ez software This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). 1040nr ez software Exception. 1040nr ez software   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. 1040nr ez software However, the maximum amount you may be able to exclude will be reduced. 1040nr ez software See Reduced Maximum Exclusion , later. 1040nr ez software Example 1—home owned and occupied for at least 2 years. 1040nr ez software Mya bought and moved into her main home in September 2011. 1040nr ez software She sold the home at a gain in October 2013. 1040nr ez software During the 5-year period ending on the date of sale in October 2013, she owned and lived in the home for more than 2 years. 1040nr ez software She meets the ownership and use tests. 1040nr ez software Example 2—ownership test met but use test not met. 1040nr ez software Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. 1040nr ez software He later sold the home for a gain. 1040nr ez software He owned the home during the entire 5-year period ending on the date of sale. 1040nr ez software He meets the ownership test but not the use test. 1040nr ez software He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). 1040nr ez software Period of Ownership and Use The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time. 1040nr ez software You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale. 1040nr ez software Temporary absence. 1040nr ez software   Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. 1040nr ez software The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. 1040nr ez software Example 1. 1040nr ez software David Johnson, who is single, bought and moved into his home on February 1, 2011. 1040nr ez software Each year during 2011 and 2012, David left his home for a 2-month summer vacation. 1040nr ez software David sold the house on March 1, 2013. 1040nr ez software Although the total time David used his home is less than 2 years (21 months), he meets the requirement and may exclude gain. 1040nr ez software The 2-month vacations are short temporary absences and are counted as periods of use in determining whether David used the home for the required 2 years. 1040nr ez software Example 2. 1040nr ez software Professor Paul Beard, who is single, bought and moved into a house on August 18, 2010. 1040nr ez software He lived in it as his main home continuously until January 5, 2012, when he went abroad for a 1-year sabbatical leave. 1040nr ez software On February 6, 2013, 1 month after returning from the leave, Paul sold the house at a gain. 1040nr ez software Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. 1040nr ez software He cannot exclude any part of his gain, because he did not use the residence for the required 2 years. 1040nr ez software Ownership and use tests met at different times. 1040nr ez software   You can meet the ownership and use tests during different 2-year periods. 1040nr ez software However, you must meet both tests during the 5-year period ending on the date of the sale. 1040nr ez software Example. 1040nr ez software Beginning in 2002, Helen Jones lived in a rented apartment. 1040nr ez software The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. 1040nr ez software In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. 1040nr ez software On July 12, 2013, while still living in her daughter's home, she sold her condominium. 1040nr ez software Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 13, 2008, to July 12, 2013, the date she sold the condominium. 1040nr ez software She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). 1040nr ez software She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). 1040nr ez software The time Helen lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use. 1040nr ez software Cooperative apartment. 1040nr ez software   If you sold stock as a tenant-stockholder in a cooperative housing corporation, the ownership and use tests are met if, during the 5-year period ending on the date of sale, you: Owned the stock for at least 2 years, and Lived in the house or apartment that the stock entitles you to occupy as your main home for at least 2 years. 1040nr ez software Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. 1040nr ez software Exception for individuals with a disability. 1040nr ez software   There is an exception to the use test if: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home. 1040nr ez software Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. 1040nr ez software If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. 1040nr ez software Previous home destroyed or condemned. 1040nr ez software   For the ownership and use tests, you add the time you owned and lived in a previous home that was destroyed or condemned to the time you owned and lived in the replacement home on whose sale you wish to exclude gain. 1040nr ez software This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home. 1040nr ez software Otherwise, you must have owned and lived in the same home for 2 of the 5 years before the sale to qualify for the exclusion. 1040nr ez software Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. 1040nr ez software   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on “qualified official extended duty” as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. 1040nr ez software You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve outside the United States either as an employee of the Peace Corps on "qualified official extended duty" or as an enrolled volunteer or volunteer leader of the Peace Corps. 1040nr ez software This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. 1040nr ez software   If this helps you qualify to exclude gain, you can choose to have the 5-year test period suspended by filing a return for the year of sale that does not include the gain. 1040nr ez software For more information about the suspension of the 5-year test period, see Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps in Publication 523. 1040nr ez software Married Persons If you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use tests, you can exclude up to $250,000 of the gain. 1040nr ez software (But see Special rules for joint returns , next. 1040nr ez software ) Special rules for joint returns. 1040nr ez software   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. 1040nr ez software You are married and file a joint return for the year. 1040nr ez software Either you or your spouse meets the ownership test. 1040nr ez software Both you and your spouse meet the use test. 1040nr ez software During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. 1040nr ez software If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. 1040nr ez software For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. 1040nr ez software Example 1—one spouse sells a home. 1040nr ez software Emily sells her home in June 2013 for a gain of $300,000. 1040nr ez software She marries Jamie later in the year. 1040nr ez software She meets the ownership and use tests, but Jamie does not. 1040nr ez software Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. 1040nr ez software The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. 1040nr ez software Example 2—each spouse sells a home. 1040nr ez software The facts are the same as in Example 1 except that Jamie also sells a home in 2013 for a gain of $200,000 before he marries Emily. 1040nr ez software He meets the ownership and use tests on his home, but Emily does not. 1040nr ez software Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. 1040nr ez software However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. 1040nr ez software Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. 1040nr ez software The $500,000 maximum exclusion for certain joint returns does not apply because Emily and Jamie do not both meet the use test for the same home. 1040nr ez software Sale of main home by surviving spouse. 1040nr ez software   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. 1040nr ez software   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. 1040nr ez software The sale or exchange took place after 2008. 1040nr ez software The sale or exchange took place no more than 2 years after the date of death of your spouse. 1040nr ez software You have not remarried. 1040nr ez software You and your spouse met the use test at the time of your spouse's death. 1040nr ez software You or your spouse met the ownership test at the time of your spouse's death. 1040nr ez software Neither you nor your spouse excluded gain from the sale of another home during the last 2 years. 1040nr ez software Example. 1040nr ez software   Harry owned and used a house as his main home since 2009. 1040nr ez software Harry and Wilma married on July 1, 2013, and from that date they use Harry's house as their main home. 1040nr ez software Harry died on August 15, 2013, and Wilma inherited the property. 1040nr ez software Wilma sold the property on September 3, 2013, at which time she had not remarried. 1040nr ez software Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Harry owned and used the property before death. 1040nr ez software Home transferred from spouse. 1040nr ez software   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. 1040nr ez software Use of home after divorce. 1040nr ez software   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. 1040nr ez software Reduced Maximum Exclusion If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. 1040nr ez software This applies to those who: Fail to meet the ownership and use tests, or Have used the exclusion within 2 years of selling their current home. 1040nr ez software In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. 1040nr ez software A change in place of employment. 1040nr ez software Health. 1040nr ez software Unforeseen circumstances. 1040nr ez software Unforeseen circumstances. 1040nr ez software   The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying your main home. 1040nr ez software   See Publication 523 for more information and to use Worksheet 3 to figure your reduced maximum exclusion. 1040nr ez software Business Use or Rental of Home You may be able to exclude gain from the sale of a home you have used for business or to produce rental income. 1040nr ez software But you must meet the ownership and use tests. 1040nr ez software Periods of nonqualified use. 1040nr ez software   In most cases, gain from the sale or exchange of your main home will not qualify for the exclusion to the extent that the gains are allocated to periods of nonqualified use. 1040nr ez software Nonqualified use is any period after 2008 during which neither you nor your spouse (or your former spouse) used the property as a main home with the following exceptions. 1040nr ez software Exceptions. 1040nr ez software   A period of nonqualified use does not include: Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home; Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty: As a member of the uniformed services; As a member of the Foreign Service of the United States; or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. 1040nr ez software The gain resulting from the sale of the property is allocated between qualified and nonqualified use periods based on the amount of time the property was held for qualified and nonqualified use. 1040nr ez software Gain from the sale or exchange of a main home allocable to periods of qualified use will continue to qualify for the exclusion for the sale of your main home. 1040nr ez software Gain from the sale or exchange of property allocable to nonqualified use will not qualify for the exclusion. 1040nr ez software Calculation. 1040nr ez software   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain by the following fraction:   Total nonqualified use during the period of ownership after 2008      Total period of ownership     This calculation can be found in Worksheet 2, line 10, in Publication 523. 1040nr ez software Example 1. 1040nr ez software On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. 1040nr ez software She moved in on that date and lived in it until May 31, 2009, when she moved out of the house and put it up for rent. 1040nr ez software The house was rented from June 1, 2009, to March 31, 2011. 1040nr ez software Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. 1040nr ez software Amy moved back into the house on April 1, 2011, and lived there until she sold it on January 31, 2013, for a gain of $200,000. 1040nr ez software During the 5-year period ending on the date of the sale (January 31, 2008-January 31, 2013), Amy owned and lived in the house for more than 2 years as shown in the following table. 1040nr ez software Five Year Period Used as  Home Used as  Rental 1/31/08 – 5/31/09 16 months       6/1/09 – 3/31/11   22 months 4/1/11 – 1/31/13 22 months         38 months 22 months During the period Amy owned the house (2,080 days), her period of nonqualified use was 668 days. 1040nr ez software Amy divides 668 by 2,080 and obtains a decimal (rounded to at least three decimal places) of 0. 1040nr ez software 321. 1040nr ez software To figure her gain attributable to the period of nonqualified use, she multiplies $190,000 (the gain not attributable to the $10,000 depreciation deduction) by 0. 1040nr ez software 321. 1040nr ez software Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain. 1040nr ez software Example 2. 1040nr ez software William owned and used a house as his main home from 2007 through 2010. 1040nr ez software On January 1, 2011, he moved to another state. 1040nr ez software He rented his house from that date until April 30, 2013, when he sold it. 1040nr ez software During the 5-year period ending on the date of sale (May 1, 2008-April 30, 2013), William owned and lived in the house for more than 2 years. 1040nr ez software He must report the sale on Form 4797 because it was rental property at the time of sale. 1040nr ez software Because the period of nonqualified use does not include any part of the 5-year period after the last date William lived in the house, he has no period of nonqualified use. 1040nr ez software Because he met the ownership and use tests, he can exclude gain up to $250,000. 1040nr ez software However, he cannot exclude the part of the gain equal to the depreciation he claimed or could have claimed for renting the house, as explained next. 1040nr ez software Depreciation after May 6, 1997. 1040nr ez software   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. 1040nr ez software If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed. 1040nr ez software See Publication 544 for more information. 1040nr ez software Property used partly for business or rental. 1040nr ez software   If you used property partly as a home and partly for business or to produce rental income, see Publication 523. 1040nr ez software Reporting the Sale Do not report the 2013 sale of your main home on your tax return unless: You have a gain and do not qualify to exclude all of it, You have a gain and choose not to exclude it, or You received Form 1099-S. 1040nr ez software If any of these conditions apply, report the entire gain or loss. 1040nr ez software For details on how to report the gain or loss, see the Instructions for Schedule D (Form 1040) and the Instructions for Form 8949. 1040nr ez software If you used the home for business or to produce rental income, you may have to use Form 4797 to report the sale of the business or rental part (or the sale of the entire property if used entirely for business or rental). 1040nr ez software See Business Use or Rental of Home in Publication 523 and the Instructions for Form 4797. 1040nr ez software Installment sale. 1040nr ez software    Some sales are made under arrangements that provide for part or all of the selling price to be paid in a later year. 1040nr ez software These sales are called “installment sales. 1040nr ez software ” If you finance the buyer's purchase of your home yourself instead of having the buyer get a loan or mortgage from a bank, you probably have an installment sale. 1040nr ez software You may be able to report the part of the gain you cannot exclude on the installment basis. 1040nr ez software    Use Form 6252, Installment Sale Income, to report the sale. 1040nr ez software Enter your exclusion on line 15 of Form 6252. 1040nr ez software Seller-financed mortgage. 1040nr ez software   If you sell your home and hold a note, mortgage, or other financial agreement, the payments you receive in most cases consist of both interest and principal. 1040nr ez software You must separately report as interest income the interest you receive as part of each payment. 1040nr ez software If the buyer of your home uses the property as a main or second home, you must also report the name, address, and social security number (SSN) of the buyer on line 1 of Schedule B (Form 1040A or 1040). 1040nr ez software The buyer must give you his or her SSN, and you must give the buyer your SSN. 1040nr ez software Failure to meet these requirements may result in a $50 penalty for each failure. 1040nr ez software If either you or the buyer does not have and is not eligible to get an SSN, see Social Security Number in chapter 1. 1040nr ez software More information. 1040nr ez software   For more information on installment sales, see Publication 537, Installment Sales. 1040nr ez software Special Situations The situations that follow may affect your exclusion. 1040nr ez software Sale of home acquired in a like-kind exchange. 1040nr ez software   You cannot claim the exclusion if: You acquired your home in a like-kind exchange (also known as a section 1031 exchange), or your basis in your home is determined by reference to the basis of the home in the hands of the person who acquired the property in a like-kind exchange (for example, you received the home from that person as a gift), and You sold the home during the 5-year period beginning with the date your home was acquired in the like-kind exchange. 1040nr ez software Gain from a like-kind exchange is not taxable at the time of the exchange. 1040nr ez software This means that gain will not be taxed until you sell or otherwise dispose of the property you receive. 1040nr ez software To defer gain from a like-kind exchange, you must have exchanged business or investment property for business or investment property of a like kind. 1040nr ez software For more information about like-kind exchanges, see Publication 544, Sales and Other Dispositions of Assets. 1040nr ez software Home relinquished in a like-kind exchange. 1040nr ez software   If you use your main home partly for business or rental purposes and then exchange the home for another property, see Publication 523. 1040nr ez software Expatriates. 1040nr ez software   You cannot claim the exclusion if the expatriation tax applies to you. 1040nr ez software The expatriation tax applies to certain U. 1040nr ez software S. 1040nr ez software citizens who have renounced their citizenship (and to certain long-term residents who have ended their residency). 1040nr ez software For more information about the expatriation tax, see Expatriation Tax in chapter 4 of Publication 519, U. 1040nr ez software S. 1040nr ez software Tax Guide for Aliens. 1040nr ez software Home destroyed or condemned. 1040nr ez software   If your home was destroyed or condemned, any gain (for example, because of insurance proceeds you received) qualifies for the exclusion. 1040nr ez software   Any part of the gain that cannot be excluded (because it is more than the maximum exclusion) can be postponed under the rules explained in: Publication 547, in the case of a home that was destroyed, or Publication 544, chapter 1, in the case of a home that was condemned. 1040nr ez software Sale of remainder interest. 1040nr ez software   Subject to the other rules in this chapter, you can choose to exclude gain from the sale of a remainder interest in your home. 1040nr ez software If you make this choice, you cannot choose to exclude gain from your sale of any other interest in the home that you sell separately. 1040nr ez software Exception for sales to related persons. 1040nr ez software   You cannot exclude gain from the sale of a remainder interest in your home to a related person. 1040nr ez software Related persons include your brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. 1040nr ez software ), and lineal descendants (children, grandchildren, etc. 1040nr ez software ). 1040nr ez software Related persons also include certain corporations, partnerships, trusts, and exempt organizations. 1040nr ez software Recapturing (Paying Back) a Federal Mortgage Subsidy If you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. 1040nr ez software You recapture the benefit by increasing your federal income tax for the year of the sale. 1040nr ez software You may have to pay this recapture tax even if you can exclude your gain from income under the rules discussed earlier; that exclusion does not affect the recapture tax. 1040nr ez software Loans subject to recapture rules. 1040nr ez software   The recapture applies to loans that: Came from the proceeds of qualified mortgage bonds, or Were based on mortgage credit certificates. 1040nr ez software The recapture also applies to assumptions of these loans. 1040nr ez software When recapture applies. 1040nr ez software   Recapture of the federal mortgage subsidy applies only if you meet both of the following conditions. 1040nr ez software You sell or otherwise dispose of your home at a gain within the first 9 years after the date you close your mortgage loan. 1040nr ez software Your income for the year of disposition is more than that year's adjusted qualifying income for your family size for that year (related to the income requirements a person must meet to qualify for the federally subsidized program). 1040nr ez software When recapture does not apply. 1040nr ez software   Recapture does not apply in any of the following situations. 1040nr ez software Your mortgage loan was a qualified home improvement loan (QHIL) of not more than $15,000 used for alterations, repairs, and improvements that protect or improve the basic livability or energy efficiency of your home. 1040nr ez software Your mortgage loan was a QHIL of not more than $150,000 in the case of a QHIL used to repair damage from Hurricane Katrina to homes in the hurricane disaster area; a QHIL funded by a qualified mortgage bond that is a qualified Gulf Opportunity Zone Bond; or a QHIL for an owner-occupied home in the Gulf Opportunity Zone (GO Zone), Rita GO Zone, or Wilma GO Zone. 1040nr ez software For more information, see Publication 4492, Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma. 1040nr ez software Also see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. 1040nr ez software The home is disposed of as a result of your death. 1040nr ez software You dispose of the home more than 9 years after the date you closed your mortgage loan. 1040nr ez software You transfer the home to your spouse, or to your former spouse incident to a divorce, where no gain is included in your income. 1040nr ez software You dispose of the home at a loss. 1040nr ez software Your home is destroyed by a casualty, and you replace it on its original site within 2 years after the end of the tax year when the destruction happened. 1040nr ez software The replacement period is extended for main homes destroyed in a federally declared disaster area, a Midwestern disaster area, the Kansas disaster area, and the Hurricane Katrina disaster area. 1040nr ez software For more information, see Replacement Period in Publication 547. 1040nr ez software You refinance your mortgage loan (unless you later meet the conditions listed previously under When recapture applies ). 1040nr ez software Notice of amounts. 1040nr ez software   At or near the time of settlement of your mortgage loan, you should receive a notice that provides the federally subsidized amount and other information you will need to figure your recapture tax. 1040nr ez software How to figure and report the recapture. 1040nr ez software    The recapture tax is figured on Form 8828. 1040nr ez software If you sell your home and your mortgage is subject to recapture rules, you must file Form 8828 even if you do not owe a recapture tax. 1040nr ez software Attach Form 8828 to your Form 1040. 1040nr ez software For more information, see Form 8828 and its instructions. 1040nr ez software Prev  Up  Next   Home   More Online Publications