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Eztax

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Eztax

Eztax 10. Eztax   Education Savings Bond Program Table of Contents Introduction Who Can Cash In Bonds Tax FreeAdjusted qualified education expenses. Eztax Eligible educational institution. Eztax Dependent for whom you claim an exemption. Eztax MAGI when using Form 1040A. Eztax MAGI when using Form 1040. Eztax Figuring the Tax-Free AmountEffect of the Amount of Your Income on the Amount of Your Exclusion Claiming the Exclusion Introduction Generally, you must pay tax on the interest earned on U. Eztax S. Eztax savings bonds. Eztax If you do not include the interest in income in the years it is earned, you must include it in your income in the year in which you cash in the bonds. Eztax However, when you cash in certain savings bonds under an education savings bond program, you may be able to exclude the interest from income. Eztax Who Can Cash In Bonds Tax Free You may be able to cash in qualified U. Eztax S. Eztax savings bonds without having to include in your income some or all of the interest earned on the bonds if you meet the following conditions. Eztax You pay qualified education expenses for yourself, your spouse, or a dependent for whom you claim an exemption on your return. Eztax Your modified adjusted gross income (MAGI) is less than the amount specified for your filing status. Eztax Your filing status is not married filing separately. Eztax Qualified U. Eztax S. Eztax savings bonds. Eztax   A qualified U. Eztax S. Eztax savings bond is a series EE bond issued after 1989 or a series I bond. Eztax The bond must be issued either in your name (as the sole owner) or in the name of both you and your spouse (as co-owners). Eztax   The owner must be at least 24 years old before the bond's issue date. Eztax The issue date is printed on the front of the savings bond. Eztax    The issue date is not necessarily the date of purchase—it will be the first day of the month in which the bond is purchased (or posted, if bought electronically). Eztax Qualified education expenses. Eztax   These include the following items you pay for either yourself, your spouse, or a dependent for whom you claim an exemption. Eztax Tuition and fees required to enroll at or attend an eligible educational institution. Eztax Qualified education expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. Eztax Contributions to a qualified tuition program (QTP) (see How Much Can You Contribute in chapter 8, Qualified Tuition Program). Eztax Contributions to a Coverdell education savings account (ESA) (see Contributions in chapter 7, Coverdell Education Savings Account). Eztax Adjusted qualified education expenses. Eztax   You must reduce your qualified education expenses by all of the following tax-free benefits. Eztax Tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions). Eztax Expenses used to figure the tax-free portion of distributions from a Coverdell ESA (see Qualified Education Expenses in chapter 7, Coverdell Education Savings Account). Eztax Expenses used to figure the tax-free portion of distributions from a QTP (see Qualified education expenses in chapter 8, Qualified Tuition Program). Eztax Any tax-free payments (other than gifts or inheritances) received as educational assistance, such as: Veterans' educational assistance benefits (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Qualified tuition reductions (see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), or Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ). Eztax Any expenses used in figuring the American opportunity and lifetime learning credits. Eztax See What Expenses Qualify in chapter 2, American Opportunity Credit, and What Expenses Qualify in chapter 3, Lifetime Learning Credit, for more information. Eztax Eligible educational institution. Eztax   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Eztax S. Eztax Department of Education. Eztax It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Eztax The educational institution should be able to tell you if it is an eligible educational institution. Eztax   Certain educational institutions located outside the United States also participate in the U. Eztax S. Eztax Department of Education's Federal Student Aid (FSA) programs. Eztax Dependent for whom you claim an exemption. Eztax   You claim an exemption for a person if you list his or her name and other required information on Form 1040 (or Form 1040A), line 6c. Eztax Modified adjusted gross income (MAGI). Eztax   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return without taking into account this interest exclusion. Eztax However, as discussed below, there may be other modifications. Eztax MAGI when using Form 1040A. Eztax   If you file Form 1040A, your MAGI is the AGI on line 22 of that form figured without taking into account any savings bond interest exclusion and modified by adding back any amount on line 18 (student loan interest deduction) and line 19 (tuition and fees deduction). Eztax MAGI when using Form 1040. Eztax   If you file Form 1040, your MAGI is the AGI on line 38 of that form figured without taking into account any savings bond interest exclusion and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, Exclusion of income by bona fide residents of Puerto Rico, Exclusion for adoption benefits received under an employer's adoption assistance program, Deduction for student loan interest, Deduction for tuition and fees, and Deduction for domestic production activities. Eztax    Use the worksheet in the instructions for line 9 of Form 8815 to figure your MAGI. Eztax If you claim any of the exclusion or deduction items (1)–(6) listed above, add the amount of the exclusion or deduction to the amount on line 5 of the worksheet. Eztax Do not add in the deduction for (7) student loan interest, and (8) tuition and fees, or (9) domestic production activities because line 4 of the worksheet already includes these amounts. Eztax Enter the total on Form 8815, line 9, as your modified adjusted gross income (MAGI). Eztax    Because the deduction for interest expenses attributable to royalties and other investments is limited to your net investment income, you cannot figure the deduction until you have figured this interest exclusion. Eztax Therefore, if you had interest expenses attributable to royalties and deductible on Schedule E (Form 1040), Supplemental Income and Loss, you must make a special computation of your deductible interest without regard to this exclusion to figure the net royalty income included in your MAGI. Eztax See Royalties included in MAGI under Education Savings Bond Program in Publication 550, chapter 1. Eztax Figuring the Tax-Free Amount If the total you receive when you cash in the bonds is not more than the adjusted qualified education expenses for the year, all of the interest on the bonds may be tax free. Eztax However, if the total you receive when you cash in the bonds is more than the adjusted expenses, only part of the interest may be tax free. Eztax To determine the tax-free amount, multiply the interest part of the proceeds by a fraction. Eztax The numerator (top part) of the fraction is the adjusted qualified education expenses (AQEE) you paid during the year. Eztax The denominator (bottom part) of the fraction is the total proceeds you received during the year. Eztax Example. Eztax In February 2013, Mark and Joan Washington, a married couple, cashed a qualified series EE U. Eztax S. Eztax savings bond. Eztax They received proceeds of $9,000, representing principal of $6,000 and interest of $3,000. Eztax In 2013, they paid $7,650 of their daughter's college tuition. Eztax They are not claiming an American opportunity or lifetime learning credit for those expenses, and their daughter does not have any tax-free educational assistance. Eztax Their MAGI for 2013 was $80,000. Eztax   $3,000 interest × $7,650 AQEE  $9,000 proceeds = $2,550 tax-free interest   They can exclude $2,550 of interest in 2013. Eztax They must pay tax on the remaining $450 ($3,000 − $2,550) interest. Eztax Effect of the Amount of Your Income on the Amount of Your Exclusion The amount of your interest exclusion is gradually reduced (phased out) based on your MAGI and filing status. Eztax Claiming the Exclusion Use Form 8815 to figure your education savings bond interest exclusion. Eztax Enter your exclusion on line 3 of Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends. Eztax Attach Form 8815 to your tax return. Eztax Prev  Up  Next   Home   More Online Publications
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Page Last Reviewed or Updated: 13-Mar-2014

The Eztax

Eztax 9. Eztax   Rental Income and Expenses Table of Contents Introduction Useful Items - You may want to see: Rental Income Rental ExpensesVacant while listed for sale. Eztax Repairs and Improvements Other Expenses Property Changed to Rental Use Renting Part of Property Not Rented for Profit Personal Use of Dwelling Unit (Including Vacation Home)Example. Eztax Dividing Expenses Dwelling Unit Used as a Home Reporting Income and Deductions DepreciationChanging your accounting method to deduct unclaimed depreciation. Eztax Limits on Rental LossesAt-Risk Rules Passive Activity Limits How To Report Rental Income and ExpensesSchedule E (Form 1040) Introduction This chapter discusses rental income and expenses. Eztax It also covers the following topics. Eztax Personal use of dwelling unit (including vacation home). Eztax Depreciation. Eztax Limits on rental losses. Eztax How to report your rental income and expenses. Eztax If you sell or otherwise dispose of your rental property, see Publication 544, Sales and Other Dispositions of Assets. Eztax If you have a loss from damage to, or theft of, rental property, see Publication 547, Casualties, Disasters, and Thefts. Eztax If you rent a condominium or a cooperative apartment, some special rules apply to you even though you receive the same tax treatment as other owners of rental property. Eztax See Publication 527, Residential Rental Property, for more information. Eztax Useful Items - You may want to see: Publication 527 Residential Rental Property 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 925 Passive Activity and At-Risk Rules 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 6251 Alternative Minimum Tax—Individuals 8582 Passive Activity Loss Limitations Schedule E (Form 1040) Supplemental Income and Loss Rental Income In most cases, you must include in your gross income all amounts you receive as rent. Eztax Rental income is any payment you receive for the use or occupation of property. Eztax In addition to amounts you receive as normal rent payments, there are other amounts that may be rental income. Eztax When to report. Eztax   If you are a cash-basis taxpayer, you report rental income on your return for the year you actually or constructively receive it. Eztax You are a cash-basis taxpayer if you report income in the year you receive it, regardless of when it was earned. Eztax You constructively receive income when it is made available to you, for example, by being credited to your bank account. Eztax   For more information about when you constructively receive income, see Accounting Methods in chapter 1. Eztax Advance rent. Eztax   Advance rent is any amount you receive before the period that it covers. Eztax Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. Eztax Example. Eztax You sign a 10-year lease to rent your property. Eztax In the first year, you receive $5,000 for the first year's rent and $5,000 as rent for the last year of the lease. Eztax You must include $10,000 in your income in the first year. Eztax Canceling a lease. Eztax   If your tenant pays you to cancel a lease, the amount you receive is rent. Eztax Include the payment in your income in the year you receive it regardless of your method of accounting. Eztax Expenses paid by tenant. Eztax   If your tenant pays any of your expenses, the payments are rental income. Eztax Because you must include this amount in income, you can deduct the expenses if they are deductible rental expenses. Eztax See Rental Expenses , later, for more information. Eztax Property or services. Eztax   If you receive property or services, instead of money, as rent, include the fair market value of the property or services in your rental income. Eztax   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. Eztax Security deposits. Eztax   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. Eztax But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. Eztax   If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Eztax Include it in your income when you receive it. Eztax Part interest. Eztax   If you own a part interest in rental property, you must report your part of the rental income from the property. Eztax Rental of property also used as your home. Eztax   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. Eztax However, you can deduct on Schedule A (Form 1040) the interest, taxes, and casualty and theft losses that are allowed for nonrental property. Eztax See Personal Use of Dwelling Unit (Including Vacation Home) , later. Eztax Rental Expenses This part discusses expenses of renting property that you ordinarily can deduct from your rental income. Eztax It includes information on the expenses you can deduct if you rent part of your property, or if you change your property to rental use. Eztax Depreciation , which you can also deduct from your rental income, is discussed later. Eztax Personal use of rental property. Eztax   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. Eztax Also, your rental expense deductions may be limited. Eztax See Personal Use of Dwelling Unit (Including Vacation Home) , later. Eztax Part interest. Eztax   If you own a part interest in rental property, you can deduct expenses that you paid according to your percentage of ownership. Eztax When to deduct. Eztax   If you are a cash-basis taxpayer, you generally deduct your rental expenses in the year you pay them. Eztax Depreciation. Eztax   You can begin to depreciate rental property when it is ready and available for rent. Eztax See Placed-in-Service under When Does Depreciation Begin and End in chapter 2 of Publication 527. Eztax Pre-rental expenses. Eztax   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. Eztax Uncollected rent. Eztax   If you are a cash-basis taxpayer, do not deduct uncollected rent. Eztax Because you have not included it in your income, it is not deductible. Eztax Vacant rental property. Eztax   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. Eztax However, you cannot deduct any loss of rental income for the period the property is vacant. Eztax Vacant while listed for sale. Eztax   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. Eztax If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. Eztax Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. Eztax Improvements. Eztax   You must capitalize any expense you pay to improve your rental property. Eztax An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. Eztax Betterments. Eztax   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. Eztax Restoration. Eztax   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. Eztax Adaptation. Eztax   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. Eztax Separate the costs of repairs and improvements, and keep accurate records. Eztax You will need to know the cost of improvements when you sell or depreciate your property. Eztax The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. Eztax Other Expenses Other expenses you can deduct from your rental income include advertising, cleaning and maintenance, utilities, fire and liability insurance, taxes, interest, commissions for the collection of rent, ordinary and necessary travel and transportation, and other expenses, discussed next. Eztax Insurance premiums paid in advance. Eztax   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. Eztax You cannot deduct the total premium in the year you pay it. Eztax Legal and other professional fees. Eztax   You can deduct, as a rental expense, legal and other professional expenses, such as tax return preparation fees you paid to prepare Schedule E (Form 1040), Part I. Eztax For example, on your 2013 Schedule E, you can deduct fees paid in 2013 to prepare your 2012 Schedule E, Part I. Eztax You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. Eztax Local benefit taxes. Eztax   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. Eztax These charges are nondepreciable capital expenditures, and must be added to the basis of your property. Eztax However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. Eztax Local transportation expenses. Eztax    You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. Eztax However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. Eztax See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Eztax   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. Eztax For 2013, the standard mileage rate for business use is 56. Eztax 5 cents per mile. Eztax For more information, see chapter 26. Eztax    To deduct car expenses under either method, you must keep records that follow the rules in chapter 26. Eztax In addition, you must complete Form 4562, Part V, and attach it to your tax return. Eztax Rental of equipment. Eztax   You can deduct the rent you pay for equipment that you use for rental purposes. Eztax However, in some cases, lease contracts are actually purchase contracts. Eztax If so, you cannot deduct these payments. Eztax You can recover the cost of purchased equipment through depreciation. Eztax Rental of property. Eztax   You can deduct the rent you pay for property that you use for rental purposes. Eztax If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. Eztax Travel expenses. Eztax   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. Eztax You must properly allocate your expenses between rental and nonrental activities. Eztax You cannot deduct the cost of traveling away from home if the primary purpose of the trip was to improve your property. Eztax You recover the cost of improvements by taking depreciation. Eztax For information on travel expenses, see chapter 26. Eztax    To deduct travel expenses, you must keep records that follow the rules in chapter 26. Eztax   See Rental Expenses in Publication 527 for more information. Eztax Property Changed to Rental Use If you change your home or other property (or a part of it) to rental use at any time other than the beginning of your tax year, you must divide yearly expenses, such as taxes and insurance, between rental use and personal use. Eztax You can deduct as rental expenses only the part of the expense that is for the part of the year the property was used or held for rental purposes. Eztax You cannot deduct depreciation or insurance for the part of the year the property was held for personal use. Eztax However, you can include the home mortgage interest, qualified mortgage insurance premiums, and real estate tax expenses for the part of the year the property was held for personal use as an itemized deduction on Schedule A (Form 1040). Eztax Example. Eztax Your tax year is the calendar year. Eztax You moved from your home in May and started renting it out on June 1. Eztax You can deduct as rental expenses seven-twelfths of your yearly expenses, such as taxes and insurance. Eztax Starting with June, you can deduct as rental expenses the amounts you pay for items generally billed monthly, such as utilities. Eztax Renting Part of Property If you rent part of your property, you must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes, as though you actually had two separate pieces of property. Eztax You can deduct the expenses related to the part of the property used for rental purposes, such as home mortgage interest, qualified mortgage insurance premiums, and real estate taxes, as rental expenses on Schedule E (Form 1040). Eztax You can also deduct as rental expenses a portion of other expenses that normally are nondeductible personal expenses, such as expenses for electricity or painting the outside of your house. Eztax There is no change in the types of expenses deductible for the personal-use part of your property. Eztax Generally, these expenses may be deducted only if you itemize your deductions on Schedule A (Form 1040). Eztax You cannot deduct any part of the cost of the first phone line even if your tenants have unlimited use of it. Eztax You do not have to divide the expenses that belong only to the rental part of your property. Eztax For example, if you paint a room that you rent, or if you pay premiums for liability insurance in connection with renting a room in your home, your entire cost is a rental expense. Eztax If you install a second phone line strictly for your tenants' use, all of the cost of the second line is deductible as a rental expense. Eztax You can deduct depreciation, discussed later, on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes. Eztax How to divide expenses. Eztax   If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between the rental use and the personal use. Eztax You can use any reasonable method for dividing the expense. Eztax It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. Eztax The two most common methods for dividing an expense are based on (1) the number of rooms in your home, and (2) the square footage of your home. Eztax Not Rented for Profit If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. Eztax You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year. Eztax For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Publication 535. Eztax Where to report. Eztax   Report your not-for-profit rental income on Form 1040, line 21. Eztax For example, you can include your mortgage interest and any qualified mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses on the appropriate lines of Schedule A (Form 1040) if you itemize your deductions. Eztax   If you itemize your deductions, claim your other rental expenses, subject to the rules explained in chapter 1 of Publication 535, as miscellaneous itemized deductions on Form 1040, Schedule A, line 23. Eztax You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income. Eztax Personal Use of Dwelling Unit (Including Vacation Home) If you have any personal use of a dwelling unit (including a vacation home) that you rent, you must divide your expenses between rental use and personal use. Eztax In general, your rental expenses will be no more than your total expenses multiplied by a fraction; the denominator of which is the total number of days the dwelling unit is used and the numerator of which is the total number of days actually rented at a fair rental price. Eztax Only your rental expenses may be deducted on Schedule E (Form 1040). Eztax Some of your personal expenses may be deductible if you itemize your deductions on Schedule A (Form 1040). Eztax You must also determine if the dwelling unit is considered a home. Eztax The amount of rental expenses that you can deduct may be limited if the dwelling unit is considered a home. Eztax Whether a dwelling unit is considered a home depends on how many days during the year are considered to be days of personal use. Eztax There is a special rule if you used the dwelling unit as a home and you rented it for less than 15 days during the year. Eztax Dwelling unit. Eztax   A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. Eztax It also includes all structures or other property belonging to the dwelling unit. Eztax A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. Eztax   A dwelling unit does not include property used solely as a hotel, motel, inn, or similar establishment. Eztax Property is used solely as a hotel, motel, inn, or similar establishment if it is regularly available for occupancy by paying customers and is not used by an owner as a home during the year. Eztax Example. Eztax   You rent a room in your home that is always available for short-term occupancy by paying customers. Eztax You do not use the room yourself, and you allow only paying customers to use the room. Eztax The room is used solely as a hotel, motel, inn, or similar establishment and is not a dwelling unit. Eztax Dividing Expenses If you use a dwelling unit for both rental and personal purposes, divide your expenses between the rental use and the personal use based on the number of days used for each purpose. Eztax When dividing your expenses, follow these rules. Eztax Any day that the unit is rented at a fair rental price is a day of rental use even if you used the unit for personal purposes that day. Eztax This rule does not apply when determining whether you used the unit as a home. Eztax Any day that the unit is available for rent but not actually rented is not a day of rental use. Eztax Example. Eztax Your beach cottage was available for rent from June 1 through August 31 (92 days). Eztax During that time, except for the first week in August (7 days) when you were unable to find a renter, you rented the cottage at a fair rental price. Eztax The person who rented the cottage for July allowed you to use it over the weekend (2 days) without any reduction in or refund of rent. Eztax Your family also used the cottage during the last 2 weeks of May (14 days). Eztax The cottage was not used at all before May 17 or after August 31. Eztax You figure the part of the cottage expenses to treat as rental expenses as follows. Eztax The cottage was used for rental a total of 85 days (92 − 7). Eztax The days it was available for rent but not rented (7 days) are not days of rental use. Eztax The July weekend (2 days) you used it is rental use because you received a fair rental price for the weekend. Eztax You used the cottage for personal purposes for 14 days (the last 2 weeks in May). Eztax The total use of the cottage was 99 days (14 days personal use + 85 days rental use). Eztax Your rental expenses are 85/99 (86%) of the cottage expenses. Eztax Note. Eztax When determining whether you used the cottage as a home, the July weekend (2 days) you used it is considered personal use even though you received a fair rental price for the weekend. Eztax Therefore, you had 16 days of personal use and 83 days of rental use for this purpose. Eztax Because you used the cottage for personal purposes more than 14 days and more than 10% of the days of rental use (8 days), you used it as a home. Eztax If you have a net loss, you may not be able to deduct all of the rental expenses. Eztax See Dwelling Unit Used as a Home, next. Eztax Dwelling Unit Used as a Home If you use a dwelling unit for both rental and personal purposes, the tax treatment of the rental expenses you figured earlier under Dividing Expenses and rental income depends on whether you are considered to be using the dwelling unit as a home. Eztax You use a dwelling unit as a home during the tax year if you use it for personal purposes more than the greater of: 14 days, or 10% of the total days it is rented to others at a fair rental price. Eztax See What is a day of personal use , later. Eztax Fair rental price. Eztax   A fair rental price for your property generally is the amount of rent that a person who is not related to you would be willing to pay. Eztax The rent you charge is not a fair rental price if it is substantially less than the rents charged for other properties that are similar to your property in your area. Eztax   If a dwelling unit is used for personal purposes on a day it is rented at a fair rental price, do not count that day as a day of rental use in applying (2) above. Eztax Instead, count it as a day of personal use in applying both (1) and (2) above. Eztax What is a day of personal use?   A day of personal use of a dwelling unit is any day that the unit is used by any of the following persons. Eztax You or any other person who has an interest in the unit, unless you rent it to another owner as his or her main home under a shared equity financing agreement (defined later). Eztax However, see Days used as a main home before or after renting , later. Eztax A member of your family or a member of the family of any other person who owns an interest in the unit, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. Eztax Family includes only your spouse, brothers and sisters, half-brothers and half-sisters, ancestors (parents, grandparents, etc. Eztax ), and lineal descendants (children, grandchildren, etc. Eztax ). Eztax Anyone under an arrangement that lets you use some other dwelling unit. Eztax Anyone at less than a fair rental price. Eztax Main home. Eztax   If the other person or member of the family in (1) or (2) above has more than one home, his or her main home is ordinarily the one he or she lived in most of the time. Eztax Shared equity financing agreement. Eztax   This is an agreement under which two or more persons acquire undivided interests for more than 50 years in an entire dwelling unit, including the land, and one or more of the co-owners is entitled to occupy the unit as his or her main home upon payment of rent to the other co-owner or owners. Eztax Donation of use of property. Eztax   You use a dwelling unit for personal purposes if: You donate the use of the unit to a charitable organization, The organization sells the use of the unit at a fund-raising event, and The “purchaser” uses the unit. Eztax Examples. Eztax   The following examples show how to determine days of personal use. Eztax Example 1. Eztax You and your neighbor are co-owners of a condominium at the beach. Eztax Last year, you rented the unit to vacationers whenever possible. Eztax The unit was not used as a main home by anyone. Eztax Your neighbor used the unit for 2 weeks last year; you did not use it at all. Eztax Because your neighbor has an interest in the unit, both of you are considered to have used the unit for personal purposes during those 2 weeks. Eztax Example 2. Eztax You and your neighbors are co-owners of a house under a shared equity financing agreement. Eztax Your neighbors live in the house and pay you a fair rental price. Eztax Even though your neighbors have an interest in the house, the days your neighbors live there are not counted as days of personal use by you. Eztax This is because your neighbors rent the house as their main home under a shared equity financing agreement. Eztax Example 3. Eztax You own a rental property that you rent to your son. Eztax Your son does not own any interest in this property. Eztax He uses it as his main home and pays you a fair rental price. Eztax Your son's use of the property is not personal use by you because your son is using it as his main home, he owns no interest in the property, and he is paying you a fair rental price. Eztax Example 4. Eztax You rent your beach house to Joshua. Eztax Joshua rents his cabin in the mountains to you. Eztax You each pay a fair rental price. Eztax You are using your house for personal purposes on the days that Joshua uses it because your house is used by Joshua under an arrangement that allows you to use his house. Eztax Days used for repairs and maintenance. Eztax   Any day that you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. Eztax Do not count such a day as a day of personal use even if family members use the property for recreational purposes on the same day. Eztax Days used as a main home before or after renting. Eztax   For purposes of determining whether a dwelling unit was used as a home, you may not have to count days you used the property as your main home before or after renting it or offering it for rent as days of personal use. Eztax Do not count them as days of personal use if: You rented or tried to rent the property for 12 or more consecutive months. Eztax You rented or tried to rent the property for a period of less than 12 consecutive months and the period ended because you sold or exchanged the property. Eztax However, this special rule does not apply when dividing expenses between rental and personal use. Eztax Examples. Eztax   The following examples show how to determine whether you used your rental property as a home. Eztax Example 1. Eztax You converted the basement of your home into an apartment with a bedroom, a bathroom, and a small kitchen. Eztax You rented the basement apartment at a fair rental price to college students during the regular school year. Eztax You rented to them on a 9-month lease (273 days). Eztax You figured 10% of the total days rented to others at a fair rental price is 27 days. Eztax During June (30 days), your brothers stayed with you and lived in the basement apartment rent free. Eztax Your basement apartment was used as a home because you used it for personal purposes for 30 days. Eztax Rent-free use by your brothers is considered personal use. Eztax Your personal use (30 days) is more than the greater of 14 days or 10% of the total days it was rented (27 days). Eztax Example 2. Eztax You rented the guest bedroom in your home at a fair rental price during the local college's homecoming, commencement, and football weekends (a total of 27 days). Eztax Your sister-in-law stayed in the room, rent free, for the last 3 weeks (21 days) in July. Eztax You figured 10% of the total days rented to others at a fair rental price is 3 days. Eztax The room was used as a home because you used it for personal purposes for 21 days. Eztax That is more than the greater of 14 days or 10% of the 27 days it was rented (3 days). Eztax Example 3. Eztax You own a condominium apartment in a resort area. Eztax You rented it at a fair rental price for a total of 170 days during the year. Eztax For 12 of those days, the tenant was not able to use the apartment and allowed you to use it even though you did not refund any of the rent. Eztax Your family actually used the apartment for 10 of those days. Eztax Therefore, the apartment is treated as having been rented for 160 (170 − 10) days. Eztax You figured 10% of the total days rented to others at a fair rental price is 16 days. Eztax Your family also used the apartment for 7 other days during the year. Eztax You used the apartment as a home because you used it for personal purposes for 17 days. Eztax That is more than the greater of 14 days or 10% of the 160 days it was rented (16 days). Eztax Minimal rental use. Eztax   If you use the dwelling unit as a home and you rent it less than 15 days during the year, that period is not treated as rental activity. Eztax See Used as a home but rented less than 15 days , later, for more information. Eztax Limit on deductions. Eztax   Renting a dwelling unit that is considered a home is not a passive activity. Eztax Instead, if your rental expenses are more than your rental income, some or all of the excess expenses cannot be used to offset income from other sources. Eztax The excess expenses that cannot be used to offset income from other sources are carried forward to the next year and treated as rental expenses for the same property. Eztax Any expenses carried forward to the next year will be subject to any limits that apply for that year. Eztax This limitation will apply to expenses carried forward to another year even if you do not use the property as your home for that subsequent year. Eztax   To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 9-1. Eztax Reporting Income and Deductions Property not used for personal purposes. Eztax   If you do not use a dwelling unit for personal purposes, see How To Report Rental Income and Expenses , later, for how to report your rental income and expenses. Eztax Property used for personal purposes. Eztax   If you do use a dwelling unit for personal purposes, then how you report your rental income and expenses depends on whether you used the dwelling unit as a home. Eztax Not used as a home. Eztax   If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. Eztax Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in Dividing Expenses . Eztax The expenses for personal use are not deductible as rental expenses. Eztax   Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses , later. Eztax Used as a home but rented less than 15 days. Eztax   If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function is not considered to be rental and it should not be reported on Schedule E (Form 1040). Eztax You are not required to report the rental income and rental expenses from this activity. Eztax The expenses, including qualified mortgage interest, property taxes, and any qualified casualty loss will be reported as normally allowed on Schedule A (Form 1040). Eztax See the Instructions for Schedule A (Form 1040) for more information on deducting these expenses. Eztax Used as a home and rented 15 days or more. Eztax   If you use a dwelling unit as a home and rent it 15 days or more during the year, include all your rental income in your income. Eztax Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in Dividing Expenses . Eztax The expenses for personal use are not deductible as rental expenses. Eztax   If you had a net profit from renting the dwelling unit for the year (that is, if your rental income is more than the total of your rental expenses, including depreciation), deduct all of your rental expenses. Eztax You do not need to use Worksheet 9-1. Eztax   However, if you had a net loss from renting the dwelling unit for the year, your deduction for certain rental expenses is limited. Eztax To figure your deductible rental expenses and any carryover to next year, use Worksheet 9-1. Eztax Depreciation You recover the cost of income-producing property through yearly tax deductions. Eztax You do this by depreciating the property; that is, by deducting some of the cost each year on your tax return. Eztax Three factors determine how much depreciation you can deduct each year: (1) your basis in the property, (2) the recovery period for the property, and (3) the depreciation method used. Eztax You cannot simply deduct your mortgage or principal payments, or the cost of furniture, fixtures, and equipment, as an expense. Eztax You can deduct depreciation only on the part of your property used for rental purposes. Eztax Depreciation reduces your basis for figuring gain or loss on a later sale or exchange. Eztax You may have to use Form 4562 to figure and report your depreciation. Eztax See How To Report Rental Income and Expenses , later. Eztax Alternative minimum tax (AMT). Eztax    If you use accelerated depreciation, you may be subject to the AMT. Eztax Accelerated depreciation allows you to deduct more depreciation earlier in the recovery period than you could deduct using a straight line method (same deduction each year). Eztax Claiming the correct amount of depreciation. Eztax   You should claim the correct amount of depreciation each tax year. Eztax If you did not claim all the depreciation you were entitled to deduct, you must still reduce your basis in the property by the full amount of depreciation that you could have deducted. Eztax   If you deducted an incorrect amount of depreciation for property in any year, you may be able to make a correction by filing Form 1040X, Amended U. Eztax S Individual Income Tax Return. Eztax If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amount of depreciation. Eztax See Claiming the correct amount of depreciation in chapter 2 of Publication 527 for more information. Eztax Changing your accounting method to deduct unclaimed depreciation. Eztax   To change your accounting method, you generally must file Form 3115, Application for Change in Accounting Method, to get the consent of the IRS. Eztax In some instances, that consent is automatic. Eztax For more information, see chapter 1 of Publication 946. Eztax Land. Eztax   You cannot depreciate the cost of land because land generally does not wear out, become obsolete, or get used up. Eztax The costs of clearing, grading, planting, and landscaping are usually all part of the cost of land and cannot be depreciated. Eztax More information. Eztax   See Publication 527 for more information about depreciating rental property and see Publication 946 for more information about depreciation. Eztax Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. Eztax You must consider these rules in the order shown below. Eztax At-risk rules. Eztax These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. Eztax This applies only if the real property was placed in service after 1986. Eztax Passive activity limits. Eztax Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. Eztax However, there are exceptions. Eztax At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. Eztax Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. Eztax In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. Eztax You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. Eztax See Publication 925 for more information. Eztax Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. Eztax For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. Eztax Limits on passive activity deductions and credits. Eztax    Deductions or losses from passive activities are limited. Eztax You generally cannot offset income, other than passive income, with losses from passive activities. Eztax Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. Eztax Any excess loss or credit is carried forward to the next tax year. Eztax   For a detailed discussion of these rules, see Publication 925. Eztax    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. Eztax Real estate professionals. Eztax   Rental activities in which you materially participated during the year are not passive activities if, for that year, you were a real estate professional. Eztax For a detailed discussion of the requirements, see Publication 527. Eztax For a detailed discussion of material participation, see Publication 925. Eztax Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. Eztax Instead, follow the rules explained in Personal Use of Dwelling Unit (Including Vacation Home), earlier. Eztax Exception for Rental Real Estate Activities With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. Eztax This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. Eztax Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. Eztax Active participation. Eztax   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Eztax Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions. Eztax Maximum special allowance. Eztax   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. Eztax   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. Eztax If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. Eztax   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. Eztax More information. Eztax   See Publication 925 for more information on the passive loss limits, including information on the treatment of unused disallowed passive losses and credits and the treatment of gains and losses realized on the disposition of a passive activity. Eztax How To Report Rental Income and Expenses The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). Eztax However, do not use that schedule to report a not-for-profit activity. Eztax See Not Rented for Profit, earlier. Eztax Providing substantial services. Eztax   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business (Sole Proprietorship). Eztax Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. Eztax For information, see Publication 334, Tax Guide for Small Business. Eztax You also may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. Eztax   Use Form 1065, U. Eztax S. Eztax Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). Eztax Qualified joint venture. Eztax   If you and your spouse each materially participate as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Eztax This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. Eztax For more information, see Publication 527. Eztax Form 1098, Mortgage Interest Statement. Eztax    If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098, or similar statement showing the interest you paid for the year. Eztax If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. Eztax Attach a statement to your return showing the name and address of the other person. Eztax In the left margin of Schedule E, next to line 13, enter “See attached. Eztax ” Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. Eztax , you normally report your rental income and expenses on Schedule E, Part I. Eztax List your total income, expenses, and depreciation for each rental property. Eztax Be sure to enter the number of fair rental and personal use days on line 2. Eztax If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. Eztax Complete lines 1 and 2 for each property. Eztax However, fill in lines 23a through 26 on only one Schedule E. Eztax On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. Eztax To find out if you need to attach Form 4562, see Form 4562, in chapter 3 of Publication 527. Eztax If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. Eztax Form 6198, At-Risk Limitations. Eztax See At-Risk Rules , earlier. Eztax Also see Publication 925. Eztax Form 8582, Passive Activity Loss Limitations. Eztax See Passive Activity Limits , earlier. Eztax Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. Eztax If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. Eztax Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). Eztax Worksheet 9-1. Eztax Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Use this worksheet only if you answer “yes” to all of the following questions. Eztax Did you use the dwelling unit as a home this year? (See Dwelling Unit Used as a Home . Eztax ) Did you rent the dwelling unit at a fair rental price 15 days or more this year? Is the total of your rental expenses and depreciation more than your rental income? PART I. Eztax Rental Use Percentage A. Eztax Total days available for rent at fair rental price A. Eztax       B. Eztax Total days available for rent (line A) but not rented B. Eztax       C. Eztax Total days of rental use. Eztax Subtract line B from line A C. Eztax       D. Eztax Total days of personal use (including days rented at less than fair rental price) D. Eztax       E. Eztax Total days of rental and personal use. Eztax Add lines C and D E. Eztax       F. Eztax Percentage of expenses allowed for rental. Eztax Divide line C by line E     F. Eztax   PART II. Eztax Allowable Rental Expenses 1. Eztax Enter rents received 1. Eztax   2a. Eztax Enter the rental portion of deductible home mortgage interest and qualified mortgage insurance premiums (see instructions) 2a. Eztax       b. Eztax Enter the rental portion of real estate taxes b. Eztax       c. Eztax Enter the rental portion of deductible casualty and theft losses (see instructions) c. Eztax       d. Eztax Enter direct rental expenses (see instructions) d. Eztax       e. Eztax Fully deductible rental expenses. Eztax Add lines 2a–2d. Eztax Enter here and  on the appropriate lines on Schedule E (see instructions) 2e. Eztax   3. Eztax Subtract line 2e from line 1. Eztax If zero or less, enter -0- 3. Eztax   4a. Eztax Enter the rental portion of expenses directly related to operating or maintaining  the dwelling unit (such as repairs, insurance, and utilities) 4a. Eztax       b. Eztax Enter the rental portion of excess mortgage interest and qualified mortgage insurance premiums (see instructions) b. Eztax       c. Eztax Carryover of operating expenses from 2012 worksheet c. Eztax       d. Eztax Add lines 4a–4c d. Eztax       e. Eztax Allowable expenses. Eztax Enter the smaller of line 3 or line 4d (see instructions) 4e. Eztax   5. Eztax Subtract line 4e from line 3. Eztax If zero or less, enter -0- 5. Eztax   6a. Eztax Enter the rental portion of excess casualty and theft losses (see instructions) 6a. Eztax       b. Eztax Enter the rental portion of depreciation of the dwelling unit b. Eztax       c. Eztax Carryover of excess casualty losses and depreciation from 2012 worksheet c. Eztax       d. Eztax Add lines 6a–6c d. Eztax       e. Eztax Allowable excess casualty and theft losses and depreciation. Eztax Enter the smaller of  line 5 or line 6d (see instructions) 6e. Eztax   PART III. Eztax Carryover of Unallowed Expenses to Next Year 7a. Eztax Operating expenses to be carried over to next year. Eztax Subtract line 4e from line 4d 7a. Eztax   b. Eztax Excess casualty and theft losses and depreciation to be carried over to next year. Eztax  Subtract line 6e from line 6d b. Eztax   Worksheet 9-1 Instructions. Eztax Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Caution. Eztax Use the percentage determined in Part I, line F, to figure the rental portions to enter on lines 2a–2c, 4a–4b, and 6a–6b of  Part II. Eztax Line 2a. Eztax Figure the mortgage interest on the dwelling unit that you could deduct on Schedule A as if you had not rented the unit. Eztax Do not include interest on a loan that did not benefit the dwelling unit. Eztax For example, do not include interest on a home equity loan used to pay off credit cards or other personal loans, buy a car, or pay college tuition. Eztax Include interest on a loan used to buy, build, or improve the dwelling unit, or to refinance such a loan. Eztax Include the rental portion of this interest in the total you enter on line 2a of the worksheet. Eztax   Figure the qualified mortgage insurance premiums on the dwelling unit that you could deduct on line 13 of Schedule A as if you had not rented the unit. Eztax See the Schedule A instructions. Eztax However, figure your adjusted gross income (Form 1040, line 38) without your rental income and expenses from the dwelling unit. Eztax See Line 4b to deduct the part of the qualified mortgage insurance premiums not allowed because of the adjusted gross income limit. Eztax Include the rental portion of the amount from Schedule A, line 13, in the total you enter on line 2a of the worksheet. Eztax   Note. Eztax Do not file this Schedule A or use it to figure the amount to deduct on line 13 of that schedule. Eztax Instead, figure the personal portion on a separate Schedule A. Eztax If you have deducted mortgage interest or qualified mortgage insurance premiums on the dwelling unit on other forms, such as Schedule C or F, remember to reduce your Schedule A deduction by that amount. Eztax           Line 2c. Eztax Figure the casualty and theft losses related to the dwelling unit that you could deduct on Schedule A as if you had not rented the dwelling unit. Eztax To do this, complete Section A of Form 4684, Casualties and Thefts, treating the losses as personal losses. Eztax If any of the loss is due to a federally declared disaster, see the Instructions for Form 4684. Eztax On Form 4684, line 17, enter 10% of your adjusted gross income figured without your rental income and expenses from the dwelling unit. Eztax Enter the rental portion of the result from Form 4684, line 18, on line 2c of this worksheet. Eztax   Note. Eztax Do not file this Form 4684 or use it to figure your personal losses on Schedule A. Eztax Instead, figure the personal portion on a separate Form 4684. Eztax           Line 2d. Eztax Enter the total of your rental expenses that are directly related only to the rental activity. Eztax These include interest on loans used for rental activities other than to buy, build, or improve the dwelling unit. Eztax Also include rental agency fees, advertising, office supplies, and depreciation on office equipment used in your rental activity. Eztax           Line 2e. Eztax You can deduct the amounts on lines 2a, 2b, 2c, and 2d as rental expenses on Schedule E even if your rental expenses are more than your rental income. Eztax Enter the amounts on lines 2a, 2b, 2c, and 2d on the appropriate lines of Schedule E. Eztax           Line 4b. Eztax On line 2a, you entered the rental portion of the mortgage interest and qualified mortgage insurance premiums you could deduct on Schedule A if you had not rented the dwelling unit. Eztax If you had additional mortgage interest and qualified mortgage insurance premiums that would not be deductible on Schedule A because of limits imposed on them, enter on line 4b of this worksheet the rental portion of those excess amounts. Eztax Do not include interest on a loan that did not benefit the dwelling unit (as explained in the line 2a instructions). Eztax           Line 4e. Eztax You can deduct the amounts on lines 4a, 4b, and 4c as rental expenses on Schedule E only to the extent they are not more than the amount on line 4e. Eztax *           Line 6a. Eztax To find the rental portion of excess casualty and theft losses, use the Form 4684 you prepared for line 2c of this worksheet. Eztax   A. Eztax Enter the amount from Form 4684, line 10       B. Eztax Enter the rental portion of line A       C. Eztax Enter the amount from line 2c of this worksheet       D. Eztax Subtract line C from line B. Eztax Enter the result here and on line 6a of this worksheet               Line 6e. Eztax You can deduct the amounts on lines 6a, 6b, and 6c as rental expenses on Schedule E only to the extent they are not more than the amount on line 6e. Eztax * *Allocating the limited deduction. Eztax If you cannot deduct all of the amount on line 4d or 6d this year, you can allocate the allowable deduction in any way you wish among the expenses included on line 4d or 6d. Eztax Enter the amount you allocate to each expense on the appropriate line of Schedule E, Part I. Eztax Prev  Up  Next   Home   More Online Publications