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Free Tax Filing 2011 State And Federal

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Free Tax Filing 2011 State And Federal

Free tax filing 2011 state and federal 1. Free tax filing 2011 state and federal   Bona Fide Residence Table of Contents Presence TestDays of Presence in the United States or Relevant Possession Significant Connection Tax HomeExceptions Closer ConnectionException for Year of Move Special Rules in the Year of a MoveYear of Moving to a Possession Year of Moving From a Possession Reporting a Change in Bona Fide ResidenceWho Must File Penalty for Not Filing Form 8898 In order to qualify for certain tax benefits (see chapter 3), you must be a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI for the entire tax year. Free tax filing 2011 state and federal Generally, you are a bona fide resident of one of these possessions (the relevant possession) if, during the tax year, you: Meet the presence test, Do not have a tax home outside the relevant possession, and Do not have a closer connection to the United States or to a foreign country than to the relevant possession. Free tax filing 2011 state and federal Special rule for members of the U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal Armed Forces. Free tax filing 2011 state and federal   If you are a member of the U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal Armed Forces who qualified as a bona fide resident of the relevant possession in an earlier tax year, your absence from that possession during the current tax year in compliance with military orders will not affect your status as a bona fide resident. Free tax filing 2011 state and federal Likewise, being in a possession solely in compliance with military orders will not qualify you for bona fide residency. Free tax filing 2011 state and federal Also see the special income source rule for members of the U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal Armed Forces in chapter 2, under Compensation for Labor or Personal Services . Free tax filing 2011 state and federal Special rule for civilian spouse of active duty member of the U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal Armed Forces. Free tax filing 2011 state and federal   If you are the civilian spouse of an active duty servicemember, under Military Spouses Residency Relief Act (MSRRA) you can choose to keep your prior residence or domicile for tax purposes (tax residence) when accompanying the servicemember spouse, who is relocating under military orders, to a new military duty station in one of the 50 states, the District of Columbia, or a U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal possession. Free tax filing 2011 state and federal Before relocating, you and your spouse must have the same tax residence. Free tax filing 2011 state and federal If you are a civilian spouse and choose to keep your prior tax residence after such relocation, the source of income for services performed (for example, wages, salaries, tips, or self-employment) by you is considered to be (the jurisdiction of) the prior tax residence. Free tax filing 2011 state and federal As a result, the amount of income tax withholding (from Form(s) W-2, Wage and Tax Statement) that you are able to claim on your federal return, as well as the need to file a state or U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal possession return, may be affected. Free tax filing 2011 state and federal For more information, consult with state, local, or U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal possession tax authorities regarding your tax obligations under MSRRA. Free tax filing 2011 state and federal Presence Test If you are a U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal citizen or resident alien, you will satisfy the presence test for the entire tax year if you meet one of the following conditions. Free tax filing 2011 state and federal You were present in the relevant possession for at least 183 days during the tax year. Free tax filing 2011 state and federal You were present in the relevant possession for at least 549 days during the 3-year period that includes the current tax year and the 2 immediately preceding tax years. Free tax filing 2011 state and federal During each year of the 3-year period, you must be present in the relevant possession for at least 60 days. Free tax filing 2011 state and federal You were present in the United States for no more than 90 days during the tax year. Free tax filing 2011 state and federal You had earned income in the United States of no more than a total of $3,000 and were present for more days in the relevant possession than in the United States during the tax year. Free tax filing 2011 state and federal Earned income is pay for personal services performed, such as wages, salaries, or professional fees. Free tax filing 2011 state and federal You had no significant connection to the United States during the tax year. Free tax filing 2011 state and federal Special rule for nonresident aliens. Free tax filing 2011 state and federal   Conditions (1) through (5) above do not apply to nonresident aliens of the United States. Free tax filing 2011 state and federal Instead, nonresident aliens must meet the substantial presence test discussed in chapter 1 of Publication 519. Free tax filing 2011 state and federal In that discussion, substitute the name of the possession for “United States” and “U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal ” wherever they appear. Free tax filing 2011 state and federal Disregard the discussion in that chapter about a Closer Connection to a Foreign Country. Free tax filing 2011 state and federal Days of Presence in the United States or Relevant Possession Generally, you are treated as being present in the United States or in the relevant possession on any day that you are physically present in that location at any time during the day. Free tax filing 2011 state and federal Days of presence in a possession. Free tax filing 2011 state and federal   You are considered to be present in the relevant possession on any of the following days. Free tax filing 2011 state and federal Any day you are physically present in that possession at any time during the day. Free tax filing 2011 state and federal Any day you are outside of the relevant possession in order to receive, or to accompany any of the following family members to receive, qualifying medical treatment (see Qualifying Medical Treatment , later). Free tax filing 2011 state and federal Your parent. Free tax filing 2011 state and federal Your spouse. Free tax filing 2011 state and federal Your child, who is your son, daughter, stepson, or stepdaughter. Free tax filing 2011 state and federal This includes an adopted child or child lawfully placed with you for legal adoption. Free tax filing 2011 state and federal This also includes a foster child who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. Free tax filing 2011 state and federal Any day you are outside the relevant possession because you leave or are unable to return to the relevant possession during any: 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a federal declaration of a major disaster is issued in the Federal Register, or Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located. Free tax filing 2011 state and federal   If, during a single day, you are physically present: In the United States and in the relevant possession, that day is considered a day of presence in the relevant possession; or In two possessions, that day is considered a day of presence in the possession where your tax home is located (see Tax Home , later). Free tax filing 2011 state and federal Days of presence in the United States. Free tax filing 2011 state and federal   You are considered to be present in the United States on any day that you are physically present in the United States at any time during the day. Free tax filing 2011 state and federal However, do not count the following days as days of presence in the United States. Free tax filing 2011 state and federal Any day you are temporarily present in the United States in order to receive, or to accompany a parent, spouse, or child who is receiving, qualifying medical treatment. Free tax filing 2011 state and federal “Child” is defined under item 2c earlier. Free tax filing 2011 state and federal “Qualifying medical treatment” is defined later. Free tax filing 2011 state and federal Any day you are temporarily present in the United States because you leave or are unable to return to the relevant possession during any: 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a federal declaration of a major disaster is issued in the Federal Register, or Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located. Free tax filing 2011 state and federal Any day you are in the United States for less than 24 hours when you are traveling between two places outside the United States. Free tax filing 2011 state and federal Any day you are temporarily present in the United States as a professional athlete to compete in a charitable sports event (defined later). Free tax filing 2011 state and federal Any day you are temporarily in the United States as a student (defined later). Free tax filing 2011 state and federal Any day you are in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions). Free tax filing 2011 state and federal Qualifying Medical Treatment Such treatment is generally provided by (or under the supervision of) a physician for an illness, injury, impairment, or physical or mental condition. Free tax filing 2011 state and federal The treatment generally involves: Any period of inpatient care that requires an overnight stay in a hospital or hospice, and any period immediately before or after that inpatient care to the extent it is medically necessary, or Any temporary period of inpatient care in a residential medical care facility for medically necessary rehabilitation services. Free tax filing 2011 state and federal With respect to each qualifying medical treatment, you must prepare (or obtain) and maintain documentation supporting your claim that such treatment meets the criteria to be considered days of presence in the relevant possession. Free tax filing 2011 state and federal You must be able to produce this documentation within 30 days if requested by the IRS or tax administrator for the relevant possession. Free tax filing 2011 state and federal You must keep the following documentation. Free tax filing 2011 state and federal Records that provide: The patient's name and relationship to you (if the medical treatment is provided to a person you accompany); The name and address of the hospital, hospice, or residential medical care facility where the medical treatment was provided; The name, address, and telephone number of the physician who provided the medical treatment; The date(s) on which the medical treatment was provided; and Receipt(s) of payment for the medical treatment. Free tax filing 2011 state and federal Signed certification by the providing or supervising physician that the medical treatment met the requirements for being qualified medical treatment, and setting forth: The patient's name, A reasonably detailed description of the medical treatment provided by (or under the supervision of) the physician, The dates on which the medical treatment was provided, and The medical facts that support the physician's certification and determination that the treatment was medically necessary. Free tax filing 2011 state and federal Charitable Sports Event A charitable sports event is one that meets all of the following conditions. Free tax filing 2011 state and federal The main purpose is to benefit a qualified charitable organization. Free tax filing 2011 state and federal The entire net proceeds go to charity. Free tax filing 2011 state and federal Volunteers perform substantially all the work. Free tax filing 2011 state and federal In figuring the days of presence in the United States, you can exclude only the days on which you actually competed in the charitable sports event. Free tax filing 2011 state and federal You cannot exclude the days on which you were in the United States to practice for the event, to perform promotional or other activities related to the event, or to travel between events. Free tax filing 2011 state and federal Student To qualify as a student, you must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or A student taking a full-time, on-farm training course given by a school described in (1) above or by a state, county, or local government agency. Free tax filing 2011 state and federal The 5 calendar months do not have to be consecutive. Free tax filing 2011 state and federal Full-time student. Free tax filing 2011 state and federal   A full-time student is a person who is enrolled for the number of hours or courses the school considers to be full-time attendance. Free tax filing 2011 state and federal However, school attendance exclusively at night is not considered full-time attendance. Free tax filing 2011 state and federal School. Free tax filing 2011 state and federal   The term “school” includes elementary schools, middle schools, junior and senior high schools, colleges, universities, and technical, trade, and mechanical schools. Free tax filing 2011 state and federal It does not include on-the-job training courses, correspondence schools, and schools offering courses only through the Internet. Free tax filing 2011 state and federal Significant Connection One way in which you can meet the presence test is to have no significant connection to the United States during the tax year. Free tax filing 2011 state and federal This section looks at the factors that determine if a significant connection exists. Free tax filing 2011 state and federal You are treated as having a significant connection to the United States if you: Have a permanent home in the United States, Are currently registered to vote in any political subdivision of the United States, or Have a spouse or child (see item 2c under Days of presence in a possession , earlier) who is under age 18 whose main home is in the United States, other than: A child who is in the United States because he or she is the child of divorced or legally separated parents and is living with a custodial parent under a custodial decree or multiple support agreement, or A child who is in the United States as a student. Free tax filing 2011 state and federal For the purpose of determining if you have a significant connection to the United States, the term “spouse” does not include a spouse from whom you are legally separated under a decree of divorce or separate maintenance. Free tax filing 2011 state and federal Permanent home. Free tax filing 2011 state and federal   A permanent home generally includes an accommodation such as a house, an apartment, or a furnished room that is either owned or rented by you or your spouse. Free tax filing 2011 state and federal The dwelling unit must be available at all times, continuously, not only for short stays. Free tax filing 2011 state and federal Exception for rental property. Free tax filing 2011 state and federal   If you or your spouse own the dwelling unit and at any time during the tax year it is rented to someone else at fair rental value, it will be considered your permanent home only if you or your spouse use that property for personal purposes for more than the greater of: 14 days, or 10% of the number of days during that tax year that the property is rented to others at a fair rental value. Free tax filing 2011 state and federal   You are treated as using rental property for personal purposes on any day the property is not being rented to someone else at fair rental value for the entire day. Free tax filing 2011 state and federal   A day of personal use of a dwelling unit is also any day that the unit is used by any of the following persons. Free tax filing 2011 state and federal You or any other person who has an interest in it, unless you rent it to another owner as his or her main home under a shared equity financing agreement. Free tax filing 2011 state and federal A member of your family or a member of the family of any other person who has an interest in it, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. Free tax filing 2011 state and federal Family includes only brothers and sisters, half-brothers and half-sisters, spouses, ancestors (parents, grandparents, etc. Free tax filing 2011 state and federal ), and lineal descendants (children, grandchildren, etc. Free tax filing 2011 state and federal ). Free tax filing 2011 state and federal Anyone under an arrangement that lets you use some other dwelling unit. Free tax filing 2011 state and federal Anyone at less than a fair rental price. Free tax filing 2011 state and federal   However, any day you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. Free tax filing 2011 state and federal Whether your property is used mainly for this purpose is determined in light of all the facts and circumstances, such as: The amount of time you devote to repair and maintenance work, How often during the tax year you perform repair and maintenance work on this property, and The presence and activities of companions. Free tax filing 2011 state and federal   See Publication 527, Residential Rental Property, for more information about personal use of a dwelling unit. Free tax filing 2011 state and federal Example—significant connection. Free tax filing 2011 state and federal Ann Green, a U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal citizen, is a sales representative for a company based in Guam. Free tax filing 2011 state and federal Ann lives with her spouse and young children in their house in Guam, where she is also registered to vote. Free tax filing 2011 state and federal Her business travel requires her to spend 120 days in the United States and another 120 days in foreign countries. Free tax filing 2011 state and federal When traveling on business, Ann generally stays at hotels but sometimes stays with her brother, who lives in the United States. Free tax filing 2011 state and federal Ann's stays are always of short duration and she asks her brother's permission to stay with him. Free tax filing 2011 state and federal Her brother's house is not her permanent home, nor does she have any other accommodations in the United States that would be considered her permanent home. Free tax filing 2011 state and federal Ann satisfies the presence test because she has no significant connection to the United States. Free tax filing 2011 state and federal Example—presence test. Free tax filing 2011 state and federal Eric and Wanda Brown live for part of the year in a condominium, which they own, in the CNMI. Free tax filing 2011 state and federal They also own a house in Maine where they live for 120 days every year to be near their grown children and grandchildren. Free tax filing 2011 state and federal The Browns are retired and their only income is from pension payments, dividends, interest, and social security benefits. Free tax filing 2011 state and federal In 2013, they spent only 175 days in the CNMI because of a 70-day vacation to Europe and Asia. Free tax filing 2011 state and federal Thus, in 2013, the Browns were not present in the CNMI for at least 183 days, were present in the United States for more than 90 days, and had a significant connection to the United States because of their permanent home. Free tax filing 2011 state and federal However, the Browns still satisfied the presence test with respect to the CNMI because they had no earned income in the United States and were physically present for more days in the CNMI than in the United States. Free tax filing 2011 state and federal Tax Home You will have met the tax home test if you did not have a tax home outside the relevant possession during any part of the tax year. Free tax filing 2011 state and federal Your tax home is your regular or main place of business, employment, or post of duty regardless of where you maintain your family home. Free tax filing 2011 state and federal If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. Free tax filing 2011 state and federal If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. Free tax filing 2011 state and federal Exceptions There are some special rules regarding tax home that provide exceptions to the general rule stated above. Free tax filing 2011 state and federal Students and Government Officials Disregard the following days when determining whether you have a tax home outside the relevant possession. Free tax filing 2011 state and federal Days you were temporarily in the United States as a student (see Student under Days of Presence in the United States or Relevant Possession, earlier). Free tax filing 2011 state and federal Days you were in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions). Free tax filing 2011 state and federal Seafarers You will not be considered to have a tax home outside the relevant possession solely because you are employed on a ship or other seafaring vessel that is predominantly used in local and international waters. Free tax filing 2011 state and federal For this purpose, a vessel is considered to be predominantly used in local and international waters if, during the tax year, the total amount of time it is used in international waters and in the waters within 3 miles of the relevant possession exceeds the total amount of time it is used in the territorial waters of the United States, another possession, or any foreign country. Free tax filing 2011 state and federal Example. Free tax filing 2011 state and federal In 2013, Sean Silverman, a U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal citizen, was employed by a fishery and spent 250 days at sea on a fishing vessel. Free tax filing 2011 state and federal When not at sea, Sean lived with his spouse at a house they own in American Samoa. Free tax filing 2011 state and federal The fishing vessel on which Sean works departs and arrives at various ports in American Samoa, other possessions, and foreign countries, but was in international or American Samoa's local waters for 225 days. Free tax filing 2011 state and federal For purposes of determining bona fide residency of American Samoa, Sean will not be considered to have a tax home outside that possession solely because of his employment on board the fishing vessel. Free tax filing 2011 state and federal Year of Move If you are moving to or from a possession during the year, you may still be able to meet the tax home test for that year. Free tax filing 2011 state and federal See Special Rules in the Year of a Move , later in this chapter. Free tax filing 2011 state and federal Closer Connection You will have met the closer connection test if, during any part of the tax year, you do not have a closer connection to the United States or a foreign country than to the relevant U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal possession. Free tax filing 2011 state and federal You will be considered to have a closer connection to a possession than to the United States or to a foreign country if you have maintained more significant contacts with the possession(s) than with the United States or foreign country. Free tax filing 2011 state and federal In determining if you have maintained more significant contacts with the relevant possession, the facts and circumstances to be considered include, but are not limited to, the following. Free tax filing 2011 state and federal The location of your permanent home. Free tax filing 2011 state and federal The location of your family. Free tax filing 2011 state and federal The location of personal belongings, such as automobiles, furniture, clothing, and jewelry owned by you and your family. Free tax filing 2011 state and federal The location of social, political, cultural, professional, or religious organizations with which you have a current relationship. Free tax filing 2011 state and federal The location where you conduct your routine personal banking activities. Free tax filing 2011 state and federal The location where you conduct business activities (other than those that go into determining your tax home). Free tax filing 2011 state and federal The location of the jurisdiction in which you hold a driver's license. Free tax filing 2011 state and federal The location of the jurisdiction in which you vote. Free tax filing 2011 state and federal The location of charitable organizations to which you contribute. Free tax filing 2011 state and federal The country of residence you designate on forms and documents. Free tax filing 2011 state and federal The types of official forms and documents you file, such as Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals), or Form W-9, Request for Taxpayer Identification Number and Certification. Free tax filing 2011 state and federal Your connections to the relevant possession will be compared to the total of your connections with the United States and foreign countries. Free tax filing 2011 state and federal Your answers to the questions on Form 8898, Part III, will help establish the jurisdiction to which you have a closer connection. Free tax filing 2011 state and federal Example—closer connection to the United States. Free tax filing 2011 state and federal Marcos Reyes, a U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal citizen, moved to Puerto Rico in 2013 to start an investment consulting and venture capital business. Free tax filing 2011 state and federal His spouse and two teenage children remained in California to allow the children to complete high school. Free tax filing 2011 state and federal He traveled back to the United States regularly to see his spouse and children, to engage in business activities, and to take vacations. Free tax filing 2011 state and federal Marcos had an apartment available for his full-time use in Puerto Rico, but remained a joint owner of the residence in California where his spouse and children lived. Free tax filing 2011 state and federal Marcos and his family had automobiles and personal belongings such as furniture, clothing, and jewelry located at both residences. Free tax filing 2011 state and federal Although Marcos was a member of the Puerto Rico Chamber of Commerce, he also belonged to and had current relationships with social, political, cultural, and religious organizations in California. Free tax filing 2011 state and federal Marcos received mail in California, including bank and brokerage statements and credit card bills. Free tax filing 2011 state and federal He conducted his personal banking activities in California. Free tax filing 2011 state and federal He held a California driver's license and was also registered to vote there. Free tax filing 2011 state and federal Based on all of the particular facts and circumstances pertaining to Marcos, he was not a bona fide resident of Puerto Rico in 2013 because he had a closer connection to the United States than to Puerto Rico. Free tax filing 2011 state and federal Closer connection to another possession. Free tax filing 2011 state and federal   Generally, possessions are not treated as foreign countries. Free tax filing 2011 state and federal Therefore, a closer connection to a possession other than the relevant possession will not be treated as a closer connection to a foreign country. Free tax filing 2011 state and federal Example—tax home and closer connection to possession. Free tax filing 2011 state and federal Pearl Blackmon, a U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal citizen, is a permanent employee of a hotel in Guam, but works only during the tourist season. Free tax filing 2011 state and federal For the remainder of each year, Pearl lives with her spouse and children in the CNMI, where she has no outside employment. Free tax filing 2011 state and federal Most of Pearl's personal belongings, including her automobile, are located in the CNMI. Free tax filing 2011 state and federal She is registered to vote in, and has a driver's license issued by, the CNMI. Free tax filing 2011 state and federal She does her personal banking in the CNMI and routinely lists her CNMI address as her permanent address on forms and documents. Free tax filing 2011 state and federal Pearl satisfies the presence test with respect to both Guam and the CNMI. Free tax filing 2011 state and federal She satisfies the tax home test with respect to Guam, because her regular place of business is in Guam. Free tax filing 2011 state and federal Pearl satisfies the closer connection test with respect to both Guam and the CNMI, because she does not have a closer connection to the United States or to any foreign country. Free tax filing 2011 state and federal Pearl is considered a bona fide resident of Guam, the location of her tax home. Free tax filing 2011 state and federal Exception for Year of Move If you are moving to or from a possession during the year, you may still be able to meet the closer connection test for that year. Free tax filing 2011 state and federal See Special Rules in the Year of a Move , next. Free tax filing 2011 state and federal Special Rules in the Year of a Move If you are moving to or from a possession during the year, you may still be able to meet the tax home and closer connection tests for that year. Free tax filing 2011 state and federal Year of Moving to a Possession You will satisfy the tax home and closer connection tests in the tax year of changing your residence to the relevant possession if you meet all of the following. Free tax filing 2011 state and federal You have not been a bona fide resident of the relevant possession in any of the 3 tax years immediately preceding your move. Free tax filing 2011 state and federal In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the last 183 days of the tax year. Free tax filing 2011 state and federal You are a bona fide resident of the relevant possession for each of the 3 tax years immediately following your move. Free tax filing 2011 state and federal Example. Free tax filing 2011 state and federal Dwight Wood, a U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal citizen, files returns on a calendar year basis. Free tax filing 2011 state and federal He lived in the United States from January 2007 through May 2013. Free tax filing 2011 state and federal In June 2013 he moved to the USVI, purchased a house, and accepted a permanent job with a local employer. Free tax filing 2011 state and federal From July 1 through December 31, 2013 (more than 183 days), Dwight's principal place of business was in the USVI and, during that time, he did not have a closer connection to the United States or a foreign country than to the USVI. Free tax filing 2011 state and federal If he is a bona fide resident of the USVI during all of 2014 through 2016, he will satisfy the tax home and closer connection tests for 2013. Free tax filing 2011 state and federal If Dwight also satisfies the presence test in 2013, he will be considered a bona fide resident of the USVI for the entire 2013 tax year. Free tax filing 2011 state and federal Year of Moving From a Possession In the year you cease to be a bona fide resident of American Samoa, the CNMI, Guam, or the USVI, you will satisfy the tax home and closer connection tests with respect to the relevant possession if you meet all of the following. Free tax filing 2011 state and federal You have been a bona fide resident of the relevant possession for each of the 3 tax years immediately preceding your change of residence. Free tax filing 2011 state and federal In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the first 183 days of the tax year. Free tax filing 2011 state and federal You are not a bona fide resident of the relevant possession for any of the 3 tax years immediately following your move. Free tax filing 2011 state and federal Example. Free tax filing 2011 state and federal Jean Aspen, a U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal citizen, files returns on a calendar year basis. Free tax filing 2011 state and federal From January 2010 through December 2012, Jean was a bona fide resident of American Samoa. Free tax filing 2011 state and federal Jean continued to live there until September 6, 2013, when she accepted new employment and moved to Hawaii. Free tax filing 2011 state and federal Jean's principal place of business from January 1 through September 5, 2013 (more than 183 days), was in American Samoa, and during that period Jean did not have a closer connection to the United States or a foreign country than to American Samoa. Free tax filing 2011 state and federal If Jean continues to live and work in Hawaii for the rest of 2013 and throughout years 2014 through 2016, she will satisfy the tax home and closer connection tests for 2013 with respect to American Samoa. Free tax filing 2011 state and federal If Jean also satisfies the presence test in 2013, she will be considered a bona fide resident for the entire 2013 tax year. Free tax filing 2011 state and federal Puerto Rico You will be considered a bona fide resident of Puerto Rico for the part of the tax year preceding the date on which you move if you: Are a U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal citizen, Are a bona fide resident of Puerto Rico for at least 2 tax years immediately preceding the tax year of the move, Cease to be a bona fide resident of Puerto Rico during the tax year, Cease to have a tax home in Puerto Rico during the tax year, and Have a closer connection to Puerto Rico than to the United States or a foreign country throughout the part of the tax year preceding the date on which you cease to have a tax home in Puerto Rico. Free tax filing 2011 state and federal Example. Free tax filing 2011 state and federal Randy White, a U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal citizen, files returns on a calendar year basis. Free tax filing 2011 state and federal For all of 2011 and 2012, Randy was a bona fide resident of Puerto Rico. Free tax filing 2011 state and federal From January through April 2013, Randy continued to reside and maintain his principal place of business in and closer connection to Puerto Rico. Free tax filing 2011 state and federal On May 5, 2013, Randy moved and changed his tax home to Nevada. Free tax filing 2011 state and federal Later that year he established a closer connection to the United States than to Puerto Rico. Free tax filing 2011 state and federal Randy did not satisfy the presence test for 2013 with respect to Puerto Rico, nor the tax home or closer connection tests. Free tax filing 2011 state and federal However, because Randy was a bona fide resident of Puerto Rico for at least 2 tax years before he moved to Nevada in 2013, he was a bona fide resident of Puerto Rico from January 1 through May 4, 2013. Free tax filing 2011 state and federal Reporting a Change in Bona Fide Residence If you became or ceased to be a bona fide resident of a U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal possession, you may need to file Form 8898. Free tax filing 2011 state and federal This applies to the U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal possessions of American Samoa, the CNMI, Guam, Puerto Rico, and the USVI. Free tax filing 2011 state and federal Who Must File You must file Form 8898 for the tax year in which you meet both of the following conditions. Free tax filing 2011 state and federal Your worldwide gross income (defined below) in that tax year is more than $75,000. Free tax filing 2011 state and federal You meet one of the following. Free tax filing 2011 state and federal You take a position for U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal tax purposes that you became a bona fide resident of a U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal possession after a tax year for which you filed a U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal income tax return as a citizen or resident alien of the United States but not as a bona fide resident of the possession. Free tax filing 2011 state and federal You are a citizen or resident alien of the United States who takes the position for U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal tax purposes that you ceased to be a bona fide resident of a U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal possession after a tax year for which you filed an income tax return (with the IRS, the possession tax authority, or both) as a bona fide resident of the possession. Free tax filing 2011 state and federal You take the position for U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal tax purposes that you became a bona fide resident of Puerto Rico or American Samoa after a tax year for which you were required to file an income tax return as a bona fide resident of the CNMI, Guam, or the USVI. Free tax filing 2011 state and federal Worldwide gross income. Free tax filing 2011 state and federal   Worldwide gross income means all income you received in the form of money, goods, property, and services, including any income from sources outside the United States (even if you can exclude part or all of it) and before any deductions, credits, or rebates. Free tax filing 2011 state and federal Example. Free tax filing 2011 state and federal You are a U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal citizen who moved to the CNMI in December 2012, but did not become a bona fide resident of that possession until the 2013 tax year. Free tax filing 2011 state and federal You must file Form 8898 for the 2013 tax year if your worldwide gross income for that year was more than $75,000. Free tax filing 2011 state and federal Penalty for Not Filing Form 8898 If you are required to file Form 8898 for any tax year and you fail to file it, you may owe a penalty of $1,000. Free tax filing 2011 state and federal You may also owe this penalty if you do not include all the information required by the form or the form includes incorrect information. Free tax filing 2011 state and federal In either case, you will not owe this penalty if you can show that such failure is due to reasonable cause and not willful neglect. Free tax filing 2011 state and federal This is in addition to any criminal penalty that may be imposed. Free tax filing 2011 state and federal Prev  Up  Next   Home   More Online Publications
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Free tax filing 2011 state and federal 15. Free tax filing 2011 state and federal   Selling Your Home Table of Contents Reminder Introduction Useful Items - You may want to see: Main Home Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Business Use or Rental of Home Reporting the SaleSeller-financed mortgage. Free tax filing 2011 state and federal More information. Free tax filing 2011 state and federal Special SituationsException for sales to related persons. Free tax filing 2011 state and federal Recapturing (Paying Back) a Federal Mortgage Subsidy Reminder Home sold with undeducted points. Free tax filing 2011 state and federal  If you have not deducted all the points you paid to secure a mortgage on your old home, you may be able to deduct the remaining points in the year of the sale. Free tax filing 2011 state and federal See Mortgage ending early under Points in chapter 23. Free tax filing 2011 state and federal Introduction This chapter explains the tax rules that apply when you sell your main home. Free tax filing 2011 state and federal In most cases, your main home is the one in which you live most of the time. Free tax filing 2011 state and federal If you sold your main home in 2013, you may be able to exclude from income any gain up to a limit of $250,000 ($500,000 on a joint return in most cases). Free tax filing 2011 state and federal See Excluding the Gain , later. Free tax filing 2011 state and federal Generally, if you can exclude all the gain, you do not need to report the sale on your tax return. Free tax filing 2011 state and federal If you have gain that cannot be excluded, it is taxable. Free tax filing 2011 state and federal Report it on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D (Form 1040). Free tax filing 2011 state and federal You may also have to complete Form 4797, Sales of Business Property. Free tax filing 2011 state and federal See Reporting the Sale , later. Free tax filing 2011 state and federal If you have a loss on the sale, you generally cannot deduct it on your return. Free tax filing 2011 state and federal However, you may need to report it. Free tax filing 2011 state and federal See Reporting the Sale , later. Free tax filing 2011 state and federal The following are main topics in this chapter. Free tax filing 2011 state and federal Figuring gain or loss. Free tax filing 2011 state and federal Basis. Free tax filing 2011 state and federal Excluding the gain. Free tax filing 2011 state and federal Ownership and use tests. Free tax filing 2011 state and federal Reporting the sale. Free tax filing 2011 state and federal Other topics include the following. Free tax filing 2011 state and federal Business use or rental of home. Free tax filing 2011 state and federal Recapturing a federal mortgage subsidy. Free tax filing 2011 state and federal Useful Items - You may want to see: Publication 523 Selling Your Home 530 Tax Information for Homeowners 547 Casualties, Disasters, and Thefts Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 982 Reduction of Tax Attributes Due to Discharge of Indebtedness 8828 Recapture of Federal Mortgage Subsidy 8949 Sales and Other Dispositions of Capital Assets Main Home This section explains the term “main home. Free tax filing 2011 state and federal ” Usually, the home you live in most of the time is your main home and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Free tax filing 2011 state and federal To exclude gain under the rules of this chapter, you in most cases must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. Free tax filing 2011 state and federal Land. Free tax filing 2011 state and federal   If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land. Free tax filing 2011 state and federal However, if you sell vacant land used as part of your main home and that is adjacent to it, you may be able to exclude the gain from the sale under certain circumstances. Free tax filing 2011 state and federal See Vacant land under Main Home in Publication 523 for more information. Free tax filing 2011 state and federal Example. Free tax filing 2011 state and federal You buy a piece of land and move your main home to it. Free tax filing 2011 state and federal Then you sell the land on which your main home was located. Free tax filing 2011 state and federal This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. Free tax filing 2011 state and federal More than one home. Free tax filing 2011 state and federal   If you have more than one home, you can exclude gain only from the sale of your main home. Free tax filing 2011 state and federal You must include in income gain from the sale of any other home. Free tax filing 2011 state and federal If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time during the year. Free tax filing 2011 state and federal Example 1. Free tax filing 2011 state and federal You own two homes, one in New York and one in Florida. Free tax filing 2011 state and federal From 2009 through 2013, you live in the New York home for 7 months and in the Florida residence for 5 months of each year. Free tax filing 2011 state and federal In the absence of facts and circumstances indicating otherwise, the New York home is your main home. Free tax filing 2011 state and federal You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. Free tax filing 2011 state and federal Example 2. Free tax filing 2011 state and federal You own a house, but you live in another house that you rent. Free tax filing 2011 state and federal The rented house is your main home. Free tax filing 2011 state and federal Example 3. Free tax filing 2011 state and federal You own two homes, one in Virginia and one in New Hampshire. Free tax filing 2011 state and federal In 2009 and 2010, you lived in the Virginia home. Free tax filing 2011 state and federal In 2011 and 2012, you lived in the New Hampshire home. Free tax filing 2011 state and federal In 2013, you lived again in the Virginia home. Free tax filing 2011 state and federal Your main home in 2009, 2010, and 2013 is the Virginia home. Free tax filing 2011 state and federal Your main home in 2011 and 2012 is the New Hampshire home. Free tax filing 2011 state and federal You would be eligible to exclude gain from the sale of either home (but not both) in 2013. Free tax filing 2011 state and federal Property used partly as your main home. Free tax filing 2011 state and federal   If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. Free tax filing 2011 state and federal For details, see Business Use or Rental of Home , later. Free tax filing 2011 state and federal Figuring Gain or Loss To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. Free tax filing 2011 state and federal Subtract the adjusted basis from the amount realized to get your gain or loss. Free tax filing 2011 state and federal     Selling price     − Selling expenses       Amount realized       Amount realized     − Adjusted basis       Gain or loss   Selling Price The selling price is the total amount you receive for your home. Free tax filing 2011 state and federal It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale. Free tax filing 2011 state and federal Payment by employer. Free tax filing 2011 state and federal   You may have to sell your home because of a job transfer. Free tax filing 2011 state and federal If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. Free tax filing 2011 state and federal Your employer will include it as wages in box 1 of your Form W-2, and you will include it in your income on Form 1040, line 7. Free tax filing 2011 state and federal Option to buy. Free tax filing 2011 state and federal   If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. Free tax filing 2011 state and federal If the option is not exercised, you must report the amount as ordinary income in the year the option expires. Free tax filing 2011 state and federal Report this amount on Form 1040, line 21. Free tax filing 2011 state and federal Form 1099-S. Free tax filing 2011 state and federal   If you received Form 1099-S, Proceeds From Real Estate Transactions, box 2 (Gross proceeds) should show the total amount you received for your home. Free tax filing 2011 state and federal   However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. Free tax filing 2011 state and federal Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. Free tax filing 2011 state and federal Amount Realized The amount realized is the selling price minus selling expenses. Free tax filing 2011 state and federal Selling expenses. Free tax filing 2011 state and federal   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. Free tax filing 2011 state and federal ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. Free tax filing 2011 state and federal This adjusted basis must be determined before you can figure gain or loss on the sale of your home. Free tax filing 2011 state and federal For information on how to figure your home's adjusted basis, see Determining Basis , later. Free tax filing 2011 state and federal Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. Free tax filing 2011 state and federal Gain on sale. Free tax filing 2011 state and federal   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, in most cases is taxable. Free tax filing 2011 state and federal Loss on sale. Free tax filing 2011 state and federal   If the amount realized is less than the adjusted basis, the difference is a loss. Free tax filing 2011 state and federal A loss on the sale of your main home cannot be deducted. Free tax filing 2011 state and federal Jointly owned home. Free tax filing 2011 state and federal   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. Free tax filing 2011 state and federal Separate returns. Free tax filing 2011 state and federal   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. Free tax filing 2011 state and federal Your ownership interest is generally determined by state law. Free tax filing 2011 state and federal Joint owners not married. Free tax filing 2011 state and federal   If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. Free tax filing 2011 state and federal Each of you applies the rules discussed in this chapter on an individual basis. Free tax filing 2011 state and federal Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. Free tax filing 2011 state and federal Foreclosure or repossession. Free tax filing 2011 state and federal   If your home was foreclosed on or repossessed, you have a disposition. Free tax filing 2011 state and federal See Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments, to determine if you have ordinary income, gain, or loss. Free tax filing 2011 state and federal Abandonment. Free tax filing 2011 state and federal   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. Free tax filing 2011 state and federal Trading (exchanging) homes. Free tax filing 2011 state and federal   If you trade your old home for another home, treat the trade as a sale and a purchase. Free tax filing 2011 state and federal Example. Free tax filing 2011 state and federal You owned and lived in a home with an adjusted basis of $41,000. Free tax filing 2011 state and federal A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. Free tax filing 2011 state and federal This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 – $41,000). Free tax filing 2011 state and federal If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed). Free tax filing 2011 state and federal Transfer to spouse. Free tax filing 2011 state and federal   If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss. Free tax filing 2011 state and federal This is true even if you receive cash or other consideration for the home. Free tax filing 2011 state and federal As a result, the rules in this chapter do not apply. Free tax filing 2011 state and federal More information. Free tax filing 2011 state and federal   If you need more information, see Transfer to spouse in Publication 523 and Property Settlements in Publication 504, Divorced or Separated Individuals. Free tax filing 2011 state and federal Involuntary conversion. Free tax filing 2011 state and federal   You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. Free tax filing 2011 state and federal This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations . Free tax filing 2011 state and federal Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. Free tax filing 2011 state and federal Your basis in your home is determined by how you got the home. Free tax filing 2011 state and federal Generally, your basis is its cost if you bought it or built it. Free tax filing 2011 state and federal If you got it in some other way (inheritance, gift, etc. Free tax filing 2011 state and federal ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. Free tax filing 2011 state and federal While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. Free tax filing 2011 state and federal The result of these adjustments is your home's adjusted basis, which is used to figure gain or loss on the sale of your home. Free tax filing 2011 state and federal See Adjusted Basis , later. Free tax filing 2011 state and federal You can find more information on basis and adjusted basis in chapter 13 of this publication and in Publication 523. Free tax filing 2011 state and federal Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. Free tax filing 2011 state and federal Purchase. Free tax filing 2011 state and federal   If you bought your home, your basis is its cost to you. Free tax filing 2011 state and federal This includes the purchase price and certain settlement or closing costs. Free tax filing 2011 state and federal In most cases, your purchase price includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home. Free tax filing 2011 state and federal If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed in Publication 523. Free tax filing 2011 state and federal Settlement fees or closing costs. Free tax filing 2011 state and federal   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. Free tax filing 2011 state and federal You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. Free tax filing 2011 state and federal A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing). Free tax filing 2011 state and federal    Chapter 13 lists some of the settlement fees and closing costs that you can include in the basis of property, including your home. Free tax filing 2011 state and federal It also lists some settlement costs that cannot be included in basis. Free tax filing 2011 state and federal   Also see Publication 523 for additional items and a discussion of basis other than cost. Free tax filing 2011 state and federal Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. Free tax filing 2011 state and federal To figure your adjusted basis, you can use Worksheet 1 in Publication 523. Free tax filing 2011 state and federal Do not use Worksheet 1 if you acquired an interest in your home from a decedent who died in 2010 and whose executor filed Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent. Free tax filing 2011 state and federal Increases to basis. Free tax filing 2011 state and federal   These include the following. Free tax filing 2011 state and federal Additions and other improvements that have a useful life of more than 1 year. Free tax filing 2011 state and federal Special assessments for local improvements. Free tax filing 2011 state and federal Amounts you spent after a casualty to restore damaged property. Free tax filing 2011 state and federal Improvements. Free tax filing 2011 state and federal   These add to the value of your home, prolong its useful life, or adapt it to new uses. Free tax filing 2011 state and federal You add the cost of additions and other improvements to the basis of your property. Free tax filing 2011 state and federal   For example, putting a recreation room or another bathroom in your unfinished basement, putting up a new fence, putting in new plumbing or wiring, putting on a new roof, or paving your unpaved driveway are improvements. Free tax filing 2011 state and federal An addition to your house, such as a new deck, a sunroom, or a new garage, is also an improvement. Free tax filing 2011 state and federal Repairs. Free tax filing 2011 state and federal   These maintain your home in good condition but do not add to its value or prolong its life. Free tax filing 2011 state and federal You do not add their cost to the basis of your property. Free tax filing 2011 state and federal   Examples of repairs include repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes. Free tax filing 2011 state and federal Decreases to basis. Free tax filing 2011 state and federal   These include the following. Free tax filing 2011 state and federal Discharge of qualified principal residence indebtedness that was excluded from income. Free tax filing 2011 state and federal Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. Free tax filing 2011 state and federal For details, see Publication 4681. Free tax filing 2011 state and federal Gain you postponed from the sale of a previous home before May 7, 1997. Free tax filing 2011 state and federal Deductible casualty losses. Free tax filing 2011 state and federal Insurance payments you received or expect to receive for casualty losses. Free tax filing 2011 state and federal Payments you received for granting an easement or right-of-way. Free tax filing 2011 state and federal Depreciation allowed or allowable if you used your home for business or rental purposes. Free tax filing 2011 state and federal Energy-related credits allowed for expenditures made on the residence. Free tax filing 2011 state and federal (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. Free tax filing 2011 state and federal ) Adoption credit you claimed for improvements added to the basis of your home. Free tax filing 2011 state and federal Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. Free tax filing 2011 state and federal Energy conservation subsidy excluded from your gross income because you received it (directly or indirectly) from a public utility after 1992 to buy or install any energy conservation measure. Free tax filing 2011 state and federal An energy conservation measure is an installation or modification primarily designed either to reduce consumption of electricity or natural gas or to improve the management of energy demand for a home. Free tax filing 2011 state and federal District of Columbia first-time homebuyer credit (allowed on the purchase of a principal residence in the District of Columbia beginning on August 5, 1997 and before January 1, 2012). Free tax filing 2011 state and federal General sales taxes (allowed beginning 2004 and ending before 2014) claimed as an itemized deduction on Schedule A (Form 1040) that were imposed on the purchase of personal property, such as a houseboat used as your home or a mobile home. Free tax filing 2011 state and federal Discharges of qualified principal residence indebtedness. Free tax filing 2011 state and federal   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. Free tax filing 2011 state and federal This exclusion applies to discharges made after 2006 and before 2014. Free tax filing 2011 state and federal If you choose to exclude this income, you must reduce (but not below zero) the basis of the principal residence by the amount excluded from your gross income. Free tax filing 2011 state and federal   File Form 982 with your tax return. Free tax filing 2011 state and federal See the form's instructions for detailed information. Free tax filing 2011 state and federal Recordkeeping. Free tax filing 2011 state and federal You should keep records to prove your home's adjusted basis. Free tax filing 2011 state and federal Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. Free tax filing 2011 state and federal But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. Free tax filing 2011 state and federal Keep records proving the basis of both homes as long as they are needed for tax purposes. Free tax filing 2011 state and federal The records you should keep include: Proof of the home's purchase price and purchase expenses, Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis, Any worksheets or other computations you used to figure the adjusted basis of the home you sold, the gain or loss on the sale, the exclusion, and the taxable gain, Any Form 982 you filed to report any discharge of qualified principal residence indebtedness, Any Form 2119, Sale of Your Home, you filed to postpone gain from the sale of a previous home before May 7, 1997, and Any worksheets you used to prepare Form 2119, such as the Adjusted Basis of Home Sold Worksheet or the Capital Improvements Worksheet from the Form 2119 instructions, or other source of computations. Free tax filing 2011 state and federal Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. Free tax filing 2011 state and federal This means that, if you qualify, you will not have to pay tax on the gain up to the limit described under Maximum Exclusion , next. Free tax filing 2011 state and federal To qualify, you must meet the ownership and use tests described later. Free tax filing 2011 state and federal You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. Free tax filing 2011 state and federal You can use Worksheet 2 in Publication 523 to figure the amount of your exclusion and your taxable gain, if any. Free tax filing 2011 state and federal If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. Free tax filing 2011 state and federal See Publication 505, Tax Withholding and Estimated Tax. Free tax filing 2011 state and federal Maximum Exclusion You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. Free tax filing 2011 state and federal You meet the ownership test. Free tax filing 2011 state and federal You meet the use test. Free tax filing 2011 state and federal During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. Free tax filing 2011 state and federal For details on gain allocated to periods of nonqualified use, see Periods of nonqualified use , later. Free tax filing 2011 state and federal You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . Free tax filing 2011 state and federal Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. Free tax filing 2011 state and federal This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). Free tax filing 2011 state and federal Exception. Free tax filing 2011 state and federal   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. Free tax filing 2011 state and federal However, the maximum amount you may be able to exclude will be reduced. Free tax filing 2011 state and federal See Reduced Maximum Exclusion , later. Free tax filing 2011 state and federal Example 1—home owned and occupied for at least 2 years. Free tax filing 2011 state and federal Mya bought and moved into her main home in September 2011. Free tax filing 2011 state and federal She sold the home at a gain in October 2013. Free tax filing 2011 state and federal During the 5-year period ending on the date of sale in October 2013, she owned and lived in the home for more than 2 years. Free tax filing 2011 state and federal She meets the ownership and use tests. Free tax filing 2011 state and federal Example 2—ownership test met but use test not met. Free tax filing 2011 state and federal Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. Free tax filing 2011 state and federal He later sold the home for a gain. Free tax filing 2011 state and federal He owned the home during the entire 5-year period ending on the date of sale. Free tax filing 2011 state and federal He meets the ownership test but not the use test. Free tax filing 2011 state and federal He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). Free tax filing 2011 state and federal Period of Ownership and Use The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time. Free tax filing 2011 state and federal You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale. Free tax filing 2011 state and federal Temporary absence. Free tax filing 2011 state and federal   Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. Free tax filing 2011 state and federal The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. Free tax filing 2011 state and federal Example 1. Free tax filing 2011 state and federal David Johnson, who is single, bought and moved into his home on February 1, 2011. Free tax filing 2011 state and federal Each year during 2011 and 2012, David left his home for a 2-month summer vacation. Free tax filing 2011 state and federal David sold the house on March 1, 2013. Free tax filing 2011 state and federal Although the total time David used his home is less than 2 years (21 months), he meets the requirement and may exclude gain. Free tax filing 2011 state and federal The 2-month vacations are short temporary absences and are counted as periods of use in determining whether David used the home for the required 2 years. Free tax filing 2011 state and federal Example 2. Free tax filing 2011 state and federal Professor Paul Beard, who is single, bought and moved into a house on August 18, 2010. Free tax filing 2011 state and federal He lived in it as his main home continuously until January 5, 2012, when he went abroad for a 1-year sabbatical leave. Free tax filing 2011 state and federal On February 6, 2013, 1 month after returning from the leave, Paul sold the house at a gain. Free tax filing 2011 state and federal Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. Free tax filing 2011 state and federal He cannot exclude any part of his gain, because he did not use the residence for the required 2 years. Free tax filing 2011 state and federal Ownership and use tests met at different times. Free tax filing 2011 state and federal   You can meet the ownership and use tests during different 2-year periods. Free tax filing 2011 state and federal However, you must meet both tests during the 5-year period ending on the date of the sale. Free tax filing 2011 state and federal Example. Free tax filing 2011 state and federal Beginning in 2002, Helen Jones lived in a rented apartment. Free tax filing 2011 state and federal The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. Free tax filing 2011 state and federal In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. Free tax filing 2011 state and federal On July 12, 2013, while still living in her daughter's home, she sold her condominium. Free tax filing 2011 state and federal Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 13, 2008, to July 12, 2013, the date she sold the condominium. Free tax filing 2011 state and federal She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). Free tax filing 2011 state and federal She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). Free tax filing 2011 state and federal The time Helen lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use. Free tax filing 2011 state and federal Cooperative apartment. Free tax filing 2011 state and federal   If you sold stock as a tenant-stockholder in a cooperative housing corporation, the ownership and use tests are met if, during the 5-year period ending on the date of sale, you: Owned the stock for at least 2 years, and Lived in the house or apartment that the stock entitles you to occupy as your main home for at least 2 years. Free tax filing 2011 state and federal Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. Free tax filing 2011 state and federal Exception for individuals with a disability. Free tax filing 2011 state and federal   There is an exception to the use test if: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home. Free tax filing 2011 state and federal Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. Free tax filing 2011 state and federal If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. Free tax filing 2011 state and federal Previous home destroyed or condemned. Free tax filing 2011 state and federal   For the ownership and use tests, you add the time you owned and lived in a previous home that was destroyed or condemned to the time you owned and lived in the replacement home on whose sale you wish to exclude gain. Free tax filing 2011 state and federal This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home. Free tax filing 2011 state and federal Otherwise, you must have owned and lived in the same home for 2 of the 5 years before the sale to qualify for the exclusion. Free tax filing 2011 state and federal Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Free tax filing 2011 state and federal   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on “qualified official extended duty” as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. Free tax filing 2011 state and federal You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve outside the United States either as an employee of the Peace Corps on "qualified official extended duty" or as an enrolled volunteer or volunteer leader of the Peace Corps. Free tax filing 2011 state and federal This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. Free tax filing 2011 state and federal   If this helps you qualify to exclude gain, you can choose to have the 5-year test period suspended by filing a return for the year of sale that does not include the gain. Free tax filing 2011 state and federal For more information about the suspension of the 5-year test period, see Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps in Publication 523. Free tax filing 2011 state and federal Married Persons If you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use tests, you can exclude up to $250,000 of the gain. Free tax filing 2011 state and federal (But see Special rules for joint returns , next. Free tax filing 2011 state and federal ) Special rules for joint returns. Free tax filing 2011 state and federal   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. Free tax filing 2011 state and federal You are married and file a joint return for the year. Free tax filing 2011 state and federal Either you or your spouse meets the ownership test. Free tax filing 2011 state and federal Both you and your spouse meet the use test. Free tax filing 2011 state and federal During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. Free tax filing 2011 state and federal If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. Free tax filing 2011 state and federal For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. Free tax filing 2011 state and federal Example 1—one spouse sells a home. Free tax filing 2011 state and federal Emily sells her home in June 2013 for a gain of $300,000. Free tax filing 2011 state and federal She marries Jamie later in the year. Free tax filing 2011 state and federal She meets the ownership and use tests, but Jamie does not. Free tax filing 2011 state and federal Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. Free tax filing 2011 state and federal The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. Free tax filing 2011 state and federal Example 2—each spouse sells a home. Free tax filing 2011 state and federal The facts are the same as in Example 1 except that Jamie also sells a home in 2013 for a gain of $200,000 before he marries Emily. Free tax filing 2011 state and federal He meets the ownership and use tests on his home, but Emily does not. Free tax filing 2011 state and federal Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. Free tax filing 2011 state and federal However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. Free tax filing 2011 state and federal Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. Free tax filing 2011 state and federal The $500,000 maximum exclusion for certain joint returns does not apply because Emily and Jamie do not both meet the use test for the same home. Free tax filing 2011 state and federal Sale of main home by surviving spouse. Free tax filing 2011 state and federal   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. Free tax filing 2011 state and federal   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. Free tax filing 2011 state and federal The sale or exchange took place after 2008. Free tax filing 2011 state and federal The sale or exchange took place no more than 2 years after the date of death of your spouse. Free tax filing 2011 state and federal You have not remarried. Free tax filing 2011 state and federal You and your spouse met the use test at the time of your spouse's death. Free tax filing 2011 state and federal You or your spouse met the ownership test at the time of your spouse's death. Free tax filing 2011 state and federal Neither you nor your spouse excluded gain from the sale of another home during the last 2 years. Free tax filing 2011 state and federal Example. Free tax filing 2011 state and federal   Harry owned and used a house as his main home since 2009. Free tax filing 2011 state and federal Harry and Wilma married on July 1, 2013, and from that date they use Harry's house as their main home. Free tax filing 2011 state and federal Harry died on August 15, 2013, and Wilma inherited the property. Free tax filing 2011 state and federal Wilma sold the property on September 3, 2013, at which time she had not remarried. Free tax filing 2011 state and federal Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Harry owned and used the property before death. Free tax filing 2011 state and federal Home transferred from spouse. Free tax filing 2011 state and federal   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. Free tax filing 2011 state and federal Use of home after divorce. Free tax filing 2011 state and federal   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. Free tax filing 2011 state and federal Reduced Maximum Exclusion If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. Free tax filing 2011 state and federal This applies to those who: Fail to meet the ownership and use tests, or Have used the exclusion within 2 years of selling their current home. Free tax filing 2011 state and federal In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. Free tax filing 2011 state and federal A change in place of employment. Free tax filing 2011 state and federal Health. Free tax filing 2011 state and federal Unforeseen circumstances. Free tax filing 2011 state and federal Unforeseen circumstances. Free tax filing 2011 state and federal   The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying your main home. Free tax filing 2011 state and federal   See Publication 523 for more information and to use Worksheet 3 to figure your reduced maximum exclusion. Free tax filing 2011 state and federal Business Use or Rental of Home You may be able to exclude gain from the sale of a home you have used for business or to produce rental income. Free tax filing 2011 state and federal But you must meet the ownership and use tests. Free tax filing 2011 state and federal Periods of nonqualified use. Free tax filing 2011 state and federal   In most cases, gain from the sale or exchange of your main home will not qualify for the exclusion to the extent that the gains are allocated to periods of nonqualified use. Free tax filing 2011 state and federal Nonqualified use is any period after 2008 during which neither you nor your spouse (or your former spouse) used the property as a main home with the following exceptions. Free tax filing 2011 state and federal Exceptions. Free tax filing 2011 state and federal   A period of nonqualified use does not include: Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home; Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty: As a member of the uniformed services; As a member of the Foreign Service of the United States; or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. Free tax filing 2011 state and federal The gain resulting from the sale of the property is allocated between qualified and nonqualified use periods based on the amount of time the property was held for qualified and nonqualified use. Free tax filing 2011 state and federal Gain from the sale or exchange of a main home allocable to periods of qualified use will continue to qualify for the exclusion for the sale of your main home. Free tax filing 2011 state and federal Gain from the sale or exchange of property allocable to nonqualified use will not qualify for the exclusion. Free tax filing 2011 state and federal Calculation. Free tax filing 2011 state and federal   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain by the following fraction:   Total nonqualified use during the period of ownership after 2008      Total period of ownership     This calculation can be found in Worksheet 2, line 10, in Publication 523. Free tax filing 2011 state and federal Example 1. Free tax filing 2011 state and federal On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. Free tax filing 2011 state and federal She moved in on that date and lived in it until May 31, 2009, when she moved out of the house and put it up for rent. Free tax filing 2011 state and federal The house was rented from June 1, 2009, to March 31, 2011. Free tax filing 2011 state and federal Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. Free tax filing 2011 state and federal Amy moved back into the house on April 1, 2011, and lived there until she sold it on January 31, 2013, for a gain of $200,000. Free tax filing 2011 state and federal During the 5-year period ending on the date of the sale (January 31, 2008-January 31, 2013), Amy owned and lived in the house for more than 2 years as shown in the following table. Free tax filing 2011 state and federal Five Year Period Used as  Home Used as  Rental 1/31/08 – 5/31/09 16 months       6/1/09 – 3/31/11   22 months 4/1/11 – 1/31/13 22 months         38 months 22 months During the period Amy owned the house (2,080 days), her period of nonqualified use was 668 days. Free tax filing 2011 state and federal Amy divides 668 by 2,080 and obtains a decimal (rounded to at least three decimal places) of 0. Free tax filing 2011 state and federal 321. Free tax filing 2011 state and federal To figure her gain attributable to the period of nonqualified use, she multiplies $190,000 (the gain not attributable to the $10,000 depreciation deduction) by 0. Free tax filing 2011 state and federal 321. Free tax filing 2011 state and federal Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain. Free tax filing 2011 state and federal Example 2. Free tax filing 2011 state and federal William owned and used a house as his main home from 2007 through 2010. Free tax filing 2011 state and federal On January 1, 2011, he moved to another state. Free tax filing 2011 state and federal He rented his house from that date until April 30, 2013, when he sold it. Free tax filing 2011 state and federal During the 5-year period ending on the date of sale (May 1, 2008-April 30, 2013), William owned and lived in the house for more than 2 years. Free tax filing 2011 state and federal He must report the sale on Form 4797 because it was rental property at the time of sale. Free tax filing 2011 state and federal Because the period of nonqualified use does not include any part of the 5-year period after the last date William lived in the house, he has no period of nonqualified use. Free tax filing 2011 state and federal Because he met the ownership and use tests, he can exclude gain up to $250,000. Free tax filing 2011 state and federal However, he cannot exclude the part of the gain equal to the depreciation he claimed or could have claimed for renting the house, as explained next. Free tax filing 2011 state and federal Depreciation after May 6, 1997. Free tax filing 2011 state and federal   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. Free tax filing 2011 state and federal If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed. Free tax filing 2011 state and federal See Publication 544 for more information. Free tax filing 2011 state and federal Property used partly for business or rental. Free tax filing 2011 state and federal   If you used property partly as a home and partly for business or to produce rental income, see Publication 523. Free tax filing 2011 state and federal Reporting the Sale Do not report the 2013 sale of your main home on your tax return unless: You have a gain and do not qualify to exclude all of it, You have a gain and choose not to exclude it, or You received Form 1099-S. Free tax filing 2011 state and federal If any of these conditions apply, report the entire gain or loss. Free tax filing 2011 state and federal For details on how to report the gain or loss, see the Instructions for Schedule D (Form 1040) and the Instructions for Form 8949. Free tax filing 2011 state and federal If you used the home for business or to produce rental income, you may have to use Form 4797 to report the sale of the business or rental part (or the sale of the entire property if used entirely for business or rental). Free tax filing 2011 state and federal See Business Use or Rental of Home in Publication 523 and the Instructions for Form 4797. Free tax filing 2011 state and federal Installment sale. Free tax filing 2011 state and federal    Some sales are made under arrangements that provide for part or all of the selling price to be paid in a later year. Free tax filing 2011 state and federal These sales are called “installment sales. Free tax filing 2011 state and federal ” If you finance the buyer's purchase of your home yourself instead of having the buyer get a loan or mortgage from a bank, you probably have an installment sale. Free tax filing 2011 state and federal You may be able to report the part of the gain you cannot exclude on the installment basis. Free tax filing 2011 state and federal    Use Form 6252, Installment Sale Income, to report the sale. Free tax filing 2011 state and federal Enter your exclusion on line 15 of Form 6252. Free tax filing 2011 state and federal Seller-financed mortgage. Free tax filing 2011 state and federal   If you sell your home and hold a note, mortgage, or other financial agreement, the payments you receive in most cases consist of both interest and principal. Free tax filing 2011 state and federal You must separately report as interest income the interest you receive as part of each payment. Free tax filing 2011 state and federal If the buyer of your home uses the property as a main or second home, you must also report the name, address, and social security number (SSN) of the buyer on line 1 of Schedule B (Form 1040A or 1040). Free tax filing 2011 state and federal The buyer must give you his or her SSN, and you must give the buyer your SSN. Free tax filing 2011 state and federal Failure to meet these requirements may result in a $50 penalty for each failure. Free tax filing 2011 state and federal If either you or the buyer does not have and is not eligible to get an SSN, see Social Security Number in chapter 1. Free tax filing 2011 state and federal More information. Free tax filing 2011 state and federal   For more information on installment sales, see Publication 537, Installment Sales. Free tax filing 2011 state and federal Special Situations The situations that follow may affect your exclusion. Free tax filing 2011 state and federal Sale of home acquired in a like-kind exchange. Free tax filing 2011 state and federal   You cannot claim the exclusion if: You acquired your home in a like-kind exchange (also known as a section 1031 exchange), or your basis in your home is determined by reference to the basis of the home in the hands of the person who acquired the property in a like-kind exchange (for example, you received the home from that person as a gift), and You sold the home during the 5-year period beginning with the date your home was acquired in the like-kind exchange. Free tax filing 2011 state and federal Gain from a like-kind exchange is not taxable at the time of the exchange. Free tax filing 2011 state and federal This means that gain will not be taxed until you sell or otherwise dispose of the property you receive. Free tax filing 2011 state and federal To defer gain from a like-kind exchange, you must have exchanged business or investment property for business or investment property of a like kind. Free tax filing 2011 state and federal For more information about like-kind exchanges, see Publication 544, Sales and Other Dispositions of Assets. Free tax filing 2011 state and federal Home relinquished in a like-kind exchange. Free tax filing 2011 state and federal   If you use your main home partly for business or rental purposes and then exchange the home for another property, see Publication 523. Free tax filing 2011 state and federal Expatriates. Free tax filing 2011 state and federal   You cannot claim the exclusion if the expatriation tax applies to you. Free tax filing 2011 state and federal The expatriation tax applies to certain U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal citizens who have renounced their citizenship (and to certain long-term residents who have ended their residency). Free tax filing 2011 state and federal For more information about the expatriation tax, see Expatriation Tax in chapter 4 of Publication 519, U. Free tax filing 2011 state and federal S. Free tax filing 2011 state and federal Tax Guide for Aliens. Free tax filing 2011 state and federal Home destroyed or condemned. Free tax filing 2011 state and federal   If your home was destroyed or condemned, any gain (for example, because of insurance proceeds you received) qualifies for the exclusion. Free tax filing 2011 state and federal   Any part of the gain that cannot be excluded (because it is more than the maximum exclusion) can be postponed under the rules explained in: Publication 547, in the case of a home that was destroyed, or Publication 544, chapter 1, in the case of a home that was condemned. Free tax filing 2011 state and federal Sale of remainder interest. Free tax filing 2011 state and federal   Subject to the other rules in this chapter, you can choose to exclude gain from the sale of a remainder interest in your home. Free tax filing 2011 state and federal If you make this choice, you cannot choose to exclude gain from your sale of any other interest in the home that you sell separately. Free tax filing 2011 state and federal Exception for sales to related persons. Free tax filing 2011 state and federal   You cannot exclude gain from the sale of a remainder interest in your home to a related person. Free tax filing 2011 state and federal Related persons include your brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. Free tax filing 2011 state and federal ), and lineal descendants (children, grandchildren, etc. Free tax filing 2011 state and federal ). Free tax filing 2011 state and federal Related persons also include certain corporations, partnerships, trusts, and exempt organizations. Free tax filing 2011 state and federal Recapturing (Paying Back) a Federal Mortgage Subsidy If you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. Free tax filing 2011 state and federal You recapture the benefit by increasing your federal income tax for the year of the sale. Free tax filing 2011 state and federal You may have to pay this recapture tax even if you can exclude your gain from income under the rules discussed earlier; that exclusion does not affect the recapture tax. Free tax filing 2011 state and federal Loans subject to recapture rules. Free tax filing 2011 state and federal   The recapture applies to loans that: Came from the proceeds of qualified mortgage bonds, or Were based on mortgage credit certificates. Free tax filing 2011 state and federal The recapture also applies to assumptions of these loans. Free tax filing 2011 state and federal When recapture applies. Free tax filing 2011 state and federal   Recapture of the federal mortgage subsidy applies only if you meet both of the following conditions. Free tax filing 2011 state and federal You sell or otherwise dispose of your home at a gain within the first 9 years after the date you close your mortgage loan. Free tax filing 2011 state and federal Your income for the year of disposition is more than that year's adjusted qualifying income for your family size for that year (related to the income requirements a person must meet to qualify for the federally subsidized program). Free tax filing 2011 state and federal When recapture does not apply. Free tax filing 2011 state and federal   Recapture does not apply in any of the following situations. Free tax filing 2011 state and federal Your mortgage loan was a qualified home improvement loan (QHIL) of not more than $15,000 used for alterations, repairs, and improvements that protect or improve the basic livability or energy efficiency of your home. Free tax filing 2011 state and federal Your mortgage loan was a QHIL of not more than $150,000 in the case of a QHIL used to repair damage from Hurricane Katrina to homes in the hurricane disaster area; a QHIL funded by a qualified mortgage bond that is a qualified Gulf Opportunity Zone Bond; or a QHIL for an owner-occupied home in the Gulf Opportunity Zone (GO Zone), Rita GO Zone, or Wilma GO Zone. Free tax filing 2011 state and federal For more information, see Publication 4492, Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma. Free tax filing 2011 state and federal Also see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. Free tax filing 2011 state and federal The home is disposed of as a result of your death. Free tax filing 2011 state and federal You dispose of the home more than 9 years after the date you closed your mortgage loan. Free tax filing 2011 state and federal You transfer the home to your spouse, or to your former spouse incident to a divorce, where no gain is included in your income. Free tax filing 2011 state and federal You dispose of the home at a loss. Free tax filing 2011 state and federal Your home is destroyed by a casualty, and you replace it on its original site within 2 years after the end of the tax year when the destruction happened. Free tax filing 2011 state and federal The replacement period is extended for main homes destroyed in a federally declared disaster area, a Midwestern disaster area, the Kansas disaster area, and the Hurricane Katrina disaster area. Free tax filing 2011 state and federal For more information, see Replacement Period in Publication 547. Free tax filing 2011 state and federal You refinance your mortgage loan (unless you later meet the conditions listed previously under When recapture applies ). Free tax filing 2011 state and federal Notice of amounts. Free tax filing 2011 state and federal   At or near the time of settlement of your mortgage loan, you should receive a notice that provides the federally subsidized amount and other information you will need to figure your recapture tax. Free tax filing 2011 state and federal How to figure and report the recapture. Free tax filing 2011 state and federal    The recapture tax is figured on Form 8828. Free tax filing 2011 state and federal If you sell your home and your mortgage is subject to recapture rules, you must file Form 8828 even if you do not owe a recapture tax. Free tax filing 2011 state and federal Attach Form 8828 to your Form 1040. Free tax filing 2011 state and federal For more information, see Form 8828 and its instructions. 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