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Form 1040x Fillable

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Form 1040x Fillable

Form 1040x fillable 7. Form 1040x fillable   Excess Contributions Table of Contents How Do I Know If I Have Excess Contributions? What Happens If I Have Excess Contributions?Excess Annual Addition Excess Elective Deferral If your actual contributions are greater than your MAC, you have an excess contribution. Form 1040x fillable Excess contributions can result in income tax, additional taxes, and penalties. Form 1040x fillable The effect of excess contributions depends on the type of excess contribution. Form 1040x fillable This chapter discusses excess contributions to your 403(b) account. Form 1040x fillable How Do I Know If I Have Excess Contributions? At the end of the year or the beginning of the next year, you should refigure your MAC based on your actual compensation and actual contributions made to your account. Form 1040x fillable If the actual contributions to your account are greater than your MAC, you have excess contributions. Form 1040x fillable If, at any time during the year, your employment status or your compensation changes, you should refigure your MAC using a revised estimate of compensation to prevent excess contributions. Form 1040x fillable What Happens If I Have Excess Contributions? Certain excess contributions in a 403(b) account can be corrected. Form 1040x fillable The effect of an excess 403(b) contribution will depend on the type of excess contribution. Form 1040x fillable Types of excess contributions. Form 1040x fillable   If, after checking your actual contributions, you determine that you have an excess, the first thing is to identify the type of excess that you have. Form 1040x fillable Excess contributions to a 403(b) account are categorized as either an: Excess annual addition, or Excess elective deferral. Form 1040x fillable Excess Annual Addition An excess annual addition is a contribution that is more than your limit on annual additions. Form 1040x fillable To determine your limit on annual additions, see chapter 3 (chapter 5 for ministers or church employees). Form 1040x fillable In the year that your contributions are more than your limit on annual additions, the excess amount will be included in your income. Form 1040x fillable Excise Tax If your 403(b) account invests in mutual funds, and you exceed your limit on annual additions, you may be subject to a 6% excise tax on the excess contribution. Form 1040x fillable The excise tax does not apply to funds in an annuity account or to excess deferrals. Form 1040x fillable You must pay the excise tax each year in which there are excess contributions in your account. Form 1040x fillable Excess contributions can be corrected by contributing less than the applicable limit in later years or by making permissible distributions. Form 1040x fillable See chapter 8 for a discussion on permissible distributions. Form 1040x fillable You cannot deduct the excise tax. Form 1040x fillable Reporting requirement. Form 1040x fillable   You must file Form 5330 if there has been an excess contribution to a custodial account and that excess has not been corrected. Form 1040x fillable Excess Elective Deferral An excess elective deferral is the amount that is more than your limit on elective deferrals. Form 1040x fillable To determine your limit on elective deferrals, see chapter 4. Form 1040x fillable Your employer's 403(b) plan may contain language permitting it to distribute excess deferrals. Form 1040x fillable If so, it may require that in order to get a distribution of excess deferrals, you either notify the plan of the amount of excess deferrals or designate a distribution as an excess deferral. Form 1040x fillable The plan may require that the notification or designation be in writing and may require that you certify or otherwise establish that the designated amount is an excess deferral. Form 1040x fillable A plan is not required to permit distribution of excess deferrals. Form 1040x fillable Correction of excess deferrals during year. Form 1040x fillable   If you have excess deferrals for a year, a corrective distribution may be made only if both of the following conditions are satisfied. Form 1040x fillable The plan and either you or your employer designate the distribution as an excess deferral to the extent you have excess deferrals for the year. Form 1040x fillable The correcting distribution is made after the date on which the excess deferral was made. Form 1040x fillable Correction of excess deferrals after the year. Form 1040x fillable   If you have excess deferrals for a year, you may receive a correcting distribution of the excess deferral no later than April 15 of the following year. Form 1040x fillable The plan can distribute the excess deferral (and any income allocable to the excess) no later than April 15 of the year following the year the excess deferral was made. Form 1040x fillable Tax treatment of excess deferrals not attributable to Roth contributions. Form 1040x fillable   If the excess deferral is distributed by April 15, it is included in your income in the year contributed and the earnings on the excess deferral will be taxed in the year distributed. Form 1040x fillable Tax treatment of excess deferrals attributable to Roth contributions. Form 1040x fillable   For these rules, see Regulations section 1. Form 1040x fillable 402(g)-1(e). Form 1040x fillable Prev  Up  Next   Home   More Online Publications
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The Form 1040x Fillable

Form 1040x fillable 1. Form 1040x fillable   Rental Income and Expenses (If No Personal Use of Dwelling) Table of Contents Rental IncomeWhen To Report Types of Income Rental ExpensesWhen To Deduct Types of Expenses This chapter discusses the various types of rental income and expenses for a residential rental activity with no personal use of the dwelling. Form 1040x fillable Generally, each year you will report all income and deduct all out-of-pocket expenses in full. Form 1040x fillable The deduction to recover the cost of your rental property—depreciation—is taken over a prescribed number of years, and is discussed in chapter 2, Depreciation of Rental Property. Form 1040x fillable If your rental income is from property you also use personally or rent to someone at less than a fair rental price, first read the information in chapter 5 , Personal Use of Dwelling Unit (Including Vacation Home). Form 1040x fillable Rental Income In most cases, you must include in your gross income all amounts you receive as rent. Form 1040x fillable Rental income is any payment you receive for the use or occupation of property. Form 1040x fillable In addition to amounts you receive as normal rental payments, there are other amounts that may be rental income. Form 1040x fillable When To Report When you report rental income on your tax return generally depends on whether you are a cash basis taxpayer or use an accrual method. Form 1040x fillable Most individual taxpayers use the cash method. Form 1040x fillable Cash method. Form 1040x fillable   You are a cash basis taxpayer if you report income on your return in the year you actually or constructively receive it, regardless of when it was earned. Form 1040x fillable You constructively receive income when it is made available to you, for example, by being credited to your bank account. Form 1040x fillable Accrual method. Form 1040x fillable    If you are an accrual basis taxpayer, you generally report income when you earn it, rather than when you receive it. Form 1040x fillable You generally deduct your expenses when you incur them, rather than when you pay them. Form 1040x fillable More information. Form 1040x fillable   See Publication 538, Accounting Periods and Methods, for more information about when you constructively receive income and accrual methods of accounting. Form 1040x fillable Types of Income The following are common types of rental income. Form 1040x fillable Advance rent. Form 1040x fillable   Advance rent is any amount you receive before the period that it covers. Form 1040x fillable Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. Form 1040x fillable Example. Form 1040x fillable On March 18, 2013, you signed a 10-year lease to rent your property. Form 1040x fillable During 2013, you received $9,600 for the first year's rent and $9,600 as rent for the last year of the lease. Form 1040x fillable You must include $19,200 in your rental income in the first year. Form 1040x fillable Canceling a lease. Form 1040x fillable   If your tenant pays you to cancel a lease, the amount you receive is rent. Form 1040x fillable Include the payment in your income in the year you receive it regardless of your method of accounting. Form 1040x fillable Expenses paid by tenant. Form 1040x fillable   If your tenant pays any of your expenses, those payments are rental income. Form 1040x fillable Because you must include this amount in income, you can also deduct the expenses if they are deductible rental expenses. Form 1040x fillable For more information, see Rental Expenses , later. Form 1040x fillable Example 1. Form 1040x fillable Your tenant pays the water and sewage bill for your rental property and deducts the amount from the normal rent payment. Form 1040x fillable Under the terms of the lease, your tenant does not have to pay this bill. Form 1040x fillable Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income. Form 1040x fillable You can deduct the utility payment made by your tenant as a rental expense. Form 1040x fillable Example 2. Form 1040x fillable While you are out of town, the furnace in your rental property stops working. Form 1040x fillable Your tenant pays for the necessary repairs and deducts the repair bill from the rent payment. Form 1040x fillable Include the repair bill paid by the tenant and any amount received as a rent payment in your rental income. Form 1040x fillable You can deduct the repair payment made by your tenant as a rental expense. Form 1040x fillable Property or services. Form 1040x fillable   If you receive property or services as rent, instead of money, include the fair market value of the property or services in your rental income. Form 1040x fillable   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. Form 1040x fillable Example. Form 1040x fillable Your tenant is a house painter. Form 1040x fillable He offers to paint your rental property instead of paying 2 months rent. Form 1040x fillable You accept his offer. Form 1040x fillable Include in your rental income the amount the tenant would have paid for 2 months rent. Form 1040x fillable You can deduct that same amount as a rental expense for painting your property. Form 1040x fillable Security deposits. Form 1040x fillable   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. Form 1040x fillable But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. Form 1040x fillable    If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Form 1040x fillable Include it in your income when you receive it. Form 1040x fillable Other Sources of Rental Income Lease with option to buy. Form 1040x fillable   If the rental agreement gives your tenant the right to buy your rental property, the payments you receive under the agreement are generally rental income. Form 1040x fillable If your tenant exercises the right to buy the property, the payments you receive for the period after the date of sale are considered part of the selling price. Form 1040x fillable Part interest. Form 1040x fillable   If you own a part interest in rental property, you must report your part of the rental income from the property. Form 1040x fillable Rental of property also used as your home. Form 1040x fillable   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. Form 1040x fillable However, you can deduct on Schedule A (Form 1040), Itemized Deductions, the interest, taxes, and casualty and theft losses that are allowed for nonrental property. Form 1040x fillable See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Form 1040x fillable Rental Expenses In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. Form 1040x fillable Personal use of rental property. Form 1040x fillable   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. Form 1040x fillable Also, your rental expense deductions may be limited. Form 1040x fillable See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Form 1040x fillable Part interest. Form 1040x fillable   If you own a part interest in rental property, you can deduct expenses you paid according to your percentage of ownership. Form 1040x fillable Example. Form 1040x fillable Roger owns a one-half undivided interest in a rental house. Form 1040x fillable Last year he paid $968 for necessary repairs on the property. Form 1040x fillable Roger can deduct $484 (50% × $968) as a rental expense. Form 1040x fillable He is entitled to reimbursement for the remaining half from the co-owner. Form 1040x fillable When To Deduct You generally deduct your rental expenses in the year you pay them. Form 1040x fillable If you use the accrual method, see Publication 538 for more information. Form 1040x fillable Types of Expenses Listed below are the most common rental expenses. Form 1040x fillable Advertising. Form 1040x fillable Auto and travel expenses. Form 1040x fillable Cleaning and maintenance. Form 1040x fillable Commissions. Form 1040x fillable Depreciation. Form 1040x fillable Insurance. Form 1040x fillable Interest (other). Form 1040x fillable Legal and other professional fees. Form 1040x fillable Local transportation expenses. Form 1040x fillable Management fees. Form 1040x fillable Mortgage interest paid to banks, etc. Form 1040x fillable Points. Form 1040x fillable Rental payments. Form 1040x fillable Repairs. Form 1040x fillable Taxes. Form 1040x fillable Utilities. Form 1040x fillable Some of these expenses, as well as other less common ones, are discussed below. Form 1040x fillable Depreciation. Form 1040x fillable   Depreciation is a capital expense. Form 1040x fillable It is the mechanism for recovering your cost in an income producing property and must be taken over the expected life of the property. Form 1040x fillable   You can begin to depreciate rental property when it is ready and available for rent. Form 1040x fillable See Placed in Service under When Does Depreciation Begin and End in chapter 2. Form 1040x fillable Insurance premiums paid in advance. Form 1040x fillable   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. Form 1040x fillable You cannot deduct the total premium in the year you pay it. Form 1040x fillable See chapter 6 of Publication 535 for information on deductible premiums. Form 1040x fillable Interest expense. Form 1040x fillable   You can deduct mortgage interest you pay on your rental property. Form 1040x fillable When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Form 1040x fillable Chapter 4 of Publication 535 explains mortgage interest in detail. Form 1040x fillable Expenses paid to obtain a mortgage. Form 1040x fillable   Certain expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. Form 1040x fillable These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property. Form 1040x fillable Form 1098, Mortgage Interest Statement. Form 1040x fillable   If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098 or similar statement showing the interest you paid for the year. Form 1040x fillable If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on, the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. Form 1040x fillable Attach a statement to your return showing the name and address of the other person. Form 1040x fillable On the dotted line next to line 13, enter “See attached. Form 1040x fillable ” Legal and other professional fees. Form 1040x fillable   You can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. Form 1040x fillable For example, on your 2013 Schedule E you can deduct fees paid in 2013 to prepare Part I of your 2012 Schedule E. Form 1040x fillable You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. Form 1040x fillable Local benefit taxes. Form 1040x fillable   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. Form 1040x fillable These charges are nondepreciable capital expenditures and must be added to the basis of your property. Form 1040x fillable However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. Form 1040x fillable Local transportation expenses. Form 1040x fillable   You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. Form 1040x fillable However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. Form 1040x fillable See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Form 1040x fillable   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. Form 1040x fillable For 2013, the standard mileage rate for business use is 56. Form 1040x fillable 5 cents per mile. Form 1040x fillable For more information, see chapter 4 of Publication 463. Form 1040x fillable    To deduct car expenses under either method, you must keep records that follow the rules in chapter 5 of Publication 463. Form 1040x fillable In addition, you must complete Form 4562, Part V, and attach it to your tax return. Form 1040x fillable Pre-rental expenses. Form 1040x fillable   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. Form 1040x fillable Rental of equipment. Form 1040x fillable   You can deduct the rent you pay for equipment that you use for rental purposes. Form 1040x fillable However, in some cases, lease contracts are actually purchase contracts. Form 1040x fillable If so, you cannot deduct these payments. Form 1040x fillable You can recover the cost of purchased equipment through depreciation. Form 1040x fillable Rental of property. Form 1040x fillable   You can deduct the rent you pay for property that you use for rental purposes. Form 1040x fillable If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. Form 1040x fillable Travel expenses. Form 1040x fillable   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. Form 1040x fillable You must properly allocate your expenses between rental and nonrental activities. Form 1040x fillable You cannot deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. Form 1040x fillable The cost of improvements is recovered by taking depreciation. Form 1040x fillable For information on travel expenses, see chapter 1 of Publication 463. Form 1040x fillable    To deduct travel expenses, you must keep records that follow the rules in chapter 5 of Publication 463. Form 1040x fillable Uncollected rent. Form 1040x fillable   If you are a cash basis taxpayer, do not deduct uncollected rent. Form 1040x fillable Because you have not included it in your income, it is not deductible. Form 1040x fillable   If you use an accrual method, report income when you earn it. Form 1040x fillable If you are unable to collect the rent, you may be able to deduct it as a business bad debt. Form 1040x fillable See chapter 10 of Publication 535 for more information about business bad debts. Form 1040x fillable Vacant rental property. Form 1040x fillable   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. Form 1040x fillable However, you cannot deduct any loss of rental income for the period the property is vacant. Form 1040x fillable Vacant while listed for sale. Form 1040x fillable   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. Form 1040x fillable If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. Form 1040x fillable Points The term “points” is often used to describe some of the charges paid, or treated as paid, by a borrower to take out a loan or a mortgage. Form 1040x fillable These charges are also called loan origination fees, maximum loan charges, or premium charges. Form 1040x fillable Any of these charges (points) that are solely for the use of money are interest. Form 1040x fillable Because points are prepaid interest, you generally cannot deduct the full amount in the year paid, but must deduct the interest over the term of the loan. Form 1040x fillable The method used to figure the amount of points you can deduct each year follows the original issue discount (OID) rules. Form 1040x fillable In this case, points are equivalent to OID, which is the difference between: The amount borrowed (redemption price at maturity, or principal) and The proceeds (issue price). Form 1040x fillable The first step is to determine whether your total OID (which you may have on bonds or other investments in addition to the mortgage loan), including the OID resulting from the points, is insignificant or de minimis. Form 1040x fillable If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct. Form 1040x fillable De minimis OID. Form 1040x fillable   The OID is de minimis if it is less than one-fourth of 1% (. Form 1040x fillable 0025) of the stated redemption price at maturity (principal amount of the loan) multiplied by the number of full years from the date of original issue to maturity (term of the loan). Form 1040x fillable   If the OID is de minimis, you can choose one of the following ways to figure the amount of points you can deduct each year. Form 1040x fillable On a constant-yield basis over the term of the loan. Form 1040x fillable On a straight line basis over the term of the loan. Form 1040x fillable In proportion to stated interest payments. Form 1040x fillable In its entirety at maturity of the loan. Form 1040x fillable You make this choice by deducting the OID (points) in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued. Form 1040x fillable Example. Form 1040x fillable Carol Madison took out a $100,000 mortgage loan on January 1, 2013, to buy a house she will use as a rental during 2013. Form 1040x fillable The loan is to be repaid over 30 years. Form 1040x fillable During 2013, Carol paid $10,000 of mortgage interest (stated interest) to the lender. Form 1040x fillable When the loan was made, she paid $1,500 in points to the lender. Form 1040x fillable The points reduced the principal amount of the loan from $100,000 to $98,500, resulting in $1,500 of OID. Form 1040x fillable Carol determines that the points (OID) she paid are de minimis based on the following computation. Form 1040x fillable Redemption price at maturity (principal amount of the loan) $100,000 Multiplied by: The term of the  loan in complete years ×30 Multiplied by ×. Form 1040x fillable 0025 De minimis amount $7,500 The points (OID) she paid ($1,500) are less than the de minimis amount ($7,500). Form 1040x fillable Therefore, Carol has de minimis OID and she can choose one of the four ways discussed earlier to figure the amount she can deduct each year. Form 1040x fillable Under the straight line method, she can deduct $50 each year for 30 years. Form 1040x fillable Constant-yield method. Form 1040x fillable   If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. Form 1040x fillable   You figure your deduction for the first year in the following manner. Form 1040x fillable Determine the issue price of the loan. Form 1040x fillable If you paid points on the loan, the issue price generally is the difference between the principal and the points. Form 1040x fillable Multiply the result in (1) by the yield to maturity (defined later). Form 1040x fillable Subtract any qualified stated interest payments (defined later) from the result in (2). Form 1040x fillable This is the OID you can deduct in the first year. Form 1040x fillable Yield to maturity (YTM). Form 1040x fillable   This rate is generally shown in the literature you receive from your lender. Form 1040x fillable If you do not have this information, consult your lender or tax advisor. Form 1040x fillable In general, the YTM is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan. Form 1040x fillable Qualified stated interest (QSI). Form 1040x fillable   In general, this is the stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a fixed rate. Form 1040x fillable Example—Year 1. Form 1040x fillable The facts are the same as in the previous example. Form 1040x fillable The yield to maturity on Carol's loan is 10. Form 1040x fillable 2467%, compounded annually. Form 1040x fillable She figured the amount of points (OID) she could deduct in 2013 as follows. Form 1040x fillable Principal amount of the loan $100,000 Minus: Points (OID) –1,500 Issue price of the loan $98,500 Multiplied by: YTM × . Form 1040x fillable 102467 Total 10,093 Minus: QSI –10,000 Points (OID) deductible in 2013 $93 To figure your deduction in any subsequent year, you start with the adjusted issue price. Form 1040x fillable To get the adjusted issue price, add to the issue price figured in Year 1 any OID previously deducted. Form 1040x fillable Then follow steps (2) and (3), earlier. Form 1040x fillable Example—Year 2. Form 1040x fillable Carol figured the deduction for 2014 as follows. Form 1040x fillable Issue price $98,500 Plus: Points (OID) deducted  in 2013 +93 Adjusted issue price $98,593 Multiplied by: YTM × . Form 1040x fillable 102467 Total 10,103 Minus: QSI –10,000 Points (OID) deductible in 2014 $103 Loan or mortgage ends. Form 1040x fillable    If your loan or mortgage ends, you may be able to deduct any remaining points (OID) in the tax year in which the loan or mortgage ends. Form 1040x fillable A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event. Form 1040x fillable However, if the refinancing is with the same lender, the remaining points (OID) generally are not deductible in the year in which the refinancing occurs, but may be deductible over the term of the new mortgage or loan. Form 1040x fillable Points when loan refinance is more than the previous outstanding balance. Form 1040x fillable   When you refinance a rental property for more than the previous outstanding balance, the portion of the points allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Form 1040x fillable For example, if an individual refinanced a loan with a balance of $100,000, the amount of the new loan was $120,000, and the taxpayer used $20,000 to purchase a car, points allocable to the $20,000 would be treated as nondeductible personal interest. Form 1040x fillable Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. Form 1040x fillable Improvements. Form 1040x fillable   You must capitalize any expense you pay to improve your rental property. Form 1040x fillable An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. Form 1040x fillable Betterments. Form 1040x fillable   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. Form 1040x fillable Restoration. Form 1040x fillable   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. Form 1040x fillable Adaptation. Form 1040x fillable   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. Form 1040x fillable Separate the costs of repairs and improvements, and keep accurate records. Form 1040x fillable You will need to know the cost of improvements when you sell or depreciate your property. Form 1040x fillable The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. Form 1040x fillable Table 1-1. Form 1040x fillable Examples of Improvements Additions Bedroom Bathroom Deck Garage Porch Patio  Lawn & Grounds Landscaping Driveway Walkway Fence Retaining wall Sprinkler system Swimming pool Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system   Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances Kitchen modernization Flooring Wall-to-wall carpeting  Insulation Attic Walls, floor Pipes, duct work Prev  Up  Next   Home   More Online Publications