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Amended Tax Return Forms

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Amended Tax Return Forms

Amended tax return forms 1. Amended tax return forms   Investment Income Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: General InformationSSN for joint account. Amended tax return forms Custodian account for your child. Amended tax return forms Penalty for failure to supply SSN. Amended tax return forms Certification. Amended tax return forms Underreported interest and dividends. Amended tax return forms How to stop backup withholding due to underreporting. Amended tax return forms How to stop backup withholding due to an incorrect identification number. Amended tax return forms Reporting backup withholding. Amended tax return forms Nonresident aliens. Amended tax return forms Penalties. Amended tax return forms Savings account with parent as trustee. Amended tax return forms Interest IncomeInterest not reported on Form 1099-INT. Amended tax return forms Nominees. Amended tax return forms Incorrect amount. Amended tax return forms Information reporting requirement. Amended tax return forms Taxable Interest — General Below-Market Loans U. Amended tax return forms S. Amended tax return forms Savings Bonds U. Amended tax return forms S. Amended tax return forms Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Discount on Debt InstrumentsOriginal Issue Discount (OID) Market Discount Bonds Discount on Short-Term Obligations Election To Report All Interest as OID When To Report Interest IncomeConstructive receipt. Amended tax return forms How To Report Interest IncomeSchedule B (Form 1040A or 1040). Amended tax return forms Worksheet for savings bonds distributed from a retirement or profit-sharing plan. Amended tax return forms File Form 1099-INT with the IRS. Amended tax return forms Dividends and Other DistributionsDividends not reported on Form 1099-DIV. Amended tax return forms Nominees. Amended tax return forms Ordinary Dividends Capital Gain Distributions Nondividend Distributions Liquidating Distributions Distributions of Stock and Stock Rights Other Distributions How To Report Dividend IncomeElection. Amended tax return forms Independent contractor. Amended tax return forms Investment interest deducted. Amended tax return forms Exception 1. Amended tax return forms Exception 2. Amended tax return forms Undistributed capital gains. Amended tax return forms File Form 1099-DIV with the IRS. Amended tax return forms Stripped Preferred Stock REMICs, FASITs, and Other CDOsREMICs Collateralized Debt Obligations (CDOs) FASITs S CorporationsLimit on losses and deductions. Amended tax return forms Passive activity losses. Amended tax return forms Form 8582. Amended tax return forms Investment ClubsInvestments in name of member. Amended tax return forms Tax Treatment of the Club Topics - This chapter discusses: Interest Income , Discount on Debt Instruments , When To Report Interest Income , How To Report Interest Income , Dividends and Other Distributions , How To Report Dividend Income , Stripped Preferred Stock , Real estate mortgage investment conduits (REMICs), financial asset securitization investment trusts (FASITs), and other collateralized debt obligations (CDOs) , S Corporations , and Investment Clubs . Amended tax return forms Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 537 Installment Sales 590 Individual Retirement Arrangements (IRAs) 925 Passive Activity and At-Risk Rules 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends Schedule D (Form 1040) Capital Gains and Losses 1040 U. Amended tax return forms S. Amended tax return forms Individual Income Tax Return 1040A U. Amended tax return forms S. Amended tax return forms Individual Income Tax Return 1040EZ Income Tax Return for Single and Joint Filers With No Dependents 1099 General Instructions for Certain Information Returns 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 3115 Application for Change in Accounting Method 6251 Alternative Minimum Tax — Individuals 8582 Passive Activity Loss Limitations 8615 Tax for Certain Children Who Have Unearned Income 8814 Parents' Election To Report Child's Interest and Dividends 8815 Exclusion of Interest From Series EE and I U. Amended tax return forms S. Amended tax return forms Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. Amended tax return forms S. Amended tax return forms Savings Bonds Issued After 1989 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets 8960 Net Investment Income Tax—Individuals, Estates, and Trusts See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Amended tax return forms General Information A few items of general interest are covered here. Amended tax return forms Recordkeeping. Amended tax return forms You should keep a list showing sources and investment income amounts you receive during the year. Amended tax return forms Also keep the forms you receive showing your investment income (Forms 1099-INT, Interest Income, and 1099-DIV, Dividends and Distributions, for example) as an important part of your records. Amended tax return forms Net investment income tax (NIIT). Amended tax return forms   Beginning in 2013, you may be subject to the NIIT. Amended tax return forms The NIIT is a 3. Amended tax return forms 8% tax on the lesser of your net investment income or the amount of your modified adjusted gross income (MAGI) that is over a threshold amount based on your filing status. Amended tax return forms    Filing Status Threshold Amount Married filing jointly $250,000 Married filing separately $125,000 Single $200,000 Head of household (with qualifying person) $200,000 Qualifying Widow(er) with dependent child $250,000    For more information, see Form 8960 and Instructions for Form 8960. Amended tax return forms Tax on unearned income of certain children. Amended tax return forms   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Amended tax return forms This may happen if all of the following are true. Amended tax return forms The child had more than $2,000 of unearned income. Amended tax return forms The child is required to file a tax return. Amended tax return forms The child was: Under age 18 at the end of 2013, Age 18 at the end of 2013 and did not have earned income that was more than half of the child's support, or A full-time student over age 18 and under age 24 at the end of 2013 and did not have earned income that was more than half of the child's support. Amended tax return forms At least one of the child's parents was alive at the end of 2013. Amended tax return forms The child does not file a joint return for 2013. Amended tax return forms A child born on January 1, 1996, is considered to be age 18 at the end of 2013; a child born on January 1, 1995, is considered to be age 19 at the end of 2013; a child born on January 1, 1990, is considered to be age 24 at the end of 2013. Amended tax return forms   If all of these statements are true, Form 8615 must be completed and attached to the child's tax return. Amended tax return forms If any of these statements is not true, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Amended tax return forms    However, the parent can choose to include the child's interest and dividends on the parent's return if certain requirements are met. Amended tax return forms Use Form 8814 for this purpose. Amended tax return forms   For more information about the tax on unearned income of children and the parents' election, see Publication 929, Tax Rules for Children and Dependents. Amended tax return forms Beneficiary of an estate or trust. Amended tax return forms   Interest, dividends, and other investment income you receive as a beneficiary of an estate or trust is generally taxable income. Amended tax return forms You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Amended tax return forms , from the fiduciary. Amended tax return forms Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Amended tax return forms Social security number (SSN). Amended tax return forms   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. Amended tax return forms This includes payers of interest and dividends. Amended tax return forms If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. Amended tax return forms SSN for joint account. Amended tax return forms   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. Amended tax return forms (For information on who owns the funds in a joint account, see Joint accounts , later. Amended tax return forms ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. Amended tax return forms This is because only one name and SSN can be shown on Form 1099. Amended tax return forms   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. Amended tax return forms For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. Amended tax return forms Custodian account for your child. Amended tax return forms   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. Amended tax return forms For example, you must give your child's SSN to the payer of dividends on stock owned by your child, even though the dividends are paid to you as custodian. Amended tax return forms Penalty for failure to supply SSN. Amended tax return forms   You will be subject to a penalty if, when required, you fail to: Include your SSN on any return, statement, or other document, Give your SSN to another person who must include it on any return, statement, or other document, or Include the SSN of another person on any return, statement, or other document. Amended tax return forms The penalty is $50 for each failure up to a maximum penalty of $100,000 for any calendar year. Amended tax return forms   You will not be subject to this penalty if you can show that your failure to provide the SSN was due to reasonable cause and not to willful neglect. Amended tax return forms   If you fail to supply an SSN, you may also be subject to backup withholding. Amended tax return forms Backup withholding. Amended tax return forms   Your investment income is generally not subject to regular withholding. Amended tax return forms However, it may be subject to backup withholding to ensure that income tax is collected on the income. Amended tax return forms Under backup withholding, the bank, broker, or other payer of interest, original issue discount (OID), dividends, cash patronage dividends, or royalties must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Amended tax return forms   Backup withholding applies if: You do not give the payer your identification number (either a social security number or an employer identification number) in the required manner, The IRS notifies the payer that you gave an incorrect identification number, The IRS notifies the payer that you are subject to backup withholding on interest or dividends because you have underreported interest or dividends on your income tax return, or You are required, but fail, to certify that you are not subject to backup withholding for the reason described in (3). Amended tax return forms Certification. Amended tax return forms   For new accounts paying interest or dividends, you must certify under penalties of perjury that your SSN is correct and that you are not subject to backup withholding. Amended tax return forms Your payer will give you a Form W-9, Request for Taxpayer Identification Number and Certification, or similar form, to make this certification. Amended tax return forms If you fail to make this certification, backup withholding may begin immediately on your new account or investment. Amended tax return forms Underreported interest and dividends. Amended tax return forms   You will be considered to have underreported your interest and dividends if the IRS has determined for a tax year that: You failed to include any part of a reportable interest or dividend payment required to be shown on your return, or You were required to file a return and to include a reportable interest or dividend payment on that return, but you failed to file the return. Amended tax return forms How to stop backup withholding due to underreporting. Amended tax return forms   If you have been notified that you underreported interest or dividends, you can request a determination from the IRS to prevent backup withholding from starting or to stop backup withholding once it has begun. Amended tax return forms You must show that at least one of the following situations applies. Amended tax return forms No underreporting occurred. Amended tax return forms You have a bona fide dispute with the IRS about whether underreporting occurred. Amended tax return forms Backup withholding will cause or is causing an undue hardship, and it is unlikely that you will underreport interest and dividends in the future. Amended tax return forms You have corrected the underreporting by filing a return if you did not previously file one and by paying all taxes, penalties, and interest due for any underreported interest or dividend payments. Amended tax return forms   If the IRS determines that backup withholding should stop, it will provide you with a certification and will notify the payers who were sent notices earlier. Amended tax return forms How to stop backup withholding due to an incorrect identification number. Amended tax return forms   If you have been notified by a payer that you are subject to backup withholding because you have provided an incorrect SSN or employer identification number, you can stop it by following the instructions the payer gives you. Amended tax return forms Reporting backup withholding. Amended tax return forms   If backup withholding is deducted from your interest or dividend income or other reportable payment, the bank or other business must give you an information return for the year (for example, a Form 1099-INT) indicating the amount withheld. Amended tax return forms The information return will show any backup withholding as “Federal income tax withheld. Amended tax return forms ” Nonresident aliens. Amended tax return forms    Generally, payments made to nonresident aliens are not subject to backup withholding. Amended tax return forms You can use Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, to certify exempt status. Amended tax return forms However, this does not exempt you from the 30% (or lower treaty) withholding rate that may apply to your investment income. Amended tax return forms For information on the 30% rate, see Publication 519, U. Amended tax return forms S. Amended tax return forms Tax Guide for Aliens. Amended tax return forms Penalties. Amended tax return forms   There are civil and criminal penalties for giving false information to avoid backup withholding. Amended tax return forms The civil penalty is $500. Amended tax return forms The criminal penalty, upon conviction, is a fine of up to $1,000, or imprisonment of up to 1 year, or both. Amended tax return forms Where to report investment income. Amended tax return forms   Table 1-1 gives an overview of the forms and schedules to use to report some common types of investment income. Amended tax return forms But see the rest of this publication for detailed information about reporting investment income. Amended tax return forms Joint accounts. Amended tax return forms   If two or more persons hold property (such as a savings account, bond, or stock) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest or dividends from the property is determined by local law. Amended tax return forms Community property states. Amended tax return forms   If you are married and receive a distribution that is community income, one-half of the distribution is generally considered to be received by each spouse. Amended tax return forms If you file separate returns, you must each report one-half of any taxable distribution. Amended tax return forms See Publication 555, Community Property, for more information on community income. Amended tax return forms   If the distribution is not considered community property and you and your spouse file separate returns, each of you must report your separate taxable distributions. Amended tax return forms Example. Amended tax return forms You and your spouse have a joint money market account. Amended tax return forms Under state law, half the income from the account belongs to you, and half belongs to your spouse. Amended tax return forms If you file separate returns, you each report half the income. Amended tax return forms Income from property given to a child. Amended tax return forms   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. Amended tax return forms   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. Amended tax return forms Savings account with parent as trustee. Amended tax return forms   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. Amended tax return forms The savings account legally belongs to the child. Amended tax return forms The parents are not legally permitted to use any of the funds to support the child. Amended tax return forms Table 1-1. Amended tax return forms Where To Report Common Types of Investment Income (For detailed information about reporting investment income, see the rest of this publication, especially How To Report Interest Income and How To Report Dividend Income in chapter 1. Amended tax return forms ) Type of Income If you file Form 1040, report on . Amended tax return forms . Amended tax return forms . Amended tax return forms If you can file Form 1040A, report on . Amended tax return forms . Amended tax return forms . Amended tax return forms If you can file Form 1040EZ, report on . Amended tax return forms . Amended tax return forms . Amended tax return forms Tax-exempt interest (Form 1099-INT, box 8) Line 8b Line 8b Space to the left of line 2 (enter “TEI” and the amount) Taxable interest that totals $1,500 or less Line 8a (You may need to file Schedule B as well. Amended tax return forms ) Line 8a (You may need to file Schedule B as well. Amended tax return forms ) Line 2 Taxable interest that totals more than $1,500 Line 8a; also use Schedule B, line 1 Line 8a; also use Schedule B, line 1   Savings bond interest you will exclude because of higher education expenses Schedule B; also use Form 8815 Schedule B; also use Form 8815   Ordinary dividends that total $1,500 or less Line 9a (You may need to file Schedule B as well. Amended tax return forms ) Line 9a (You may need to file Schedule B as well. Amended tax return forms )   Ordinary dividends that total more than $1,500 Line 9a; also use Schedule B, line 5 Line 9a; also use Schedule B, line 5   Qualified dividends (if you do not have to file Schedule D) Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 2 Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 2   Qualified dividends (if you have to file Schedule D) Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet, line 2 You cannot use Form 1040A    You cannot use Form 1040EZ Capital gain distributions (if you do not have to file Schedule D) Line 13; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 3 Line 10; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 3   Capital gain distributions (if you have to file Schedule D) Schedule D, line 13; also use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet     Section 1250, 1202, or collectibles gain (Form 1099-DIV, box 2b, 2c, or 2d) Form 8949 and Schedule D     Nondividend distributions (Form 1099-DIV, box 3) Generally not reported*     Undistributed capital gains (Form 2439, boxes 1a - 1d) Schedule D     Gain or loss from sales of stocks or bonds Line 13; also use Form 8949, Schedule D, and the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet You cannot use Form 1040A   Gain or loss from exchanges of like-kind investment property Line 13; also use Schedule D, Form 8824, and the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet     *Report any amounts in excess of your basis in your mutual fund shares on Form 8949. Amended tax return forms Use Part II if you held the shares more than 1 year. Amended tax return forms Use Part I if you held your mutual fund shares 1 year or less. Amended tax return forms For details on Form 8949, see Reporting Capital Gains and Losses in chapter 4, and the Instructions for Form 8949. Amended tax return forms Accuracy-related penalty. Amended tax return forms   An accuracy-related penalty of 20% can be charged for underpayments of tax due to negligence or disregard of rules or regulations or substantial understatement of tax. Amended tax return forms For information on the penalty and any interest that applies, see Penalties in chapter 2. Amended tax return forms Interest Income This section discusses the tax treatment of different types of interest income. Amended tax return forms In general, any interest that you receive or that is credited to your account and can be withdrawn is taxable income. Amended tax return forms (It does not have to be entered in your passbook. Amended tax return forms ) Exceptions to this rule are discussed later. Amended tax return forms Form 1099-INT. Amended tax return forms   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. Amended tax return forms This form shows you the interest you received during the year. Amended tax return forms Keep this form for your records. Amended tax return forms You do not have to attach it to your tax return. Amended tax return forms   Report on your tax return the total interest income you receive for the tax year. Amended tax return forms Interest not reported on Form 1099-INT. Amended tax return forms   Even if you do not receive Form 1099-INT, you must still report all of your interest income. Amended tax return forms For example, you may receive distributive shares of interest from partnerships or S corporations. Amended tax return forms This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Amended tax return forms , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Amended tax return forms Nominees. Amended tax return forms   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. Amended tax return forms   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on Nominee distributions , later, under How To Report Interest Income. Amended tax return forms Incorrect amount. Amended tax return forms   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Amended tax return forms The new Form 1099-INT you receive will be marked “Corrected. Amended tax return forms ” Form 1099-OID. Amended tax return forms   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. Amended tax return forms For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. Amended tax return forms Exempt-interest dividends. Amended tax return forms   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. Amended tax return forms (However, see Information reporting requirement , next. Amended tax return forms ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Amended tax return forms You do not reduce your basis for distributions that are exempt-interest dividends. Amended tax return forms Information reporting requirement. Amended tax return forms   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. Amended tax return forms This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. Amended tax return forms See How To Report Interest Income , later. Amended tax return forms Note. Amended tax return forms Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Amended tax return forms The exempt-interest dividends subject to the alternative minimum tax are shown in box 11 of Form 1099-DIV. Amended tax return forms See Form 6251 and its instructions for more information about this tax. Amended tax return forms Private activity bonds are discussed later under State or Local Government Obligations. Amended tax return forms Interest on VA dividends. Amended tax return forms   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. Amended tax return forms This includes interest paid on dividends on converted United States Government Life Insurance policies and on National Service Life Insurance policies. Amended tax return forms Individual retirement arrangements (IRAs). Amended tax return forms   Interest on a Roth IRA generally is not taxable. Amended tax return forms Interest on a traditional IRA is tax deferred. Amended tax return forms You generally do not include it in your income until you make withdrawals from the IRA. Amended tax return forms See Publication 590 for more information. Amended tax return forms Taxable Interest — General Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. Amended tax return forms The following are some sources of taxable interest. Amended tax return forms Dividends that are actually interest. Amended tax return forms   Certain distributions commonly called dividends are actually interest. Amended tax return forms You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. Amended tax return forms  The “dividends” will be shown as interest income on Form 1099-INT. Amended tax return forms Money market funds. Amended tax return forms   Money market funds are offered by nonbank financial institutions such as mutual funds and stock brokerage houses, and pay dividends. Amended tax return forms Generally, amounts you receive from money market funds should be reported as dividends, not as interest. Amended tax return forms Certificates of deposit and other deferred interest accounts. Amended tax return forms   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. Amended tax return forms You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. Amended tax return forms The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. Amended tax return forms If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. Amended tax return forms Interest subject to penalty for early withdrawal. Amended tax return forms   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. Amended tax return forms You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. Amended tax return forms See Penalty on early withdrawal of savings under How To Report Interest Income, later, for more information on how to report the interest and deduct the penalty. Amended tax return forms Money borrowed to invest in certificate of deposit. Amended tax return forms   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. Amended tax return forms You must report the total interest you earn on the certificate in your income. Amended tax return forms If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. Amended tax return forms See Interest Expenses in chapter 3. Amended tax return forms Example. Amended tax return forms You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. Amended tax return forms The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. Amended tax return forms The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. Amended tax return forms The bank also gives you a statement showing that you paid $310 interest for 2013. Amended tax return forms You must include the $575 in your income. Amended tax return forms If you itemize your deductions on Schedule A (Form 1040), Itemized Deductions, you can deduct $310, subject to the net investment income limit. Amended tax return forms Gift for opening account. Amended tax return forms   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. Amended tax return forms   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. Amended tax return forms For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. Amended tax return forms The value is determined by the cost to the financial institution. Amended tax return forms Example. Amended tax return forms You open a savings account at your local bank and deposit $800. Amended tax return forms The account earns $20 interest. Amended tax return forms You also receive a $15 calculator. Amended tax return forms If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. Amended tax return forms You must report $35 interest income on your tax return. Amended tax return forms Interest on insurance dividends. Amended tax return forms   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. Amended tax return forms However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. Amended tax return forms Prepaid insurance premiums. Amended tax return forms   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. Amended tax return forms U. Amended tax return forms S. Amended tax return forms obligations. Amended tax return forms   Interest on U. Amended tax return forms S. Amended tax return forms obligations, such as U. Amended tax return forms S. Amended tax return forms Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. Amended tax return forms Interest on tax refunds. Amended tax return forms   Interest you receive on tax refunds is taxable income. Amended tax return forms Interest on condemnation award. Amended tax return forms   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. Amended tax return forms Installment sale payments. Amended tax return forms   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. Amended tax return forms That interest is taxable when you receive it. Amended tax return forms If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. Amended tax return forms See Unstated Interest and Original Issue Discount (OID) in Publication 537. Amended tax return forms Interest on annuity contract. Amended tax return forms   Accumulated interest on an annuity contract you sell before its maturity date is taxable. Amended tax return forms Usurious interest. Amended tax return forms   Usurious interest is interest charged at an illegal rate. Amended tax return forms This is taxable as interest unless state law automatically changes it to a payment on the principal. Amended tax return forms Interest income on frozen deposits. Amended tax return forms   Exclude from your gross income interest on frozen deposits. Amended tax return forms A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state in which the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. Amended tax return forms   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). Amended tax return forms If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income for information about reporting this interest income exclusion on your tax return. Amended tax return forms   The interest you exclude is treated as credited to your account in the following year. Amended tax return forms You must include it in income in the year you can withdraw it. Amended tax return forms Example. Amended tax return forms $100 of interest was credited on your frozen deposit during the year. Amended tax return forms You withdrew $80 but could not withdraw any more as of the end of the year. Amended tax return forms You must include $80 in your income and exclude $20 from your income for the year. Amended tax return forms You must include the $20 in your income for the year you can withdraw it. Amended tax return forms Bonds traded flat. Amended tax return forms    If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. Amended tax return forms The defaulted or unpaid interest is not income and is not taxable as interest if paid later. Amended tax return forms When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. Amended tax return forms Interest that accrues after the date of purchase, however, is taxable interest income for the year received or accrued. Amended tax return forms See Bonds Sold Between Interest Dates , later in this chapter. Amended tax return forms Below-Market Loans If you make a below-market gift or demand loan, you must report as interest income any forgone interest (defined later) from that loan. Amended tax return forms The below-market loan rules and exceptions are described in this section. Amended tax return forms For more information, see section 7872 of the Internal Revenue Code and its regulations. Amended tax return forms If you receive a below-market loan, you may be able to deduct the forgone interest as well as any interest you actually paid, but not if it is personal interest. Amended tax return forms Loans subject to the rules. Amended tax return forms   The rules for below-market loans apply to: Gift loans, Pay-related loans, Corporation-shareholder loans, Tax avoidance loans, and Certain loans made to qualified continuing care facilities under a continuing care contract. Amended tax return forms A pay-related loan is any below-market loan between an employer and an employee or between an independent contractor and a person for whom the contractor provides services. Amended tax return forms A tax avoidance loan is any below-market loan where the avoidance of federal tax is one of the main purposes of the interest arrangement. Amended tax return forms Forgone interest. Amended tax return forms   For any period, forgone interest is: The amount of interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. Amended tax return forms Applicable federal rate. Amended tax return forms   Applicable federal rates are published by the IRS each month in the Internal Revenue Bulletin. Amended tax return forms Some IRS offices have these bulletins available for research. Amended tax return forms See chapter 5, How To Get Tax Help , for other ways to get this information. Amended tax return forms Rules for below-market loans. Amended tax return forms   The rules that apply to a below-market loan depend on whether the loan is a gift loan, demand loan, or term loan. Amended tax return forms Gift and demand loans. Amended tax return forms   A gift loan is any below-market loan where the forgone interest is in the nature of a gift. Amended tax return forms   A demand loan is a loan payable in full at any time upon demand by the lender. Amended tax return forms A demand loan is a below-market loan if no interest is charged or if interest is charged at a rate below the applicable federal rate. Amended tax return forms   A demand loan or gift loan that is a below-market loan is generally treated as an arm's-length transaction in which the lender is treated as having made: A loan to the borrower in exchange for a note that requires the payment of interest at the applicable federal rate, and An additional payment to the borrower in an amount equal to the forgone interest. Amended tax return forms The borrower is generally treated as transferring the additional payment back to the lender as interest. Amended tax return forms The lender must report that amount as interest income. Amended tax return forms   The lender's additional payment to the borrower is treated as a gift, dividend, contribution to capital, pay for services, or other payment, depending on the substance of the transaction. Amended tax return forms The borrower may have to report this payment as taxable income, depending on its classification. Amended tax return forms These transfers are considered to occur annually, generally on December 31. Amended tax return forms Term loans. Amended tax return forms   A term loan is any loan that is not a demand loan. Amended tax return forms A term loan is a below-market loan if the amount of the loan is more than the present value of all payments due under the loan. Amended tax return forms   A lender who makes a below-market term loan other than a gift loan is treated as transferring an additional lump-sum cash payment to the borrower (as a dividend, contribution to capital, etc. Amended tax return forms ) on the date the loan is made. Amended tax return forms The amount of this payment is the amount of the loan minus the present value, at the applicable federal rate, of all payments due under the loan. Amended tax return forms An equal amount is treated as original issue discount (OID). Amended tax return forms The lender must report the annual part of the OID as interest income. Amended tax return forms The borrower may be able to deduct the OID as interest expense. Amended tax return forms See Original Issue Discount (OID) , later. Amended tax return forms Exceptions to the below-market loan rules. Amended tax return forms   Exceptions to the below-market loan rules are discussed here. Amended tax return forms Exception for loans of $10,000 or less. Amended tax return forms   The rules for below-market loans do not apply to any day on which the total outstanding amount of loans between the borrower and lender is $10,000 or less. Amended tax return forms This exception applies only to: Gift loans between individuals if the gift loan is not directly used to buy or carry income-producing assets, and Pay-related loans or corporation-shareholder loans if the avoidance of federal tax is not a principal purpose of the interest arrangement. Amended tax return forms This exception does not apply to a term loan described in (2) earlier that previously has been subject to the below-market loan rules. Amended tax return forms Those rules will continue to apply even if the outstanding balance is reduced to $10,000 or less. Amended tax return forms Exception for loans to continuing care facilities. Amended tax return forms   Loans to qualified continuing care facilities under continuing care contracts are not subject to the rules for below-market loans for the calendar year if the lender or the lender's spouse is age 62 or older at the end of the year. Amended tax return forms For the definitions of qualified continuing care facility and continuing care contract, see Internal Revenue Code section 7872(h). Amended tax return forms Exception for loans without significant tax effect. Amended tax return forms   Loans are excluded from the below-market loan rules if their interest arrangements do not have a significant effect on the federal tax liability of the borrower or the lender. Amended tax return forms These loans include: Loans made available by the lender to the general public on the same terms and conditions that are consistent with the lender's customary business practice; Loans subsidized by a federal, state, or municipal government that are made available under a program of general application to the public; Certain employee-relocation loans; Certain loans from a foreign person, unless the interest income would be effectively connected with the conduct of a U. Amended tax return forms S. Amended tax return forms trade or business and would not be exempt from U. Amended tax return forms S. Amended tax return forms tax under an income tax treaty; Gift loans to a charitable organization, contributions to which are deductible, if the total outstanding amount of loans between the organization and lender is $250,000 or less at all times during the tax year; and Other loans on which the interest arrangement can be shown to have no significant effect on the federal tax liability of the lender or the borrower. Amended tax return forms For a loan described in (6) above, all the facts and circumstances are used to determine if the interest arrangement has a significant effect on the federal tax liability of the lender or borrower. Amended tax return forms Some factors to be considered are: Whether items of income and deduction generated by the loan offset each other; The amount of these items; The cost to you of complying with the below-market loan rules, if they were to apply; and Any reasons other than taxes for structuring the transaction as a below-market loan. Amended tax return forms If you structure a transaction to meet this exception and one of the principal purposes of that structure is the avoidance of federal tax, the loan will be considered a tax-avoidance loan, and this exception will not apply. Amended tax return forms Limit on forgone interest for gift loans of $100,000 or less. Amended tax return forms   For gift loans between individuals, if the outstanding loans between the lender and borrower total $100,000 or less, the forgone interest to be included in income by the lender and deducted by the borrower is limited to the amount of the borrower's net investment income for the year. Amended tax return forms If the borrower's net investment income is $1,000 or less, it is treated as zero. Amended tax return forms This limit does not apply to a loan if the avoidance of federal tax is one of the main purposes of the interest arrangement. Amended tax return forms Effective dates. Amended tax return forms    These rules apply to term loans made after June 6, 1984, and to demand loans outstanding after that date. Amended tax return forms U. Amended tax return forms S. Amended tax return forms Savings Bonds This section provides tax information on U. Amended tax return forms S. Amended tax return forms savings bonds. Amended tax return forms It explains how to report the interest income on these bonds and how to treat transfers of these bonds. Amended tax return forms U. Amended tax return forms S. Amended tax return forms savings bonds currently offered to individuals include Series EE bonds and Series I bonds. Amended tax return forms For other information on U. Amended tax return forms S. Amended tax return forms savings bonds, write to:  For Series HH/H: Bureau of the Fiscal Service Division of Customer Assistance P. Amended tax return forms O. Amended tax return forms Box 2186 Parkersburg, WV 26106-2186  For Series EE and I paper savings bonds: Bureau of the Fiscal Service Division of Customer Assistance P. Amended tax return forms O. Amended tax return forms Box 7012 Parkersburg, WV 26106-7012  For Series EE and I electronic bonds: Bureau of the Fiscal Service  Division of Customer Assistance P. Amended tax return forms O. Amended tax return forms Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. Amended tax return forms treasurydirect. Amended tax return forms gov/indiv/indiv. Amended tax return forms htm. Amended tax return forms Accrual method taxpayers. Amended tax return forms   If you use an accrual method of accounting, you must report interest on U. Amended tax return forms S. Amended tax return forms savings bonds each year as it accrues. Amended tax return forms You cannot postpone reporting interest until you receive it or until the bonds mature. Amended tax return forms Cash method taxpayers. Amended tax return forms   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. Amended tax return forms S. Amended tax return forms savings bonds when you receive it. Amended tax return forms But see Reporting options for cash method taxpayers , later. Amended tax return forms Series HH bonds. Amended tax return forms   These bonds were issued at face value. Amended tax return forms Interest is paid twice a year by direct deposit to your bank account. Amended tax return forms If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. Amended tax return forms   Series HH bonds were first offered in 1980 and last offered in August 2004. Amended tax return forms Before 1980, series H bonds were issued. Amended tax return forms Series H bonds are treated the same as series HH bonds. Amended tax return forms If you are a cash method taxpayer, you must report the interest when you receive it. Amended tax return forms   Series H bonds have a maturity period of 30 years. Amended tax return forms Series HH bonds mature in 20 years. Amended tax return forms The last series H bonds matured in 2009. Amended tax return forms The last series HH bonds will mature in 2024. Amended tax return forms Series EE and series I bonds. Amended tax return forms   Interest on these bonds is payable when you redeem the bonds. Amended tax return forms The difference between the purchase price and the redemption value is taxable interest. Amended tax return forms Series EE bonds. Amended tax return forms   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. Amended tax return forms Before July 1980, series E bonds were issued. Amended tax return forms The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. Amended tax return forms Paper series EE and series E bonds are issued at a discount. Amended tax return forms The face value is payable to you at maturity. Amended tax return forms Electronic series EE bonds are issued at their face value. Amended tax return forms The face value plus accrued interest is payable to you at maturity. Amended tax return forms As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. Amended tax return forms    Owners of paper series EE bonds can convert them to electronic bonds. Amended tax return forms These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). Amended tax return forms Series I bonds. Amended tax return forms   Series I bonds were first offered in 1998. Amended tax return forms These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. Amended tax return forms The face value plus all accrued interest is payable to you at maturity. Amended tax return forms Reporting options for cash method taxpayers. Amended tax return forms   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. Amended tax return forms Method 1. Amended tax return forms Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year in which they mature. Amended tax return forms (However, see Savings bonds traded , later. Amended tax return forms )  Note. Amended tax return forms Series EE bonds issued in 1983 matured in 2013. Amended tax return forms If you have used method 1, you generally must report the interest on these bonds on your 2013 return. Amended tax return forms The last series E bonds were issued in 1980 and matured in 2010. Amended tax return forms If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. Amended tax return forms Method 2. Amended tax return forms Choose to report the increase in redemption value as interest each year. Amended tax return forms  You must use the same method for all series EE, series E, and series I bonds you own. Amended tax return forms If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. Amended tax return forms If you plan to cash your bonds in the same year you will pay for higher educational expenses, you may want to use method 1 because you may be able to exclude the interest from your income. Amended tax return forms To learn how, see Education Savings Bond Program, later. Amended tax return forms Change from method 1. Amended tax return forms   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. Amended tax return forms In the year of change, you must report all interest accrued to date and not previously reported for all your bonds. Amended tax return forms   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. Amended tax return forms Change from method 2. Amended tax return forms   To change from method 2 to method 1, you must request permission from the IRS. Amended tax return forms Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. Amended tax return forms You have typed or printed the following number at the top: “131. Amended tax return forms ” It includes your name and social security number under “131. Amended tax return forms ” It includes the year of change (both the beginning and ending dates). Amended tax return forms It identifies the savings bonds for which you are requesting this change. Amended tax return forms It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest; and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. Amended tax return forms   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). Amended tax return forms   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. Amended tax return forms On the statement, type or print “Filed pursuant to section 301. Amended tax return forms 9100-2. Amended tax return forms ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). Amended tax return forms    By the date you file the original statement with your return, you must also send a signed copy to the address below. Amended tax return forms    Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. Amended tax return forms O. Amended tax return forms Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. Amended tax return forms Internal Revenue Service Attention: CC:IT&A  (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW Washington, DC 20224    Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115. Amended tax return forms In that case, follow the form instructions for an automatic change. Amended tax return forms No user fee is required. Amended tax return forms Co-owners. Amended tax return forms   If a U. Amended tax return forms S. Amended tax return forms savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. Amended tax return forms One co-owner's funds used. Amended tax return forms   If you used your funds to buy the bond, you must pay the tax on the interest. Amended tax return forms This is true even if you let the other co-owner redeem the bond and keep all the proceeds. Amended tax return forms Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. Amended tax return forms The co-owner who redeemed the bond is a “nominee. Amended tax return forms ” See Nominee distributions under How To Report Interest Income, later, for more information about how a person who is a nominee reports interest income belonging to another person. Amended tax return forms Both co-owners' funds used. Amended tax return forms   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. Amended tax return forms Community property. Amended tax return forms   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. Amended tax return forms If you file separate returns, each of you generally must report one-half of the bond interest. Amended tax return forms For more information about community property, see Publication 555. Amended tax return forms Table 1-2. Amended tax return forms   These rules are also shown in Table 1-2. Amended tax return forms Child as only owner. Amended tax return forms   Interest on U. Amended tax return forms S. Amended tax return forms savings bonds bought for and registered only in the name of your child is income to your child, even if you paid for the bonds and are named as beneficiary. Amended tax return forms If the bonds are series EE, series E, or series I bonds, the interest on the bonds is income to your child in the earlier of the year the bonds are cashed or disposed of or the year the bonds mature, unless your child chooses to report the interest income each year. Amended tax return forms Choice to report interest each year. Amended tax return forms   The choice to report the accrued interest each year can be made either by your child or by you for your child. Amended tax return forms This choice is made by filing an income tax return that shows all the interest earned to date, and by stating on the return that your child chooses to report the interest each year. Amended tax return forms Either you or your child should keep a copy of this return. Amended tax return forms   Unless your child is otherwise required to file a tax return for any year after making this choice, your child does not have to file a return only to report the annual accrual of U. Amended tax return forms S. Amended tax return forms savings bond interest under this choice. Amended tax return forms However, see Tax on unearned income of certain children , earlier, under General Information. Amended tax return forms Neither you nor your child can change the way you report the interest unless you request permission from the IRS, as discussed earlier under Change from method 2 . Amended tax return forms Ownership transferred. Amended tax return forms   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. Amended tax return forms But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. Amended tax return forms   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. Amended tax return forms Example. Amended tax return forms You bought series EE bonds entirely with your own funds. Amended tax return forms You did not choose to report the accrued interest each year. Amended tax return forms Later, you transfer the bonds to your former spouse under a divorce agreement. Amended tax return forms You must include the deferred accrued interest, from the date of the original issue of the bonds to the date of transfer, in your income in the year of transfer. Amended tax return forms Your former spouse includes in income the interest on the bonds from the date of transfer to the date of redemption. Amended tax return forms Table 1-2. Amended tax return forms Who Pays the Tax on U. Amended tax return forms S. Amended tax return forms Savings Bond Interest IF . Amended tax return forms . Amended tax return forms . Amended tax return forms THEN the interest must be reported by . Amended tax return forms . Amended tax return forms . Amended tax return forms you buy a bond in your name and the name of another person as co-owners, using only your own funds you. Amended tax return forms you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. Amended tax return forms you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. Amended tax return forms you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. Amended tax return forms If you file separate returns, both you and your spouse generally report one-half of the interest. Amended tax return forms Purchased jointly. Amended tax return forms   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. Amended tax return forms The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. Amended tax return forms This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. Amended tax return forms   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. Amended tax return forms But the new co-owner will report only his or her share of the interest earned after the transfer. Amended tax return forms   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. Amended tax return forms Example 1. Amended tax return forms You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. Amended tax return forms The bond was issued to you and your spouse as co-owners. Amended tax return forms You both postpone reporting interest on the bond. Amended tax return forms You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Amended tax return forms At that time neither you nor your spouse has to report the interest earned to the date of reissue. Amended tax return forms Example 2. Amended tax return forms You bought a $1,000 series EE savings bond entirely with your own funds. Amended tax return forms The bond was issued to you and your spouse as co-owners. Amended tax return forms You both postponed reporting interest on the bond. Amended tax return forms You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Amended tax return forms You must report half the interest earned to the date of reissue. Amended tax return forms Transfer to a trust. Amended tax return forms   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. Amended tax return forms However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. Amended tax return forms You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. Amended tax return forms   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. Amended tax return forms See Savings bonds traded , later. Amended tax return forms Decedents. Amended tax return forms   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. Amended tax return forms Decedent who reported interest each year. Amended tax return forms   If the bonds transferred because of death were owned by a person who used an accrual method, or who used the cash method and had chosen to report the interest each year, the interest earned in the year of death up to the date of death must be reported on that person's final return. Amended tax return forms The person who acquires the bonds includes in income only interest earned after the date of death. Amended tax return forms Decedent who postponed reporting interest. Amended tax return forms   If the transferred bonds were owned by a decedent who had used the cash method and had not chosen to report the interest each year, and who had bought the bonds entirely with his or her own funds, all interest earned before death must be reported in one of the following ways. Amended tax return forms The surviving spouse or personal representative (executor, administrator, etc. Amended tax return forms ) who files the final income tax return of the decedent can choose to include on that return all interest earned on the bonds before the decedent's death. Amended tax return forms The person who acquires the bonds then includes in income only interest earned after the date of death. Amended tax return forms If the choice in (1) is not made, the interest earned up to the date of death is income in respect of the decedent and should not be included in the decedent's final return. Amended tax return forms All interest earned both before and after the decedent's death (except any part reported by the estate on its income tax return) is income to the person who acquires the bonds. Amended tax return forms If that person uses the cash method and does not choose to report the interest each year, he or she can postpone reporting it until the year the bonds are cashed or disposed of or the year they mature, whichever is earlier. Amended tax return forms In the year that person reports the interest, he or she can claim a deduction for any federal estate tax paid on the part of the interest included in the decedent's estate. Amended tax return forms For more information on income in respect of a decedent, see Publication 559, Survivors, Executors, and Administrators. Amended tax return forms Example 1. Amended tax return forms Your uncle, a cash method taxpayer, died and left you a $1,000 series EE bond. Amended tax return forms He had bought the bond for $500 and had not chosen to report the interest each year. Amended tax return forms At the date of death, interest of $200 had accrued on the bond, and its value of $700 was included in your uncle's estate. Amended tax return forms Your uncle's executor chose not to include the $200 accrued interest in your uncle's final income tax return. Amended tax return forms The $200 is income in respect of the decedent. Amended tax return forms You are a cash method taxpayer and do not choose to report the interest each year as it is earned. Amended tax return forms If you cash the bond when it reaches maturity value of $1,000, you report $500 interest income—the difference between maturity value of $1,000 and the original cost of $500. Amended tax return forms For that year, you can deduct (as a miscellaneous itemized deduction not subject to the 2%-of-adjusted-gross-income limit) any federal estate tax paid because the $200 interest was included in your uncle's estate. Amended tax return forms Example 2. Amended tax return forms If, in Example 1 , the executor had chosen to include the $200 accrued interest in your uncle's final return, you would report only $300 as interest when you cashed the bond at maturity. Amended tax return forms $300 is the interest earned after your uncle's death. Amended tax return forms Example 3. Amended tax return forms If, in Example 1 , you make or have made the choice to report the increase in redemption value as interest each year, you include in gross income for the year you acquire the bond all of the unreported increase in value of all series E, series EE, and series I bonds you hold, including the $200 on the bond you inherited from your uncle. Amended tax return forms Example 4. Amended tax return forms When your aunt died, she owned series HH bonds that she had acquired in a trade for series EE bonds. Amended tax return forms You were the beneficiary of these bonds. Amended tax return forms Your aunt used the cash method and did not choose to report the interest on the series EE bonds each year as it accrued. Amended tax return forms Your aunt's executor chose not to include any interest earned before your aunt's death on her final return. Amended tax return forms The income in respect of the decedent is the sum of the unreported interest on the series EE bonds and the interest, if any, payable on the series HH bonds but not received as of the date of your aunt's death. Amended tax return forms You must report any interest received during the year as income on your return. Amended tax return forms The part of the interest payable but not received before your aunt's death is income in respect of the decedent and may qualify for the estate tax deduction. Amended tax return forms For information on when to report the interest on the series EE bonds traded, see Savings bonds traded , later. Amended tax return forms Savings bonds distributed from a retirement or profit-sharing plan. Amended tax return forms   If you acquire a U. Amended tax return forms S. Amended tax return forms savings bond in a taxable distribution from a retirement or profit-sharing plan, your income for the year of distribution includes the bond's redemption value (its cost plus the interest accrued before the distribution). Amended tax return forms When you redeem the bond (whether in the year of distribution or later), your interest income includes only the interest accrued after the bond was distributed. Amended tax return forms To figure the interest reported as a taxable distribution and your interest income when you redeem the bond, see Worksheet for savings bonds distributed from a retirement or profit-sharing plan under How To Report Interest Income, later. Amended tax return forms Savings bonds traded. Amended tax return forms   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. Amended tax return forms (You cannot trade series I bonds for series HH bonds. Amended tax return forms After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. Amended tax return forms ) Any cash you received is income up to the amount of the interest earned on the bonds traded. Amended tax return forms When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. Amended tax return forms Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. Amended tax return forms Example. Amended tax return forms You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. Amended tax return forms You reported the $223 as taxable income on your tax return. Amended tax return forms At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. Amended tax return forms You hold the series HH bonds until maturity, when you receive $2,500. Amended tax return forms You must report $300 as interest income in the year of maturity. Amended tax return forms This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). Amended tax return forms (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. Amended tax return forms ) Choice to report interest in year of trade. Amended tax return forms   You could have chosen to treat all of the previously unreported accrued interest on series EE or series E bonds traded for series HH bonds as income in the year of the trade. Amended tax return forms If you made this choice, it is treated as a change from method 1. Amended tax return forms See Change from method 1 under Series EE and series I bonds, earlier. Amended tax return forms Form 1099-INT for U. Amended tax return forms S. Amended tax return forms savings bond interest. Amended tax return forms   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. Amended tax return forms Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. Amended tax return forms However, your Form 1099-INT may show more interest than you have to include on your income tax return. Amended tax return forms For example, this may happen if any of the following are true. Amended tax return forms You chose to report the increase in the redemption value of the bond each year. Amended tax return forms The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. Amended tax return forms You received the bond from a decedent. Amended tax return forms The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. Amended tax return forms Ownership of the bond was transferred. Amended tax return forms The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. Amended tax return forms You were named as a co-owner, and the other co-owner contributed funds to buy the bond. Amended tax return forms The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. Amended tax return forms (See Co-owners , earlier in this section, for more information about the reporting requirements. Amended tax return forms ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. Amended tax return forms The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. Amended tax return forms (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Amended tax return forms , for the year of distribution. Amended tax return forms )   For more information on including the correct amount of interest on your return, see U. Amended tax return forms S. Amended tax return forms savings bond interest previously reported or Nominee distributions under How To Report Interest Income, later. Amended tax return forms    Interest on U. Amended tax return forms S. Amended tax return forms savings bonds is exempt from state and local taxes. Amended tax return forms The Form 1099-INT you receive will indicate the amount that is for U. Amended tax return forms S. Amended tax return forms savings bonds interest in box 3. Amended tax return forms Do not include this income on your state or local income tax return. Amended tax return forms Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. Amended tax return forms S. Amended tax return forms savings bonds during the year if you pay qualified higher educational expenses during the same year. Amended tax return forms This exclusion is known as the Education Savings Bond Program. Amended tax return forms You do not qualify for this exclusion if your filing status is married filing separately. Amended tax return forms Form 8815. Amended tax return forms   Use Form 8815 to figure your exclusion. Amended tax return forms Attach the form to your Form 1040 or Form 1040A. Amended tax return forms Qualified U. Amended tax return forms S. Amended tax return forms savings bonds. Amended tax return forms   A qualified U. Amended tax return forms S. Amended tax return forms savings bond is a series EE bond issued after 1989 or a series I bond. Amended tax return forms The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). Amended tax return forms You must be at least 24 years old before the bond's issue date. Amended tax return forms For example, a bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child. Amended tax return forms    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. Amended tax return forms Beneficiary. Amended tax return forms   You can designate any individual (including a child) as a beneficiary of the bond. Amended tax return forms Verification by IRS. Amended tax return forms   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of Treasury. Amended tax return forms Qualified expenses. Amended tax return forms   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. Amended tax return forms   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. Amended tax return forms For information about these programs, see Publication 970, Tax Benefits for Education. Amended tax return forms   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. Amended tax return forms Eligible educational institutions. Amended tax return forms   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the Department of Education. Amended tax return forms Reduction for certain benefits. Amended tax return forms   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. Amended tax return forms Tax-free part of scholarships and fellowships. Amended tax return forms Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. Amended tax return forms Expenses used to figure the tax-free portion of distributions from a qualified tuition program. Amended tax return forms Any tax-free payments (other than gifts or inheritances) received as educational assistance, such as: Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. Amended tax return forms Any expense used in figuring the American Opportunity and lifetime learning credits. Amended tax return forms For information about these benefits, see Publication 970. Amended tax return forms Amount excludable. Amended tax return forms   If the total proceeds (interest and principal) from the qualified U. Amended tax return forms S. Amended tax return forms savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. Amended tax return forms If the proceeds are more than the expenses, you may be able to exclude only part of the interest. Amended tax return forms   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. Amended tax return forms The numer
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Tax Benefits for Education: Information Center

Tax credits, deductions and savings plans can help taxpayers with their expenses for higher education.

  • A tax credit reduces the amount of income tax you may have to pay.
  • A deduction reduces the amount of your income that is subject to tax, thus generally reducing the amount of tax you may have to pay.
  • Certain savings plans allow the accumulated interest to grow tax-free until money is taken out (known as a distribution), or allow the distribution to be tax-free, or both.
  • An exclusion from income means that you won't have to pay income tax on the benefit you're receiving, but you also won't be able to use that same tax-free benefit for a deduction or credit. 
  • Education credits are claimed on Form 8863, Education Credits. For details, see IRS Publication 970, Tax Benefits of Education.
 You can use the IRS’s Interactive Tax Assistant tool to help determine if you’re eligible for educational credits or deductions, including the American opportunity credit, the lifetime learning credit and the tuition and fees deduction.

Credits


American Opportunity Credit

Under the American Recovery and Reinvestment Act (ARRA), more parents and students qualify for a tax credit, the American opportunity credit, to pay for college expenses.

The American opportunity credit originally modified the existing Hope credit for tax years 2009 and 2010. The American opportunity credit was later extended through 2017, making the benefit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible qualify for the maximum annual credit of $2,500 per student.

The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the the prior Hope and existing lifetime learning credit.

If you have questions about the American opportunity credit, these questions and answers might help. For more information, see American opportunity credit.

Lifetime Learning Credit

The lifetime learning credit helps parents and students pay for post-secondary education.

For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all students enrolled in eligible educational institutions. There is no limit on the number of years the lifetime learning credit can be claimed for each student. However, a taxpayer cannot claim both the American opportunity credit and lifetime learning credits for the same student in one year. Thus, the lifetime learning credit may be particularly helpful to graduate students, students who are only taking one course and those who are not pursuing a degree.

Generally, you can claim the lifetime learning credit if all three of the following requirements are met:

  • You pay qualified education expenses of higher education.
  • You pay the education expenses for an eligible student.
  • The eligible student is either yourself, your spouse or a dependent for whom you claim an exemption on your tax return.

If you’re eligible to claim the lifetime learning credit and are also eligible to claim the American opportunity credit for the same student in the same year, you can choose to claim either credit, but not both.

If you pay qualified education expenses for more than one student in the same year, you can choose to take credits on a per-student, per-year basis. This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year.


Deductions


Tuition and Fees Deduction

You may be able to deduct qualified education expenses paid during the year for yourself, your spouse or your dependent. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. The qualified expenses must be for higher education.

The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000. This deduction, reported on Form 8917, Tuition and Fees Deduction, is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Schedule A (Form 1040). This deduction may be beneficial to you if, for example, you cannot take the lifetime learning credit because your income is too high.

You may be able to take one of the education credits for your education expenses instead of a tuition and fees deduction. You can choose the one that will give you the lower tax.

Generally, you can claim the tuition and fees deduction if all three of the following requirements are met:

  • You pay qualified education expenses of higher education.
  • You pay the education expenses for an eligible student.
  • The eligible student is yourself, your spouse, or your dependent for whom you claim an exemption on your tax return.

You cannot claim the tuition and fees deduction if any of the following apply:

  • Your filing status is married filing separately.

  • Another person can claim an exemption for you as a dependent on his or her tax return. You cannot take the deduction even if the other person does not actually claim that exemption.

  • Your modified adjusted gross income (MAGI) is more than $80,000 ($160,000 if filing a joint return).

  • You were a nonresident alien for any part of the year and did not elect to be treated as a resident alien for tax purposes. More information on nonresident aliens can be found in Publication 519, U.S. Tax Guide for Aliens.

  • You or anyone else claims an education credit for expenses of the student for whom the qualified education expenses were paid.

Student-activity fees and expenses for course-related books, supplies and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance.

Student Loan Interest Deduction

Generally, personal interest you pay, other than certain mortgage interest, is not deductible on your tax return. However, if your modified adjusted gross income (MAGI) is less than $75,000 ($150,000 if filing a joint return), there is a special deduction allowed for paying interest on a student loan (also known as an education loan) used for higher education. Student loan interest is interest you paid during the year on a qualified student loan. It includes both required and voluntary interest payments.

For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return before subtracting any deduction for student loan interest. This deduction can reduce the amount of your income subject to tax by up to $2,500.

The student loan interest deduction is taken as an adjustment to income. This means you can claim this deduction even if you do not itemize deductions on Form 1040's Schedule A.

Qualified Student Loan

This is a loan you took out solely to pay qualified education expenses (defined later) that were:

  • For you, your spouse, or a person who was your dependent when you took out the loan.
  • Paid or incurred within a reasonable period of time before or after you took out the loan.
  • For education provided during an academic period for an eligible student.

Loans from the following sources are not qualified student loans:

  • A related person.
  • A qualified employer plan.

Qualified Education Expenses

For purposes of the student loan interest deduction, these expenses are the total costs of attending an eligible educational institution, including graduate school. They include amounts paid for the following items:

  • Tuition and fees.
  • Room and board.
  • Books, supplies and equipment.
  • Other necessary expenses (such as transportation).

The cost of room and board qualifies only to the extent that it is not more than the greater of:

  • The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student, or
  • The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution.

Business Deduction for Work-Related Education


If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses is greater than 2% of your adjusted gross income. An itemized deduction may reduce the amount of your income subject to tax.

If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. This may reduce the amount of your income subject to both income tax and self-employment tax.

Your work-related education expenses may also qualify you for other tax benefits, such as the tuition and fees deduction and the lifetime learning credit. You may qualify for these other benefits even if you do not meet the requirements listed above.

To claim a business deduction for work-related education, you must:

  • Be working.
  • Itemize your deductions on Schedule A (Form 1040 or 1040NR) if you are an employee.
  • File Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040) if you are self-employed.
  • Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education, below.

Qualifying Work-Related Education

You can deduct the costs of qualifying work-related education as business expenses. This is education that meets at least one of the following two tests:

  • The education is required by your employer or the law to keep your present salary, status or job. The required education must serve a bona fide business purpose of your employer.
  • The education maintains or improves skills needed in your present work.

However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it:

  • Is needed to meet the minimum educational requirements of your present trade or business or
  • Is part of a program of study that will qualify you for a new trade or business.

You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree.

Education Required by Employer or by Law

Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. This additional education is qualifying work-related education if all three of the following requirements are met.

  • It is required for you to keep your present salary, status or job.
  • The requirement serves a business purpose of your employer.
  • The education is not part of a program that will qualify you for a new trade or business.

When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work.

Education to Maintain or Improve Skills

If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. This could include refresher courses, courses on current developments and academic or vocational courses.


Savings Plans


529 Plans

States sponsor 529 plans — qualified tuition programs authorized under section 529 of the Internal Revenue Code — that allow taxpayers to either prepay or contribute to an account for paying a student's qualified higher education expenses. Similarly, colleges and groups of colleges sponsor 529 plans that allow them to prepay a student's qualified education expenses. These 529 plans have, in recent years, become a popular way for parents and other family members to save for a child’s college education. Though contributions to 529 plans are not deductible, there is also no income limit for contributors.

529 plan distributions are tax-free as long as they are used to pay qualified higher education expenses for a designated beneficiary. Qualified expenses include tuition, required fees, books and supplies. For someone who is at least a half-time student, room and board also qualify.

For 2009 and 2010, an ARRA change to tax-free college savings plans and prepaid tuition programs added to this list expenses for computer technology and equipment or Internet access and related services to be used by the student while enrolled at an eligible educational institution. Software designed for sports, games or hobbies does not qualify, unless it is predominantly educational in nature. In general, expenses for computer technology are not qualified expenses for the American opportunity credit, lifetime learning credit or tuition and fees deduction.

Coverdell Education Savings Account

This account was created as an incentive to help parents and students save for education expenses. Unlike a 529 plan, a Coverdell ESA can be used to pay a student’s eligible k-12 expenses, as well as post-secondary expenses. On the other hand, income limits apply to contributors, and  the total contributions for the beneficiary of this account cannot be more than $2,000 in any year, no matter how many accounts have been established. A beneficiary is someone who is under age 18 or is a special needs beneficiary.

Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. The beneficiary will not owe tax on the distributions if they are less than a beneficiary’s qualified education expenses at an eligible institution. This benefit applies to qualified higher education expenses as well as to qualified elementary and secondary education expenses.

Here are some things to remember about distributions from Coverdell accounts:

  • Distributions are tax-free as long as they are used for qualified education expenses, such as tuition and fees, required books, supplies and equipment and qualified expenses for room and board.

  • There is no tax on distributions if they are for enrollment or attendance at an eligible educational institution. This includes any public, private or religious school that provides elementary or secondary education as determined under state law. Virtually all accredited public, nonprofit and proprietary (privately owned profit-making) post-secondary institutions are eligible.

  • Education tax credits can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits.

  • If the distribution exceeds qualified education expenses, a portion will be taxable to the beneficiary and will usually be subject to an additional 10% tax. Exceptions to the additional 10% tax include the death or disability of the beneficiary or if the beneficiary receives a qualified scholarship.

For more information, see Tax Tip 2008-59, Coverdell Education Savings Accounts.


Scholarships and Fellowships


A scholarship is generally an amount paid or allowed to, or for the benefit of, a student at an educational institution to aid in the pursuit of studies. The student may be either an undergraduate or a graduate. A fellowship is generally an amount paid for the benefit of an individual to aid in the pursuit of study or research. Generally, whether the amount is tax free or taxable depends on the expense paid with the amount and whether you are a degree candidate.

A scholarship or fellowship is tax free only if you meet the following conditions:

  • You are a candidate for a degree at an eligible educational institution.
  • You use the scholarship or fellowship to pay qualified education expenses.

Qualified Education Expenses

For purposes of tax-free scholarships and fellowships, these are expenses for:

  • Tuition and fees required to enroll at or attend an eligible educational institution.
  • Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. These items must be required of all students in your course of instruction.

However, in order for these to be qualified education expenses, the terms of the scholarship or fellowship cannot require that it be used for other purposes, such as room and board, or specify that it cannot be used for tuition or course-related expenses. 

Expenses that Don’t Qualify

Qualified education expenses do not include the cost of:

  • Room and board.
  • Travel.
  • Research.
  • Clerical help.
  • Equipment and other expenses that are not required for enrollment in or attendance at an eligible educational institution.

This is true even if the fee must be paid to the institution as a condition of enrollment or attendance. Scholarship or fellowship amounts used to pay these costs are taxable.

For more information, see Pub. 970.


Exclusions from Income


You may exclude certain educational assistance benefits from your income. That means that you won’t have to pay any tax on them. However, it also means that you can’t use any of the tax-free education expenses as the basis for any other deduction or credit, including the lifetime learning credit.

Employer-Provided Educational Assistance


If you receive educational assistance benefits from your employer under an educational assistance program, you can exclude up to $5,250 of those benefits each year. This means your employer should not include the benefits with your wages, tips, and other compensation shown in box 1 of your Form W-2.

Educational Assistance Program

To qualify as an educational assistance program, the plan must be written and must meet certain other requirements. Your employer can tell you whether there is a qualified program where you work.

Educational Assistance Benefits

Tax-free educational assistance benefits include payments for tuition, fees and similar expenses, books, supplies, and equipment. The payments may be for either undergraduate- or graduate-level courses. The payments do not have to be for work-related courses. Educational assistance benefits do not include payments for the following items.

  • Meals, lodging, or transportation.
  • Tools or supplies (other than textbooks) that you can keep after completing the course of instruction.
  • Courses involving sports, games, or hobbies unless they:
    • Have a reasonable relationship to the business of your employer, or
    • Are required as part of a degree program.

Benefits over $5,250

If your employer pays more than $5,250 for educational benefits for you during the year, you must generally pay tax on the amount over $5,250. Your employer should include in your wages (Form W-2, box 1) the amount that you must include in income.

Working Condition Fringe Benefit 

However, if the benefits over $5,250 also qualify as a working condition fringe benefit, your employer does not have to include them in your wages. A working condition fringe benefit is a benefit which, had you paid for it, you could deduct as an employee business expense. For more information on working condition fringe benefits, see Working Condition Benefits in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits.


Related Items:

 

Page Last Reviewed or Updated: 24-Jan-2014

The Amended Tax Return Forms

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