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File taxes 2008 Publication 530 - Main Content Table of Contents What You Can and Cannot DeductHardest Hit Fund and Emergency Homeowners' Loan Programs Real Estate Taxes Sales Taxes Home Mortgage Interest Mortgage Insurance Premiums Mortgage Interest CreditFiguring the Credit BasisFiguring Your Basis Adjusted Basis Keeping Records How To Get Tax HelpLow Income Taxpayer Clinics What You Can and Cannot Deduct To deduct expenses of owning a home, you must file Form 1040, U. File taxes 2008 S. File taxes 2008 Individual Income Tax Return, and itemize your deductions on Schedule A (Form 1040). File taxes 2008 If you itemize, you cannot take the standard deduction. File taxes 2008 This section explains what expenses you can deduct as a homeowner. File taxes 2008 It also points out expenses that you cannot deduct. File taxes 2008 There are four primary discussions: real estate taxes, sales taxes, home mortgage interest, and mortgage insurance premiums. File taxes 2008 Generally, your real estate taxes, home mortgage interest, and mortgage insurance premiums are included in your house payment. File taxes 2008 Your house payment. File taxes 2008   If you took out a mortgage (loan) to finance the purchase of your home, you probably have to make monthly house payments. File taxes 2008 Your house payment may include several costs of owning a home. File taxes 2008 The only costs you can deduct are real estate taxes actually paid to the taxing authority, interest that qualifies as home mortgage interest, and mortgage insurance premiums. File taxes 2008 These are discussed in more detail later. File taxes 2008   Some nondeductible expenses that may be included in your house payment include: Fire or homeowner's insurance premiums, and The amount applied to reduce the principal of the mortgage. File taxes 2008 Minister's or military housing allowance. File taxes 2008   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you still can deduct your real estate taxes and your home mortgage interest. File taxes 2008 You do not have to reduce your deductions by your nontaxable allowance. File taxes 2008 For more information see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers, and Publication 3, Armed Forces' Tax Guide. File taxes 2008 Nondeductible payments. File taxes 2008   You cannot deduct any of the following items. File taxes 2008 Insurance (other than mortgage insurance premiums), including fire and comprehensive coverage, and title insurance. File taxes 2008 Wages you pay for domestic help. File taxes 2008 Depreciation. File taxes 2008 The cost of utilities, such as gas, electricity, or water. File taxes 2008 Most settlement costs. File taxes 2008 See Settlement or closing costs under Cost as Basis, later, for more information. File taxes 2008 Forfeited deposits, down payments, or earnest money. File taxes 2008 Hardest Hit Fund and Emergency Homeowners' Loan Programs You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. File taxes 2008 You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. File taxes 2008 You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. File taxes 2008 If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098-MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received), box 4 (mortgage insurance premiums) and box 5 (real property taxes). File taxes 2008 However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. File taxes 2008 Real Estate Taxes Most state and local governments charge an annual tax on the value of real property. File taxes 2008 This is called a real estate tax. File taxes 2008 You can deduct the tax if it is assessed uniformly at a like rate on all real property throughout the community. File taxes 2008 The proceeds must be for general community or governmental purposes and not be a payment for a special privilege granted or service rendered to you. File taxes 2008 Deductible Real Estate Taxes You can deduct real estate taxes imposed on you. File taxes 2008 You must have paid them either at settlement or closing, or to a taxing authority (either directly or through an escrow account) during the year. File taxes 2008 If you own a cooperative apartment, see Special Rules for Cooperatives , later. File taxes 2008 Where to deduct real estate taxes. File taxes 2008   Enter the amount of your deductible real estate taxes on Schedule A (Form 1040), line 6. File taxes 2008 Real estate taxes paid at settlement or closing. File taxes 2008   Real estate taxes are generally divided so that you and the seller each pay taxes for the part of the property tax year you owned the home. File taxes 2008 Your share of these taxes is fully deductible if you itemize your deductions. File taxes 2008 Division of real estate taxes. File taxes 2008   For federal income tax purposes, the seller is treated as paying the property taxes up to, but not including, the date of sale. File taxes 2008 You (the buyer) are treated as paying the taxes beginning with the date of sale. File taxes 2008 This applies regardless of the lien dates under local law. File taxes 2008 Generally, this information is included on the settlement statement you get at closing. File taxes 2008   You and the seller each are considered to have paid your own share of the taxes, even if one or the other paid the entire amount. File taxes 2008 You each can deduct your own share, if you itemize deductions, for the year the property is sold. File taxes 2008 Example. File taxes 2008 You bought your home on September 1. File taxes 2008 The property tax year (the period to which the tax relates) in your area is the calendar year. File taxes 2008 The tax for the year was $730 and was due and paid by the seller on August 15. File taxes 2008 You owned your new home during the property tax year for 122 days (September 1 to December 31, including your date of purchase). File taxes 2008 You figure your deduction for real estate taxes on your home as follows. File taxes 2008 1. File taxes 2008 Enter the total real estate taxes for the real property tax year $730 2. File taxes 2008 Enter the number of days in the property tax year that you owned the property 122 3. File taxes 2008 Divide line 2 by 365 . File taxes 2008 3342 4. File taxes 2008 Multiply line 1 by line 3. File taxes 2008 This is your deduction. File taxes 2008 Enter it on Schedule A (Form 1040), line 6 $244   You can deduct $244 on your return for the year if you itemize your deductions. File taxes 2008 You are considered to have paid this amount and can deduct it on your return even if, under the contract, you did not have to reimburse the seller. File taxes 2008 Delinquent taxes. File taxes 2008   Delinquent taxes are unpaid taxes that were imposed on the seller for an earlier tax year. File taxes 2008 If you agree to pay delinquent taxes when you buy your home, you cannot deduct them. File taxes 2008 You treat them as part of the cost of your home. File taxes 2008 See Real estate taxes , later, under Basis. File taxes 2008 Escrow accounts. File taxes 2008   Many monthly house payments include an amount placed in escrow (put in the care of a third party) for real estate taxes. File taxes 2008 You may not be able to deduct the total you pay into the escrow account. File taxes 2008 You can deduct only the real estate taxes that the lender actually paid from escrow to the taxing authority. File taxes 2008 Your real estate tax bill will show this amount. File taxes 2008 Refund or rebate of real estate taxes. File taxes 2008   If you receive a refund or rebate of real estate taxes this year for amounts you paid this year, you must reduce your real estate tax deduction by the amount refunded to you. File taxes 2008 If the refund or rebate was for real estate taxes paid for a prior year, you may have to include some or all of the refund in your income. File taxes 2008 For more information, see Recoveries in Publication 525, Taxable and Nontaxable Income. File taxes 2008 Items You Cannot Deduct as Real Estate Taxes The following items are not deductible as real estate taxes. File taxes 2008 Charges for services. File taxes 2008   An itemized charge for services to specific property or people is not a tax, even if the charge is paid to the taxing authority. File taxes 2008 You cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged for trash collection), or A flat fee charged for a single service provided by your local government (such as a $30 charge for mowing your lawn because it had grown higher than permitted under a local ordinance). File taxes 2008    You must look at your real estate tax bill to decide if any nondeductible itemized charges, such as those listed above, are included in the bill. File taxes 2008 If your taxing authority (or lender) does not furnish you a copy of your real estate tax bill, ask for it. File taxes 2008 Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. File taxes 2008 Assessments for local benefits. File taxes 2008   You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. File taxes 2008 Local benefits include the construction of streets, sidewalks, or water and sewer systems. File taxes 2008 You must add these amounts to the basis of your property. File taxes 2008   You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. File taxes 2008 An example is a charge to repair an existing sidewalk and any interest included in that charge. File taxes 2008   If only a part of the assessment is for maintenance, repair, or interest charges, you must be able to show the amount of that part to claim the deduction. File taxes 2008 If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. File taxes 2008   An assessment for a local benefit may be listed as an item in your real estate tax bill. File taxes 2008 If so, use the rules in this section to find how much of it, if any, you can deduct. File taxes 2008 Transfer taxes (or stamp taxes). File taxes 2008   You cannot deduct transfer taxes and similar taxes and charges on the sale of a personal home. File taxes 2008 If you are the buyer and you pay them, include them in the cost basis of the property. File taxes 2008 If you are the seller and you pay them, they are expenses of the sale and reduce the amount realized on the sale. File taxes 2008 Homeowners association assessments. File taxes 2008   You cannot deduct these assessments because the homeowners association, rather than a state or local government, imposes them. File taxes 2008 Special Rules for Cooperatives If you own a cooperative apartment, some special rules apply to you, though you generally receive the same tax treatment as other homeowners. File taxes 2008 As an owner of a cooperative apartment, you own shares of stock in a corporation that owns or leases housing facilities. File taxes 2008 You can deduct your share of the corporation's deductible real estate taxes if the cooperative housing corporation meets the following conditions: The corporation has only one class of stock outstanding, Each stockholder, solely because of ownership of the stock, can live in a house, apartment, or house trailer owned or leased by the corporation, No stockholder can receive any distribution out of capital, except on a partial or complete liquidation of the corporation, and At least one of the following: At least 80% of the corporation's gross income for the tax year was paid by the tenant-stockholders. File taxes 2008 For this purpose, gross income means all income received during the entire tax year, including any received before the corporation changed to cooperative ownership. File taxes 2008 At least 80% of the total square footage of the corporation's property must be available for use by the tenant-stockholders during the entire tax year. File taxes 2008 At least 90% of the expenditures paid or incurred by the corporation were used for the acquisition, construction, management, maintenance, or care of the property for the benefit of the tenant-shareholders during the entire tax year. File taxes 2008 Tenant-stockholders. File taxes 2008   A tenant-stockholder can be any entity (such as a corporation, trust, estate, partnership, or association) as well as an individual. File taxes 2008 The tenant-stockholder does not have to live in any of the cooperative's dwelling units. File taxes 2008 The units that the tenant-stockholder has the right to occupy can be rented to others. File taxes 2008 Deductible taxes. File taxes 2008   You figure your share of real estate taxes in the following way. File taxes 2008 Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. File taxes 2008 Multiply the corporation's deductible real estate taxes by the number you figured in (1). File taxes 2008 This is your share of the real estate taxes. File taxes 2008   Generally, the corporation will tell you your share of its real estate tax. File taxes 2008 This is the amount you can deduct if it reasonably reflects the cost of real estate taxes for your dwelling unit. File taxes 2008 Refund of real estate taxes. File taxes 2008   If the corporation receives a refund of real estate taxes it paid in an earlier year, it must reduce the amount of real estate taxes paid this year when it allocates the tax expense to you. File taxes 2008 Your deduction for real estate taxes the corporation paid this year is reduced by your share of the refund the corporation received. File taxes 2008 Sales Taxes Generally, you can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040). File taxes 2008 Deductible sales taxes may include sales taxes paid on your home (including mobile and prefabricated), or home building materials if the tax rate was the same as the general sales tax rate. File taxes 2008 For information on figuring your deduction, see the Instructions for Schedule A (Form 1040). File taxes 2008 If you elect to deduct the sales taxes paid on your home, or home building materials, you cannot include them as part of your cost basis in the home. File taxes 2008 Home Mortgage Interest This section of the publication gives you basic information about home mortgage interest, including information on interest paid at settlement, points, and Form 1098, Mortgage Interest Statement. File taxes 2008 Most home buyers take out a mortgage (loan) to buy their home. File taxes 2008 They then make monthly payments to either the mortgage holder or someone collecting the payments for the mortgage holder. File taxes 2008 Usually, you can deduct the entire part of your payment that is for mortgage interest, if you itemize your deductions on Schedule A (Form 1040). File taxes 2008 However, your deduction may be limited if: Your total mortgage balance is more than $1 million ($500,000 if married filing separately), or You took out a mortgage for reasons other than to buy, build, or improve your home. File taxes 2008 If either of these situations applies to you, see Publication 936 for more information. File taxes 2008 Also see Publication 936 if you later refinance your mortgage or buy a second home. File taxes 2008 Refund of home mortgage interest. File taxes 2008   If you receive a refund of home mortgage interest that you deducted in an earlier year and that reduced your tax, you generally must include the refund in income in the year you receive it. File taxes 2008 For more information, see Recoveries in Publication 525. File taxes 2008 The amount of the refund will usually be shown on the mortgage interest statement you receive from your mortgage lender. File taxes 2008 See Mortgage Interest Statement , later. File taxes 2008 Deductible Mortgage Interest To be deductible, the interest you pay must be on a loan secured by your main home or a second home. File taxes 2008 The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. File taxes 2008 Prepaid interest. File taxes 2008   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. File taxes 2008 Generally, you can deduct in each year only the interest that qualifies as home mortgage interest for that year. File taxes 2008 An exception (discussed later) applies to points. File taxes 2008 Late payment charge on mortgage payment. File taxes 2008   You can deduct as home mortgage interest a late payment charge if it was not for a specific service in connection with your mortgage loan. File taxes 2008 Mortgage prepayment penalty. File taxes 2008   If you pay off your home mortgage early, you may have to pay a penalty. File taxes 2008 You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. File taxes 2008 Ground rent. File taxes 2008   In some states (such as Maryland), you may buy your home subject to a ground rent. File taxes 2008 A ground rent is an obligation you assume to pay a fixed amount per year on the property. File taxes 2008 Under this arrangement, you are leasing (rather than buying) the land on which your home is located. File taxes 2008 Redeemable ground rents. File taxes 2008   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. File taxes 2008 The ground rent is a redeemable ground rent only if all of the following are true. File taxes 2008 Your lease, including renewal periods, is for more than 15 years. File taxes 2008 You can freely assign the lease. File taxes 2008 You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specified amount. File taxes 2008 The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. File taxes 2008   Payments made to end the lease and buy the lessor's entire interest in the land are not redeemable ground rents. File taxes 2008 You cannot deduct them. File taxes 2008 Nonredeemable ground rents. File taxes 2008   Payments on a nonredeemable ground rent are not mortgage interest. File taxes 2008 You can deduct them as rent only if they are a business expense or if they are for rental property. File taxes 2008 Cooperative apartment. File taxes 2008   You can usually treat the interest on a loan you took out to buy stock in a cooperative housing corporation as home mortgage interest if you own a cooperative apartment, and the cooperative housing corporation meets the conditions described earlier under Special Rules for Cooperatives . File taxes 2008 In addition, you can treat as home mortgage interest your share of the corporation's deductible mortgage interest. File taxes 2008 Figure your share of mortgage interest the same way that is shown for figuring your share of real estate taxes in the Example under Division of real estate taxes, earlier. File taxes 2008 For more information on cooperatives, see Special Rule for Tenant-Stockholders in Cooperative Housing Corporations in Publication 936. File taxes 2008 Refund of cooperative's mortgage interest. File taxes 2008   You must reduce your mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. File taxes 2008 The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. File taxes 2008   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. File taxes 2008 Mortgage Interest Paid at Settlement One item that normally appears on a settlement or closing statement is home mortgage interest. File taxes 2008 You can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). File taxes 2008 This amount should be included in the mortgage interest statement provided by your lender. File taxes 2008 See the discussion under Mortgage Interest Statement , later. File taxes 2008 Also, if you pay interest in advance, see Prepaid interest , earlier, and Points , next. File taxes 2008 Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. File taxes 2008 Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points. File taxes 2008 A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. File taxes 2008 See Points paid by the seller , later. File taxes 2008 General rule. File taxes 2008   You cannot deduct the full amount of points in the year paid. File taxes 2008 They are prepaid interest, so you generally must deduct them over the life (term) of the mortgage. File taxes 2008 Exception. File taxes 2008   You can deduct the full amount of points in the year paid if you meet all the following tests. File taxes 2008 Your loan is secured by your main home. File taxes 2008 (Generally, your main home is the one you live in most of the time. File taxes 2008 ) Paying points is an established business practice in the area where the loan was made. File taxes 2008 The points paid were not more than the points generally charged in that area. File taxes 2008 You use the cash method of accounting. File taxes 2008 This means you report income in the year you receive it and deduct expenses in the year you pay them. File taxes 2008 Most individuals use this method. File taxes 2008 The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. File taxes 2008 The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. File taxes 2008 The funds you provided are not required to have been applied to the points. File taxes 2008 They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. File taxes 2008 You cannot have borrowed these funds. File taxes 2008 You use your loan to buy or build your main home. File taxes 2008 The points were computed as a percentage of the principal amount of the mortgage. File taxes 2008 The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. File taxes 2008 The points may be shown as paid from either your funds or the seller's. File taxes 2008 Note. File taxes 2008 If you meet all of the tests listed above and you itemize your deductions in the year you get the loan, you can either deduct the full amount of points in the year paid or deduct them over the life of the loan, beginning in the year you get the loan. File taxes 2008 If you do not itemize your deductions in the year you get the loan, you can spread the points over the life of the loan and deduct the appropriate amount in each future year, if any, when you do itemize your deductions. File taxes 2008 Home improvement loan. File taxes 2008   You can also fully deduct in the year paid points paid on a loan to improve your main home, if you meet the first six tests listed earlier. File taxes 2008 Refinanced loan. File taxes 2008   If you use part of the refinanced mortgage proceeds to improve your main home and you meet the first six tests listed earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. File taxes 2008 You can deduct the rest of the points over the life of the loan. File taxes 2008 Points not fully deductible in year paid. File taxes 2008    If you do not qualify under the exception to deduct the full amount of points in the year paid (or choose not to do so), see Points in Publication 936 for the rules on when and how much you can deduct. File taxes 2008 Figure A. File taxes 2008   You can use Figure A, next, as a quick guide to see whether your points are fully deductible in the year paid. File taxes 2008    Please click here for the text description of the image. File taxes 2008 Figure A. File taxes 2008 Are my points fully deductible this year? Amounts charged for services. File taxes 2008   Amounts charged by the lender for specific services connected to the loan are not interest. File taxes 2008 Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. File taxes 2008 You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. File taxes 2008 For information about the tax treatment of these amounts and other settlement fees and closing costs, see Basis , later. File taxes 2008 Points paid by the seller. File taxes 2008   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. File taxes 2008 Treatment by seller. File taxes 2008   The seller cannot deduct these fees as interest. File taxes 2008 However, they are a selling expense that reduces the seller's amount realized. File taxes 2008 See Publication 523 for more information. File taxes 2008 Treatment by buyer. File taxes 2008   The buyer treats seller-paid points as if he or she had paid them. File taxes 2008 If all the tests listed earlier under Exception are met, the buyer can deduct the points in the year paid. File taxes 2008 If any of those tests are not met, the buyer must deduct the points over the life of the loan. File taxes 2008   The buyer must also reduce the basis of the home by the amount of the seller-paid points. File taxes 2008 For more information about the basis of your home, see Basis , later. File taxes 2008 Funds provided are less than points. File taxes 2008   If you meet all the tests listed earlier under Exception except that the funds you provided were less than the points charged to you (test 6), you can deduct the points in the year paid up to the amount of funds you provided. File taxes 2008 In addition, you can deduct any points paid by the seller. File taxes 2008 Example 1. File taxes 2008 When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). File taxes 2008 You meet all the tests for deducting points in the year paid (see Exception , earlier), except the only funds you provided were a $750 down payment. File taxes 2008 Of the $1,000 you were charged for points, you can deduct $750 in the year paid. File taxes 2008 You spread the remaining $250 over the life of the mortgage. File taxes 2008 Example 2. File taxes 2008 The facts are the same as in Example 1 , except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. File taxes 2008 In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). File taxes 2008 You spread the remaining $250 over the life of the mortgage. File taxes 2008 You must reduce the basis of your home by the $1,000 paid by the seller. File taxes 2008 Excess points. File taxes 2008   If you meet all the tests under Exception , earlier, except that the points paid were more than are generally charged in your area (test 3), you can deduct in the year paid only the points that are generally charged. File taxes 2008 You must spread any additional points over the life of the mortgage. File taxes 2008 Mortgage ending early. File taxes 2008   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. File taxes 2008 A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. File taxes 2008 Example. File taxes 2008 Dan paid $3,000 in points in 2006 that he had to spread out over the 15-year life of the mortgage. File taxes 2008 He had deducted $1,400 of these points through 2012. File taxes 2008 Dan prepaid his mortgage in full in 2013. File taxes 2008 He can deduct the remaining $1,600 of points in 2013. File taxes 2008 Exception. File taxes 2008   If you refinance the mortgage with the same lender, you cannot deduct any remaining points for the year. File taxes 2008 Instead, deduct them over the term of the new loan. File taxes 2008 Form 1098. File taxes 2008   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your deductible points paid during the year. File taxes 2008 See Mortgage Interest Statement , later. File taxes 2008 Where To Deduct Home Mortgage Interest Enter on Schedule A (Form 1040), line 10, the home mortgage interest and points reported to you on Form 1098 (discussed next). File taxes 2008 If you did not receive a Form 1098, enter your deductible interest on line 11, and any deductible points on line 12. File taxes 2008 See Table 1 below for a summary of where to deduct home mortgage interest and real estate taxes. File taxes 2008 If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and social security number (SSN) or employer identification number (EIN) on the dotted lines next to line 11. File taxes 2008 The seller must give you this number and you must give the seller your SSN. File taxes 2008 Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. File taxes 2008 Failure to meet either of these requirements may result in a $50 penalty for each failure. File taxes 2008 Table 1. File taxes 2008 Where To Deduct Interest and Taxes Paid on Your Home See the text for information on what expenses are eligible. File taxes 2008 IF you are eligible to deduct . File taxes 2008 . File taxes 2008 . File taxes 2008 THEN report the amount  on Schedule A (Form 1040) . File taxes 2008 . File taxes 2008 . File taxes 2008 real estate taxes line 6. File taxes 2008 home mortgage interest and points reported on Form 1098 line 10. File taxes 2008 home mortgage interest not reported on  Form 1098 line 11. File taxes 2008 points not reported on Form 1098 line 12. File taxes 2008 qualified mortgage insurance premiums line 13. File taxes 2008 Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage to a mortgage holder in the course of that holder's trade or business, you should receive a Form 1098 or similar statement from the mortgage holder. File taxes 2008 The statement will show the total interest paid on your mortgage during the year. File taxes 2008 If you bought a main home during the year, it also will show the deductible points you paid and any points you can deduct that were paid by the person who sold you your home. File taxes 2008 See Points , earlier. File taxes 2008 The interest you paid at settlement should be included on the statement. File taxes 2008 If it is not, add the interest from the settlement sheet that qualifies as home mortgage interest to the total shown on Form 1098 or similar statement. File taxes 2008 Put the total on Schedule A (Form 1040), line 10, and attach a statement to your return explaining the difference. File taxes 2008 Write “See attached” to the right of line 10. File taxes 2008 A mortgage holder can be a financial institution, a governmental unit, or a cooperative housing corporation. File taxes 2008 If a statement comes from a cooperative housing corporation, it generally will show your share of interest. File taxes 2008 Your mortgage interest statement for 2013 should be provided or sent to you by January 31, 2014. File taxes 2008 If it is mailed, you should allow adequate time to receive it before contacting the mortgage holder. File taxes 2008 A copy of this form will be sent to the IRS also. File taxes 2008 Example. File taxes 2008 You bought a new home on May 3. File taxes 2008 You paid no points on the purchase. File taxes 2008 During the year, you made mortgage payments which included $4,480 deductible interest on your new home. File taxes 2008 The settlement sheet for the purchase of the home included interest of $620 for 29 days in May. File taxes 2008 The mortgage statement you receive from the lender includes total interest of $5,100 ($4,480 + $620). File taxes 2008 You can deduct the $5,100 if you itemize your deductions. File taxes 2008 Refund of overpaid interest. File taxes 2008   If you receive a refund of mortgage interest you overpaid in a prior year, you generally will receive a Form 1098 showing the refund in box 3. File taxes 2008 Generally, you must include the refund in income in the year you receive it. File taxes 2008 See Refund of home mortgage interest , earlier, under Home Mortgage Interest. File taxes 2008 More than one borrower. File taxes 2008   If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. File taxes 2008 Show how much of the interest each of you paid, and give the name and address of the person who received the form. File taxes 2008 Deduct your share of the interest on Schedule A (Form 1040), line 11, and write “See attached” to the right of that line. File taxes 2008 Mortgage Insurance Premiums You may be able to take an itemized deduction on Schedule A (Form 1040), line 13, for premiums you pay or accrue during 2013 for qualified mortgage insurance in connection with home acquisition debt on your qualified home. File taxes 2008 Mortgage insurance premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as an itemized deduction. File taxes 2008 Qualified Mortgage Insurance Qualified mortgage insurance is mortgage insurance provided by the Veterans Administration, the Federal Housing Administration, or the Rural Housing Administration, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). File taxes 2008 Prepaid mortgage insurance premiums. File taxes 2008   If you paid premiums that are allocable to periods after 2013, you must allocate them over the shorter of: The stated term of the mortgage, or 84 months, beginning with the month the insurance was obtained. File taxes 2008 The premiums are treated as paid in the year to which they were allocated. File taxes 2008 If the mortgage is satisfied before its term, no deduction is allowed for the unamortized balance. File taxes 2008 See Publication 936 for details. File taxes 2008 Exception for certain mortgage insurance. File taxes 2008   The allocation rules, explained above, do not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Service. File taxes 2008 Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home. File taxes 2008 It also must be secured by that home. File taxes 2008 If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. File taxes 2008 Home acquisition debt limit. File taxes 2008   The total amount you can treat as home acquisition debt at any time on your home cannot be more than $1 million ($500,000 if married filing separately). File taxes 2008 Discharges of qualified principal residence indebtedness. File taxes 2008   You can exclude from gross income any discharges of qualified principal residence indebtedness made after 2006 and before 2014. File taxes 2008 You must reduce the basis of your principal residence (but not below zero) by the amount you exclude. File taxes 2008 Principal residence. File taxes 2008   Your principal residence is the home where you ordinarily live most of the time. File taxes 2008 You can have only one principal residence at any one time. File taxes 2008 Qualified principal residence indebtedness. File taxes 2008   This is a mortgage that you took out to buy, build, or substantially improve your principal residence and that is secured by that residence. File taxes 2008 If the amount of your original mortgage is more than the cost of your principal residence plus the cost of substantial improvements, qualified principal residence indebtedness cannot be more than the cost of your principal residence plus improvements. File taxes 2008   Any debt secured by your principal residence that you use to refinance qualified principal residence indebtedness is qualified principal residence indebtedness up to the amount of your old mortgage principal just before the refinancing. File taxes 2008 Additional debt incurred to substantially improve your principal residence is also qualified principal residence indebtedness. File taxes 2008 Amount you can exclude. File taxes 2008   You can only exclude debt discharged after 2006 and before 2014. File taxes 2008 The most you can exclude is $2 million ($1 million if married filing separately). File taxes 2008 You cannot exclude any amount that was discharged because of services performed for the lender or on account of any other factor not directly related either to a decline in the value of your residence or to your financial condition. File taxes 2008 Ordering rule. File taxes 2008   If only a part of a loan is qualified principal residence indebtedness, you can exclude only the amount of the discharge that is more than the amount of the loan (immediately before the discharge) that is not qualified principal residence indebtedness. File taxes 2008 Qualified Home This means your main home or your second home. File taxes 2008 A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. File taxes 2008 Main home. File taxes 2008   You can have only one main home at any one time. File taxes 2008 This is the home where you ordinarily live most of the time. File taxes 2008 Second home and other special situations. File taxes 2008   If you have a second home, use part of your home for other than residential living (such as a home office), rent out part of your home, or are having your home constructed, see Qualified Home in Publication 936. File taxes 2008 Limit on Deduction If your adjusted gross income (AGI) on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are deductible is reduced and may be eliminated. File taxes 2008 See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. File taxes 2008 If your AGI is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. File taxes 2008 Form 1098. File taxes 2008   The amount of mortgage insurance premiums you paid during 2013 should be reported in box 4. File taxes 2008 See Form 1098, Mortgage Interest Statement in Publication 936. File taxes 2008 Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals afford home ownership. File taxes 2008 If you qualify, you can claim the credit on Form 8396 each year for part of the home mortgage interest you pay. File taxes 2008 Who qualifies. File taxes 2008   You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate (MCC) from your state or local government. File taxes 2008 Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. File taxes 2008 The MCC will show the certificate credit rate you will use to figure your credit. File taxes 2008 It also will show the certified indebtedness amount. File taxes 2008 Only the interest on that amount qualifies for the credit. File taxes 2008 See Figuring the Credit , later. File taxes 2008 You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home. File taxes 2008 Contact your state or local housing finance agency for information about the availability of MCCs in your area. File taxes 2008 How to claim the credit. File taxes 2008   To claim the credit, complete Form 8396 and attach it to your Form 1040 or Form 1040NR, U. File taxes 2008 S. File taxes 2008 Nonresident Alien Income Tax Return. File taxes 2008 Include the credit in your total for Form 1040, line 53, or Form 1040NR, line 50; be sure to check box c and write “Form 8396” on that line. File taxes 2008 Reducing your home mortgage interest deduction. File taxes 2008   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. File taxes 2008 You must do this even if part of that amount is to be carried forward to 2014. File taxes 2008 Selling your home. File taxes 2008   If you purchase a home after 1990 using an MCC, and you sell that home within 9 years, you may have to recapture (repay) all or part of the benefit you received from the MCC program. File taxes 2008 For additional information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, in Publication 523. File taxes 2008 Figuring the Credit Figure your credit on Form 8396. File taxes 2008 Mortgage not more than certified indebtedness. File taxes 2008   If your mortgage loan amount is equal to (or smaller than) the certified indebtedness amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. File taxes 2008 Mortgage more than certified indebtedness. File taxes 2008   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. File taxes 2008 To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. File taxes 2008 Certified indebtedness amount on your MCC Original amount of your mortgage   The fraction will not change as long as you are entitled to take the mortgage interest credit. File taxes 2008 Example. File taxes 2008 Emily bought a home this year. File taxes 2008 Her mortgage loan is $125,000. File taxes 2008 The certified indebtedness amount on her MCC is $100,000. File taxes 2008 She paid $7,500 interest this year. File taxes 2008 Emily figures the interest to enter on Form 8396, line 1, as follows:   $100,000 = 80% (. File taxes 2008 80)       $125,000       $7,500 x . File taxes 2008 80 = $6,000   Emily enters $6,000 on Form 8396, line 1. File taxes 2008 In each later year, she will figure her credit using only 80% of the interest she pays for that year. File taxes 2008 Limits Two limits may apply to your credit. File taxes 2008 A limit based on the credit rate, and A limit based on your tax. File taxes 2008 Limit based on credit rate. File taxes 2008   If the certificate credit rate is higher than 20%, the credit you are allowed cannot be more than $2,000. File taxes 2008 Limit based on tax. File taxes 2008   After applying the limit based on the credit rate, your credit generally cannot be more than your tax liability. File taxes 2008 See the Credit Limit Worksheet in the Form 8396 instructions to calculate the limit based on tax. File taxes 2008 Dividing the Credit If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, the credit must be divided based on the interest held by each person. File taxes 2008 Example. File taxes 2008 John and his brother, George, were issued an MCC. File taxes 2008 They used it to get a mortgage on their main home. File taxes 2008 John has a 60% ownership interest in the home, and George has a 40% ownership interest in the home. File taxes 2008 John paid $5,400 mortgage interest this year and George paid $3,600. File taxes 2008 The MCC shows a credit rate of 25% and a certified indebtedness amount of $130,000. File taxes 2008 The loan amount (mortgage) on their home is $120,000. File taxes 2008 The credit is limited to $2,000 because the credit rate is more than 20%. File taxes 2008 John figures the credit by multiplying the mortgage interest he paid this year ($5,400) by the certificate credit rate (25%) for a total of $1,350. File taxes 2008 His credit is limited to $1,200 ($2,000 × 60%). File taxes 2008 George figures the credit by multiplying the mortgage interest he paid this year ($3,600) by the certificate credit rate (25%) for a total of $900. File taxes 2008 His credit is limited to $800 ($2,000 × 40%). File taxes 2008 Carryforward If your allowable credit is reduced because of the limit based on your tax, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. File taxes 2008 Example. File taxes 2008 You receive a mortgage credit certificate from State X. File taxes 2008 This year, your regular tax liability is $1,100, you owe no alternative minimum tax, and your mortgage interest credit is $1,700. File taxes 2008 You claim no other credits. File taxes 2008 Your unused mortgage interest credit for this year is $600 ($1,700 − $1,100). File taxes 2008 You can carry forward this amount to the next 3 years or until used, whichever comes first. File taxes 2008 Credit rate more than 20%. File taxes 2008   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). File taxes 2008 Example. File taxes 2008 In the earlier example under Dividing the Credit , John and George used the entire $2,000 credit. File taxes 2008 The excess   John $1,350 − $1,200 = $150     George $900 − $800 = $100   $150 for John ($1,350 − $1,200) and $100 for George ($900 − $800) cannot be carried forward to future years, despite the respective tax liabilities for John and George. File taxes 2008 Refinancing If you refinance your original mortgage loan on which you had been given an MCC, you must get a new MCC to be able to claim the credit on the new loan. File taxes 2008 The amount of credit you can claim on the new loan may change. File taxes 2008 Table 2 below summarizes how to figure your credit if you refinance your original mortgage loan. File taxes 2008 Table 2. File taxes 2008 Effect of Refinancing on Your Credit IF you get a new (reissued) MCC and the amount of your new mortgage is . File taxes 2008 . File taxes 2008 . File taxes 2008 THEN the interest you claim on Form 8396, line 1, is* . File taxes 2008 . File taxes 2008 . File taxes 2008 smaller than or equal to the certified indebtedness amount on the new MCC all the interest paid during the year on your new mortgage. File taxes 2008 larger than the certified indebtedness amount on the new MCC interest paid during the year on your new mortgage multiplied by the following fraction. File taxes 2008         certified indebtedness  amount on your new MCC       original amount of your  mortgage   *The credit using the new MCC cannot be more than the credit using the old MCC. File taxes 2008  See New MCC cannot increase your credit above. File taxes 2008 An issuer may reissue an MCC after you refinance your mortgage. File taxes 2008 If you did not get a new MCC, you may want to contact the state or local housing finance agency that issued your original MCC for information about whether you can get a reissued MCC. File taxes 2008 Year of refinancing. File taxes 2008   In the year of refinancing, add the applicable amount of interest paid on the old mortgage and the applicable amount of interest paid on the new mortgage, and enter the total on Form 8396, line 1. File taxes 2008   If your new MCC has a credit rate different from the rate on the old MCC, you must attach a statement to Form 8396. File taxes 2008 The statement must show the calculation for lines 1, 2, and 3 for the part of the year when the old MCC was in effect. File taxes 2008 It must show a separate calculation for the part of the year when the new MCC was in effect. File taxes 2008 Combine the amounts from both calculations for line 3, enter the total on line 3 of the form, and write “See attached” on the dotted line next to line 2. File taxes 2008 New MCC cannot increase your credit. File taxes 2008   The credit that you claim with your new MCC cannot be more than the credit that you could have claimed with your old MCC. File taxes 2008   In most cases, the agency that issues your new MCC will make sure that it does not increase your credit. File taxes 2008 However, if either your old loan or your new loan has a variable (adjustable) interest rate, you will need to check this yourself. File taxes 2008 In that case, you will need to know the amount of the credit you could have claimed using the old MCC. File taxes 2008   There are two methods for figuring the credit you could have claimed. File taxes 2008 Under one method, you figure the actual credit that would have been allowed. File taxes 2008 This means you use the credit rate on the old MCC and the interest you would have paid on the old loan. File taxes 2008   If your old loan was a variable rate mortgage, you can use another method to determine the credit that you could have claimed. File taxes 2008 Under this method, you figure the credit using a payment schedule of a hypothetical self-amortizing mortgage with level payments projected to the final maturity date of the old mortgage. File taxes 2008 The interest rate of the hypothetical mortgage is the annual percentage rate (APR) of the new mortgage for purposes of the Federal Truth in Lending Act. File taxes 2008 The principal of the hypothetical mortgage is the remaining outstanding balance of the certified mortgage indebtedness shown on the old MCC. File taxes 2008    You must choose one method and use it consistently beginning with the first tax year for which you claim the credit based on the new MCC. File taxes 2008    As part of your tax records, you should keep your old MCC and the schedule of payments for your old mortgage. File taxes 2008 Basis Basis is your starting point for figuring a gain or loss if you later sell your home, or for figuring depreciation if you later use part of your home for business purposes or for rent. File taxes 2008 While you own your home, you may add certain items to your basis. File taxes 2008 You may subtract certain other items from your basis. File taxes 2008 These items are called adjustments to basis and are explained later under Adjusted Basis . File taxes 2008 It is important that you understand these terms when you first acquire your home because you must keep track of your basis and adjusted basis during the period you own your home. File taxes 2008 You also must keep records of the events that affect basis or adjusted basis. File taxes 2008 See Keeping Records , below. File taxes 2008 Figuring Your Basis How you figure your basis depends on how you acquire your home. File taxes 2008 If you buy or build your home, your cost is your basis. File taxes 2008 If you receive your home as a gift, your basis is usually the same as the adjusted basis of the person who gave you the property. File taxes 2008 If you inherit your home from a decedent, different rules apply depending on the date of the decedent's death. File taxes 2008 Each of these topics is discussed later. File taxes 2008 Property transferred from a spouse. File taxes 2008   If your home is transferred to you from your spouse, or from your former spouse as a result of a divorce, your basis is the same as your spouse's (or former spouse's) adjusted basis just before the transfer. File taxes 2008 Publication 504, Divorced or Separated Individuals, fully discusses transfers between spouses. File taxes 2008 Cost as Basis The cost of your home, whether you purchased it or constructed it, is the amount you paid for it, including any debt you assumed. File taxes 2008 The cost of your home includes most settlement or closing costs you paid when you bought the home. File taxes 2008 If you built your home, your cost includes most closing costs paid when you bought the land or settled on your mortgage. File taxes 2008 See Settlement or closing costs , later. File taxes 2008 If you elect to deduct the sales taxes on the purchase or construction of your home as an itemized deduction on Schedule A (Form 1040), you cannot include the sales taxes as part of your cost basis in the home. File taxes 2008 Purchase. File taxes 2008   The basis of a home you bought is the amount you paid for it. File taxes 2008 This usually includes your down payment and any debt you assumed. File taxes 2008 The basis of a cooperative apartment is the amount you paid for your shares in the corporation that owns or controls the property. File taxes 2008 This amount includes any purchase commissions or other costs of acquiring the shares. File taxes 2008 Construction. File taxes 2008   If you contracted to have your home built on land that you own, your basis in the home is your basis in the land plus the amount you paid to have the home built. File taxes 2008 This includes the cost of labor and materials, the amount you paid the contractor, any architect's fees, building permit charges, utility meter and connection charges, and legal fees that are directly connected with building your home. File taxes 2008 If you built all or part of your home yourself, your basis is the total amount it cost you to build it. File taxes 2008 You cannot include in basis the value of your own labor or any other labor for which you did not pay. File taxes 2008 Real estate taxes. File taxes 2008   Real estate taxes are usually divided so that you and the seller each pay taxes for the part of the property tax year that each owned the home. File taxes 2008 See the earlier discussion of Real estate taxes paid at settlement or closing , under Real Estate Taxes, earlier, to figure the real estate taxes you paid or are considered to have paid. File taxes 2008   If you pay any part of the seller's share of the real estate taxes (the taxes up to the date of sale), and the seller did not reimburse you, add those taxes to your basis in the home. File taxes 2008 You cannot deduct them as taxes paid. File taxes 2008   If the seller paid any of your share of the real estate taxes (the taxes beginning with the date of sale), you can still deduct those taxes. File taxes 2008 Do not include those taxes in your basis. File taxes 2008 If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. File taxes 2008 Example 1. File taxes 2008 You bought your home on September 1. File taxes 2008 The property tax year in your area is the calendar year, and the tax is due on August 15. File taxes 2008 The real estate taxes on the home you bought were $1,275 for the year and had been paid by the seller on August 15. File taxes 2008 You did not reimburse the seller for your share of the real estate taxes from September 1 through December 31. File taxes 2008 You must reduce the basis of your home by the $426 [(122 ÷ 365) × $1,275] the seller paid for you. File taxes 2008 You can deduct your $426 share of real estate taxes on your return for the year you purchased your home. File taxes 2008 Example 2. File taxes 2008 You bought your home on May 3, 2013. File taxes 2008 The property tax year in your area is the calendar year. File taxes 2008 The taxes for the previous year are assessed on January 2 and are due on May 31 and November 30. File taxes 2008 Under state law, the taxes become a lien on May 31. File taxes 2008 You agreed to pay all taxes due after the date of sale. File taxes 2008 The taxes due in 2013 for 2012 were $1,375. File taxes 2008 The taxes due in 2014 for 2013 will be $1,425. File taxes 2008 You cannot deduct any of the taxes paid in 2013 because they relate to the 2012 property tax year and you did not own the home until 2013. File taxes 2008 Instead, you add the $1,375 to the cost (basis) of your home. File taxes 2008 You owned the home in 2013 for 243 days (May 3 to December 31), so you can take a tax deduction on your 2014 return of $949 [(243 ÷ 365) × $1,425] paid in 2014 for 2013. File taxes 2008 You add the remaining $476 ($1,425 − $949) of taxes paid in 2014 to the cost (basis) of your home. File taxes 2008 Settlement or closing costs. File taxes 2008   If you bought your home, you probably paid settlement or closing costs in addition to the contract price. File taxes 2008 These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. File taxes 2008 If you built your home, you probably paid these costs when you bought the land or settled on your mortgage. File taxes 2008   The only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. File taxes 2008 You deduct them in the year you buy your home if you itemize your deductions. File taxes 2008 You can add certain other settlement or closing costs to the basis of your home. File taxes 2008 Items added to basis. File taxes 2008   You can include in your basis the settlement fees and closing costs you paid for buying your home. File taxes 2008 A fee is for buying the home if you would have had to pay it even if you paid cash for the home. File taxes 2008   The following are some of the settlement fees and closing costs that you can include in the original basis of your home. File taxes 2008 Abstract fees (abstract of title fees). File taxes 2008 Charges for installing utility services. File taxes 2008 Legal fees (including fees for the title search and preparation of the sales contract and deed). File taxes 2008 Recording fees. File taxes 2008 Surveys. File taxes 2008 Transfer or stamp taxes. File taxes 2008 Owner's title insurance. File taxes 2008 Any amount the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, cost for improvements or repairs, and sales commissions. File taxes 2008   If the seller actually paid for any item for which you are liable and for which you can take a deduction (such as your share of the real estate taxes for the year of sale), you must reduce your basis by that amount unless you are charged for it in the settlement. File taxes 2008 Items not added to basis and not deductible. File taxes 2008   Here are some settlement and closing costs that you cannot deduct or add to your basis. File taxes 2008 Fire insurance premiums. File taxes 2008 Charges for using utilities or other services related to occupancy of the home before closing. File taxes 2008 Rent for occupying the home before closing. File taxes 2008 Charges connected with getting or refinancing a mortgage loan, such as: Loan assumption fees, Cost of a credit report, and Fee for an appraisal required by a lender. File taxes 2008 Points paid by seller. File taxes 2008   If you bought your home after April 3, 1994, you must reduce your basis by any points paid for your mortgage by the person who sold you your home. File taxes 2008   If you bought your home after 1990 but before April 4, 1994, you must reduce your basis by seller-paid points only if you deducted them. File taxes 2008 See Points , earlier, for the rules on deducting points. File taxes 2008 Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined later) to the donor just before it was given to you, its fair market value (FMV) at the time it was given to you, and any gift tax paid on it. File taxes 2008 Fair market value. File taxes 2008   Fair market value (FMV) is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and who both have a reasonable knowledge of all the necessary facts. File taxes 2008 Donor's adjusted basis is more than FMV. File taxes 2008   If someone gave you your home and the donor's adjusted basis, when it was given to you, was more than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis. File taxes 2008 Disposition basis. File taxes 2008   If the donor's adjusted basis at the time of the gift is more than the FMV, your basis (plus or minus any required adjustments, see Adjusted Basis , later) when you dispose of the property will depend on whether you have a gain or a loss. File taxes 2008 Your basis for figuring a gain is the same as the donor's adjusted basis. File taxes 2008 Your basis for figuring a loss is the FMV when you received the gift. File taxes 2008 If you use the donor's adjusted basis to figure a gain and it results in a loss, then you must use the FMV (at the time of the gift) to refigure the loss. File taxes 2008 However, if using the FMV results in a gain, then you neither have a gain nor a loss. File taxes 2008 Example 1. File taxes 2008 Andrew received a house as a gift from Ishmael (the donor). File taxes 2008 At the time of the gift, the home had an FMV of $80,000. File taxes 2008 Ishmael's adjusted basis was $100,000. File taxes 2008 After he received the house, no events occurred to increase or decrease the basis. File taxes 2008 If Andrew sells the house for $120,000, he will have a $20,000 gain because he must use the donor's adjusted basis ($100,000) at the time of the gift as his basis to figure the gain. File taxes 2008 Example 2. File taxes 2008 Same facts as Example 1 , except this time Andrew sells the house for $70,000. File taxes 2008 He will have a loss of $10,000 because he must use the FMV ($80,000) at the time of the gift as his basis to figure the loss. File taxes 2008 Example 3. File taxes 2008 Same facts as Example 1 , except this time Andrew sells the house for $90,000. File taxes 2008 Initially, he figures the gain using Ishmael's adjusted basis ($100,000), which results in a loss of $10,000. File taxes 2008 Since it is a loss, Andrew must now recalculate the loss using the FMV ($80,000), which results in a gain of $10,000. File taxes 2008 So in this situation, Andrew will neither have a gain nor a loss. File taxes 2008 Donor's adjusted basis equal to or less than the FMV. File taxes 2008   If someone gave you your home after 1976 and the donor's adjusted basis, when it was given to you, was equal to or less than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home. File taxes 2008 Part of federal gift tax due to net increase in value. File taxes 2008   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. File taxes 2008 The numerator (top part) of the fraction is the net increase in the value of the home, and the denominator (bottom part) is the value of the home for gift tax purposes after reduction for any annual exclusion and marital or charitable deduction that applies to the gift. File taxes 2008 The net increase in the value of the home is its FMV minus the adjusted basis of the donor. File taxes 2008 Publication 551 gives more information, including examples, on figuring your basis when you receive property as a gift. File taxes 2008 Inheritance Your basis in a home you inherited is generally the fair market value of the home on the date of the decedent's death or on the alternative valuation date if the personal representative for the estate chooses to use alternative valuation. File taxes 2008 If an estate tax return was filed, your basis is generally the value of the home listed on the estate tax return. File taxes 2008 If an estate tax return was not filed, your basis is the appraised value of the home at the decedent's date of death for state inheritance or transmission taxes. File taxes 2008 Publication 551 and Publication 559, Survivors, Executors, and Administrators, have more information on the basis of inherited property. File taxes 2008 If you inherited your home from someone who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. File taxes 2008 Adjusted Basis While you own your home, various events may take place that can change the original basis of your home. File taxes 2008 These events can increase or decrease your original basis. File taxes 2008 The result is called adjusted basis. File taxes 2008 See Table 3, on this page, for a list of some of the items that can adjust your basis. File taxes 2008 Table 3. File taxes 2008 Adjusted Basis This table lists examples of some items that generally will increase or decrease your basis in your home. File taxes 2008 It is not intended to be all-inclusive. File taxes 2008 Increases to Basis Decreases to Basis Improvements: Putting an addition on your home Replacing an entire roof Paving your driveway Installing central air conditioning Rewiring your home Assessments for local improvements (see Assessments for local benefits , under What You Can and Cannot Deduct, earlier) Amounts spent to restore damaged property Insurance or other reimbursement for casualty losses Deductible casualty loss not covered by insurance Payments received for easement or right-of-way granted Depreciation allowed or allowable if home is used for business or rental purposes Value of subsidy for energy conservation measure excluded from income Improvements. File taxes 2008   An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. File taxes 2008 You must add the cost of any improvements to the basis of your home. File taxes 2008 You cannot deduct these costs. File taxes 2008   Improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, and paving your driveway. File taxes 2008 Amount added to basis. File taxes 2008   The amount you add to your basis for improvements is your actual cost. File taxes 2008 This includes all costs for material and labor, except your own labor, and all expenses related to the improvement. File taxes 2008 For example, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. File taxes 2008   You also must add to your basis state and local assessments for improvements such as streets and sidewalks if they increase the value of the property. File taxes 2008 These assessments are discussed earlier under Real Estate Taxes . File taxes 2008 Improvements no longer part of home. File taxes 2008    Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. File taxes 2008 Example. File taxes 2008 You put wall-to-wall carpeting in your home 15 years ago. File taxes 2008 Later, you replaced that carpeting with new wall-to-wall carpeting. File taxes 2008 The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. File taxes 2008 Repairs versus improvements. File taxes 2008   A repair keeps your home in an ordinary, efficient operating condition. File taxes 2008 It does not add to the value of your home or prolong its life. File taxes 2008 Repairs include repainting your home inside or outside, fixing your gutters or floors, fixing leaks or plastering, and replacing broken window panes. File taxes 2008 You cannot deduct repair costs and generally cannot add them to the basis of your home. File taxes 2008   However, repairs that are done as part of an extensive remodeling or restoration of your home are considered improvements. File taxes 2008 You add them to the basis of your home. File taxes 2008 Records to keep. File taxes 2008   You can use Table 4 (at the end of the publication) as a guide to help you keep track of improvements to your home. File taxes 2008 Also see Keeping Records , below. File taxes 2008 Energy conservation subsidy. File taxes 2008   If a public utility gives you (directly or indirectly) a subsidy for the purchase or installation of an energy conservation measure for your home, do not include the value of that subsidy in your income. File taxes 2008 You must reduce the basis of your home by that value. File taxes 2008   An energy conservation measure is an installation or modification primarily designed to reduce consumption of electricity or natural gas or to improve the management of energy demand. File taxes 2008 Keeping Records Keeping full and accurate records is vital to properly report your income and expenses, to support your deductions and credits, and to know the basis or adjusted basis of your home. File taxes 2008 These records include your purchase contract and settlement papers if you bought the property, or other objective evidence if you acquired it by gift, inheritance, or similar means. File taxes 2008 You should keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. File taxes 2008 In addition, you should keep track of any decreases to the basis such as those listed in Table 3, earlier. File taxes 2008 How to keep records. File taxes 2008   How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. File taxes 2008 How long to keep records. File taxes 2008   You must keep your records for as long as they are important for meeting any provision of the federal tax law. File taxes 2008   Keep records that support an item of income, a deduction, or a credit appearing on a return until the period of limitations for the return runs out. File taxes 2008 (A period of limitations is the period of time after which no legal action can be brought. File taxes 2008 ) For assessment of tax you owe, this is generally 3 years from the date you filed the return. File taxes 2008 For filing a claim for credit or refund, this is generally 3 years from the date you filed the original return, or 2 years from the date you paid the tax, whichever is later. File taxes 2008 Returns filed before the due date are treated as filed on the due date. File taxes 2008   You may need to keep records relating to the basis of property (discussed earlier) for longer than the period of limitations. File taxes 2008 Keep those records as long as they are important in figuring the basis of the original or replacement property. File taxes 2008 Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. File taxes 2008 Table 4. File taxes 2008 Record of Home Improvements Keep this for your records. File taxes 2008 Also, keep receipts or other proof of improvements. File taxes 2008 Remove from this record any improvements that are no longer part of your main home. File taxes 2008 For example, if you put wall-to-wall carpeting in your home and later replace it with new wall-to-wall carpeting, remove the cost of the first carpeting. File taxes 2008 (a) Type of Improvement (b) Date (c) Amount   (a) Type of Improvement (b) Date (c) Amount Additions:       Heating & Air  Conditioning:     Bedroom       Heating system     Bathroom       Central air conditioning     Deck       Furnace     Garage       Duct work     Porch       Central humidifier     Patio       Filtration system     Storage shed       Other     Fireplace       Electrical:     Other           Lawn & Grounds:       Lighting fixtures           Wiring upgrades     Landscaping       Other     Driveway       Plumbing:     Walkway           Fences       Water heater     Retaining wall       Soft water system     Sprinkler system       Filtration system     Swimming pool       Other     Exterior lighting       Insulation:     Other           Communications:       Attic           Walls     Satellite dish       Floors     Intercom       Pipes and duct work     Security system       Other     Other             Miscellaneous:       Interior  Improvements:     Storm windows and doors       Built-in appliances     Roof       Kitchen modernization     Central vacuum       Bathroom modernization     Other       Flooring             Wall-to-wall carpeting             Other     How To
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Abusive Tax Schemes - Criminal Investigation (CI)

Overview - Abusive Tax Schemes
Since the mid-1990s, the IRS has witnessed a proliferation of abusive tax schemes, particularly those with offshore components. 

What are some of the Most Common Abusive Tax Schemes?
The most common abusive tax schemes involve numerous domestic and foreign trusts, partnerships, or nominees.

How Does the Taxpayer Access the Funds in Offshore Accounts? - Abusive Tax Schemes
There are two methods commonly used to get funds back to the taxpayers. They are through credit/debit cards and fraudulent loans. 

In Partnership - IRS Criminal and Civil Enforcement and Department of Justice - Abusive Tax Schemes
Parallel civil and criminal investigations are an effective and aggressive approach that halts these schemes quickly and permanently.

Civil and Criminal Penalties - Abusive Tax Schemes
Investors of abusive tax schemes that improperly evade tax are still liable for taxes, interest, and civil penalties.

Statistical Data - Abusive Tax Schemes
Enforcement statistics on investigations initiated, prosecutions recommended, indictments, sentenced, and months to serve in prison.

Examples of Abusive Tax Scheme
Examples have been written from public record documents filed in the district courts where the case was prosecuted.

 


Criminal Enforcement Home Page

How to Report Suspected Tax Fraud Activities

Page Last Reviewed or Updated: 30-Oct-2013

The File Taxes 2008

File taxes 2008 Publication 590 - Introductory Material Table of Contents What's New for 2013 What's New for 2014 Reminders IntroductionOrdering forms and publications. File taxes 2008 Tax questions. File taxes 2008 Useful Items - You may want to see: Note. File taxes 2008 After 2013, Publication 590 will be split into two separate publications as follows. File taxes 2008 Publication 590-A, will focus on contributions to traditional IRAs as well as Roth IRAs. File taxes 2008 This publication will include the rules for rollover and conversion contributions. File taxes 2008 Publication 590-B, will focus on distributions from traditional IRAs as well as Roth IRAs. File taxes 2008 This publication will include the rules for required minimum distributions and IRA beneficiaries. File taxes 2008 What's New for 2013 Traditional IRA contribution and deduction limit. File taxes 2008  The contribution limit to your traditional IRA for 2013 will be increased to the smaller of the following amounts: $5,500, or Your taxable compensation for the year. File taxes 2008 If you were age 50 or older before 2014, the most that can be contributed to your traditional IRA for 2013 will be the smaller of the following amounts: $6,500, or Your taxable compensation for the year. File taxes 2008 For more information, see How Much Can Be Contributed? in chapter 1. File taxes 2008 Roth IRA contribution limit. File taxes 2008  If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $5,500, or Your taxable compensation for the year. File taxes 2008 If you were age 50 or older before 2014 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $6,500, or Your taxable compensation for the year. File taxes 2008 However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. File taxes 2008 For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? in chapter 2. File taxes 2008 Modified AGI limit for traditional IRA contributions increased. File taxes 2008  For 2013, if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er), More than $59,000 but less than $69,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. File taxes 2008 If you either lived with your spouse or file a joint return, and your spouse was covered by a retirement plan at work, but you were not, your deduction is phased out if your modified AGI is more than $178,000 but less than $188,000. File taxes 2008 If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. File taxes 2008 See How Much Can You Deduct? in chapter 1. File taxes 2008 Modified AGI limit for Roth IRA contributions increased. File taxes 2008  For 2013, your Roth IRA contribution limit is reduced (phased out) in the following situations. File taxes 2008 Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $178,000. File taxes 2008 You cannot make a Roth IRA contribution if your modified AGI is $188,000 or more. File taxes 2008 Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2013 and your modified AGI is at least $112,000. File taxes 2008 You cannot make a Roth IRA contribution if your modified AGI is $127,000 or more. File taxes 2008 Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. File taxes 2008 You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. File taxes 2008 See Can You Contribute to a Roth IRA? in chapter 2. File taxes 2008 Net Investment Income Tax. File taxes 2008  For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 457(b) plans, and IRAs). File taxes 2008 However, these distributions are taken into account when determining the modified adjusted gross income threshold. File taxes 2008 Distributions from a nonqualified retirement plan are included in net investment income. File taxes 2008 See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. File taxes 2008 Kay Bailey Hutchison Spousal IRA. File taxes 2008 . File taxes 2008  In 2013, spousal IRAs were renamed to Kay Bailey Hutchison Spousal IRAs. File taxes 2008 There are no changes to the rules regarding these IRAs. File taxes 2008 See Kay Bailey Hutchison Spousal IRA Limit in chapter 1 for more information. File taxes 2008 What's New for 2014 Modified AGI limit for traditional IRA contributions increased. File taxes 2008  For 2014, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $96,000 but less than $116,000 for a married couple filing a joint return or a qualifying widow(er), More than $60,000 but less than $70,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. File taxes 2008 If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. File taxes 2008 If your modified AGI is $191,000 or more, you cannot take a deduction for contributions to a traditional IRA. File taxes 2008 Modified AGI limit for Roth IRA contributions increased. File taxes 2008  For 2014, your Roth IRA contribution limit is reduced (phased out) in the following situations. File taxes 2008 Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $181,000. File taxes 2008 You cannot make a Roth IRA contribution if your modified AGI is $191,000 or more. File taxes 2008 Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2014 and your modified AGI is at least $114,000. File taxes 2008 You cannot make a Roth IRA contribution if your modified AGI is $129,000 or more. File taxes 2008 Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. File taxes 2008 You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. File taxes 2008 Reminders Future developments. File taxes 2008  For the latest information about developments related to Publication 590, such as legislation enacted after it was published, go to www. File taxes 2008 irs. File taxes 2008 gov/pub590. File taxes 2008 Simplified employee pension (SEP). File taxes 2008  SEP IRAs are not covered in this publication. File taxes 2008 They are covered in Publication 560, Retirement Plans for Small Business. File taxes 2008 Deemed IRAs. File taxes 2008  A qualified employer plan (retirement plan) can maintain a separate account or annuity under the plan (a deemed IRA) to receive voluntary employee contributions. File taxes 2008 If the separate account or annuity otherwise meets the requirements of an IRA, it will be subject only to IRA rules. File taxes 2008 An employee's account can be treated as a traditional IRA or a Roth IRA. File taxes 2008 For this purpose, a “qualified employer plan” includes: A qualified pension, profit-sharing, or stock bonus plan (section 401(a) plan), A qualified employee annuity plan (section 403(a) plan), A tax-sheltered annuity plan (section 403(b) plan), and A deferred compensation plan (section 457 plan) maintained by a state, a political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state. File taxes 2008 Contributions to both traditional and Roth IRAs. File taxes 2008  For information on your combined contribution limit if you contribute to both traditional and Roth IRAs, see Roth IRAs and traditional IRAs under How Much Can Be Contributed? in chapter 2. File taxes 2008 Statement of required minimum distribution (RMD). File taxes 2008  If an RMD is required from your IRA, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the RMD to you, or offer to calculate it for you. File taxes 2008 The report or offer must include the date by which the amount must be distributed. File taxes 2008 The report is due January 31 of the year in which the minimum distribution is required. File taxes 2008 It can be provided with the year-end fair market value statement that you normally get each year. File taxes 2008 No report is required for section 403(b) contracts (generally tax-sheltered annuities) or for IRAs of owners who have died. File taxes 2008 IRA interest. File taxes 2008  Although interest earned from your IRA is generally not taxed in the year earned, it is not tax-exempt interest. File taxes 2008 Tax on your traditional IRA is generally deferred until you take a distribution. File taxes 2008 Do not report this interest on your return as tax-exempt interest. File taxes 2008 For more information on tax-exempt interest, see the instructions for your tax return. File taxes 2008 Photographs of missing children. File taxes 2008  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. File taxes 2008 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. File taxes 2008 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. File taxes 2008 Introduction This publication discusses individual retirement arrangements (IRAs). File taxes 2008 An IRA is a personal savings plan that gives you tax advantages for setting aside money for retirement. File taxes 2008 What are some tax advantages of an IRA?   Two tax advantages of an IRA are that: Contributions you make to an IRA may be fully or partially deductible, depending on which type of IRA you have and on your circumstances, and Generally, amounts in your IRA (including earnings and gains) are not taxed until distributed. File taxes 2008 In some cases, amounts are not taxed at all if distributed according to the rules. File taxes 2008 What's in this publication?   This publication discusses traditional, Roth, and SIMPLE IRAs. File taxes 2008 It explains the rules for: Setting up an IRA, Contributing to an IRA, Transferring money or property to and from an IRA, Handling an inherited IRA, Receiving distributions (making withdrawals) from an IRA, and Taking a credit for contributions to an IRA. File taxes 2008   It also explains the penalties and additional taxes that apply when the rules are not followed. File taxes 2008 To assist you in complying with the tax rules for IRAs, this publication contains worksheets, sample forms, and tables, which can be found throughout the publication and in the appendices at the back of the publication. File taxes 2008 How to use this publication. File taxes 2008   The rules that you must follow depend on which type of IRA you have. File taxes 2008 Use Table I-1 to help you determine which parts of this publication to read. File taxes 2008 Also use Table I-1 if you were referred to this publication from instructions to a form. File taxes 2008 Comments and suggestions. File taxes 2008   We welcome your comments about this publication and your suggestions for future editions. File taxes 2008   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. File taxes 2008 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. File taxes 2008 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. File taxes 2008   You can send your comments from www. File taxes 2008 irs. File taxes 2008 gov/formspubs/. File taxes 2008 Click on “More Information” and then on “Comment on Tax Forms and Publications”. File taxes 2008   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. File taxes 2008 Ordering forms and publications. File taxes 2008   Visit www. File taxes 2008 irs. File taxes 2008 gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. File taxes 2008 Internal Revenue Service 1201 N. File taxes 2008 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. File taxes 2008   If you have a tax question, check the information available on IRS. File taxes 2008 gov or call 1-800-829-1040. File taxes 2008 We cannot answer tax questions sent to either of the above addresses. File taxes 2008 Useful Items - You may want to see: Publications 560 Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) 571 Tax-Sheltered Annuity Plans (403(b) Plans) 575 Pension and Annuity Income 939 General Rule for Pensions and Annuities Forms (and instructions) W-4P Withholding Certificate for Pension or Annuity Payments 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. File taxes 2008 5304-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–Not for Use With a Designated Financial Institution 5305-S SIMPLE Individual Retirement Trust Account 5305-SA SIMPLE Individual Retirement Custodial Account 5305-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–for Use With a Designated Financial Institution 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 5498 IRA Contribution Information 8606 Nondeductible IRAs 8815 Exclusion of Interest From Series EE and I U. File taxes 2008 S. File taxes 2008 Savings Bonds Issued After 1989 8839 Qualified Adoption Expenses 8880 Credit for Qualified Retirement Savings Contributions See chapter 5 for information about getting these publications and forms. File taxes 2008 Table I-1. File taxes 2008 Using This Publication IF you need information on . File taxes 2008 . File taxes 2008 . File taxes 2008 THEN see . File taxes 2008 . File taxes 2008 . File taxes 2008 traditional IRAs chapter 1. File taxes 2008 Roth IRAs chapter 2, and parts of  chapter 1. File taxes 2008 SIMPLE IRAs chapter 3. File taxes 2008 the credit for qualified retirement savings contributions (the saver's credit) chapter 4. File taxes 2008 how to keep a record of your contributions to, and distributions from, your traditional IRA(s) appendix A. File taxes 2008 SEP IRAs and 401(k) plans Publication 560. File taxes 2008 Coverdell education savings accounts (formerly called education IRAs) Publication 970. File taxes 2008 IF for 2013, you received social security benefits, had taxable compensation, contributed to a traditional IRA, and you or your spouse was covered by an employer retirement plan, and you want to. File taxes 2008 . File taxes 2008 . File taxes 2008 THEN see . File taxes 2008 . File taxes 2008 . File taxes 2008 first figure your modified adjusted gross income (AGI) appendix B, worksheet 1. File taxes 2008 then figure how much of your traditional IRA contribution you can deduct appendix B, worksheet 2. File taxes 2008 and finally figure how much of your social security is taxable appendix B, worksheet 3. File taxes 2008 Table I-2. File taxes 2008 How Are a Traditional IRA and a Roth IRA Different? This table shows the differences between traditional and Roth IRAs. File taxes 2008 Answers in the middle column apply to traditional IRAs. File taxes 2008 Answers in the right column apply to Roth IRAs. File taxes 2008 Question Answer   Traditional IRA? Roth IRA? Is there an age limit on when I can open and contribute to a Yes. File taxes 2008 You must not have reached age  70½ by the end of the year. File taxes 2008 See Who Can Open a Traditional IRA? in chapter 1. File taxes 2008 No. File taxes 2008 You can be any age. File taxes 2008 See Can You Contribute to a Roth IRA? in chapter 2. File taxes 2008 If I earned more than $5,500 in 2013 ($6,500 if I was 50 or older by the end of 2013), is there a limit on how much I can contribute to a Yes. File taxes 2008 For 2013, you can contribute to a traditional IRA up to: $5,500, or $6,500 if you were age 50 or older by the end of 2013. File taxes 2008  There is no upper limit on how much you can earn and still contribute. File taxes 2008 See How Much Can Be Contributed? in chapter 1. File taxes 2008 Yes. File taxes 2008 For 2013, you may be able to contribute to a Roth IRA up to: $5,500, or $6,500 if you were age 50 or older by the end of 2013,  but the amount you can contribute may be less than that depending on your income, filing status, and if you contribute to another IRA. File taxes 2008 See How Much Can Be Contributed? and Table 2-1 in chapter 2. File taxes 2008 Can I deduct contributions to a Yes. File taxes 2008 You may be able to deduct your contributions to a traditional IRA depending on your income, filing status, whether you are covered by a retirement plan at work, and whether you receive social security benefits. File taxes 2008 See How Much Can You Deduct? in chapter 1. File taxes 2008 No. File taxes 2008 You can never deduct contributions to a Roth IRA. File taxes 2008 See What Is a Roth IRA? in chapter 2. File taxes 2008 Do I have to file a form just because I contribute to a Not unless you make nondeductible contributions to your traditional IRA. File taxes 2008 In that case, you must file Form 8606. File taxes 2008 See Nondeductible Contributions in chapter 1. File taxes 2008 No. File taxes 2008 You do not have to file a form if you contribute to a Roth IRA. File taxes 2008 See Contributions not reported in chapter 2. File taxes 2008 Do I have to start taking distributions when I reach a certain age from a Yes. File taxes 2008 You must begin receiving required minimum distributions by April 1 of the year following the year you reach age 70½. File taxes 2008 See When Must You Withdraw Assets? (Required Minimum Distributions) in chapter 1. File taxes 2008 No. File taxes 2008 If you are the original owner of a Roth IRA, you do not have to take distributions regardless of your age. File taxes 2008 See Are Distributions Taxable? in chapter 2. File taxes 2008 However, if you are the beneficiary of a Roth IRA, you may have to take distributions. File taxes 2008 See Distributions After Owner's Death in chapter 2. File taxes 2008 How are distributions taxed from a Distributions from a traditional IRA are taxed as ordinary income, but if you made nondeductible contributions, not all of the distribution is taxable. File taxes 2008 See Are Distributions Taxable? in chapter 1. File taxes 2008 Distributions from a Roth IRA are not taxed as long as you meet certain criteria. File taxes 2008 See Are Distributions Taxable? in chapter 2. File taxes 2008 Do I have to file a form just because I receive distributions from a Not unless you have ever made a nondeductible contribution to a traditional IRA. File taxes 2008 If you have, file Form 8606. File taxes 2008 See Nondeductible Contributions in chapter 1. File taxes 2008 Yes. File taxes 2008 File Form 8606 if you received distributions from a Roth IRA (other than a rollover, qualified charitable distribution, one-time distribution to fund an HSA, recharacterization, certain qualified distributions, or a return of certain contributions). 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