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Fill out 1040ez online 11. Fill out 1040ez online   Departing Aliens and the Sailing or Departure Permit Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Aliens Not Required To Obtain Sailing or Departure Permits Aliens Required To Obtain Sailing or Departure PermitsGetting a Sailing or Departure Permit Forms To File Paying Taxes and Obtaining Refunds Bond To Ensure Payment Filing Annual U. Fill out 1040ez online S. Fill out 1040ez online Income Tax Returns Introduction Before leaving the United States, all aliens (except those listed under Aliens Not Required To Obtain Sailing or Departure Permits must obtain a certificate of compliance. Fill out 1040ez online This document, also popularly known as the sailing permit or departure permit, is part of the income tax form you must file before leaving. Fill out 1040ez online You will receive a sailing or departure permit after filing a Form 1040-C or Form 2063. Fill out 1040ez online These forms are discussed in this chapter. Fill out 1040ez online To find out if you need a sailing or departure permit, first read Aliens Not Required To Obtain Sailing or Departure Permits . Fill out 1040ez online If you do not fall into one of the categories in that discussion, you must obtain a sailing or departure permit. Fill out 1040ez online Read Aliens Required To Obtain Sailing or Departure Permits . Fill out 1040ez online Topics - This chapter discusses: Who needs a sailing permit, How to get a sailing permit, and Forms you file to get a sailing permit. Fill out 1040ez online Useful Items - You may want to see: Form (and Instructions) 1040-C U. Fill out 1040ez online S. Fill out 1040ez online Departing Alien Income Tax Return 2063 U. Fill out 1040ez online S. Fill out 1040ez online Departing Alien Income Tax Statement See chapter 12 for information about getting these forms. Fill out 1040ez online Aliens Not Required To Obtain Sailing or Departure Permits If you are included in one of the following categories, you do not have to get a sailing or departure permit before leaving the United States. Fill out 1040ez online If you are in one of these categories and do not have to get a sailing or departure permit, you must be able to support your claim for exemption with proper identification or give the authority for the exemption. Fill out 1040ez online Category 1. Fill out 1040ez online   Representatives of foreign governments with diplomatic passports, whether accredited to the United States or other countries, members of their households, and servants accompanying them. Fill out 1040ez online Servants who are leaving, but not with a person with a diplomatic passport, must get a sailing or departure permit. Fill out 1040ez online However, they can get a sailing or departure permit on Form 2063 without examination of their income tax liability by presenting a letter from the chief of their diplomatic mission certifying that: Their name appears on the “White List” (a list of employees of diplomatic missions), and They do not owe to the United States any income tax, and will not owe any tax up to and including the intended date of departure. Fill out 1040ez online   The statement must be presented to an IRS office. Fill out 1040ez online Category 2. Fill out 1040ez online    Employees of international organizations and foreign governments (other than diplomatic representatives exempt under category 1) and members of their households: Whose compensation for official services is exempt from U. Fill out 1040ez online S. Fill out 1040ez online tax under U. Fill out 1040ez online S. Fill out 1040ez online tax laws (described in chapter 10), and Who receive no other income from U. Fill out 1040ez online S. Fill out 1040ez online sources. Fill out 1040ez online If you are an alien in category (1) or (2), above, who filed the waiver under section 247(b) of the Immigration and Nationality Act, you must get a sailing or departure permit. Fill out 1040ez online This is true even if your income is exempt from U. Fill out 1040ez online S. Fill out 1040ez online tax because of an income tax treaty, consular agreement, or international agreement. Fill out 1040ez online Category 3. Fill out 1040ez online   Alien students, industrial trainees, and exchange visitors, including their spouses and children, who enter on an “F-1,” “F-2,” “H-3,” “H-4,” “J-1,” “J-2,” or “Q” visa only and who receive no income from U. Fill out 1040ez online S. Fill out 1040ez online sources while in the United States under those visas other than: Allowances to cover expenses incident to study or training in the United States, such as expenses for travel, maintenance, and tuition, The value of any services or food and lodging connected with this study or training, Income from employment authorized by the U. Fill out 1040ez online S. Fill out 1040ez online Citizenship and Immigration Services (USCIS), or Interest income on deposits that is not effectively connected with a U. Fill out 1040ez online S. Fill out 1040ez online trade or business. Fill out 1040ez online (See Interest Income in chapter 3. Fill out 1040ez online ) Category 4. Fill out 1040ez online   Alien students, including their spouses and children, who enter on an “M-1” or “M-2” visa only and who receive no income from U. Fill out 1040ez online S. Fill out 1040ez online sources while in the United States under those visas, other than: Income from employment authorized by the U. Fill out 1040ez online S. Fill out 1040ez online Citizenship and Immigration Services (USCIS) or Interest income on deposits that is not effectively connected with a U. Fill out 1040ez online S. Fill out 1040ez online trade or business. Fill out 1040ez online (See Interest Income in chapter 3. Fill out 1040ez online ) Category 5. Fill out 1040ez online   Certain other aliens temporarily in the United States who have received no taxable income during the tax year up to and including the date of departure or during the preceding tax year. Fill out 1040ez online If the IRS has reason to believe that an alien has received income subject to tax and that the collection of income tax is jeopardized by departure, it may then require the alien to obtain a sailing or departure permit. Fill out 1040ez online Aliens in this category are: Alien military trainees who enter the United States for training under the sponsorship of the Department of Defense and who leave the United States on official military travel orders, Alien visitors for business on a “B-1” visa, or on both a “B-1” visa and a “B-2” visa, who do not remain in the United States or a U. Fill out 1040ez online S. Fill out 1040ez online possession for more than 90 days during the tax year, Alien visitors for pleasure on a “B-2” visa, Aliens in transit through the United States or any of its possessions on a “C-1” visa, or under a contract, such as a bond agreement, between a transportation line and the Attorney General, and Aliens who enter the United States on a border-crossing identification card or for whom passports, visas, and border-crossing identification cards are not required, if they are: Visitors for pleasure, Visitors for business who do not remain in the United States or a U. Fill out 1040ez online S. Fill out 1040ez online possession for more than 90 days during the tax year, or In transit through the United States or any of its possessions. Fill out 1040ez online Category 6. Fill out 1040ez online   Alien residents of Canada or Mexico who frequently commute between that country and the United States for employment, and whose wages are subject to the withholding of U. Fill out 1040ez online S. Fill out 1040ez online tax. Fill out 1040ez online Aliens Required To Obtain Sailing or Departure Permits If you do not fall into one of the categories listed under Aliens Not Required To Obtain Sailing or Departure Permits, you must obtain a sailing or departure permit. Fill out 1040ez online To obtain a permit, file Form 1040-C or Form 2063 (whichever applies) with your local IRS office before you leave the United States. Fill out 1040ez online See Forms To File , later. Fill out 1040ez online You must also pay all the tax shown as due on Form 1040-C and any taxes due for past years. Fill out 1040ez online See Paying Taxes and Obtaining Refunds , later. Fill out 1040ez online Getting a Sailing or Departure Permit The following discussion covers when and where to get your sailing permit. Fill out 1040ez online Where to get a sailing or departure permit. Fill out 1040ez online   If you have been working in the United States, you should get the permit from an IRS office in the area of your employment, or you may obtain one from an IRS office in the area of your departure. Fill out 1040ez online When to get a sailing or departure permit. Fill out 1040ez online   You should get your sailing or departure permit at least 2 weeks before you plan to leave. Fill out 1040ez online You cannot apply earlier than 30 days before your planned departure date. Fill out 1040ez online Do not wait until the last minute in case there are unexpected problems. Fill out 1040ez online Papers to submit. Fill out 1040ez online   Getting your sailing or departure permit will go faster if you bring to the IRS office papers and documents related to your income and your stay in the United States. Fill out 1040ez online Bring the following records with you if they apply. Fill out 1040ez online Your passport and alien registration card or visa. Fill out 1040ez online Copies of your U. Fill out 1040ez online S. Fill out 1040ez online income tax returns filed for the past 2 years. Fill out 1040ez online If you were in the United States for less than 2 years, bring the income tax returns you filed for that period. Fill out 1040ez online Receipts for income taxes paid on these returns. Fill out 1040ez online Receipts, bank records, canceled checks, and other documents that prove your deductions, business expenses, and dependents claimed on your returns. Fill out 1040ez online A statement from each employer showing wages paid and tax withheld from January 1 of the current year to the date of departure if you were an employee. Fill out 1040ez online If you were self-employed, you must bring a statement of income and expenses up to the date you plan to leave. Fill out 1040ez online Proof of estimated tax payments for the past year and this year. Fill out 1040ez online Documents showing any gain or loss from the sale of personal property and/or real property, including capital assets and merchandise. Fill out 1040ez online Documents relating to scholarship or fellowship grants including: Verification of the grantor, source, and purpose of the grant. Fill out 1040ez online Copies of the application for, and approval of, the grant. Fill out 1040ez online A statement of the amount paid, and your duties and obligations under the grant. Fill out 1040ez online A list of any previous grants. Fill out 1040ez online Documents indicating you qualify for any special tax treaty benefits claimed. Fill out 1040ez online Document verifying your date of departure from the United States, such as an airline ticket. Fill out 1040ez online Document verifying your U. Fill out 1040ez online S. Fill out 1040ez online taxpayer identification number, such as a social security card or an IRS issued Notice CP 565 showing your individual taxpayer identification number (ITIN). Fill out 1040ez online Note. Fill out 1040ez online   If you are married and reside in a community property state, also bring the above-listed documents for your spouse. Fill out 1040ez online This applies whether or not your spouse requires a permit. Fill out 1040ez online Forms To File If you must get a sailing or departure permit, you must file Form 2063 or Form 1040-C. Fill out 1040ez online Employees in the IRS office can assist in filing these forms. Fill out 1040ez online Both forms have a “certificate of compliance” section. Fill out 1040ez online When the certificate of compliance is signed by an agent of the Field Assistance Area Director, it certifies that your U. Fill out 1040ez online S. Fill out 1040ez online tax obligations have been satisfied according to available information. Fill out 1040ez online Your Form 1040-C copy of the signed certificate, or the one detached from Form 2063, is your sailing or departure permit. Fill out 1040ez online Form 2063 This is a short form that asks for certain information but does not include a tax computation. Fill out 1040ez online The following departing aliens can get their sailing or departure permits by filing Form 2063. Fill out 1040ez online Aliens, whether resident or nonresident, who have had no taxable income for the tax year up to and including the date of departure and for the preceding year, if the period for filing the income tax return for that year has not expired. Fill out 1040ez online Resident aliens who have received taxable income during the tax year or preceding year and whose departure will not hinder the collection of any tax. Fill out 1040ez online However, if the IRS has information indicating that the aliens are leaving to avoid paying their income tax, they must file a Form 1040-C. Fill out 1040ez online Aliens in either of these categories who have not filed an income tax return or paid income tax for any tax year must file the return and pay the income tax before they can be issued a sailing or departure permit on Form 2063. Fill out 1040ez online The sailing or departure permit detached from Form 2063 can be used for all departures during the current year. Fill out 1040ez online However, the IRS may cancel the sailing or departure permit for any later departure if it believes the collection of income tax is jeopardized by that later departure. Fill out 1040ez online Form 1040-C If you must get a sailing or departure permit and you do not qualify to file Form 2063, you must file Form 1040-C. Fill out 1040ez online Ordinarily, all income received or reasonably expected to be received during the tax year up to and including the date of departure must be reported on Form 1040-C and the tax on it must be paid. Fill out 1040ez online When you pay any tax shown as due on the Form 1040-C, and you file all returns and pay all tax due for previous years, you will receive a sailing or departure permit. Fill out 1040ez online However, the IRS may permit you to furnish a bond guaranteeing payment instead of paying the taxes for certain years. Fill out 1040ez online See Bond To Ensure Payment , discussed later. Fill out 1040ez online The sailing or departure permit issued under the conditions in this paragraph is only for the specific departure for which it is issued. Fill out 1040ez online Returning to the United States. Fill out 1040ez online   If you furnish the IRS with information showing, to the satisfaction of the IRS, that you intend to return to the United States and that your departure does not jeopardize the collection of income tax, you can get a sailing or departure permit by filing Form 1040-C without having to pay the tax shown on it. Fill out 1040ez online You must, however, file all income tax returns that have not yet been filed as required, and pay all income tax that is due on these returns. Fill out 1040ez online   Your Form 1040-C must include all income received and reasonably expected to be received during the entire year of departure. Fill out 1040ez online The sailing or departure permit issued with this Form 1040-C can be used for all departures during the current year. Fill out 1040ez online However, the Service may cancel the sailing or departure permit for any later departure if the payment of income tax appears to be in jeopardy. Fill out 1040ez online Joint return on Form 1040-C. Fill out 1040ez online   Departing husbands and wives who are nonresident aliens cannot file joint returns. Fill out 1040ez online However, if both spouses are resident aliens, they can file a joint return on Form 1040-C if: Both spouses can reasonably be expected to qualify to file a joint return at the normal close of their tax year, and The tax years of the spouses end at the same time. Fill out 1040ez online Paying Taxes and Obtaining Refunds You must pay all tax shown as due on the Form 1040-C at the time of filing it, except when a bond is furnished, or the IRS is satisfied that your departure does not jeopardize the collection of income tax. Fill out 1040ez online You must also pay any taxes due for past years. Fill out 1040ez online If the tax computation on Form 1040-C results in an overpayment, there is no tax to pay at the time you file that return. Fill out 1040ez online However, the IRS cannot provide a refund at the time of departure. Fill out 1040ez online If you are due a refund, you must file either Form 1040NR or Form 1040NR-EZ at the end of the tax year. Fill out 1040ez online Bond To Ensure Payment Usually, you must pay the tax shown as due on Form 1040-C when you file it. Fill out 1040ez online However, if you pay all taxes due that you owe for prior years, you can furnish a bond guaranteeing payment instead of paying the income taxes shown as due on the Form 1040-C or the tax return for the preceding year if the period for filing that return has not expired. Fill out 1040ez online The bond must equal the tax due plus interest to the date of payment as figured by the IRS. Fill out 1040ez online Information about the form of bond and security on it can be obtained from your IRS office. Fill out 1040ez online Filing Annual U. Fill out 1040ez online S. Fill out 1040ez online Income Tax Returns Form 1040-C is not an annual U. Fill out 1040ez online S. Fill out 1040ez online income tax return. Fill out 1040ez online If an income tax return is required by law, that return must be filed even though a Form 1040-C has already been filed. Fill out 1040ez online Chapters 5 and 7 discuss filing an annual U. Fill out 1040ez online S. Fill out 1040ez online income tax return. Fill out 1040ez online The tax paid with Form 1040-C should be taken as a credit against the tax liability for the entire tax year on your annual U. Fill out 1040ez online S. Fill out 1040ez online income tax return. Fill out 1040ez online Prev  Up  Next   Home   More Online Publications
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Fill out 1040ez online 23. Fill out 1040ez online   Interest Expense Table of Contents Introduction Useful Items - You may want to see: Home Mortgage InterestAmount Deductible Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement Investment InterestInvestment Property Allocation of Interest Expense Limit on Deduction Items You Cannot DeductPersonal Interest Allocation of Interest How To ReportMore than one borrower. Fill out 1040ez online Mortgage proceeds used for business or investment. Fill out 1040ez online Introduction This chapter discusses what interest expenses you can deduct. Fill out 1040ez online Interest is the amount you pay for the use of borrowed money. Fill out 1040ez online The following are types of interest you can deduct as itemized deductions on Schedule A (Form 1040). Fill out 1040ez online Home mortgage interest, including certain points and mortgage insurance premiums. Fill out 1040ez online Investment interest. Fill out 1040ez online This chapter explains these deductions. Fill out 1040ez online It also explains where to deduct other types of interest and lists some types of interest you cannot deduct. Fill out 1040ez online Use Table 23-1 to find out where to get more information on various types of interest, including investment interest. Fill out 1040ez online Useful Items - You may want to see: Publication 936 Home Mortgage Interest Deduction 550 Investment Income and Expenses Home Mortgage Interest Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). Fill out 1040ez online The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. Fill out 1040ez online You can deduct home mortgage interest if all the following conditions are met. Fill out 1040ez online You file Form 1040 and itemize deductions on Schedule A (Form 1040). Fill out 1040ez online The mortgage is a secured debt on a qualified home in which you have an ownership interest. Fill out 1040ez online (Generally, your mortgage is a secured debt if you put your home up as collateral to protect the interest of the lender. Fill out 1040ez online The term “qualified home” means your main home or second home. Fill out 1040ez online For details, see Publication 936. Fill out 1040ez online )  Both you and the lender must intend that the loan be repaid. Fill out 1040ez online Amount Deductible In most cases, you can deduct all of your home mortgage interest. Fill out 1040ez online How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. Fill out 1040ez online Fully deductible interest. Fill out 1040ez online   If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. Fill out 1040ez online (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category. Fill out 1040ez online )   The three categories are as follows: Mortgages you took out on or before October 13, 1987 (called grandfathered debt). Fill out 1040ez online Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2013 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately). Fill out 1040ez online Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2013 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2). Fill out 1040ez online The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. Fill out 1040ez online   See Part II of Publication 936 for more detailed definitions of grandfathered, home acquisition, and home equity debt. Fill out 1040ez online    You can use Figure 23-A to check whether your home mortgage interest is fully deductible. Fill out 1040ez online Figure 23-A. Fill out 1040ez online Is My Home Mortgage Interest Fully Deductible? Please click here for the text description of the image. Fill out 1040ez online Figure 23-A. Fill out 1040ez online Is My Interest Fully Deductible? Limits on deduction. Fill out 1040ez online   You cannot fully deduct interest on a mortgage that does not fit into any of the three categories listed earlier. Fill out 1040ez online If this applies to you, see Part II of Publication 936 to figure the amount of interest you can deduct. Fill out 1040ez online Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. Fill out 1040ez online It also describes certain special situations that may affect your deduction. Fill out 1040ez online Late payment charge on mortgage payment. Fill out 1040ez online   You can deduct as home mortgage interest a late payment charge if it was not for a specific service performed in connection with your mortgage loan. Fill out 1040ez online Mortgage prepayment penalty. Fill out 1040ez online   If you pay off your home mortgage early, you may have to pay a penalty. Fill out 1040ez online 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. Fill out 1040ez online Sale of home. Fill out 1040ez online   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of sale. Fill out 1040ez online Example. Fill out 1040ez online John and Peggy Harris sold their home on May 7. Fill out 1040ez online Through April 30, they made home mortgage interest payments of $1,220. Fill out 1040ez online The settlement sheet for the sale of the home showed $50 interest for the 6-day period in May up to, but not including, the date of sale. Fill out 1040ez online Their mortgage interest deduction is $1,270 ($1,220 + $50). Fill out 1040ez online Prepaid interest. Fill out 1040ez online   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. Fill out 1040ez online You can deduct in each year only the interest that qualifies as home mortgage interest for that year. Fill out 1040ez online However, there is an exception that applies to points, discussed later. Fill out 1040ez online Mortgage interest credit. Fill out 1040ez online   You may be able to claim a mortgage interest credit if you were issued a mortgage credit certificate (MCC) by a state or local government. Fill out 1040ez online Figure the credit on Form 8396, Mortgage Interest Credit. Fill out 1040ez online If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. Fill out 1040ez online   For more information on the credit, see chapter 37. Fill out 1040ez online Ministers' and military housing allowance. Fill out 1040ez online   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you can still deduct your home mortgage interest. Fill out 1040ez online Hardest Hit Fund and Emergency Homeowners' Loan Programs. Fill out 1040ez online   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. Fill out 1040ez online 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. Fill out 1040ez online 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. Fill out 1040ez online If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098-MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received from payer(s) / borrower(s)), box 4 (mortgage insurance premiums) and box 5 (real property taxes). Fill out 1040ez online 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. Fill out 1040ez online Mortgage assistance payments under section 235 of the National Housing Act. Fill out 1040ez online   If you qualify for mortgage assistance payments for lower-income families under section 235 of the National Housing Act, part or all of the interest on your mortgage may be paid for you. Fill out 1040ez online You cannot deduct the interest that is paid for you. Fill out 1040ez online No other effect on taxes. Fill out 1040ez online   Do not include these mortgage assistance payments in your income. Fill out 1040ez online Also, do not use these payments to reduce other deductions, such as real estate taxes. Fill out 1040ez online Divorced or separated individuals. Fill out 1040ez online   If a divorce or separation agreement requires you or your spouse or former spouse to pay home mortgage interest on a home owned by both of you, the payment of interest may be alimony. Fill out 1040ez online See the discussion of Payments for jointly-owned home in chapter 18. Fill out 1040ez online Redeemable ground rents. Fill out 1040ez online   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. Fill out 1040ez online   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. Fill out 1040ez online For more information, see Publication 936. Fill out 1040ez online Nonredeemable ground rents. Fill out 1040ez online   Payments on a nonredeemable ground rent are not mortgage interest. Fill out 1040ez online You can deduct them as rent if they are a business expense or if they are for rental property. Fill out 1040ez online Reverse mortgages. Fill out 1040ez online   A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. Fill out 1040ez online With a reverse mortgage, you retain title to your home. Fill out 1040ez online Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. Fill out 1040ez online Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Fill out 1040ez online Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until the loan is paid in full. Fill out 1040ez online Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Publication 936. Fill out 1040ez online Rental payments. Fill out 1040ez online   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. Fill out 1040ez online This is true even if the settlement papers call them interest. Fill out 1040ez online You cannot deduct these payments as home mortgage interest. Fill out 1040ez online Mortgage proceeds invested in tax-exempt securities. Fill out 1040ez online   You cannot deduct the home mortgage interest on grandfathered debt or home equity debt if you used the proceeds of the mortgage to buy securities or certificates that produce tax-free income. Fill out 1040ez online “Grandfathered debt” and “home equity debt” are defined earlier under Amount Deductible. Fill out 1040ez online Refunds of interest. Fill out 1040ez online   If you receive a refund of interest in the same tax year you paid it, you must reduce your interest expense by the amount refunded to you. Fill out 1040ez online If you receive a refund of interest you deducted in an earlier year, you generally must include the refund in income in the year you receive it. Fill out 1040ez online However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. Fill out 1040ez online This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. Fill out 1040ez online    If you received a refund of interest you overpaid in an earlier year, you generally will receive a Form 1098, Mortgage Interest Statement, showing the refund in box 3. Fill out 1040ez online For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. Fill out 1040ez online   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in chapter 12. Fill out 1040ez online Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Fill out 1040ez online Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Fill out 1040ez online A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Fill out 1040ez online See Points paid by the seller , later. Fill out 1040ez online General Rule You generally cannot deduct the full amount of points in the year paid. Fill out 1040ez online Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. Fill out 1040ez online See Deduction Allowed Ratably , next. Fill out 1040ez online For exceptions to the general rule, see Deduction Allowed in Year Paid , later. Fill out 1040ez online Deduction Allowed Ratably If you do not meet the tests listed under Deduction Allowed in Year Paid , later, the loan is not a home improvement loan, or you choose not to deduct your points in full in the year paid, you can deduct the points ratably (equally) over the life of the loan if you meet all the following tests. Fill out 1040ez online You use the cash method of accounting. Fill out 1040ez online This means you report income in the year you receive it and deduct expenses in the year you pay them. Fill out 1040ez online Most individuals use this method. Fill out 1040ez online Your loan is secured by a home. Fill out 1040ez online (The home does not need to be your main home. Fill out 1040ez online ) Your loan period is not more than 30 years. Fill out 1040ez online If your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period. Fill out 1040ez online Either your loan amount is $250,000 or less, or the number of points is not more than: 4, if your loan period is 15 years or less, or 6, if your loan period is more than 15 years. Fill out 1040ez online Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. Fill out 1040ez online (You can use Figure 23-B as a quick guide to see whether your points are fully deductible in the year paid. Fill out 1040ez online ) Your loan is secured by your main home. Fill out 1040ez online (Your main home is the one you ordinarily live in most of the time. Fill out 1040ez online ) Paying points is an established business practice in the area where the loan was made. Fill out 1040ez online The points paid were not more than the points generally charged in that area. Fill out 1040ez online You use the cash method of accounting. Fill out 1040ez online This means you report income in the year you receive it and deduct expenses in the year you pay them. Fill out 1040ez online (If you want more information about this method, see Accounting Methods in chapter 1. Fill out 1040ez online ) 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. Fill out 1040ez online The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Fill out 1040ez online The funds you provided are not required to have been applied to the points. Fill out 1040ez online They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Fill out 1040ez online You cannot have borrowed these funds from your lender or mortgage broker. Fill out 1040ez online You use your loan to buy or build your main home. Fill out 1040ez online The points were computed as a percentage of the principal amount of the mortgage. Fill out 1040ez online The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. Fill out 1040ez online The points may be shown as paid from either your funds or the seller's. Fill out 1040ez online Figure 23-B. Fill out 1040ez online Are My Points Fully Deductible This Year? Please click here for the text description of the image. Fill out 1040ez online Figure 23-B. Fill out 1040ez online Are My Points Fully Deductible This Year? Note. Fill out 1040ez online If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan. Fill out 1040ez online Home improvement loan. Fill out 1040ez online   You can also fully deduct in the year paid points paid on a loan to improve your main home, if tests (1) through (6) are met. Fill out 1040ez online Second home. Fill out 1040ez online You cannot fully deduct in the year paid points you pay on loans secured by your second home. Fill out 1040ez online You can deduct these points only over the life of the loan. Fill out 1040ez online Refinancing. Fill out 1040ez online   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. Fill out 1040ez online This is true even if the new mortgage is secured by your main home. Fill out 1040ez online   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Fill out 1040ez online You can deduct the rest of the points over the life of the loan. Fill out 1040ez online Example 1. Fill out 1040ez online In 1998, Bill Fields got a mortgage to buy a home. Fill out 1040ez online In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. Fill out 1040ez online The mortgage is secured by his home. Fill out 1040ez online To get the new loan, he had to pay three points ($3,000). Fill out 1040ez online Two points ($2,000) were for prepaid interest, and one point ($1,000) was charged for services, in place of amounts that ordinarily are stated separately on the settlement statement. Fill out 1040ez online Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. Fill out 1040ez online The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. Fill out 1040ez online Bill's first payment on the new loan was due July 1. Fill out 1040ez online He made six payments on the loan in 2013 and is a cash basis taxpayer. Fill out 1040ez online Bill used the funds from the new mortgage to repay his existing mortgage. Fill out 1040ez online Although the new mortgage loan was for Bill's continued ownership of his main home, it was not for the purchase or improvement of that home. Fill out 1040ez online He cannot deduct all of the points in 2013. Fill out 1040ez online He can deduct two points ($2,000) ratably over the life of the loan. Fill out 1040ez online He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. Fill out 1040ez online The other point ($1,000) was a fee for services and is not deductible. Fill out 1040ez online Example 2. Fill out 1040ez online The facts are the same as in Example 1, except that Bill used $25,000 of the loan proceeds to improve his home and $75,000 to repay his existing mortgage. Fill out 1040ez online Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. Fill out 1040ez online His deduction is $500 ($2,000 × 25%). Fill out 1040ez online Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. Fill out 1040ez online This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. Fill out 1040ez online The total amount Bill deducts in 2013 is $550 ($500 + $50). Fill out 1040ez online Special Situations This section describes certain special situations that may affect your deduction of points. Fill out 1040ez online Original issue discount. Fill out 1040ez online   If you do not qualify to either deduct the points in the year paid or deduct them ratably over the life of the loan, or if you choose not to use either of these methods, the points reduce the issue price of the loan. Fill out 1040ez online This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. Fill out 1040ez online Amounts charged for services. Fill out 1040ez online   Amounts charged by the lender for specific services connected to the loan are not interest. Fill out 1040ez online Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Fill out 1040ez online You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Fill out 1040ez online Points paid by the seller. Fill out 1040ez online   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Fill out 1040ez online Treatment by seller. Fill out 1040ez online   The seller cannot deduct these fees as interest. Fill out 1040ez online But they are a selling expense that reduces the amount realized by the seller. Fill out 1040ez online See chapter 15 for information on selling your home. Fill out 1040ez online Treatment by buyer. Fill out 1040ez online    The buyer reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them. Fill out 1040ez online If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. Fill out 1040ez online If any of those tests are not met, the buyer deducts the points over the life of the loan. Fill out 1040ez online   For information about basis, see chapter 13. Fill out 1040ez online Funds provided are less than points. Fill out 1040ez online   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the funds you provided were less than the points charged to you (test (6)), you can deduct the points in the year paid, up to the amount of funds you provided. Fill out 1040ez online In addition, you can deduct any points paid by the seller. Fill out 1040ez online Example 1. Fill out 1040ez online When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Fill out 1040ez online You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. Fill out 1040ez online Of the $1,000 charged for points, you can deduct $750 in the year paid. Fill out 1040ez online You spread the remaining $250 over the life of the mortgage. Fill out 1040ez online Example 2. Fill out 1040ez online 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. Fill out 1040ez online In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Fill out 1040ez online You spread the remaining $250 over the life of the mortgage. Fill out 1040ez online You must reduce the basis of your home by the $1,000 paid by the seller. Fill out 1040ez online Excess points. Fill out 1040ez online   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the points paid were more than generally paid in your area (test (3)), you deduct in the year paid only the points that are generally charged. Fill out 1040ez online You must spread any additional points over the life of the mortgage. Fill out 1040ez online Mortgage ending early. Fill out 1040ez online   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. Fill out 1040ez online However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. Fill out 1040ez online Instead, deduct the remaining balance over the term of the new loan. Fill out 1040ez online    A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Fill out 1040ez online Example. Fill out 1040ez online Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. Fill out 1040ez online He deducts $200 points per year. Fill out 1040ez online Through 2012, Dan has deducted $2,200 of the points. Fill out 1040ez online Dan prepaid his mortgage in full in 2013. Fill out 1040ez online He can deduct the remaining $800 of points in 2013. Fill out 1040ez online Limits on deduction. Fill out 1040ez online   You cannot fully deduct points paid on a mortgage unless the mortgage fits into one of the categories listed earlier under Fully deductible interest . Fill out 1040ez online See Publication 936 for details. Fill out 1040ez online Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. Fill out 1040ez online The insurance must be in connection with home acquisition debt and the insurance contract must have been issued after 2006. Fill out 1040ez online Qualified mortgage insurance. Fill out 1040ez online   Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). Fill out 1040ez online   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. Fill out 1040ez online If provided by the Rural Housing Service, it is commonly known as a guarantee fee. Fill out 1040ez online These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Fill out 1040ez online Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. Fill out 1040ez online Special rules for prepaid mortgage insurance. Fill out 1040ez online   Generally, if you paid premiums for qualified mortgage insurance that are allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. Fill out 1040ez online You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. Fill out 1040ez online No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. Fill out 1040ez online This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. Fill out 1040ez online See the Example below. Fill out 1040ez online Example. Fill out 1040ez online Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. Fill out 1040ez online Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Fill out 1040ez online Since the $9,240 in private mortgage insurance is allocable to periods after 2012, Ryan must allocate the $9,240 over the shorter of the life of the mortgage or 84 months. Fill out 1040ez online Ryan's adjusted gross income (AGI) for 2012 is $76,000. Fill out 1040ez online Ryan can deduct $880 ($9,240 ÷ 84 × 8 months) for qualified mortgage insurance premiums in 2012. Fill out 1040ez online For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 × 12 months) if his AGI is $100,000 or less. Fill out 1040ez online In this example, the mortgage insurance premiums are allocated over 84 months, which is shorter than the life of the mortgage of 15 years (180 months). Fill out 1040ez online Limit on deduction. Fill out 1040ez online   If your adjusted gross income on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. Fill out 1040ez online 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. Fill out 1040ez online If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Fill out 1040ez online Form 1098, Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage, you generally will receive a Form 1098 or a similar statement from the mortgage holder. Fill out 1040ez online You will receive the statement if you pay interest to a person (including a financial institution or a cooperative housing corporation) in the course of that person's trade or business. Fill out 1040ez online A governmental unit is a person for purposes of furnishing the statement. Fill out 1040ez online The statement for each year should be sent to you by January 31 of the following year. Fill out 1040ez online A copy of this form will also be sent to the IRS. Fill out 1040ez online The statement will show the total interest you paid during the year, any mortgage insurance premiums you paid, and if you purchased a main home during the year, it also will show the deductible points paid during the year, including seller-paid points. Fill out 1040ez online However, it should not show any interest that was paid for you by a government agency. Fill out 1040ez online As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Fill out 1040ez online However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. Fill out 1040ez online See Points , earlier, to determine whether you can deduct points not shown on Form 1098. Fill out 1040ez online Prepaid interest on Form 1098. Fill out 1040ez online   If you prepaid interest in 2013 that accrued in full by January 15, 2014, this prepaid interest may be included in box 1 of Form 1098. Fill out 1040ez online However, you cannot deduct the prepaid amount for January 2014 in 2013. Fill out 1040ez online (See Prepaid interest , earlier. Fill out 1040ez online ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. Fill out 1040ez online You will include the interest for January 2014 with the other interest you pay for 2014. Fill out 1040ez online See How To Report , later. Fill out 1040ez online Refunded interest. Fill out 1040ez online   If you received a refund of mortgage interest you overpaid in an earlier year, you generally will receive a Form 1098 showing the refund in box 3. Fill out 1040ez online See Refunds of interest , earlier. Fill out 1040ez online Mortgage insurance premiums. Fill out 1040ez online   The amount of mortgage insurance premiums you paid during 2013 may be shown in box 4 of Form 1098. Fill out 1040ez online See Mortgage Insurance Premiums, earlier. Fill out 1040ez online Investment Interest This section discusses interest expenses you may be able to deduct as an investor. Fill out 1040ez online If you borrow money to buy property you hold for investment, the interest you pay is investment interest. Fill out 1040ez online You can deduct investment interest subject to the limit discussed later. Fill out 1040ez online However, you cannot deduct interest you incurred to produce tax-exempt income. Fill out 1040ez online Nor can you deduct interest expenses on straddles. Fill out 1040ez online Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. Fill out 1040ez online Investment Property Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. Fill out 1040ez online It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). Fill out 1040ez online Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). Fill out 1040ez online Partners, shareholders, and beneficiaries. Fill out 1040ez online   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. Fill out 1040ez online Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. Fill out 1040ez online Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. Fill out 1040ez online The allocation is not affected by the use of property that secures the debt. Fill out 1040ez online Limit on Deduction Generally, your deduction for investment interest expense is limited to the amount of your net investment income. Fill out 1040ez online You can carry over the amount of investment interest that you could not deduct because of this limit to the next tax year. Fill out 1040ez online The interest carried over is treated as investment interest paid or accrued in that next year. Fill out 1040ez online You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. Fill out 1040ez online Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. Fill out 1040ez online Investment income. Fill out 1040ez online    This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). Fill out 1040ez online Investment income does not include Alaska Permanent Fund dividends. Fill out 1040ez online It also does not include qualified dividends or net capital gain unless you choose to include them. Fill out 1040ez online Choosing to include qualified dividends. Fill out 1040ez online   Investment income generally does not include qualified dividends, discussed in chapter 8. Fill out 1040ez online However, you can choose to include all or part of your qualified dividends in investment income. Fill out 1040ez online   You make this choice by completing Form 4952, line 4g, according to its instructions. Fill out 1040ez online   If you choose to include any amount of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. Fill out 1040ez online Choosing to include net capital gain. Fill out 1040ez online   Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). Fill out 1040ez online However, you can choose to include all or part of your net capital gain in investment income. Fill out 1040ez online    You make this choice by completing Form 4952, line 4g, according to its instructions. Fill out 1040ez online   If you choose to include any amount of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. Fill out 1040ez online    Before making either choice, consider the overall effect on your tax liability. Fill out 1040ez online Compare your tax if you make one or both of these choices with your tax if you do not. Fill out 1040ez online Investment income of child reported on parent's return. Fill out 1040ez online    Investment income includes the part of your child's interest and dividend income that you choose to report on your return. Fill out 1040ez online If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814, Parents' Election To Report Child's Interest and Dividends. Fill out 1040ez online Child's qualified dividends. Fill out 1040ez online   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. Fill out 1040ez online However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. Fill out 1040ez online   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). Fill out 1040ez online Child's Alaska Permanent Fund dividends. Fill out 1040ez online   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. Fill out 1040ez online To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. Fill out 1040ez online Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. Fill out 1040ez online Subtract the result from the amount on Form 8814, line 12. Fill out 1040ez online Child's capital gain distributions. Fill out 1040ez online    If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D, line 13, or Form 1040, line 13) generally does not count as investment income. Fill out 1040ez online However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. Fill out 1040ez online   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). Fill out 1040ez online Investment expenses. Fill out 1040ez online   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. Fill out 1040ez online Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. Fill out 1040ez online Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A, line 27. Fill out 1040ez online Losses from passive activities. Fill out 1040ez online   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). Fill out 1040ez online See Publication 925, Passive Activity and At-Risk Rules, for information about passive activities. Fill out 1040ez online Form 4952 Use Form 4952, Investment Interest Expense Deduction, to figure your deduction for investment interest. Fill out 1040ez online Exception to use of Form 4952. Fill out 1040ez online   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. Fill out 1040ez online Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. Fill out 1040ez online You do not have any other deductible investment expenses. Fill out 1040ez online You have no carryover of investment interest expense from 2012. Fill out 1040ez online If you meet all of these tests, you can deduct all of your investment interest. Fill out 1040ez online More Information For more information on investment interest, see Interest Expenses in chapter 3 of Publication 550. Fill out 1040ez online Items You Cannot Deduct Some interest payments are not deductible. Fill out 1040ez online Certain expenses similar to interest also are not deductible. Fill out 1040ez online Nondeductible expenses include the following items. Fill out 1040ez online Personal interest (discussed later). Fill out 1040ez online Service charges (however, see Other Expenses (Line 23) in chapter 28). Fill out 1040ez online Annual fees for credit cards. Fill out 1040ez online Loan fees. Fill out 1040ez online Credit investigation fees. Fill out 1040ez online Interest to purchase or carry tax-exempt securities. Fill out 1040ez online Penalties. Fill out 1040ez online   You cannot deduct fines and penalties paid to a government for violations of law, regardless of their nature. Fill out 1040ez online Personal Interest Personal interest is not deductible. Fill out 1040ez online Personal interest is any interest that is not home mortgage interest, investment interest, business interest, or other deductible interest. Fill out 1040ez online It includes the following items. Fill out 1040ez online Interest on car loans (unless you use the car for business). Fill out 1040ez online Interest on federal, state, or local income tax. Fill out 1040ez online Finance charges on credit cards, retail installment contracts, and revolving charge accounts incurred for personal expenses. Fill out 1040ez online Late payment charges by a public utility. Fill out 1040ez online You may be able to deduct interest you pay on a qualified student loan. Fill out 1040ez online For details, see Publication 970, Tax Benefits for Education. Fill out 1040ez online Allocation of Interest If you use the proceeds of a loan for more than one purpose (for example, personal and business), you must allocate the interest on the loan to each use. Fill out 1040ez online However, you do not have to allocate home mortgage interest if it is fully deductible, regardless of how the funds are used. Fill out 1040ez online You allocate interest (other than fully deductible home mortgage interest) on a loan in the same way as the loan itself is allocated. Fill out 1040ez online You do this by tracing disbursements of the debt proceeds to specific uses. Fill out 1040ez online For details on how to do this, see chapter 4 of Publication 535. Fill out 1040ez online How To Report You must file Form 1040 to deduct any home mortgage interest expense on your tax return. Fill out 1040ez online Where you deduct your interest expense generally depends on how you use the loan proceeds. Fill out 1040ez online See Table 23-1 for a summary of where to deduct your interest expense. Fill out 1040ez online Home mortgage interest and points. Fill out 1040ez online   Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. Fill out 1040ez online If you paid more deductible interest to the financial institution than the amount shown on Form 1098, show the larger deductible amount on line 10. Fill out 1040ez online Attach a statement explaining the difference and print “See attached” next to line 10. Fill out 1040ez online    Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. Fill out 1040ez online If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and taxpayer identification number (TIN) on the dotted lines next to line 11. Fill out 1040ez online The seller must give you this number and you must give the seller your TIN. Fill out 1040ez online A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Fill out 1040ez online Failure to meet any of these requirements may result in a $50 penalty for each failure. Fill out 1040ez online The TIN can be either a social security number, an individual taxpayer identification number (issued by the Internal Revenue Service), or an employer identification number. Fill out 1040ez online See Social Security Number (SSN) in chapter 1 for more information about TINs. Fill out 1040ez online    If you can take a deduction for points that were not reported to you on Form 1098, deduct those points on Schedule A (Form 1040), line 12. Fill out 1040ez online   Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. Fill out 1040ez online More than one borrower. Fill out 1040ez online   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. Fill out 1040ez online Show how much of the interest each of you paid, and give the name and address of the person who received the form. Fill out 1040ez online Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Fill out 1040ez online Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. Fill out 1040ez online   Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Fill out 1040ez online You should let each of the other borrowers know what his or her share is. Fill out 1040ez online Mortgage proceeds used for business or investment. Fill out 1040ez online    If your home mortgage interest deduction is limited, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 23-1. Fill out 1040ez online It shows where to deduct the part of your excess interest that is for those activities. Fill out 1040ez online Investment interest. Fill out 1040ez online    Deduct investment interest, subject to certain limits discussed in Publication 550, on Schedule A (Form 1040), line 14. Fill out 1040ez online Amortization of bond premium. Fill out 1040ez online   There are various ways to treat the premium you pay to buy taxable bonds. Fill out 1040ez online See Bond Premium Amortization in Publication 550. Fill out 1040ez online Income-producing rental or royalty interest. Fill out 1040ez online   Deduct interest on a loan for income-producing rental or royalty property that is not used in your business in Part I of Schedule E (Form 1040). Fill out 1040ez online Example. Fill out 1040ez online You rent out part of your home and borrow money to make repairs. Fill out 1040ez online You can deduct only the interest payment for the rented part in Part I of Schedule E (Form 1040). Fill out 1040ez online Deduct the rest of the interest payment on Schedule A (Form 1040) if it is deductible home mortgage interest. Fill out 1040ez online Table 23-1. Fill out 1040ez online Where To Deduct Your Interest Expense IF you have . Fill out 1040ez online . Fill out 1040ez online . Fill out 1040ez online THEN deduct it on . Fill out 1040ez online . Fill out 1040ez online . Fill out 1040ez online AND for more information go to . Fill out 1040ez online . Fill out 1040ez online . Fill out 1040ez online deductible student loan interest Form 1040, line 33, or Form 1040A, line 18 Publication 970. Fill out 1040ez online deductible home mortgage interest and points reported on Form 1098 Schedule A (Form 1040), line 10 Publication 936. Fill out 1040ez online deductible home mortgage interest not reported on Form 1098 Schedule A (Form 1040), line 11 Publication 936. Fill out 1040ez online deductible points not reported on Form 1098 Schedule A (Form 1040), line 12 Publication 936. Fill out 1040ez online deductible mortgage insurance premiums Schedule A (Form 1040), line 13 Publication 936. Fill out 1040ez online deductible investment interest (other than incurred to produce rents or royalties) Schedule A (Form 1040), line 14 Publication 550. Fill out 1040ez online deductible business interest (non-farm) Schedule C or C-EZ (Form 1040) Publication 535. Fill out 1040ez online deductible farm business interest Schedule F (Form 1040) Publications 225 and 535. Fill out 1040ez online deductible interest incurred to produce rents or royalties Schedule E (Form 1040) Publications 527 and 535. Fill out 1040ez online personal interest not deductible. Fill out 1040ez online Prev  Up  Next   Home   More Online Publications