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Back taxes owed 6. Back taxes owed   How To Get Tax Help Table of Contents Low Income Taxpayer Clinics Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Back taxes owed Free help with your tax return. Back taxes owed   You can get free help preparing your return nationwide from IRS-certified volunteers. Back taxes owed The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Back taxes owed The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Back taxes owed Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Back taxes owed In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Back taxes owed To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Back taxes owed gov, download the IRS2Go app, or call 1-800-906-9887. Back taxes owed   As part of the TCE program, AARP offers the Tax-Aide counseling program. Back taxes owed To find the nearest AARP Tax-Aide site, visit AARP's website at www. Back taxes owed aarp. Back taxes owed org/money/taxaide or call 1-888-227-7669. Back taxes owed For more information on these programs, go to IRS. Back taxes owed gov and enter “VITA” in the search box. Back taxes owed Internet. Back taxes owed    IRS. Back taxes owed gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Back taxes owed Download the free IRS2Go app from the iTunes app store or from Google Play. Back taxes owed Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Back taxes owed Check the status of your 2013 refund with the Where's My Refund? application on IRS. Back taxes owed gov or download the IRS2Go app and select the Refund Status option. Back taxes owed The IRS issues more than 9 out of 10 refunds in less than 21 days. Back taxes owed Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Back taxes owed You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Back taxes owed The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Back taxes owed Use the Interactive Tax Assistant (ITA) to research your tax questions. Back taxes owed No need to wait on the phone or stand in line. Back taxes owed The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Back taxes owed When you reach the response screen, you can print the entire interview and the final response for your records. Back taxes owed New subject areas are added on a regular basis. Back taxes owed  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Back taxes owed gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Back taxes owed You can use the IRS Tax Map, to search publications and instructions by topic or keyword. Back taxes owed The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Back taxes owed When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Back taxes owed Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Back taxes owed You can also ask the IRS to mail a return or an account transcript to you. Back taxes owed Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Back taxes owed gov or by calling 1-800-908-9946. Back taxes owed Tax return and tax account transcripts are generally available for the current year and the past three years. Back taxes owed Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Back taxes owed Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Back taxes owed If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Back taxes owed Check the status of your amended return using Where's My Amended Return? Go to IRS. Back taxes owed gov and enter Where's My Amended Return? in the search box. Back taxes owed You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Back taxes owed It can take up to 3 weeks from the date you mailed it to show up in our system. Back taxes owed Make a payment using one of several safe and convenient electronic payment options available on IRS. Back taxes owed gov. Back taxes owed Select the Payment tab on the front page of IRS. Back taxes owed gov for more information. Back taxes owed Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Back taxes owed Figure your income tax withholding with the IRS Withholding Calculator on IRS. Back taxes owed gov. Back taxes owed Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Back taxes owed Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Back taxes owed gov. Back taxes owed Request an Electronic Filing PIN by going to IRS. Back taxes owed gov and entering Electronic Filing PIN in the search box. Back taxes owed Download forms, instructions and publications, including accessible versions for people with disabilities. Back taxes owed Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Back taxes owed gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Back taxes owed An employee can answer questions about your tax account or help you set up a payment plan. Back taxes owed Before you visit, check the Office Locator on IRS. Back taxes owed gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Back taxes owed If you have a special need, such as a disability, you can request an appointment. Back taxes owed Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Back taxes owed Apply for an Employer Identification Number (EIN). Back taxes owed Go to IRS. Back taxes owed gov and enter Apply for an EIN in the search box. Back taxes owed Read the Internal Revenue Code, regulations, or other official guidance. Back taxes owed Read Internal Revenue Bulletins. Back taxes owed Sign up to receive local and national tax news and more by email. Back taxes owed Just click on “subscriptions” above the search box on IRS. Back taxes owed gov and choose from a variety of options. Back taxes owed Phone. Back taxes owed    You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Back taxes owed Download the free IRS2Go app from the iTunes app store or from Google Play. Back taxes owed Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. Back taxes owed gov, or download the IRS2Go app. Back taxes owed Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Back taxes owed The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Back taxes owed Most VITA and TCE sites offer free electronic filing. Back taxes owed Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Back taxes owed Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Back taxes owed Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. Back taxes owed If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Back taxes owed The IRS issues more than 9 out of 10 refunds in less than 21 days. Back taxes owed Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. Back taxes owed Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. Back taxes owed The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Back taxes owed Note, the above information is for our automated hotline. Back taxes owed Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. Back taxes owed Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. Back taxes owed You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Back taxes owed It can take up to 3 weeks from the date you mailed it to show up in our system. Back taxes owed Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). Back taxes owed You should receive your order within 10 business days. Back taxes owed Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. Back taxes owed If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. Back taxes owed Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Back taxes owed The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Back taxes owed These individuals can also contact the IRS through relay services such as the Federal Relay Service. Back taxes owed Walk-in. Back taxes owed   You can find a selection of forms, publications and services — in-person. Back taxes owed Products. Back taxes owed You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Back taxes owed Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Back taxes owed Services. Back taxes owed You can walk in to your local TAC for face-to-face tax help. Back taxes owed An employee can answer questions about your tax account or help you set up a payment plan. Back taxes owed Before visiting, use the Office Locator tool on IRS. Back taxes owed gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. Back taxes owed Mail. Back taxes owed   You can send your order for forms, instructions, and publications to the address below. Back taxes owed You should receive a response within 10 business days after your request is received. Back taxes owed Internal Revenue Service 1201 N. Back taxes owed Mitsubishi Motorway Bloomington, IL 61705-6613    The Taxpayer Advocate Service Is Here to Help You. Back taxes owed The Taxpayer Advocate Service (TAS) is your voice at the IRS. Back taxes owed Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Back taxes owed   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. Back taxes owed We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. Back taxes owed You face (or your business is facing) an immediate threat of adverse action. Back taxes owed You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Back taxes owed   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. Back taxes owed Here's why we can help: TAS is an independent organization within the IRS. Back taxes owed Our advocates know how to work with the IRS. Back taxes owed Our services are free and tailored to meet your needs. Back taxes owed We have offices in every state, the District of Columbia, and Puerto Rico. Back taxes owed   How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at Taxpayer Advocate, or call us toll-free at 1-877-777-4778. Back taxes owed   How else does TAS help taxpayers?  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Back taxes owed If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System. Back taxes owed Low Income Taxpayer Clinics Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals and tax collection disputes. Back taxes owed Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Back taxes owed Visit Taxpayer Advocate or see IRS Publication 4134, Low Income Taxpayer Clinic List. Back taxes owed Prev  Up  Next   Home   More Online Publications
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Back taxes owed Publication 530 - Main Content Table of Contents What You Can and Cannot DeductHardest Hit Fund and Emergency Homeowners' Loan Programs Real Estate Taxes Sales Taxes Home Mortgage Interest Mortgage Insurance Premiums Mortgage Interest CreditFiguring the Credit BasisFiguring Your Basis Adjusted Basis Keeping Records How To Get Tax HelpLow Income Taxpayer Clinics What You Can and Cannot Deduct To deduct expenses of owning a home, you must file Form 1040, U. Back taxes owed S. Back taxes owed Individual Income Tax Return, and itemize your deductions on Schedule A (Form 1040). Back taxes owed If you itemize, you cannot take the standard deduction. Back taxes owed This section explains what expenses you can deduct as a homeowner. Back taxes owed It also points out expenses that you cannot deduct. Back taxes owed There are four primary discussions: real estate taxes, sales taxes, home mortgage interest, and mortgage insurance premiums. Back taxes owed Generally, your real estate taxes, home mortgage interest, and mortgage insurance premiums are included in your house payment. Back taxes owed Your house payment. Back taxes owed   If you took out a mortgage (loan) to finance the purchase of your home, you probably have to make monthly house payments. Back taxes owed Your house payment may include several costs of owning a home. Back taxes owed The only costs you can deduct are real estate taxes actually paid to the taxing authority, interest that qualifies as home mortgage interest, and mortgage insurance premiums. Back taxes owed These are discussed in more detail later. Back taxes owed   Some nondeductible expenses that may be included in your house payment include: Fire or homeowner's insurance premiums, and The amount applied to reduce the principal of the mortgage. Back taxes owed Minister's or military housing allowance. Back taxes owed   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you still can deduct your real estate taxes and your home mortgage interest. Back taxes owed You do not have to reduce your deductions by your nontaxable allowance. Back taxes owed For more information see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers, and Publication 3, Armed Forces' Tax Guide. Back taxes owed Nondeductible payments. Back taxes owed   You cannot deduct any of the following items. Back taxes owed Insurance (other than mortgage insurance premiums), including fire and comprehensive coverage, and title insurance. Back taxes owed Wages you pay for domestic help. Back taxes owed Depreciation. Back taxes owed The cost of utilities, such as gas, electricity, or water. Back taxes owed Most settlement costs. Back taxes owed See Settlement or closing costs under Cost as Basis, later, for more information. Back taxes owed Forfeited deposits, down payments, or earnest money. Back taxes owed Hardest Hit Fund and Emergency Homeowners' Loan Programs You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. Back taxes owed You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. Back taxes owed You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. Back taxes owed If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098-MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received), box 4 (mortgage insurance premiums) and box 5 (real property taxes). Back taxes owed However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. Back taxes owed Real Estate Taxes Most state and local governments charge an annual tax on the value of real property. Back taxes owed This is called a real estate tax. Back taxes owed You can deduct the tax if it is assessed uniformly at a like rate on all real property throughout the community. Back taxes owed The proceeds must be for general community or governmental purposes and not be a payment for a special privilege granted or service rendered to you. Back taxes owed Deductible Real Estate Taxes You can deduct real estate taxes imposed on you. Back taxes owed You must have paid them either at settlement or closing, or to a taxing authority (either directly or through an escrow account) during the year. Back taxes owed If you own a cooperative apartment, see Special Rules for Cooperatives , later. Back taxes owed Where to deduct real estate taxes. Back taxes owed   Enter the amount of your deductible real estate taxes on Schedule A (Form 1040), line 6. Back taxes owed Real estate taxes paid at settlement or closing. Back taxes owed   Real estate taxes are generally divided so that you and the seller each pay taxes for the part of the property tax year you owned the home. Back taxes owed Your share of these taxes is fully deductible if you itemize your deductions. Back taxes owed Division of real estate taxes. Back taxes owed   For federal income tax purposes, the seller is treated as paying the property taxes up to, but not including, the date of sale. Back taxes owed You (the buyer) are treated as paying the taxes beginning with the date of sale. Back taxes owed This applies regardless of the lien dates under local law. Back taxes owed Generally, this information is included on the settlement statement you get at closing. Back taxes owed   You and the seller each are considered to have paid your own share of the taxes, even if one or the other paid the entire amount. Back taxes owed You each can deduct your own share, if you itemize deductions, for the year the property is sold. Back taxes owed Example. Back taxes owed You bought your home on September 1. Back taxes owed The property tax year (the period to which the tax relates) in your area is the calendar year. Back taxes owed The tax for the year was $730 and was due and paid by the seller on August 15. Back taxes owed You owned your new home during the property tax year for 122 days (September 1 to December 31, including your date of purchase). Back taxes owed You figure your deduction for real estate taxes on your home as follows. Back taxes owed 1. Back taxes owed Enter the total real estate taxes for the real property tax year $730 2. Back taxes owed Enter the number of days in the property tax year that you owned the property 122 3. Back taxes owed Divide line 2 by 365 . Back taxes owed 3342 4. Back taxes owed Multiply line 1 by line 3. Back taxes owed This is your deduction. Back taxes owed Enter it on Schedule A (Form 1040), line 6 $244   You can deduct $244 on your return for the year if you itemize your deductions. Back taxes owed You are considered to have paid this amount and can deduct it on your return even if, under the contract, you did not have to reimburse the seller. Back taxes owed Delinquent taxes. Back taxes owed   Delinquent taxes are unpaid taxes that were imposed on the seller for an earlier tax year. Back taxes owed If you agree to pay delinquent taxes when you buy your home, you cannot deduct them. Back taxes owed You treat them as part of the cost of your home. Back taxes owed See Real estate taxes , later, under Basis. Back taxes owed Escrow accounts. Back taxes owed   Many monthly house payments include an amount placed in escrow (put in the care of a third party) for real estate taxes. Back taxes owed You may not be able to deduct the total you pay into the escrow account. Back taxes owed You can deduct only the real estate taxes that the lender actually paid from escrow to the taxing authority. Back taxes owed Your real estate tax bill will show this amount. Back taxes owed Refund or rebate of real estate taxes. Back taxes owed   If you receive a refund or rebate of real estate taxes this year for amounts you paid this year, you must reduce your real estate tax deduction by the amount refunded to you. Back taxes owed If the refund or rebate was for real estate taxes paid for a prior year, you may have to include some or all of the refund in your income. Back taxes owed For more information, see Recoveries in Publication 525, Taxable and Nontaxable Income. Back taxes owed Items You Cannot Deduct as Real Estate Taxes The following items are not deductible as real estate taxes. Back taxes owed Charges for services. Back taxes owed   An itemized charge for services to specific property or people is not a tax, even if the charge is paid to the taxing authority. Back taxes owed You cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged for trash collection), or A flat fee charged for a single service provided by your local government (such as a $30 charge for mowing your lawn because it had grown higher than permitted under a local ordinance). Back taxes owed    You must look at your real estate tax bill to decide if any nondeductible itemized charges, such as those listed above, are included in the bill. Back taxes owed If your taxing authority (or lender) does not furnish you a copy of your real estate tax bill, ask for it. Back taxes owed Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. Back taxes owed Assessments for local benefits. Back taxes owed   You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. Back taxes owed Local benefits include the construction of streets, sidewalks, or water and sewer systems. Back taxes owed You must add these amounts to the basis of your property. Back taxes owed   You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. Back taxes owed An example is a charge to repair an existing sidewalk and any interest included in that charge. Back taxes owed   If only a part of the assessment is for maintenance, repair, or interest charges, you must be able to show the amount of that part to claim the deduction. Back taxes owed If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. Back taxes owed   An assessment for a local benefit may be listed as an item in your real estate tax bill. Back taxes owed If so, use the rules in this section to find how much of it, if any, you can deduct. Back taxes owed Transfer taxes (or stamp taxes). Back taxes owed   You cannot deduct transfer taxes and similar taxes and charges on the sale of a personal home. Back taxes owed If you are the buyer and you pay them, include them in the cost basis of the property. Back taxes owed If you are the seller and you pay them, they are expenses of the sale and reduce the amount realized on the sale. Back taxes owed Homeowners association assessments. Back taxes owed   You cannot deduct these assessments because the homeowners association, rather than a state or local government, imposes them. Back taxes owed Special Rules for Cooperatives If you own a cooperative apartment, some special rules apply to you, though you generally receive the same tax treatment as other homeowners. Back taxes owed As an owner of a cooperative apartment, you own shares of stock in a corporation that owns or leases housing facilities. Back taxes owed You can deduct your share of the corporation's deductible real estate taxes if the cooperative housing corporation meets the following conditions: The corporation has only one class of stock outstanding, Each stockholder, solely because of ownership of the stock, can live in a house, apartment, or house trailer owned or leased by the corporation, No stockholder can receive any distribution out of capital, except on a partial or complete liquidation of the corporation, and At least one of the following: At least 80% of the corporation's gross income for the tax year was paid by the tenant-stockholders. Back taxes owed For this purpose, gross income means all income received during the entire tax year, including any received before the corporation changed to cooperative ownership. Back taxes owed At least 80% of the total square footage of the corporation's property must be available for use by the tenant-stockholders during the entire tax year. Back taxes owed At least 90% of the expenditures paid or incurred by the corporation were used for the acquisition, construction, management, maintenance, or care of the property for the benefit of the tenant-shareholders during the entire tax year. Back taxes owed Tenant-stockholders. Back taxes owed   A tenant-stockholder can be any entity (such as a corporation, trust, estate, partnership, or association) as well as an individual. Back taxes owed The tenant-stockholder does not have to live in any of the cooperative's dwelling units. Back taxes owed The units that the tenant-stockholder has the right to occupy can be rented to others. Back taxes owed Deductible taxes. Back taxes owed   You figure your share of real estate taxes in the following way. Back taxes owed Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. Back taxes owed Multiply the corporation's deductible real estate taxes by the number you figured in (1). Back taxes owed This is your share of the real estate taxes. Back taxes owed   Generally, the corporation will tell you your share of its real estate tax. Back taxes owed This is the amount you can deduct if it reasonably reflects the cost of real estate taxes for your dwelling unit. Back taxes owed Refund of real estate taxes. Back taxes owed   If the corporation receives a refund of real estate taxes it paid in an earlier year, it must reduce the amount of real estate taxes paid this year when it allocates the tax expense to you. Back taxes owed Your deduction for real estate taxes the corporation paid this year is reduced by your share of the refund the corporation received. Back taxes owed Sales Taxes Generally, you can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040). Back taxes owed Deductible sales taxes may include sales taxes paid on your home (including mobile and prefabricated), or home building materials if the tax rate was the same as the general sales tax rate. Back taxes owed For information on figuring your deduction, see the Instructions for Schedule A (Form 1040). Back taxes owed If you elect to deduct the sales taxes paid on your home, or home building materials, you cannot include them as part of your cost basis in the home. Back taxes owed Home Mortgage Interest This section of the publication gives you basic information about home mortgage interest, including information on interest paid at settlement, points, and Form 1098, Mortgage Interest Statement. Back taxes owed Most home buyers take out a mortgage (loan) to buy their home. Back taxes owed They then make monthly payments to either the mortgage holder or someone collecting the payments for the mortgage holder. Back taxes owed Usually, you can deduct the entire part of your payment that is for mortgage interest, if you itemize your deductions on Schedule A (Form 1040). Back taxes owed However, your deduction may be limited if: Your total mortgage balance is more than $1 million ($500,000 if married filing separately), or You took out a mortgage for reasons other than to buy, build, or improve your home. Back taxes owed If either of these situations applies to you, see Publication 936 for more information. Back taxes owed Also see Publication 936 if you later refinance your mortgage or buy a second home. Back taxes owed Refund of home mortgage interest. Back taxes owed   If you receive a refund of home mortgage interest that you deducted in an earlier year and that reduced your tax, you generally must include the refund in income in the year you receive it. Back taxes owed For more information, see Recoveries in Publication 525. Back taxes owed The amount of the refund will usually be shown on the mortgage interest statement you receive from your mortgage lender. Back taxes owed See Mortgage Interest Statement , later. Back taxes owed Deductible Mortgage Interest To be deductible, the interest you pay must be on a loan secured by your main home or a second home. Back taxes owed The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. Back taxes owed Prepaid interest. Back taxes owed   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. Back taxes owed Generally, you can deduct in each year only the interest that qualifies as home mortgage interest for that year. Back taxes owed An exception (discussed later) applies to points. Back taxes owed Late payment charge on mortgage payment. Back taxes owed   You can deduct as home mortgage interest a late payment charge if it was not for a specific service in connection with your mortgage loan. Back taxes owed Mortgage prepayment penalty. Back taxes owed   If you pay off your home mortgage early, you may have to pay a penalty. Back taxes owed You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. Back taxes owed Ground rent. Back taxes owed   In some states (such as Maryland), you may buy your home subject to a ground rent. Back taxes owed A ground rent is an obligation you assume to pay a fixed amount per year on the property. Back taxes owed Under this arrangement, you are leasing (rather than buying) the land on which your home is located. Back taxes owed Redeemable ground rents. Back taxes owed   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. Back taxes owed The ground rent is a redeemable ground rent only if all of the following are true. Back taxes owed Your lease, including renewal periods, is for more than 15 years. Back taxes owed You can freely assign the lease. Back taxes owed You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specified amount. Back taxes owed The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. Back taxes owed   Payments made to end the lease and buy the lessor's entire interest in the land are not redeemable ground rents. Back taxes owed You cannot deduct them. Back taxes owed Nonredeemable ground rents. Back taxes owed   Payments on a nonredeemable ground rent are not mortgage interest. Back taxes owed You can deduct them as rent only if they are a business expense or if they are for rental property. Back taxes owed Cooperative apartment. Back taxes owed   You can usually treat the interest on a loan you took out to buy stock in a cooperative housing corporation as home mortgage interest if you own a cooperative apartment, and the cooperative housing corporation meets the conditions described earlier under Special Rules for Cooperatives . Back taxes owed In addition, you can treat as home mortgage interest your share of the corporation's deductible mortgage interest. Back taxes owed Figure your share of mortgage interest the same way that is shown for figuring your share of real estate taxes in the Example under Division of real estate taxes, earlier. Back taxes owed For more information on cooperatives, see Special Rule for Tenant-Stockholders in Cooperative Housing Corporations in Publication 936. Back taxes owed Refund of cooperative's mortgage interest. Back taxes owed   You must reduce your mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. Back taxes owed The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. Back taxes owed   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. Back taxes owed Mortgage Interest Paid at Settlement One item that normally appears on a settlement or closing statement is home mortgage interest. Back taxes owed You can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). Back taxes owed This amount should be included in the mortgage interest statement provided by your lender. Back taxes owed See the discussion under Mortgage Interest Statement , later. Back taxes owed Also, if you pay interest in advance, see Prepaid interest , earlier, and Points , next. Back taxes owed Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Back taxes owed Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points. Back taxes owed A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Back taxes owed See Points paid by the seller , later. Back taxes owed General rule. Back taxes owed   You cannot deduct the full amount of points in the year paid. Back taxes owed They are prepaid interest, so you generally must deduct them over the life (term) of the mortgage. Back taxes owed Exception. Back taxes owed   You can deduct the full amount of points in the year paid if you meet all the following tests. Back taxes owed Your loan is secured by your main home. Back taxes owed (Generally, your main home is the one you live in most of the time. Back taxes owed ) Paying points is an established business practice in the area where the loan was made. Back taxes owed The points paid were not more than the points generally charged in that area. Back taxes owed You use the cash method of accounting. Back taxes owed This means you report income in the year you receive it and deduct expenses in the year you pay them. Back taxes owed Most individuals use this method. Back taxes owed The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. Back taxes owed The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Back taxes owed The funds you provided are not required to have been applied to the points. Back taxes owed They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Back taxes owed You cannot have borrowed these funds. Back taxes owed You use your loan to buy or build your main home. Back taxes owed The points were computed as a percentage of the principal amount of the mortgage. Back taxes owed The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. Back taxes owed The points may be shown as paid from either your funds or the seller's. Back taxes owed Note. Back taxes owed If you meet all of the tests listed above and you itemize your deductions in the year you get the loan, you can either deduct the full amount of points in the year paid or deduct them over the life of the loan, beginning in the year you get the loan. Back taxes owed If you do not itemize your deductions in the year you get the loan, you can spread the points over the life of the loan and deduct the appropriate amount in each future year, if any, when you do itemize your deductions. Back taxes owed Home improvement loan. Back taxes owed   You can also fully deduct in the year paid points paid on a loan to improve your main home, if you meet the first six tests listed earlier. Back taxes owed Refinanced loan. Back taxes owed   If you use part of the refinanced mortgage proceeds to improve your main home and you meet the first six tests listed earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Back taxes owed You can deduct the rest of the points over the life of the loan. Back taxes owed Points not fully deductible in year paid. Back taxes owed    If you do not qualify under the exception to deduct the full amount of points in the year paid (or choose not to do so), see Points in Publication 936 for the rules on when and how much you can deduct. Back taxes owed Figure A. Back taxes owed   You can use Figure A, next, as a quick guide to see whether your points are fully deductible in the year paid. Back taxes owed    Please click here for the text description of the image. Back taxes owed Figure A. Back taxes owed Are my points fully deductible this year? Amounts charged for services. Back taxes owed   Amounts charged by the lender for specific services connected to the loan are not interest. Back taxes owed Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Back taxes owed You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Back taxes owed For information about the tax treatment of these amounts and other settlement fees and closing costs, see Basis , later. Back taxes owed Points paid by the seller. Back taxes owed   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Back taxes owed Treatment by seller. Back taxes owed   The seller cannot deduct these fees as interest. Back taxes owed However, they are a selling expense that reduces the seller's amount realized. Back taxes owed See Publication 523 for more information. Back taxes owed Treatment by buyer. Back taxes owed   The buyer treats seller-paid points as if he or she had paid them. Back taxes owed If all the tests listed earlier under Exception are met, the buyer can deduct the points in the year paid. Back taxes owed If any of those tests are not met, the buyer must deduct the points over the life of the loan. Back taxes owed   The buyer must also reduce the basis of the home by the amount of the seller-paid points. Back taxes owed For more information about the basis of your home, see Basis , later. Back taxes owed Funds provided are less than points. Back taxes owed   If you meet all the tests listed earlier under Exception except that the funds you provided were less than the points charged to you (test 6), you can deduct the points in the year paid up to the amount of funds you provided. Back taxes owed In addition, you can deduct any points paid by the seller. Back taxes owed Example 1. Back taxes owed When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Back taxes owed You meet all the tests for deducting points in the year paid (see Exception , earlier), except the only funds you provided were a $750 down payment. Back taxes owed Of the $1,000 you were charged for points, you can deduct $750 in the year paid. Back taxes owed You spread the remaining $250 over the life of the mortgage. Back taxes owed Example 2. Back taxes owed The facts are the same as in Example 1 , except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. Back taxes owed In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Back taxes owed You spread the remaining $250 over the life of the mortgage. Back taxes owed You must reduce the basis of your home by the $1,000 paid by the seller. Back taxes owed Excess points. Back taxes owed   If you meet all the tests under Exception , earlier, except that the points paid were more than are generally charged in your area (test 3), you can deduct in the year paid only the points that are generally charged. Back taxes owed You must spread any additional points over the life of the mortgage. Back taxes owed Mortgage ending early. Back taxes owed   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. Back taxes owed A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Back taxes owed Example. Back taxes owed Dan paid $3,000 in points in 2006 that he had to spread out over the 15-year life of the mortgage. Back taxes owed He had deducted $1,400 of these points through 2012. Back taxes owed Dan prepaid his mortgage in full in 2013. Back taxes owed He can deduct the remaining $1,600 of points in 2013. Back taxes owed Exception. Back taxes owed   If you refinance the mortgage with the same lender, you cannot deduct any remaining points for the year. Back taxes owed Instead, deduct them over the term of the new loan. Back taxes owed Form 1098. Back taxes owed   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your deductible points paid during the year. Back taxes owed See Mortgage Interest Statement , later. Back taxes owed Where To Deduct Home Mortgage Interest Enter on Schedule A (Form 1040), line 10, the home mortgage interest and points reported to you on Form 1098 (discussed next). Back taxes owed If you did not receive a Form 1098, enter your deductible interest on line 11, and any deductible points on line 12. Back taxes owed See Table 1 below for a summary of where to deduct home mortgage interest and real estate taxes. Back taxes owed If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and social security number (SSN) or employer identification number (EIN) on the dotted lines next to line 11. Back taxes owed The seller must give you this number and you must give the seller your SSN. Back taxes owed Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Back taxes owed Failure to meet either of these requirements may result in a $50 penalty for each failure. Back taxes owed Table 1. Back taxes owed Where To Deduct Interest and Taxes Paid on Your Home See the text for information on what expenses are eligible. Back taxes owed IF you are eligible to deduct . Back taxes owed . Back taxes owed . Back taxes owed THEN report the amount  on Schedule A (Form 1040) . Back taxes owed . Back taxes owed . Back taxes owed real estate taxes line 6. Back taxes owed home mortgage interest and points reported on Form 1098 line 10. Back taxes owed home mortgage interest not reported on  Form 1098 line 11. Back taxes owed points not reported on Form 1098 line 12. Back taxes owed qualified mortgage insurance premiums line 13. Back taxes owed Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage to a mortgage holder in the course of that holder's trade or business, you should receive a Form 1098 or similar statement from the mortgage holder. Back taxes owed The statement will show the total interest paid on your mortgage during the year. Back taxes owed If you bought a main home during the year, it also will show the deductible points you paid and any points you can deduct that were paid by the person who sold you your home. Back taxes owed See Points , earlier. Back taxes owed The interest you paid at settlement should be included on the statement. Back taxes owed If it is not, add the interest from the settlement sheet that qualifies as home mortgage interest to the total shown on Form 1098 or similar statement. Back taxes owed Put the total on Schedule A (Form 1040), line 10, and attach a statement to your return explaining the difference. Back taxes owed Write “See attached” to the right of line 10. Back taxes owed A mortgage holder can be a financial institution, a governmental unit, or a cooperative housing corporation. Back taxes owed If a statement comes from a cooperative housing corporation, it generally will show your share of interest. Back taxes owed Your mortgage interest statement for 2013 should be provided or sent to you by January 31, 2014. Back taxes owed If it is mailed, you should allow adequate time to receive it before contacting the mortgage holder. Back taxes owed A copy of this form will be sent to the IRS also. Back taxes owed Example. Back taxes owed You bought a new home on May 3. Back taxes owed You paid no points on the purchase. Back taxes owed During the year, you made mortgage payments which included $4,480 deductible interest on your new home. Back taxes owed The settlement sheet for the purchase of the home included interest of $620 for 29 days in May. Back taxes owed The mortgage statement you receive from the lender includes total interest of $5,100 ($4,480 + $620). Back taxes owed You can deduct the $5,100 if you itemize your deductions. Back taxes owed Refund of overpaid interest. Back taxes owed   If you receive a refund of mortgage interest you overpaid in a prior year, you generally will receive a Form 1098 showing the refund in box 3. Back taxes owed Generally, you must include the refund in income in the year you receive it. Back taxes owed See Refund of home mortgage interest , earlier, under Home Mortgage Interest. Back taxes owed More than one borrower. Back taxes owed   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 a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Back taxes owed Show how much of the interest each of you paid, and give the name and address of the person who received the form. Back taxes owed Deduct your share of the interest on Schedule A (Form 1040), line 11, and write “See attached” to the right of that line. Back taxes owed Mortgage Insurance Premiums You may be able to take an itemized deduction on Schedule A (Form 1040), line 13, for premiums you pay or accrue during 2013 for qualified mortgage insurance in connection with home acquisition debt on your qualified home. Back taxes owed Mortgage insurance premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as an itemized deduction. Back taxes owed Qualified Mortgage Insurance Qualified mortgage insurance is mortgage insurance provided by the Veterans Administration, the Federal Housing Administration, or the Rural Housing Administration, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). Back taxes owed Prepaid mortgage insurance premiums. Back taxes owed   If you paid premiums that are allocable to periods after 2013, you must allocate them over the shorter of: The stated term of the mortgage, or 84 months, beginning with the month the insurance was obtained. Back taxes owed The premiums are treated as paid in the year to which they were allocated. Back taxes owed If the mortgage is satisfied before its term, no deduction is allowed for the unamortized balance. Back taxes owed See Publication 936 for details. Back taxes owed Exception for certain mortgage insurance. Back taxes owed   The allocation rules, explained above, do not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Service. Back taxes owed Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home. Back taxes owed It also must be secured by that home. Back taxes owed If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. Back taxes owed Home acquisition debt limit. Back taxes owed   The total amount you can treat as home acquisition debt at any time on your home cannot be more than $1 million ($500,000 if married filing separately). Back taxes owed Discharges of qualified principal residence indebtedness. Back taxes owed   You can exclude from gross income any discharges of qualified principal residence indebtedness made after 2006 and before 2014. Back taxes owed You must reduce the basis of your principal residence (but not below zero) by the amount you exclude. Back taxes owed Principal residence. Back taxes owed   Your principal residence is the home where you ordinarily live most of the time. Back taxes owed You can have only one principal residence at any one time. Back taxes owed Qualified principal residence indebtedness. Back taxes owed   This is a mortgage that you took out to buy, build, or substantially improve your principal residence and that is secured by that residence. Back taxes owed If the amount of your original mortgage is more than the cost of your principal residence plus the cost of substantial improvements, qualified principal residence indebtedness cannot be more than the cost of your principal residence plus improvements. Back taxes owed   Any debt secured by your principal residence that you use to refinance qualified principal residence indebtedness is qualified principal residence indebtedness up to the amount of your old mortgage principal just before the refinancing. Back taxes owed Additional debt incurred to substantially improve your principal residence is also qualified principal residence indebtedness. Back taxes owed Amount you can exclude. Back taxes owed   You can only exclude debt discharged after 2006 and before 2014. Back taxes owed The most you can exclude is $2 million ($1 million if married filing separately). Back taxes owed You cannot exclude any amount that was discharged because of services performed for the lender or on account of any other factor not directly related either to a decline in the value of your residence or to your financial condition. Back taxes owed Ordering rule. Back taxes owed   If only a part of a loan is qualified principal residence indebtedness, you can exclude only the amount of the discharge that is more than the amount of the loan (immediately before the discharge) that is not qualified principal residence indebtedness. Back taxes owed Qualified Home This means your main home or your second home. Back taxes owed A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. Back taxes owed Main home. Back taxes owed   You can have only one main home at any one time. Back taxes owed This is the home where you ordinarily live most of the time. Back taxes owed Second home and other special situations. Back taxes owed   If you have a second home, use part of your home for other than residential living (such as a home office), rent out part of your home, or are having your home constructed, see Qualified Home in Publication 936. Back taxes owed Limit on Deduction If your adjusted gross income (AGI) on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are deductible is reduced and may be eliminated. Back taxes owed See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. Back taxes owed If your AGI is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Back taxes owed Form 1098. Back taxes owed   The amount of mortgage insurance premiums you paid during 2013 should be reported in box 4. Back taxes owed See Form 1098, Mortgage Interest Statement in Publication 936. Back taxes owed Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals afford home ownership. Back taxes owed If you qualify, you can claim the credit on Form 8396 each year for part of the home mortgage interest you pay. Back taxes owed Who qualifies. Back taxes owed   You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate (MCC) from your state or local government. Back taxes owed Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. Back taxes owed The MCC will show the certificate credit rate you will use to figure your credit. Back taxes owed It also will show the certified indebtedness amount. Back taxes owed Only the interest on that amount qualifies for the credit. Back taxes owed See Figuring the Credit , later. Back taxes owed You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home. Back taxes owed Contact your state or local housing finance agency for information about the availability of MCCs in your area. Back taxes owed How to claim the credit. Back taxes owed   To claim the credit, complete Form 8396 and attach it to your Form 1040 or Form 1040NR, U. Back taxes owed S. Back taxes owed Nonresident Alien Income Tax Return. Back taxes owed Include the credit in your total for Form 1040, line 53, or Form 1040NR, line 50; be sure to check box c and write “Form 8396” on that line. Back taxes owed Reducing your home mortgage interest deduction. Back taxes owed   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. Back taxes owed You must do this even if part of that amount is to be carried forward to 2014. Back taxes owed Selling your home. Back taxes owed   If you purchase a home after 1990 using an MCC, and you sell that home within 9 years, you may have to recapture (repay) all or part of the benefit you received from the MCC program. Back taxes owed For additional information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, in Publication 523. Back taxes owed Figuring the Credit Figure your credit on Form 8396. Back taxes owed Mortgage not more than certified indebtedness. Back taxes owed   If your mortgage loan amount is equal to (or smaller than) the certified indebtedness amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. Back taxes owed Mortgage more than certified indebtedness. Back taxes owed   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. Back taxes owed To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. Back taxes owed Certified indebtedness amount on your MCC Original amount of your mortgage   The fraction will not change as long as you are entitled to take the mortgage interest credit. Back taxes owed Example. Back taxes owed Emily bought a home this year. Back taxes owed Her mortgage loan is $125,000. Back taxes owed The certified indebtedness amount on her MCC is $100,000. Back taxes owed She paid $7,500 interest this year. Back taxes owed Emily figures the interest to enter on Form 8396, line 1, as follows:   $100,000 = 80% (. Back taxes owed 80)       $125,000       $7,500 x . Back taxes owed 80 = $6,000   Emily enters $6,000 on Form 8396, line 1. Back taxes owed In each later year, she will figure her credit using only 80% of the interest she pays for that year. Back taxes owed Limits Two limits may apply to your credit. Back taxes owed A limit based on the credit rate, and A limit based on your tax. Back taxes owed Limit based on credit rate. Back taxes owed   If the certificate credit rate is higher than 20%, the credit you are allowed cannot be more than $2,000. Back taxes owed Limit based on tax. Back taxes owed   After applying the limit based on the credit rate, your credit generally cannot be more than your tax liability. Back taxes owed See the Credit Limit Worksheet in the Form 8396 instructions to calculate the limit based on tax. Back taxes owed Dividing the Credit If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, the credit must be divided based on the interest held by each person. Back taxes owed Example. Back taxes owed John and his brother, George, were issued an MCC. Back taxes owed They used it to get a mortgage on their main home. Back taxes owed John has a 60% ownership interest in the home, and George has a 40% ownership interest in the home. Back taxes owed John paid $5,400 mortgage interest this year and George paid $3,600. Back taxes owed The MCC shows a credit rate of 25% and a certified indebtedness amount of $130,000. Back taxes owed The loan amount (mortgage) on their home is $120,000. Back taxes owed The credit is limited to $2,000 because the credit rate is more than 20%. Back taxes owed John figures the credit by multiplying the mortgage interest he paid this year ($5,400) by the certificate credit rate (25%) for a total of $1,350. Back taxes owed His credit is limited to $1,200 ($2,000 × 60%). Back taxes owed George figures the credit by multiplying the mortgage interest he paid this year ($3,600) by the certificate credit rate (25%) for a total of $900. Back taxes owed His credit is limited to $800 ($2,000 × 40%). Back taxes owed Carryforward If your allowable credit is reduced because of the limit based on your tax, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. Back taxes owed Example. Back taxes owed You receive a mortgage credit certificate from State X. Back taxes owed This year, your regular tax liability is $1,100, you owe no alternative minimum tax, and your mortgage interest credit is $1,700. Back taxes owed You claim no other credits. Back taxes owed Your unused mortgage interest credit for this year is $600 ($1,700 − $1,100). Back taxes owed You can carry forward this amount to the next 3 years or until used, whichever comes first. Back taxes owed Credit rate more than 20%. Back taxes owed   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). Back taxes owed Example. Back taxes owed In the earlier example under Dividing the Credit , John and George used the entire $2,000 credit. Back taxes owed The excess   John $1,350 − $1,200 = $150     George $900 − $800 = $100   $150 for John ($1,350 − $1,200) and $100 for George ($900 − $800) cannot be carried forward to future years, despite the respective tax liabilities for John and George. Back taxes owed Refinancing If you refinance your original mortgage loan on which you had been given an MCC, you must get a new MCC to be able to claim the credit on the new loan. Back taxes owed The amount of credit you can claim on the new loan may change. Back taxes owed Table 2 below summarizes how to figure your credit if you refinance your original mortgage loan. Back taxes owed Table 2. Back taxes owed Effect of Refinancing on Your Credit IF you get a new (reissued) MCC and the amount of your new mortgage is . Back taxes owed . Back taxes owed . Back taxes owed THEN the interest you claim on Form 8396, line 1, is* . Back taxes owed . Back taxes owed . Back taxes owed smaller than or equal to the certified indebtedness amount on the new MCC all the interest paid during the year on your new mortgage. Back taxes owed larger than the certified indebtedness amount on the new MCC interest paid during the year on your new mortgage multiplied by the following fraction. Back taxes owed         certified indebtedness  amount on your new MCC       original amount of your  mortgage   *The credit using the new MCC cannot be more than the credit using the old MCC. Back taxes owed  See New MCC cannot increase your credit above. Back taxes owed An issuer may reissue an MCC after you refinance your mortgage. Back taxes owed If you did not get a new MCC, you may want to contact the state or local housing finance agency that issued your original MCC for information about whether you can get a reissued MCC. Back taxes owed Year of refinancing. Back taxes owed   In the year of refinancing, add the applicable amount of interest paid on the old mortgage and the applicable amount of interest paid on the new mortgage, and enter the total on Form 8396, line 1. Back taxes owed   If your new MCC has a credit rate different from the rate on the old MCC, you must attach a statement to Form 8396. Back taxes owed The statement must show the calculation for lines 1, 2, and 3 for the part of the year when the old MCC was in effect. Back taxes owed It must show a separate calculation for the part of the year when the new MCC was in effect. Back taxes owed Combine the amounts from both calculations for line 3, enter the total on line 3 of the form, and write “See attached” on the dotted line next to line 2. Back taxes owed New MCC cannot increase your credit. Back taxes owed   The credit that you claim with your new MCC cannot be more than the credit that you could have claimed with your old MCC. Back taxes owed   In most cases, the agency that issues your new MCC will make sure that it does not increase your credit. Back taxes owed However, if either your old loan or your new loan has a variable (adjustable) interest rate, you will need to check this yourself. Back taxes owed In that case, you will need to know the amount of the credit you could have claimed using the old MCC. Back taxes owed   There are two methods for figuring the credit you could have claimed. Back taxes owed Under one method, you figure the actual credit that would have been allowed. Back taxes owed This means you use the credit rate on the old MCC and the interest you would have paid on the old loan. Back taxes owed   If your old loan was a variable rate mortgage, you can use another method to determine the credit that you could have claimed. Back taxes owed Under this method, you figure the credit using a payment schedule of a hypothetical self-amortizing mortgage with level payments projected to the final maturity date of the old mortgage. Back taxes owed The interest rate of the hypothetical mortgage is the annual percentage rate (APR) of the new mortgage for purposes of the Federal Truth in Lending Act. Back taxes owed The principal of the hypothetical mortgage is the remaining outstanding balance of the certified mortgage indebtedness shown on the old MCC. Back taxes owed    You must choose one method and use it consistently beginning with the first tax year for which you claim the credit based on the new MCC. Back taxes owed    As part of your tax records, you should keep your old MCC and the schedule of payments for your old mortgage. Back taxes owed Basis Basis is your starting point for figuring a gain or loss if you later sell your home, or for figuring depreciation if you later use part of your home for business purposes or for rent. Back taxes owed While you own your home, you may add certain items to your basis. Back taxes owed You may subtract certain other items from your basis. Back taxes owed These items are called adjustments to basis and are explained later under Adjusted Basis . Back taxes owed It is important that you understand these terms when you first acquire your home because you must keep track of your basis and adjusted basis during the period you own your home. Back taxes owed You also must keep records of the events that affect basis or adjusted basis. Back taxes owed See Keeping Records , below. Back taxes owed Figuring Your Basis How you figure your basis depends on how you acquire your home. Back taxes owed If you buy or build your home, your cost is your basis. Back taxes owed If you receive your home as a gift, your basis is usually the same as the adjusted basis of the person who gave you the property. Back taxes owed If you inherit your home from a decedent, different rules apply depending on the date of the decedent's death. Back taxes owed Each of these topics is discussed later. Back taxes owed Property transferred from a spouse. Back taxes owed   If your home is transferred to you from your spouse, or from your former spouse as a result of a divorce, your basis is the same as your spouse's (or former spouse's) adjusted basis just before the transfer. Back taxes owed Publication 504, Divorced or Separated Individuals, fully discusses transfers between spouses. Back taxes owed Cost as Basis The cost of your home, whether you purchased it or constructed it, is the amount you paid for it, including any debt you assumed. Back taxes owed The cost of your home includes most settlement or closing costs you paid when you bought the home. Back taxes owed If you built your home, your cost includes most closing costs paid when you bought the land or settled on your mortgage. Back taxes owed See Settlement or closing costs , later. Back taxes owed If you elect to deduct the sales taxes on the purchase or construction of your home as an itemized deduction on Schedule A (Form 1040), you cannot include the sales taxes as part of your cost basis in the home. Back taxes owed Purchase. Back taxes owed   The basis of a home you bought is the amount you paid for it. Back taxes owed This usually includes your down payment and any debt you assumed. Back taxes owed The basis of a cooperative apartment is the amount you paid for your shares in the corporation that owns or controls the property. Back taxes owed This amount includes any purchase commissions or other costs of acquiring the shares. Back taxes owed Construction. Back taxes owed   If you contracted to have your home built on land that you own, your basis in the home is your basis in the land plus the amount you paid to have the home built. Back taxes owed This includes the cost of labor and materials, the amount you paid the contractor, any architect's fees, building permit charges, utility meter and connection charges, and legal fees that are directly connected with building your home. Back taxes owed If you built all or part of your home yourself, your basis is the total amount it cost you to build it. Back taxes owed You cannot include in basis the value of your own labor or any other labor for which you did not pay. Back taxes owed Real estate taxes. Back taxes owed   Real estate taxes are usually divided so that you and the seller each pay taxes for the part of the property tax year that each owned the home. Back taxes owed See the earlier discussion of Real estate taxes paid at settlement or closing , under Real Estate Taxes, earlier, to figure the real estate taxes you paid or are considered to have paid. Back taxes owed   If you pay any part of the seller's share of the real estate taxes (the taxes up to the date of sale), and the seller did not reimburse you, add those taxes to your basis in the home. Back taxes owed You cannot deduct them as taxes paid. Back taxes owed   If the seller paid any of your share of the real estate taxes (the taxes beginning with the date of sale), you can still deduct those taxes. Back taxes owed Do not include those taxes in your basis. Back taxes owed If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Back taxes owed Example 1. Back taxes owed You bought your home on September 1. Back taxes owed The property tax year in your area is the calendar year, and the tax is due on August 15. Back taxes owed The real estate taxes on the home you bought were $1,275 for the year and had been paid by the seller on August 15. Back taxes owed You did not reimburse the seller for your share of the real estate taxes from September 1 through December 31. Back taxes owed You must reduce the basis of your home by the $426 [(122 ÷ 365) × $1,275] the seller paid for you. Back taxes owed You can deduct your $426 share of real estate taxes on your return for the year you purchased your home. Back taxes owed Example 2. Back taxes owed You bought your home on May 3, 2013. Back taxes owed The property tax year in your area is the calendar year. Back taxes owed The taxes for the previous year are assessed on January 2 and are due on May 31 and November 30. Back taxes owed Under state law, the taxes become a lien on May 31. Back taxes owed You agreed to pay all taxes due after the date of sale. Back taxes owed The taxes due in 2013 for 2012 were $1,375. Back taxes owed The taxes due in 2014 for 2013 will be $1,425. Back taxes owed You cannot deduct any of the taxes paid in 2013 because they relate to the 2012 property tax year and you did not own the home until 2013. Back taxes owed Instead, you add the $1,375 to the cost (basis) of your home. Back taxes owed You owned the home in 2013 for 243 days (May 3 to December 31), so you can take a tax deduction on your 2014 return of $949 [(243 ÷ 365) × $1,425] paid in 2014 for 2013. Back taxes owed You add the remaining $476 ($1,425 − $949) of taxes paid in 2014 to the cost (basis) of your home. Back taxes owed Settlement or closing costs. Back taxes owed   If you bought your home, you probably paid settlement or closing costs in addition to the contract price. Back taxes owed These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. Back taxes owed If you built your home, you probably paid these costs when you bought the land or settled on your mortgage. Back taxes owed   The only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. Back taxes owed You deduct them in the year you buy your home if you itemize your deductions. Back taxes owed You can add certain other settlement or closing costs to the basis of your home. Back taxes owed Items added to basis. Back taxes owed   You can include in your basis the settlement fees and closing costs you paid for buying your home. Back taxes owed A fee is for buying the home if you would have had to pay it even if you paid cash for the home. Back taxes owed   The following are some of the settlement fees and closing costs that you can include in the original basis of your home. Back taxes owed Abstract fees (abstract of title fees). Back taxes owed Charges for installing utility services. Back taxes owed Legal fees (including fees for the title search and preparation of the sales contract and deed). Back taxes owed Recording fees. Back taxes owed Surveys. Back taxes owed Transfer or stamp taxes. Back taxes owed Owner's title insurance. Back taxes owed Any amount the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, cost for improvements or repairs, and sales commissions. Back taxes owed   If the seller actually paid for any item for which you are liable and for which you can take a deduction (such as your share of the real estate taxes for the year of sale), you must reduce your basis by that amount unless you are charged for it in the settlement. Back taxes owed Items not added to basis and not deductible. Back taxes owed   Here are some settlement and closing costs that you cannot deduct or add to your basis. Back taxes owed Fire insurance premiums. Back taxes owed Charges for using utilities or other services related to occupancy of the home before closing. Back taxes owed Rent for occupying the home before closing. Back taxes owed Charges connected with getting or refinancing a mortgage loan, such as: Loan assumption fees, Cost of a credit report, and Fee for an appraisal required by a lender. Back taxes owed Points paid by seller. Back taxes owed   If you bought your home after April 3, 1994, you must reduce your basis by any points paid for your mortgage by the person who sold you your home. Back taxes owed   If you bought your home after 1990 but before April 4, 1994, you must reduce your basis by seller-paid points only if you deducted them. Back taxes owed See Points , earlier, for the rules on deducting points. Back taxes owed Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined later) to the donor just before it was given to you, its fair market value (FMV) at the time it was given to you, and any gift tax paid on it. Back taxes owed Fair market value. Back taxes owed   Fair market value (FMV) is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and who both have a reasonable knowledge of all the necessary facts. Back taxes owed Donor's adjusted basis is more than FMV. Back taxes owed   If someone gave you your home and the donor's adjusted basis, when it was given to you, was more than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis. Back taxes owed Disposition basis. Back taxes owed   If the donor's adjusted basis at the time of the gift is more than the FMV, your basis (plus or minus any required adjustments, see Adjusted Basis , later) when you dispose of the property will depend on whether you have a gain or a loss. Back taxes owed Your basis for figuring a gain is the same as the donor's adjusted basis. Back taxes owed Your basis for figuring a loss is the FMV when you received the gift. Back taxes owed If you use the donor's adjusted basis to figure a gain and it results in a loss, then you must use the FMV (at the time of the gift) to refigure the loss. Back taxes owed However, if using the FMV results in a gain, then you neither have a gain nor a loss. Back taxes owed Example 1. Back taxes owed Andrew received a house as a gift from Ishmael (the donor). Back taxes owed At the time of the gift, the home had an FMV of $80,000. Back taxes owed Ishmael's adjusted basis was $100,000. Back taxes owed After he received the house, no events occurred to increase or decrease the basis. Back taxes owed If Andrew sells the house for $120,000, he will have a $20,000 gain because he must use the donor's adjusted basis ($100,000) at the time of the gift as his basis to figure the gain. Back taxes owed Example 2. Back taxes owed Same facts as Example 1 , except this time Andrew sells the house for $70,000. Back taxes owed He will have a loss of $10,000 because he must use the FMV ($80,000) at the time of the gift as his basis to figure the loss. Back taxes owed Example 3. Back taxes owed Same facts as Example 1 , except this time Andrew sells the house for $90,000. Back taxes owed Initially, he figures the gain using Ishmael's adjusted basis ($100,000), which results in a loss of $10,000. Back taxes owed Since it is a loss, Andrew must now recalculate the loss using the FMV ($80,000), which results in a gain of $10,000. Back taxes owed So in this situation, Andrew will neither have a gain nor a loss. Back taxes owed Donor's adjusted basis equal to or less than the FMV. Back taxes owed   If someone gave you your home after 1976 and the donor's adjusted basis, when it was given to you, was equal to or less than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home. Back taxes owed Part of federal gift tax due to net increase in value. Back taxes owed   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. Back taxes owed The numerator (top part) of the fraction is the net increase in the value of the home, and the denominator (bottom part) is the value of the home for gift tax purposes after reduction for any annual exclusion and marital or charitable deduction that applies to the gift. Back taxes owed The net increase in the value of the home is its FMV minus the adjusted basis of the donor. Back taxes owed Publication 551 gives more information, including examples, on figuring your basis when you receive property as a gift. Back taxes owed Inheritance Your basis in a home you inherited is generally the fair market value of the home on the date of the decedent's death or on the alternative valuation date if the personal representative for the estate chooses to use alternative valuation. Back taxes owed If an estate tax return was filed, your basis is generally the value of the home listed on the estate tax return. Back taxes owed If an estate tax return was not filed, your basis is the appraised value of the home at the decedent's date of death for state inheritance or transmission taxes. Back taxes owed Publication 551 and Publication 559, Survivors, Executors, and Administrators, have more information on the basis of inherited property. Back taxes owed If you inherited your home from someone who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Back taxes owed Adjusted Basis While you own your home, various events may take place that can change the original basis of your home. Back taxes owed These events can increase or decrease your original basis. Back taxes owed The result is called adjusted basis. Back taxes owed See Table 3, on this page, for a list of some of the items that can adjust your basis. Back taxes owed Table 3. Back taxes owed Adjusted Basis This table lists examples of some items that generally will increase or decrease your basis in your home. Back taxes owed It is not intended to be all-inclusive. Back taxes owed Increases to Basis Decreases to Basis Improvements: Putting an addition on your home Replacing an entire roof Paving your driveway Installing central air conditioning Rewiring your home Assessments for local improvements (see Assessments for local benefits , under What You Can and Cannot Deduct, earlier) Amounts spent to restore damaged property Insurance or other reimbursement for casualty losses Deductible casualty loss not covered by insurance Payments received for easement or right-of-way granted Depreciation allowed or allowable if home is used for business or rental purposes Value of subsidy for energy conservation measure excluded from income Improvements. Back taxes owed   An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. Back taxes owed You must add the cost of any improvements to the basis of your home. Back taxes owed You cannot deduct these costs. Back taxes owed   Improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, and paving your driveway. Back taxes owed Amount added to basis. Back taxes owed   The amount you add to your basis for improvements is your actual cost. Back taxes owed This includes all costs for material and labor, except your own labor, and all expenses related to the improvement. Back taxes owed For example, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. Back taxes owed   You also must add to your basis state and local assessments for improvements such as streets and sidewalks if they increase the value of the property. Back taxes owed These assessments are discussed earlier under Real Estate Taxes . Back taxes owed Improvements no longer part of home. Back taxes owed    Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. Back taxes owed Example. Back taxes owed You put wall-to-wall carpeting in your home 15 years ago. Back taxes owed Later, you replaced that carpeting with new wall-to-wall carpeting. Back taxes owed The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. Back taxes owed Repairs versus improvements. Back taxes owed   A repair keeps your home in an ordinary, efficient operating condition. Back taxes owed It does not add to the value of your home or prolong its life. Back taxes owed Repairs include repainting your home inside or outside, fixing your gutters or floors, fixing leaks or plastering, and replacing broken window panes. Back taxes owed You cannot deduct repair costs and generally cannot add them to the basis of your home. Back taxes owed   However, repairs that are done as part of an extensive remodeling or restoration of your home are considered improvements. Back taxes owed You add them to the basis of your home. Back taxes owed Records to keep. Back taxes owed   You can use Table 4 (at the end of the publication) as a guide to help you keep track of improvements to your home. Back taxes owed Also see Keeping Records , below. Back taxes owed Energy conservation subsidy. Back taxes owed   If a public utility gives you (directly or indirectly) a subsidy for the purchase or installation of an energy conservation measure for your home, do not include the value of that subsidy in your income. Back taxes owed You must reduce the basis of your home by that value. Back taxes owed   An energy conservation measure is an installation or modification primarily designed to reduce consumption of electricity or natural gas or to improve the management of energy demand. Back taxes owed Keeping Records Keeping full and accurate records is vital to properly report your income and expenses, to support your deductions and credits, and to know the basis or adjusted basis of your home. Back taxes owed These records include your purchase contract and settlement papers if you bought the property, or other objective evidence if you acquired it by gift, inheritance, or similar means. Back taxes owed You should keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. Back taxes owed In addition, you should keep track of any decreases to the basis such as those listed in Table 3, earlier. Back taxes owed How to keep records. Back taxes owed   How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. Back taxes owed How long to keep records. Back taxes owed   You must keep your records for as long as they are important for meeting any provision of the federal tax law. Back taxes owed   Keep records that support an item of income, a deduction, or a credit appearing on a return until the period of limitations for the return runs out. Back taxes owed (A period of limitations is the period of time after which no legal action can be brought. Back taxes owed ) For assessment of tax you owe, this is generally 3 years from the date you filed the return. Back taxes owed For filing a claim for credit or refund, this is generally 3 years from the date you filed the original return, or 2 years from the date you paid the tax, whichever is later. Back taxes owed Returns filed before the due date are treated as filed on the due date. Back taxes owed   You may need to keep records relating to the basis of property (discussed earlier) for longer than the period of limitations. Back taxes owed Keep those records as long as they are important in figuring the basis of the original or replacement property. Back taxes owed Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. Back taxes owed Table 4. Back taxes owed Record of Home Improvements Keep this for your records. Back taxes owed Also, keep receipts or other proof of improvements. Back taxes owed Remove from this record any improvements that are no longer part of your main home. Back taxes owed For example, if you put wall-to-wall carpeting in your home and later replace it with new wall-to-wall carpeting, remove the cost of the first carpeting. Back taxes owed (a) Type of Improvement (b) Date (c) Amount   (a) Type of Improvement (b) Date (c) Amount Additions:       Heating & Air  Conditioning:     Bedroom       Heating system     Bathroom       Central air conditioning     Deck       Furnace     Garage       Duct work     Porch       Central humidifier     Patio       Filtration system     Storage shed       Other     Fireplace       Electrical:     Other           Lawn & Grounds:       Lighting fixtures           Wiring upgrades     Landscaping       Other     Driveway       Plumbing:     Walkway           Fences       Water heater     Retaining wall       Soft water system     Sprinkler system       Filtration system     Swimming pool       Other     Exterior lighting       Insulation:     Other           Communications:       Attic           Walls     Satellite dish       Floors     Intercom       Pipes and duct work     Security system       Other     Other             Miscellaneous:       Interior  Improvements:     Storm windows and doors       Built-in appliances     Roof       Kitchen modernization     Central vacuum       Bathroom modernization     Other       Flooring             Wall-to-wall carpeting             Other     How To