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Amend 2012 Tax Return Free

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Amend 2012 Tax Return Free

Amend 2012 tax return free 4. Amend 2012 tax return free   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. Amend 2012 tax return free However, the information shown on the filled-in forms is not from any actual person or scenario. Amend 2012 tax return free Example 1—Mortgage loan modification. Amend 2012 tax return free    In 2007, Nancy Oak bought a main home for $435,000. Amend 2012 tax return free Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. Amend 2012 tax return free The loan was secured by the home. Amend 2012 tax return free The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. Amend 2012 tax return free In 2008, Nancy took out a second mortgage loan (also a recourse debt) in the amount of $30,000 that was used to substantially improve her kitchen. Amend 2012 tax return free    In 2011, when the outstanding principal of the first and second mortgage loans was $440,000, Nancy refinanced the two recourse loans into one recourse loan in the amount of $475,000. Amend 2012 tax return free The FMV of Nancy's home at the time of the refinancing was $500,000. Amend 2012 tax return free Nancy used the additional $35,000 debt ($475,000 new mortgage loan minus $440,000 outstanding principal of Nancy's first and second mortgage loans immediately before the refinancing) to pay off personal credit cards and to pay college tuition for her son. Amend 2012 tax return free After the refinancing, Nancy has qualified principal residence indebtedness in the amount of $440,000 because the refinanced debt is qualified principal residence indebtedness only to the extent the amount of debt is not more than the old mortgage principal just before the refinancing. Amend 2012 tax return free   In 2013, Nancy was unable to make her mortgage loan payments. Amend 2012 tax return free On August 31, 2013, when the outstanding balance of her refinanced mortgage loan was still $475,000 and the FMV of the property was $425,000, Nancy's bank agreed to a loan modification (a “workout”) that resulted in a $40,000 reduction in the principal balance of her loan. Amend 2012 tax return free Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. Amend 2012 tax return free   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. Amend 2012 tax return free Identifiable event code "F" appears in box 6. Amend 2012 tax return free This box shows the reason the creditor has filed Form 1099-C. Amend 2012 tax return free To determine if she must include the canceled debt in her income, Nancy must determine whether she meets any of the exceptions or exclusions that apply to canceled debts. Amend 2012 tax return free Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. Amend 2012 tax return free   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. Amend 2012 tax return free Although Nancy has $440,000 of qualified principal residence indebtedness, part of her loan ($35,000) was not qualified principal residence indebtedness because it was used to pay off personal credit cards and college tuition for her son. Amend 2012 tax return free Applying the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent the amount canceled is more than the amount of the debt (immediately before the cancellation) that is not qualified principal residence indebtedness. Amend 2012 tax return free Thus, Nancy can exclude only $5,000 of the canceled debt as qualified principal residence indebtedness ($40,000 amount canceled minus $35,000 nonqualified debt). Amend 2012 tax return free   Because Nancy does not meet any other exception or exclusion, she checks only the box on line 1e of Form 982 and enters $5,000 on line 2. Amend 2012 tax return free Nancy must also enter $5,000 on line 10b and reduce the basis of her main home by the $5,000 she excluded from income, bringing the adjusted basis in her home to $460,000 ($435,000 purchase price plus $30,000 substantial improvement minus $5,000). Amend 2012 tax return free Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. Amend 2012 tax return free You can see Nancy's Form 1099-C and a portion of her Form 1040 below. Amend 2012 tax return free Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Amend 2012 tax return free Please click the link to view the image. Amend 2012 tax return free Form 1099-C, Cancellation of Debt Nancy's 2013 Form 1040 This image is too large to be displayed in the current screen. Amend 2012 tax return free Please click the link to view the image. Amend 2012 tax return free Form 1040, U. Amend 2012 tax return free S. Amend 2012 tax return free Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. Amend 2012 tax return free Please click the link to view the image. Amend 2012 tax return free Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. Amend 2012 tax return free    In 2005, John and Mary Elm bought a main home for $335,000. Amend 2012 tax return free John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. Amend 2012 tax return free The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. Amend 2012 tax return free   John and Mary became unable to make their mortgage loan payments and on March 1, 2013, when the outstanding balance of the mortgage loan was $315,000 and the FMV of the property was $290,000, the bank foreclosed on the property and simultaneously canceled the remaining mortgage debt. Amend 2012 tax return free Immediately before the foreclosure, John and Mary's only other assets and liabilities were a checking account with a balance of $6,000, retirement savings of $13,000, and credit card debt of $5,500. Amend 2012 tax return free   John and Mary received a 2013 Form 1099-C showing canceled debt of $25,000 in box 2 ($315,000 outstanding balance minus $290,000 FMV) and an FMV of $290,000 in box 7. Amend 2012 tax return free Identifiable event code "D" appears in box 6. Amend 2012 tax return free This box shows the reason the creditor has filed Form 1099-C. Amend 2012 tax return free In order to determine if John and Mary must include the canceled debt in income, they must first determine whether they meet any of the exceptions or exclusions that apply to canceled debts. Amend 2012 tax return free In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. Amend 2012 tax return free Their sample Form 1099-C is shown on this page. Amend 2012 tax return free   John and Mary complete the insolvency worksheet and determine that they were insolvent immediately before the cancellation because at that time their liabilities exceeded the FMV of their assets by $11,500 ($320,500 total liabilities minus $309,000 FMV of total assets). Amend 2012 tax return free However, because the entire debt canceled is qualified principal residence indebtedness, the insolvency exclusion only applies if John and Mary elect to apply the insolvency exclusion instead of the qualified principal residence exclusion. Amend 2012 tax return free   John and Mary do not elect to apply the insolvency exclusion instead of the qualified principal residence exclusion because under the insolvency exclusion their exclusion would be limited to the amount by which they were insolvent ($11,500). Amend 2012 tax return free Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. Amend 2012 tax return free Under the qualified principal residence exclusion, the amount that John and Mary can exclude is not limited because their qualified principal residence indebtedness is not more than $2 million and no portion of the loan was nonqualified debt. Amend 2012 tax return free As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. Amend 2012 tax return free Because John and Mary no longer own the home due to the foreclosure, John and Mary have no remaining basis in the home at the time of the debt cancellation. Amend 2012 tax return free Thus, John and Mary leave line 10b of Form 982 blank. Amend 2012 tax return free   John and Mary must also determine whether they have a gain or loss from the foreclosure. Amend 2012 tax return free John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. Amend 2012 tax return free Because this loss relates to their home, it is a nondeductible loss. Amend 2012 tax return free   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. Amend 2012 tax return free John and Mary's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Amend 2012 tax return free Please click the link to view the image. Amend 2012 tax return free Form 1099-C, Cancellation of Debt Table 1-1. Amend 2012 tax return free Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. Amend 2012 tax return free Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Amend 2012 tax return free Otherwise, go to Part 2. Amend 2012 tax return free 1. Amend 2012 tax return free Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $315,000. Amend 2012 tax return free 00 2. Amend 2012 tax return free Enter the fair market value of the transferred property $290,000. Amend 2012 tax return free 00 3. Amend 2012 tax return free Ordinary income from the cancellation of debt upon foreclosure or repossession. Amend 2012 tax return free * Subtract line 2 from line 1. Amend 2012 tax return free If less than zero, enter zero. Amend 2012 tax return free Next, go to Part 2 $ 25,000. Amend 2012 tax return free 00 Part 2. Amend 2012 tax return free Gain or loss from foreclosure or repossession. Amend 2012 tax return free   4. Amend 2012 tax return free Enter the smaller of line 1 or line 2. Amend 2012 tax return free If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property $290,000. Amend 2012 tax return free 00 5. Amend 2012 tax return free Enter any proceeds you received from the foreclosure sale   6. Amend 2012 tax return free Add line 4 and line 5 $290,000. Amend 2012 tax return free 00 7. Amend 2012 tax return free Enter the adjusted basis of the transferred property $335,000. Amend 2012 tax return free 00 8. Amend 2012 tax return free Gain or loss from foreclosure or repossession. Amend 2012 tax return free Subtract line 7 from line 6 ($ 45,000. Amend 2012 tax return free 00) * The income may not be taxable. Amend 2012 tax return free See chapter 1 for more details. Amend 2012 tax return free Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. Amend 2012 tax return free Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. Amend 2012 tax return free Credit card debt $ 5,500 2. Amend 2012 tax return free Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 315,000 3. Amend 2012 tax return free Car and other vehicle loans $ 4. Amend 2012 tax return free Medical bills owed $ 5. Amend 2012 tax return free Student loans $ 6. Amend 2012 tax return free Accrued or past-due mortgage interest $ 7. Amend 2012 tax return free Accrued or past-due real estate taxes $ 8. Amend 2012 tax return free Accrued or past-due utilities (water, gas, electric) $ 9. Amend 2012 tax return free Accrued or past-due child care costs $ 10. Amend 2012 tax return free Federal or state income taxes remaining due (for prior tax years) $ 11. Amend 2012 tax return free Judgments $ 12. Amend 2012 tax return free Business debts (including those owed as a sole proprietor or partner) $ 13. Amend 2012 tax return free Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. Amend 2012 tax return free Other liabilities (debts) not included above $ 15. Amend 2012 tax return free Total liabilities immediately before the cancellation. Amend 2012 tax return free Add lines 1 through 14. Amend 2012 tax return free $ 320,500 Part II. Amend 2012 tax return free Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. Amend 2012 tax return free Cash and bank account balances $ 6,000 17. Amend 2012 tax return free Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 290,000 18. Amend 2012 tax return free Cars and other vehicles $ 19. Amend 2012 tax return free Computers $ 20. Amend 2012 tax return free Household goods and furnishings (for example, appliances, electronics, furniture, etc. Amend 2012 tax return free ) $ 21. Amend 2012 tax return free Tools $ 22. Amend 2012 tax return free Jewelry $ 23. Amend 2012 tax return free Clothing $ 24. Amend 2012 tax return free Books $ 25. Amend 2012 tax return free Stocks and bonds $ 26. Amend 2012 tax return free Investments in coins, stamps, paintings, or other collectibles $ 27. Amend 2012 tax return free Firearms, sports, photographic, and other hobby equipment $ 28. Amend 2012 tax return free Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. Amend 2012 tax return free Interest in a pension plan $ 30. Amend 2012 tax return free Interest in education accounts $ 31. Amend 2012 tax return free Cash value of life insurance $ 32. Amend 2012 tax return free Security deposits with landlords, utilities, and others $ 33. Amend 2012 tax return free Interests in partnerships $ 34. Amend 2012 tax return free Value of investment in a business $ 35. Amend 2012 tax return free Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. Amend 2012 tax return free Other assets not included above $ 37. Amend 2012 tax return free FMV of total assets immediately before the cancellation. Amend 2012 tax return free Add lines 16 through 36. Amend 2012 tax return free $ 309,000 Part III. Amend 2012 tax return free Insolvency 38. Amend 2012 tax return free Amount of Insolvency. Amend 2012 tax return free Subtract line 37 from line 15. Amend 2012 tax return free If zero or less, you are not insolvent. Amend 2012 tax return free $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. Amend 2012 tax return free Please click the link to view the image. Amend 2012 tax return free Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)          Example 3—Mortgage loan foreclosure with debt exceeding $2 million limit. Amend 2012 tax return free    In 2011, Kathy and Frank Willow got married and entered into a contract with Hive Construction Corporation to build a house for $3,000,000 to be used as their main home. Amend 2012 tax return free Kathy and Frank made a $400,000 down payment and took out a $2,600,000 mortgage to finance the remaining cost of the house. Amend 2012 tax return free Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. Amend 2012 tax return free   In November 2013, when the outstanding principal balance on the mortgage loan was $2,500,000, the FMV of the property fell to $1,750,000 and Kathy and Frank abandoned the property by permanently moving out. Amend 2012 tax return free The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. Amend 2012 tax return free On December 26, 2013, the lender canceled the remaining debt. Amend 2012 tax return free Kathy and Frank have no tax attributes other than basis of personal-use property. Amend 2012 tax return free   The lender issued a 2013 Form 1099-C to Kathy and Frank showing canceled debt of $750,000 in box 2 (the remaining balance on the $2,500,000 mortgage debt after application of the foreclosure sale proceeds) and $1,750,000 in box 7 (FMV of the property). Amend 2012 tax return free Identifiable event code "D" appears in box 6. Amend 2012 tax return free This box shows the reason the creditor has filed Form 1099-C. Amend 2012 tax return free Although Kathy and Frank abandoned the property, the lender did not need to also file a Form 1099-A because the lender canceled the debt in connection with the foreclosure in the same calendar year. Amend 2012 tax return free Kathy and Frank are filing a joint return for 2013. Amend 2012 tax return free   Because the foreclosure occurred prior to the debt cancellation, Kathy and Frank first calculate their gain or loss from the foreclosure using Table 1-1. Amend 2012 tax return free Because Kathy and Frank remained personally liable for the $750,000 debt remaining after the foreclosure ($2,500,000 outstanding debt immediately before the foreclosure minus $1,750,000 satisfied through the sale of the home), Kathy and Frank enter $1,750,000 on line 1 of Table 1-1 ($2,500,000 outstanding debt immediately before the foreclosure minus the $750,000 for which they remained liable). Amend 2012 tax return free Completing Table 1-1, Kathy and Frank find that they have no ordinary income from the cancellation of debt upon foreclosure and that they have a $1,250,000 loss. Amend 2012 tax return free Because this loss relates to their home, it is a nondeductible loss. Amend 2012 tax return free   Because the lender later canceled the remaining amount of the debt, Kathy and Frank must also determine whether that canceled debt is taxable. Amend 2012 tax return free Immediately before the cancellation, Kathy and Frank had $15,000 in a savings account, household furnishings with an FMV of $17,000, a car with an FMV of $10,000, and $18,000 in credit card debt. Amend 2012 tax return free Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. Amend 2012 tax return free The household furnishings originally cost $30,000. Amend 2012 tax return free The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. Amend 2012 tax return free Kathy and Frank had no adjustments to the cost basis of the car. Amend 2012 tax return free Kathy and Frank had no other assets or liabilities at the time of the cancellation. Amend 2012 tax return free Kathy and Frank complete the insolvency worksheet to calculate that they were insolvent to the extent of $726,000 immediately before the cancellation ($768,000 of total liabilities minus $42,000 FMV of total assets). Amend 2012 tax return free   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. Amend 2012 tax return free Kathy and Frank also owned the same car at that time (still with an FMV of $10,000 and basis of $16,000) and the same household furnishings (still with an FMV of $17,000 and a basis of $30,000). Amend 2012 tax return free Kathy and Frank had no other assets or liabilities at that time. Amend 2012 tax return free Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. Amend 2012 tax return free   Because the canceled debt is qualified principal residence indebtedness, the insolvency exclusion does not apply unless Kathy and Frank elect to apply the insolvency exclusion instead of the qualified principal residence indebtedness exclusion. Amend 2012 tax return free The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. Amend 2012 tax return free The remaining $500,000 ($2,500,000 outstanding mortgage loan minus $2,000,000 limit on qualified principal residence indebtedness) is not qualified principal residence indebtedness. Amend 2012 tax return free Because only a part of the loan is qualified principal residence indebtedness, Kathy and Frank must apply the ordering rule to the canceled debt. Amend 2012 tax return free Under the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent that the amount canceled ($750,000) exceeds the amount of the loan (immediately before the cancellation) that is not qualified principal residence indebtedness ($500,000). Amend 2012 tax return free This means that Kathy and Frank can only exclude $250,000 ($750,000 amount canceled minus $500,000 nonqualified debt) under the qualified principal residence indebtedness exclusion. Amend 2012 tax return free   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. Amend 2012 tax return free Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. Amend 2012 tax return free Kathy and Frank can exclude the remaining $500,000 canceled debt under the insolvency exclusion because they were insolvent immediately before the cancellation to the extent of $726,000. Amend 2012 tax return free Thus, Kathy and Frank check the boxes on lines 1b and 1e of Form 982 and enter $750,000 on line 2 ($250,000 excluded under the qualified principal residence indebtedness exclusion plus $500,000 excluded under the insolvency exclusion). Amend 2012 tax return free   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. Amend 2012 tax return free Because Kathy and Frank no longer own the home due to the foreclosure, Kathy and Frank have no remaining basis in the home at the time of the debt cancellation. Amend 2012 tax return free Thus, Kathy and Frank leave line 10b of Form 982 blank. Amend 2012 tax return free However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. Amend 2012 tax return free As a result, Kathy and Frank must reduce the basis of property they own based on the amount of canceled debt they are excluding from income under the insolvency rules. Amend 2012 tax return free Because Kathy and Frank have no tax attributes other than basis of personal-use property to reduce, Kathy and Frank figure the amount they must include on line 10a of Form 982 by taking the smallest of: The $46,000 bases of their personal-use property held at the beginning of 2014 ($16,000 basis in the car plus $30,000 basis in household furnishings), The $500,000 of the nonbusiness debt (other than qualified principal residence indebtedness) that they are excluding from income on line 2 of Form 982, or The $43,000 excess of the total bases of the property and the amount of money they held immediately after the cancellation over their total liabilities immediately after the cancellation ($15,000 in savings account plus $30,000 basis in household furnishings plus $16,000 adjusted basis in car minus $18,000 credit card debt). Amend 2012 tax return free Kathy and Frank enter $43,000 on Form 982, line 10a and reduce their bases in the car and the household furnishings in proportion to the total adjusted bases in all their property. Amend 2012 tax return free Kathy and Frank reduce the basis in the car by $14,956. Amend 2012 tax return free 52 ($43,000 x $16,000/$46,000). Amend 2012 tax return free And they reduce the basis in the household furnishings by $28,043. Amend 2012 tax return free 48 ($43,000 x $30,000/$46,000). Amend 2012 tax return free   Following are Kathy and Frank's sample forms and worksheets. Amend 2012 tax return free Frank and Kathy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Amend 2012 tax return free Please click the link to view the image. Amend 2012 tax return free Form 1099-C, Cancellation of Debt Table 1-1. Amend 2012 tax return free Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. Amend 2012 tax return free Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Amend 2012 tax return free Otherwise, go to Part 2. Amend 2012 tax return free 1. Amend 2012 tax return free Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $1,750,000. Amend 2012 tax return free 00 2. Amend 2012 tax return free Enter the fair market value of the transferred property $1,750,000. Amend 2012 tax return free 00 3. Amend 2012 tax return free Ordinary income from the cancellation of debt upon foreclosure or repossession. Amend 2012 tax return free * Subtract line 2 from line 1. Amend 2012 tax return free If less than zero, enter zero. Amend 2012 tax return free Next, go to Part 2 $0. Amend 2012 tax return free 00 Part 2. Amend 2012 tax return free Gain or loss from foreclosure or repossession. Amend 2012 tax return free   4. Amend 2012 tax return free Enter the smaller of line 1 or line 2. Amend 2012 tax return free If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property. Amend 2012 tax return free $1,750,000. Amend 2012 tax return free 00 5. Amend 2012 tax return free Enter any proceeds you received from the foreclosure sale   6. Amend 2012 tax return free Add line 4 and line 5 $1,750,000. Amend 2012 tax return free 00 7. Amend 2012 tax return free Enter the adjusted basis of the transferred property $3,000,000. Amend 2012 tax return free 00 8. Amend 2012 tax return free Gain or loss from foreclosure or repossession. Amend 2012 tax return free Subtract line 7 from line 6 ($1,250,000. Amend 2012 tax return free 00) * The income may not be taxable. Amend 2012 tax return free See chapter 1 for more details. Amend 2012 tax return free    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. Amend 2012 tax return free Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. Amend 2012 tax return free Credit card debt $ 18,000 2. Amend 2012 tax return free Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 750,000 3. Amend 2012 tax return free Car and other vehicle loans $ 4. Amend 2012 tax return free Medical bills owed $ 5. Amend 2012 tax return free Student loans $ 6. Amend 2012 tax return free Accrued or past-due mortgage interest $ 7. Amend 2012 tax return free Accrued or past-due real estate taxes $ 8. Amend 2012 tax return free Accrued or past-due utilities (water, gas, electric) $ 9. Amend 2012 tax return free Accrued or past-due child care costs $ 10. Amend 2012 tax return free Federal or state income taxes remaining due (for prior tax years) $ 11. Amend 2012 tax return free Judgments $ 12. Amend 2012 tax return free Business debts (including those owed as a sole proprietor or partner) $ 13. Amend 2012 tax return free Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. Amend 2012 tax return free Other liabilities (debts) not included above $ 15. Amend 2012 tax return free Total liabilities immediately before the cancellation. Amend 2012 tax return free Add lines 1 through 14. Amend 2012 tax return free $ 768,000 Part II. Amend 2012 tax return free Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. Amend 2012 tax return free Cash and bank account balances $ 15,000 17. Amend 2012 tax return free Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 18. Amend 2012 tax return free Cars and other vehicles $ 10,000 19. Amend 2012 tax return free Computers $ 20. Amend 2012 tax return free Household goods and furnishings (for example, appliances, electronics, furniture, etc. Amend 2012 tax return free ) $ 17,000 21. Amend 2012 tax return free Tools $ 22. Amend 2012 tax return free Jewelry $ 23. Amend 2012 tax return free Clothing $ 24. Amend 2012 tax return free Books $ 25. Amend 2012 tax return free Stocks and bonds $ 26. Amend 2012 tax return free Investments in coins, stamps, paintings, or other collectibles $ 27. Amend 2012 tax return free Firearms, sports, photographic, and other hobby equipment $ 28. Amend 2012 tax return free Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. Amend 2012 tax return free Interest in a pension plan $ 30. Amend 2012 tax return free Interest in education accounts $ 31. Amend 2012 tax return free Cash value of life insurance $ 32. Amend 2012 tax return free Security deposits with landlords, utilities, and others $ 33. Amend 2012 tax return free Interests in partnerships $ 34. Amend 2012 tax return free Value of investment in a business $ 35. Amend 2012 tax return free Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. Amend 2012 tax return free Other assets not included above $ 37. Amend 2012 tax return free FMV of total assets immediately before the cancellation. Amend 2012 tax return free Add lines 16 through 36. Amend 2012 tax return free $ 42,000 Part III. Amend 2012 tax return free Insolvency 38. Amend 2012 tax return free Amount of Insolvency. Amend 2012 tax return free Subtract line 37 from line 15. Amend 2012 tax return free If zero or less, you are not insolvent. Amend 2012 tax return free $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. Amend 2012 tax return free Please click the link to view the image. Amend 2012 tax return free Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Prev  Up  Next   Home   More Online Publications
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Amend 2012 tax return free 1. Amend 2012 tax return free   Rental Income and Expenses (If No Personal Use of Dwelling) Table of Contents Rental IncomeWhen To Report Types of Income Rental ExpensesWhen To Deduct Types of Expenses This chapter discusses the various types of rental income and expenses for a residential rental activity with no personal use of the dwelling. Amend 2012 tax return free Generally, each year you will report all income and deduct all out-of-pocket expenses in full. Amend 2012 tax return free The deduction to recover the cost of your rental property—depreciation—is taken over a prescribed number of years, and is discussed in chapter 2, Depreciation of Rental Property. Amend 2012 tax return free If your rental income is from property you also use personally or rent to someone at less than a fair rental price, first read the information in chapter 5 , Personal Use of Dwelling Unit (Including Vacation Home). Amend 2012 tax return free Rental Income In most cases, you must include in your gross income all amounts you receive as rent. Amend 2012 tax return free Rental income is any payment you receive for the use or occupation of property. Amend 2012 tax return free In addition to amounts you receive as normal rental payments, there are other amounts that may be rental income. Amend 2012 tax return free When To Report When you report rental income on your tax return generally depends on whether you are a cash basis taxpayer or use an accrual method. Amend 2012 tax return free Most individual taxpayers use the cash method. Amend 2012 tax return free Cash method. Amend 2012 tax return free   You are a cash basis taxpayer if you report income on your return in the year you actually or constructively receive it, regardless of when it was earned. Amend 2012 tax return free You constructively receive income when it is made available to you, for example, by being credited to your bank account. Amend 2012 tax return free Accrual method. Amend 2012 tax return free    If you are an accrual basis taxpayer, you generally report income when you earn it, rather than when you receive it. Amend 2012 tax return free You generally deduct your expenses when you incur them, rather than when you pay them. Amend 2012 tax return free More information. Amend 2012 tax return free   See Publication 538, Accounting Periods and Methods, for more information about when you constructively receive income and accrual methods of accounting. Amend 2012 tax return free Types of Income The following are common types of rental income. Amend 2012 tax return free Advance rent. Amend 2012 tax return free   Advance rent is any amount you receive before the period that it covers. Amend 2012 tax return free Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. Amend 2012 tax return free Example. Amend 2012 tax return free On March 18, 2013, you signed a 10-year lease to rent your property. Amend 2012 tax return free During 2013, you received $9,600 for the first year's rent and $9,600 as rent for the last year of the lease. Amend 2012 tax return free You must include $19,200 in your rental income in the first year. Amend 2012 tax return free Canceling a lease. Amend 2012 tax return free   If your tenant pays you to cancel a lease, the amount you receive is rent. Amend 2012 tax return free Include the payment in your income in the year you receive it regardless of your method of accounting. Amend 2012 tax return free Expenses paid by tenant. Amend 2012 tax return free   If your tenant pays any of your expenses, those payments are rental income. Amend 2012 tax return free Because you must include this amount in income, you can also deduct the expenses if they are deductible rental expenses. Amend 2012 tax return free For more information, see Rental Expenses , later. Amend 2012 tax return free Example 1. Amend 2012 tax return free Your tenant pays the water and sewage bill for your rental property and deducts the amount from the normal rent payment. Amend 2012 tax return free Under the terms of the lease, your tenant does not have to pay this bill. Amend 2012 tax return free Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income. Amend 2012 tax return free You can deduct the utility payment made by your tenant as a rental expense. Amend 2012 tax return free Example 2. Amend 2012 tax return free While you are out of town, the furnace in your rental property stops working. Amend 2012 tax return free Your tenant pays for the necessary repairs and deducts the repair bill from the rent payment. Amend 2012 tax return free Include the repair bill paid by the tenant and any amount received as a rent payment in your rental income. Amend 2012 tax return free You can deduct the repair payment made by your tenant as a rental expense. Amend 2012 tax return free Property or services. Amend 2012 tax return free   If you receive property or services as rent, instead of money, include the fair market value of the property or services in your rental income. Amend 2012 tax return free   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. Amend 2012 tax return free Example. Amend 2012 tax return free Your tenant is a house painter. Amend 2012 tax return free He offers to paint your rental property instead of paying 2 months rent. Amend 2012 tax return free You accept his offer. Amend 2012 tax return free Include in your rental income the amount the tenant would have paid for 2 months rent. Amend 2012 tax return free You can deduct that same amount as a rental expense for painting your property. Amend 2012 tax return free Security deposits. Amend 2012 tax return free   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. Amend 2012 tax return free But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. Amend 2012 tax return free    If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Amend 2012 tax return free Include it in your income when you receive it. Amend 2012 tax return free Other Sources of Rental Income Lease with option to buy. Amend 2012 tax return free   If the rental agreement gives your tenant the right to buy your rental property, the payments you receive under the agreement are generally rental income. Amend 2012 tax return free If your tenant exercises the right to buy the property, the payments you receive for the period after the date of sale are considered part of the selling price. Amend 2012 tax return free Part interest. Amend 2012 tax return free   If you own a part interest in rental property, you must report your part of the rental income from the property. Amend 2012 tax return free Rental of property also used as your home. Amend 2012 tax return free   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. Amend 2012 tax return free However, you can deduct on Schedule A (Form 1040), Itemized Deductions, the interest, taxes, and casualty and theft losses that are allowed for nonrental property. Amend 2012 tax return free See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Amend 2012 tax return free Rental Expenses In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. Amend 2012 tax return free Personal use of rental property. Amend 2012 tax return free   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. Amend 2012 tax return free Also, your rental expense deductions may be limited. Amend 2012 tax return free See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Amend 2012 tax return free Part interest. Amend 2012 tax return free   If you own a part interest in rental property, you can deduct expenses you paid according to your percentage of ownership. Amend 2012 tax return free Example. Amend 2012 tax return free Roger owns a one-half undivided interest in a rental house. Amend 2012 tax return free Last year he paid $968 for necessary repairs on the property. Amend 2012 tax return free Roger can deduct $484 (50% × $968) as a rental expense. Amend 2012 tax return free He is entitled to reimbursement for the remaining half from the co-owner. Amend 2012 tax return free When To Deduct You generally deduct your rental expenses in the year you pay them. Amend 2012 tax return free If you use the accrual method, see Publication 538 for more information. Amend 2012 tax return free Types of Expenses Listed below are the most common rental expenses. Amend 2012 tax return free Advertising. Amend 2012 tax return free Auto and travel expenses. Amend 2012 tax return free Cleaning and maintenance. Amend 2012 tax return free Commissions. Amend 2012 tax return free Depreciation. Amend 2012 tax return free Insurance. Amend 2012 tax return free Interest (other). Amend 2012 tax return free Legal and other professional fees. Amend 2012 tax return free Local transportation expenses. Amend 2012 tax return free Management fees. Amend 2012 tax return free Mortgage interest paid to banks, etc. Amend 2012 tax return free Points. Amend 2012 tax return free Rental payments. Amend 2012 tax return free Repairs. Amend 2012 tax return free Taxes. Amend 2012 tax return free Utilities. Amend 2012 tax return free Some of these expenses, as well as other less common ones, are discussed below. Amend 2012 tax return free Depreciation. Amend 2012 tax return free   Depreciation is a capital expense. Amend 2012 tax return free It is the mechanism for recovering your cost in an income producing property and must be taken over the expected life of the property. Amend 2012 tax return free   You can begin to depreciate rental property when it is ready and available for rent. Amend 2012 tax return free See Placed in Service under When Does Depreciation Begin and End in chapter 2. Amend 2012 tax return free Insurance premiums paid in advance. Amend 2012 tax return free   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. Amend 2012 tax return free You cannot deduct the total premium in the year you pay it. Amend 2012 tax return free See chapter 6 of Publication 535 for information on deductible premiums. Amend 2012 tax return free Interest expense. Amend 2012 tax return free   You can deduct mortgage interest you pay on your rental property. Amend 2012 tax return free When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Amend 2012 tax return free Chapter 4 of Publication 535 explains mortgage interest in detail. Amend 2012 tax return free Expenses paid to obtain a mortgage. Amend 2012 tax return free   Certain expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. Amend 2012 tax return free These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property. Amend 2012 tax return free Form 1098, Mortgage Interest Statement. Amend 2012 tax return free   If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098 or similar statement showing the interest you paid for the year. Amend 2012 tax return free If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on, the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. Amend 2012 tax return free Attach a statement to your return showing the name and address of the other person. Amend 2012 tax return free On the dotted line next to line 13, enter “See attached. Amend 2012 tax return free ” Legal and other professional fees. Amend 2012 tax return free   You can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. Amend 2012 tax return free For example, on your 2013 Schedule E you can deduct fees paid in 2013 to prepare Part I of your 2012 Schedule E. Amend 2012 tax return free You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. Amend 2012 tax return free Local benefit taxes. Amend 2012 tax return free   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. Amend 2012 tax return free These charges are nondepreciable capital expenditures and must be added to the basis of your property. Amend 2012 tax return free However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. Amend 2012 tax return free Local transportation expenses. Amend 2012 tax return free   You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. Amend 2012 tax return free However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. Amend 2012 tax return free See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Amend 2012 tax return free   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. Amend 2012 tax return free For 2013, the standard mileage rate for business use is 56. Amend 2012 tax return free 5 cents per mile. Amend 2012 tax return free For more information, see chapter 4 of Publication 463. Amend 2012 tax return free    To deduct car expenses under either method, you must keep records that follow the rules in chapter 5 of Publication 463. Amend 2012 tax return free In addition, you must complete Form 4562, Part V, and attach it to your tax return. Amend 2012 tax return free Pre-rental expenses. Amend 2012 tax return free   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. Amend 2012 tax return free Rental of equipment. Amend 2012 tax return free   You can deduct the rent you pay for equipment that you use for rental purposes. Amend 2012 tax return free However, in some cases, lease contracts are actually purchase contracts. Amend 2012 tax return free If so, you cannot deduct these payments. Amend 2012 tax return free You can recover the cost of purchased equipment through depreciation. Amend 2012 tax return free Rental of property. Amend 2012 tax return free   You can deduct the rent you pay for property that you use for rental purposes. Amend 2012 tax return free If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. Amend 2012 tax return free Travel expenses. Amend 2012 tax return free   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. Amend 2012 tax return free You must properly allocate your expenses between rental and nonrental activities. Amend 2012 tax return free You cannot deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. Amend 2012 tax return free The cost of improvements is recovered by taking depreciation. Amend 2012 tax return free For information on travel expenses, see chapter 1 of Publication 463. Amend 2012 tax return free    To deduct travel expenses, you must keep records that follow the rules in chapter 5 of Publication 463. Amend 2012 tax return free Uncollected rent. Amend 2012 tax return free   If you are a cash basis taxpayer, do not deduct uncollected rent. Amend 2012 tax return free Because you have not included it in your income, it is not deductible. Amend 2012 tax return free   If you use an accrual method, report income when you earn it. Amend 2012 tax return free If you are unable to collect the rent, you may be able to deduct it as a business bad debt. Amend 2012 tax return free See chapter 10 of Publication 535 for more information about business bad debts. Amend 2012 tax return free Vacant rental property. Amend 2012 tax return free   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. Amend 2012 tax return free However, you cannot deduct any loss of rental income for the period the property is vacant. Amend 2012 tax return free Vacant while listed for sale. Amend 2012 tax return free   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. Amend 2012 tax return free If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. Amend 2012 tax return free Points The term “points” is often used to describe some of the charges paid, or treated as paid, by a borrower to take out a loan or a mortgage. Amend 2012 tax return free These charges are also called loan origination fees, maximum loan charges, or premium charges. Amend 2012 tax return free Any of these charges (points) that are solely for the use of money are interest. Amend 2012 tax return free Because points are prepaid interest, you generally cannot deduct the full amount in the year paid, but must deduct the interest over the term of the loan. Amend 2012 tax return free The method used to figure the amount of points you can deduct each year follows the original issue discount (OID) rules. Amend 2012 tax return free In this case, points are equivalent to OID, which is the difference between: The amount borrowed (redemption price at maturity, or principal) and The proceeds (issue price). Amend 2012 tax return free The first step is to determine whether your total OID (which you may have on bonds or other investments in addition to the mortgage loan), including the OID resulting from the points, is insignificant or de minimis. Amend 2012 tax return free If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct. Amend 2012 tax return free De minimis OID. Amend 2012 tax return free   The OID is de minimis if it is less than one-fourth of 1% (. Amend 2012 tax return free 0025) of the stated redemption price at maturity (principal amount of the loan) multiplied by the number of full years from the date of original issue to maturity (term of the loan). Amend 2012 tax return free   If the OID is de minimis, you can choose one of the following ways to figure the amount of points you can deduct each year. Amend 2012 tax return free On a constant-yield basis over the term of the loan. Amend 2012 tax return free On a straight line basis over the term of the loan. Amend 2012 tax return free In proportion to stated interest payments. Amend 2012 tax return free In its entirety at maturity of the loan. Amend 2012 tax return free You make this choice by deducting the OID (points) in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued. Amend 2012 tax return free Example. Amend 2012 tax return free Carol Madison took out a $100,000 mortgage loan on January 1, 2013, to buy a house she will use as a rental during 2013. Amend 2012 tax return free The loan is to be repaid over 30 years. Amend 2012 tax return free During 2013, Carol paid $10,000 of mortgage interest (stated interest) to the lender. Amend 2012 tax return free When the loan was made, she paid $1,500 in points to the lender. Amend 2012 tax return free The points reduced the principal amount of the loan from $100,000 to $98,500, resulting in $1,500 of OID. Amend 2012 tax return free Carol determines that the points (OID) she paid are de minimis based on the following computation. Amend 2012 tax return free Redemption price at maturity (principal amount of the loan) $100,000 Multiplied by: The term of the  loan in complete years ×30 Multiplied by ×. Amend 2012 tax return free 0025 De minimis amount $7,500 The points (OID) she paid ($1,500) are less than the de minimis amount ($7,500). Amend 2012 tax return free Therefore, Carol has de minimis OID and she can choose one of the four ways discussed earlier to figure the amount she can deduct each year. Amend 2012 tax return free Under the straight line method, she can deduct $50 each year for 30 years. Amend 2012 tax return free Constant-yield method. Amend 2012 tax return free   If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. Amend 2012 tax return free   You figure your deduction for the first year in the following manner. Amend 2012 tax return free Determine the issue price of the loan. Amend 2012 tax return free If you paid points on the loan, the issue price generally is the difference between the principal and the points. Amend 2012 tax return free Multiply the result in (1) by the yield to maturity (defined later). Amend 2012 tax return free Subtract any qualified stated interest payments (defined later) from the result in (2). Amend 2012 tax return free This is the OID you can deduct in the first year. Amend 2012 tax return free Yield to maturity (YTM). Amend 2012 tax return free   This rate is generally shown in the literature you receive from your lender. Amend 2012 tax return free If you do not have this information, consult your lender or tax advisor. Amend 2012 tax return free In general, the YTM is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan. Amend 2012 tax return free Qualified stated interest (QSI). Amend 2012 tax return free   In general, this is the stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a fixed rate. Amend 2012 tax return free Example—Year 1. Amend 2012 tax return free The facts are the same as in the previous example. Amend 2012 tax return free The yield to maturity on Carol's loan is 10. Amend 2012 tax return free 2467%, compounded annually. Amend 2012 tax return free She figured the amount of points (OID) she could deduct in 2013 as follows. Amend 2012 tax return free Principal amount of the loan $100,000 Minus: Points (OID) –1,500 Issue price of the loan $98,500 Multiplied by: YTM × . Amend 2012 tax return free 102467 Total 10,093 Minus: QSI –10,000 Points (OID) deductible in 2013 $93 To figure your deduction in any subsequent year, you start with the adjusted issue price. Amend 2012 tax return free To get the adjusted issue price, add to the issue price figured in Year 1 any OID previously deducted. Amend 2012 tax return free Then follow steps (2) and (3), earlier. Amend 2012 tax return free Example—Year 2. Amend 2012 tax return free Carol figured the deduction for 2014 as follows. Amend 2012 tax return free Issue price $98,500 Plus: Points (OID) deducted  in 2013 +93 Adjusted issue price $98,593 Multiplied by: YTM × . Amend 2012 tax return free 102467 Total 10,103 Minus: QSI –10,000 Points (OID) deductible in 2014 $103 Loan or mortgage ends. Amend 2012 tax return free    If your loan or mortgage ends, you may be able to deduct any remaining points (OID) in the tax year in which the loan or mortgage ends. Amend 2012 tax return free A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event. Amend 2012 tax return free However, if the refinancing is with the same lender, the remaining points (OID) generally are not deductible in the year in which the refinancing occurs, but may be deductible over the term of the new mortgage or loan. Amend 2012 tax return free Points when loan refinance is more than the previous outstanding balance. Amend 2012 tax return free   When you refinance a rental property for more than the previous outstanding balance, the portion of the points allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Amend 2012 tax return free For example, if an individual refinanced a loan with a balance of $100,000, the amount of the new loan was $120,000, and the taxpayer used $20,000 to purchase a car, points allocable to the $20,000 would be treated as nondeductible personal interest. Amend 2012 tax return free Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. Amend 2012 tax return free Improvements. Amend 2012 tax return free   You must capitalize any expense you pay to improve your rental property. Amend 2012 tax return free An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. Amend 2012 tax return free Betterments. Amend 2012 tax return free   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. Amend 2012 tax return free Restoration. Amend 2012 tax return free   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. Amend 2012 tax return free Adaptation. Amend 2012 tax return free   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. Amend 2012 tax return free Separate the costs of repairs and improvements, and keep accurate records. Amend 2012 tax return free You will need to know the cost of improvements when you sell or depreciate your property. Amend 2012 tax return free The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. Amend 2012 tax return free Table 1-1. Amend 2012 tax return free Examples of Improvements Additions Bedroom Bathroom Deck Garage Porch Patio  Lawn & Grounds Landscaping Driveway Walkway Fence Retaining wall Sprinkler system Swimming pool Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system   Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances Kitchen modernization Flooring Wall-to-wall carpeting  Insulation Attic Walls, floor Pipes, duct work Prev  Up  Next   Home   More Online Publications