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How To Amend 2012 Taxes

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How To Amend 2012 Taxes

How to amend 2012 taxes 13. How to amend 2012 taxes   Basis of Property Table of Contents Introduction Useful Items - You may want to see: Cost BasisReal Property Adjusted BasisIncreases to Basis Decreases to Basis Basis Other Than CostProperty Received for Services Taxable Exchanges Involuntary Conversions Nontaxable Exchanges Property Transferred From a Spouse Property Received as a Gift Inherited Property Property Changed From Personal to Business or Rental Use Stocks and Bonds Introduction This chapter discusses how to figure your basis in property. How to amend 2012 taxes It is divided into the following sections. How to amend 2012 taxes Cost basis. How to amend 2012 taxes Adjusted basis. How to amend 2012 taxes Basis other than cost. How to amend 2012 taxes Your basis is the amount of your investment in property for tax purposes. How to amend 2012 taxes Use the basis to figure gain or loss on the sale, exchange, or other disposition of property. How to amend 2012 taxes Also use it to figure deductions for depreciation, amortization, depletion, and casualty losses. How to amend 2012 taxes If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. How to amend 2012 taxes Only the basis allocated to the business or investment use of the property can be depreciated. How to amend 2012 taxes Your original basis in property is adjusted (increased or decreased) by certain events. How to amend 2012 taxes For example, if you make improvements to the property, increase your basis. How to amend 2012 taxes If you take deductions for depreciation or casualty losses, or claim certain credits, reduce your basis. How to amend 2012 taxes Keep accurate records of all items that affect the basis of your property. How to amend 2012 taxes For more information on keeping records, see chapter 1. How to amend 2012 taxes Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 525 Taxable and Nontaxable Income 535 Business Expenses 537 Installment Sales 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 551 Basis of Assets 946 How To Depreciate Property Cost Basis The basis of property you buy is usually its cost. How to amend 2012 taxes The cost is the amount you pay in cash, debt obligations, other property, or services. How to amend 2012 taxes Your cost also includes amounts you pay for the following items: Sales tax, Freight, Installation and testing, Excise taxes, Legal and accounting fees (when they must be capitalized), Revenue stamps, Recording fees, and Real estate taxes (if you assume liability for the seller). How to amend 2012 taxes In addition, the basis of real estate and business assets may include other items. How to amend 2012 taxes Loans with low or no interest. How to amend 2012 taxes    If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price minus any amount considered to be unstated interest. How to amend 2012 taxes You generally have unstated interest if your interest rate is less than the applicable federal rate. How to amend 2012 taxes   For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. How to amend 2012 taxes Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. How to amend 2012 taxes If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. How to amend 2012 taxes Lump sum purchase. How to amend 2012 taxes   If you buy buildings and the land on which they stand for a lump sum, allocate the cost basis among the land and the buildings. How to amend 2012 taxes Allocate the cost basis according to the respective fair market values (FMVs) of the land and buildings at the time of purchase. How to amend 2012 taxes Figure the basis of each asset by multiplying the lump sum by a fraction. How to amend 2012 taxes The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. How to amend 2012 taxes    If you are not certain of the FMVs of the land and buildings, you can allocate the basis according to their assessed values for real estate tax purposes. How to amend 2012 taxes Fair market value (FMV). How to amend 2012 taxes   FMV is the price at which the property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the necessary facts. How to amend 2012 taxes Sales of similar property on or about the same date may be helpful in figuring the FMV of the property. How to amend 2012 taxes Assumption of mortgage. How to amend 2012 taxes   If you buy property and assume (or buy the property subject to) an existing mortgage on the property, your basis includes the amount you pay for the property plus the amount to be paid on the mortgage. How to amend 2012 taxes Settlement costs. How to amend 2012 taxes   Your basis includes the settlement fees and closing costs you paid for buying the property. How to amend 2012 taxes (A fee for buying property is a cost that must be paid even if you buy the property for cash. How to amend 2012 taxes ) Do not include fees and costs for getting a loan on the property in your basis. How to amend 2012 taxes   The following are some of the settlement fees or closing costs you can include in the basis of your property. How to amend 2012 taxes Abstract fees (abstract of title fees). How to amend 2012 taxes Charges for installing utility services. How to amend 2012 taxes Legal fees (including fees for the title search and preparation of the sales contract and deed). How to amend 2012 taxes Recording fees. How to amend 2012 taxes Survey fees. How to amend 2012 taxes Transfer taxes. How to amend 2012 taxes Owner's title insurance. How to amend 2012 taxes Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. How to amend 2012 taxes   Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance. How to amend 2012 taxes   The following are some of the settlement fees and closing costs you cannot include in the basis of property. How to amend 2012 taxes Casualty insurance premiums. How to amend 2012 taxes Rent for occupancy of the property before closing. How to amend 2012 taxes Charges for utilities or other services related to occupancy of the property before closing. How to amend 2012 taxes Charges connected with getting a loan, such as points (discount points, loan origination fees), mortgage insurance premiums, loan assumption fees, cost of a credit report, and fees for an appraisal required by a lender. How to amend 2012 taxes Fees for refinancing a mortgage. How to amend 2012 taxes Real estate taxes. How to amend 2012 taxes   If you pay real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. How to amend 2012 taxes You cannot deduct them as an expense. How to amend 2012 taxes    If you reimburse the seller for taxes the seller paid for you, you can usually deduct that amount as an expense in the year of purchase. How to amend 2012 taxes Do not include that amount in the basis of your property. How to amend 2012 taxes If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. How to amend 2012 taxes Points. How to amend 2012 taxes   If you pay points to get a loan (including a mortgage, second mortgage, line of credit, or a home equity loan), do not add the points to the basis of the related property. How to amend 2012 taxes Generally, you deduct the points over the term of the loan. How to amend 2012 taxes For more information on how to deduct points, see chapter 23. How to amend 2012 taxes Points on home mortgage. How to amend 2012 taxes   Special rules may apply to points you and the seller pay when you get a mortgage to buy your main home. How to amend 2012 taxes If certain requirements are met, you can deduct the points in full for the year in which they are paid. How to amend 2012 taxes Reduce the basis of your home by any seller-paid points. How to amend 2012 taxes Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments (increases and decreases) to the cost basis or basis other than cost (discussed later) of the property. How to amend 2012 taxes The result is the adjusted basis. How to amend 2012 taxes Increases to Basis Increase the basis of any property by all items properly added to a capital account. How to amend 2012 taxes Examples of items that increase basis are shown in Table 13-1. How to amend 2012 taxes These include the items discussed below. How to amend 2012 taxes Improvements. How to amend 2012 taxes   Add to your basis in property the cost of improvements having a useful life of more than 1 year, that increase the value of the property, lengthen its life, or adapt it to a different use. How to amend 2012 taxes For example, improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, or paving your driveway. How to amend 2012 taxes Assessments for local improvements. How to amend 2012 taxes   Add to the basis of property assessments for improvements such as streets and sidewalks if they increase the value of the property assessed. How to amend 2012 taxes Do not deduct them as taxes. How to amend 2012 taxes However, you can deduct as taxes assessments for maintenance or repairs, or for meeting interest charges related to the improvements. How to amend 2012 taxes Example. How to amend 2012 taxes Your city changes the street in front of your store into an enclosed pedestrian mall and assesses you and other affected property owners for the cost of the conversion. How to amend 2012 taxes Add the assessment to your property's basis. How to amend 2012 taxes In this example, the assessment is a depreciable asset. How to amend 2012 taxes Decreases to Basis Decrease the basis of any property by all items that represent a return of capital for the period during which you held the property. How to amend 2012 taxes Examples of items that decrease basis are shown in Table 13-1. How to amend 2012 taxes These include the items discussed below. How to amend 2012 taxes Table 13-1. How to amend 2012 taxes Examples of Adjustments to Basis Increases to Basis Decreases to Basis • Capital improvements: • Exclusion from income of   Putting an addition on your home subsidies for energy conservation   Replacing an entire roof measures   Paving your driveway     Installing central air conditioning • Casualty or theft loss deductions   Rewiring your home and insurance reimbursements       • Assessments for local improvements:     Water connections     Extending utility service lines to the property • Postponed gain from the sale of a home   Sidewalks • Alternative motor vehicle credit  (Form 8910)   Roads       • Alternative fuel vehicle refueling     property credit (Form 8911)           • Residential energy credits (Form 5695)       • Casualty losses: • Depreciation and section 179 deduction   Restoring damaged property     • Nontaxable corporate distributions • Legal fees:     Cost of defending and perfecting a title • Certain canceled debt excluded from   Fees for getting a reduction of an assessment income     • Zoning costs • Easements           • Adoption tax benefits Casualty and theft losses. How to amend 2012 taxes   If you have a casualty or theft loss, decrease the basis in your property by any insurance proceeds or other reimbursement and by any deductible loss not covered by insurance. How to amend 2012 taxes    You must increase your basis in the property by the amount you spend on repairs that restore the property to its pre-casualty condition. How to amend 2012 taxes   For more information on casualty and theft losses, see chapter 25. How to amend 2012 taxes Depreciation and section 179 deduction. How to amend 2012 taxes   Decrease the basis of your qualifying business property by any section 179 deduction you take and the depreciation you deducted, or could have deducted (including any special depreciation allowance), on your tax returns under the method of depreciation you selected. How to amend 2012 taxes   For more information about depreciation and the section 179 deduction, see Publication 946 and the Instructions for Form 4562. How to amend 2012 taxes Example. How to amend 2012 taxes You owned a duplex used as rental property that cost you $40,000, of which $35,000 was allocated to the building and $5,000 to the land. How to amend 2012 taxes You added an improvement to the duplex that cost $10,000. How to amend 2012 taxes In February last year, the duplex was damaged by fire. How to amend 2012 taxes Up to that time, you had been allowed depreciation of $23,000. How to amend 2012 taxes You sold some salvaged material for $1,300 and collected $19,700 from your insurance company. How to amend 2012 taxes You deducted a casualty loss of $1,000 on your income tax return for last year. How to amend 2012 taxes You spent $19,000 of the insurance proceeds for restoration of the duplex, which was completed this year. How to amend 2012 taxes You must use the duplex's adjusted basis after the restoration to determine depreciation for the rest of the property's recovery period. How to amend 2012 taxes Figure the adjusted basis of the duplex as follows: Original cost of duplex $35,000 Addition to duplex 10,000 Total cost of duplex $45,000 Minus: Depreciation 23,000 Adjusted basis before casualty $22,000 Minus: Insurance proceeds $19,700     Deducted casualty loss 1,000     Salvage proceeds 1,300 22,000 Adjusted basis after casualty $-0- Add: Cost of restoring duplex 19,000 Adjusted basis after restoration $19,000 Note. How to amend 2012 taxes Your basis in the land is its original cost of $5,000. How to amend 2012 taxes Easements. How to amend 2012 taxes   The amount you receive for granting an easement is generally considered to be proceeds from the sale of an interest in real property. How to amend 2012 taxes It reduces the basis of the affected part of the property. How to amend 2012 taxes If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. How to amend 2012 taxes   If the gain is on a capital asset, see chapter 16 for information about how to report it. How to amend 2012 taxes If the gain is on property used in a trade or business, see Publication 544 for information about how to report it. How to amend 2012 taxes Exclusion of subsidies for energy conservation measures. How to amend 2012 taxes   You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of an energy conservation measure for a dwelling unit. How to amend 2012 taxes Reduce the basis of the property for which you received the subsidy by the excluded amount. How to amend 2012 taxes For more information about this subsidy, see chapter 12. How to amend 2012 taxes Postponed gain from sale of home. How to amend 2012 taxes    If you postponed gain from the sale of your main home under rules in effect before May 7, 1997, you must reduce the basis of the home you acquired as a replacement by the amount of the postponed gain. How to amend 2012 taxes For more information on the rules for the sale of a home, see chapter 15. How to amend 2012 taxes Basis Other Than Cost There are many times when you cannot use cost as basis. How to amend 2012 taxes In these cases, the fair market value or the adjusted basis of the property can be used. How to amend 2012 taxes Fair market value (FMV) and adjusted basis were discussed earlier. How to amend 2012 taxes Property Received for Services If you receive property for your services, include the FMV of the property in income. How to amend 2012 taxes The amount you include in income becomes your basis. How to amend 2012 taxes If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. How to amend 2012 taxes Restricted property. How to amend 2012 taxes   If you receive property for your services and the property is subject to certain restrictions, your basis in the property is its FMV when it becomes substantially vested. How to amend 2012 taxes However, this rule does not apply if you make an election to include in income the FMV of the property at the time it is transferred to you, less any amount you paid for it. How to amend 2012 taxes Property is substantially vested when it is transferable or when it is not subject to a substantial risk of forfeiture (you do not have a good chance of losing it). How to amend 2012 taxes For more information, see Restricted Property in Publication 525. How to amend 2012 taxes Bargain purchases. How to amend 2012 taxes   A bargain purchase is a purchase of an item for less than its FMV. How to amend 2012 taxes If, as compensation for services, you buy goods or other property at less than FMV, include the difference between the purchase price and the property's FMV in your income. How to amend 2012 taxes Your basis in the property is its FMV (your purchase price plus the amount you include in income). How to amend 2012 taxes   If the difference between your purchase price and the FMV is a qualified employee discount, do not include the difference in income. How to amend 2012 taxes However, your basis in the property is still its FMV. How to amend 2012 taxes See Employee Discounts in Publication 15-B. How to amend 2012 taxes Taxable Exchanges A taxable exchange is one in which the gain is taxable or the loss is deductible. How to amend 2012 taxes A taxable gain or deductible loss also is known as a recognized gain or loss. How to amend 2012 taxes If you receive property in exchange for other property in a taxable exchange, the basis of the property you receive is usually its FMV at the time of the exchange. How to amend 2012 taxes Involuntary Conversions If you receive replacement property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, figure the basis of the replacement property using the basis of the converted property. How to amend 2012 taxes Similar or related property. How to amend 2012 taxes   If you receive replacement property similar or related in service or use to the converted property, the replacement property's basis is the same as the converted property's basis on the date of the conversion, with the following adjustments. How to amend 2012 taxes Decrease the basis by the following. How to amend 2012 taxes Any loss you recognize on the involuntary conversion. How to amend 2012 taxes Any money you receive that you do not spend on similar property. How to amend 2012 taxes Increase the basis by the following. How to amend 2012 taxes Any gain you recognize on the involuntary conversion. How to amend 2012 taxes Any cost of acquiring the replacement property. How to amend 2012 taxes Money or property not similar or related. How to amend 2012 taxes    If you receive money or property not similar or related in service or use to the converted property, and you buy replacement property similar or related in service or use to the converted property, the basis of the replacement property is its cost decreased by the gain not recognized on the conversion. How to amend 2012 taxes Example. How to amend 2012 taxes The state condemned your property. How to amend 2012 taxes The adjusted basis of the property was $26,000 and the state paid you $31,000 for it. How to amend 2012 taxes You realized a gain of $5,000 ($31,000 − $26,000). How to amend 2012 taxes You bought replacement property similar in use to the converted property for $29,000. How to amend 2012 taxes You recognize a gain of $2,000 ($31,000 − $29,000), the unspent part of the payment from the state. How to amend 2012 taxes Your unrecognized gain is $3,000, the difference between the $5,000 realized gain and the $2,000 recognized gain. How to amend 2012 taxes The basis of the replacement property is figured as follows: Cost of replacement property $29,000 Minus: Gain not recognized 3,000 Basis of replacement property $26,000 Allocating the basis. How to amend 2012 taxes   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. How to amend 2012 taxes Basis for depreciation. How to amend 2012 taxes   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. How to amend 2012 taxes For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. How to amend 2012 taxes Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. How to amend 2012 taxes If you receive property in a nontaxable exchange, its basis is generally the same as the basis of the property you transferred. How to amend 2012 taxes See Nontaxable Trades in chapter 14. How to amend 2012 taxes Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. How to amend 2012 taxes To qualify as a like-kind exchange, the property traded and the property received must be both of the following. How to amend 2012 taxes Qualifying property. How to amend 2012 taxes Like-kind property. How to amend 2012 taxes The basis of the property you receive is generally the same as the adjusted basis of the property you gave up. How to amend 2012 taxes If you trade property in a like-kind exchange and also pay money, the basis of the property received is the adjusted basis of the property you gave up increased by the money you paid. How to amend 2012 taxes Qualifying property. How to amend 2012 taxes   In a like-kind exchange, you must hold for investment or for productive use in your trade or business both the property you give up and the property you receive. How to amend 2012 taxes Like-kind property. How to amend 2012 taxes   There must be an exchange of like-kind property. How to amend 2012 taxes Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. How to amend 2012 taxes The exchange of real estate for real estate and personal property for similar personal property are exchanges of like-kind property. How to amend 2012 taxes Example. How to amend 2012 taxes You trade in an old truck used in your business with an adjusted basis of $1,700 for a new one costing $6,800. How to amend 2012 taxes The dealer allows you $2,000 on the old truck, and you pay $4,800. How to amend 2012 taxes This is a like-kind exchange. How to amend 2012 taxes The basis of the new truck is $6,500 (the adjusted basis of the old one, $1,700, plus the amount you paid, $4,800). How to amend 2012 taxes If you sell your old truck to a third party for $2,000 instead of trading it in and then buy a new one from the dealer, you have a taxable gain of $300 on the sale (the $2,000 sale price minus the $1,700 adjusted basis). How to amend 2012 taxes The basis of the new truck is the price you pay the dealer. How to amend 2012 taxes Partially nontaxable exchanges. How to amend 2012 taxes   A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. How to amend 2012 taxes The basis of the property you receive is the same as the adjusted basis of the property you gave up, with the following adjustments. How to amend 2012 taxes Decrease the basis by the following amounts. How to amend 2012 taxes Any money you receive. How to amend 2012 taxes Any loss you recognize on the exchange. How to amend 2012 taxes Increase the basis by the following amounts. How to amend 2012 taxes Any additional costs you incur. How to amend 2012 taxes Any gain you recognize on the exchange. How to amend 2012 taxes If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. How to amend 2012 taxes Allocation of basis. How to amend 2012 taxes   If you receive like-kind and unlike properties in the exchange, allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. How to amend 2012 taxes The rest is the basis of the like-kind property. How to amend 2012 taxes More information. How to amend 2012 taxes   See Like-Kind Exchanges in chapter 1 of Publication 544 for more information. How to amend 2012 taxes Basis for depreciation. How to amend 2012 taxes   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind exchange. How to amend 2012 taxes For information, see What Is the Basis of Your Depreciable Property? in chapter 1 of Publication 946. How to amend 2012 taxes Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse is the same as your spouse's adjusted basis. How to amend 2012 taxes The same rule applies to a transfer by your former spouse that is incident to divorce. How to amend 2012 taxes However, for property transferred in trust, adjust your basis for any gain recognized by your spouse or former spouse if the liabilities assumed, plus the liabilities to which the property is subject, are more than the adjusted basis of the property transferred. How to amend 2012 taxes If the property transferred to you is a series E, series EE, or series I U. How to amend 2012 taxes S. How to amend 2012 taxes savings bond, the transferor must include in income the interest accrued to the date of transfer. How to amend 2012 taxes Your basis in the bond immediately after the transfer is equal to the transferor's basis increased by the interest income includible in the transferor's income. How to amend 2012 taxes For more information on these bonds, see chapter 7. How to amend 2012 taxes At the time of the transfer, the transferor must give you the records needed to determine the adjusted basis and holding period of the property as of the date of the transfer. How to amend 2012 taxes For more information about the transfer of property from a spouse, see chapter 14. How to amend 2012 taxes Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis to the donor just before it was given to you, its FMV at the time it was given to you, and any gift tax paid on it. How to amend 2012 taxes FMV less than donor's adjusted basis. How to amend 2012 taxes   If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. How to amend 2012 taxes Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. How to amend 2012 taxes Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property. How to amend 2012 taxes See Adjusted Basis , earlier. How to amend 2012 taxes Example. How to amend 2012 taxes You received an acre of land as a gift. How to amend 2012 taxes At the time of the gift, the land had an FMV of $8,000. How to amend 2012 taxes The donor's adjusted basis was $10,000. How to amend 2012 taxes After you received the property, no events occurred to increase or decrease your basis. How to amend 2012 taxes If you later sell the property for $12,000, you will have a $2,000 gain because you must use the donor's adjusted basis at the time of the gift ($10,000) as your basis to figure gain. How to amend 2012 taxes If you sell the property for $7,000, you will have a $1,000 loss because you must use the FMV at the time of the gift ($8,000) as your basis to figure loss. How to amend 2012 taxes If the sales price is between $8,000 and $10,000, you have neither gain nor loss. How to amend 2012 taxes Business property. How to amend 2012 taxes   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deductions is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. How to amend 2012 taxes FMV equal to or greater than donor's adjusted basis. How to amend 2012 taxes   If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. How to amend 2012 taxes Increase your basis by all or part of any gift tax paid, depending on the date of the gift, explained later. How to amend 2012 taxes   Also, for figuring gain or loss from a sale or other disposition or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis (the donor's adjusted basis) by any required adjustments to basis while you held the property. How to amend 2012 taxes See Adjusted Basis , earlier. How to amend 2012 taxes   If you received a gift during the tax year, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it due to the net increase in value of the gift. How to amend 2012 taxes Figure the increase by multiplying the gift tax paid by a fraction. How to amend 2012 taxes The numerator of the fraction is the net increase in value of the gift and the denominator is the amount of the gift. How to amend 2012 taxes   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. How to amend 2012 taxes The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. How to amend 2012 taxes Example. How to amend 2012 taxes In 2013, you received a gift of property from your mother that had an FMV of $50,000. How to amend 2012 taxes Her adjusted basis was $20,000. How to amend 2012 taxes The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). How to amend 2012 taxes She paid a gift tax of $7,320 on the property. How to amend 2012 taxes Your basis is $26,076, figured as follows: Fair market value $50,000 Minus: Adjusted basis −20,000 Net increase in value $30,000     Gift tax paid $7,320 Multiplied by ($30,000 ÷ $36,000) × . How to amend 2012 taxes 83 Gift tax due to net increase in value $6,076 Adjusted basis of property to your mother +20,000 Your basis in the property $26,076 Note. How to amend 2012 taxes If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. How to amend 2012 taxes However, your basis cannot exceed the FMV of the gift at the time it was given to you. How to amend 2012 taxes Inherited Property Your basis in property you inherited from a decedent, who died before January 1, 2010, or after December 31, 2010, is generally one of the following: The FMV of the property at the date of the decedent's death. How to amend 2012 taxes The FMV on the alternate valuation date if the personal representative for the estate elects to use alternate valuation. How to amend 2012 taxes The value under the special-use valuation method for real property used in farming or a closely held business if elected for estate tax purposes. How to amend 2012 taxes The decedent's adjusted basis in land to the extent of the value excluded from the decedent's taxable estate as a qualified conservation easement. How to amend 2012 taxes If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. How to amend 2012 taxes For more information, see the instructions to Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. How to amend 2012 taxes Property inherited from a decedent who died in 2010. How to amend 2012 taxes   If you inherited property from a decedent who died in 2010, special rules may apply. How to amend 2012 taxes For more information, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. How to amend 2012 taxes Community property. How to amend 2012 taxes   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), husband and wife are each usually considered to own half the community property. How to amend 2012 taxes When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. How to amend 2012 taxes For this rule to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. How to amend 2012 taxes Example. How to amend 2012 taxes You and your spouse owned community property that had a basis of $80,000. How to amend 2012 taxes When your spouse died, half the FMV of the community interest was includible in your spouse's estate. How to amend 2012 taxes The FMV of the community interest was $100,000. How to amend 2012 taxes The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). How to amend 2012 taxes The basis of the other half to your spouse's heirs is also $50,000. How to amend 2012 taxes For more information about community property, see Publication 555, Community Property. How to amend 2012 taxes Property Changed From Personal to Business or Rental Use If you hold property for personal use and then change it to business use or use it to produce rent, you can begin to depreciate the property at the time of the change. How to amend 2012 taxes To do so, you must figure its basis for depreciation at the time of the change. How to amend 2012 taxes An example of changing property held for personal use to business or rental use would be renting out your former personal residence. How to amend 2012 taxes Basis for depreciation. How to amend 2012 taxes   The basis for depreciation is the lesser of the following amounts. How to amend 2012 taxes The FMV of the property on the date of the change. How to amend 2012 taxes Your adjusted basis on the date of the change. How to amend 2012 taxes Example. How to amend 2012 taxes Several years ago, you paid $160,000 to have your house built on a lot that cost $25,000. How to amend 2012 taxes You paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house before changing the property to rental use last year. How to amend 2012 taxes Because land is not depreciable, you include only the cost of the house when figuring the basis for depreciation. How to amend 2012 taxes Your adjusted basis in the house when you changed its use was $178,000 ($160,000 + $20,000 − $2,000). How to amend 2012 taxes On the same date, your property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. How to amend 2012 taxes The basis for figuring depreciation on the house is its FMV on the date of the change ($165,000) because it is less than your adjusted basis ($178,000). How to amend 2012 taxes Sale of property. How to amend 2012 taxes   If you later sell or dispose of property changed to business or rental use, the basis you use will depend on whether you are figuring gain or loss. How to amend 2012 taxes Gain. How to amend 2012 taxes   The basis for figuring a gain is your adjusted basis in the property when you sell the property. How to amend 2012 taxes Example. How to amend 2012 taxes Assume the same facts as in the previous example except that you sell the property at a gain after being allowed depreciation deductions of $37,500. How to amend 2012 taxes Your adjusted basis for figuring gain is $165,500 ($178,000 + $25,000 (land) − $37,500). How to amend 2012 taxes Loss. How to amend 2012 taxes   Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. How to amend 2012 taxes Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . How to amend 2012 taxes Example. How to amend 2012 taxes Assume the same facts as in the previous example, except that you sell the property at a loss after being allowed depreciation deductions of $37,500. How to amend 2012 taxes In this case, you would start with the FMV on the date of the change to rental use ($180,000), because it is less than the adjusted basis of $203,000 ($178,000 + $25,000 (land)) on that date. How to amend 2012 taxes Reduce that amount ($180,000) by the depreciation deductions ($37,500). How to amend 2012 taxes The basis for loss is $142,500 ($180,000 − $37,500). How to amend 2012 taxes Stocks and Bonds The basis of stocks or bonds you buy generally is the purchase price plus any costs of purchase, such as commissions and recording or transfer fees. How to amend 2012 taxes If you get stocks or bonds other than by purchase, your basis is usually determined by the FMV or the previous owner's adjusted basis, as discussed earlier. How to amend 2012 taxes You must adjust the basis of stocks for certain events that occur after purchase. How to amend 2012 taxes For example, if you receive additional stock from nontaxable stock dividends or stock splits, reduce your basis for each share of stock by dividing the adjusted basis of the old stock by the number of shares of old and new stock. How to amend 2012 taxes This rule applies only when the additional stock received is identical to the stock held. How to amend 2012 taxes Also reduce your basis when you receive nontaxable distributions. How to amend 2012 taxes They are a return of capital. How to amend 2012 taxes Example. How to amend 2012 taxes In 2011 you bought 100 shares of XYZ stock for $1,000 or $10 a share. How to amend 2012 taxes In 2012 you bought 100 shares of XYZ stock for $1,600 or $16 a share. How to amend 2012 taxes In 2013 XYZ declared a 2-for-1 stock split. How to amend 2012 taxes You now have 200 shares of stock with a basis of $5 a share and 200 shares with a basis of $8 a share. How to amend 2012 taxes Other basis. How to amend 2012 taxes   There are other ways to figure the basis of stocks or bonds depending on how you acquired them. How to amend 2012 taxes For detailed information, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. How to amend 2012 taxes Identifying stocks or bonds sold. How to amend 2012 taxes   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stocks or bonds. How to amend 2012 taxes If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. How to amend 2012 taxes For more information about identifying securities you sell, see Stocks and Bonds under Basis of Investment Property in chapter 4 of Publication 550. How to amend 2012 taxes Mutual fund shares. How to amend 2012 taxes   If you sell mutual fund shares you acquired at various times and prices and left on deposit in an account kept by a custodian or agent, you can elect to use an average basis. How to amend 2012 taxes For more information, see Publication 550. How to amend 2012 taxes Bond premium. How to amend 2012 taxes   If you buy a taxable bond at a premium and elect to amortize the premium, reduce the basis of the bond by the amortized premium you deduct each year. How to amend 2012 taxes See Bond Premium Amortization in chapter 3 of Publication 550 for more information. How to amend 2012 taxes Although you cannot deduct the premium on a tax-exempt bond, you must amortize the premium each year and reduce your basis in the bond by the amortized amount. How to amend 2012 taxes Original issue discount (OID) on debt instruments. How to amend 2012 taxes   You must increase your basis in an OID debt instrument by the OID you include in income for that instrument. How to amend 2012 taxes See Original Issue Discount (OID) in chapter 7 and Publication 1212, Guide To Original Issue Discount (OID) Instruments. How to amend 2012 taxes Tax-exempt obligations. How to amend 2012 taxes    OID on tax-exempt obligations is generally not taxable. How to amend 2012 taxes However, when you dispose of a tax-exempt obligation issued after September 3, 1982, and acquired after March 1, 1984, you must accrue OID on the obligation to determine its adjusted basis. How to amend 2012 taxes The accrued OID is added to the basis of the obligation to determine your gain or loss. How to amend 2012 taxes See chapter 4 of Publication 550. How to amend 2012 taxes Prev  Up  Next   Home   More Online Publications
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The How To Amend 2012 Taxes

How to amend 2012 taxes 4. How to amend 2012 taxes   Deductions Table of Contents Standard DeductionStandard Deduction for Dependents Itemized DeductionsMedical and Dental Expenses Most taxpayers have a choice of taking a standard deduction or itemizing their deductions. How to amend 2012 taxes You benefit from the standard deduction if your standard deduction is more than the total of your allowable itemized deductions. How to amend 2012 taxes If you have a choice, you should use the method that gives you the lower tax. How to amend 2012 taxes Standard Deduction The standard deduction amount depends on your filing status, whether you are 65 or older or blind, and whether an exemption can be claimed for you by another taxpayer. How to amend 2012 taxes Generally, the standard deduction amounts are adjusted each year for inflation. How to amend 2012 taxes In most cases, you can use Worksheet 4-1 to figure your standard deduction amount. How to amend 2012 taxes Persons not eligible for the standard deduction. How to amend 2012 taxes   Your standard deduction is zero and you should itemize any deductions you have if: You are married and filing a separate return, and your spouse itemizes deductions, You are filing a tax return for a short tax year because of a change in your annual accounting period, or You are a nonresident or dual-status alien during the year. How to amend 2012 taxes You are considered a dual-status alien if you were both a nonresident alien and a resident alien during the year. How to amend 2012 taxes   If you are a nonresident alien who is married to a U. How to amend 2012 taxes S. How to amend 2012 taxes citizen or resident alien at the end of the year, you can choose to be treated as a U. How to amend 2012 taxes S. How to amend 2012 taxes resident. How to amend 2012 taxes See Publication 519, U. How to amend 2012 taxes S. How to amend 2012 taxes Tax Guide for Aliens. How to amend 2012 taxes If you make this choice, you can take the standard deduction. How to amend 2012 taxes Decedent's final return. How to amend 2012 taxes   The amount of the standard deduction for a decedent's final tax return is the same as it would have been had the decedent continued to live. How to amend 2012 taxes However, if the decedent was not 65 or older at the time of death, the higher standard deduction for age cannot be claimed. How to amend 2012 taxes Higher standard deduction for age (65 or older). How to amend 2012 taxes   If you do not itemize deductions, you are entitled to a higher standard deduction if you are age 65 or older at the end of the year. How to amend 2012 taxes You are considered age 65 on the day before your 65th birthday. How to amend 2012 taxes Therefore, you can take a higher standard deduction for 2013 if you were born before January 2, 1949. How to amend 2012 taxes Higher standard deduction for blindness. How to amend 2012 taxes   If you are blind on the last day of the year and you do not itemize deductions, you are entitled to a higher standard deduction. How to amend 2012 taxes You qualify for this benefit if you are totally or partly blind. How to amend 2012 taxes Not totally blind. How to amend 2012 taxes   If you are not totally blind, you must get a certified statement from an eye doctor (ophthalmologist or optometrist) that: You cannot see better than 20/200 in the better eye with glasses or contact lenses, or Your field of vision is not more than 20 degrees. How to amend 2012 taxes   If your eye condition will never improve beyond these limits, the statement should include this fact. How to amend 2012 taxes You must keep the statement in your records. How to amend 2012 taxes   If your vision can be corrected beyond these limits only by contact lenses that you can wear only briefly because of pain, infection, or ulcers, you can take the higher standard deduction for blindness if you otherwise qualify. How to amend 2012 taxes Spouse 65 or older or blind. How to amend 2012 taxes   You can take the higher standard deduction if your spouse is age 65 or older or blind and: You file a joint return, or You file a separate return and can claim an exemption for your spouse because your spouse had no gross income and an exemption for your spouse could not be claimed by another taxpayer. How to amend 2012 taxes    You cannot claim the higher standard deduction for an individual other than yourself and your spouse. How to amend 2012 taxes Example. How to amend 2012 taxes This example illustrates how to determine your standard deduction using Worksheet 4-1. How to amend 2012 taxes Bill and Lisa are filing a joint return for 2013. How to amend 2012 taxes Both are over age 65. How to amend 2012 taxes Neither is blind, and neither can be claimed as a dependent. How to amend 2012 taxes They do not itemize deductions, so they use Worksheet 4-1. How to amend 2012 taxes Because they are married filing jointly, they enter $12,200 on line 1. How to amend 2012 taxes They check the “No” box on line 2, so they also enter $12,200 on line 4. How to amend 2012 taxes Because they are both over age 65, they enter $2,400 ($1,200 × 2) on line 5. How to amend 2012 taxes They enter $14,600 ($12,200 + $2,400) on line 6, so their standard deduction is $14,600. How to amend 2012 taxes Standard Deduction for Dependents The standard deduction for an individual for whom an exemption can be claimed on another person's tax return is generally limited to the greater of: $1,000, or The individual's earned income for the year plus $350 (but not more than the regular standard deduction amount, generally $6,100). How to amend 2012 taxes However, the standard deduction may be higher if the individual is 65 or older or blind. How to amend 2012 taxes If an exemption for you (or your spouse if you are filing jointly) can be claimed on someone else's return, use Worksheet 4-1, if applicable, to determine your standard deduction. How to amend 2012 taxes Worksheet 4-1. How to amend 2012 taxes 2013 Standard Deduction Worksheet Caution. How to amend 2012 taxes If you are married filing separately and your spouse itemizes deductions, or if you are a dual-status alien, do not complete this worksheet. How to amend 2012 taxes If you were born before January 2, 1949, and/or blind, check the correct number of boxes below. How to amend 2012 taxes Put the total number of boxes checked in box c and go to line 1. How to amend 2012 taxes a. How to amend 2012 taxes You   Born before  January 2, 1949     Blind b. How to amend 2012 taxes Your spouse, if claiming  spouse's exemption   Born before January 2, 1949     Blind c. How to amend 2012 taxes Total boxes checked             1. How to amend 2012 taxes Enter the amount shown below for your filing status. How to amend 2012 taxes               Single or married filing separately — $6,100 Married filing jointly or Qualifying widow(er) — $12,200 Head of household — $8,950   1. How to amend 2012 taxes           2. How to amend 2012 taxes Can you (or your spouse if filing jointly) be claimed as a dependent on someone else's return?  No. How to amend 2012 taxes Skip line 3; enter the amount from line 1 on line 4. How to amend 2012 taxes   Yes. How to amend 2012 taxes Go to line 3. How to amend 2012 taxes         3. How to amend 2012 taxes Is your earned income* more than $650?               Yes. How to amend 2012 taxes Add $350 to your earned income. How to amend 2012 taxes Enter the total   3. How to amend 2012 taxes         No. How to amend 2012 taxes Enter $1,000 4. How to amend 2012 taxes Enter the smaller of line 1 or line 3 4. How to amend 2012 taxes   5. How to amend 2012 taxes If born before January 2, 1949, or blind, multiply the number in box c by $1,200 ($1,500 if single or head of household). How to amend 2012 taxes Enter the result here. How to amend 2012 taxes Otherwise, enter -0- 5. How to amend 2012 taxes   6. How to amend 2012 taxes Add lines 4 and 5. How to amend 2012 taxes This is your standard deduction for 2013. How to amend 2012 taxes 6. How to amend 2012 taxes   * Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. How to amend 2012 taxes It also includes any amount received as a scholarship that you must include in your income. How to amend 2012 taxes Generally, your earned income is the total of the amount(s) you reported on Form 1040, lines 7, 12, and 18, minus the amount, if any, on line 27 (or the amount you reported on Form 1040A, line 7). How to amend 2012 taxes Itemized Deductions Some individuals should itemize their deductions because it will save them money. How to amend 2012 taxes Others should itemize because they do not qualify for the standard deduction. How to amend 2012 taxes See the discussion under Standard Deduction , earlier, to decide if it would be to your advantage to itemize deductions. How to amend 2012 taxes You may be subject to a limit on some of your itemized deductions if your adjusted gross income is more than $150,000. How to amend 2012 taxes For more information, see Overall limitation, later. How to amend 2012 taxes Medical and dental expenses, some taxes, certain interest expenses, charitable contributions, casualty and theft losses, and certain other miscellaneous expenses may be itemized as deductions on Schedule A (Form 1040). How to amend 2012 taxes You may benefit from itemizing your deductions on Schedule A (Form 1040) if you: Cannot take the standard deduction, Had uninsured medical or dental expenses that are more than 10% of your adjusted gross income (or more than 7. How to amend 2012 taxes 5% of your adjusted gross income if either you or your spouse is age 65 or older), Paid interest on your home, Paid real estate or personal property taxes, Paid mortgage insurance premiums, Paid state and local income or general sales taxes, Had large unreimbursed employee business expenses or other miscellaneous deductions, Had large uninsured casualty or theft losses, Made large contributions to qualified charities (see Publication 526, Charitable Contributions), or Have total itemized deductions that are more than the standard deduction that applies to you. How to amend 2012 taxes See the Schedule A (Form 1040) instructions for more information. How to amend 2012 taxes Overall limitation. How to amend 2012 taxes   You may not be able to deduct all of your itemized deductions if your adjusted gross income is more than: $150,000, if married filing separately, $250,000, if single, $275,000, if head of household, or $300,000, if married filing jointly or qualifying widow(er). How to amend 2012 taxes  If your adjusted gross income exceeds the applicable amount, you will use the Itemized Deductions Worksheet in the Instructions for Schedule A (Form 1040) to figure your total itemized deductions. How to amend 2012 taxes Medical and Dental Expenses You can deduct certain medical and dental expenses you paid for yourself, your spouse, and your dependent(s) if you itemize your deductions on Schedule A (Form 1040). How to amend 2012 taxes Table 4-1 shows some common items that you can or cannot include in figuring your medical expense deduction. How to amend 2012 taxes For more information, see the following discussions of selected items, which are presented in alphabetical order. How to amend 2012 taxes A more extensive list of items and further details can be found in Publication 502, Medical and Dental Expenses. How to amend 2012 taxes Table 4-1. How to amend 2012 taxes Medical and Dental Expenses Checklist You can include: You cannot include: Bandages Capital expenses for equipment or improvements to your home needed for medical care (see Publication 502) Certain weight-loss expenses for obesity Diagnostic devices Expenses of an organ donor Eye surgery—to promote the correct function of the eye Guide dogs or other animals aiding the blind, deaf, and disabled Hospital services fees (lab work, therapy, nursing services, surgery, etc. How to amend 2012 taxes ) Lead-based paint removal (see Publication 502) Long-term care contracts, qualified (see Publication 502) Meals and lodging provided by a hospital during medical treatment Medical and hospital insurance premiums Medical services fees (from doctors, dentists, surgeons, specialists, and other medical practitioners) Medicare Part D premiums Oxygen equipment and oxygen Part of life-care fee paid to retirement home designated for medical care Prescription medicines (prescribed by a doctor) and insulin Psychiatric and psychological treatment Social security tax, Medicare tax, FUTA, and state employment tax for worker providing medical care (see Publication 502) Special items (artificial limbs, false teeth, eyeglasses, contact lenses, hearing aids, crutches, wheelchair, etc. How to amend 2012 taxes ) Special education for mentally or physically disabled persons (see Publication 502) Stop-smoking programs Transportation for needed medical care Treatment at a drug or alcohol center (includes meals and lodging provided by the center) Wages for nursing services (see Publication 502) Contributions to Archer MSAs (see Publication 969) Bottled water Diaper service Expenses for your general health (even if following your doctor's advice) such as: —Health club dues —Household help (even if recommended by a doctor) —Social activities, such as dancing or swimming lessons —Trip for general health improvement Flexible spending account reimbursements for medical expenses (if contributions were on a pretax basis) (see Publication 502) Funeral, burial, or cremation expenses Health savings account payments for medical expenses (see Publication 502) Illegal operation or treatment Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc. How to amend 2012 taxes Medical insurance included in a car insurance policy covering all persons injured in or by your car Medicine you buy without a prescription Nursing care for a healthy baby Prescription drugs you brought in (or ordered shipped) from another country, in most cases (see Publication 502) Surgery for purely cosmetic reasons (see Publication 502) Toothpaste, toiletries, cosmetics, etc. How to amend 2012 taxes Teeth whitening Weight-loss expenses not for the treatment of obesity or other disease You can deduct only the amount of your medical and dental expenses that is more than 10% of your adjusted gross income (or that is more than 7. How to amend 2012 taxes 5% of your adjusted gross income if you or your spouse is age 65 or older). How to amend 2012 taxes What to include. How to amend 2012 taxes   Generally, you can include only the medical and dental expenses you paid this year, regardless of when the services were provided. How to amend 2012 taxes If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. How to amend 2012 taxes If you use a pay-by-phone or online account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. How to amend 2012 taxes You can include medical expenses you charge to your credit card in the year the charge is made. How to amend 2012 taxes It does not matter when you actually pay the amount charged. How to amend 2012 taxes Home Improvements You can include in medical expenses amounts you pay for home improvements if their main purpose is medical care for you, your spouse, or your dependent. How to amend 2012 taxes Only reasonable costs to accommodate a home to your disabled condition (or that of your spouse or your dependent(s) who live with you) are considered medical care. How to amend 2012 taxes Additional costs for personal motives, such as for architectural or aesthetic reasons, are not medical expenses. How to amend 2012 taxes Publication 502 contains additional information and examples, including a capital expense worksheet, to assist you in figuring the amount of the capital expense that you can include in your medical expenses. How to amend 2012 taxes Also, see Publication 502 for information about deductible operating and upkeep expenses related to such capital expense items, and for information about improvements, for medical reasons, to property rented by a person with disabilities. How to amend 2012 taxes Household Help You cannot include in medical expenses the cost of household help, even if such help is recommended by a doctor. How to amend 2012 taxes This is a personal expense that is not deductible. How to amend 2012 taxes However, you may be able to include certain expenses paid to a person providing nursing-type services. How to amend 2012 taxes For more information, see Nursing Services , later. How to amend 2012 taxes Also, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. How to amend 2012 taxes For more information, see Qualified long-term care services under Long-Term Care, later. How to amend 2012 taxes Hospital Services You can include in medical expenses amounts you pay for the cost of inpatient care at a hospital or similar institution if a principal reason for being there is to receive medical care. How to amend 2012 taxes This includes amounts paid for meals and lodging. How to amend 2012 taxes Also, see Meals and Lodging , later. How to amend 2012 taxes Long-Term Care You can include in medical expenses amounts paid for qualified long-term care services and premiums paid for qualified long-term care insurance contracts. How to amend 2012 taxes Qualified long-term care services. How to amend 2012 taxes   Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services (defined later) that are: Required by a chronically ill individual, and Provided under a plan of care prescribed by a licensed health care practitioner. How to amend 2012 taxes Chronically ill individual. How to amend 2012 taxes    An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions. How to amend 2012 taxes He or she is unable to perform at least two activities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. How to amend 2012 taxes Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. How to amend 2012 taxes He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. How to amend 2012 taxes Maintenance and personal care services. How to amend 2012 taxes    Maintenance or personal care services is care which has as its primary purpose the providing of a chronically ill individual with needed assistance with his or her disabilities (including protection from threats to health and safety due to severe cognitive impairment). How to amend 2012 taxes Qualified long-term care insurance contracts. How to amend 2012 taxes   A qualified long-term care insurance contract is an insurance contract that provides only coverage of qualified long-term care services. How to amend 2012 taxes The contract must: Be guaranteed renewable, Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed, Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract must be used only to reduce future premiums or increase future benefits, and Generally not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer, or the contract makes per diem or other periodic payments without regard to expenses. How to amend 2012 taxes   The amount of qualified long-term care premiums you can include is limited. How to amend 2012 taxes You can include the following as medical expenses on Schedule A (Form 1040). How to amend 2012 taxes Qualified long-term care premiums up to the following amounts. How to amend 2012 taxes Age 40 or under – $360. How to amend 2012 taxes Age 41 to 50 – $680. How to amend 2012 taxes Age 51 to 60 – $1,360. How to amend 2012 taxes Age 61 to 70 – $3,640. How to amend 2012 taxes Age 71 or over – $4,550. How to amend 2012 taxes Unreimbursed expenses for qualified long-term care services. How to amend 2012 taxes Note. How to amend 2012 taxes The limit on premiums is for each person. How to amend 2012 taxes Meals and Lodging You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if your main reason for being there is to receive medical care. How to amend 2012 taxes You may be able to include in medical expenses the cost of lodging (but not meals) not provided in a hospital or similar institution. How to amend 2012 taxes You can include the cost of such lodging while away from home if all of the following requirements are met. How to amend 2012 taxes The lodging is primarily for, and essential to, medical care. How to amend 2012 taxes The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital. How to amend 2012 taxes The lodging is not lavish or extravagant under the circumstances. How to amend 2012 taxes There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. How to amend 2012 taxes The amount you include in medical expenses for lodging cannot be more than $50 per night for each person. How to amend 2012 taxes You can include lodging for a person traveling with the person receiving the medical care. How to amend 2012 taxes For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. How to amend 2012 taxes (Meals are not included. How to amend 2012 taxes ) Nursing home. How to amend 2012 taxes   You can include in medical expenses the cost of medical care in a nursing home or a home for the aged for yourself, your spouse, or your dependent(s). How to amend 2012 taxes This includes the cost of meals and lodging in the home if a main reason for being there is to get medical care. How to amend 2012 taxes   Do not include the cost of meals and lodging if the reason for being in the home is personal. How to amend 2012 taxes However, you can include in medical expenses the part of the cost that is for medical or nursing care. How to amend 2012 taxes Medical Insurance Premiums You can include in medical expenses insurance premiums you pay for policies that cover medical care. How to amend 2012 taxes Policies can provide payment for: Hospitalization, surgical fees, X-rays, Prescription drugs and insulin, Dental care, Replacement of lost or damaged contact lenses, and Qualified long-term care insurance contracts (subject to the additional limits included in the discussion on qualified long-term care insurance contracts under Long-Term Care , earlier). How to amend 2012 taxes If you have a policy that provides payments for other than medical care, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. How to amend 2012 taxes The cost of the medical portion must be separately stated in the insurance contract or given to you in a separate statement. How to amend 2012 taxes Medicare Part A. How to amend 2012 taxes   If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare Part A. How to amend 2012 taxes The payroll tax paid for Medicare Part A is not a medical expense. How to amend 2012 taxes If you are not covered under social security (or were not a government employee who paid Medicare tax), you can enroll voluntarily in Medicare Part A. How to amend 2012 taxes In this situation you can include the premiums you paid for Medicare Part A as a medical expense. How to amend 2012 taxes Medicare Part B. How to amend 2012 taxes   Medicare Part B is a supplemental medical insurance. How to amend 2012 taxes Premiums you pay for Medicare Part B are a medical expense. How to amend 2012 taxes If you applied for it at age 65 or after you became disabled, you can include in medical expenses the monthly premiums you paid. How to amend 2012 taxes If you were over age 65 or disabled when you first enrolled, check with your local Social Security Administration office, or go to their website at www. How to amend 2012 taxes SSA. How to amend 2012 taxes gov, to find out your premium. How to amend 2012 taxes Medicare Part D. How to amend 2012 taxes   Medicare Part D is a voluntary prescription drug insurance program for persons with Medicare Part A or Part B. How to amend 2012 taxes You can include as a medical expense premiums you pay for Medicare Part D. How to amend 2012 taxes Prepaid insurance premiums. How to amend 2012 taxes   Insurance premiums you pay before you are age 65 for medical care for yourself, your spouse, or your dependents after you reach age 65 are medical care expenses in the year paid if they are: Payable in equal yearly installments, or more often, and Payable for at least 10 years, or until you reach age 65 (but not for less than 5 years). How to amend 2012 taxes Medicines You can include in medical expenses amounts you pay for prescribed medicines and drugs. How to amend 2012 taxes A prescribed drug is one that requires a prescription by a doctor for its use by an individual. How to amend 2012 taxes You can also include amounts you pay for insulin. How to amend 2012 taxes Except for insulin, you cannot include in medical expenses amounts you pay for a drug that is not prescribed. How to amend 2012 taxes Imported medicines and drugs. How to amend 2012 taxes   If you import medicines or drugs from other countries, see Medicines and Drugs From Other Countries, under What Expenses Are Not Includible, in Publication 502. How to amend 2012 taxes Nursing Services You can include in medical expenses wages and other amounts you pay for nursing services. How to amend 2012 taxes The services need not be performed by a nurse as long as the services are of a kind generally performed by a nurse. How to amend 2012 taxes This includes services connected with caring for the patient's condition, such as giving medication or changing dressings, as well as bathing and grooming the patient. How to amend 2012 taxes These services can be provided in your home or another care facility. How to amend 2012 taxes Generally, only the amount spent for nursing services is a medical expense. How to amend 2012 taxes If the attendant also provides personal and household services, amounts paid to the attendant must be divided between the time spent performing household and personal services and the time spent for nursing services. How to amend 2012 taxes However, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. How to amend 2012 taxes See Maintenance and personal care services under Qualified long-term care services, earlier. How to amend 2012 taxes Additionally, certain expenses for household services or for the care of a qualifying individual incurred to allow you to work may qualify for the child and dependent care credit. How to amend 2012 taxes See Child and Dependent Care Credit , later, and Publication 503, Child and Dependent Care Expenses. How to amend 2012 taxes You can also include in medical expenses part of the amount you pay for that attendant's meals. How to amend 2012 taxes Divide the food expense among the household members to find the cost of the attendant's food. How to amend 2012 taxes Then divide that cost in the same manner as in the preceding paragraph. How to amend 2012 taxes If you had to pay additional amounts for household upkeep because of the attendant, you can include the extra amounts with your medical expenses. How to amend 2012 taxes This includes extra rent or utilities you pay because you moved to a larger apartment to provide space for the attendant. How to amend 2012 taxes Employment taxes. How to amend 2012 taxes   You can include as a medical expense social security tax, FUTA, Medicare tax, and state employment taxes you pay for a nurse, attendant, or other person who provides medical care. How to amend 2012 taxes If the attendant also provides personal and household services, you can include as a medical expense only the amount of employment taxes paid for medical services as explained earlier under Nursing Services. How to amend 2012 taxes For information on employment tax responsibilities of household employers, see Publication 926, Household Employer's Tax Guide. How to amend 2012 taxes Transportation You can include in medical expenses amounts paid for transportation primarily for, and essential to, medical care. How to amend 2012 taxes Car expenses. How to amend 2012 taxes    You can include out-of-pocket expenses, such as the cost of gas and oil, when you use a car for medical reasons. How to amend 2012 taxes You cannot include depreciation, insurance, general repair, or maintenance expenses. How to amend 2012 taxes   If you do not want to use your actual expenses for 2013, you can use the standard medical mileage rate of 24 cents a mile. How to amend 2012 taxes   You can also include parking fees and tolls. How to amend 2012 taxes You can add these fees and tolls to your medical expenses whether you use actual expenses or use the standard mileage rate. How to amend 2012 taxes You can also include:    Bus, taxi, train, or plane fares or ambulance service, and Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone. How to amend 2012 taxes Do not include transportation expenses if, for purely personal reasons, you choose to travel to another city for an operation or other medical care prescribed by your doctor. 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