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File An Amended Tax Return

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File An Amended Tax Return

File an amended tax return Index A Accelerated cost recovery system (ACRS):, ACRS Defined Alternate method, Alternate ACRS Method (Modified Straight Line Method) Classes of recovery property, Classes of Recovery Property Deduction, short tax year, ACRS Deduction in Short Tax Year Defined, ACRS Defined Dispositions, Early dispositions of ACRS property other than 15-, 18-, or 19-year real property. File an amended tax return Recovery periods, Recovery Periods Unadjusted basis, Unadjusted Basis B Basis: Adjusted, Adjusted basis. File an amended tax return Unadjusted, ACRS, Unadjusted Basis C Changing methods, How To Change Methods D Declining balance method, Declining Balance Method Deduction: ACRS, How To Figure the Deduction How to figure, How To Figure the Deduction Dispositions, Dispositions, Dispositions I Income forecast method, Income Forecast Method L Listed property:, Listed Property Defined 5% owner, 5% owner. File an amended tax return Computers, related equipment, Computers and Related Peripheral Equipment Defined, Listed Property Defined Entertainment use, Entertainment Use Leased, Leased Property Other transportation property, Other Property Used for Transportation Predominant use test, Predominant Use Test Qualified business use, Qualified Business Use Recordkeeping, What Records Must Be Kept, Adequate Records Related person, Related person. File an amended tax return Reporting on Form 4562, Reporting Information on Form 4562 Use by employee, Employees M Methods of figuring depreciation:, Income Forecast Method ACRS, How To Figure the Deduction Declining Balance, Declining Balance Method Income forecast, Income Forecast Method Straight line, Straight Line Method P Passenger automobile: Defined, Passenger Automobile Defined Predominant use test, applying, Applying the Predominant Use Test Property: ACRS, What Can and Cannot Be Depreciated Under ACRS Intangible, Intangible property. File an amended tax return R Recapture: Depreciation, Depreciation Recapture Excess depreciation, listed property, Recapture of excess depreciation. File an amended tax return Recordkeeping: For listed property, What Records Must Be Kept S Salvage value, Salvage Value Straight line method, Straight Line Method U Useful life, Useful Life V Videocassettes, Videocassettes. File an amended tax return Prev  Up     Home   More Online Publications
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IRS Releases the Dirty Dozen Tax Scams for 2012

IR-2012-23, Feb. 16, 2012

WASHINGTON –– The Internal Revenue Service today issued its annual “Dirty Dozen” ranking of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.

The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

“Taxpayers should be careful and avoid falling into a trap with the Dirty Dozen,” said IRS Commissioner Doug Shulman. “Scam artists will tempt people in-person, on-line and by e-mail with misleading promises about lost refunds and free money. Don’t be fooled by these scams.”

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. The IRS Criminal Investigation Division works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.

The following is the Dirty Dozen tax scams for 2012:

Identity Theft

Topping this year’s list Dirty Dozen list is identity theft. In response to growing identity theft concerns, the IRS has embarked on a comprehensive strategy that is focused on preventing, detecting and resolving identity theft cases as soon as possible. In addition to the law-enforcement crackdown, the IRS has stepped up its internal reviews to spot false tax returns before tax refunds are issued as well as working to help victims of the identity theft refund schemes.

Identity theft cases are among the most complex ones the IRS handles, but the agency is committed to working with taxpayers who have become victims of identity theft.

The IRS is increasingly seeing identity thieves looking for ways to use a legitimate taxpayer’s identity and personal information to file a tax return and claim a fraudulent refund.
 
An IRS notice informing a taxpayer that more than one return was filed in the taxpayer’s name or that the taxpayer received wages from an unknown employer may be the first tip off the individual receives that he or she has been victimized. 

The IRS has a robust screening process with measures in place to stop fraudulent returns. While the IRS is continuing to address tax-related identity theft aggressively, the agency is also seeing an increase in identity crimes, including more complex schemes. In 2011, the IRS protected more than $1.4 billion of taxpayer funds from getting into the wrong hands due to identity theft.

In January, the IRS announced the results of a massive, national sweep cracking down on suspected identity theft perpetrators as part of a stepped-up effort against refund fraud and identity theft.  Working with the Justice Department’s Tax Division and local U.S. Attorneys’ offices, the nationwide effort targeted 105 people in 23 states.

Anyone who believes his or her personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit.  For more information, visit the special identity theft page at www.IRS.gov/identitytheft

Phishing

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information.  This includes any type of electronic communication, such as text messages and social media channels.  The IRS has information that can help you protect yourself from email scams.

Return Preparer Fraud

About 60 percent of taxpayers will use tax professionals this year to prepare and file their tax returns. Most return preparers provide honest service to their clients. But as in any other business, there are also some who prey on unsuspecting taxpayers.

Questionable return preparers have been known to skim off their clients’ refunds, charge inflated fees for return preparation services and attract new clients by promising guaranteed or inflated refunds. Taxpayers should choose carefully when hiring a tax preparer. Federal courts have issued hundreds of injunctions ordering individuals to cease preparing returns, and the Department of Justice has pending complaints against many others.

In 2012, every paid preparer needs to have a Preparer Tax Identification Number (PTIN) and enter it on the returns he or she prepares.

Signals to watch for when you are dealing with an unscrupulous return preparer would include that they:

  • Do not sign the return or place a Preparer Tax identification Number on it.
  • Do not give you a copy of your tax return.
  • Promise larger than normal tax refunds.
  • Charge a percentage of the refund amount as preparation fee.
  • Require you to split the refund to pay the preparation fee.
  • Add forms to the return you have never filed before.
  • Encourage you to place false information on your return, such as false income, expenses and/or credits.

For advice on how to find a competent tax professional, see  Tips for Choosing a Tax Preparer.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities, using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting and disclosure requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.
 
Since 2009, 30,000 individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to bring their money back into the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore will become increasingly more difficult.

At the beginning of this year, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion.  This program will be open for an indefinite period until otherwise announced.

The IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program, reflecting closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program.  That number will grow as the IRS processes the 2011 cases.

“Free Money” from the IRS & Tax Scams Involving Social Security

Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file a tax return with little or no documentation, have been appearing in community churches around the country. These schemes are also often spread by word of mouth as unsuspecting and well-intentioned people tell their friends and relatives.

Scammers prey on low income individuals and the elderly. They build false hopes and charge people good money for bad advice. In the end, the victims discover their claims are rejected. Meanwhile, the promoters are long gone. The IRS warns all taxpayers to remain vigilant.

There are a number of tax scams involving Social Security. For example, scammers have been known to lure the unsuspecting with promises of non-existent Social Security refunds or rebates. In another situation, a taxpayer may really be due a credit or refund but uses inflated information to complete the return. 

Beware. Intentional mistakes of this kind can result in a $5,000 penalty.

False/Inflated Income and Expenses

Including income that was never earned, either as wages or as self-employment income in order to maximize refundable credits, is another popular scam. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions.  This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution. 

Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit when their occupations or income levels make the claims unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

False Form 1099 Refund Claims

In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return. In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS.

Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Frivolous Arguments

Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.

Falsely Claiming Zero Wages

Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

Abuse of Charitable Organizations and Deductions

IRS examiners continue to uncover the intentional abuse of 501(c)(3) organizations, including arrangements that improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or the income from donated property. The IRS is investigating schemes that involve the donation of non-cash assets –– including situations in which several organizations claim the full value of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new standards for qualified appraisals.

Disguised Corporate Ownership

Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.

These entities can be used to underreport income, claim fictitious deductions, avoid filing tax returns, participate in listed transactions and facilitate money laundering, and financial crimes. The IRS is working with state authorities to identify these entities and bring the owners into compliance with the law.

Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel have seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.
 

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Page Last Reviewed or Updated: 11-Feb-2014

The File An Amended Tax Return

File an amended tax return 9. File an amended tax return   Rental Income and Expenses Table of Contents Introduction Useful Items - You may want to see: Rental Income Rental ExpensesVacant while listed for sale. File an amended tax return 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. File an amended tax return Dividing Expenses Dwelling Unit Used as a Home Reporting Income and Deductions DepreciationChanging your accounting method to deduct unclaimed depreciation. File an amended tax return 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. File an amended tax return It also covers the following topics. File an amended tax return Personal use of dwelling unit (including vacation home). File an amended tax return Depreciation. File an amended tax return Limits on rental losses. File an amended tax return How to report your rental income and expenses. File an amended tax return If you sell or otherwise dispose of your rental property, see Publication 544, Sales and Other Dispositions of Assets. File an amended tax return If you have a loss from damage to, or theft of, rental property, see Publication 547, Casualties, Disasters, and Thefts. File an amended tax return 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. File an amended tax return See Publication 527, Residential Rental Property, for more information. File an amended tax return 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. File an amended tax return Rental income is any payment you receive for the use or occupation of property. File an amended tax return In addition to amounts you receive as normal rent payments, there are other amounts that may be rental income. File an amended tax return When to report. File an amended tax return   If you are a cash-basis taxpayer, you report rental income on your return for the year you actually or constructively receive it. File an amended tax return You are a cash-basis taxpayer if you report income in the year you receive it, regardless of when it was earned. File an amended tax return You constructively receive income when it is made available to you, for example, by being credited to your bank account. File an amended tax return   For more information about when you constructively receive income, see Accounting Methods in chapter 1. File an amended tax return Advance rent. File an amended tax return   Advance rent is any amount you receive before the period that it covers. File an amended tax return 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. File an amended tax return Example. File an amended tax return You sign a 10-year lease to rent your property. File an amended tax return 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. File an amended tax return You must include $10,000 in your income in the first year. File an amended tax return Canceling a lease. File an amended tax return   If your tenant pays you to cancel a lease, the amount you receive is rent. File an amended tax return Include the payment in your income in the year you receive it regardless of your method of accounting. File an amended tax return Expenses paid by tenant. File an amended tax return   If your tenant pays any of your expenses, the payments are rental income. File an amended tax return Because you must include this amount in income, you can deduct the expenses if they are deductible rental expenses. File an amended tax return See Rental Expenses , later, for more information. File an amended tax return Property or services. File an amended tax return   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. File an amended tax return   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. File an amended tax return Security deposits. File an amended tax return   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. File an amended tax return 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. File an amended tax return   If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. File an amended tax return Include it in your income when you receive it. File an amended tax return Part interest. File an amended tax return   If you own a part interest in rental property, you must report your part of the rental income from the property. File an amended tax return Rental of property also used as your home. File an amended tax return   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. File an amended tax return However, you can deduct on Schedule A (Form 1040) the interest, taxes, and casualty and theft losses that are allowed for nonrental property. File an amended tax return See Personal Use of Dwelling Unit (Including Vacation Home) , later. File an amended tax return Rental Expenses This part discusses expenses of renting property that you ordinarily can deduct from your rental income. File an amended tax return 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. File an amended tax return Depreciation , which you can also deduct from your rental income, is discussed later. File an amended tax return Personal use of rental property. File an amended tax return   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. File an amended tax return Also, your rental expense deductions may be limited. File an amended tax return See Personal Use of Dwelling Unit (Including Vacation Home) , later. File an amended tax return Part interest. File an amended tax return   If you own a part interest in rental property, you can deduct expenses that you paid according to your percentage of ownership. File an amended tax return When to deduct. File an amended tax return   If you are a cash-basis taxpayer, you generally deduct your rental expenses in the year you pay them. File an amended tax return Depreciation. File an amended tax return   You can begin to depreciate rental property when it is ready and available for rent. File an amended tax return See Placed-in-Service under When Does Depreciation Begin and End in chapter 2 of Publication 527. File an amended tax return Pre-rental expenses. File an amended tax return   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. File an amended tax return Uncollected rent. File an amended tax return   If you are a cash-basis taxpayer, do not deduct uncollected rent. File an amended tax return Because you have not included it in your income, it is not deductible. File an amended tax return Vacant rental property. File an amended tax return   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. File an amended tax return However, you cannot deduct any loss of rental income for the period the property is vacant. File an amended tax return Vacant while listed for sale. File an amended tax return   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. File an amended tax return If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. File an amended tax return 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. File an amended tax return Improvements. File an amended tax return   You must capitalize any expense you pay to improve your rental property. File an amended tax return 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. File an amended tax return Betterments. File an amended tax return   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. File an amended tax return Restoration. File an amended tax return   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. File an amended tax return Adaptation. File an amended tax return   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. File an amended tax return Separate the costs of repairs and improvements, and keep accurate records. File an amended tax return You will need to know the cost of improvements when you sell or depreciate your property. File an amended tax return The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. File an amended tax return 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. File an amended tax return Insurance premiums paid in advance. File an amended tax return   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. File an amended tax return You cannot deduct the total premium in the year you pay it. File an amended tax return Legal and other professional fees. File an amended tax return   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. File an amended tax return For example, on your 2013 Schedule E, you can deduct fees paid in 2013 to prepare your 2012 Schedule E, Part I. File an amended tax return 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. File an amended tax return Local benefit taxes. File an amended tax return   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. File an amended tax return These charges are nondepreciable capital expenditures, and must be added to the basis of your property. File an amended tax return However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. File an amended tax return Local transportation expenses. File an amended tax return    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. File an amended tax return 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. File an amended tax return See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. File an amended tax return   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. File an amended tax return For 2013, the standard mileage rate for business use is 56. File an amended tax return 5 cents per mile. File an amended tax return For more information, see chapter 26. File an amended tax return    To deduct car expenses under either method, you must keep records that follow the rules in chapter 26. File an amended tax return In addition, you must complete Form 4562, Part V, and attach it to your tax return. File an amended tax return Rental of equipment. File an amended tax return   You can deduct the rent you pay for equipment that you use for rental purposes. File an amended tax return However, in some cases, lease contracts are actually purchase contracts. File an amended tax return If so, you cannot deduct these payments. File an amended tax return You can recover the cost of purchased equipment through depreciation. File an amended tax return Rental of property. File an amended tax return   You can deduct the rent you pay for property that you use for rental purposes. File an amended tax return 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. File an amended tax return Travel expenses. File an amended tax return   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. File an amended tax return You must properly allocate your expenses between rental and nonrental activities. File an amended tax return You cannot deduct the cost of traveling away from home if the primary purpose of the trip was to improve your property. File an amended tax return You recover the cost of improvements by taking depreciation. File an amended tax return For information on travel expenses, see chapter 26. File an amended tax return    To deduct travel expenses, you must keep records that follow the rules in chapter 26. File an amended tax return   See Rental Expenses in Publication 527 for more information. File an amended tax return 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. File an amended tax return 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. File an amended tax return You cannot deduct depreciation or insurance for the part of the year the property was held for personal use. File an amended tax return 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). File an amended tax return Example. File an amended tax return Your tax year is the calendar year. File an amended tax return You moved from your home in May and started renting it out on June 1. File an amended tax return You can deduct as rental expenses seven-twelfths of your yearly expenses, such as taxes and insurance. File an amended tax return Starting with June, you can deduct as rental expenses the amounts you pay for items generally billed monthly, such as utilities. File an amended tax return 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. File an amended tax return 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). File an amended tax return 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. File an amended tax return There is no change in the types of expenses deductible for the personal-use part of your property. File an amended tax return Generally, these expenses may be deducted only if you itemize your deductions on Schedule A (Form 1040). File an amended tax return You cannot deduct any part of the cost of the first phone line even if your tenants have unlimited use of it. File an amended tax return You do not have to divide the expenses that belong only to the rental part of your property. File an amended tax return 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. File an amended tax return 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. File an amended tax return 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. File an amended tax return How to divide expenses. File an amended tax return   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. File an amended tax return You can use any reasonable method for dividing the expense. File an amended tax return It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. File an amended tax return 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. File an amended tax return 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. File an amended tax return 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. File an amended tax return 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. File an amended tax return Where to report. File an amended tax return   Report your not-for-profit rental income on Form 1040, line 21. File an amended tax return 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. File an amended tax return   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. File an amended tax return You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income. File an amended tax return 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. File an amended tax return 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. File an amended tax return Only your rental expenses may be deducted on Schedule E (Form 1040). File an amended tax return Some of your personal expenses may be deductible if you itemize your deductions on Schedule A (Form 1040). File an amended tax return You must also determine if the dwelling unit is considered a home. File an amended tax return The amount of rental expenses that you can deduct may be limited if the dwelling unit is considered a home. File an amended tax return Whether a dwelling unit is considered a home depends on how many days during the year are considered to be days of personal use. File an amended tax return 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. File an amended tax return Dwelling unit. File an amended tax return   A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. File an amended tax return It also includes all structures or other property belonging to the dwelling unit. File an amended tax return A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. File an amended tax return   A dwelling unit does not include property used solely as a hotel, motel, inn, or similar establishment. File an amended tax return 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. File an amended tax return Example. File an amended tax return   You rent a room in your home that is always available for short-term occupancy by paying customers. File an amended tax return You do not use the room yourself, and you allow only paying customers to use the room. File an amended tax return The room is used solely as a hotel, motel, inn, or similar establishment and is not a dwelling unit. File an amended tax return 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. File an amended tax return When dividing your expenses, follow these rules. File an amended tax return 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. File an amended tax return This rule does not apply when determining whether you used the unit as a home. File an amended tax return Any day that the unit is available for rent but not actually rented is not a day of rental use. File an amended tax return Example. File an amended tax return Your beach cottage was available for rent from June 1 through August 31 (92 days). File an amended tax return 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. File an amended tax return 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. File an amended tax return Your family also used the cottage during the last 2 weeks of May (14 days). File an amended tax return The cottage was not used at all before May 17 or after August 31. File an amended tax return You figure the part of the cottage expenses to treat as rental expenses as follows. File an amended tax return The cottage was used for rental a total of 85 days (92 − 7). File an amended tax return The days it was available for rent but not rented (7 days) are not days of rental use. File an amended tax return The July weekend (2 days) you used it is rental use because you received a fair rental price for the weekend. File an amended tax return You used the cottage for personal purposes for 14 days (the last 2 weeks in May). File an amended tax return The total use of the cottage was 99 days (14 days personal use + 85 days rental use). File an amended tax return Your rental expenses are 85/99 (86%) of the cottage expenses. File an amended tax return Note. File an amended tax return 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. File an amended tax return Therefore, you had 16 days of personal use and 83 days of rental use for this purpose. File an amended tax return 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. File an amended tax return If you have a net loss, you may not be able to deduct all of the rental expenses. File an amended tax return See Dwelling Unit Used as a Home, next. File an amended tax return 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. File an amended tax return 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. File an amended tax return See What is a day of personal use , later. File an amended tax return Fair rental price. File an amended tax return   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. File an amended tax return 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. File an amended tax return   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. File an amended tax return Instead, count it as a day of personal use in applying both (1) and (2) above. File an amended tax return 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. File an amended tax return 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). File an amended tax return However, see Days used as a main home before or after renting , later. File an amended tax return 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. File an amended tax return Family includes only your spouse, brothers and sisters, half-brothers and half-sisters, ancestors (parents, grandparents, etc. File an amended tax return ), and lineal descendants (children, grandchildren, etc. File an amended tax return ). File an amended tax return Anyone under an arrangement that lets you use some other dwelling unit. File an amended tax return Anyone at less than a fair rental price. File an amended tax return Main home. File an amended tax return   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. File an amended tax return Shared equity financing agreement. File an amended tax return   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. File an amended tax return Donation of use of property. File an amended tax return   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. File an amended tax return Examples. File an amended tax return   The following examples show how to determine days of personal use. File an amended tax return Example 1. File an amended tax return You and your neighbor are co-owners of a condominium at the beach. File an amended tax return Last year, you rented the unit to vacationers whenever possible. File an amended tax return The unit was not used as a main home by anyone. File an amended tax return Your neighbor used the unit for 2 weeks last year; you did not use it at all. File an amended tax return 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. File an amended tax return Example 2. File an amended tax return You and your neighbors are co-owners of a house under a shared equity financing agreement. File an amended tax return Your neighbors live in the house and pay you a fair rental price. File an amended tax return 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. File an amended tax return This is because your neighbors rent the house as their main home under a shared equity financing agreement. File an amended tax return Example 3. File an amended tax return You own a rental property that you rent to your son. File an amended tax return Your son does not own any interest in this property. File an amended tax return He uses it as his main home and pays you a fair rental price. File an amended tax return 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. File an amended tax return Example 4. File an amended tax return You rent your beach house to Joshua. File an amended tax return Joshua rents his cabin in the mountains to you. File an amended tax return You each pay a fair rental price. File an amended tax return 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. File an amended tax return Days used for repairs and maintenance. File an amended tax return   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. File an amended tax return 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. File an amended tax return Days used as a main home before or after renting. File an amended tax return   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. File an amended tax return Do not count them as days of personal use if: You rented or tried to rent the property for 12 or more consecutive months. File an amended tax return 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. File an amended tax return However, this special rule does not apply when dividing expenses between rental and personal use. File an amended tax return Examples. File an amended tax return   The following examples show how to determine whether you used your rental property as a home. File an amended tax return Example 1. File an amended tax return You converted the basement of your home into an apartment with a bedroom, a bathroom, and a small kitchen. File an amended tax return You rented the basement apartment at a fair rental price to college students during the regular school year. File an amended tax return You rented to them on a 9-month lease (273 days). File an amended tax return You figured 10% of the total days rented to others at a fair rental price is 27 days. File an amended tax return During June (30 days), your brothers stayed with you and lived in the basement apartment rent free. File an amended tax return Your basement apartment was used as a home because you used it for personal purposes for 30 days. File an amended tax return Rent-free use by your brothers is considered personal use. File an amended tax return Your personal use (30 days) is more than the greater of 14 days or 10% of the total days it was rented (27 days). File an amended tax return Example 2. File an amended tax return 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). File an amended tax return Your sister-in-law stayed in the room, rent free, for the last 3 weeks (21 days) in July. File an amended tax return You figured 10% of the total days rented to others at a fair rental price is 3 days. File an amended tax return The room was used as a home because you used it for personal purposes for 21 days. File an amended tax return That is more than the greater of 14 days or 10% of the 27 days it was rented (3 days). File an amended tax return Example 3. File an amended tax return You own a condominium apartment in a resort area. File an amended tax return You rented it at a fair rental price for a total of 170 days during the year. File an amended tax return 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. File an amended tax return Your family actually used the apartment for 10 of those days. File an amended tax return Therefore, the apartment is treated as having been rented for 160 (170 − 10) days. File an amended tax return You figured 10% of the total days rented to others at a fair rental price is 16 days. File an amended tax return Your family also used the apartment for 7 other days during the year. File an amended tax return You used the apartment as a home because you used it for personal purposes for 17 days. File an amended tax return That is more than the greater of 14 days or 10% of the 160 days it was rented (16 days). File an amended tax return Minimal rental use. File an amended tax return   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. File an amended tax return See Used as a home but rented less than 15 days , later, for more information. File an amended tax return Limit on deductions. File an amended tax return   Renting a dwelling unit that is considered a home is not a passive activity. File an amended tax return 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. File an amended tax return 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. File an amended tax return Any expenses carried forward to the next year will be subject to any limits that apply for that year. File an amended tax return 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. File an amended tax return   To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 9-1. File an amended tax return Reporting Income and Deductions Property not used for personal purposes. File an amended tax return   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. File an amended tax return Property used for personal purposes. File an amended tax return   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. File an amended tax return Not used as a home. File an amended tax return   If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. File an amended tax return 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 . File an amended tax return The expenses for personal use are not deductible as rental expenses. File an amended tax return   Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses , later. File an amended tax return Used as a home but rented less than 15 days. File an amended tax return   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). File an amended tax return You are not required to report the rental income and rental expenses from this activity. File an amended tax return The expenses, including qualified mortgage interest, property taxes, and any qualified casualty loss will be reported as normally allowed on Schedule A (Form 1040). File an amended tax return See the Instructions for Schedule A (Form 1040) for more information on deducting these expenses. File an amended tax return Used as a home and rented 15 days or more. File an amended tax return   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. File an amended tax return 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 . File an amended tax return The expenses for personal use are not deductible as rental expenses. File an amended tax return   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. File an amended tax return You do not need to use Worksheet 9-1. File an amended tax return   However, if you had a net loss from renting the dwelling unit for the year, your deduction for certain rental expenses is limited. File an amended tax return To figure your deductible rental expenses and any carryover to next year, use Worksheet 9-1. File an amended tax return Depreciation You recover the cost of income-producing property through yearly tax deductions. File an amended tax return You do this by depreciating the property; that is, by deducting some of the cost each year on your tax return. File an amended tax return 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. File an amended tax return You cannot simply deduct your mortgage or principal payments, or the cost of furniture, fixtures, and equipment, as an expense. File an amended tax return You can deduct depreciation only on the part of your property used for rental purposes. File an amended tax return Depreciation reduces your basis for figuring gain or loss on a later sale or exchange. File an amended tax return You may have to use Form 4562 to figure and report your depreciation. File an amended tax return See How To Report Rental Income and Expenses , later. File an amended tax return Alternative minimum tax (AMT). File an amended tax return    If you use accelerated depreciation, you may be subject to the AMT. File an amended tax return 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). File an amended tax return Claiming the correct amount of depreciation. File an amended tax return   You should claim the correct amount of depreciation each tax year. File an amended tax return 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. File an amended tax return   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. File an amended tax return S Individual Income Tax Return. File an amended tax return 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. File an amended tax return See Claiming the correct amount of depreciation in chapter 2 of Publication 527 for more information. File an amended tax return Changing your accounting method to deduct unclaimed depreciation. File an amended tax return   To change your accounting method, you generally must file Form 3115, Application for Change in Accounting Method, to get the consent of the IRS. File an amended tax return In some instances, that consent is automatic. File an amended tax return For more information, see chapter 1 of Publication 946. File an amended tax return Land. File an amended tax return   You cannot depreciate the cost of land because land generally does not wear out, become obsolete, or get used up. File an amended tax return The costs of clearing, grading, planting, and landscaping are usually all part of the cost of land and cannot be depreciated. File an amended tax return More information. File an amended tax return   See Publication 527 for more information about depreciating rental property and see Publication 946 for more information about depreciation. File an amended tax return 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. File an amended tax return You must consider these rules in the order shown below. File an amended tax return At-risk rules. File an amended tax return These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. File an amended tax return This applies only if the real property was placed in service after 1986. File an amended tax return Passive activity limits. File an amended tax return 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. File an amended tax return However, there are exceptions. File an amended tax return 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. File an amended tax return Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. File an amended tax return 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. File an amended tax return 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. File an amended tax return See Publication 925 for more information. File an amended tax return Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. File an amended tax return 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. File an amended tax return Limits on passive activity deductions and credits. File an amended tax return    Deductions or losses from passive activities are limited. File an amended tax return You generally cannot offset income, other than passive income, with losses from passive activities. File an amended tax return Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. File an amended tax return Any excess loss or credit is carried forward to the next tax year. File an amended tax return   For a detailed discussion of these rules, see Publication 925. File an amended tax return    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. File an amended tax return Real estate professionals. File an amended tax return   Rental activities in which you materially participated during the year are not passive activities if, for that year, you were a real estate professional. File an amended tax return For a detailed discussion of the requirements, see Publication 527. File an amended tax return For a detailed discussion of material participation, see Publication 925. File an amended tax return 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. File an amended tax return Instead, follow the rules explained in Personal Use of Dwelling Unit (Including Vacation Home), earlier. File an amended tax return 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. File an amended tax return This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. File an amended tax return 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. File an amended tax return Active participation. File an amended tax return   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. File an amended tax return Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions. File an amended tax return Maximum special allowance. File an amended tax return   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. File an amended tax return   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. File an amended tax return 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. File an amended tax return   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. File an amended tax return More information. File an amended tax return   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. File an amended tax return How To Report Rental Income and Expenses The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). File an amended tax return However, do not use that schedule to report a not-for-profit activity. File an amended tax return See Not Rented for Profit, earlier. File an amended tax return Providing substantial services. File an amended tax return   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). File an amended tax return Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. File an amended tax return For information, see Publication 334, Tax Guide for Small Business. File an amended tax return You also may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. File an amended tax return   Use Form 1065, U. File an amended tax return S. File an amended tax return Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). File an amended tax return Qualified joint venture. File an amended tax return   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. File an amended tax return 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. File an amended tax return For more information, see Publication 527. File an amended tax return Form 1098, Mortgage Interest Statement. File an amended tax return    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. File an amended 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 the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. File an amended tax return Attach a statement to your return showing the name and address of the other person. File an amended tax return In the left margin of Schedule E, next to line 13, enter “See attached. File an amended tax return ” Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. File an amended tax return , you normally report your rental income and expenses on Schedule E, Part I. File an amended tax return List your total income, expenses, and depreciation for each rental property. File an amended tax return Be sure to enter the number of fair rental and personal use days on line 2. File an amended tax return If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. File an amended tax return Complete lines 1 and 2 for each property. File an amended tax return However, fill in lines 23a through 26 on only one Schedule E. File an amended tax return On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. File an amended tax return To find out if you need to attach Form 4562, see Form 4562, in chapter 3 of Publication 527. File an amended tax return If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. File an amended tax return Form 6198, At-Risk Limitations. File an amended tax return See At-Risk Rules , earlier. File an amended tax return Also see Publication 925. File an amended tax return Form 8582, Passive Activity Loss Limitations. File an amended tax return See Passive Activity Limits , earlier. File an amended tax return Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. File an amended tax return 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. File an amended tax return Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). File an amended tax return Worksheet 9-1. File an amended tax return 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. File an amended tax return Did you use the dwelling unit as a home this year? (See Dwelling Unit Used as a Home . File an amended tax return ) 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. File an amended tax return Rental Use Percentage A. File an amended tax return Total days available for rent at fair rental price A. File an amended tax return       B. File an amended tax return Total days available for rent (line A) but not rented B. File an amended tax return       C. File an amended tax return Total days of rental use. File an amended tax return Subtract line B from line A C. File an amended tax return       D. File an amended tax return Total days of personal use (including days rented at less than fair rental price) D. File an amended tax return       E. File an amended tax return Total days of rental and personal use. File an amended tax return Add lines C and D E. File an amended tax return       F. File an amended tax return Percentage of expenses allowed for rental. File an amended tax return Divide line C by line E     F. File an amended tax return   PART II. File an amended tax return Allowable Rental Expenses 1. File an amended tax return Enter rents received 1. File an amended tax return   2a. File an amended tax return Enter the rental portion of deductible home mortgage interest and qualified mortgage insurance premiums (see instructions) 2a. File an amended tax return       b. File an amended tax return Enter the rental portion of real estate taxes b. File an amended tax return       c. File an amended tax return Enter the rental portion of deductible casualty and theft losses (see instructions) c. File an amended tax return       d. File an amended tax return Enter direct rental expenses (see instructions) d. File an amended tax return       e. File an amended tax return Fully deductible rental expenses. File an amended tax return Add lines 2a–2d. File an amended tax return Enter here and  on the appropriate lines on Schedule E (see instructions) 2e. File an amended tax return   3. File an amended tax return Subtract line 2e from line 1. File an amended tax return If zero or less, enter -0- 3. File an amended tax return   4a. File an amended tax return Enter the rental portion of expenses directly related to operating or maintaining  the dwelling unit (such as repairs, insurance, and utilities) 4a. File an amended tax return       b. File an amended tax return Enter the rental portion of excess mortgage interest and qualified mortgage insurance premiums (see instructions) b. File an amended tax return       c. File an amended tax return Carryover of operating expenses from 2012 worksheet c. File an amended tax return       d. File an amended tax return Add lines 4a–4c d. File an amended tax return       e. File an amended tax return Allowable expenses. File an amended tax return Enter the smaller of line 3 or line 4d (see instructions) 4e. File an amended tax return   5. File an amended tax return Subtract line 4e from line 3. File an amended tax return If zero or less, enter -0- 5. File an amended tax return   6a. File an amended tax return Enter the rental portion of excess casualty and theft losses (see instructions) 6a. File an amended tax return       b. File an amended tax return Enter the rental portion of depreciation of the dwelling unit b. File an amended tax return       c. File an amended tax return Carryover of excess casualty losses and depreciation from 2012 worksheet c. File an amended tax return       d. File an amended tax return Add lines 6a–6c d. File an amended tax return       e. File an amended tax return Allowable excess casualty and theft losses and depreciation. File an amended tax return Enter the smaller of  line 5 or line 6d (see instructions) 6e. File an amended tax return   PART III. File an amended tax return Carryover of Unallowed Expenses to Next Year 7a. File an amended tax return Operating expenses to be carried over to next year. File an amended tax return Subtract line 4e from line 4d 7a. File an amended tax return   b. File an amended tax return Excess casualty and theft losses and depreciation to be carried over to next year. File an amended tax return  Subtract line 6e from line 6d b. File an amended tax return   Worksheet 9-1 Instructions. File an amended tax return Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Caution. File an amended tax return 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. File an amended tax return Line 2a. File an amended tax return Figure the mortgage interest on the dwelling unit that you could deduct on Schedule A as if you had not rented the unit. File an amended tax return Do not include interest on a loan that did not benefit the dwelling unit. File an amended tax return 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. File an amended tax return Include interest on a loan used to buy, build, or improve the dwelling unit, or to refinance such a loan. File an amended tax return Include the rental portion of this interest in the total you enter on line 2a of the worksheet. File an amended tax return   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. File an amended tax return See the Schedule A instructions. File an amended tax return However, figure your adjusted gross income (Form 1040, line 38) without your rental income and expenses from the dwelling unit. File an amended tax return See Line 4b to deduct the part of the qualified mortgage insurance premiums not allowed because of the adjusted gross income limit. File an amended tax return Include the rental portion of the amount from Schedule A, line 13, in the total you enter on line 2a of the worksheet. File an amended tax return   Note. File an amended tax return Do not file this Schedule A or use it to figure the amount to deduct on line 13 of that schedule. File an amended tax return Instead, figure the personal portion on a separate Schedule A. File an amended tax return 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. File an amended tax return           Line 2c. File an amended tax return 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. File an amended tax return To do this, complete Section A of Form 4684, Casualties and Thefts, treating the losses as personal losses. File an amended tax return If any of the loss is due to a federally declared disaster, see the Instructions for Form 4684. File an amended tax return On Form 4684, line 17, enter 10% of your adjusted gross income figured without your rental income and expenses from the dwelling unit. File an amended tax return Enter the rental portion of the result from Form 4684, line 18, on line 2c of this worksheet. File an amended tax return   Note. File an amended tax return Do not file this Form 4684 or use it to figure your personal losses on Schedule A. File an amended tax return Instead, figure the personal portion on a separate Form 4684. File an amended tax return           Line 2d. File an amended tax return Enter the total of your rental expenses that are directly related only to the rental activity. File an amended tax return These include interest on loans used for rental activities other than to buy, build, or improve the dwelling unit. File an amended tax return Also include rental agency fees, advertising, office supplies, and depreciation on office equipment used in your rental activity. File an amended tax return           Line 2e. File an amended tax return 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. File an amended tax return Enter the amounts on lines 2a, 2b, 2c, and 2d on the appropriate lines of Schedule E. File an amended tax return           Line 4b. File an amended tax return 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. File an amended tax return 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. File an amended tax return Do not include interest on a loan that did not benefit the dwelling unit (as explained in the line 2a instructions). File an amended tax return           Line 4e. File an amended tax return 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. File an amended tax return *           Line 6a. File an amended tax return To find the rental portion of excess casualty and theft losses, use the Form 4684 you prepared for line 2c of this worksheet. File an amended tax return   A. File an amended tax return Enter the amount from Form 4684, line 10       B. File an amended tax return Enter the rental portion of line A       C. File an amended tax return Enter the amount from line 2c of this worksheet       D. File an amended tax return Subtract line C from line B. File an amended tax return Enter the result here and on line 6a of this worksheet               Line 6e. File an amended tax return 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. File an amended tax return * *Allocating the limited deduction. File an amended tax return 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. File an amended tax return Enter the amount you allocate to each expense on the appropriate line of Schedule E, Part I. File an amended tax return Prev  Up  Next   Home   More Online Publications