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Hrblock free 6. Hrblock free   Tip Income Table of Contents Introduction Useful Items - You may want to see: Keeping a Daily Tip RecordElectronic tip record. Hrblock free Reporting Tips to Your EmployerElectronic tip statement. Hrblock free Final report. Hrblock free Reporting Tips on Your Tax Return Allocated Tips Introduction This chapter is for employees who receive tips. Hrblock free All tips you receive are income and are subject to federal income tax. Hrblock free You must include in gross income all tips you receive directly, charged tips paid to you by your employer, and your share of any tips you receive under a tip-splitting or tip-pooling arrangement. Hrblock free The value of noncash tips, such as tickets, passes, or other items of value, is also income and subject to tax. Hrblock free Reporting your tip income correctly is not difficult. Hrblock free You must do three things. Hrblock free Keep a daily tip record. Hrblock free Report tips to your employer. Hrblock free Report all your tips on your income tax return. Hrblock free  This chapter will explain these three things and show you what to do on your tax return if you have not done the first two. Hrblock free This chapter will also show you how to treat allocated tips. Hrblock free For information on special tip programs and agreements, see Publication 531. Hrblock free Useful Items - You may want to see: Publication 531 Reporting Tip Income 1244 Employee's Daily Record of Tips and Report to Employer Form (and Instructions) 4137 Social Security and Medicare Tax on Unreported Tip Income 4070 Employee's Report of Tips to Employer Keeping a Daily Tip Record Why keep a daily tip record. Hrblock free   You must keep a daily tip record so you can: Report your tips accurately to your employer, Report your tips accurately on your tax return, and Prove your tip income if your return is ever questioned. Hrblock free How to keep a daily tip record. Hrblock free   There are two ways to keep a daily tip record. Hrblock free You can either: Write information about your tips in a tip diary, or Keep copies of documents that show your tips, such as restaurant bills and credit or debit card charge slips. Hrblock free You should keep your daily tip record with your tax or other personal records. Hrblock free You must keep your records for as long as they are important for administration of the federal tax law. Hrblock free For information on how long to keep records, see How long to keep records in chapter 1. Hrblock free    If you keep a tip diary, you can use Form 4070A, Employee's Daily Record of Tips. Hrblock free To get Form 4070A, ask the Internal Revenue Service (IRS) or your employer for Publication 1244. Hrblock free Also, Publication 1244 is available online at www. Hrblock free irs. Hrblock free gov/pub/irs-pdf/p1244. Hrblock free pdf. Hrblock free Publication 1244 includes a 1-year supply of Form 4070A. Hrblock free Each day, write in the information asked for on the form. Hrblock free   In addition to the information asked for on Form 4070A, you also need to keep a record of the date and value of any noncash tips you get, such as tickets, passes, or other items of value. Hrblock free Although you do not report these tips to your employer, you must report them on your tax return. Hrblock free   If you do not use Form 4070A, start your records by writing your name, your employer's name, and the name of the business (if it is different from your employer's name). Hrblock free Then, each workday, write the date and the following information. Hrblock free Cash tips you get directly from customers or from other employees. Hrblock free Tips from credit and debit card charge customers that your employer pays you. Hrblock free The value of any noncash tips you get, such as tickets, passes, or other items of value. Hrblock free The amount of tips you paid out to other employees through tip pools or tip splitting, or other arrangements, and the names of the employees to whom you paid the tips. Hrblock free Electronic tip record. Hrblock free   You can use an electronic system provided by your employer to record your daily tips. Hrblock free If you do, you must receive and keep a paper copy of this record. Hrblock free Service charges. Hrblock free    Do not write in your tip diary the amount of any service charge that your employer adds to a customer's bill and then pays to you and treats as wages. Hrblock free This is part of your wages, not a tip. Hrblock free See examples below. Hrblock free Example 1. Hrblock free Good Food Restaurant adds an 18% charge to the bill for parties of 6 or more customers. Hrblock free Jane’s bill for food and beverages for her party of 8 includes an amount on the tip line equal to 18% of the charges for food and beverages, and the total includes this amount. Hrblock free Because Jane did not have an unrestricted right to determine the amount on the “tip line,” the 18% charge is considered a service charge. Hrblock free Do not include the 18% charge in your tip diary. Hrblock free Service charges that are paid to you are considered wages, not tips. Hrblock free Example 2. Hrblock free Good Food Restaurant also includes sample calculations of tip amounts at the bottom of its bills for food and beverages provided to customers. Hrblock free David’s bill includes a blank “tip line,” with sample tip calculations of 15%, 18%, and 20% of his charges for food and beverages at the bottom of the bill beneath the signature line. Hrblock free Because David is free to enter any amount on the “tip line” or leave it blank, any amount he includes is considered a tip. Hrblock free Be sure to include this amount in your tip diary. Hrblock free Reporting Tips to Your Employer Why report tips to your employer. Hrblock free   You must report tips to your employer so that: Your employer can withhold federal income tax and social security, Medicare, Additional Medicare, or railroad retirement taxes, Your employer can report the correct amount of your earnings to the Social Security Administration or Railroad Retirement Board (which affects your benefits when you retire or if you become disabled, or your family's benefits if you die), and You can avoid the penalty for not reporting tips to your employer (explained later). Hrblock free What tips to report. Hrblock free   Report to your employer only cash, check, and debit and credit card tips you receive. Hrblock free   If your total tips for any 1 month from any one job are less than $20, do not report the tips for that month to that employer. Hrblock free   If you participate in a tip-splitting or tip-pooling arrangement, report only the tips you receive and retain. Hrblock free Do not report to your employer any portion of the tips you receive that you pass on to other employees. Hrblock free However, you must report tips you receive from other employees. Hrblock free    Do not report the value of any noncash tips, such as tickets or passes, to your employer. Hrblock free You do not pay social security, Medicare, Additional Medicare or railroad retirement taxes on these tips. Hrblock free How to report. Hrblock free    If your employer does not give you any other way to report tips, you can use Form 4070. Hrblock free Fill in the information asked for on the form, sign and date the form, and give it to your employer. Hrblock free To get a 1-year supply of the form, ask the IRS or your employer for Publication 1244. Hrblock free   If you do not use Form 4070, give your employer a statement with the following information. Hrblock free Your name, address, and social security number. Hrblock free Your employer's name, address, and business name (if it is different from your employer's name). Hrblock free The month (or the dates of any shorter period) in which you received tips. Hrblock free The total tips required to be reported for that period. Hrblock free You must sign and date the statement. Hrblock free Be sure to keep a copy with your tax or other personal records. Hrblock free   Your employer may require you to report your tips more than once a month. Hrblock free However, the statement cannot cover a period of more than 1 calendar month. Hrblock free Electronic tip statement. Hrblock free   Your employer can have you furnish your tip statements electronically. Hrblock free When to report. Hrblock free   Give your report for each month to your employer by the 10th of the next month. Hrblock free If the 10th falls on a Saturday, Sunday, or legal holiday, give your employer the report by the next day that is not a Saturday, Sunday, or legal holiday. Hrblock free Example. Hrblock free You must report your tips received in September 2014 by October 10, 2014. Hrblock free Final report. Hrblock free   If your employment ends during the month, you can report your tips when your employment ends. Hrblock free Penalty for not reporting tips. Hrblock free   If you do not report tips to your employer as required, you may be subject to a penalty equal to 50% of the social security, Medicare, and Additional Medicare taxes or railroad retirement tax you owe on the unreported tips. Hrblock free (For information about these taxes, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, later. Hrblock free ) The penalty amount is in addition to the taxes you owe. Hrblock free   You can avoid this penalty if you can show reasonable cause for not reporting the tips to your employer. Hrblock free To do so, attach a statement to your return explaining why you did not report them. Hrblock free Giving your employer money for taxes. Hrblock free   Your regular pay may not be enough for your employer to withhold all the taxes you owe on your regular pay plus your reported tips. Hrblock free If this happens, you can give your employer money until the close of the calendar year to pay the rest of the taxes. Hrblock free   If you do not give your employer enough money, your employer will apply your regular pay and any money you give in the following order. Hrblock free All taxes on your regular pay. Hrblock free Social security, Medicare, and Additional Medicare taxes or railroad retirement taxes on your reported tips. Hrblock free Federal, state, and local income taxes on your reported tips. Hrblock free    Any taxes that remain unpaid can be collected by your employer from your next paycheck. Hrblock free If withholding taxes remain uncollected at the end of the year, you may be subject to a penalty for underpayment of estimated taxes. Hrblock free See Publication 505, Tax Withholding and Estimated Tax, for more information. Hrblock free    Uncollected taxes. Hrblock free You must report on your tax return any social security and Medicare taxes or railroad retirement tax that remained uncollected at the end of 2013. Hrblock free These uncollected taxes will be shown on your 2013 Form W-2. Hrblock free See Reporting uncollected social security, Medicare, or railroad retirement taxes on tips reported to your employer under Reporting Tips on Your Tax Return, later. Hrblock free Reporting Tips on Your Tax Return How to report tips. Hrblock free    Report your tips with your wages on Form 1040, line 7; Form 1040A, line 7; or Form 1040EZ, line 1. Hrblock free What tips to report. Hrblock free   You must report all tips you received in 2013 on your tax return, including both cash tips and noncash tips. Hrblock free Any tips you reported to your employer for 2013 are included in the wages shown in box 1 of your Form W-2. Hrblock free Add to the amount in box 1 only the tips you did not report to your employer. Hrblock free    If you received $20 or more in cash and charge tips in a month and did not report all of those tips to your employer, see Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer, later. Hrblock free    If you did not keep a daily tip record as required and an amount is shown in box 8 of your Form W-2, see Allocated Tips, later. Hrblock free   If you kept a daily tip record and reported tips to your employer as required under the rules explained earlier, add the following tips to the amount in box 1 of your Form W-2. Hrblock free Cash and charge tips you received that totaled less than $20 for any month. Hrblock free The value of noncash tips, such as tickets, passes, or other items of value. Hrblock free Example. Hrblock free Ben Smith began working at the Blue Ocean Restaurant (his only employer in 2013) on June 30 and received $10,000 in wages during the year. Hrblock free Ben kept a daily tip record showing that his tips for June were $18 and his tips for the rest of the year totaled $7,000. Hrblock free He was not required to report his June tips to his employer, but he reported all of the rest of his tips to his employer as required. Hrblock free Ben's Form W-2 from Blue Ocean Restaurant shows $17,000 ($10,000 wages plus $7,000 reported tips) in box 1. Hrblock free He adds the $18 unreported tips to that amount and reports $17,018 as wages on his tax return. Hrblock free Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer. Hrblock free    If you received $20 or more in cash and charge tips in a month from any one job and did not report all of those tips to your employer, you must report the social security, Medicare, and Additional Medicare taxes on the unreported tips as additional tax on your return. Hrblock free To report these taxes, you must file a return even if you would not otherwise have to file. Hrblock free You must use Form 1040. Hrblock free (You cannot file Form 1040EZ or Form 1040A. Hrblock free )    Use Form 4137 to figure social security and Medicare taxes. Hrblock free Enter the tax on your return as instructed, and attach the completed Form 4137 to your return. Hrblock free Use Form 8959 to figure Additional Medicare Tax. Hrblock free    If you are subject to the Railroad Retirement Tax Act, you cannot use Form 4137 to pay railroad retirement tax on unreported tips. Hrblock free To get railroad retirement credit, you must report tips to your employer. Hrblock free Reporting uncollected social security, Medicare, or railroad retirement taxes on tips reported to your employer. Hrblock free   You may have uncollected taxes if your regular pay was not enough for your employer to withhold all the taxes you owe and you did not give your employer enough money to pay the rest of the taxes. Hrblock free For more information, see Giving your employer money for taxes , under Reporting Tips to Your Employer, earlier. Hrblock free   If your employer could not collect all the social security and Medicare taxes or railroad retirement tax you owe on tips reported for 2013, the uncollected taxes will be shown in box 12 of your Form W-2 (codes A and B). Hrblock free You must report these amounts as additional tax on your return. Hrblock free Unlike the uncollected portion of the regular (1. Hrblock free 45%) Medicare tax, the uncollected Additional Medicare Tax is not reported in box 12 of Form W-2 with code B. Hrblock free    To report these uncollected taxes, you must file a return even if you would not otherwise have to file. Hrblock free You must report these taxes on Form 1040, line 60. Hrblock free See the instructions for Form 1040, line 60. Hrblock free (You cannot file Form 1040EZ or Form 1040A. Hrblock free ) Allocated Tips If your employer allocated tips to you, they are shown separately in box 8 of your Form W-2. Hrblock free They are not included in box 1 with your wages and reported tips. Hrblock free If box 8 is blank, this discussion does not apply to you. Hrblock free What are allocated tips. Hrblock free   These are tips that your employer assigned to you in addition to the tips you reported to your employer for the year. Hrblock free Your employer will have done this only if: You worked in an establishment (restaurant, cocktail lounge, or similar business) that must allocate tips to employees, and The tips you reported to your employer were less than your share of 8% of food and drink sales. Hrblock free No income, social security, Medicare, Additional Medicare or railroad retirement taxes are withheld on allocated tips. Hrblock free How were your allocated tips figured. Hrblock free   The tips allocated to you are your share of an amount figured by subtracting the reported tips of all employees from 8% (or an approved lower rate) of food and drink sales (other than carryout sales and sales with a service charge of 10% or more). Hrblock free Your share of that amount was figured using either a method provided by an employer-employee agreement or a method provided by IRS regulations based on employees' sales or hours worked. Hrblock free For information about the exact allocation method used, ask your employer. Hrblock free Must you report your allocated tips on your tax return. Hrblock free   You must report all tips you received in 2013 on your tax return, including both cash tips and noncash tips. Hrblock free Any tips you reported to your employer for 2013 are included in the wages shown in box 1 of your Form W-2. Hrblock free Add to the amount in box 1 only the tips you did not report to your employer. Hrblock free This should include any allocated tips shown in box 8 on your Form(s) W-2, unless you have adequate records to show that you received less tips in the year than the allocated figures. Hrblock free   See What tips to report under Reporting Tips on Your Tax Return, and Keeping a Daily Tip Record , earlier. Hrblock free How to report allocated tips. Hrblock free   Report the amount in box 1 and the allocated tips in box 8 of your Form(s) W-2 as wages on Form 1040, line 7; Form 1040NR, line 8; or Form 1040NR-EZ, line 3. Hrblock free (You cannot file Form 1040A or Form 1040EZ when you have allocated tips. Hrblock free )    Because social security, Medicare, and Additional Medicare taxes were not withheld from the allocated tips, you must report those taxes as additional tax on your return. Hrblock free Complete Form 4137, and include the allocated tips on line 1 of the form. Hrblock free See Reporting social security, Medicare, Additional Medicare, or railroad retirement taxes on tips not reported to your employer under Reporting Tips on Your Tax Return, earlier. Hrblock free Prev  Up  Next   Home   More Online Publications
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Deducting Business Expenses

Business expenses are the cost of carrying on a trade or business. These expenses are usually deductible if the business is operated to make a profit.

What Can I Deduct?

To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.

It is important to separate business expenses from the following expenses:

  • The expenses used to figure the cost of goods sold,
  • Capital Expenses, and
  • Personal Expenses.

Cost of Goods Sold

If your business manufactures products or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold. Some of your expenses may be included in figuring the cost of goods sold. Cost of goods sold is deducted from your gross receipts to figure your gross profit for the year. If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense.

The following are types of expenses that go into figuring the cost of goods sold.

  • The cost of products or raw materials, including freight
  • Storage
  • Direct labor costs (including contributions to pensions or annuity plans) for workers who produce the products
  • Factory overhead

Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Indirect costs include rent, interest, taxes, storage, purchasing, processing, repackaging, handling, and administrative costs.

This rule does not apply to personal property you acquire for resale if your average annual gross receipts (or those of your predecessor) for the preceding 3 tax years are not more than $10 million.

For additional information, refer to the chapter on Cost of Goods Sold, Publication 334, Tax Guide for Small Businesses and the chapter on Inventories, Publication 538, Accounting Periods and Methods.

Capital Expenses

You must capitalize, rather than deduct, some costs. These costs are a part of your investment in your business and are called capital expenses. Capital expenses are considered assets in your business. There are, in general, three types of costs you capitalize.

  • Business start-up cost (See the note below)
  • Business assets
  • Improvements

Note: You can elect to deduct or amortize certain business start-up costs. Refer to chapters 7 and 8 of Publication 535, Business Expenses.

Personal versus Business Expenses

Generally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part.

For example, if you borrow money and use 70% of it for business and the other 30% for a family vacation, you can deduct 70% of the interest as a business expense. The remaining 30% is personal interest and is not deductible. Refer to chapter 4 of Publication 535, Business Expenses, for information on deducting interest and the allocation rules.

Business Use of Your Home

If you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Refer to Home Office Deduction and Publication 587, Business Use of Your Home, for more information.

Business Use of Your Car

If you use your car in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses. For a list of current and prior year mileage rates see the Standard Mileage Rates.

Other Types of Business Expenses

  • Employees' Pay - You can generally deduct the pay you give your employees for the services they perform for your business.
  • Retirement Plans - Retirement plans are savings plans that offer you tax advantages to set aside money for your own, and your employees' retirement.
  • Rent Expense - Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible.
  • Interest - Business interest expense is an amount charged for the use of money you borrowed for business activities.
  • Taxes - You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses.
  • Insurance - Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.

This list is not all inclusive of the types of business expenses that you can deduct. For additional information, refer to Publication 535, Business Expenses.

Page Last Reviewed or Updated: 04-Feb-2014

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Hrblock free Publication 584 - Additional Material Table of Contents This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Entrance Hall This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Living Room This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Dining Room This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Kitchen This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Den This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Bedrooms This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Bathrooms This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Recreation Room This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Laundry and Basement This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Garage This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Sporting Equipment This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Men's Clothing This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Women's Clothing This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Children's Clothing This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Jewelry This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Electrical Appliances This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Linens This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Miscellaneous This image is too large to be displayed in the current screen. Hrblock free Please click the link to view the image. Hrblock free Motor Vehicles Schedule 20. Hrblock free Home (Excluding Contents) Note. Hrblock free If you used the entire property as your home, fill out only column (a). Hrblock free If you used part of the property as your home and part of it for business or to produce rental income, you must allocate the entries on lines 2-9 between the personal part (column (a)) and the business/rental part (column (b)). Hrblock free 1. Hrblock free Description of property (Show location and date acquired. Hrblock free )     (a)  Personal Part (b)  Business/Rental Part 2. Hrblock free Cost or other (adjusted) basis of property (from Worksheet A)     3. Hrblock free Insurance or other reimbursement Note. Hrblock free If line 2 is more than line 3, skip line 4. Hrblock free If line 3 is more than line 2, you exclude gain, and the gain is more than you can exclude, see the instructions for line 3 in the Instructions for Form 4684 for the amount to enter. Hrblock free     4. Hrblock free Gain from casualty. Hrblock free If line 3 is more than line 2, enter the difference here and skip lines 5 through 9. Hrblock free But see Next below line 9. Hrblock free     5. Hrblock free Fair market value before casualty     6. Hrblock free Fair market value after casualty     7. Hrblock free Decrease in fair market value. Hrblock free Subtract line 6 from line 5. Hrblock free     8. Hrblock free Enter the smaller of line 2 or line 7 Note for business/rental part. Hrblock free If the property was totally destroyed by casualty, enter on line 8, column (b) the amount from line 2, column (b). Hrblock free     9. Hrblock free Subtract line 3 from line 8. Hrblock free If zero or less, enter -0-. Hrblock free     Next: Transfer the entries from line 1 and lines 2-9, column (a), above to the corresponding lines on Form 4684, Section A. Hrblock free Transfer the entries from line 1 and lines 2-9, column (b), to the corresponding lines on Form 4684, Section B. Hrblock free Worksheet A. Hrblock free Cost or Other (Adjusted) Basis Caution. Hrblock free See the Worksheet A Instructions before you use this worksheet. Hrblock free         (a) Personal Part (b) Business/Rental Part 1. Hrblock free   Enter the purchase price of the home damaged or destroyed. Hrblock free (If you filed Form 2119 when you originally acquired that home to postpone gain on the sale of a previous home before May 7, 1997, enter the adjusted basis of the new home from that Form 2119. Hrblock free ) 1. Hrblock free     2. Hrblock free   Seller paid points for home bought after 1990. Hrblock free Do not include any seller-paid points you already subtracted to arrive at the amount entered on line 1 2. Hrblock free     3. Hrblock free   Subtract line 2 from line 1 3. Hrblock free     4. Hrblock free   Settlement fees or closing costs. Hrblock free (See Settlement costs in Publication 551. Hrblock free ) If line 1 includes the adjusted basis of the new home from Form 2119, skip lines 4a-4g and 5; go to line 6. Hrblock free         a. Hrblock free Abstract and recording fees 4a. Hrblock free       b. Hrblock free Legal fees (including fees for title search and preparing documents) 4b. Hrblock free       c. Hrblock free Survey fees 4c. Hrblock free       d. Hrblock free Title insurance 4d. Hrblock free       e. Hrblock free Transfer or stamp taxes 4e. Hrblock free       f. Hrblock free Amounts that the seller owed that you agreed to pay (back taxes or interest, recording or mortgage fees, and sales commissions) 4f. Hrblock free       g. Hrblock free Other 4g. Hrblock free     5. Hrblock free   Add lines 4a through 4g 5. Hrblock free     6. Hrblock free   Cost of additions and improvements. Hrblock free (See Increases to Basis in Publication 551. Hrblock free ) Do not include any additions and improvements included on line 1 6. Hrblock free     7. Hrblock free   Special tax assessments paid for local improvements, such as streets and sidewalks 7. Hrblock free     8. Hrblock free   Other increases to basis 8. Hrblock free     9. Hrblock free   Add lines 3, 5, 6, 7, and 8 9. Hrblock free     10. Hrblock free   Depreciation allowed or allowable, related to the business use or rental of the home 10. Hrblock free 0   11. Hrblock free   Other decreases to basis (See Decreases to Basis in Publication 551. Hrblock free ) 11. Hrblock free     12. Hrblock free   Add lines 10 and 11 12. Hrblock free     13. Hrblock free   Cost or other (adjusted) basis of home damaged or destroyed. Hrblock free Subtract line 12 from line 9. Hrblock free Enter here and on Schedule 20, line 2 13. Hrblock free     Worksheet A Instructions. Hrblock free If you use Worksheet A to figure the cost or other (adjusted) basis of your home, follow these instructions. Hrblock free DO NOT use this worksheet to determine your basis if you acquired an interest in your home from a decedent who died in 2010 and whose executor filed Form 8939. Hrblock free IF. Hrblock free . Hrblock free . Hrblock free   THEN. Hrblock free . Hrblock free . Hrblock free you inherited your home from a decedent who died either before or after 2010 or from a decedent who died in 2010 and whose executor did not file Form 8939. Hrblock free 1 skip lines 1–4 of the worksheet. Hrblock free 2 find your basis using the rules under Inherited Property in Publication 551. Hrblock free Enter this amount on line 5 of the worksheet. Hrblock free 3 fill out lines 6–13 of the worksheet. Hrblock free you received your home as a gift 1 read Property Received as a Gift in Publication 551 and enter on lines 1 and 3 of the worksheet either the donor's adjusted basis or the home's fair market value at the time of the gift, whichever is appropriate. Hrblock free 2 if you can add any federal gift tax to your basis, enter that amount on line 5 of the worksheet. Hrblock free 3 fill out the rest of the worksheet. Hrblock free you received your home as a trade for other property 1 enter on line 1 of the worksheet the fair market value of the other property at the time of the trade. Hrblock free (But if you received your home as a trade for your previous home before May 7, 1997, and had a gain on the trade that you postponed using Form 2119, enter on line 1 of the worksheet the adjusted basis of the new home from that Form 2119. Hrblock free ) 2 fill out the rest of the worksheet. Hrblock free you built your home 1 add the purchase price of the land and the cost of building the home. Hrblock free Enter that total on line 1 of the worksheet. Hrblock free (However, if you filed a Form 2119 to postpone gain on the sale of a previous home before May 7, 1997, enter on line 1 of the worksheet the adjusted basis of the new home from that Form 2119. Hrblock free ) 2 fill out the rest of the worksheet. Hrblock free you received your home from your spouse after July 18, 1984 1 skip lines 1–4 of the worksheet. Hrblock free 2 enter on line 5 of the worksheet your spouse's cost or other (adjusted) basis in the home just before you received it. Hrblock free 3 fill out lines 6–13 of the worksheet, making adjustments to basis only for events after the transfer. Hrblock free you owned a home jointly with your spouse, who transferred his or her interest in the home to you after July 18, 1984     fill out one worksheet, making adjustments to basis for events both before and after the transfer. Hrblock free   you received your home from your spouse before July 19, 1984 1 skip lines 1–4 of the worksheet. Hrblock free 2 enter on line 5 of the worksheet the home's fair market value at the time you received it. Hrblock free 3 fill out lines 6–13 of the worksheet, making adjustments to basis only for events after the transfer. Hrblock free you owned a home jointly with your spouse, and your spouse transferred his or her interest in the home to you before July 19, 1984 1 fill out a worksheet, lines 1–13, making adjustments to basis only for events before the transfer. Hrblock free 2 multiply the amount on line 13 of that worksheet by 50% (0. Hrblock free 50) to get the adjusted basis of your half-interest at the time of the transfer. Hrblock free 3 multiply the fair market value of the home at the time of the transfer by 50% (0. Hrblock free 50). Hrblock free Generally, this is the basis of the half-interest that your spouse owned. Hrblock free 4 add the amounts from steps 2 and 3 and enter the total on line 5 of a second worksheet. Hrblock free 5 complete lines 6–13 of the second worksheet, making adjustments to basis only for events after the transfer. Hrblock free you owned your home jointly with a nonspouse 1 fill out lines 1–13 of the worksheet. Hrblock free 2 multiply the amount on line 13 by your percentage of ownership to get the adjusted basis of your part-interest. Hrblock free Worksheet A Instructions. Hrblock free (Continued) IF. Hrblock free . Hrblock free . Hrblock free   THEN. Hrblock free . Hrblock free . Hrblock free you owned your home jointly with your spouse who died before 2010 and before the casualty 1 fill out a worksheet, lines 1–13, including adjustments to basis only for events before your spouse's death. Hrblock free 2 multiply the amount on line 13 of that worksheet by 50% (0. Hrblock free 50) to get the adjusted basis of your half-interest on the date of death. Hrblock free 3 figure the basis for the half-interest owned by your spouse. Hrblock free This is one-half of the fair market value on the date of death (or later alternate valuation used for estate or inheritance tax). Hrblock free (The basis in your half will remain one-half of the adjusted basis determined in step 2. Hrblock free ) 4 add the amounts from steps 2 and 3 and enter the total on line 5 of a second worksheet. Hrblock free 5 complete lines 6–13 of the second worksheet, making adjustments to basis only for events after your spouse's death. Hrblock free you owned your home jointly with your spouse who died before 2010 and before the casualty, and your permanent legal home is in a community property state 1 skip lines 1–4 of the worksheet. Hrblock free 2 enter the amount of your basis on line 5 of the worksheet. Hrblock free Generally, this is the fair market value of the home at the time of death. Hrblock free (But see Community Property in Publication 551 for special rules. Hrblock free ) 3 fill out lines 6–13 of the worksheet, making adjustments to basis only for events after your spouse's death. Hrblock free you owned your home jointly with a nonspouse who died before 2010 and before the casualty 1 fill out lines 1–13 of the worksheet, including adjustments to basis only for events before the co-owner's death. Hrblock free 2 multiply the amount on line 13 by your percentage of ownership to get the adjusted basis of your part-interest on the date of death. Hrblock free 3 multiply the fair market value on the date of death (or later alternate valuation used for estate or inheritance tax) by the co-owner's percentage of ownership. Hrblock free This is the basis for the co-owner's part-interest. Hrblock free 4 add the amounts from steps 2 and 3 and enter the total on line 5 of a second worksheet. Hrblock free 5 complete lines 6–13 of the second worksheet, including adjustments to basis only for events after the co-owner's death. Hrblock free your home was ever damaged as a result of a prior casualty 1 on line 8 of the worksheet, enter any amounts you spent to restore the home to its condition before the prior casualty. Hrblock free 2 on line 11 enter: any insurance reimbursements you received (or expect to receive) for the prior loss,  and any deductible casualty losses from prior years not covered by insurance. Hrblock free the person who sold you your home paid points on your loan and you bought your home after 1990 but before April 4, 1994. Hrblock free   on line 2 enter the seller-paid points only if you deducted them as home mortgage interest in the year paid (unless you used the seller-paid points to reduce the amount on line 1). Hrblock free the person who sold you your home paid points on your loan and you bought your home after April 3, 1994   on line 2 enter the seller-paid points even if you did not deduct them (unless you used the seller-paid points to reduce the amount on line 1). Hrblock free you used part of the property as your home and part of it for business or to produce rental income   you must allocate the entries on Worksheet A between the personal part (column (a)) and the business/rental part (column (b)). Hrblock free none of these items apply   fill out the entire worksheet. Hrblock free Prev  Up  Next   Home   More Online Publications