Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Free State Efile Taxes

Amending My 2010 Tax ReturnTax Form 1040x More:label_tax_20form_201040x More:bizfinanceH And R Block Free FilingHow To File An Amendment1040 Easy2006 TaxesAmending Federal Tax ReturnIrs1040ezTurbotax Military1040x How ToIf I Am Unemployed Do I File TaxesH And R Block Free Tax FilingFiling Income Tax For 20122011 TaxUnited Way Free Tax Preparation2012 Taxes Online FreeTurbo Tax AmmendAmended Tax ReturnsFiling 1040x Electronically2012 Tax Software Download2011 Tax Filing DeadlineState TaxsFile Taxes Online Free 20122012 Income Tax Forms1040x Amended Return 2012Irs Amended Tax ReturnHow To File State Taxes Online FreeFree State Returns Taxes FilingHow To File Back Taxes Online2011 Tax Form 1040Free Online Amended Tax ReturnFederal Taxes 2012Instructions For 1040ez 20132010 1040xTax Return 2012 FormAmend TaxesIrs FormsAmended Tax Form 2012Form 1040 Es1040ezforms

Free State Efile Taxes

Free state efile taxes Index A Additional Medicare Tax, Reminder, Social Security and Medicare Taxes, Withholding the employee's share. Free state efile taxes Assistance (see Tax help) B Baby sitters (see Household employee) Baby-sitting costs (see Child and dependent care expenses) Business employers, employment tax payment option, Payment option for business employers. Free state efile taxes C Caretakers (see Household employee) Child and dependent care expenses, credit for, Can You Claim a Credit for Child and Dependent Care Expenses? Comments on publication, Comments and suggestions. Free state efile taxes Correcting Schedule H Schedule H attached to another form, How Can You Correct Schedule H? Schedule H filed by itself, How Can You Correct Schedule H? D Dependent care expenses, Can You Claim a Credit for Child and Dependent Care Expenses? Disability payments, state, State disability payments treated as wages. Free state efile taxes Domestic worker (see Household employee) Drivers (see Household employee) E Earned income credit (EIC), What Do You Need To Know About the Earned Income Credit? EIC notice, Notice about the EIC. Free state efile taxes Employer identification number (EIN), Employer identification number (EIN). Free state efile taxes Employing an alien legally (see Legal employee) Employment eligibility verification form, Can Your Employee Legally Work in the United States? Employment taxes Need to pay, Do You Need To Pay Employment Taxes? Payment options, Payment option for business employers. Free state efile taxes Tax returns, Business employment tax returns. Free state efile taxes Estimated tax, paying, Paying estimated tax. Free state efile taxes F Federal income tax withholding, increasing (see How to increase withholding) Federal unemployment (FUTA) tax, Federal Unemployment (FUTA) Tax Form 1040-ES, Paying estimated tax. Free state efile taxes 940, Business employment tax returns. Free state efile taxes 941, Business employment tax returns. Free state efile taxes 943, Business employment tax returns. Free state efile taxes 944, Business employment tax returns. Free state efile taxes I-9, Can Your Employee Legally Work in the United States? M-274, Can Your Employee Legally Work in the United States? SS-4, Employer identification number (EIN). Free state efile taxes SS-5, Employee's social security number. Free state efile taxes W-2, Notice about the EIC. Free state efile taxes , Form W-2. Free state efile taxes W-4, Do You Need To Withhold Federal Income Tax?, Asking for more federal income tax withholding. Free state efile taxes W-4P, Asking for more federal income tax withholding. Free state efile taxes Forms you must file, What Forms Must You File? Free tax services, Free help with your tax return. Free state efile taxes FUTA (see Federal Unemployment (FUTA)Tax) H Handbook for Employers, Can Your Employee Legally Work in the United States? Health aides (see Household employee) Help (see Tax help) House cleaning workers (see Household employee) Household employee, Do You Have a Household Employee? Housekeepers (see Household employee) How to increase withholding, Asking for more federal income tax withholding. Free state efile taxes How to pay estimated tax, Paying estimated tax. Free state efile taxes I Income tax withholding, increasing (see How to increase withholding) L Legal employee, Can Your Employee Legally Work in the United States? M Maids (see Household employee) Medicare (see Social security and Medicare taxes) N Nannies (see Household employee) Nonemployees, Workers who are not your employees. Free state efile taxes Nurses, private (see Household employee) P Publications (see Tax help) R Records you must keep, What Records Must You Keep? S Schedule H (Form 1040), How Do You Make Tax Payments?, Schedule H. Free state efile taxes Self-employed workers (see Nonemployees) Social security and Medicare Taxes, Social Security and Medicare Taxes Wages, Social security and Medicare wages. Free state efile taxes Social security number, employee's, Employee's social security number. Free state efile taxes State Disability payments, State disability payments treated as wages. Free state efile taxes Employment taxes, State employment taxes. Free state efile taxes Suggestions for publication, Comments and suggestions. Free state efile taxes T Tax credits Child and dependent care expenses, Can You Claim a Credit for Child and Dependent Care Expenses? Earned income, What Do You Need To Know About the Earned Income Credit? FUTA, Credit for 2013. Free state efile taxes Tax help, How To Get Tax Help Taxes How to make payments, How Do You Make Tax Payments? Medicare, Social Security and Medicare Taxes Social security, Social Security and Medicare Taxes U Unemployment taxes Federal, Federal Unemployment (FUTA) Tax State, State employment taxes. Free state efile taxes USCIS website, Can Your Employee Legally Work in the United States? W Wages Cash, Cash wages. Free state efile taxes FUTA, FUTA wages. Free state efile taxes Medicare, Social security and Medicare wages. Free state efile taxes Social security, Social security and Medicare wages. Free state efile taxes State disability payments, State disability payments treated as wages. Free state efile taxes Withholding Employee's share, Withholding the employee's share. Free state efile taxes Federal income tax, Do You Need To Withhold Federal Income Tax? How to increase, Asking for more federal income tax withholding. Free state efile taxes Wages, Wages. Free state efile taxes Y Yard workers (see Household employee) Prev  Up     Home   More Online Publications
Español

Energy Star Program

The ENERGY STAR label is awarded to products for the home and office that are highly energy-efficient. The program encourages the use of energy efficient products that both protect the environment and save consumers money.

Contact the Agency or Department

Website: Energy Star Program

E-mail:

Address: 1200 Pennsylvania Ave., NW
Room 6202J

Washington, DC 20460

Phone Number: 703-412-3086

Toll-free: 1-888-782-7937

The Free State Efile Taxes

Free state efile taxes 23. Free state efile taxes   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. Free state efile taxes Mortgage proceeds used for business or investment. Free state efile taxes Introduction This chapter discusses what interest expenses you can deduct. Free state efile taxes Interest is the amount you pay for the use of borrowed money. Free state efile taxes The following are types of interest you can deduct as itemized deductions on Schedule A (Form 1040). Free state efile taxes Home mortgage interest, including certain points and mortgage insurance premiums. Free state efile taxes Investment interest. Free state efile taxes This chapter explains these deductions. Free state efile taxes It also explains where to deduct other types of interest and lists some types of interest you cannot deduct. Free state efile taxes Use Table 23-1 to find out where to get more information on various types of interest, including investment interest. Free state efile taxes 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). Free state efile taxes The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. Free state efile taxes You can deduct home mortgage interest if all the following conditions are met. Free state efile taxes You file Form 1040 and itemize deductions on Schedule A (Form 1040). Free state efile taxes The mortgage is a secured debt on a qualified home in which you have an ownership interest. Free state efile taxes (Generally, your mortgage is a secured debt if you put your home up as collateral to protect the interest of the lender. Free state efile taxes The term “qualified home” means your main home or second home. Free state efile taxes For details, see Publication 936. Free state efile taxes )  Both you and the lender must intend that the loan be repaid. Free state efile taxes Amount Deductible In most cases, you can deduct all of your home mortgage interest. Free state efile taxes How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. Free state efile taxes Fully deductible interest. Free state efile taxes   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. Free state efile taxes (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. Free state efile taxes )   The three categories are as follows: Mortgages you took out on or before October 13, 1987 (called grandfathered debt). Free state efile taxes 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). Free state efile taxes 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). Free state efile taxes The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. Free state efile taxes   See Part II of Publication 936 for more detailed definitions of grandfathered, home acquisition, and home equity debt. Free state efile taxes    You can use Figure 23-A to check whether your home mortgage interest is fully deductible. Free state efile taxes Figure 23-A. Free state efile taxes Is My Home Mortgage Interest Fully Deductible? Please click here for the text description of the image. Free state efile taxes Figure 23-A. Free state efile taxes Is My Interest Fully Deductible? Limits on deduction. Free state efile taxes   You cannot fully deduct interest on a mortgage that does not fit into any of the three categories listed earlier. Free state efile taxes If this applies to you, see Part II of Publication 936 to figure the amount of interest you can deduct. Free state efile taxes Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. Free state efile taxes It also describes certain special situations that may affect your deduction. Free state efile taxes Late payment charge on mortgage payment. Free state efile taxes   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. Free state efile taxes Mortgage prepayment penalty. Free state efile taxes   If you pay off your home mortgage early, you may have to pay a penalty. Free state efile taxes 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. Free state efile taxes Sale of home. Free state efile taxes   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. Free state efile taxes Example. Free state efile taxes John and Peggy Harris sold their home on May 7. Free state efile taxes Through April 30, they made home mortgage interest payments of $1,220. Free state efile taxes 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. Free state efile taxes Their mortgage interest deduction is $1,270 ($1,220 + $50). Free state efile taxes Prepaid interest. Free state efile taxes   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. Free state efile taxes You can deduct in each year only the interest that qualifies as home mortgage interest for that year. Free state efile taxes However, there is an exception that applies to points, discussed later. Free state efile taxes Mortgage interest credit. Free state efile taxes   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. Free state efile taxes Figure the credit on Form 8396, Mortgage Interest Credit. Free state efile taxes If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. Free state efile taxes   For more information on the credit, see chapter 37. Free state efile taxes Ministers' and military housing allowance. Free state efile taxes   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. Free state efile taxes Hardest Hit Fund and Emergency Homeowners' Loan Programs. Free state efile taxes   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. Free state efile taxes 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. Free state efile taxes 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. Free state efile taxes 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). Free state efile taxes 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. Free state efile taxes Mortgage assistance payments under section 235 of the National Housing Act. Free state efile taxes   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. Free state efile taxes You cannot deduct the interest that is paid for you. Free state efile taxes No other effect on taxes. Free state efile taxes   Do not include these mortgage assistance payments in your income. Free state efile taxes Also, do not use these payments to reduce other deductions, such as real estate taxes. Free state efile taxes Divorced or separated individuals. Free state efile taxes   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. Free state efile taxes See the discussion of Payments for jointly-owned home in chapter 18. Free state efile taxes Redeemable ground rents. Free state efile taxes   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. Free state efile taxes   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. Free state efile taxes For more information, see Publication 936. Free state efile taxes Nonredeemable ground rents. Free state efile taxes   Payments on a nonredeemable ground rent are not mortgage interest. Free state efile taxes You can deduct them as rent if they are a business expense or if they are for rental property. Free state efile taxes Reverse mortgages. Free state efile taxes   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. Free state efile taxes With a reverse mortgage, you retain title to your home. Free state efile taxes 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. Free state efile taxes Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Free state efile taxes Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until the loan is paid in full. Free state efile taxes Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Publication 936. Free state efile taxes Rental payments. Free state efile taxes   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. Free state efile taxes This is true even if the settlement papers call them interest. Free state efile taxes You cannot deduct these payments as home mortgage interest. Free state efile taxes Mortgage proceeds invested in tax-exempt securities. Free state efile taxes   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. Free state efile taxes “Grandfathered debt” and “home equity debt” are defined earlier under Amount Deductible. Free state efile taxes Refunds of interest. Free state efile taxes   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. Free state efile taxes 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. Free state efile taxes However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. Free state efile taxes This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. Free state efile taxes    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. Free state efile taxes For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. Free state efile taxes   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in chapter 12. Free state efile taxes Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Free state efile taxes Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Free state efile taxes A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Free state efile taxes See Points paid by the seller , later. Free state efile taxes General Rule You generally cannot deduct the full amount of points in the year paid. Free state efile taxes Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. Free state efile taxes See Deduction Allowed Ratably , next. Free state efile taxes For exceptions to the general rule, see Deduction Allowed in Year Paid , later. Free state efile taxes 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. Free state efile taxes You use the cash method of accounting. Free state efile taxes This means you report income in the year you receive it and deduct expenses in the year you pay them. Free state efile taxes Most individuals use this method. Free state efile taxes Your loan is secured by a home. Free state efile taxes (The home does not need to be your main home. Free state efile taxes ) Your loan period is not more than 30 years. Free state efile taxes 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. Free state efile taxes 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. Free state efile taxes Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. Free state efile taxes (You can use Figure 23-B as a quick guide to see whether your points are fully deductible in the year paid. Free state efile taxes ) Your loan is secured by your main home. Free state efile taxes (Your main home is the one you ordinarily live in most of the time. Free state efile taxes ) Paying points is an established business practice in the area where the loan was made. Free state efile taxes The points paid were not more than the points generally charged in that area. Free state efile taxes You use the cash method of accounting. Free state efile taxes This means you report income in the year you receive it and deduct expenses in the year you pay them. Free state efile taxes (If you want more information about this method, see Accounting Methods in chapter 1. Free state efile taxes ) 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. Free state efile taxes The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Free state efile taxes The funds you provided are not required to have been applied to the points. Free state efile taxes They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Free state efile taxes You cannot have borrowed these funds from your lender or mortgage broker. Free state efile taxes You use your loan to buy or build your main home. Free state efile taxes The points were computed as a percentage of the principal amount of the mortgage. Free state efile taxes The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. Free state efile taxes The points may be shown as paid from either your funds or the seller's. Free state efile taxes Figure 23-B. Free state efile taxes Are My Points Fully Deductible This Year? Please click here for the text description of the image. Free state efile taxes Figure 23-B. Free state efile taxes Are My Points Fully Deductible This Year? Note. Free state efile taxes 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. Free state efile taxes Home improvement loan. Free state efile taxes   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. Free state efile taxes Second home. Free state efile taxes You cannot fully deduct in the year paid points you pay on loans secured by your second home. Free state efile taxes You can deduct these points only over the life of the loan. Free state efile taxes Refinancing. Free state efile taxes   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. Free state efile taxes This is true even if the new mortgage is secured by your main home. Free state efile taxes   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. Free state efile taxes You can deduct the rest of the points over the life of the loan. Free state efile taxes Example 1. Free state efile taxes In 1998, Bill Fields got a mortgage to buy a home. Free state efile taxes In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. Free state efile taxes The mortgage is secured by his home. Free state efile taxes To get the new loan, he had to pay three points ($3,000). Free state efile taxes 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. Free state efile taxes Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. Free state efile taxes The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. Free state efile taxes Bill's first payment on the new loan was due July 1. Free state efile taxes He made six payments on the loan in 2013 and is a cash basis taxpayer. Free state efile taxes Bill used the funds from the new mortgage to repay his existing mortgage. Free state efile taxes 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. Free state efile taxes He cannot deduct all of the points in 2013. Free state efile taxes He can deduct two points ($2,000) ratably over the life of the loan. Free state efile taxes He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. Free state efile taxes The other point ($1,000) was a fee for services and is not deductible. Free state efile taxes Example 2. Free state efile taxes 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. Free state efile taxes Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. Free state efile taxes His deduction is $500 ($2,000 × 25%). Free state efile taxes Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. Free state efile taxes This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. Free state efile taxes The total amount Bill deducts in 2013 is $550 ($500 + $50). Free state efile taxes Special Situations This section describes certain special situations that may affect your deduction of points. Free state efile taxes Original issue discount. Free state efile taxes   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. Free state efile taxes This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. Free state efile taxes Amounts charged for services. Free state efile taxes   Amounts charged by the lender for specific services connected to the loan are not interest. Free state efile taxes Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Free state efile taxes You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Free state efile taxes Points paid by the seller. Free state efile taxes   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Free state efile taxes Treatment by seller. Free state efile taxes   The seller cannot deduct these fees as interest. Free state efile taxes But they are a selling expense that reduces the amount realized by the seller. Free state efile taxes See chapter 15 for information on selling your home. Free state efile taxes Treatment by buyer. Free state efile taxes    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. Free state efile taxes If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. Free state efile taxes If any of those tests are not met, the buyer deducts the points over the life of the loan. Free state efile taxes   For information about basis, see chapter 13. Free state efile taxes Funds provided are less than points. Free state efile taxes   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. Free state efile taxes In addition, you can deduct any points paid by the seller. Free state efile taxes Example 1. Free state efile taxes When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Free state efile taxes You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. Free state efile taxes Of the $1,000 charged for points, you can deduct $750 in the year paid. Free state efile taxes You spread the remaining $250 over the life of the mortgage. Free state efile taxes Example 2. Free state efile taxes 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. Free state efile taxes In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Free state efile taxes You spread the remaining $250 over the life of the mortgage. Free state efile taxes You must reduce the basis of your home by the $1,000 paid by the seller. Free state efile taxes Excess points. Free state efile taxes   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. Free state efile taxes You must spread any additional points over the life of the mortgage. Free state efile taxes Mortgage ending early. Free state efile taxes   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. Free state efile taxes However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. Free state efile taxes Instead, deduct the remaining balance over the term of the new loan. Free state efile taxes    A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Free state efile taxes Example. Free state efile taxes Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. Free state efile taxes He deducts $200 points per year. Free state efile taxes Through 2012, Dan has deducted $2,200 of the points. Free state efile taxes Dan prepaid his mortgage in full in 2013. Free state efile taxes He can deduct the remaining $800 of points in 2013. Free state efile taxes Limits on deduction. Free state efile taxes   You cannot fully deduct points paid on a mortgage unless the mortgage fits into one of the categories listed earlier under Fully deductible interest . Free state efile taxes See Publication 936 for details. Free state efile taxes Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. Free state efile taxes The insurance must be in connection with home acquisition debt and the insurance contract must have been issued after 2006. Free state efile taxes Qualified mortgage insurance. Free state efile taxes   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). Free state efile taxes   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. Free state efile taxes If provided by the Rural Housing Service, it is commonly known as a guarantee fee. Free state efile taxes These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Free state efile taxes Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. Free state efile taxes Special rules for prepaid mortgage insurance. Free state efile taxes   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. Free state efile taxes 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. Free state efile taxes No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. Free state efile taxes This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. Free state efile taxes See the Example below. Free state efile taxes Example. Free state efile taxes Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. Free state efile taxes Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Free state efile taxes 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. Free state efile taxes Ryan's adjusted gross income (AGI) for 2012 is $76,000. Free state efile taxes Ryan can deduct $880 ($9,240 ÷ 84 × 8 months) for qualified mortgage insurance premiums in 2012. Free state efile taxes For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 × 12 months) if his AGI is $100,000 or less. Free state efile taxes 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). Free state efile taxes Limit on deduction. Free state efile taxes   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. Free state efile taxes 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. Free state efile taxes If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Free state efile taxes 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. Free state efile taxes 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. Free state efile taxes A governmental unit is a person for purposes of furnishing the statement. Free state efile taxes The statement for each year should be sent to you by January 31 of the following year. Free state efile taxes A copy of this form will also be sent to the IRS. Free state efile taxes 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. Free state efile taxes However, it should not show any interest that was paid for you by a government agency. Free state efile taxes As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Free state efile taxes However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. Free state efile taxes See Points , earlier, to determine whether you can deduct points not shown on Form 1098. Free state efile taxes Prepaid interest on Form 1098. Free state efile taxes   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. Free state efile taxes However, you cannot deduct the prepaid amount for January 2014 in 2013. Free state efile taxes (See Prepaid interest , earlier. Free state efile taxes ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. Free state efile taxes You will include the interest for January 2014 with the other interest you pay for 2014. Free state efile taxes See How To Report , later. Free state efile taxes Refunded interest. Free state efile taxes   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. Free state efile taxes See Refunds of interest , earlier. Free state efile taxes Mortgage insurance premiums. Free state efile taxes   The amount of mortgage insurance premiums you paid during 2013 may be shown in box 4 of Form 1098. Free state efile taxes See Mortgage Insurance Premiums, earlier. Free state efile taxes Investment Interest This section discusses interest expenses you may be able to deduct as an investor. Free state efile taxes If you borrow money to buy property you hold for investment, the interest you pay is investment interest. Free state efile taxes You can deduct investment interest subject to the limit discussed later. Free state efile taxes However, you cannot deduct interest you incurred to produce tax-exempt income. Free state efile taxes Nor can you deduct interest expenses on straddles. Free state efile taxes 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. Free state efile taxes 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. Free state efile taxes 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). Free state efile taxes Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). Free state efile taxes Partners, shareholders, and beneficiaries. Free state efile taxes   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. Free state efile taxes 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. Free state efile taxes Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. Free state efile taxes The allocation is not affected by the use of property that secures the debt. Free state efile taxes Limit on Deduction Generally, your deduction for investment interest expense is limited to the amount of your net investment income. Free state efile taxes You can carry over the amount of investment interest that you could not deduct because of this limit to the next tax year. Free state efile taxes The interest carried over is treated as investment interest paid or accrued in that next year. Free state efile taxes 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. Free state efile taxes Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. Free state efile taxes Investment income. Free state efile taxes    This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). Free state efile taxes Investment income does not include Alaska Permanent Fund dividends. Free state efile taxes It also does not include qualified dividends or net capital gain unless you choose to include them. Free state efile taxes Choosing to include qualified dividends. Free state efile taxes   Investment income generally does not include qualified dividends, discussed in chapter 8. Free state efile taxes However, you can choose to include all or part of your qualified dividends in investment income. Free state efile taxes   You make this choice by completing Form 4952, line 4g, according to its instructions. Free state efile taxes   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. Free state efile taxes Choosing to include net capital gain. Free state efile taxes   Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). Free state efile taxes However, you can choose to include all or part of your net capital gain in investment income. Free state efile taxes    You make this choice by completing Form 4952, line 4g, according to its instructions. Free state efile taxes   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. Free state efile taxes    Before making either choice, consider the overall effect on your tax liability. Free state efile taxes Compare your tax if you make one or both of these choices with your tax if you do not. Free state efile taxes Investment income of child reported on parent's return. Free state efile taxes    Investment income includes the part of your child's interest and dividend income that you choose to report on your return. Free state efile taxes 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. Free state efile taxes Child's qualified dividends. Free state efile taxes   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. Free state efile taxes However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. Free state efile taxes   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). Free state efile taxes Child's Alaska Permanent Fund dividends. Free state efile taxes   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. Free state efile taxes 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. Free state efile taxes 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. Free state efile taxes Subtract the result from the amount on Form 8814, line 12. Free state efile taxes Child's capital gain distributions. Free state efile taxes    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. Free state efile taxes However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. Free state efile taxes   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). Free state efile taxes Investment expenses. Free state efile taxes   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. Free state efile taxes 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. Free state efile taxes Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A, line 27. Free state efile taxes Losses from passive activities. Free state efile taxes   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). Free state efile taxes See Publication 925, Passive Activity and At-Risk Rules, for information about passive activities. Free state efile taxes Form 4952 Use Form 4952, Investment Interest Expense Deduction, to figure your deduction for investment interest. Free state efile taxes Exception to use of Form 4952. Free state efile taxes   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. Free state efile taxes Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. Free state efile taxes You do not have any other deductible investment expenses. Free state efile taxes You have no carryover of investment interest expense from 2012. Free state efile taxes If you meet all of these tests, you can deduct all of your investment interest. Free state efile taxes More Information For more information on investment interest, see Interest Expenses in chapter 3 of Publication 550. Free state efile taxes Items You Cannot Deduct Some interest payments are not deductible. Free state efile taxes Certain expenses similar to interest also are not deductible. Free state efile taxes Nondeductible expenses include the following items. Free state efile taxes Personal interest (discussed later). Free state efile taxes Service charges (however, see Other Expenses (Line 23) in chapter 28). Free state efile taxes Annual fees for credit cards. Free state efile taxes Loan fees. Free state efile taxes Credit investigation fees. Free state efile taxes Interest to purchase or carry tax-exempt securities. Free state efile taxes Penalties. Free state efile taxes   You cannot deduct fines and penalties paid to a government for violations of law, regardless of their nature. Free state efile taxes Personal Interest Personal interest is not deductible. Free state efile taxes Personal interest is any interest that is not home mortgage interest, investment interest, business interest, or other deductible interest. Free state efile taxes It includes the following items. Free state efile taxes Interest on car loans (unless you use the car for business). Free state efile taxes Interest on federal, state, or local income tax. Free state efile taxes Finance charges on credit cards, retail installment contracts, and revolving charge accounts incurred for personal expenses. Free state efile taxes Late payment charges by a public utility. Free state efile taxes You may be able to deduct interest you pay on a qualified student loan. Free state efile taxes For details, see Publication 970, Tax Benefits for Education. Free state efile taxes 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. Free state efile taxes However, you do not have to allocate home mortgage interest if it is fully deductible, regardless of how the funds are used. Free state efile taxes You allocate interest (other than fully deductible home mortgage interest) on a loan in the same way as the loan itself is allocated. Free state efile taxes You do this by tracing disbursements of the debt proceeds to specific uses. Free state efile taxes For details on how to do this, see chapter 4 of Publication 535. Free state efile taxes How To Report You must file Form 1040 to deduct any home mortgage interest expense on your tax return. Free state efile taxes Where you deduct your interest expense generally depends on how you use the loan proceeds. Free state efile taxes See Table 23-1 for a summary of where to deduct your interest expense. Free state efile taxes Home mortgage interest and points. Free state efile taxes   Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. Free state efile taxes 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. Free state efile taxes Attach a statement explaining the difference and print “See attached” next to line 10. Free state efile taxes    Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. Free state efile taxes 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. Free state efile taxes The seller must give you this number and you must give the seller your TIN. Free state efile taxes A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Free state efile taxes Failure to meet any of these requirements may result in a $50 penalty for each failure. Free state efile taxes 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. Free state efile taxes See Social Security Number (SSN) in chapter 1 for more information about TINs. Free state efile taxes    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. Free state efile taxes   Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. Free state efile taxes More than one borrower. Free state efile taxes   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. Free state efile taxes Show how much of the interest each of you paid, and give the name and address of the person who received the form. Free state efile taxes Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Free state efile taxes Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. Free state efile taxes   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. Free state efile taxes You should let each of the other borrowers know what his or her share is. Free state efile taxes Mortgage proceeds used for business or investment. Free state efile taxes    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. Free state efile taxes It shows where to deduct the part of your excess interest that is for those activities. Free state efile taxes Investment interest. Free state efile taxes    Deduct investment interest, subject to certain limits discussed in Publication 550, on Schedule A (Form 1040), line 14. Free state efile taxes Amortization of bond premium. Free state efile taxes   There are various ways to treat the premium you pay to buy taxable bonds. Free state efile taxes See Bond Premium Amortization in Publication 550. Free state efile taxes Income-producing rental or royalty interest. Free state efile taxes   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). Free state efile taxes Example. Free state efile taxes You rent out part of your home and borrow money to make repairs. Free state efile taxes You can deduct only the interest payment for the rented part in Part I of Schedule E (Form 1040). Free state efile taxes Deduct the rest of the interest payment on Schedule A (Form 1040) if it is deductible home mortgage interest. Free state efile taxes Table 23-1. Free state efile taxes Where To Deduct Your Interest Expense IF you have . Free state efile taxes . Free state efile taxes . Free state efile taxes THEN deduct it on . Free state efile taxes . Free state efile taxes . Free state efile taxes AND for more information go to . Free state efile taxes . Free state efile taxes . Free state efile taxes deductible student loan interest Form 1040, line 33, or Form 1040A, line 18 Publication 970. Free state efile taxes deductible home mortgage interest and points reported on Form 1098 Schedule A (Form 1040), line 10 Publication 936. Free state efile taxes deductible home mortgage interest not reported on Form 1098 Schedule A (Form 1040), line 11 Publication 936. Free state efile taxes deductible points not reported on Form 1098 Schedule A (Form 1040), line 12 Publication 936. Free state efile taxes deductible mortgage insurance premiums Schedule A (Form 1040), line 13 Publication 936. Free state efile taxes deductible investment interest (other than incurred to produce rents or royalties) Schedule A (Form 1040), line 14 Publication 550. Free state efile taxes deductible business interest (non-farm) Schedule C or C-EZ (Form 1040) Publication 535. Free state efile taxes deductible farm business interest Schedule F (Form 1040) Publications 225 and 535. Free state efile taxes deductible interest incurred to produce rents or royalties Schedule E (Form 1040) Publications 527 and 535. Free state efile taxes personal interest not deductible. Free state efile taxes Prev  Up  Next   Home   More Online Publications