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2005 Tax Return Online

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2005 Tax Return Online

2005 tax return online 30. 2005 tax return online   How To Figure Your Tax Table of Contents Introduction Figuring Your Tax Alternative Minimum Tax (AMT) Tax Figured by IRSFiling the Return Introduction After you have figured your income and deductions as explained in Parts One through Five, your next step is to figure your tax. 2005 tax return online This chapter discusses: The general steps you take to figure your tax, An additional tax you may have to pay called the alternative minimum tax (AMT), and The conditions you must meet if you want the IRS to figure your tax. 2005 tax return online Figuring Your Tax Your income tax is based on your taxable income. 2005 tax return online After you figure your income tax and AMT, if any, subtract your tax credits and add any other taxes you may owe. 2005 tax return online The result is your total tax. 2005 tax return online Compare your total tax with your total payments to determine whether you are entitled to a refund or if you must make a payment. 2005 tax return online This section provides a general outline of how to figure your tax. 2005 tax return online You can find step-by-step directions in the Instructions for Forms 1040EZ, 1040A, and 1040. 2005 tax return online If you are unsure of which tax form you should file, see Which Form Should I Use? in chapter 1. 2005 tax return online Tax. 2005 tax return online   Most taxpayers use either the Tax Table or the Tax Computation Worksheet to figure their income tax. 2005 tax return online However, there are special methods if your income includes any of the following items. 2005 tax return online A net capital gain. 2005 tax return online (See chapter 16. 2005 tax return online ) Qualified dividends taxed at the same rates as a net capital gain. 2005 tax return online (See chapters 8 and 16. 2005 tax return online ) Lump-sum distributions. 2005 tax return online (See chapter 10. 2005 tax return online ) Farming or fishing income. 2005 tax return online (See Schedule J (Form 1040), Income Averaging for Farmers and Fishermen. 2005 tax return online ) Unearned income over $2,000 for certain children. 2005 tax return online (See chapter 31. 2005 tax return online ) Parents' election to report child's interest and dividends. 2005 tax return online (See chapter 31. 2005 tax return online ) Foreign earned income exclusion or the housing exclusion. 2005 tax return online (See Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion, and the Foreign Earned Income Tax Worksheet in the Form 1040 instructions. 2005 tax return online ) Credits. 2005 tax return online   After you figure your income tax and any AMT (discussed later), determine if you are eligible for any tax credits. 2005 tax return online Eligibility information for these tax credits is discussed in chapters 32 through 37 and your form instructions. 2005 tax return online The following table lists the credits you may be able to subtract from your tax and shows where you can find more information on each credit. 2005 tax return online CREDITS For information on: See  chapter: Adoption 37 Alternative motor vehicle 37 Alternative fuel vehicle refueling  property 37 Child and dependent care 32 Child tax 34 Credit to holders of tax credit  bonds 37 Education 35 Elderly or disabled 33 Electric vehicle 37 Foreign tax 37 Mortgage interest 37 Prior year minimum tax 37 Residential energy 37 Retirement savings contributions 37   Some credits (such as the earned income credit) are not listed because they are treated as payments. 2005 tax return online See Payments , later. 2005 tax return online   There are other credits that are not discussed in this publication. 2005 tax return online These include the following credits. 2005 tax return online General business credit, which is made up of several separate business-related credits. 2005 tax return online These generally are reported on Form 3800, General Business Credit, and are discussed in chapter 4 of Publication 334, Tax Guide for Small Business. 2005 tax return online Renewable electricity, refined coal, and Indian coal production credit for electricity and refined coal produced at facilities placed in service after October 22, 2004 (after October 2, 2008, for electricity produced from marine and hydrokinetic renewables), and Indian coal produced at facilities placed in service after August 8, 2005. 2005 tax return online See Form 8835, Part II. 2005 tax return online Work opportunity credit. 2005 tax return online See Form 5884. 2005 tax return online Credit for employer social security and Medicare taxes paid on certain employee tips. 2005 tax return online See Form 8846. 2005 tax return online Other taxes. 2005 tax return online   After you subtract your tax credits, determine whether there are any other taxes you must pay. 2005 tax return online This chapter does not explain these other taxes. 2005 tax return online You can find that information in other chapters of this publication and your form instructions. 2005 tax return online See the following table for other taxes you may need to add to your income tax. 2005 tax return online OTHER TAXES For information on: See  chapter: Additional taxes on qualified retirement plans and IRAs 10, 17 Household employment taxes 32 Recapture of an education credit 35 Social security and Medicare tax on wages 5 Social security and Medicare tax on tips 6 Uncollected social security and Medicare tax on tips 6   You also may have to pay AMT (discussed later in this chapter). 2005 tax return online   There are other taxes that are not discussed in this publication. 2005 tax return online These include the following items. 2005 tax return online Self-employment tax. 2005 tax return online You must figure this tax if either of the following applies to you (or your spouse if you file a joint return). 2005 tax return online Your net earnings from self-employment from other than church employee income were $400 or more. 2005 tax return online The term “net earnings from self-employment” may include certain nonemployee compensation and other amounts reported to you on Form 1099-MISC, Miscellaneous Income. 2005 tax return online If you received a Form 1099-MISC, see the Instructions for Recipient on the back. 2005 tax return online Also see the Instructions for Schedule SE (Form 1040), Self-Employment Tax; and Publication 334, Tax Guide for Small Business. 2005 tax return online You had church employee income of $108. 2005 tax return online 28 or more. 2005 tax return online Additional Medicare Tax. 2005 tax return online Beginning in 2013, you may be subject to a 0. 2005 tax return online 9% Additional Medicare Tax that applies to Medicare wages, Railroad Retirement Act compensation, and self-employment income over a threshold based on your filing status. 2005 tax return online For more information, see the Instructions for Form 1040, line 60 and Form 8959. 2005 tax return online Net Investment Income Tax (NIIT). 2005 tax return online Beginning in 2013, you may be subject to Net Investment Income Tax (NIIT). 2005 tax return online NIIT is a 3. 2005 tax return online 8% tax on the lesser of net investment income or the excess of your modified adjusted gross income over a threshold amount. 2005 tax return online For more information, see the Instructions for Form 1040, line 60 and Form 8960. 2005 tax return online Recapture taxes. 2005 tax return online You may have to pay these taxes if you previously claimed an investment credit, a low-income housing credit, a new markets credit, a qualified plug-in electric drive motor vehicle credit, an alternative motor vehicle credit, a credit for employer-provided child care facilities, an Indian employment credit, or other credits listed in the instructions for Form 1040, line 60. 2005 tax return online For more information, see the instructions for Form 1040, line 60. 2005 tax return online Section 72(m)(5) excess benefits tax. 2005 tax return online If you are (or were) a 5% owner of a business and you received a distribution that exceeds the benefits provided for you under the qualified pension or annuity plan formula, you may have to pay this additional tax. 2005 tax return online See Tax on Excess Benefits in chapter 4 of Publication 560, Retirement Plans for Small Business. 2005 tax return online Uncollected social security and Medicare tax on group-term life insurance. 2005 tax return online If your former employer provides you with more than $50,000 of group-term life insurance coverage, you must pay the employee part of social security and Medicare taxes on those premiums. 2005 tax return online The amount should be shown in box 12 of your Form W-2 with codes M and N. 2005 tax return online Tax on golden parachute payments. 2005 tax return online This tax applies if you received an “excess parachute payment” (EPP) due to a change in a corporation's ownership or control. 2005 tax return online The amount should be shown in box 12 of your Form W-2 with code K. 2005 tax return online See the instructions for Form 1040, line 60. 2005 tax return online Tax on accumulation distribution of trusts. 2005 tax return online This applies if you are the beneficiary of a trust that accumulated its income instead of distributing it currently. 2005 tax return online See Form 4970 and its instructions. 2005 tax return online Additional tax on HSAs or MSAs. 2005 tax return online If amounts contributed to, or distributed from, your health savings account or medical savings account do not meet the rules for these accounts, you may have to pay additional taxes. 2005 tax return online See Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans; Form 8853, Archer MSAs and Long-Term Care Insurance Contracts; Form 8889, Health Savings Accounts (HSAs); and Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts. 2005 tax return online Additional tax on Coverdell ESAs. 2005 tax return online This applies if amounts contributed to, or distributed from, your Coverdell ESA do not meet the rules for these accounts. 2005 tax return online See Publication 970, Tax Benefits for Education, and Form 5329. 2005 tax return online Additional tax on qualified tuition programs. 2005 tax return online This applies to amounts distributed from qualified tuition programs that do not meet the rules for these accounts. 2005 tax return online See Publication 970 and Form 5329. 2005 tax return online Excise tax on insider stock compensation from an expatriated corporation. 2005 tax return online You may owe a 15% excise tax on the value of nonstatutory stock options and certain other stock-based compensation held by you or a member of your family from an expatriated corporation or its expanded affiliated group in which you were an officer, director, or more-than-10% owner. 2005 tax return online For more information, see the instructions for Form 1040, line 60. 2005 tax return online Additional tax on income you received from a nonqualified deferred compensation plan that fails to meet certain requirements. 2005 tax return online This income should be shown in Form W-2, box 12, with code Z, or in Form 1099-MISC, box 15b. 2005 tax return online For more information, see the instructions for Form 1040, line 60. 2005 tax return online Interest on the tax due on installment income from the sale of certain residential lots and timeshares. 2005 tax return online For more information, see the instructions for Form 1040, line 60. 2005 tax return online Interest on the deferred tax on gain from certain installment sales with a sales price over $150,000. 2005 tax return online For more information, see the instructions for Form 1040, line 60. 2005 tax return online Repayment of first-time homebuyer credit. 2005 tax return online For more information, see Form 5405, Repayment of the First-Time Homebuyer Credit, and its instructions. 2005 tax return online Also see the instructions for Form 1040, line 59b. 2005 tax return online Payments. 2005 tax return online   After you determine your total tax, figure the total payments you have already made for the year. 2005 tax return online Include credits that are treated as payments. 2005 tax return online This chapter does not explain these payments and credits. 2005 tax return online You can find that information in other chapters of this publication and your form instructions. 2005 tax return online See the following table for amounts you can include in your total payments. 2005 tax return online PAYMENTS For information on: See  chapter: Child tax credit (additional) 34 Earned income credit 36 Estimated tax paid 4 Excess social security   and RRTA tax withheld 37 Federal income tax withheld 4 Health coverage tax credit 37 Credit for tax on   undistributed capital gain 37 Tax paid with extension 1   Another credit that is treated as a payment is the credit for federal excise tax paid on fuels. 2005 tax return online This credit is for persons who have a nontaxable use of certain fuels, such as diesel fuel and kerosene. 2005 tax return online It is claimed on Form 1040, line 70. 2005 tax return online See Form 4136, Credit for Federal Tax Paid on Fuels. 2005 tax return online Refund or balance due. 2005 tax return online   To determine whether you are entitled to a refund or whether you must make a payment, compare your total payments with your total tax. 2005 tax return online If you are entitled to a refund, see your form instructions for information on having it directly deposited into one or more of your accounts, or to purchase U. 2005 tax return online S. 2005 tax return online savings bonds instead of receiving a paper check. 2005 tax return online Alternative Minimum Tax (AMT) This section briefly discusses an additional tax you may have to pay. 2005 tax return online The tax law gives special treatment to some kinds of income and allows special deductions and credits for some kinds of expenses. 2005 tax return online Taxpayers who benefit from this special treatment may have to pay at least a minimum amount of tax through an additional tax called AMT. 2005 tax return online You may have to pay the AMT if your taxable income for regular tax purposes, combined with certain adjustments and tax preference items, is more than a certain amount. 2005 tax return online See Form 6251, Alternative Minimum Tax — Individuals. 2005 tax return online Adjustments and tax preference items. 2005 tax return online   The more common adjustments and tax preference items include: Addition of personal exemptions, Addition of the standard deduction (if claimed), Addition of itemized deductions claimed for state and local taxes, certain interest, most miscellaneous deductions, and part of medical expenses, Subtraction of any refund of state and local taxes included in gross income, Changes to accelerated depreciation of certain property, Difference between gain or loss on the sale of property reported for regular tax purposes and AMT purposes, Addition of certain income from incentive stock options, Change in certain passive activity loss deductions, Addition of certain depletion that is more than the adjusted basis of the property, Addition of part of the deduction for certain intangible drilling costs, and Addition of tax-exempt interest on certain private activity bonds. 2005 tax return online More information. 2005 tax return online   For more information about the AMT, see the instructions for Form 6251. 2005 tax return online Tax Figured by IRS If you file by April 15, 2014, you can have the IRS figure your tax for you on Form 1040EZ, Form 1040A, or Form 1040. 2005 tax return online If the IRS figures your tax and you paid too much, you will receive a refund. 2005 tax return online If you did not pay enough, you will receive a bill for the balance. 2005 tax return online To avoid interest or the penalty for late payment, you must pay the bill within 30 days of the date of the bill or by the due date for your return, whichever is later. 2005 tax return online The IRS can also figure the credit for the elderly or the disabled and the earned income credit for you. 2005 tax return online When the IRS cannot figure your tax. 2005 tax return online   The IRS cannot figure your tax for you if any of the following apply. 2005 tax return online You want your refund directly deposited into your accounts. 2005 tax return online You want any part of your refund applied to your 2014 estimated tax. 2005 tax return online You had income for the year from sources other than wages, salaries, tips, interest, dividends, taxable social security benefits, unemployment compensation, IRA distributions, pensions, and annuities. 2005 tax return online Your taxable income is $100,000 or more. 2005 tax return online You itemize deductions. 2005 tax return online You file any of the following forms. 2005 tax return online Form 2555, Foreign Earned Income. 2005 tax return online Form 2555-EZ, Foreign Earned Income Exclusion. 2005 tax return online Form 4137, Social Security and Medicare Tax on Unreported Tip Income. 2005 tax return online Form 4970, Tax on Accumulation Distribution of Trusts. 2005 tax return online Form 4972, Tax on Lump-Sum Distributions. 2005 tax return online Form 6198, At-Risk Limitations. 2005 tax return online Form 6251, Alternative Minimum Tax—Individuals. 2005 tax return online Form 8606, Nondeductible IRAs. 2005 tax return online Form 8615, Tax for Certain Children Who Have Unearned Income. 2005 tax return online Form 8814, Parents' Election To Report Child's Interest and Dividends. 2005 tax return online Form 8839, Qualified Adoption Expenses. 2005 tax return online Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. 2005 tax return online Form 8889, Health Savings Accounts (HSAs). 2005 tax return online Form 8919, Uncollected Social Security and Medicare Tax on Wages. 2005 tax return online Filing the Return After you complete the line entries for the tax form you are filing, fill in your name and address. 2005 tax return online Enter your social security number in the space provided. 2005 tax return online If you are married, enter the social security numbers of you and your spouse even if you file separately. 2005 tax return online Sign and date your return and enter your occupation(s). 2005 tax return online If you are filing a joint return, both you and your spouse must sign it. 2005 tax return online Enter your daytime phone number in the space provided. 2005 tax return online This may help speed the processing of your return if we have a question that can be answered over the phone. 2005 tax return online If you are filing a joint return, you may enter either your or your spouse's daytime phone number. 2005 tax return online If you want to allow a friend, family member, or any other person you choose to discuss your 2013 tax return with the IRS, check the “Yes” box in the “Third party designee” area on your return. 2005 tax return online Also enter the designee's name, phone number, and any five digits the designee chooses as his or her personal identification number (PIN). 2005 tax return online If you check the “Yes” box, you, and your spouse if filing a joint return, are authorizing the IRS to call the designee to answer any questions that may arise during the processing of your return. 2005 tax return online Fill in and attach any schedules and forms asked for on the lines you completed to your paper return. 2005 tax return online Attach a copy of each of your Forms W-2 to your paper return. 2005 tax return online Also attach to your paper return any Form 1099-R you received that has withholding tax in box 4. 2005 tax return online Mail your return to the Internal Revenue Service Center for the area where you live. 2005 tax return online A list of Service Center addresses is in the instructions for your tax return. 2005 tax return online Form 1040EZ Line Entries Read lines 1 through 8b and fill in the lines that apply to you. 2005 tax return online Do not complete lines 9 through 12. 2005 tax return online If you are filing a joint return, use the space to the left of line 6 to separately show your taxable income and your spouse's taxable income. 2005 tax return online Payments. 2005 tax return online   Enter any federal income tax withheld on line 7. 2005 tax return online Federal income tax withheld is shown on Form W-2, box 2, or Form 1099, box 4. 2005 tax return online Earned income credit. 2005 tax return online   If you can take this credit, as discussed in chapter 36, the IRS can figure it for you. 2005 tax return online Enter “EIC” in the space to the left of line 8a. 2005 tax return online Enter the nontaxable combat pay you elect to include in earned income on line 8b. 2005 tax return online   If your credit for any year after 1996 was reduced or disallowed by the IRS, you may also have to file Form 8862, Information To Claim Earned Income Credit After Disallowance, with your return. 2005 tax return online For details, see the Form 1040EZ Instructions. 2005 tax return online Form 1040A Line Entries Read lines 1 through 27 and fill in the lines that apply to you. 2005 tax return online If you are filing a joint return, use the space to the left of the entry space for line 27 to separately show your taxable income and your spouse's taxable income. 2005 tax return online Do not complete line 28. 2005 tax return online Complete lines 29 through 33 and 36 through 40 if they apply to you. 2005 tax return online However, do not fill in lines 30 and 38a if you want the IRS to figure the credits shown on those lines. 2005 tax return online Also, enter any write-in information that applies to you in the space to the left of line 41. 2005 tax return online Do not complete lines 34, 35, and 42 through 46. 2005 tax return online Payments. 2005 tax return online   Enter any federal income tax withheld that is shown on Form W-2, box 2, or Form 1099, box 4, on line 36. 2005 tax return online Enter any estimated tax payments you made on line 37. 2005 tax return online Credit for child and dependent care expenses. 2005 tax return online   If you can take this credit, as discussed in chapter 32, complete Form 2441, Child and Dependent Care Expenses, and attach it to your return. 2005 tax return online Enter the amount of the credit on line 29. 2005 tax return online The IRS will not figure this credit. 2005 tax return online Credit for the elderly or the disabled. 2005 tax return online   If you can take this credit, as discussed in chapter 33, the IRS can figure it for you. 2005 tax return online Enter “CFE” in the space to the left of line 30 and attach Schedule R (Form 1040A or 1040), Credit for the Elderly or the Disabled, to your paper return. 2005 tax return online On Schedule R (Form 1040A or 1040), check the box in Part I for your filing status and age. 2005 tax return online Complete Part II and Part III, lines 11 and 13, if they apply. 2005 tax return online Earned income credit. 2005 tax return online   If you can take this credit, as discussed in chapter 36, the IRS can figure it for you. 2005 tax return online Enter “EIC” to the left of the entry space for line 38a. 2005 tax return online Enter the nontaxable combat pay you elect to include in earned income on line 38b. 2005 tax return online    If you have a qualifying child, you must fill in Schedule EIC (Form 1040A or 1040), Earned Income Credit, and attach it to your paper return. 2005 tax return online If you do not provide the child's social security number on Schedule EIC, line 2, the credit will be reduced or disallowed unless the child was born and died in 2013. 2005 tax return online   If your credit for any year after 1996 was reduced or disallowed by the IRS, you may also have to file Form 8862 with your return. 2005 tax return online For details, see the Form 1040A Instructions. 2005 tax return online Form 1040 Line Entries Read lines 1 through 43 and fill in the lines that apply to you. 2005 tax return online Do not complete line 44. 2005 tax return online If you are filing a joint return, use the space under the words “Adjusted Gross Income” on the front of your return to separately show your taxable income and your spouse's taxable income. 2005 tax return online Read lines 45 through 71. 2005 tax return online Fill in the lines that apply to you, but do not fill in lines 54, 61, and 72. 2005 tax return online Also, do not complete line 55 and lines 73 through 77. 2005 tax return online Do not fill in line 53, box “c,” if you are completing Schedule R (Form 1040A or 1040), or line 64a if you want the IRS to figure the credits shown on those lines. 2005 tax return online Payments. 2005 tax return online   Enter any federal income tax withheld that is shown on Form W-2, box 2, or Form 1099, box 4, on line 62. 2005 tax return online Enter any estimated tax payments you made on line 63. 2005 tax return online Credit for child and dependent care expenses. 2005 tax return online   If you can take this credit, as discussed in chapter 32, complete Form 2441 and attach it to your paper return. 2005 tax return online Enter the amount of the credit on line 48. 2005 tax return online The IRS will not figure this credit. 2005 tax return online Credit for the elderly or the disabled. 2005 tax return online   If you can take this credit, as discussed in chapter 33, the IRS can figure it for you. 2005 tax return online Enter “CFE” on the line next to line 53, check box “c,” and attach Schedule R (Form 1040A or 1040) to your paper return. 2005 tax return online On Schedule R (Form 1040A or 1040), check the box in Part I for your filing status and age. 2005 tax return online Complete Part II and Part III, lines 11 and 13, if they apply. 2005 tax return online Earned income credit. 2005 tax return online   If you can take this credit, as discussed in chapter 36, the IRS can figure it for you. 2005 tax return online Enter “EIC” on the dotted line next to Form 1040, line 64a. 2005 tax return online Enter the nontaxable combat pay you elect to include in earned income on line 64b. 2005 tax return online   If you have a qualifying child, you must fill in Schedule EIC (Form 1040A or 1040), Earned Income Credit, and attach it to your paper return. 2005 tax return online If you do not provide the child's social security number on Schedule EIC, line 2, the credit will be reduced or disallowed unless the child was born and died in 2013. 2005 tax return online   If your credit for any year after 1996 was reduced or disallowed by the IRS, you may also have to file Form 8862 with your return. 2005 tax return online For details, see the Form 1040 Instructions. 2005 tax return online Prev  Up  Next   Home   More Online Publications
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The 2005 Tax Return Online

2005 tax return online Publication 523 - Main Content Table of Contents Main HomeVacant land. 2005 tax return online Factors used to determine main home. 2005 tax return online Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining BasisCost As Basis Basis Other Than Cost Adjusted Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Nonqualified Use Business Use or Rental of HomeUnrecaptured section 1250 gain. 2005 tax return online Property Used Partly for Business or Rental Reporting the SaleSeller-financed mortgage. 2005 tax return online Individual taxpayer identification number (ITIN). 2005 tax return online More information. 2005 tax return online Comprehensive Examples Special SituationsException for sales to related persons. 2005 tax return online Deducting Taxes in the Year of SaleForm 1099-S. 2005 tax return online More information. 2005 tax return online Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of First-Time Homebuyer CreditExample. 2005 tax return online Worksheets How To Get Tax HelpLow Income Taxpayer Clinics Main Home This section explains the term “main home. 2005 tax return online ” 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. 2005 tax return online To exclude gain under the rules in this publication, 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. 2005 tax return online Land. 2005 tax return online   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. 2005 tax return online Example. 2005 tax return online You buy a piece of land and move your main home to it. 2005 tax return online Then, you sell the land on which your main home was located. 2005 tax return online This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. 2005 tax return online Vacant land. 2005 tax return online   The sale of vacant land is not a sale of your main home unless: The vacant land is adjacent to land containing your home, You owned and used the vacant land as part of your main home, The separate sale of your home satisfies the requirements for exclusion and occurs within 2 years before or 2 years after the date of the sale of the vacant land, and The other requirements for excluding gain from the sale of a main home have been satisfied with respect to the vacant land. 2005 tax return online If these requirements are met, the sale of the home and the sale of the vacant land are treated as one sale and only one maximum exclusion can be applied to any gain. 2005 tax return online See Excluding the Gain , later. 2005 tax return online The destruction of your home is treated as a sale of your home. 2005 tax return online As a result, you may be able to meet these requirements if you sell vacant land used as a part of your main home within 2 years from the date of the destruction of your main home. 2005 tax return online For information, see Publication 547. 2005 tax return online More than one home. 2005 tax return online   If you have more than one home, you can exclude gain only from the sale of your main home. 2005 tax return online You must include in income the gain from the sale of any other home. 2005 tax return online If you have two homes and live in each of them, your main home is ordinarily the one you live in most of the time during the year. 2005 tax return online Example 1. 2005 tax return online You own two homes, one in New York and one in Florida. 2005 tax return online 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. 2005 tax return online In the absence of facts and circumstances indicating otherwise, the New York home is your main home. 2005 tax return online You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. 2005 tax return online Example 2. 2005 tax return online You own a house, but you live in another house that you rent. 2005 tax return online The rented house is your main home. 2005 tax return online Example 3. 2005 tax return online You own two homes, one in Virginia and one in New Hampshire. 2005 tax return online In 2009 and 2010, you lived in the Virginia home. 2005 tax return online In 2011 and 2012, you lived in the New Hampshire home. 2005 tax return online In 2013, you lived again in the Virginia home. 2005 tax return online Your main home in 2009, 2010, and 2013 is the Virginia home. 2005 tax return online Your main home in 2011 and 2012 is the New Hampshire home. 2005 tax return online You would be eligible to exclude gain from the sale of either home (but not both) in 2013. 2005 tax return online Factors used to determine main home. 2005 tax return online   In addition to the amount of time you live in each home, other factors are relevant in determining which home is your main home. 2005 tax return online Those factors include the following. 2005 tax return online Your place of employment. 2005 tax return online The location of your family members' main home. 2005 tax return online Your mailing address for bills and correspondence. 2005 tax return online The address listed on your: Federal and state tax returns, Driver's license, Car registration, and Voter registration card. 2005 tax return online The location of the banks you use. 2005 tax return online The location of recreational clubs and religious organizations of which you are a member. 2005 tax return online Property used partly as your main home. 2005 tax return online   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. 2005 tax return online For details, see Business Use or Rental of Home , later. 2005 tax return online 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. 2005 tax return online Subtract the adjusted basis from the amount realized to get your gain or loss. 2005 tax return online     Selling price     − Selling expenses       Amount realized     − Adjusted basis       Gain or loss   Gain. 2005 tax return online   Gain is the excess of the amount realized over the adjusted basis of the property. 2005 tax return online Loss. 2005 tax return online   Loss is the excess of the adjusted basis over the amount realized for the property. 2005 tax return online Selling Price The selling price is the total amount you receive for your home. 2005 tax return online 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. 2005 tax return online Personal property. 2005 tax return online   The selling price of your home does not include amounts you received for personal property sold with your home. 2005 tax return online Personal property is property that is not a permanent part of the home. 2005 tax return online Examples are furniture, draperies, rugs, a washer and dryer, and lawn equipment. 2005 tax return online Separately stated amounts you received for these items should not be shown on Form 1099-S (discussed later). 2005 tax return online Any gains from sales of personal property must be included in your income, but not as part of the sale of your home. 2005 tax return online Payment by employer. 2005 tax return online   You may have to sell your home because of a job transfer. 2005 tax return online 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. 2005 tax return online 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, or on Form 1040NR, line 8. 2005 tax return online Option to buy. 2005 tax return online   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. 2005 tax return online If the option is not exercised, you must report the amount as ordinary income in the year the option expires. 2005 tax return online Report this amount on Form 1040, line 21, or on Form 1040NR, line 21. 2005 tax return online Form 1099-S. 2005 tax return online   If you received Form 1099-S, box 2 (gross proceeds) should show the total amount you received for your home. 2005 tax return online   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. 2005 tax return online Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. 2005 tax return online Amount Realized The amount realized is the selling price minus selling expenses. 2005 tax return online Selling expenses. 2005 tax return online   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. 2005 tax return online ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. 2005 tax return online This adjusted basis must be determined before you can figure gain or loss on the sale of your home. 2005 tax return online For information on how to figure your home's adjusted basis, see Determining Basis , later. 2005 tax return online Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. 2005 tax return online Gain on sale. 2005 tax return online   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, generally is taxable. 2005 tax return online Loss on sale. 2005 tax return online   If the amount realized is less than the adjusted basis, the difference is a loss. 2005 tax return online Generally, a loss on the sale of your main home cannot be deducted. 2005 tax return online Jointly owned home. 2005 tax return online   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. 2005 tax return online Separate returns. 2005 tax return online   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. 2005 tax return online Your ownership interest is generally determined by state law. 2005 tax return online Joint owners not married. 2005 tax return online   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. 2005 tax return online Each of you applies the rules discussed in this publication on an individual basis. 2005 tax return online Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. 2005 tax return online Foreclosure or repossession. 2005 tax return online   If your home was foreclosed on or repossessed, you have a disposition. 2005 tax return online See Publication 4681 to determine if you have ordinary income, gain, or loss. 2005 tax return online More information. 2005 tax return online   If part of a home is used for business or rental purposes, see Foreclosures and Repossessions in chapter 1 of Publication 544 for more information. 2005 tax return online Publication 544 has examples of how to figure gain or loss on a foreclosure or repossession. 2005 tax return online Abandonment. 2005 tax return online   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. 2005 tax return online Trading (exchanging) homes. 2005 tax return online   If you trade your home for another home, treat the trade as a sale and a purchase. 2005 tax return online Example. 2005 tax return online You owned and lived in a home with an adjusted basis of $41,000. 2005 tax return online 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. 2005 tax return online This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 − $41,000). 2005 tax return online 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). 2005 tax return online Transfer to spouse. 2005 tax return online   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 (unless the Exception, discussed next, applies). 2005 tax return online This is true even if you receive cash or other consideration for the home. 2005 tax return online As a result, the rules explained in this publication do not apply. 2005 tax return online   If you owned your home jointly with your spouse and transfer your interest in the home to your spouse, or to your former spouse incident to your divorce, the same rule applies. 2005 tax return online You have no gain or loss. 2005 tax return online Exception. 2005 tax return online   These transfer rules do not apply if your spouse or former spouse is a nonresident alien. 2005 tax return online In that case, you generally will have a gain or loss. 2005 tax return online More information. 2005 tax return online    See Property Settlements in Publication 504, Divorced or Separated Individuals, for more information. 2005 tax return online Involuntary conversion. 2005 tax return online   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. 2005 tax return online 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 (see Home destroyed or condemned ). 2005 tax return online Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. 2005 tax return online Your basis in your home is determined by how you got the home. 2005 tax return online Generally, your basis is its cost if you bought it or built it. 2005 tax return online If you got it in some other way (inheritance, gift, etc. 2005 tax return online ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. 2005 tax return online While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. 2005 tax return online 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. 2005 tax return online To figure your adjusted basis, you can use Worksheet 1, near the end of this publication. 2005 tax return online Filled-in examples of that worksheet are included in the Comprehensive Examples , later. 2005 tax return online Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. 2005 tax return online Purchase. 2005 tax return online   If you bought your home, your basis is its cost to you. 2005 tax return online This includes the purchase price and certain settlement or closing costs. 2005 tax return online 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. 2005 tax return online If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed later. 2005 tax return online Seller-paid points. 2005 tax return online   If the person who sold you your home paid points on your loan, you may have to reduce your home's basis by the amount of the points, as shown in the following chart. 2005 tax return online    IF you bought your home. 2005 tax return online . 2005 tax return online . 2005 tax return online THEN reduce your home's basis by the seller-paid points. 2005 tax return online . 2005 tax return online . 2005 tax return online after 1990 but before April 4, 1994 only if you deducted them as home mortgage interest in the year paid. 2005 tax return online after April 3, 1994 even if you did not deduct them. 2005 tax return online Settlement fees or closing costs. 2005 tax return online   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. 2005 tax return online 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. 2005 tax return online 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). 2005 tax return online   Settlement fees do not include amounts placed in escrow for the future payment of items such as taxes and insurance. 2005 tax return online   Some of the settlement fees or closing costs that you can include in your basis are: Abstract fees (abstract of title fees), Charges for installing utility services, Legal fees (including fees for the title search and preparing the sales contract and deed), Recording fees, Survey fees, Transfer or stamp taxes, Owner's title insurance, and Any amounts the seller owes that you agree to pay, such as: Certain real estate taxes (discussed later), Back interest, Recording or mortgage fees, Charges for improvements or repairs, and Sales commissions. 2005 tax return online   Some settlement fees and closing costs you cannot include in your basis are: Fire insurance premiums, Rent for occupancy of the house before closing, Charges for utilities or other services related to occupancy of the house before closing, Any fee or cost that you deducted as a moving expense (allowed for certain fees and costs before 1994), Charges connected with getting a mortgage loan, such as: Mortgage insurance premiums (including funding fees connected with loans guaranteed by the Department of Veterans Affairs), Loan assumption fees, Cost of a credit report, Fee for an appraisal required by a lender, and Fees for refinancing a mortgage. 2005 tax return online Real estate taxes. 2005 tax return online   Real estate taxes for the year you bought your home may affect your basis, as shown in the following chart. 2005 tax return online    IF. 2005 tax return online . 2005 tax return online . 2005 tax return online AND. 2005 tax return online . 2005 tax return online . 2005 tax return online THEN the taxes. 2005 tax return online . 2005 tax return online . 2005 tax return online you pay taxes that the seller owed on the home up to the date of sale the seller does not reimburse you are added to the basis of your home. 2005 tax return online the seller reimburses you do not affect the basis of your home. 2005 tax return online the seller pays taxes for you (taxes owed beginning on the date of sale) you do not reimburse the seller are subtracted from the basis of your home. 2005 tax return online you reimburse the seller do not affect the basis of your home. 2005 tax return online Construction. 2005 tax return online   If you contracted to have your house built on land you own, your basis is: The cost of the land, plus The amount it cost you to complete the house, including: The cost of labor and materials, Any amounts paid to a contractor, Any architect's fees, Building permit charges, Utility meter and connection charges, and Legal fees directly connected with building the house. 2005 tax return online   Your cost includes your down payment and any debt such as a first or second mortgage or notes you gave the seller or builder. 2005 tax return online It also includes certain settlement or closing costs. 2005 tax return online You may have to reduce your basis by points the seller paid for you. 2005 tax return online For more information, see Seller-paid points and Settlement fees or closing costs , earlier. 2005 tax return online Built by you. 2005 tax return online   If you built all or part of your house yourself, its basis is the total amount it cost you to complete it. 2005 tax return online Do not include in the cost of the house: The value of your own labor, or The value of any other labor you did not pay for. 2005 tax return online Temporary housing. 2005 tax return online   If a builder gave you temporary housing while your home was being finished, you must reduce your basis by the part of the contract price that was for the temporary housing. 2005 tax return online To figure the amount of the reduction, multiply the contract price by a fraction. 2005 tax return online The numerator is the value of the temporary housing, and the denominator is the sum of the value of the temporary housing plus the value of the new home. 2005 tax return online Cooperative apartment. 2005 tax return online   If you are a tenant-stockholder in a cooperative housing corporation, your basis in the cooperative apartment used as your home is usually the cost of your stock in the corporation. 2005 tax return online This may include your share of a mortgage on the apartment building. 2005 tax return online Condominium. 2005 tax return online   To determine your basis in a condominium apartment used as your home, use the same rules as for any other home. 2005 tax return online Basis Other Than Cost You must use a basis other than cost, such as adjusted basis or fair market value, if you received your home as a gift, inheritance, a trade, or from your spouse. 2005 tax return online These situations are discussed in the following pages. 2005 tax return online Also, the instructions for Worksheet 1 (near the end of the publication) address each of these issues. 2005 tax return online Other special rules may apply in certain situations. 2005 tax return online If you converted the property, or some part of it, to business or rental use, see Property Changed to Business or Rental Use, in Publication 551. 2005 tax return online Home received as gift. 2005 tax return online   Use the following chart to find the basis of a home you received as a gift. 2005 tax return online IF the donor's adjusted basis at the time of the gift was. 2005 tax return online . 2005 tax return online . 2005 tax return online THEN your basis is. 2005 tax return online . 2005 tax return online . 2005 tax return online more than the fair market value of the home at that time the same as the donor's adjusted basis at the time of the gift. 2005 tax return online   Exception: If using the donor's adjusted basis results in a loss when you sell the home, you must use the fair market value of the home at the time of the gift as your basis. 2005 tax return online If using the fair market value results in a gain, you have neither gain nor loss. 2005 tax return online equal to or less than the fair market value at that time, and you received the gift before 1977 the smaller of the: • donor's adjusted basis, plus  any federal gift tax paid on  the gift, or • the home's fair market value  at the time of the gift. 2005 tax return online equal to or less than the fair market value at that time, and you received the gift after 1976 the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home (explained next). 2005 tax return online Fair market value. 2005 tax return online   The fair market value of property at the time of the gift is the value of the property as appraised for purposes of the federal gift tax. 2005 tax return online If the gift was not subject to the federal gift tax, the fair market value is the value as appraised for the purposes of a state gift tax. 2005 tax return online Part of federal gift tax due to net increase in value. 2005 tax return online   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. 2005 tax return online The numerator of the fraction is the net increase in the value of the home, and the denominator is the value of the home for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. 2005 tax return online The net increase in the value of the home is its fair market value minus the donor's adjusted basis immediately before the gift. 2005 tax return online Home acquired from a decedent who died before or after 2010. 2005 tax return online   If you inherited your home from a decedent who died before or after 2010, your basis is the fair market value of the property on the date of the decedent's death (or the later alternate valuation date chosen by the personal representative of the estate). 2005 tax return online If an estate tax return was filed or required to be filed, the value of the property listed on the estate tax return is your basis. 2005 tax return online If a federal estate tax return did not have to be filed, your basis in the home is the same as its appraised value at the date of death, for purposes of state inheritance or transmission taxes. 2005 tax return online Surviving spouse. 2005 tax return online   If you are a surviving spouse and you owned your home jointly, your basis in the home will change. 2005 tax return online The new basis for the interest your spouse owned will be its fair market value on the date of death (or alternate valuation date). 2005 tax return online The basis in your interest will remain the same. 2005 tax return online Your new basis in the home is the total of these two amounts. 2005 tax return online   If you and your spouse owned the home either as tenants by the entirety or as joint tenants with right of survivorship, you will each be considered to have owned one-half of the home. 2005 tax return online Example. 2005 tax return online Your jointly owned home (owned as joint tenants with right of survivorship) had an adjusted basis of $50,000 on the date of your spouse's death, and the fair market value on that date was $100,000. 2005 tax return online Your new basis in the home is $75,000 ($25,000 for one-half of the adjusted basis plus $50,000 for one-half of the fair market value). 2005 tax return online Community property. 2005 tax return online   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), each spouse is usually considered to own half of the community property. 2005 tax return online When either spouse dies, the total fair market value of the community property becomes the basis of the entire property, including the part belonging to the surviving spouse. 2005 tax return online For this to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. 2005 tax return online   For more information about community property, see Publication 555, Community Property. 2005 tax return online    If you are selling a home in which you acquired an interest from a decedent who died in 2010, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your basis. 2005 tax return online Home received as trade. 2005 tax return online   If you acquired your home as a trade for other property, in most cases, the basis of your home is the fair market value (at the time of the trade) of the property you gave up. 2005 tax return online If you traded one home for another, you have made a sale and purchase. 2005 tax return online In that case, you may have a gain. 2005 tax return online See Trading (exchanging) homes under Dispositions Other Than Sales, earlier, for an example of figuring the gain. 2005 tax return online Home received from spouse. 2005 tax return online   If you received your home from your spouse or from your former spouse incident to your divorce, your basis in the home depends on the date of the transfer. 2005 tax return online Transfers after July 18, 1984. 2005 tax return online   If you received the home after July 18, 1984, there was no gain or loss on the transfer. 2005 tax return online In most cases, your basis in this home is the same as your spouse's (or former spouse's) adjusted basis just before you received it. 2005 tax return online This rule applies even if you received the home in exchange for cash, the release of marital rights, the assumption of liabilities, or other considerations. 2005 tax return online   If you owned a home jointly with your spouse and your spouse transferred his or her interest in the home to you, in most cases, your basis in the half interest received from your spouse is the same as your spouse's adjusted basis just before the transfer. 2005 tax return online This also applies if your former spouse transferred his or her interest in the home to you incident to your divorce. 2005 tax return online Your basis in the half interest you already owned does not change. 2005 tax return online Your new basis in the home is the total of these two amounts. 2005 tax return online Transfers before July 19, 1984. 2005 tax return online   If you received your home before July 19, 1984, in exchange for your release of marital rights, in most cases, your basis in the home is generally its fair market value at the time you received it. 2005 tax return online More information. 2005 tax return online   For more information on property received from a spouse or former spouse, see Property Settlements in Publication 504. 2005 tax return online Involuntary conversion. 2005 tax return online   If your home is destroyed or condemned, you may receive insurance proceeds or a condemnation award. 2005 tax return online If you acquired a replacement home with these proceeds, the basis is its cost decreased by any gain not recognized on the conversion under the rules explained in: Publication 547, in the case of a home that was destroyed, or Chapter 1 of Publication 544, in the case of a home that was condemned. 2005 tax return online Example. 2005 tax return online A fire destroyed your home that you owned and used for only 6 months. 2005 tax return online The home had an adjusted basis of $80,000 and the insurance company paid you $130,000 for the loss. 2005 tax return online Your gain is $50,000 ($130,000 − $80,000). 2005 tax return online You bought a replacement home for $100,000. 2005 tax return online The part of your gain that is taxable is $30,000 ($130,000 − $100,000), the unspent part of the payment from the insurance company. 2005 tax return online The rest of the gain ($20,000) is not taxable, so that amount reduces your basis in the new home. 2005 tax return online The basis of the new home is figured as follows. 2005 tax return online Cost of replacement home $100,000 Minus: Gain not recognized 20,000 Basis of the replacement home $80,000 More information. 2005 tax return online   For more information about basis, see Publication 551. 2005 tax return online Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. 2005 tax return online To figure your adjusted basis, you can use Worksheet 1, found toward the end of this publication. 2005 tax return online Filled-in examples of that worksheet are included in Comprehensive Examples , later. 2005 tax return online Recordkeeping. 2005 tax return online You should keep records to prove your home's adjusted basis. 2005 tax return online 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. 2005 tax return online 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. 2005 tax return online Keep records proving the basis of both homes as long as they are needed for tax purposes. 2005 tax return online 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 exclude 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. 2005 tax return online Increases to Basis These include the following. 2005 tax return online Additions and other improvements that have a useful life of more than 1 year. 2005 tax return online Special assessments for local improvements. 2005 tax return online Amounts you spent after a casualty to restore damaged property. 2005 tax return online Improvements. 2005 tax return online   These add to the value of your home, prolong its useful life, or adapt it to new uses. 2005 tax return online You add the cost of additions and other improvements to the basis of your property. 2005 tax return online   The following chart lists some other examples of improvements. 2005 tax return online Examples of Improvements That Increase Basis Additions Bedroom Bathroom Deck Garage Porch Patio Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system 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  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 Floors Pipes and duct work Improvements no longer part of home. 2005 tax return online   Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. 2005 tax return online Example. 2005 tax return online You put wall-to-wall carpeting in your home 15 years ago. 2005 tax return online Later, you replaced that carpeting with new wall-to-wall carpeting. 2005 tax return online The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. 2005 tax return online Repairs. 2005 tax return online   These maintain your home in good condition but do not add to its value or prolong its life. 2005 tax return online You do not add their cost to the basis of your property. 2005 tax return online Examples. 2005 tax return online Repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes are examples of repairs. 2005 tax return online Exception. 2005 tax return online   The entire job is considered an improvement if items that would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home. 2005 tax return online For example, if you have a casualty and your home is damaged, increase your basis by the amount you spend on repairs that restore the property to its pre-casualty condition. 2005 tax return online Decreases to Basis These include the following. 2005 tax return online Discharge of qualified principal residence indebtedness that was excluded from income (but not below zero). 2005 tax return online For details, see Publication 4681. 2005 tax return online Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. 2005 tax return online For details, see Publication 4681. 2005 tax return online Gain you postponed from the sale of a previous home before May 7, 1997. 2005 tax return online Deductible casualty losses. 2005 tax return online Insurance payments you received or expect to receive for casualty losses. 2005 tax return online Payments you received for granting an easement or right-of-way. 2005 tax return online Depreciation allowed or allowable if you used your home for business or rental purposes. 2005 tax return online Energy-related credits allowed for expenditures made on the residence. 2005 tax return online (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. 2005 tax return online ) Adoption credit you claimed for improvements added to the basis of your home. 2005 tax return online Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. 2005 tax return online 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. 2005 tax return online 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. 2005 tax return online District of Columbia first-time homebuyer credit allowed on the purchase of a principal residence in the District of Columbia. 2005 tax return online General sales taxes 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. 2005 tax return online Discharges of qualified principal residence indebtedness. 2005 tax return online   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. 2005 tax return online This exclusion applies to discharges made after 2006 and before 2014. 2005 tax return online If you choose to exclude this income, you must reduce (but not below zero) the basis of your principal residence by the amount excluded from gross income. 2005 tax return online   File Form 982 with your tax return. 2005 tax return online See the form's instructions for detailed information. 2005 tax return online    A decrease in basis due to a discharge of qualified principal residence indebtedness that is excluded from income occurs only if you retain ownership of the principal residence after a discharge. 2005 tax return online In most cases, this would occur in a refinancing or a restructuring of the mortgage. 2005 tax return online Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. 2005 tax return online 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. 2005 tax return online To qualify, you must meet the ownership and use tests described later. 2005 tax return online 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. 2005 tax return online This choice can be made (or revoked) at any time before the expiration of a 3-year period beginning on the due date of your return (not including extensions) for the year of the sale. 2005 tax return online You can use Worksheet 2 (near the end of this publication) to figure the amount of your exclusion and your taxable gain, if any. 2005 tax return online If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. 2005 tax return online See Publication 505, Tax Withholding and Estimated Tax. 2005 tax return online 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. 2005 tax return online You meet the ownership test. 2005 tax return online You meet the use test. 2005 tax return online During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. 2005 tax return online For details on gain allocated to periods of nonqualified use, see Nonqualified Use , later. 2005 tax return online If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed. 2005 tax return online 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 . 2005 tax return online Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. 2005 tax return online 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). 2005 tax return online Exception. 2005 tax return online   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. 2005 tax return online However, the maximum amount you may be able to exclude will be reduced. 2005 tax return online See Reduced Maximum Exclusion , later. 2005 tax return online Example 1—home owned and occupied for at least 2 years. 2005 tax return online Mya bought and moved into her main home in September 2011. 2005 tax return online She sold the home at a gain in October 2013. 2005 tax return online 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. 2005 tax return online She meets the ownership and use tests. 2005 tax return online Example 2—ownership test met but use test not met. 2005 tax return online Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. 2005 tax return online He later sold the home for a gain in June 2013. 2005 tax return online He owned the home during the entire 5-year period ending on the date of sale. 2005 tax return online He meets the ownership test but not the use test. 2005 tax return online He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). 2005 tax return online 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. 2005 tax return online 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. 2005 tax return online Example. 2005 tax return online Naomi bought and moved into a house in July 2009. 2005 tax return online She lived there for 13 months and then moved in with a friend. 2005 tax return online She later moved back into her house and lived there for 12 months until she sold it in August 2013. 2005 tax return online Naomi meets the ownership and use tests because, during the 5-year period ending on the date of sale, she owned the house for more than 2 years and lived in it for a total of 25 (13 + 12) months. 2005 tax return online Temporary absence. 2005 tax return online   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. 2005 tax return online The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. 2005 tax return online Example 1. 2005 tax return online David Johnson, who is single, bought and moved into his home on February 1, 2011. 2005 tax return online Each year during 2011 and 2012, David left his home for a 2-month summer vacation. 2005 tax return online David sold the house on March 1, 2013. 2005 tax return online Although the total time David lived in his home is less than 2 years (21 months), he meets the use requirement and may exclude gain. 2005 tax return online 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. 2005 tax return online Example 2. 2005 tax return online Professor Paul Beard, who is single, bought and moved into a house in December 2010, went abroad for a 1-year sabbatical leave in January 2012, returned to the house in January 2013, and sold it at a gain in February 2013. 2005 tax return online Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. 2005 tax return online He cannot exclude any part of his gain because he did not use the residence for the required 2 years. 2005 tax return online Ownership and use tests met at different times. 2005 tax return online   You can meet the ownership and use tests during different 2-year periods. 2005 tax return online However, you must meet both tests during the 5-year period ending on the date of the sale. 2005 tax return online Example. 2005 tax return online Beginning in 2002, Helen Jones lived in a rented apartment. 2005 tax return online The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. 2005 tax return online In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. 2005 tax return online On July 12, 2013, while still living in her daughter's home, she sold her condominium. 2005 tax return online 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. 2005 tax return online She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). 2005 tax return online She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). 2005 tax return online 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. 2005 tax return online Cooperative apartment. 2005 tax return online   If you sold stock as a tenant-shareholder 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 entitled you to occupy as your main home for at least 2 years. 2005 tax return online Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. 2005 tax return online Exception for individuals with a disability. 2005 tax return online   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. 2005 tax return online 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. 2005 tax return online   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. 2005 tax return online Previous home destroyed or condemned. 2005 tax return online   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. 2005 tax return online This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home (see Involuntary Conversions in Publication 551). 2005 tax return online 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. 2005 tax return online Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. 2005 tax return online   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 (defined later) as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. 2005 tax return online 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 (defined later) or as an enrolled volunteer or volunteer leader of the Peace Corps. 2005 tax return online 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. 2005 tax return online   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. 2005 tax return online Example. 2005 tax return online John bought and moved into a home in 2005. 2005 tax return online He lived in it as his main home for 2½ years. 2005 tax return online For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. 2005 tax return online He then sold the home at a gain in 2013. 2005 tax return online To meet the use test, John chooses to suspend the 5-year test period for the 6 years he was on qualified official extended duty. 2005 tax return online This means he can disregard those 6 years. 2005 tax return online Therefore, John's 5-year test period consists of the 5 years before he went on qualified official extended duty. 2005 tax return online He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. 2005 tax return online Period of suspension. 2005 tax return online   The period of suspension cannot last more than 10 years. 2005 tax return online Together, the 10-year suspension period and the 5-year test period can be as long as, but no more than, 15 years. 2005 tax return online You cannot suspend the 5-year period for more than one property at a time. 2005 tax return online You can revoke your choice to suspend the 5-year period at any time. 2005 tax return online Example. 2005 tax return online Mary bought a home on April 1, 1997. 2005 tax return online She used it as her main home until August 31, 2000. 2005 tax return online On September 1, 2000, she went on qualified official extended duty with the Navy. 2005 tax return online She did not live in the house again before selling it on July 31, 2013. 2005 tax return online Mary chooses to use the entire 10-year suspension period. 2005 tax return online Therefore, the suspension period would extend back from July 31, 2013, to August 1, 2003, and the 5-year test period would extend back to August 1, 1998. 2005 tax return online During that period, Mary owned the house all 5 years and lived in it as her main home from August 1, 1998, until August 31, 2000, a period of more than 24 months. 2005 tax return online She meets the ownership and use tests because she owned and lived in the home for at least 2 years during this test period. 2005 tax return online Uniformed services. 2005 tax return online   The uniformed services are: The Armed Forces (the Army, Navy, Air Force, Marine Corps, and Coast Guard), The commissioned corps of the National Oceanic and Atmospheric Administration, and The commissioned corps of the Public Health Service. 2005 tax return online Foreign Service member. 2005 tax return online   For purposes of the choice to suspend the 5-year test period for ownership and use, you are a member of the Foreign Service if you are any of the following. 2005 tax return online A Chief of mission. 2005 tax return online An Ambassador at large. 2005 tax return online A member of the Senior Foreign Service. 2005 tax return online A Foreign Service officer. 2005 tax return online Part of the Foreign Service personnel. 2005 tax return online Employee of the intelligence community. 2005 tax return online   For purposes of the choice to suspend the 5-year test period for ownership and use, you are an employee of the intelligence community if you are an employee of any of the following. 2005 tax return online The Office of the Director of National Intelligence. 2005 tax return online The Central Intelligence Agency. 2005 tax return online The National Security Agency. 2005 tax return online The Defense Intelligence Agency. 2005 tax return online The National Geospatial-Intelligence Agency. 2005 tax return online The National Reconnaissance Office and any other office within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs. 2005 tax return online Any of the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, the Department of Treasury, the Department of Energy, and the Coast Guard. 2005 tax return online The Bureau of Intelligence and Research of the Department of State. 2005 tax return online Any of the elements of the Department of Homeland Security concerned with the analyses of foreign intelligence information. 2005 tax return online Qualified official extended duty. 2005 tax return online   You are on qualified official extended duty if you are on extended duty while: Serving at a duty station at least 50 miles from your main home, or Living in Government quarters under Government orders. 2005 tax return online   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. 2005 tax return online 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. 2005 tax return online (But see Special rules for joint returns, next. 2005 tax return online ) Special rules for joint returns. 2005 tax return online   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. 2005 tax return online You are married and file a joint return for the year. 2005 tax return online Either you or your spouse meets the ownership test. 2005 tax return online Both you and your spouse meet the use test. 2005 tax return online 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. 2005 tax return online 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. 2005 tax return online For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. 2005 tax return online Example 1—one spouse sells a home. 2005 tax return online Emily sells her home in June 2013 for a gain of $300,000. 2005 tax return online She marries Jamie later in the year. 2005 tax return online She meets the ownership and use tests, but Jamie does not. 2005 tax return online Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. 2005 tax return online The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. 2005 tax return online Example 2—each spouse sells a home. 2005 tax return online 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. 2005 tax return online He meets the ownership and use tests on his home, but Emily does not. 2005 tax return online Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. 2005 tax return online However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. 2005 tax return online Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. 2005 tax return online 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. 2005 tax return online Sale of main home by surviving spouse. 2005 tax return online   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. 2005 tax return online   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. 2005 tax return online The sale or exchange took place after 2008. 2005 tax return online The sale or exchange took place no more than 2 years after the date of death of your spouse. 2005 tax return online You have not remarried. 2005 tax return online You and your spouse met the use test at the time of your spouse's death. 2005 tax return online You or your spouse met the ownership test at the time of your spouse's death. 2005 tax return online Neither you nor your spouse excluded gain from the sale of another home during the last 2 years before the date of death. 2005 tax return online The ownership and use tests were described earlier. 2005 tax return online Example. 2005 tax return online Harry owned and used a house as his main home since 2009. 2005 tax return online Harry and Wilma married on July 1, 2013, and from that date they used Harry's house as their main home. 2005 tax return online Harry died on August 15, 2013, and Wilma inherited the property. 2005 tax return online Wilma sold the property on September 1, 2013, at which time she had not remarried. 2005 tax return online 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. 2005 tax return online Home transferred from spouse. 2005 tax return online   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. 2005 tax return online Use of home after divorce. 2005 tax return online   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. 2005 tax return online 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. 2005 tax return online 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. 2005 tax return online In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. 2005 tax return online A change in place of employment. 2005 tax return online Health. 2005 tax return online Unforeseen circumstances. 2005 tax return online Qualified individual. 2005 tax return online   For purposes of the reduced maximum exclusion, a qualified individual is any of the following. 2005 tax return online You. 2005 tax return online Your spouse. 2005 tax return online A co-owner of the home. 2005 tax return online A person whose main home is the same as yours. 2005 tax return online Primary reason for sale. 2005 tax return online   One of the three reasons above will be considered to be the primary reason you sold your home if either (1) or (2) is true. 2005 tax return online You qualify under a “safe harbor. 2005 tax return online ” This is a specific set of facts and circumstances that, if applicable, qualifies you to claim a reduced maximum exclusion. 2005 tax return online Safe harbors corresponding to the reasons listed above are described later. 2005 tax return online A safe harbor does not apply, but you can establish, based on facts and circumstances, that the primary reason for the sale is a change in place of employment, health, or unforeseen circumstances. 2005 tax return online  Factors that may be relevant in determining your primary reason for sale include whether: Your sale and the circumstances causing it were close in time, The circumstances causing your sale occurred during the time you owned and used the property as your main home, The circumstances causing your sale were not reasonably foreseeable when you began using the property as your main home, Your financial ability to maintain the property became materially impaired, The suitability of the property as your main home materially changed, and During the time you owned the property, you used it as your home. 2005 tax return online Change in Place of Employment You may qualify for a reduced exclusion if the primary reason for the sale of your main home is a change in the location of employment of a qualified individual. 2005 tax return online Employment. 2005 tax return online   For this purpose, employment includes the start of work with a new employer or continuation of work with the same employer. 2005 tax return online It also includes the start or continuation of self-employment. 2005 tax return online Distance safe harbor. 2005 tax return online   A change in place of employment is considered to be the reason you sold your home if: The change occurred during the period you owned and used the property as your main home, and The new place of employment is at least 50 miles farther from the home you sold than was the former place of employment (or, if there was no former place of employment, the distance between your new place of employment and the home sold is at least 50 miles). 2005 tax return online Example. 2005 tax return online Justin was unemployed and living in a townhouse in Florida he had owned and used as his main home since 2012. 2005 tax return online He got a job in North Carolina and sold his townhouse in 2013. 2005 tax return online Because the distance between Justin's new place of employment and the home he sold is at least 50 miles, the sale satisfies the conditions of the distance safe harbor. 2005 tax return online Justin's sale of his home is considered to be because of a change in place of employment, and he is entitled to claim a reduced maximum exclusion of gain from the sale. 2005 tax return online Health The sale of your main home is because of health if your primary reason for the sale is: To obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual, or To obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury. 2005 tax return online The sale of your home is not because of health if the sale merely benefits a qualified individual's general health or well-being. 2005 tax return online For purposes of this reason, a qualified individual includes, in addition to the individuals listed earlier under Qualified individual , any of the following family members of these individuals. 2005 tax return online Parent, grandparent, stepmother, stepfather. 2005 tax return online Child, grandchild, stepchild, adopted child, eligible foster child. 2005 tax return online Brother, sister, stepbrother, stepsister, half-brother, half-sister. 2005 tax return online Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law. 2005 tax return online Uncle, aunt, nephew, niece, or cousin. 2005 tax return online Example. 2005 tax return online In 2012, Chase and Lauren, spouses, bought a house that they used as their main home. 2005 tax return online Lauren's father has a chronic disease and is unable to care for himself. 2005 tax return online In 2013, Chase and Lauren sold their home in order to move into Lauren's father's house to provide care for him. 2005 tax return online Because the primary reason for the sale of their home was to provide care for Lauren's father, Chase and Lauren are entitled to a reduced maximum exclusion. 2005 tax return online Doctor's recommendation safe harbor. 2005 tax return online   Health is considered to be the reason you sold your home if, for one or more of the reasons listed at the beginning of this discussion, a doctor recommends a change of residence. 2005 tax return online Unforeseen Circumstances 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 that home. 2005 tax return online You are not considered to have an unforeseen circumstance if the primary reason you sold your home was that you preferred to get a different home or because your finances improved. 2005 tax return online Specific event safe harbors. 2005 tax return online   Unforeseen circumstances are considered to be the reason for selling your home if any of the following events occurred while you owned and used the property as your main home. 2005 tax return online An involuntary conversion of your home, such as when your home is destroyed or condemned. 2005 tax return online Natural or man-made disasters or acts of war or terrorism resulting in a casualty to your home, whether or not your loss is deductible. 2005 tax return online In the case of qualified individuals (listed earlier under Qualified individual ): Death, Unemployment (if the individual is eligible for unemployment compensation), A change in employment or self-employment status that results in the individual's inability to pay reasonable basic living expenses (listed under Reasonable basic living expenses , later) for his or her household, Divorce or legal separation under a decree of divorce or separate maintenance, or Multiple births resulting from the same pregnancy. 2005 tax return online An event the IRS determined to be an unforeseen circumstance in published guidance of general applicability. 2005 tax return online For example, the IRS determined the September 11, 2001, terrorist attacks to be an unforeseen circumstance. 2005 tax return online Reasonable basic living expenses. 2005 tax return online   Reasonable basic living expenses for your household include the following. 2005 tax return online Amounts spent for food. 2005 tax return online Amounts spent for clothing. 2005 tax return online Housing and related expenses. 2005 tax return online Medical expenses. 2005 tax return online Transportation expenses. 2005 tax return online Tax payments. 2005 tax return online Court-ordered payments. 2005 tax return online Expenses reasonably necessary to produce income. 2005 tax return online   Any of these amounts spent to maintain an affluent or luxurious standard of living are not reasonable basic living expenses. 2005 tax return online Nonqualified Use Gain from the sale or exchange of the main home is not excludable from income if it is allocable to periods of nonqualified use. 2005 tax return online Nonqualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions (see next). 2005 tax return online Exceptions. 2005 tax return online   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. 2005 tax return online Calculation. 2005 tax return online   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain (net of any depreciation allowed or allowable on the property for periods after May 6, 1997) 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, later in this publication. 2005 tax return online   For examples of this calculation, see Business Use or Rental of Home , next. 2005 tax return online 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 if you meet the ownership and use tests. 2005 tax return online Example 1. 2005 tax return online On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. 2005 tax return online 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. 2005 tax return online The house was rented from June 1, 2009, to March 31, 2011. 2005 tax return online Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. 2005 tax return online 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. 2005 tax return online 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. 2005 tax return online Five-Year Period Used as Home Used as Rental 1/31/08 – 5/31/09 16 months   6/01/09 – 3/31/11   22 months 4/01/11 – 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. 2005 tax return online Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain, as shown on Worksheet 2. 2005 tax return online Example 2. 2005 tax return online William owned and used a house as his main home from 2007 through 2010. 2005 tax return online On January 1, 2011, he moved to another state. 2005 tax return online He rented his house from that date until April 30, 2013, when he sold it. 2005 tax return online 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. 2005 tax return online Because it was rental property at the time of the sale, he must report the sale on Form 4797. 2005 tax return online 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. 2005 tax return online Because he met the ownership and use tests, he can exclude gain up to $250,000. 2005 tax return online 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. 2005 tax return online Depreciation after May 6, 1997. 2005 tax return online   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. 2005 tax return online 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. 2005 tax return online Unrecaptured section 1250 gain. 2005 tax return online   This is the part of any long-term capital gain from the sale of your home that is due to depreciation and cannot be excluded. 2005 tax return online To figure the amount of unrecaptured section 1250 gain to be reported on Schedule D (Form 1040), you must also take into account certain gains or losses from the sale of property other than your home. 2005 tax return online Use the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions for this purpose. 2005 tax return online Worksheet 2. 2005 tax return online Taxable Gain on Sale of Home—Completed Example 1 for Amy Part 1. 2005 tax return online Gain or (Loss) on Sale       1. 2005 tax return online   Selling price of home 1. 2005 tax return online     2. 2005 tax return online   Selling expenses (including commissions, advertising and legal fees, and seller-paid loan charges) 2. 2005 tax return online     3. 2005 tax return online   Subtract line 2 from line 1. 2005 tax return online This is the amount realized 3. 2005 tax return online     4. 2005 tax return online   Adjusted basis of home sold (from Worksheet 1, line 13) 4. 2005 tax return online     5. 2005 tax return online   Gain or (loss) on the sale. 2005 tax return online Subtract line 4 from line 3. 2005 tax return online If this is a loss, stop here 5. 2005 tax return online 200,000   Part 2. 2005 tax return online Exclusion and Taxable Gain       6. 2005 tax return online   Enter any depreciation allowed or allowable on the property for periods after May 6, 1997. 2005 tax return online If none, enter -0- 6. 2005 tax return online 10,000   7. 2005 tax return online   Subtract line 6 from line 5. 2005 tax return online If the result is less than zero, enter -0- 7. 2005 tax return online 190,000   8. 2005 tax return online   Aggregate number of days of nonqualified use after 2008. 2005 tax return online If none, enter -0-. 2005 tax return online  If line 8 is equal to zero, skip to line 12 and enter the amount from line 7 on line 12 8. 2005 tax return online 668   9. 2005 tax return online   Number of days taxpayer owned the property 9. 2005 tax return online 2,080   10. 2005 tax return online   Divide the amount on line 8 by the amount on line 9. 2005 tax return online Enter the result as a decimal (rounded to at least 3 places). 2005 tax return online But do not enter an amount greater than 1. 2005 tax return online 00 10. 2005 tax return online 0. 2005 tax return online 321   11. 2005 tax return online   Gain allocated to nonqualified use. 2005 tax return online (Line 7 multiplied by line 10) 11. 2005 tax return online 60,990   12. 2005 tax return online   Gain eligible for exclusion. 2005 tax return online Subtract line 11 from line 7 12. 2005 tax return online 129,010   13. 2005 tax return online   If you qualify to exclude gain on the sale, enter your maximum exclusion (see Maximum Exclusion ). 2005 tax return online  If you qualify for a reduced maximum exclusion, enter the amount from Worksheet 3, line 7. 2005 tax return online If you do  not qualify to exclude gain, enter -0- 13. 2005 tax return online 250,000   14. 2005 tax return online   Exclusion. 2005 tax return online Enter the smaller of line 12 or line 13 14. 2005 tax return online 129,010   15. 2005 tax return online   Taxable gain. 2005 tax return online Subtract line 14 from line 5. 2005 tax return online Report your taxable gain as described under Reporting the Sale . 2005 tax return online If the amount on line 6 is more than zero, complete line 16 15. 2005 tax return online 70,990   16. 2005 tax return online   Enter the smaller of line 6 or line 15. 2005 tax return online Enter this amount on line 12 of the Unrecaptured Section 1250 Gain  Worksheet in the instructions for Schedule D (Form 1040) 16. 2005 tax return online 10,000 Property Used Partly for Business or Rental If you use property partly as a home and partly for business or to produce rental income, the treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. 2005 tax return online Part of Home Used for Business or Rental If the part of your property used for business or to produce rental income is within your home, such as a room used as a home office for a business, you do not need to allocate gain on the sale of the property between the business part of the property and the part used as a home. 2005 tax return online In addition, you do not need to report the sale of the business or rental part on Form 4797. 2005 tax return online This is true whether or not you were entitled to claim any depreciation. 2005 tax return online However, you cannot exclude the part of any gain equal to any depreciation allowed or allowable after May 6, 1997. 2005 tax return online See Depreciation after May 6, 1997, earlier. 2005 tax return online Example 1. 2005 tax return online Ray sold his main home in 2013 at a $30,000 gain. 2005 tax return online He has no gains or losses from the sale of property other than the gain from the sale of his home. 2005 tax return online He meets the ownership and use tests to exclude the gain from his income. 2005 tax return online However, he used part of the home as a business office in 2012 and claimed $500 depreciation. 2005 tax return online Because the business office was part of his home (not separate from it), he does not have to allocate the gain on the sale between the business part of the property and the part used as a home. 2005 tax return online In addition, he does not have to report any part of the gain on Form 4797. 2005 tax return online Because Ray was entitled to take a depreciation deduction, he must recognize $500 of the gain as unrecaptured section 1250 gain. 2005 tax return online He reports his gain, exclusion, and the taxable gain of $500 on Form 8949 and Schedule D (Form 1040). 2005 tax return online Example 2. 2005 tax return online The facts are the same as in Example 1 except that Ray was not entitled to claim depreciation for the business use of his home. 2005 tax return online Since Ray did not claim any depreciation, he can exclude the entire $30,000 gain. 2005 tax return online Separate Part of Property Used for Business or Rental You may have used part of your property as your home and a separate part of it for business or to produce rental income. 2005 tax return online Examples are: A working farm on which your house was located, A duplex in w