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E File 2012 Federal Tax Return

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E File 2012 Federal Tax Return

E file 2012 federal tax return 23. E file 2012 federal tax return   Interest Expense Table of Contents Introduction Useful Items - You may want to see: Home Mortgage InterestAmount Deductible Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement Investment InterestInvestment Property Allocation of Interest Expense Limit on Deduction Items You Cannot DeductPersonal Interest Allocation of Interest How To ReportMore than one borrower. E file 2012 federal tax return Mortgage proceeds used for business or investment. E file 2012 federal tax return Introduction This chapter discusses what interest expenses you can deduct. E file 2012 federal tax return Interest is the amount you pay for the use of borrowed money. E file 2012 federal tax return The following are types of interest you can deduct as itemized deductions on Schedule A (Form 1040). E file 2012 federal tax return Home mortgage interest, including certain points and mortgage insurance premiums. E file 2012 federal tax return Investment interest. E file 2012 federal tax return This chapter explains these deductions. E file 2012 federal tax return It also explains where to deduct other types of interest and lists some types of interest you cannot deduct. E file 2012 federal tax return Use Table 23-1 to find out where to get more information on various types of interest, including investment interest. E file 2012 federal tax return Useful Items - You may want to see: Publication 936 Home Mortgage Interest Deduction 550 Investment Income and Expenses Home Mortgage Interest Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). E file 2012 federal tax return The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. E file 2012 federal tax return You can deduct home mortgage interest if all the following conditions are met. E file 2012 federal tax return You file Form 1040 and itemize deductions on Schedule A (Form 1040). E file 2012 federal tax return The mortgage is a secured debt on a qualified home in which you have an ownership interest. E file 2012 federal tax return (Generally, your mortgage is a secured debt if you put your home up as collateral to protect the interest of the lender. E file 2012 federal tax return The term “qualified home” means your main home or second home. E file 2012 federal tax return For details, see Publication 936. E file 2012 federal tax return )  Both you and the lender must intend that the loan be repaid. E file 2012 federal tax return Amount Deductible In most cases, you can deduct all of your home mortgage interest. E file 2012 federal tax return How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. E file 2012 federal tax return Fully deductible interest. E file 2012 federal tax return   If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. E file 2012 federal tax return (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category. E file 2012 federal tax return )   The three categories are as follows: Mortgages you took out on or before October 13, 1987 (called grandfathered debt). E file 2012 federal tax return Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2013 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately). E file 2012 federal tax return Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2013 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2). E file 2012 federal tax return The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. E file 2012 federal tax return   See Part II of Publication 936 for more detailed definitions of grandfathered, home acquisition, and home equity debt. E file 2012 federal tax return    You can use Figure 23-A to check whether your home mortgage interest is fully deductible. E file 2012 federal tax return Figure 23-A. E file 2012 federal tax return Is My Home Mortgage Interest Fully Deductible? Please click here for the text description of the image. E file 2012 federal tax return Figure 23-A. E file 2012 federal tax return Is My Interest Fully Deductible? Limits on deduction. E file 2012 federal tax return   You cannot fully deduct interest on a mortgage that does not fit into any of the three categories listed earlier. E file 2012 federal tax return If this applies to you, see Part II of Publication 936 to figure the amount of interest you can deduct. E file 2012 federal tax return Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. E file 2012 federal tax return It also describes certain special situations that may affect your deduction. E file 2012 federal tax return Late payment charge on mortgage payment. E file 2012 federal tax return   You can deduct as home mortgage interest a late payment charge if it was not for a specific service performed in connection with your mortgage loan. E file 2012 federal tax return Mortgage prepayment penalty. E file 2012 federal tax return   If you pay off your home mortgage early, you may have to pay a penalty. E file 2012 federal tax return 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. E file 2012 federal tax return Sale of home. E file 2012 federal tax return   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of sale. E file 2012 federal tax return Example. E file 2012 federal tax return John and Peggy Harris sold their home on May 7. E file 2012 federal tax return Through April 30, they made home mortgage interest payments of $1,220. E file 2012 federal tax return The settlement sheet for the sale of the home showed $50 interest for the 6-day period in May up to, but not including, the date of sale. E file 2012 federal tax return Their mortgage interest deduction is $1,270 ($1,220 + $50). E file 2012 federal tax return Prepaid interest. E file 2012 federal tax return   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. E file 2012 federal tax return You can deduct in each year only the interest that qualifies as home mortgage interest for that year. E file 2012 federal tax return However, there is an exception that applies to points, discussed later. E file 2012 federal tax return Mortgage interest credit. E file 2012 federal tax return   You may be able to claim a mortgage interest credit if you were issued a mortgage credit certificate (MCC) by a state or local government. E file 2012 federal tax return Figure the credit on Form 8396, Mortgage Interest Credit. E file 2012 federal tax return If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. E file 2012 federal tax return   For more information on the credit, see chapter 37. E file 2012 federal tax return Ministers' and military housing allowance. E file 2012 federal tax return   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you can still deduct your home mortgage interest. E file 2012 federal tax return Hardest Hit Fund and Emergency Homeowners' Loan Programs. E file 2012 federal tax return   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. E file 2012 federal tax return 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. E file 2012 federal tax return 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. E file 2012 federal tax return 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 from payer(s) / borrower(s)), box 4 (mortgage insurance premiums) and box 5 (real property taxes). E file 2012 federal tax return 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. E file 2012 federal tax return Mortgage assistance payments under section 235 of the National Housing Act. E file 2012 federal tax return   If you qualify for mortgage assistance payments for lower-income families under section 235 of the National Housing Act, part or all of the interest on your mortgage may be paid for you. E file 2012 federal tax return You cannot deduct the interest that is paid for you. E file 2012 federal tax return No other effect on taxes. E file 2012 federal tax return   Do not include these mortgage assistance payments in your income. E file 2012 federal tax return Also, do not use these payments to reduce other deductions, such as real estate taxes. E file 2012 federal tax return Divorced or separated individuals. E file 2012 federal tax return   If a divorce or separation agreement requires you or your spouse or former spouse to pay home mortgage interest on a home owned by both of you, the payment of interest may be alimony. E file 2012 federal tax return See the discussion of Payments for jointly-owned home in chapter 18. E file 2012 federal tax return Redeemable ground rents. E file 2012 federal tax return   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. E file 2012 federal tax return   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. E file 2012 federal tax return For more information, see Publication 936. E file 2012 federal tax return Nonredeemable ground rents. E file 2012 federal tax return   Payments on a nonredeemable ground rent are not mortgage interest. E file 2012 federal tax return You can deduct them as rent if they are a business expense or if they are for rental property. E file 2012 federal tax return Reverse mortgages. E file 2012 federal tax return   A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. E file 2012 federal tax return With a reverse mortgage, you retain title to your home. E file 2012 federal tax return Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. E file 2012 federal tax return Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. E file 2012 federal tax return Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until the loan is paid in full. E file 2012 federal tax return Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Publication 936. E file 2012 federal tax return Rental payments. E file 2012 federal tax return   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. E file 2012 federal tax return This is true even if the settlement papers call them interest. E file 2012 federal tax return You cannot deduct these payments as home mortgage interest. E file 2012 federal tax return Mortgage proceeds invested in tax-exempt securities. E file 2012 federal tax return   You cannot deduct the home mortgage interest on grandfathered debt or home equity debt if you used the proceeds of the mortgage to buy securities or certificates that produce tax-free income. E file 2012 federal tax return “Grandfathered debt” and “home equity debt” are defined earlier under Amount Deductible. E file 2012 federal tax return Refunds of interest. E file 2012 federal tax return   If you receive a refund of interest in the same tax year you paid it, you must reduce your interest expense by the amount refunded to you. E file 2012 federal tax return If you receive a refund of interest you deducted in an earlier year, you generally must include the refund in income in the year you receive it. E file 2012 federal tax return However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. E file 2012 federal tax return This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. E file 2012 federal tax return    If you received a refund of interest you overpaid in an earlier year, you generally will receive a Form 1098, Mortgage Interest Statement, showing the refund in box 3. E file 2012 federal tax return For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. E file 2012 federal tax return   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in chapter 12. E file 2012 federal tax return Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. E file 2012 federal tax return Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. E file 2012 federal tax return A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. E file 2012 federal tax return See Points paid by the seller , later. E file 2012 federal tax return General Rule You generally cannot deduct the full amount of points in the year paid. E file 2012 federal tax return Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. E file 2012 federal tax return See Deduction Allowed Ratably , next. E file 2012 federal tax return For exceptions to the general rule, see Deduction Allowed in Year Paid , later. E file 2012 federal tax return Deduction Allowed Ratably If you do not meet the tests listed under Deduction Allowed in Year Paid , later, the loan is not a home improvement loan, or you choose not to deduct your points in full in the year paid, you can deduct the points ratably (equally) over the life of the loan if you meet all the following tests. E file 2012 federal tax return You use the cash method of accounting. E file 2012 federal tax return This means you report income in the year you receive it and deduct expenses in the year you pay them. E file 2012 federal tax return Most individuals use this method. E file 2012 federal tax return Your loan is secured by a home. E file 2012 federal tax return (The home does not need to be your main home. E file 2012 federal tax return ) Your loan period is not more than 30 years. E file 2012 federal tax return If your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period. E file 2012 federal tax return Either your loan amount is $250,000 or less, or the number of points is not more than: 4, if your loan period is 15 years or less, or 6, if your loan period is more than 15 years. E file 2012 federal tax return Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. E file 2012 federal tax return (You can use Figure 23-B as a quick guide to see whether your points are fully deductible in the year paid. E file 2012 federal tax return ) Your loan is secured by your main home. E file 2012 federal tax return (Your main home is the one you ordinarily live in most of the time. E file 2012 federal tax return ) Paying points is an established business practice in the area where the loan was made. E file 2012 federal tax return The points paid were not more than the points generally charged in that area. E file 2012 federal tax return You use the cash method of accounting. E file 2012 federal tax return This means you report income in the year you receive it and deduct expenses in the year you pay them. E file 2012 federal tax return (If you want more information about this method, see Accounting Methods in chapter 1. E file 2012 federal tax return ) 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. E file 2012 federal tax return The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. E file 2012 federal tax return The funds you provided are not required to have been applied to the points. E file 2012 federal tax return They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. E file 2012 federal tax return You cannot have borrowed these funds from your lender or mortgage broker. E file 2012 federal tax return You use your loan to buy or build your main home. E file 2012 federal tax return The points were computed as a percentage of the principal amount of the mortgage. E file 2012 federal tax return The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. E file 2012 federal tax return The points may be shown as paid from either your funds or the seller's. E file 2012 federal tax return Figure 23-B. E file 2012 federal tax return Are My Points Fully Deductible This Year? Please click here for the text description of the image. E file 2012 federal tax return Figure 23-B. E file 2012 federal tax return Are My Points Fully Deductible This Year? Note. E file 2012 federal tax return If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan. E file 2012 federal tax return Home improvement loan. E file 2012 federal tax return   You can also fully deduct in the year paid points paid on a loan to improve your main home, if tests (1) through (6) are met. E file 2012 federal tax return Second home. E file 2012 federal tax return You cannot fully deduct in the year paid points you pay on loans secured by your second home. E file 2012 federal tax return You can deduct these points only over the life of the loan. E file 2012 federal tax return Refinancing. E file 2012 federal tax return   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. E file 2012 federal tax return This is true even if the new mortgage is secured by your main home. E file 2012 federal tax return   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. E file 2012 federal tax return You can deduct the rest of the points over the life of the loan. E file 2012 federal tax return Example 1. E file 2012 federal tax return In 1998, Bill Fields got a mortgage to buy a home. E file 2012 federal tax return In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. E file 2012 federal tax return The mortgage is secured by his home. E file 2012 federal tax return To get the new loan, he had to pay three points ($3,000). E file 2012 federal tax return Two points ($2,000) were for prepaid interest, and one point ($1,000) was charged for services, in place of amounts that ordinarily are stated separately on the settlement statement. E file 2012 federal tax return Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. E file 2012 federal tax return The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. E file 2012 federal tax return Bill's first payment on the new loan was due July 1. E file 2012 federal tax return He made six payments on the loan in 2013 and is a cash basis taxpayer. E file 2012 federal tax return Bill used the funds from the new mortgage to repay his existing mortgage. E file 2012 federal tax return Although the new mortgage loan was for Bill's continued ownership of his main home, it was not for the purchase or improvement of that home. E file 2012 federal tax return He cannot deduct all of the points in 2013. E file 2012 federal tax return He can deduct two points ($2,000) ratably over the life of the loan. E file 2012 federal tax return He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. E file 2012 federal tax return The other point ($1,000) was a fee for services and is not deductible. E file 2012 federal tax return Example 2. E file 2012 federal tax return The facts are the same as in Example 1, except that Bill used $25,000 of the loan proceeds to improve his home and $75,000 to repay his existing mortgage. E file 2012 federal tax return Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. E file 2012 federal tax return His deduction is $500 ($2,000 × 25%). E file 2012 federal tax return Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. E file 2012 federal tax return This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. E file 2012 federal tax return The total amount Bill deducts in 2013 is $550 ($500 + $50). E file 2012 federal tax return Special Situations This section describes certain special situations that may affect your deduction of points. E file 2012 federal tax return Original issue discount. E file 2012 federal tax return   If you do not qualify to either deduct the points in the year paid or deduct them ratably over the life of the loan, or if you choose not to use either of these methods, the points reduce the issue price of the loan. E file 2012 federal tax return This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. E file 2012 federal tax return Amounts charged for services. E file 2012 federal tax return   Amounts charged by the lender for specific services connected to the loan are not interest. E file 2012 federal tax return Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. E file 2012 federal tax return You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. E file 2012 federal tax return Points paid by the seller. E file 2012 federal tax return   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. E file 2012 federal tax return Treatment by seller. E file 2012 federal tax return   The seller cannot deduct these fees as interest. E file 2012 federal tax return But they are a selling expense that reduces the amount realized by the seller. E file 2012 federal tax return See chapter 15 for information on selling your home. E file 2012 federal tax return Treatment by buyer. E file 2012 federal tax return    The buyer reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them. E file 2012 federal tax return If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. E file 2012 federal tax return If any of those tests are not met, the buyer deducts the points over the life of the loan. E file 2012 federal tax return   For information about basis, see chapter 13. E file 2012 federal tax return Funds provided are less than points. E file 2012 federal tax return   If you meet all the tests in Deduction Allowed in Year Paid , earlier, 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. E file 2012 federal tax return In addition, you can deduct any points paid by the seller. E file 2012 federal tax return Example 1. E file 2012 federal tax return When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). E file 2012 federal tax return You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. E file 2012 federal tax return Of the $1,000 charged for points, you can deduct $750 in the year paid. E file 2012 federal tax return You spread the remaining $250 over the life of the mortgage. E file 2012 federal tax return Example 2. E file 2012 federal tax return 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. E file 2012 federal tax return In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). E file 2012 federal tax return You spread the remaining $250 over the life of the mortgage. E file 2012 federal tax return You must reduce the basis of your home by the $1,000 paid by the seller. E file 2012 federal tax return Excess points. E file 2012 federal tax return   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the points paid were more than generally paid in your area (test (3)), you deduct in the year paid only the points that are generally charged. E file 2012 federal tax return You must spread any additional points over the life of the mortgage. E file 2012 federal tax return Mortgage ending early. E file 2012 federal tax return   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. E file 2012 federal tax return However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. E file 2012 federal tax return Instead, deduct the remaining balance over the term of the new loan. E file 2012 federal tax return    A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. E file 2012 federal tax return Example. E file 2012 federal tax return Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. E file 2012 federal tax return He deducts $200 points per year. E file 2012 federal tax return Through 2012, Dan has deducted $2,200 of the points. E file 2012 federal tax return Dan prepaid his mortgage in full in 2013. E file 2012 federal tax return He can deduct the remaining $800 of points in 2013. E file 2012 federal tax return Limits on deduction. E file 2012 federal tax return   You cannot fully deduct points paid on a mortgage unless the mortgage fits into one of the categories listed earlier under Fully deductible interest . E file 2012 federal tax return See Publication 936 for details. E file 2012 federal tax return Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. E file 2012 federal tax return The insurance must be in connection with home acquisition debt and the insurance contract must have been issued after 2006. E file 2012 federal tax return Qualified mortgage insurance. E file 2012 federal tax return   Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). E file 2012 federal tax return   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. E file 2012 federal tax return If provided by the Rural Housing Service, it is commonly known as a guarantee fee. E file 2012 federal tax return These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. E file 2012 federal tax return Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. E file 2012 federal tax return Special rules for prepaid mortgage insurance. E file 2012 federal tax return   Generally, if you paid premiums for qualified mortgage insurance that are allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. E file 2012 federal tax return You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. E file 2012 federal tax return No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. E file 2012 federal tax return This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. E file 2012 federal tax return See the Example below. E file 2012 federal tax return Example. E file 2012 federal tax return Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. E file 2012 federal tax return Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. E file 2012 federal tax return Since the $9,240 in private mortgage insurance is allocable to periods after 2012, Ryan must allocate the $9,240 over the shorter of the life of the mortgage or 84 months. E file 2012 federal tax return Ryan's adjusted gross income (AGI) for 2012 is $76,000. E file 2012 federal tax return Ryan can deduct $880 ($9,240 ÷ 84 × 8 months) for qualified mortgage insurance premiums in 2012. E file 2012 federal tax return For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 × 12 months) if his AGI is $100,000 or less. E file 2012 federal tax return In this example, the mortgage insurance premiums are allocated over 84 months, which is shorter than the life of the mortgage of 15 years (180 months). E file 2012 federal tax return Limit on deduction. E file 2012 federal tax return   If your adjusted gross income 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 otherwise deductible is reduced and may be eliminated. E file 2012 federal tax return 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. E file 2012 federal tax return If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. E file 2012 federal tax return Form 1098, 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, you generally will receive a Form 1098 or a similar statement from the mortgage holder. E file 2012 federal tax return You will receive the statement if you pay interest to a person (including a financial institution or a cooperative housing corporation) in the course of that person's trade or business. E file 2012 federal tax return A governmental unit is a person for purposes of furnishing the statement. E file 2012 federal tax return The statement for each year should be sent to you by January 31 of the following year. E file 2012 federal tax return A copy of this form will also be sent to the IRS. E file 2012 federal tax return The statement will show the total interest you paid during the year, any mortgage insurance premiums you paid, and if you purchased a main home during the year, it also will show the deductible points paid during the year, including seller-paid points. E file 2012 federal tax return However, it should not show any interest that was paid for you by a government agency. E file 2012 federal tax return As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. E file 2012 federal tax return However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. E file 2012 federal tax return See Points , earlier, to determine whether you can deduct points not shown on Form 1098. E file 2012 federal tax return Prepaid interest on Form 1098. E file 2012 federal tax return   If you prepaid interest in 2013 that accrued in full by January 15, 2014, this prepaid interest may be included in box 1 of Form 1098. E file 2012 federal tax return However, you cannot deduct the prepaid amount for January 2014 in 2013. E file 2012 federal tax return (See Prepaid interest , earlier. E file 2012 federal tax return ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. E file 2012 federal tax return You will include the interest for January 2014 with the other interest you pay for 2014. E file 2012 federal tax return See How To Report , later. E file 2012 federal tax return Refunded interest. E file 2012 federal tax return   If you received a refund of mortgage interest you overpaid in an earlier year, you generally will receive a Form 1098 showing the refund in box 3. E file 2012 federal tax return See Refunds of interest , earlier. E file 2012 federal tax return Mortgage insurance premiums. E file 2012 federal tax return   The amount of mortgage insurance premiums you paid during 2013 may be shown in box 4 of Form 1098. E file 2012 federal tax return See Mortgage Insurance Premiums, earlier. E file 2012 federal tax return Investment Interest This section discusses interest expenses you may be able to deduct as an investor. E file 2012 federal tax return If you borrow money to buy property you hold for investment, the interest you pay is investment interest. E file 2012 federal tax return You can deduct investment interest subject to the limit discussed later. E file 2012 federal tax return However, you cannot deduct interest you incurred to produce tax-exempt income. E file 2012 federal tax return Nor can you deduct interest expenses on straddles. E file 2012 federal tax return Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. E file 2012 federal tax return Investment Property Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. E file 2012 federal tax return It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). E file 2012 federal tax return Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). E file 2012 federal tax return Partners, shareholders, and beneficiaries. E file 2012 federal tax return   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. E file 2012 federal tax return Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. E file 2012 federal tax return Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. E file 2012 federal tax return The allocation is not affected by the use of property that secures the debt. E file 2012 federal tax return Limit on Deduction Generally, your deduction for investment interest expense is limited to the amount of your net investment income. E file 2012 federal tax return You can carry over the amount of investment interest that you could not deduct because of this limit to the next tax year. E file 2012 federal tax return The interest carried over is treated as investment interest paid or accrued in that next year. E file 2012 federal tax return You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. E file 2012 federal tax return Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. E file 2012 federal tax return Investment income. E file 2012 federal tax return    This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). E file 2012 federal tax return Investment income does not include Alaska Permanent Fund dividends. E file 2012 federal tax return It also does not include qualified dividends or net capital gain unless you choose to include them. E file 2012 federal tax return Choosing to include qualified dividends. E file 2012 federal tax return   Investment income generally does not include qualified dividends, discussed in chapter 8. E file 2012 federal tax return However, you can choose to include all or part of your qualified dividends in investment income. E file 2012 federal tax return   You make this choice by completing Form 4952, line 4g, according to its instructions. E file 2012 federal tax return   If you choose to include any amount of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. E file 2012 federal tax return Choosing to include net capital gain. E file 2012 federal tax return   Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). E file 2012 federal tax return However, you can choose to include all or part of your net capital gain in investment income. E file 2012 federal tax return    You make this choice by completing Form 4952, line 4g, according to its instructions. E file 2012 federal tax return   If you choose to include any amount of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. E file 2012 federal tax return    Before making either choice, consider the overall effect on your tax liability. E file 2012 federal tax return Compare your tax if you make one or both of these choices with your tax if you do not. E file 2012 federal tax return Investment income of child reported on parent's return. E file 2012 federal tax return    Investment income includes the part of your child's interest and dividend income that you choose to report on your return. E file 2012 federal tax return If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814, Parents' Election To Report Child's Interest and Dividends. E file 2012 federal tax return Child's qualified dividends. E file 2012 federal tax return   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. E file 2012 federal tax return However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. E file 2012 federal tax return   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). E file 2012 federal tax return Child's Alaska Permanent Fund dividends. E file 2012 federal tax return   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. E file 2012 federal tax return To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. E file 2012 federal tax return Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. E file 2012 federal tax return Subtract the result from the amount on Form 8814, line 12. E file 2012 federal tax return Child's capital gain distributions. E file 2012 federal tax return    If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D, line 13, or Form 1040, line 13) generally does not count as investment income. E file 2012 federal tax return However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. E file 2012 federal tax return   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). E file 2012 federal tax return Investment expenses. E file 2012 federal tax return   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. E file 2012 federal tax return Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. E file 2012 federal tax return Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A, line 27. E file 2012 federal tax return Losses from passive activities. E file 2012 federal tax return   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). E file 2012 federal tax return See Publication 925, Passive Activity and At-Risk Rules, for information about passive activities. E file 2012 federal tax return Form 4952 Use Form 4952, Investment Interest Expense Deduction, to figure your deduction for investment interest. E file 2012 federal tax return Exception to use of Form 4952. E file 2012 federal tax return   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. E file 2012 federal tax return Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. E file 2012 federal tax return You do not have any other deductible investment expenses. E file 2012 federal tax return You have no carryover of investment interest expense from 2012. E file 2012 federal tax return If you meet all of these tests, you can deduct all of your investment interest. E file 2012 federal tax return More Information For more information on investment interest, see Interest Expenses in chapter 3 of Publication 550. E file 2012 federal tax return Items You Cannot Deduct Some interest payments are not deductible. E file 2012 federal tax return Certain expenses similar to interest also are not deductible. E file 2012 federal tax return Nondeductible expenses include the following items. E file 2012 federal tax return Personal interest (discussed later). E file 2012 federal tax return Service charges (however, see Other Expenses (Line 23) in chapter 28). E file 2012 federal tax return Annual fees for credit cards. E file 2012 federal tax return Loan fees. E file 2012 federal tax return Credit investigation fees. E file 2012 federal tax return Interest to purchase or carry tax-exempt securities. E file 2012 federal tax return Penalties. E file 2012 federal tax return   You cannot deduct fines and penalties paid to a government for violations of law, regardless of their nature. E file 2012 federal tax return Personal Interest Personal interest is not deductible. E file 2012 federal tax return Personal interest is any interest that is not home mortgage interest, investment interest, business interest, or other deductible interest. E file 2012 federal tax return It includes the following items. E file 2012 federal tax return Interest on car loans (unless you use the car for business). E file 2012 federal tax return Interest on federal, state, or local income tax. E file 2012 federal tax return Finance charges on credit cards, retail installment contracts, and revolving charge accounts incurred for personal expenses. E file 2012 federal tax return Late payment charges by a public utility. E file 2012 federal tax return You may be able to deduct interest you pay on a qualified student loan. E file 2012 federal tax return For details, see Publication 970, Tax Benefits for Education. E file 2012 federal tax return Allocation of Interest If you use the proceeds of a loan for more than one purpose (for example, personal and business), you must allocate the interest on the loan to each use. E file 2012 federal tax return However, you do not have to allocate home mortgage interest if it is fully deductible, regardless of how the funds are used. E file 2012 federal tax return You allocate interest (other than fully deductible home mortgage interest) on a loan in the same way as the loan itself is allocated. E file 2012 federal tax return You do this by tracing disbursements of the debt proceeds to specific uses. E file 2012 federal tax return For details on how to do this, see chapter 4 of Publication 535. E file 2012 federal tax return How To Report You must file Form 1040 to deduct any home mortgage interest expense on your tax return. E file 2012 federal tax return Where you deduct your interest expense generally depends on how you use the loan proceeds. E file 2012 federal tax return See Table 23-1 for a summary of where to deduct your interest expense. E file 2012 federal tax return Home mortgage interest and points. E file 2012 federal tax return   Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. E file 2012 federal tax return If you paid more deductible interest to the financial institution than the amount shown on Form 1098, show the larger deductible amount on line 10. E file 2012 federal tax return Attach a statement explaining the difference and print “See attached” next to line 10. E file 2012 federal tax return    Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. E file 2012 federal tax return If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and taxpayer identification number (TIN) on the dotted lines next to line 11. E file 2012 federal tax return The seller must give you this number and you must give the seller your TIN. E file 2012 federal tax return A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. E file 2012 federal tax return Failure to meet any of these requirements may result in a $50 penalty for each failure. E file 2012 federal tax return The TIN can be either a social security number, an individual taxpayer identification number (issued by the Internal Revenue Service), or an employer identification number. E file 2012 federal tax return See Social Security Number (SSN) in chapter 1 for more information about TINs. E file 2012 federal tax return    If you can take a deduction for points that were not reported to you on Form 1098, deduct those points on Schedule A (Form 1040), line 12. E file 2012 federal tax return   Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. E file 2012 federal tax return More than one borrower. E file 2012 federal tax return   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. E file 2012 federal tax return Show how much of the interest each of you paid, and give the name and address of the person who received the form. E file 2012 federal tax return Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. E file 2012 federal tax return Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. E file 2012 federal tax return   Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. E file 2012 federal tax return You should let each of the other borrowers know what his or her share is. E file 2012 federal tax return Mortgage proceeds used for business or investment. E file 2012 federal tax return    If your home mortgage interest deduction is limited, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 23-1. E file 2012 federal tax return It shows where to deduct the part of your excess interest that is for those activities. E file 2012 federal tax return Investment interest. E file 2012 federal tax return    Deduct investment interest, subject to certain limits discussed in Publication 550, on Schedule A (Form 1040), line 14. E file 2012 federal tax return Amortization of bond premium. E file 2012 federal tax return   There are various ways to treat the premium you pay to buy taxable bonds. E file 2012 federal tax return See Bond Premium Amortization in Publication 550. E file 2012 federal tax return Income-producing rental or royalty interest. E file 2012 federal tax return   Deduct interest on a loan for income-producing rental or royalty property that is not used in your business in Part I of Schedule E (Form 1040). E file 2012 federal tax return Example. E file 2012 federal tax return You rent out part of your home and borrow money to make repairs. E file 2012 federal tax return You can deduct only the interest payment for the rented part in Part I of Schedule E (Form 1040). E file 2012 federal tax return Deduct the rest of the interest payment on Schedule A (Form 1040) if it is deductible home mortgage interest. E file 2012 federal tax return Table 23-1. E file 2012 federal tax return Where To Deduct Your Interest Expense IF you have . E file 2012 federal tax return . E file 2012 federal tax return . E file 2012 federal tax return THEN deduct it on . E file 2012 federal tax return . E file 2012 federal tax return . E file 2012 federal tax return AND for more information go to . E file 2012 federal tax return . E file 2012 federal tax return . E file 2012 federal tax return deductible student loan interest Form 1040, line 33, or Form 1040A, line 18 Publication 970. E file 2012 federal tax return deductible home mortgage interest and points reported on Form 1098 Schedule A (Form 1040), line 10 Publication 936. E file 2012 federal tax return deductible home mortgage interest not reported on Form 1098 Schedule A (Form 1040), line 11 Publication 936. E file 2012 federal tax return deductible points not reported on Form 1098 Schedule A (Form 1040), line 12 Publication 936. E file 2012 federal tax return deductible mortgage insurance premiums Schedule A (Form 1040), line 13 Publication 936. E file 2012 federal tax return deductible investment interest (other than incurred to produce rents or royalties) Schedule A (Form 1040), line 14 Publication 550. E file 2012 federal tax return deductible business interest (non-farm) Schedule C or C-EZ (Form 1040) Publication 535. E file 2012 federal tax return deductible farm business interest Schedule F (Form 1040) Publications 225 and 535. E file 2012 federal tax return deductible interest incurred to produce rents or royalties Schedule E (Form 1040) Publications 527 and 535. E file 2012 federal tax return personal interest not deductible. 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Deducting Business Expenses

Business expenses are the cost of carrying on a trade or business. These expenses are usually deductible if the business is operated to make a profit.

What Can I Deduct?

To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.

It is important to separate business expenses from the following expenses:

  • The expenses used to figure the cost of goods sold,
  • Capital Expenses, and
  • Personal Expenses.

Cost of Goods Sold

If your business manufactures products or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold. Some of your expenses may be included in figuring the cost of goods sold. Cost of goods sold is deducted from your gross receipts to figure your gross profit for the year. If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense.

The following are types of expenses that go into figuring the cost of goods sold.

  • The cost of products or raw materials, including freight
  • Storage
  • Direct labor costs (including contributions to pensions or annuity plans) for workers who produce the products
  • Factory overhead

Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Indirect costs include rent, interest, taxes, storage, purchasing, processing, repackaging, handling, and administrative costs.

This rule does not apply to personal property you acquire for resale if your average annual gross receipts (or those of your predecessor) for the preceding 3 tax years are not more than $10 million.

For additional information, refer to the chapter on Cost of Goods Sold, Publication 334, Tax Guide for Small Businesses and the chapter on Inventories, Publication 538, Accounting Periods and Methods.

Capital Expenses

You must capitalize, rather than deduct, some costs. These costs are a part of your investment in your business and are called capital expenses. Capital expenses are considered assets in your business. There are, in general, three types of costs you capitalize.

  • Business start-up cost (See the note below)
  • Business assets
  • Improvements

Note: You can elect to deduct or amortize certain business start-up costs. Refer to chapters 7 and 8 of Publication 535, Business Expenses.

Personal versus Business Expenses

Generally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part.

For example, if you borrow money and use 70% of it for business and the other 30% for a family vacation, you can deduct 70% of the interest as a business expense. The remaining 30% is personal interest and is not deductible. Refer to chapter 4 of Publication 535, Business Expenses, for information on deducting interest and the allocation rules.

Business Use of Your Home

If you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Refer to Home Office Deduction and Publication 587, Business Use of Your Home, for more information.

Business Use of Your Car

If you use your car in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses. For a list of current and prior year mileage rates see the Standard Mileage Rates.

Other Types of Business Expenses

  • Employees' Pay - You can generally deduct the pay you give your employees for the services they perform for your business.
  • Retirement Plans - Retirement plans are savings plans that offer you tax advantages to set aside money for your own, and your employees' retirement.
  • Rent Expense - Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible.
  • Interest - Business interest expense is an amount charged for the use of money you borrowed for business activities.
  • Taxes - You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses.
  • Insurance - Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.

This list is not all inclusive of the types of business expenses that you can deduct. For additional information, refer to Publication 535, Business Expenses.

Page Last Reviewed or Updated: 04-Feb-2014

The E File 2012 Federal Tax Return

E file 2012 federal tax return Index A Additional Medicare Tax, What's New for 2013, What's New, Employment Taxes, Additional Medicare Tax. E file 2012 federal tax return Advertising, Advertising expenses. E file 2012 federal tax return Amortization Anti-abuse rule, Anti-abuse rule. E file 2012 federal tax return Anti-churning rules, Anti-Churning Rules Atmospheric pollution control facilities, Pollution Control Facilities Corporate organization costs, Costs of Organizing a Corporation Dispositions of section 197 intangibles, Disposition of Section 197 Intangibles Experimental costs, Research and Experimental Costs Geological and geophysical costs, Geological and Geophysical Costs How to deduct, How To Deduct Amortization Incorrect amount deducted, Incorrect Amount of Amortization Deducted Partnership organization costs, Costs of Organizing a Partnership Pollution control facilities, Pollution Control Facilities Reforestation costs, Reforestation Costs Reforestation expenses, Reforestation Costs Related person, Related person. E file 2012 federal tax return Research costs, Research and Experimental Costs Section 197 intangibles defined, Section 197 Intangibles Defined Start-up costs, Business Start-Up Costs Starting a businesscosts, Starting a Business Anticipated liabilities, Anticipated liabilities. E file 2012 federal tax return Assessments, local, Taxes for local benefits. E file 2012 federal tax return Assistance (see Tax help) At-risk limits, At-risk limits. E file 2012 federal tax return Attorney fees, Legal and professional fees. E file 2012 federal tax return Awards, Achievement awards. E file 2012 federal tax return , Length-of-service award. E file 2012 federal tax return , Safety achievement award. E file 2012 federal tax return B Bad debts Defined, Definition of Business Bad Debt How to treat, How To Claim a Business Bad Debt Recovery, Recovery of a Bad Debt Types of, Types of Business Bad Debts When worthless, When a Debt Becomes Worthless Bonuses Employee, Bonuses Royalties, Bonuses and advanced royalties. E file 2012 federal tax return Bribes, Bribes and kickbacks. E file 2012 federal tax return Business Assets, Business Assets Books and records, Business books and records, etc. E file 2012 federal tax return Meal expenses, Meals and Entertainment Use of car, Business use of your car. E file 2012 federal tax return , Car and truck expenses. E file 2012 federal tax return Use of home, Business use of your home. E file 2012 federal tax return C Campaign contribution, Political contributions. E file 2012 federal tax return Capital expenses, Capital Expenses, Capital versus Deductible Expenses Capitalization of interest, Capitalization of Interest Car allowance, Car allowance. E file 2012 federal tax return Car and truck expenses, Car and truck expenses. E file 2012 federal tax return Carrying charges, Carrying Charges Charitable contributions, Charitable contributions. E file 2012 federal tax return Circulation costs, newspapers and periodicals, Circulation Costs Club dues, Club dues and membership fees. E file 2012 federal tax return Comments on publication, Comments and suggestions. E file 2012 federal tax return Commitment fees, Commitment fees or standby charges. E file 2012 federal tax return Computer software, Computer software. E file 2012 federal tax return Constant-yield method, OID, Constant-yield method. E file 2012 federal tax return Contested liability, Contested liability. E file 2012 federal tax return Contributions Charitable, Charitable contributions. E file 2012 federal tax return Political, Political contributions. E file 2012 federal tax return Copyrights, Patents, copyrights, etc. E file 2012 federal tax return Cost depletion, Cost Depletion Cost of getting lease, Cost of Getting a Lease, Getting a Lease Cost of goods sold, Cost of Goods Sold Cost recovery, Cost recovery. E file 2012 federal tax return Covenant not to compete, Covenant not to compete. E file 2012 federal tax return Credit card convenience fees, Credit card convenience fees. E file 2012 federal tax return D De minimis OID, De minimis OID. E file 2012 federal tax return Debt-financed distributions, Debt-financed distribution. E file 2012 federal tax return Definitions Business bad debt, Definition of Business Bad Debt Necessary expense, What Can I Deduct? Ordinary expense, What Can I Deduct? Section 197 intangibles, Section 197 Intangibles Defined Demolition expenses, Demolition expenses or losses. E file 2012 federal tax return Depletion Mineral property, Mineral Property Oil and gas wells, Oil and Gas Wells Percentage table, Mines and other natural deposits. E file 2012 federal tax return Timber, Timber Who can claim, Who Can Claim Depletion? Depreciation (see Cost recovery) Development costs, miners, Development Costs Disabled, improvements for, Barrier Removal Costs Drilling and development costs, Intangible Drilling Costs Dues, membership, Club dues and membership fees. E file 2012 federal tax return E Economic interest, Who Can Claim Depletion? Economic performance, Economic performance. E file 2012 federal tax return Education expenses, Education Expenses, Education expenses. E file 2012 federal tax return Elderly, improvements for, Barrier Removal Costs Employee benefit programs, Employee benefit programs. E file 2012 federal tax return Employment taxes, Employment Taxes Entertainment, Reimbursement of Travel, Meals, and Entertainment Excise taxes, Excise taxes. E file 2012 federal tax return Experimentation costs, Research and Experimental Costs, Research and Experimental Costs Exploration costs, Exploration Costs F Fees Commitment, Commitment fees or standby charges. E file 2012 federal tax return Legal and professional, Legal and professional fees. E file 2012 federal tax return Regulatory, Licenses and regulatory fees. E file 2012 federal tax return Tax return preparation, Tax preparation fees. E file 2012 federal tax return Fines, Penalties and fines. E file 2012 federal tax return Forgone, Forgone interest. E file 2012 federal tax return Forgone interest, Forgone interest. E file 2012 federal tax return Form 3115, Form 3115. E file 2012 federal tax return , Changing Your Accounting Method 4562, How To Deduct Amortization 5213, Using the presumption later. E file 2012 federal tax return 8826, Disabled access credit. E file 2012 federal tax return 8885, Health coverage tax credit. E file 2012 federal tax return T, Form T. E file 2012 federal tax return Franchise, Franchise, trademark, or trade name. E file 2012 federal tax return , Franchise, trademark, trade name. E file 2012 federal tax return Franchise taxes, Franchise taxes. E file 2012 federal tax return Free tax services, Free help with your tax return. E file 2012 federal tax return Fringe benefits, Fringe Benefits Fuel taxes, Fuel taxes. E file 2012 federal tax return G Gas wells, Natural Gas Wells Geological and geophysical costs Development, oil and gas, Geological and Geophysical Costs Exploration, oil and gas, Geological and Geophysical Costs Geothermal wells, Intangible Drilling Costs, Mines and Geothermal Deposits Gifts, nominal value, Gifts of nominal value. E file 2012 federal tax return Going into business, Going Into Business, Starting a Business Goodwill, Goodwill. E file 2012 federal tax return Gross income, not-for-profit activity, Gross Income H Health insurance, deduction for self-employed, Self-Employed Health Insurance Deduction Heating equipment, Heating equipment. E file 2012 federal tax return Help (see Tax help) Home, business use of, Business use of your home. E file 2012 federal tax return I Impairment-related expenses, Impairment-related expenses. E file 2012 federal tax return Improvements, Improvements By lessee, Improvements by Lessee For disabled and elderly, Barrier Removal Costs Income taxes, Income Taxes Incorrect amount of amortization deducted, Incorrect Amount of Amortization Deducted Insurance Capitalized premiums, Capitalized Premiums Deductible premiums, Deductible Premiums Nondeductible premiums, Nondeductible Premiums Self-employed individuals, Self-Employed Health Insurance Deduction Intangible drilling costs, Intangible Drilling Costs Intangibles, amortization, Section 197 Intangibles Interest, Forgone interest. E file 2012 federal tax return Allocation of, Allocation of Interest Below-market, Below-Market Loans Business expense for, Interest Capitalized, Capitalized interest. E file 2012 federal tax return , Capitalization of Interest Carrying charge, Carrying Charges Deductible, Interest You Can Deduct Life insurance policies, Interest on loans with respect to life insurance policies. E file 2012 federal tax return Not deductible, Interest You Cannot Deduct Refunds of, Refunds of interest. E file 2012 federal tax return When to deduct, When To Deduct Interest Internet-related expenses, Internet-related expenses. E file 2012 federal tax return Interview expenses, Interview expense allowances. E file 2012 federal tax return K Key person, Who is a key person? Kickbacks, Bribes and kickbacks. E file 2012 federal tax return L Leases Canceling, Canceling a lease. E file 2012 federal tax return Cost of getting, Cost of Getting a Lease, Getting a Lease Improvements by lessee, Improvements by Lessee Leveraged, Leveraged leases. E file 2012 federal tax return Mineral, Bonuses and advanced royalties. E file 2012 federal tax return Oil and gas, Bonuses and advanced royalties. E file 2012 federal tax return Sales distinguished, Lease or purchase. E file 2012 federal tax return Taxes on, Taxes on Leased Property Legal and professional fees, Legal and professional fees. E file 2012 federal tax return Licenses, Government-granted license, permit, etc. E file 2012 federal tax return , Licenses and regulatory fees. E file 2012 federal tax return Life insurance coverage, Life insurance coverage. E file 2012 federal tax return Limit on deductions, Not-for-Profit Activities Line of credit, Line of credit (continuous borrowings). E file 2012 federal tax return Loans Below-market interestrate, Below-Market Loans Discounted, Discounted loan. E file 2012 federal tax return Loans or Advances, Loans or Advances Lobbying expenses, Lobbying expenses. E file 2012 federal tax return Long-term care insurance, Qualified long-term care insurance. E file 2012 federal tax return Losses, Limits on losses. E file 2012 federal tax return , Not-for-Profit Activities At-risk limits, At-risk limits. E file 2012 federal tax return Net operating, Net operating loss. E file 2012 federal tax return Passive activities, Passive activities. E file 2012 federal tax return M Machinery parts, Machinery parts. E file 2012 federal tax return Meals, Reimbursement of Travel, Meals, and Entertainment Meals and entertainment, Meals and Entertainment Meals and lodging, Meals and lodging. E file 2012 federal tax return Methods of accounting, When Can I Deduct an Expense? Mining Depletion, Mines and Geothermal Deposits Development costs, Development Costs Exploration costs, Exploration Costs Mortgage, Mortgage. E file 2012 federal tax return , Expenses paid to obtain a mortgage. E file 2012 federal tax return Moving expenses, machinery, Moving machinery. E file 2012 federal tax return N Natural gas, Natural Gas Wells Nonqualifying intangibles, Assets That Are Not Section 197 Intangibles Not-for-profit activities, Not-for-Profit Activities Not-for-profit activity, gross income, Gross Income O Office in home, Business use of your home. E file 2012 federal tax return Oil and gas wells Depletion, Oil and Gas Wells Drilling costs, Intangible Drilling Costs Partnerships, Partnerships and S Corporations S corporations, Partnerships and S Corporations Optional safe harbor method, Optional safe harbor method. E file 2012 federal tax return Optional write-off method Circulation costs, Optional Write-off of Certain Tax Preferences Experimental costs, Optional Write-off of Certain Tax Preferences Intangible drilling and development costs, Optional Write-off of Certain Tax Preferences Mining exploration and development costs, Optional Write-off of Certain Tax Preferences Research costs, Optional Write-off of Certain Tax Preferences Organization costs Corporate, Costs of Organizing a Corporation Partnership, Costs of Organizing a Partnership Organizational costs, Business Start-Up and Organizational Costs Original issue discount, Original issue discount (OID). E file 2012 federal tax return Outplacement services, Outplacement services. E file 2012 federal tax return P Passive activities, Passive activities. E file 2012 federal tax return Payments in kind, Payments in kind. E file 2012 federal tax return Penalties, Prepayment penalty. E file 2012 federal tax return Deductible, Penalties and fines. E file 2012 federal tax return Nondeductible, Penalties and fines. E file 2012 federal tax return Prepayment, Prepayment penalty. E file 2012 federal tax return Per diem and car allowances, Per Diem and Car Allowances Percentage depletion, Percentage Depletion Personal property tax, Personal property tax. E file 2012 federal tax return Political contributions, Political contributions. E file 2012 federal tax return Pollution control facilities, Pollution Control Facilities Prepaid expense, Prepayment. E file 2012 federal tax return Extends useful life, Prepayment. E file 2012 federal tax return Interest, Prepaid interest. E file 2012 federal tax return , Prepaid interest. E file 2012 federal tax return Rent, Rent paid in advance. E file 2012 federal tax return Prepayment penalty, Prepayment penalty. E file 2012 federal tax return Presumption of profit, Not-for-Profit Activities Publications (see Tax help) R Real estate taxes, Real Estate Taxes Recapture Exploration expenses, Recapture of exploration expenses. E file 2012 federal tax return Timber property, Recapture. E file 2012 federal tax return Recordkeeping, Partnerships and S Corporations Recovery of amount deducted, Recovery of amount deducted (tax benefit rule). E file 2012 federal tax return Refiners who cannot claim percentage depletion, Refiners who cannot claim percentage depletion. E file 2012 federal tax return Reforestation costs, Reforestation Costs, Reforestation Costs Regulatory fees, Licenses and regulatory fees. E file 2012 federal tax return Reimbursements, Reimbursements Business expenses, Reimbursements for Business Expenses Mileage, Per Diem and Car Allowances Nonaccountable plan, Nonaccountable Plans Per diem , Per Diem and Car Allowances Related persons Anti-churning rules, Related person. 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E file 2012 federal tax return Fuel, Fuel taxes. E file 2012 federal tax return Income, Income Taxes Leased property, Taxes on Leased Property Personal property, Personal property tax. E file 2012 federal tax return Real estate, Real Estate Taxes Sales, Sales tax. E file 2012 federal tax return Unemployment fund, Unemployment fund taxes. E file 2012 federal tax return Telephone, Telephone. E file 2012 federal tax return Timber, Reforestation Costs, Timber Tools, Tools. E file 2012 federal tax return Trademark, trade name, Franchise, trademark, or trade name. E file 2012 federal tax return , Franchise, trademark, trade name. E file 2012 federal tax return Travel, Reimbursement of Travel, Meals, and Entertainment TTY/TDD information, How To Get Tax Help U Unemployment fund taxes, Unemployment fund taxes. E file 2012 federal tax return Unpaid expenses, related person, Related person. E file 2012 federal tax return Utilities, Utilities. E file 2012 federal tax return V Vacation pay, Sick and Vacation Pay W Wages Property, Property Tests for deducting pay, Tests for Deducting Pay Welfare benefit funds, Welfare benefit funds. E file 2012 federal tax return Prev  Up     Home   More Online Publications