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Irs Amendment Form

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Irs Amendment Form

Irs amendment form 4. Irs amendment form   Filing U. Irs amendment form S. Irs amendment form Tax Returns Table of Contents Who Must FileFiling Requirement if Possession Income Is Excluded When To FileExtension of Time To File Where To File Special Rules for Completing Your U. Irs amendment form S. Irs amendment form Tax ReturnU. Irs amendment form S. Irs amendment form Armed Forces. Irs amendment form Deductions if Possession Income Is Excluded Foreign Tax Credit if Possession Income Is Excluded Self-Employment Tax Additional Medicare Tax Net Investment Income Tax Paying Your TaxesEstimated Tax Double TaxationCompetent Authority Assistance The information in chapter 3 will tell you if a U. Irs amendment form S. Irs amendment form income tax return is required for your situation. Irs amendment form If a U. Irs amendment form S. Irs amendment form return is required, your next step is to see if you meet the filing requirements. Irs amendment form If you do meet the filing requirements, the information presented in this chapter will help you understand the special procedures involved. Irs amendment form This chapter discusses: Filing requirements, When to file your return, Where to send your return, How to adjust your deductions and credits if you are excluding income from American Samoa or Puerto Rico, How to make estimated tax payments and pay self-employment tax, and How to request assistance in resolving instances of double taxation. Irs amendment form Who Must File If you are not required to file a possession tax return that includes your worldwide income, you must generally file a U. Irs amendment form S. Irs amendment form income tax return if your gross income is at least the amount shown in Table 4-1, later, for your filing status and age. Irs amendment form If you were a bona fide resident of American Samoa or Puerto Rico and are able to exclude your possession income from your U. Irs amendment form S. Irs amendment form tax return, your filing requirement may be less than the amount in Table 4-1. Irs amendment form For details, see the information under Filing Requirement if Possession Income Is Excluded , later. Irs amendment form Some individuals (such as those who can be claimed as a dependent on another person's return or who owe certain taxes, such as self-employment tax) must file a tax return even though the gross income is less than the amount shown in Table 4-1 for their filing status and age. Irs amendment form For more information, see the Form 1040 instructions. Irs amendment form Filing Requirement if Possession Income Is Excluded If you were a bona fide resident of American Samoa or Puerto Rico and qualify to exclude possession income on your U. Irs amendment form S. Irs amendment form tax return, you must determine your adjusted filing requirement. Irs amendment form Generally, your filing requirement is based on the total of your (and your spouse's if filing a joint return) personal exemption(s) plus your standard deduction. Irs amendment form Personal exemption. Irs amendment form   When figuring your filing requirement, your personal exemption is allowed in full. Irs amendment form Do not reduce it for this purpose. Irs amendment form Do not include exemptions for your dependents. Irs amendment form Allowable standard deduction. Irs amendment form   Unless your filing status is married filing separately, the minimum income level at which you must file a return is based, in part, on the standard deduction for your filing status and age. Irs amendment form Because the standard deduction applies to all types of income, it must be divided between your excluded income and income from other sources. Irs amendment form Multiply the regular standard deduction for your filing status and age (this is zero if you are married filing a separate return; all others, see Form 1040 instructions) by the following fraction:      Gross income subject to U. Irs amendment form S. Irs amendment form income tax     Gross income from all sources (including excluded possession income)   Example. Irs amendment form Barbara Spruce, a U. Irs amendment form S. Irs amendment form citizen, is single, under 65, and a bona fide resident of American Samoa. Irs amendment form During 2013, she received $20,000 of income from American Samoa sources (qualifies for exclusion) and $8,000 of income from sources outside the possession (subject to U. Irs amendment form S. Irs amendment form income tax). Irs amendment form Her allowable standard deduction for 2013 is figured as follows:   $8,000 $28,000 × $6,100 (regular standard deduction) = $1,743   Adjusted filing requirement. Irs amendment form   Figure your adjusted filing requirement by adding the amount of your allowable standard deduction to the amount of your personal exemption. Irs amendment form You must file a U. Irs amendment form S. Irs amendment form income tax return if your gross income is at least the amount shown on line 3 of the following worksheet. Irs amendment form    1. Irs amendment form Enter the allowable standard deduction you figured earlier under Allowable standard deduction . Irs amendment form If your filing status is married filing separately, enter -0-   2. Irs amendment form Personal exemption. Irs amendment form If your filing status is married filing jointly, enter $7,800; if someone can claim you as a dependent, enter -0-; otherwise, enter $3,900   3. Irs amendment form Add lines 1 and 2. Irs amendment form You must file a U. Irs amendment form S. Irs amendment form income tax return if your gross income from sources outside the relevant possession is at least this amount   Table 4-1. Irs amendment form 2013 Filing Requirements Chart for Most Taxpayers IF your filing status is. Irs amendment form . Irs amendment form . Irs amendment form AND at the end of 2013 you were*. Irs amendment form . Irs amendment form . Irs amendment form THEN file a return if your gross income** was at least. Irs amendment form . Irs amendment form . Irs amendment form single under 65 $10,000 65 or older $11,500 married filing jointly*** under 65 (both spouses) $20,000 65 or older (one spouse) $21,200 65 or older (both spouses) $22,400 married filing separately any age $3,900 head of household under 65 $12,850 65 or older $14,350 qualifying widow(er)  with dependent child under 65 $16,100 65 or older $17,300 * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Irs amendment form ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States (even if you can exclude part or all of it). Irs amendment form Do not include social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time during 2013, or (b) one-half of your social security benefits plus your other gross income is more than $25,000 ($32,000 if married filing jointly). Irs amendment form If (a) or (b) applies, see the instructions for Form 1040 or Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure the taxable part of social security benefits you must include in gross income. Irs amendment form *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900 you must file a return regardless of your age. Irs amendment form Example 1. Irs amendment form James and Joan Thompson, one over 65, are U. Irs amendment form S. Irs amendment form citizens and bona fide residents of Puerto Rico during the entire tax year. Irs amendment form They file a joint income tax return. Irs amendment form During 2013, they received $35,000 of income from Puerto Rico sources (qualifies for exclusion) and $6,000 of income from sources outside Puerto Rico (subject to U. Irs amendment form S. Irs amendment form income tax). Irs amendment form Their allowable standard deduction for 2013 is figured as follows:   $6,000 $41,000 × $13,400 ( standard deduction for 65 or older (one spouse) ) = $1,961   The Thompsons do not have to file a U. Irs amendment form S. Irs amendment form income tax return because their gross income subject to U. Irs amendment form S. Irs amendment form tax ($6,000) is less than their allowable standard deduction plus their personal exemptions ($1,961+ $7,800= $9,761). Irs amendment form Example 2. Irs amendment form Barbara Spruce (see Example under Allowable standard deduction, earlier), however, must file a U. Irs amendment form S. Irs amendment form income tax return because her gross income subject to U. Irs amendment form S. Irs amendment form tax ($8,000) is more than her allowable standard deduction plus her personal exemption ($1,743 + $3,900 = $5,643). Irs amendment form If you must file a U. Irs amendment form S. Irs amendment form income tax return, you may be able to file a paperless return using IRS e-file. Irs amendment form See your form instructions or visit our website at IRS. Irs amendment form gov. Irs amendment form When To File If you file on a calendar year basis, the due date for filing your U. Irs amendment form S. Irs amendment form income tax return is April 15 following the end of your tax year. Irs amendment form If you use a fiscal year (a year ending on the last day of a month other than December), the due date is the 15th day of the 4th month after the end of your fiscal year. Irs amendment form If any due date falls on a Saturday, Sunday, or legal holiday, your tax return is due on the next business day. Irs amendment form For your 2013 tax return, the due date is April 15, 2014. Irs amendment form If you mail your federal tax return, it is considered timely if it bears an official postmark dated on or before the due date, including any extensions. Irs amendment form If you use a private delivery service designated by the IRS, generally the postmark date is the date the private delivery service records in its database or marks on the mailing label. Irs amendment form See your form instructions for a list of designated private delivery services. Irs amendment form Extension of Time To File You can get an extension of time to file your U. Irs amendment form S. Irs amendment form income tax return. Irs amendment form Special rules apply for those living outside the United States. Irs amendment form Automatic 6-Month Extension If you cannot file your 2013 return by the due date, you can get an automatic 6-month extension of time to file. Irs amendment form Example. Irs amendment form If your return must be filed by April 15, 2014, you will have until October 15, 2014, to file. Irs amendment form Although you are not required to make a payment of the tax you estimate as due, Form 4868 does not extend the time to pay taxes. Irs amendment form If you do not pay the amount due by the regular due date (generally April 15), you will owe interest on any unpaid tax from the original due date to the date you pay the tax. Irs amendment form You may also be charged penalties (see the Instructions for Form 4868). Irs amendment form How to get the automatic extension. Irs amendment form   You can get the automatic 6-month extension if you do one of the following by the due date for filing your return. Irs amendment form E-file Form 4868 using your personal computer or a tax professional. Irs amendment form E-file and pay by credit or debit card. Irs amendment form Your payment must be at least $1. Irs amendment form You may pay by phone or over the Internet. Irs amendment form Do not file Form 4868. Irs amendment form File a paper Form 4868. Irs amendment form If you are a fiscal year taxpayer, you must file a paper Form 4868. Irs amendment form See Form 4868 for information on getting an extension using these options. Irs amendment form When to file. Irs amendment form   You must request the automatic extension by the due date for your return. Irs amendment form You can file your return any time before the 6-month extension period ends. Irs amendment form When you file your return. Irs amendment form   Enter any payment you made related to the extension of time to file on Form 1040, line 68. Irs amendment form If you file Form 1040A, U. Irs amendment form S. Irs amendment form Individual Income Tax Return, or Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, include that payment in your total payments on Form 1040A, line 41, or Form 1040EZ, line 9. Irs amendment form Also enter “Form 4868” and the amount paid in the space to the left of the entry space for line 41 or line 9. Irs amendment form You cannot ask the Internal Revenue Service to figure your tax if you use the extension of time to file. Irs amendment form Individuals Outside the United States and Puerto Rico You are allowed an automatic 2-month extension (until June 16, 2014, if you use the calendar year) to file your 2013 return and pay any federal income tax due if: You are a U. Irs amendment form S. Irs amendment form citizen or resident, and On the due date of your return: You are living outside of the United States and Puerto Rico, and your main place of business or post of duty is outside the United States and Puerto Rico, or You are in military or naval service on duty outside the United States and Puerto Rico. Irs amendment form However, if you pay the tax due after the regular due date (generally April 15), interest will be charged from April 15 until the date the tax is paid. Irs amendment form If you serve in a combat zone or qualified hazardous duty area, you may be eligible for a longer extension of time to file. Irs amendment form For more information, see Publication 3, Armed Forces' Tax Guide. Irs amendment form Married taxpayers. Irs amendment form   If you file a joint return, only one spouse has to qualify for this automatic extension. Irs amendment form However, if you and your spouse file separate returns, this automatic extension applies only to the spouse who qualifies. Irs amendment form How to get the extension. Irs amendment form   To use this special automatic extension, you must attach a statement to your return explaining what situation qualified you for the extension. Irs amendment form (See the situations listed under (2), earlier. Irs amendment form ) Extension beyond 2 months. Irs amendment form   If you cannot file your 2013 return within the automatic 2-month extension period, you can get an additional 4-month extension, for a total of 6 months. Irs amendment form File Form 4868 by the end of the automatic extension period (June 16, 2014 for calendar year taxpayers). Irs amendment form Be sure to check the box on Form 4868, line 8, if appropriate. Irs amendment form   In addition to this 6-month extension, taxpayers who are out of the country (as defined under (2) earlier) can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). Irs amendment form   To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. Irs amendment form Send the letter by the extended due date (October 15 for calendar year taxpayers) to:  Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA   You will not receive any notification from the IRS unless your request is denied for being untimely. Irs amendment form Where To File Use the addresses listed below if you have to file Form 1040 with the United States and you are excluding possession income from American Samoa or Puerto Rico. Irs amendment form If you are not including a check or a money order, send your U. Irs amendment form S. Irs amendment form tax return and all attachments to:   Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA If you are including a check or a money order, send your U. Irs amendment form S. Irs amendment form tax return and all attachments to:  Internal Revenue Service P. Irs amendment form O. Irs amendment form Box 1303 Charlotte, NC 28201-1303 USA Also send your U. Irs amendment form S. Irs amendment form return to these addresses if you are attaching Form 5074 or Form 8689. Irs amendment form If you are not in either of the above categories, send your return to the address shown in the Form 1040 instructions for the possession or state in which you reside. Irs amendment form Special Rules for Completing Your U. Irs amendment form S. Irs amendment form Tax Return If you are not excluding possession income from your U. Irs amendment form S. Irs amendment form tax return, follow the instructions for the specific forms you file. Irs amendment form However, you may not qualify to claim the earned income credit (EIC). Irs amendment form Earned income credit. Irs amendment form   Even if you maintain a household in one of the possessions discussed in this publication that is your main home and the home of your qualifying child, you cannot claim the earned income credit on your U. Irs amendment form S. Irs amendment form tax return. Irs amendment form This credit is available only if you maintain the household in the United States or you are serving on extended active duty in the U. Irs amendment form S. Irs amendment form Armed Forces. Irs amendment form U. Irs amendment form S. Irs amendment form Armed Forces. Irs amendment form   U. Irs amendment form S. Irs amendment form military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. Irs amendment form Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. Irs amendment form Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. Irs amendment form Income from American Samoa or Puerto Rico excluded. Irs amendment form   You will not be allowed to take deductions and credits that apply to the excluded income. Irs amendment form The additional information you need follows. Irs amendment form Deductions if Possession Income Is Excluded Deductions that specifically apply to your excluded possession income, such as employee business expenses, are not allowable on your U. Irs amendment form S. Irs amendment form income tax return. Irs amendment form Deductions that do not specifically apply to any particular type of income must be divided between your excluded income from sources in the relevant possession and income from all other sources to find the part that you can deduct on your U. Irs amendment form S. Irs amendment form tax return. Irs amendment form Examples of such deductions are alimony payments, the standard deduction, and certain itemized deductions (such as medical expenses, charitable contributions, real estate taxes, and mortgage interest on your home). Irs amendment form Figuring the deduction. Irs amendment form   To find the part of a deduction that is allowable, multiply the deduction by the following fraction. Irs amendment form   Gross income subject to U. Irs amendment form S. Irs amendment form income tax     Gross income from all sources (including excluded possession income)   Adjustments to Income Your adjusted gross income equals your gross income minus certain deductions (adjustments). Irs amendment form Moving expense deduction. Irs amendment form   Generally, expenses of a move to a possession are directly attributable to wages, salaries, and other earned income from that possession. Irs amendment form Likewise, the expenses of a move back to the United States are generally attributable to U. Irs amendment form S. Irs amendment form earned income. Irs amendment form   If you are claiming expenses for a move to a relevant possession, how and where you will deduct the expenses depends on your status as a bona fide resident and if any of your possession income is excluded on your U. Irs amendment form S. Irs amendment form tax return. Irs amendment form For more information, see Moving expense deduction in chapter 3 under the name of the relevant possession. Irs amendment form   If you are claiming expenses for a move from a U. Irs amendment form S. Irs amendment form possession to the United States, use Form 3903 to figure your deductible expenses and enter the amount on Form 1040, line 26. Irs amendment form For purposes of deducting moving expenses, the possessions are considered part of the United States. Irs amendment form See Publication 521, Moving Expenses, for information about what expenses are deductible. Irs amendment form Self-employment tax deduction. Irs amendment form   Generally, if you are reporting self-employment income on your U. Irs amendment form S. Irs amendment form return, you can include the deductible part of your self-employment tax on Form 1040, line 27. Irs amendment form This is an income tax deduction only; it is not a deduction in figuring net earnings from self-employment (for self-employment tax). Irs amendment form   However, if you are a bona fide resident of American Samoa or Puerto Rico and you exclude all of your self-employment income from gross income, you cannot take the deduction on Form 1040, line 27, because the deduction is related to excluded income. Irs amendment form   If only part of your self-employment income is excluded, the part of the deduction that is based on the nonexcluded income is allowed. Irs amendment form This would happen if, for instance, you have two businesses and only the income from one of them is excludable. Irs amendment form   For purposes of the deduction only, figure the self-employment tax on the nonexcluded income by multiplying your total self-employment tax (from Schedule SE (Form 1040)), Self-Employment Tax) by the following fraction. Irs amendment form   Self-employment income subject to U. Irs amendment form S. Irs amendment form income tax     Total self-employment income (including excluded possession income)   The result is your self-employment tax on nonexcluded income. Irs amendment form Include the deductible part of this amount on Form 1040, line 27. Irs amendment form Individual retirement arrangement (IRA) deduction. Irs amendment form   Do not take excluded income into account when figuring your deductible IRA contribution. Irs amendment form Standard Deduction The standard deduction is composed of the regular standard deduction amount and the additional standard deduction for taxpayers who are blind or age 65 or over. Irs amendment form To find the amount you can claim on Form 1040, line 40, first figure your full standard deduction according to the Instructions for Form 1040. Irs amendment form Then multiply your full standard deduction by the following fraction. Irs amendment form   Gross income subject to U. Irs amendment form S. Irs amendment form income tax     Gross income from all sources (including excluded possession income)   In the space above line 40, enter “Standard deduction modified due to income excluded under section 931 (if American Samoa) or section 933 (if Puerto Rico). Irs amendment form ” This calculation may not be the same as the one you used to determine if you need to file a U. Irs amendment form S. Irs amendment form tax return. Irs amendment form Itemized Deductions Most itemized deductions do not apply to a particular type of income. Irs amendment form However, itemized deductions can be divided into three categories. Irs amendment form Those that apply specifically to excluded income, such as employee business expenses, are not deductible. Irs amendment form Those that apply specifically to income subject to U. Irs amendment form S. Irs amendment form income tax, which might also be employee business expenses, are fully allowable under the Instructions for Schedule A (Form 1040), Itemized Deductions. Irs amendment form Those that do not apply to specific income must be allocated between your gross income subject to U. Irs amendment form S. Irs amendment form income tax and your total gross income from all sources. Irs amendment form The example given later shows how to figure the deductible part of each type of expense that is not related to specific income. Irs amendment form Example. Irs amendment form In 2013, you and your spouse are both under 65 and U. Irs amendment form S. Irs amendment form citizens who are bona fide residents of Puerto Rico during the entire tax year. Irs amendment form You file a joint income tax return. Irs amendment form During 2013, you earned $20,000 from Puerto Rican sources (excluded from U. Irs amendment form S. Irs amendment form gross income) and your spouse earned $60,000 from the U. Irs amendment form S. Irs amendment form Government. Irs amendment form You have $16,000 of itemized deductions that do not apply to any specific type of income. Irs amendment form These are medical expenses of $4,000, real estate taxes of $5,000, home mortgage interest of $6,000, and charitable contributions of $1,000 (cash contributions). Irs amendment form You determine the amount of each deduction that you can claim on your Schedule A (Form 1040), Itemized Deductions, by multiplying the deduction by the fraction shown under Figuring the deduction , earlier under Deductions if Possession Income is Excluded. Irs amendment form   Medical Expenses   $60,000$80,000 × $4,000 = $3,000  (enter on line 1  of Schedule A)     Real Estate Taxes   $60,000$80,000 × $5,000 = $3,750  (enter on line 6  of Schedule A)     Home Mortgage Interest   $60,000$80,000 × $6,000 = $4,500  (enter on line 10 or 11 of  Schedule A)     Charitable Contributions (cash contributions)   $60,000$80,000 × $1,000 = $750  (enter on line 16 of Schedule A)   Enter on Schedule A (Form 1040) only the allowable portion of each deduction. Irs amendment form Overall limitation on itemized deductions. Irs amendment form   If your adjusted gross income (discussed earlier) is over $300,000 if married filing jointly or qualifying widow(er); $275,000 if head of household; $250,000 if single; or $150,000 if married filing separately; see the Itemized Deductions Worksheet in the Instructions for Schedule A (Form 1040), to figure your itemized deductions. Irs amendment form Personal Exemptions Personal exemptions are allowed in full even if excluding possession income. Irs amendment form However, depending upon your adjusted gross income and filing status, the amount you can deduct may be reduced. Irs amendment form See the Deduction for Exemptions Worksheet—Line 42 in the instructions for Form 1040. Irs amendment form Foreign Tax Credit if Possession Income Is Excluded If you must report American Samoa or Puerto Rico source income on your U. Irs amendment form S. Irs amendment form tax return, you can claim a foreign tax credit for income taxes paid to the possession on that income. Irs amendment form However, you cannot claim a foreign tax credit for taxes paid on possession income that is excluded on your U. Irs amendment form S. Irs amendment form tax return. Irs amendment form The foreign tax credit is generally figured on Form 1116. Irs amendment form If you have income, such as U. Irs amendment form S. Irs amendment form Government wages, that is not excludable, and you also have possession source income that is excludable, you must figure the credit by reducing your foreign taxes paid or accrued by the taxes based on the excluded income. Irs amendment form You make this reduction for each separate income category. Irs amendment form To find the amount of this reduction, use the following formula for each income category. Irs amendment form Excluded income from possession sources less deductible expenses based on that income x Tax paid or accrued to the possession = Reduction in foreign taxes Total income subject to possession tax less deductible expenses based on that income Enter the amount of the reduction on Form 1116, line 12. Irs amendment form For more information on the foreign tax credit, see Publication 514. Irs amendment form Example. Irs amendment form Jason and Lynn Reddy are U. Irs amendment form S. Irs amendment form citizens who were bona fide residents of Puerto Rico during all of 2013. Irs amendment form They file a joint tax return. Irs amendment form The following table shows their excludable and taxable income for U. Irs amendment form S. Irs amendment form federal income tax purposes. Irs amendment form   Taxable   Excludable Jason's wages from  U. Irs amendment form S. Irs amendment form Government $25,000     Lynn's wages from Puerto Rico  corp. Irs amendment form     $15,000 Dividend from Puerto Rico corp. Irs amendment form doing business in Puerto Rico     200 Dividend from U. Irs amendment form S. Irs amendment form  corp. Irs amendment form doing business  in U. Irs amendment form S. Irs amendment form * 1,000     Totals $26,000   $15,200 * Income from sources outside Puerto Rico is taxable. Irs amendment form   Jason and Lynn must file 2013 income tax returns with both Puerto Rico and the United States. Irs amendment form They have gross income of $26,000 for U. Irs amendment form S. Irs amendment form tax purposes. Irs amendment form They paid taxes to Puerto Rico of $4,000 ($3,980 on their wages and $20 on the dividend from the Puerto Rico corporation). Irs amendment form They figure their foreign tax credit on two Forms 1116, which they must attach to their U. Irs amendment form S. Irs amendment form return. Irs amendment form They fill out one Form 1116 for wages and one Form 1116 for the dividend. Irs amendment form Jason and Lynn figure the Puerto Rico taxes on excluded income as follows. Irs amendment form   Wages: ($15,000 ÷ $40,000) × $3,980 = $1,493   Dividend: ($200 ÷ $200) × $20 = $20 They enter $1,493 on Form 1116, line 12, for wages and $20 on the second Form 1116, line 12, for the dividend. Irs amendment form Self-Employment Tax Self-employment tax includes both social security and Medicare taxes for individuals who are self-employed. Irs amendment form A U. Irs amendment form S. Irs amendment form citizen or resident alien who is self-employed must pay self-employment tax on net self-employment earnings of $400 or more. Irs amendment form This rule applies whether or not the earnings are excludable from gross income (or whether or not a U. Irs amendment form S. Irs amendment form income tax return must otherwise be filed). Irs amendment form Bona fide residents of the possessions discussed in this publication are considered U. Irs amendment form S. Irs amendment form residents for this purpose and are subject to the self-employment tax. Irs amendment form Forms to file. Irs amendment form   If you have net self-employment income and are subject to self-employment tax, file one of the following with the United States. Irs amendment form If you are required to file Form 1040 with the United States, complete Schedule SE (Form 1040) and attach it to your Form 1040. Irs amendment form If you are not required to file Form 1040 with the United States and you are a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI, file Form 1040-SS. Irs amendment form If you are a resident of Puerto Rico, you can file the Spanish-language Form 1040-PR instead. Irs amendment form Do not file forms 1040-SS or 1040-PR with Form 1040. Irs amendment form If you are required to pay Additional Medicare Tax (discussed later) on your self-employment income, attach Form 8959, Additional Medicare Tax to Form 1040, Form 1040-SS, or Form 1040-PR, as applicable. Irs amendment form Chapter 11 Bankruptcy cases. Irs amendment form   While you are a debtor in a chapter 11 bankruptcy case, your net profit or loss from self-employment will be included on the income tax return (Form 1041, U. Irs amendment form S. Irs amendment form Income Tax Return for Estates and Trusts) of the bankruptcy estate. Irs amendment form However, you—not the bankruptcy estate—are responsible for paying self-employment tax on your net earnings from self-employment. Irs amendment form   Use Schedule SE (Form 1040), Form 1040-SS, or Form 1040-PR, as determined above, to figure your correct amount of self-employment tax. Irs amendment form   For other reporting requirements, see Chapter 11 Bankruptcy Cases in the Instructions for Form 1040. Irs amendment form Additional Medicare Tax Beginning in 2013, a 0. Irs amendment form 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 if single, head of household, or qualifying widow(er). Irs amendment form Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Irs amendment form A self-employment loss should not be considered for purposes of this tax. Irs amendment form RRTA compensation should be separately compared to the threshold. Irs amendment form Your employer is responsible for withholding the 0. Irs amendment form 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000. Irs amendment form You should consider this withholding, if applicable, in determining whether you need to make estimated tax payments. Irs amendment form There are no special rules for U. Irs amendment form S. Irs amendment form citizens and nonresident aliens living abroad for purposes of this provision. Irs amendment form Wages, RRTA compensation, and self-employment income that are subject to Medicare tax will also be subject to Additional Medicare Tax if in excess of the applicable threshold. Irs amendment form For more information, see Form 8959, Additional Medicare Tax, and its instructions or visit www. Irs amendment form irs. Irs amendment form gov and enter the following words in the search box: Additional Medicare Tax. Irs amendment form You cannot include the Additional Medicare Tax as a deductible part of your self-employment tax. Irs amendment form Net Investment Income Tax Beginning in 2013, the Net Investment Income Tax (NIIT) imposes a 3. Irs amendment form 8% tax on the lesser of an individual’s net investment income or the excess of the individual’s modified adjusted gross income over a specified threshold amount. Irs amendment form Bona fide residents of Puerto Rico and American Samoa who may have a federal income tax return filing obligation may be liable for the NIIT if the taxpayer’s modified adjusted gross income from non-territory sources exceeds a specified threshold amount. Irs amendment form The NIIT does not apply to any individual who is a nonresident alien with respect to the United States. Irs amendment form Bona fide residents must take into account any additional tax liability associated with the NIIT when calculating your estimated tax payments. Irs amendment form Forms to file. Irs amendment form   If you are a bona fide resident of American Samoa and Puerto Rico and you are required to pay the NIIT, you must file Form 1040 with the United States and attach Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts. Irs amendment form For more information, see Form 8960 and its instructions. Irs amendment form Paying Your Taxes You may find that not all of your income tax has been paid through withholding by either the United States or the possession. Irs amendment form This is often true if you have income that is not subject to withholding, such as self-employment, interest, or rental income. Irs amendment form In this situation, you may need to make estimated tax payments. Irs amendment form Estimated Tax If your estimated income tax obligation is to the United States, use the worksheet in the Form 1040-ES package to figure your estimated tax, including self-employment tax. Irs amendment form Include the Additional Medicare Tax and Net Investment Income Tax if applicable. Irs amendment form If you are paying by check or money order, use the payment vouchers in the Form 1040-ES package. Irs amendment form Or, you can make your payments electronically and not have to file any paper forms. Irs amendment form See the Form 1040-ES instructions for information on making payments. Irs amendment form Double Taxation Mutual agreement procedures exist to settle issues where there is inconsistent tax treatment between the IRS and the taxing authorities of the following possessions. Irs amendment form American Samoa. Irs amendment form The Commonwealth of Puerto Rico. Irs amendment form The Commonwealth of the Northern Mariana Islands. Irs amendment form Guam. Irs amendment form The U. Irs amendment form S. Irs amendment form Virgin Islands. Irs amendment form These issues usually involve allocations of income, deductions, credits, or allowances between related persons; determinations of residency; and determinations of the source of income and related expenses. Irs amendment form Competent Authority Assistance The tax coordination agreements between the United States and the possession tax departments contain provisions allowing the competent authorities of the United States and the relevant possession to resolve, by mutual agreement, inconsistent tax treatment by the two jurisdictions. Irs amendment form How to make your request. Irs amendment form   Your request for competent authority assistance must include all the information listed in Revenue Procedure 2006-23, 2006-20 I. Irs amendment form R. Irs amendment form B. Irs amendment form 900 available at www. Irs amendment form irs. Irs amendment form gov/pub/irs-irbs/irb06-49. Irs amendment form pdf. Irs amendment form    Also, see Notice 2013-78, which provides proposed updates to the procedures for requesting U. Irs amendment form S. Irs amendment form competent authority assistance under tax treaties. Irs amendment form As noted, an update to Revenue Procedure 2006-23 will be published in the future. Irs amendment form   Your request must be in the form of a letter addressed to the Deputy Commissioner (International) LB&I. Irs amendment form It must contain a statement that competent authority assistance is requested under the mutual agreement procedure with the possession. Irs amendment form You (or a person having authority to sign your federal return) must sign and date the request. Irs amendment form    Send your written request for U. Irs amendment form S. Irs amendment form assistance under this procedure to:   Deputy Commissioner (International) Large Business and International Division Internal Revenue Service 1111 Constitution Avenue, N. Irs amendment form W. Irs amendment form  Routing: M4-365 Washington, DC 20224 (Attention: TAIT) Nonresident aliens generally must present their initial request for assistance to the relevant possession tax agency. Irs amendment form Credit or Refund In addition to the tax assistance request, if you seek a credit or refund of any overpayment of U. Irs amendment form S. Irs amendment form tax paid on the income in question, you should file a claim on Form 1040X, Amended U. Irs amendment form S. Irs amendment form Individual Income Tax Return. Irs amendment form Indicate on the form that a request for assistance under the mutual agreement procedure with the possession has been filed. Irs amendment form Attach a copy of the request to the form. Irs amendment form Also, you should take whatever steps must be taken under the possession tax code to prevent the expiration of the statutory period for filing a claim for credit or refund of a possession tax. Irs amendment form See Revenue Procedure 2006-54 (or its successor), section 9, for complete information. Irs amendment form Prev  Up  Next   Home   More Online Publications
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Understanding your CP13R Notice

We made changes to your return involving the Recovery Rebate Credit. You're not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Read your notice carefully — it will explain how the Recovery Rebate Credit relates to the changes we made.
  • Review the notice and compare our changes to the information on your tax return.
  • Correct the copy of your tax return that you kept for your records.
  • You don't need to do anything if you agree with the notice.
  • If you disagree with the notice, please contact us at the toll-free number listed on its top right corner (within 60 days of its date).

You may want to...


Answers to Common Questions

What is the Recovery Rebate Credit?
It is a refundable credit that relates to the 2008 economic stimulus payment. Generally, a refundable credit increases the amount of a refund received or it reduces the amount of taxes owed.

What should I do if I disagree with the changes you made?
Contact us at the toll free number listed on the top right corner of your notice if you disagree with the changes we made.

What should I do if I need to make another correction to my tax return?
You'll need to file an amended return to make a correction.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

Perform a quick check on the amount you have withheld to make sure you won't owe money next year. You can use this IRS withholding calculator.

Page Last Reviewed or Updated: 20-Feb-2014

The Irs Amendment Form

Irs amendment form Publication 530 - Main Content Table of Contents What You Can and Cannot DeductHardest Hit Fund and Emergency Homeowners' Loan Programs Real Estate Taxes Sales Taxes Home Mortgage Interest Mortgage Insurance Premiums Mortgage Interest CreditFiguring the Credit BasisFiguring Your Basis Adjusted Basis Keeping Records How To Get Tax HelpLow Income Taxpayer Clinics What You Can and Cannot Deduct To deduct expenses of owning a home, you must file Form 1040, U. Irs amendment form S. Irs amendment form Individual Income Tax Return, and itemize your deductions on Schedule A (Form 1040). Irs amendment form If you itemize, you cannot take the standard deduction. Irs amendment form This section explains what expenses you can deduct as a homeowner. Irs amendment form It also points out expenses that you cannot deduct. Irs amendment form There are four primary discussions: real estate taxes, sales taxes, home mortgage interest, and mortgage insurance premiums. Irs amendment form Generally, your real estate taxes, home mortgage interest, and mortgage insurance premiums are included in your house payment. Irs amendment form Your house payment. Irs amendment form   If you took out a mortgage (loan) to finance the purchase of your home, you probably have to make monthly house payments. Irs amendment form Your house payment may include several costs of owning a home. Irs amendment form The only costs you can deduct are real estate taxes actually paid to the taxing authority, interest that qualifies as home mortgage interest, and mortgage insurance premiums. Irs amendment form These are discussed in more detail later. Irs amendment form   Some nondeductible expenses that may be included in your house payment include: Fire or homeowner's insurance premiums, and The amount applied to reduce the principal of the mortgage. Irs amendment form Minister's or military housing allowance. Irs amendment form   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you still can deduct your real estate taxes and your home mortgage interest. Irs amendment form You do not have to reduce your deductions by your nontaxable allowance. Irs amendment form For more information see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers, and Publication 3, Armed Forces' Tax Guide. Irs amendment form Nondeductible payments. Irs amendment form   You cannot deduct any of the following items. Irs amendment form Insurance (other than mortgage insurance premiums), including fire and comprehensive coverage, and title insurance. Irs amendment form Wages you pay for domestic help. Irs amendment form Depreciation. Irs amendment form The cost of utilities, such as gas, electricity, or water. Irs amendment form Most settlement costs. Irs amendment form See Settlement or closing costs under Cost as Basis, later, for more information. Irs amendment form Forfeited deposits, down payments, or earnest money. Irs amendment form Hardest Hit Fund and Emergency Homeowners' Loan Programs You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. Irs amendment form You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. Irs amendment form You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. Irs amendment form If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098-MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received), box 4 (mortgage insurance premiums) and box 5 (real property taxes). Irs amendment form However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. Irs amendment form Real Estate Taxes Most state and local governments charge an annual tax on the value of real property. Irs amendment form This is called a real estate tax. Irs amendment form You can deduct the tax if it is assessed uniformly at a like rate on all real property throughout the community. Irs amendment form The proceeds must be for general community or governmental purposes and not be a payment for a special privilege granted or service rendered to you. Irs amendment form Deductible Real Estate Taxes You can deduct real estate taxes imposed on you. Irs amendment form You must have paid them either at settlement or closing, or to a taxing authority (either directly or through an escrow account) during the year. Irs amendment form If you own a cooperative apartment, see Special Rules for Cooperatives , later. Irs amendment form Where to deduct real estate taxes. Irs amendment form   Enter the amount of your deductible real estate taxes on Schedule A (Form 1040), line 6. Irs amendment form Real estate taxes paid at settlement or closing. Irs amendment form   Real estate taxes are generally divided so that you and the seller each pay taxes for the part of the property tax year you owned the home. Irs amendment form Your share of these taxes is fully deductible if you itemize your deductions. Irs amendment form Division of real estate taxes. Irs amendment form   For federal income tax purposes, the seller is treated as paying the property taxes up to, but not including, the date of sale. Irs amendment form You (the buyer) are treated as paying the taxes beginning with the date of sale. Irs amendment form This applies regardless of the lien dates under local law. Irs amendment form Generally, this information is included on the settlement statement you get at closing. Irs amendment form   You and the seller each are considered to have paid your own share of the taxes, even if one or the other paid the entire amount. Irs amendment form You each can deduct your own share, if you itemize deductions, for the year the property is sold. Irs amendment form Example. Irs amendment form You bought your home on September 1. Irs amendment form The property tax year (the period to which the tax relates) in your area is the calendar year. Irs amendment form The tax for the year was $730 and was due and paid by the seller on August 15. Irs amendment form You owned your new home during the property tax year for 122 days (September 1 to December 31, including your date of purchase). Irs amendment form You figure your deduction for real estate taxes on your home as follows. Irs amendment form 1. Irs amendment form Enter the total real estate taxes for the real property tax year $730 2. Irs amendment form Enter the number of days in the property tax year that you owned the property 122 3. Irs amendment form Divide line 2 by 365 . Irs amendment form 3342 4. Irs amendment form Multiply line 1 by line 3. Irs amendment form This is your deduction. Irs amendment form Enter it on Schedule A (Form 1040), line 6 $244   You can deduct $244 on your return for the year if you itemize your deductions. Irs amendment form You are considered to have paid this amount and can deduct it on your return even if, under the contract, you did not have to reimburse the seller. Irs amendment form Delinquent taxes. Irs amendment form   Delinquent taxes are unpaid taxes that were imposed on the seller for an earlier tax year. Irs amendment form If you agree to pay delinquent taxes when you buy your home, you cannot deduct them. Irs amendment form You treat them as part of the cost of your home. Irs amendment form See Real estate taxes , later, under Basis. Irs amendment form Escrow accounts. Irs amendment form   Many monthly house payments include an amount placed in escrow (put in the care of a third party) for real estate taxes. Irs amendment form You may not be able to deduct the total you pay into the escrow account. Irs amendment form You can deduct only the real estate taxes that the lender actually paid from escrow to the taxing authority. Irs amendment form Your real estate tax bill will show this amount. Irs amendment form Refund or rebate of real estate taxes. Irs amendment form   If you receive a refund or rebate of real estate taxes this year for amounts you paid this year, you must reduce your real estate tax deduction by the amount refunded to you. Irs amendment form If the refund or rebate was for real estate taxes paid for a prior year, you may have to include some or all of the refund in your income. Irs amendment form For more information, see Recoveries in Publication 525, Taxable and Nontaxable Income. Irs amendment form Items You Cannot Deduct as Real Estate Taxes The following items are not deductible as real estate taxes. Irs amendment form Charges for services. Irs amendment form   An itemized charge for services to specific property or people is not a tax, even if the charge is paid to the taxing authority. Irs amendment form You cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged for trash collection), or A flat fee charged for a single service provided by your local government (such as a $30 charge for mowing your lawn because it had grown higher than permitted under a local ordinance). Irs amendment form    You must look at your real estate tax bill to decide if any nondeductible itemized charges, such as those listed above, are included in the bill. Irs amendment form If your taxing authority (or lender) does not furnish you a copy of your real estate tax bill, ask for it. Irs amendment form Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. Irs amendment form Assessments for local benefits. Irs amendment form   You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. Irs amendment form Local benefits include the construction of streets, sidewalks, or water and sewer systems. Irs amendment form You must add these amounts to the basis of your property. Irs amendment form   You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. Irs amendment form An example is a charge to repair an existing sidewalk and any interest included in that charge. Irs amendment form   If only a part of the assessment is for maintenance, repair, or interest charges, you must be able to show the amount of that part to claim the deduction. Irs amendment form If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. Irs amendment form   An assessment for a local benefit may be listed as an item in your real estate tax bill. Irs amendment form If so, use the rules in this section to find how much of it, if any, you can deduct. Irs amendment form Transfer taxes (or stamp taxes). Irs amendment form   You cannot deduct transfer taxes and similar taxes and charges on the sale of a personal home. Irs amendment form If you are the buyer and you pay them, include them in the cost basis of the property. Irs amendment form If you are the seller and you pay them, they are expenses of the sale and reduce the amount realized on the sale. Irs amendment form Homeowners association assessments. Irs amendment form   You cannot deduct these assessments because the homeowners association, rather than a state or local government, imposes them. Irs amendment form Special Rules for Cooperatives If you own a cooperative apartment, some special rules apply to you, though you generally receive the same tax treatment as other homeowners. Irs amendment form As an owner of a cooperative apartment, you own shares of stock in a corporation that owns or leases housing facilities. Irs amendment form You can deduct your share of the corporation's deductible real estate taxes if the cooperative housing corporation meets the following conditions: The corporation has only one class of stock outstanding, Each stockholder, solely because of ownership of the stock, can live in a house, apartment, or house trailer owned or leased by the corporation, No stockholder can receive any distribution out of capital, except on a partial or complete liquidation of the corporation, and At least one of the following: At least 80% of the corporation's gross income for the tax year was paid by the tenant-stockholders. Irs amendment form For this purpose, gross income means all income received during the entire tax year, including any received before the corporation changed to cooperative ownership. Irs amendment form At least 80% of the total square footage of the corporation's property must be available for use by the tenant-stockholders during the entire tax year. Irs amendment form At least 90% of the expenditures paid or incurred by the corporation were used for the acquisition, construction, management, maintenance, or care of the property for the benefit of the tenant-shareholders during the entire tax year. Irs amendment form Tenant-stockholders. Irs amendment form   A tenant-stockholder can be any entity (such as a corporation, trust, estate, partnership, or association) as well as an individual. Irs amendment form The tenant-stockholder does not have to live in any of the cooperative's dwelling units. Irs amendment form The units that the tenant-stockholder has the right to occupy can be rented to others. Irs amendment form Deductible taxes. Irs amendment form   You figure your share of real estate taxes in the following way. Irs amendment form Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. Irs amendment form Multiply the corporation's deductible real estate taxes by the number you figured in (1). Irs amendment form This is your share of the real estate taxes. Irs amendment form   Generally, the corporation will tell you your share of its real estate tax. Irs amendment form This is the amount you can deduct if it reasonably reflects the cost of real estate taxes for your dwelling unit. Irs amendment form Refund of real estate taxes. Irs amendment form   If the corporation receives a refund of real estate taxes it paid in an earlier year, it must reduce the amount of real estate taxes paid this year when it allocates the tax expense to you. Irs amendment form Your deduction for real estate taxes the corporation paid this year is reduced by your share of the refund the corporation received. Irs amendment form Sales Taxes Generally, you can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040). Irs amendment form Deductible sales taxes may include sales taxes paid on your home (including mobile and prefabricated), or home building materials if the tax rate was the same as the general sales tax rate. Irs amendment form For information on figuring your deduction, see the Instructions for Schedule A (Form 1040). Irs amendment form If you elect to deduct the sales taxes paid on your home, or home building materials, you cannot include them as part of your cost basis in the home. Irs amendment form Home Mortgage Interest This section of the publication gives you basic information about home mortgage interest, including information on interest paid at settlement, points, and Form 1098, Mortgage Interest Statement. Irs amendment form Most home buyers take out a mortgage (loan) to buy their home. Irs amendment form They then make monthly payments to either the mortgage holder or someone collecting the payments for the mortgage holder. Irs amendment form Usually, you can deduct the entire part of your payment that is for mortgage interest, if you itemize your deductions on Schedule A (Form 1040). Irs amendment form However, your deduction may be limited if: Your total mortgage balance is more than $1 million ($500,000 if married filing separately), or You took out a mortgage for reasons other than to buy, build, or improve your home. Irs amendment form If either of these situations applies to you, see Publication 936 for more information. Irs amendment form Also see Publication 936 if you later refinance your mortgage or buy a second home. Irs amendment form Refund of home mortgage interest. Irs amendment form   If you receive a refund of home mortgage interest that you deducted in an earlier year and that reduced your tax, you generally must include the refund in income in the year you receive it. Irs amendment form For more information, see Recoveries in Publication 525. Irs amendment form The amount of the refund will usually be shown on the mortgage interest statement you receive from your mortgage lender. Irs amendment form See Mortgage Interest Statement , later. Irs amendment form Deductible Mortgage Interest To be deductible, the interest you pay must be on a loan secured by your main home or a second home. Irs amendment form The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. Irs amendment form Prepaid interest. Irs amendment form   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. Irs amendment form Generally, you can deduct in each year only the interest that qualifies as home mortgage interest for that year. Irs amendment form An exception (discussed later) applies to points. Irs amendment form Late payment charge on mortgage payment. Irs amendment form   You can deduct as home mortgage interest a late payment charge if it was not for a specific service in connection with your mortgage loan. Irs amendment form Mortgage prepayment penalty. Irs amendment form   If you pay off your home mortgage early, you may have to pay a penalty. Irs amendment form You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. Irs amendment form Ground rent. Irs amendment form   In some states (such as Maryland), you may buy your home subject to a ground rent. Irs amendment form A ground rent is an obligation you assume to pay a fixed amount per year on the property. Irs amendment form Under this arrangement, you are leasing (rather than buying) the land on which your home is located. Irs amendment form Redeemable ground rents. Irs amendment form   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. Irs amendment form The ground rent is a redeemable ground rent only if all of the following are true. Irs amendment form Your lease, including renewal periods, is for more than 15 years. Irs amendment form You can freely assign the lease. Irs amendment form You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specified amount. Irs amendment form The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. Irs amendment form   Payments made to end the lease and buy the lessor's entire interest in the land are not redeemable ground rents. Irs amendment form You cannot deduct them. Irs amendment form Nonredeemable ground rents. Irs amendment form   Payments on a nonredeemable ground rent are not mortgage interest. Irs amendment form You can deduct them as rent only if they are a business expense or if they are for rental property. Irs amendment form Cooperative apartment. Irs amendment form   You can usually treat the interest on a loan you took out to buy stock in a cooperative housing corporation as home mortgage interest if you own a cooperative apartment, and the cooperative housing corporation meets the conditions described earlier under Special Rules for Cooperatives . Irs amendment form In addition, you can treat as home mortgage interest your share of the corporation's deductible mortgage interest. Irs amendment form Figure your share of mortgage interest the same way that is shown for figuring your share of real estate taxes in the Example under Division of real estate taxes, earlier. Irs amendment form For more information on cooperatives, see Special Rule for Tenant-Stockholders in Cooperative Housing Corporations in Publication 936. Irs amendment form Refund of cooperative's mortgage interest. Irs amendment form   You must reduce your mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. Irs amendment form The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. Irs amendment form   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. Irs amendment form Mortgage Interest Paid at Settlement One item that normally appears on a settlement or closing statement is home mortgage interest. Irs amendment form You can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). Irs amendment form This amount should be included in the mortgage interest statement provided by your lender. Irs amendment form See the discussion under Mortgage Interest Statement , later. Irs amendment form Also, if you pay interest in advance, see Prepaid interest , earlier, and Points , next. Irs amendment form Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Irs amendment form Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points. Irs amendment form A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Irs amendment form See Points paid by the seller , later. Irs amendment form General rule. Irs amendment form   You cannot deduct the full amount of points in the year paid. Irs amendment form They are prepaid interest, so you generally must deduct them over the life (term) of the mortgage. Irs amendment form Exception. Irs amendment form   You can deduct the full amount of points in the year paid if you meet all the following tests. Irs amendment form Your loan is secured by your main home. Irs amendment form (Generally, your main home is the one you live in most of the time. Irs amendment form ) Paying points is an established business practice in the area where the loan was made. Irs amendment form The points paid were not more than the points generally charged in that area. Irs amendment form You use the cash method of accounting. Irs amendment form This means you report income in the year you receive it and deduct expenses in the year you pay them. Irs amendment form Most individuals use this method. Irs amendment form The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. Irs amendment form The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Irs amendment form The funds you provided are not required to have been applied to the points. Irs amendment form They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Irs amendment form You cannot have borrowed these funds. Irs amendment form You use your loan to buy or build your main home. Irs amendment form The points were computed as a percentage of the principal amount of the mortgage. Irs amendment form The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. Irs amendment form The points may be shown as paid from either your funds or the seller's. Irs amendment form Note. Irs amendment form If you meet all of the tests listed above and you itemize your deductions in the year you get the loan, you can either deduct the full amount of points in the year paid or deduct them over the life of the loan, beginning in the year you get the loan. Irs amendment form If you do not itemize your deductions in the year you get the loan, you can spread the points over the life of the loan and deduct the appropriate amount in each future year, if any, when you do itemize your deductions. Irs amendment form Home improvement loan. Irs amendment form   You can also fully deduct in the year paid points paid on a loan to improve your main home, if you meet the first six tests listed earlier. Irs amendment form Refinanced loan. Irs amendment form   If you use part of the refinanced mortgage proceeds to improve your main home and you meet the first six tests listed earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Irs amendment form You can deduct the rest of the points over the life of the loan. Irs amendment form Points not fully deductible in year paid. Irs amendment form    If you do not qualify under the exception to deduct the full amount of points in the year paid (or choose not to do so), see Points in Publication 936 for the rules on when and how much you can deduct. Irs amendment form Figure A. Irs amendment form   You can use Figure A, next, as a quick guide to see whether your points are fully deductible in the year paid. Irs amendment form    Please click here for the text description of the image. Irs amendment form Figure A. Irs amendment form Are my points fully deductible this year? Amounts charged for services. Irs amendment form   Amounts charged by the lender for specific services connected to the loan are not interest. Irs amendment form Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Irs amendment form You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Irs amendment form For information about the tax treatment of these amounts and other settlement fees and closing costs, see Basis , later. Irs amendment form Points paid by the seller. Irs amendment form   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Irs amendment form Treatment by seller. Irs amendment form   The seller cannot deduct these fees as interest. Irs amendment form However, they are a selling expense that reduces the seller's amount realized. Irs amendment form See Publication 523 for more information. Irs amendment form Treatment by buyer. Irs amendment form   The buyer treats seller-paid points as if he or she had paid them. Irs amendment form If all the tests listed earlier under Exception are met, the buyer can deduct the points in the year paid. Irs amendment form If any of those tests are not met, the buyer must deduct the points over the life of the loan. Irs amendment form   The buyer must also reduce the basis of the home by the amount of the seller-paid points. Irs amendment form For more information about the basis of your home, see Basis , later. Irs amendment form Funds provided are less than points. Irs amendment form   If you meet all the tests listed earlier under Exception except that the funds you provided were less than the points charged to you (test 6), you can deduct the points in the year paid up to the amount of funds you provided. Irs amendment form In addition, you can deduct any points paid by the seller. Irs amendment form Example 1. Irs amendment form When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Irs amendment form You meet all the tests for deducting points in the year paid (see Exception , earlier), except the only funds you provided were a $750 down payment. Irs amendment form Of the $1,000 you were charged for points, you can deduct $750 in the year paid. Irs amendment form You spread the remaining $250 over the life of the mortgage. Irs amendment form Example 2. Irs amendment form The facts are the same as in Example 1 , except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. Irs amendment form In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Irs amendment form You spread the remaining $250 over the life of the mortgage. Irs amendment form You must reduce the basis of your home by the $1,000 paid by the seller. Irs amendment form Excess points. Irs amendment form   If you meet all the tests under Exception , earlier, except that the points paid were more than are generally charged in your area (test 3), you can deduct in the year paid only the points that are generally charged. Irs amendment form You must spread any additional points over the life of the mortgage. Irs amendment form Mortgage ending early. Irs amendment form   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. Irs amendment form A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Irs amendment form Example. Irs amendment form Dan paid $3,000 in points in 2006 that he had to spread out over the 15-year life of the mortgage. Irs amendment form He had deducted $1,400 of these points through 2012. Irs amendment form Dan prepaid his mortgage in full in 2013. Irs amendment form He can deduct the remaining $1,600 of points in 2013. Irs amendment form Exception. Irs amendment form   If you refinance the mortgage with the same lender, you cannot deduct any remaining points for the year. Irs amendment form Instead, deduct them over the term of the new loan. Irs amendment form Form 1098. Irs amendment form   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your deductible points paid during the year. Irs amendment form See Mortgage Interest Statement , later. Irs amendment form Where To Deduct Home Mortgage Interest Enter on Schedule A (Form 1040), line 10, the home mortgage interest and points reported to you on Form 1098 (discussed next). Irs amendment form If you did not receive a Form 1098, enter your deductible interest on line 11, and any deductible points on line 12. Irs amendment form See Table 1 below for a summary of where to deduct home mortgage interest and real estate taxes. Irs amendment form If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and social security number (SSN) or employer identification number (EIN) on the dotted lines next to line 11. Irs amendment form The seller must give you this number and you must give the seller your SSN. Irs amendment form Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Irs amendment form Failure to meet either of these requirements may result in a $50 penalty for each failure. Irs amendment form Table 1. Irs amendment form Where To Deduct Interest and Taxes Paid on Your Home See the text for information on what expenses are eligible. Irs amendment form IF you are eligible to deduct . Irs amendment form . Irs amendment form . Irs amendment form THEN report the amount  on Schedule A (Form 1040) . Irs amendment form . Irs amendment form . Irs amendment form real estate taxes line 6. Irs amendment form home mortgage interest and points reported on Form 1098 line 10. Irs amendment form home mortgage interest not reported on  Form 1098 line 11. Irs amendment form points not reported on Form 1098 line 12. Irs amendment form qualified mortgage insurance premiums line 13. Irs amendment form Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage to a mortgage holder in the course of that holder's trade or business, you should receive a Form 1098 or similar statement from the mortgage holder. Irs amendment form The statement will show the total interest paid on your mortgage during the year. Irs amendment form If you bought a main home during the year, it also will show the deductible points you paid and any points you can deduct that were paid by the person who sold you your home. Irs amendment form See Points , earlier. Irs amendment form The interest you paid at settlement should be included on the statement. Irs amendment form If it is not, add the interest from the settlement sheet that qualifies as home mortgage interest to the total shown on Form 1098 or similar statement. Irs amendment form Put the total on Schedule A (Form 1040), line 10, and attach a statement to your return explaining the difference. Irs amendment form Write “See attached” to the right of line 10. Irs amendment form A mortgage holder can be a financial institution, a governmental unit, or a cooperative housing corporation. Irs amendment form If a statement comes from a cooperative housing corporation, it generally will show your share of interest. Irs amendment form Your mortgage interest statement for 2013 should be provided or sent to you by January 31, 2014. Irs amendment form If it is mailed, you should allow adequate time to receive it before contacting the mortgage holder. Irs amendment form A copy of this form will be sent to the IRS also. Irs amendment form Example. Irs amendment form You bought a new home on May 3. Irs amendment form You paid no points on the purchase. Irs amendment form During the year, you made mortgage payments which included $4,480 deductible interest on your new home. Irs amendment form The settlement sheet for the purchase of the home included interest of $620 for 29 days in May. Irs amendment form The mortgage statement you receive from the lender includes total interest of $5,100 ($4,480 + $620). Irs amendment form You can deduct the $5,100 if you itemize your deductions. Irs amendment form Refund of overpaid interest. Irs amendment form   If you receive a refund of mortgage interest you overpaid in a prior year, you generally will receive a Form 1098 showing the refund in box 3. Irs amendment form Generally, you must include the refund in income in the year you receive it. Irs amendment form See Refund of home mortgage interest , earlier, under Home Mortgage Interest. Irs amendment form More than one borrower. Irs amendment form   If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Irs amendment form Show how much of the interest each of you paid, and give the name and address of the person who received the form. Irs amendment form Deduct your share of the interest on Schedule A (Form 1040), line 11, and write “See attached” to the right of that line. Irs amendment form Mortgage Insurance Premiums You may be able to take an itemized deduction on Schedule A (Form 1040), line 13, for premiums you pay or accrue during 2013 for qualified mortgage insurance in connection with home acquisition debt on your qualified home. Irs amendment form Mortgage insurance premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as an itemized deduction. Irs amendment form Qualified Mortgage Insurance Qualified mortgage insurance is mortgage insurance provided by the Veterans Administration, the Federal Housing Administration, or the Rural Housing Administration, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). Irs amendment form Prepaid mortgage insurance premiums. Irs amendment form   If you paid premiums that are allocable to periods after 2013, you must allocate them over the shorter of: The stated term of the mortgage, or 84 months, beginning with the month the insurance was obtained. Irs amendment form The premiums are treated as paid in the year to which they were allocated. Irs amendment form If the mortgage is satisfied before its term, no deduction is allowed for the unamortized balance. Irs amendment form See Publication 936 for details. Irs amendment form Exception for certain mortgage insurance. Irs amendment form   The allocation rules, explained above, do not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Service. Irs amendment form Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home. Irs amendment form It also must be secured by that home. Irs amendment form If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. Irs amendment form Home acquisition debt limit. Irs amendment form   The total amount you can treat as home acquisition debt at any time on your home cannot be more than $1 million ($500,000 if married filing separately). Irs amendment form Discharges of qualified principal residence indebtedness. Irs amendment form   You can exclude from gross income any discharges of qualified principal residence indebtedness made after 2006 and before 2014. Irs amendment form You must reduce the basis of your principal residence (but not below zero) by the amount you exclude. Irs amendment form Principal residence. Irs amendment form   Your principal residence is the home where you ordinarily live most of the time. Irs amendment form You can have only one principal residence at any one time. Irs amendment form Qualified principal residence indebtedness. Irs amendment form   This is a mortgage that you took out to buy, build, or substantially improve your principal residence and that is secured by that residence. Irs amendment form If the amount of your original mortgage is more than the cost of your principal residence plus the cost of substantial improvements, qualified principal residence indebtedness cannot be more than the cost of your principal residence plus improvements. Irs amendment form   Any debt secured by your principal residence that you use to refinance qualified principal residence indebtedness is qualified principal residence indebtedness up to the amount of your old mortgage principal just before the refinancing. Irs amendment form Additional debt incurred to substantially improve your principal residence is also qualified principal residence indebtedness. Irs amendment form Amount you can exclude. Irs amendment form   You can only exclude debt discharged after 2006 and before 2014. Irs amendment form The most you can exclude is $2 million ($1 million if married filing separately). Irs amendment form You cannot exclude any amount that was discharged because of services performed for the lender or on account of any other factor not directly related either to a decline in the value of your residence or to your financial condition. Irs amendment form Ordering rule. Irs amendment form   If only a part of a loan is qualified principal residence indebtedness, you can exclude only the amount of the discharge that is more than the amount of the loan (immediately before the discharge) that is not qualified principal residence indebtedness. Irs amendment form Qualified Home This means your main home or your second home. Irs amendment form A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. Irs amendment form Main home. Irs amendment form   You can have only one main home at any one time. Irs amendment form This is the home where you ordinarily live most of the time. Irs amendment form Second home and other special situations. Irs amendment form   If you have a second home, use part of your home for other than residential living (such as a home office), rent out part of your home, or are having your home constructed, see Qualified Home in Publication 936. Irs amendment form Limit on Deduction If your adjusted gross income (AGI) on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are deductible is reduced and may be eliminated. Irs amendment form See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. Irs amendment form If your AGI is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Irs amendment form Form 1098. Irs amendment form   The amount of mortgage insurance premiums you paid during 2013 should be reported in box 4. Irs amendment form See Form 1098, Mortgage Interest Statement in Publication 936. Irs amendment form Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals afford home ownership. Irs amendment form If you qualify, you can claim the credit on Form 8396 each year for part of the home mortgage interest you pay. Irs amendment form Who qualifies. Irs amendment form   You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate (MCC) from your state or local government. Irs amendment form Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. Irs amendment form The MCC will show the certificate credit rate you will use to figure your credit. Irs amendment form It also will show the certified indebtedness amount. Irs amendment form Only the interest on that amount qualifies for the credit. Irs amendment form See Figuring the Credit , later. Irs amendment form You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home. Irs amendment form Contact your state or local housing finance agency for information about the availability of MCCs in your area. Irs amendment form How to claim the credit. Irs amendment form   To claim the credit, complete Form 8396 and attach it to your Form 1040 or Form 1040NR, U. Irs amendment form S. Irs amendment form Nonresident Alien Income Tax Return. Irs amendment form Include the credit in your total for Form 1040, line 53, or Form 1040NR, line 50; be sure to check box c and write “Form 8396” on that line. Irs amendment form Reducing your home mortgage interest deduction. Irs amendment form   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. Irs amendment form You must do this even if part of that amount is to be carried forward to 2014. Irs amendment form Selling your home. Irs amendment form   If you purchase a home after 1990 using an MCC, and you sell that home within 9 years, you may have to recapture (repay) all or part of the benefit you received from the MCC program. Irs amendment form For additional information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, in Publication 523. Irs amendment form Figuring the Credit Figure your credit on Form 8396. Irs amendment form Mortgage not more than certified indebtedness. Irs amendment form   If your mortgage loan amount is equal to (or smaller than) the certified indebtedness amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. Irs amendment form Mortgage more than certified indebtedness. Irs amendment form   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. Irs amendment form To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. Irs amendment form Certified indebtedness amount on your MCC Original amount of your mortgage   The fraction will not change as long as you are entitled to take the mortgage interest credit. Irs amendment form Example. Irs amendment form Emily bought a home this year. Irs amendment form Her mortgage loan is $125,000. Irs amendment form The certified indebtedness amount on her MCC is $100,000. Irs amendment form She paid $7,500 interest this year. Irs amendment form Emily figures the interest to enter on Form 8396, line 1, as follows:   $100,000 = 80% (. Irs amendment form 80)       $125,000       $7,500 x . Irs amendment form 80 = $6,000   Emily enters $6,000 on Form 8396, line 1. Irs amendment form In each later year, she will figure her credit using only 80% of the interest she pays for that year. Irs amendment form Limits Two limits may apply to your credit. Irs amendment form A limit based on the credit rate, and A limit based on your tax. Irs amendment form Limit based on credit rate. Irs amendment form   If the certificate credit rate is higher than 20%, the credit you are allowed cannot be more than $2,000. Irs amendment form Limit based on tax. Irs amendment form   After applying the limit based on the credit rate, your credit generally cannot be more than your tax liability. Irs amendment form See the Credit Limit Worksheet in the Form 8396 instructions to calculate the limit based on tax. Irs amendment form Dividing the Credit If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, the credit must be divided based on the interest held by each person. Irs amendment form Example. Irs amendment form John and his brother, George, were issued an MCC. Irs amendment form They used it to get a mortgage on their main home. Irs amendment form John has a 60% ownership interest in the home, and George has a 40% ownership interest in the home. Irs amendment form John paid $5,400 mortgage interest this year and George paid $3,600. Irs amendment form The MCC shows a credit rate of 25% and a certified indebtedness amount of $130,000. Irs amendment form The loan amount (mortgage) on their home is $120,000. Irs amendment form The credit is limited to $2,000 because the credit rate is more than 20%. Irs amendment form John figures the credit by multiplying the mortgage interest he paid this year ($5,400) by the certificate credit rate (25%) for a total of $1,350. Irs amendment form His credit is limited to $1,200 ($2,000 × 60%). Irs amendment form George figures the credit by multiplying the mortgage interest he paid this year ($3,600) by the certificate credit rate (25%) for a total of $900. Irs amendment form His credit is limited to $800 ($2,000 × 40%). Irs amendment form Carryforward If your allowable credit is reduced because of the limit based on your tax, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. Irs amendment form Example. Irs amendment form You receive a mortgage credit certificate from State X. Irs amendment form This year, your regular tax liability is $1,100, you owe no alternative minimum tax, and your mortgage interest credit is $1,700. Irs amendment form You claim no other credits. Irs amendment form Your unused mortgage interest credit for this year is $600 ($1,700 − $1,100). Irs amendment form You can carry forward this amount to the next 3 years or until used, whichever comes first. Irs amendment form Credit rate more than 20%. Irs amendment form   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). Irs amendment form Example. Irs amendment form In the earlier example under Dividing the Credit , John and George used the entire $2,000 credit. Irs amendment form The excess   John $1,350 − $1,200 = $150     George $900 − $800 = $100   $150 for John ($1,350 − $1,200) and $100 for George ($900 − $800) cannot be carried forward to future years, despite the respective tax liabilities for John and George. Irs amendment form Refinancing If you refinance your original mortgage loan on which you had been given an MCC, you must get a new MCC to be able to claim the credit on the new loan. Irs amendment form The amount of credit you can claim on the new loan may change. Irs amendment form Table 2 below summarizes how to figure your credit if you refinance your original mortgage loan. Irs amendment form Table 2. Irs amendment form Effect of Refinancing on Your Credit IF you get a new (reissued) MCC and the amount of your new mortgage is . Irs amendment form . Irs amendment form . Irs amendment form THEN the interest you claim on Form 8396, line 1, is* . Irs amendment form . Irs amendment form . Irs amendment form smaller than or equal to the certified indebtedness amount on the new MCC all the interest paid during the year on your new mortgage. Irs amendment form larger than the certified indebtedness amount on the new MCC interest paid during the year on your new mortgage multiplied by the following fraction. Irs amendment form         certified indebtedness  amount on your new MCC       original amount of your  mortgage   *The credit using the new MCC cannot be more than the credit using the old MCC. Irs amendment form  See New MCC cannot increase your credit above. Irs amendment form An issuer may reissue an MCC after you refinance your mortgage. Irs amendment form If you did not get a new MCC, you may want to contact the state or local housing finance agency that issued your original MCC for information about whether you can get a reissued MCC. Irs amendment form Year of refinancing. Irs amendment form   In the year of refinancing, add the applicable amount of interest paid on the old mortgage and the applicable amount of interest paid on the new mortgage, and enter the total on Form 8396, line 1. Irs amendment form   If your new MCC has a credit rate different from the rate on the old MCC, you must attach a statement to Form 8396. Irs amendment form The statement must show the calculation for lines 1, 2, and 3 for the part of the year when the old MCC was in effect. Irs amendment form It must show a separate calculation for the part of the year when the new MCC was in effect. Irs amendment form Combine the amounts from both calculations for line 3, enter the total on line 3 of the form, and write “See attached” on the dotted line next to line 2. Irs amendment form New MCC cannot increase your credit. Irs amendment form   The credit that you claim with your new MCC cannot be more than the credit that you could have claimed with your old MCC. Irs amendment form   In most cases, the agency that issues your new MCC will make sure that it does not increase your credit. Irs amendment form However, if either your old loan or your new loan has a variable (adjustable) interest rate, you will need to check this yourself. Irs amendment form In that case, you will need to know the amount of the credit you could have claimed using the old MCC. Irs amendment form   There are two methods for figuring the credit you could have claimed. Irs amendment form Under one method, you figure the actual credit that would have been allowed. Irs amendment form This means you use the credit rate on the old MCC and the interest you would have paid on the old loan. Irs amendment form   If your old loan was a variable rate mortgage, you can use another method to determine the credit that you could have claimed. Irs amendment form Under this method, you figure the credit using a payment schedule of a hypothetical self-amortizing mortgage with level payments projected to the final maturity date of the old mortgage. Irs amendment form The interest rate of the hypothetical mortgage is the annual percentage rate (APR) of the new mortgage for purposes of the Federal Truth in Lending Act. Irs amendment form The principal of the hypothetical mortgage is the remaining outstanding balance of the certified mortgage indebtedness shown on the old MCC. Irs amendment form    You must choose one method and use it consistently beginning with the first tax year for which you claim the credit based on the new MCC. Irs amendment form    As part of your tax records, you should keep your old MCC and the schedule of payments for your old mortgage. Irs amendment form Basis Basis is your starting point for figuring a gain or loss if you later sell your home, or for figuring depreciation if you later use part of your home for business purposes or for rent. Irs amendment form While you own your home, you may add certain items to your basis. Irs amendment form You may subtract certain other items from your basis. Irs amendment form These items are called adjustments to basis and are explained later under Adjusted Basis . Irs amendment form It is important that you understand these terms when you first acquire your home because you must keep track of your basis and adjusted basis during the period you own your home. Irs amendment form You also must keep records of the events that affect basis or adjusted basis. Irs amendment form See Keeping Records , below. Irs amendment form Figuring Your Basis How you figure your basis depends on how you acquire your home. Irs amendment form If you buy or build your home, your cost is your basis. Irs amendment form If you receive your home as a gift, your basis is usually the same as the adjusted basis of the person who gave you the property. Irs amendment form If you inherit your home from a decedent, different rules apply depending on the date of the decedent's death. Irs amendment form Each of these topics is discussed later. Irs amendment form Property transferred from a spouse. Irs amendment form   If your home is transferred to you from your spouse, or from your former spouse as a result of a divorce, your basis is the same as your spouse's (or former spouse's) adjusted basis just before the transfer. Irs amendment form Publication 504, Divorced or Separated Individuals, fully discusses transfers between spouses. Irs amendment form Cost as Basis The cost of your home, whether you purchased it or constructed it, is the amount you paid for it, including any debt you assumed. Irs amendment form The cost of your home includes most settlement or closing costs you paid when you bought the home. Irs amendment form If you built your home, your cost includes most closing costs paid when you bought the land or settled on your mortgage. Irs amendment form See Settlement or closing costs , later. Irs amendment form If you elect to deduct the sales taxes on the purchase or construction of your home as an itemized deduction on Schedule A (Form 1040), you cannot include the sales taxes as part of your cost basis in the home. Irs amendment form Purchase. Irs amendment form   The basis of a home you bought is the amount you paid for it. Irs amendment form This usually includes your down payment and any debt you assumed. Irs amendment form The basis of a cooperative apartment is the amount you paid for your shares in the corporation that owns or controls the property. Irs amendment form This amount includes any purchase commissions or other costs of acquiring the shares. Irs amendment form Construction. Irs amendment form   If you contracted to have your home built on land that you own, your basis in the home is your basis in the land plus the amount you paid to have the home built. Irs amendment form This includes the cost of labor and materials, the amount you paid the contractor, any architect's fees, building permit charges, utility meter and connection charges, and legal fees that are directly connected with building your home. Irs amendment form If you built all or part of your home yourself, your basis is the total amount it cost you to build it. Irs amendment form You cannot include in basis the value of your own labor or any other labor for which you did not pay. Irs amendment form Real estate taxes. Irs amendment form   Real estate taxes are usually divided so that you and the seller each pay taxes for the part of the property tax year that each owned the home. Irs amendment form See the earlier discussion of Real estate taxes paid at settlement or closing , under Real Estate Taxes, earlier, to figure the real estate taxes you paid or are considered to have paid. Irs amendment form   If you pay any part of the seller's share of the real estate taxes (the taxes up to the date of sale), and the seller did not reimburse you, add those taxes to your basis in the home. Irs amendment form You cannot deduct them as taxes paid. Irs amendment form   If the seller paid any of your share of the real estate taxes (the taxes beginning with the date of sale), you can still deduct those taxes. Irs amendment form Do not include those taxes in your basis. Irs amendment form If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Irs amendment form Example 1. Irs amendment form You bought your home on September 1. Irs amendment form The property tax year in your area is the calendar year, and the tax is due on August 15. Irs amendment form The real estate taxes on the home you bought were $1,275 for the year and had been paid by the seller on August 15. Irs amendment form You did not reimburse the seller for your share of the real estate taxes from September 1 through December 31. Irs amendment form You must reduce the basis of your home by the $426 [(122 ÷ 365) × $1,275] the seller paid for you. Irs amendment form You can deduct your $426 share of real estate taxes on your return for the year you purchased your home. Irs amendment form Example 2. Irs amendment form You bought your home on May 3, 2013. Irs amendment form The property tax year in your area is the calendar year. Irs amendment form The taxes for the previous year are assessed on January 2 and are due on May 31 and November 30. Irs amendment form Under state law, the taxes become a lien on May 31. Irs amendment form You agreed to pay all taxes due after the date of sale. Irs amendment form The taxes due in 2013 for 2012 were $1,375. Irs amendment form The taxes due in 2014 for 2013 will be $1,425. Irs amendment form You cannot deduct any of the taxes paid in 2013 because they relate to the 2012 property tax year and you did not own the home until 2013. Irs amendment form Instead, you add the $1,375 to the cost (basis) of your home. Irs amendment form You owned the home in 2013 for 243 days (May 3 to December 31), so you can take a tax deduction on your 2014 return of $949 [(243 ÷ 365) × $1,425] paid in 2014 for 2013. Irs amendment form You add the remaining $476 ($1,425 − $949) of taxes paid in 2014 to the cost (basis) of your home. Irs amendment form Settlement or closing costs. Irs amendment form   If you bought your home, you probably paid settlement or closing costs in addition to the contract price. Irs amendment form These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. Irs amendment form If you built your home, you probably paid these costs when you bought the land or settled on your mortgage. Irs amendment form   The only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. Irs amendment form You deduct them in the year you buy your home if you itemize your deductions. Irs amendment form You can add certain other settlement or closing costs to the basis of your home. Irs amendment form Items added to basis. Irs amendment form   You can include in your basis the settlement fees and closing costs you paid for buying your home. Irs amendment form A fee is for buying the home if you would have had to pay it even if you paid cash for the home. Irs amendment form   The following are some of the settlement fees and closing costs that you can include in the original basis of your home. Irs amendment form Abstract fees (abstract of title fees). Irs amendment form Charges for installing utility services. Irs amendment form Legal fees (including fees for the title search and preparation of the sales contract and deed). Irs amendment form Recording fees. Irs amendment form Surveys. Irs amendment form Transfer or stamp taxes. Irs amendment form Owner's title insurance. Irs amendment form Any amount the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, cost for improvements or repairs, and sales commissions. Irs amendment form   If the seller actually paid for any item for which you are liable and for which you can take a deduction (such as your share of the real estate taxes for the year of sale), you must reduce your basis by that amount unless you are charged for it in the settlement. Irs amendment form Items not added to basis and not deductible. Irs amendment form   Here are some settlement and closing costs that you cannot deduct or add to your basis. Irs amendment form Fire insurance premiums. Irs amendment form Charges for using utilities or other services related to occupancy of the home before closing. Irs amendment form Rent for occupying the home before closing. Irs amendment form Charges connected with getting or refinancing a mortgage loan, such as: Loan assumption fees, Cost of a credit report, and Fee for an appraisal required by a lender. Irs amendment form Points paid by seller. Irs amendment form   If you bought your home after April 3, 1994, you must reduce your basis by any points paid for your mortgage by the person who sold you your home. Irs amendment form   If you bought your home after 1990 but before April 4, 1994, you must reduce your basis by seller-paid points only if you deducted them. Irs amendment form See Points , earlier, for the rules on deducting points. Irs amendment form Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined later) to the donor just before it was given to you, its fair market value (FMV) at the time it was given to you, and any gift tax paid on it. Irs amendment form Fair market value. Irs amendment form   Fair market value (FMV) is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and who both have a reasonable knowledge of all the necessary facts. Irs amendment form Donor's adjusted basis is more than FMV. Irs amendment form   If someone gave you your home and the donor's adjusted basis, when it was given to you, was more than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis. Irs amendment form Disposition basis. Irs amendment form   If the donor's adjusted basis at the time of the gift is more than the FMV, your basis (plus or minus any required adjustments, see Adjusted Basis , later) when you dispose of the property will depend on whether you have a gain or a loss. Irs amendment form Your basis for figuring a gain is the same as the donor's adjusted basis. Irs amendment form Your basis for figuring a loss is the FMV when you received the gift. Irs amendment form If you use the donor's adjusted basis to figure a gain and it results in a loss, then you must use the FMV (at the time of the gift) to refigure the loss. Irs amendment form However, if using the FMV results in a gain, then you neither have a gain nor a loss. Irs amendment form Example 1. Irs amendment form Andrew received a house as a gift from Ishmael (the donor). Irs amendment form At the time of the gift, the home had an FMV of $80,000. Irs amendment form Ishmael's adjusted basis was $100,000. Irs amendment form After he received the house, no events occurred to increase or decrease the basis. Irs amendment form If Andrew sells the house for $120,000, he will have a $20,000 gain because he must use the donor's adjusted basis ($100,000) at the time of the gift as his basis to figure the gain. Irs amendment form Example 2. Irs amendment form Same facts as Example 1 , except this time Andrew sells the house for $70,000. Irs amendment form He will have a loss of $10,000 because he must use the FMV ($80,000) at the time of the gift as his basis to figure the loss. Irs amendment form Example 3. Irs amendment form Same facts as Example 1 , except this time Andrew sells the house for $90,000. Irs amendment form Initially, he figures the gain using Ishmael's adjusted basis ($100,000), which results in a loss of $10,000. Irs amendment form Since it is a loss, Andrew must now recalculate the loss using the FMV ($80,000), which results in a gain of $10,000. Irs amendment form So in this situation, Andrew will neither have a gain nor a loss. Irs amendment form Donor's adjusted basis equal to or less than the FMV. Irs amendment form   If someone gave you your home after 1976 and the donor's adjusted basis, when it was given to you, was equal to or less than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home. Irs amendment form Part of federal gift tax due to net increase in value. Irs amendment form   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. Irs amendment form The numerator (top part) of the fraction is the net increase in the value of the home, and the denominator (bottom part) is the value of the home for gift tax purposes after reduction for any annual exclusion and marital or charitable deduction that applies to the gift. Irs amendment form The net increase in the value of the home is its FMV minus the adjusted basis of the donor. Irs amendment form Publication 551 gives more information, including examples, on figuring your basis when you receive property as a gift. Irs amendment form Inheritance Your basis in a home you inherited is generally the fair market value of the home on the date of the decedent's death or on the alternative valuation date if the personal representative for the estate chooses to use alternative valuation. Irs amendment form If an estate tax return was filed, your basis is generally the value of the home listed on the estate tax return. Irs amendment form If an estate tax return was not filed, your basis is the appraised value of the home at the decedent's date of death for state inheritance or transmission taxes. Irs amendment form Publication 551 and Publication 559, Survivors, Executors, and Administrators, have more information on the basis of inherited property. Irs amendment form If you inherited your home from someone who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Irs amendment form Adjusted Basis While you own your home, various events may take place that can change the original basis of your home. Irs amendment form These events can increase or decrease your original basis. Irs amendment form The result is called adjusted basis. Irs amendment form See Table 3, on this page, for a list of some of the items that can adjust your basis. Irs amendment form Table 3. Irs amendment form Adjusted Basis This table lists examples of some items that generally will increase or decrease your basis in your home. Irs amendment form It is not intended to be all-inclusive. Irs amendment form Increases to Basis Decreases to Basis Improvements: Putting an addition on your home Replacing an entire roof Paving your driveway Installing central air conditioning Rewiring your home Assessments for local improvements (see Assessments for local benefits , under What You Can and Cannot Deduct, earlier) Amounts spent to restore damaged property Insurance or other reimbursement for casualty losses Deductible casualty loss not covered by insurance Payments received for easement or right-of-way granted Depreciation allowed or allowable if home is used for business or rental purposes Value of subsidy for energy conservation measure excluded from income Improvements. Irs amendment form   An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. Irs amendment form You must add the cost of any improvements to the basis of your home. Irs amendment form You cannot deduct these costs. Irs amendment form   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, and paving your driveway. Irs amendment form Amount added to basis. Irs amendment form   The amount you add to your basis for improvements is your actual cost. Irs amendment form This includes all costs for material and labor, except your own labor, and all expenses related to the improvement. Irs amendment form For example, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. Irs amendment form   You also must add to your basis state and local assessments for improvements such as streets and sidewalks if they increase the value of the property. Irs amendment form These assessments are discussed earlier under Real Estate Taxes . Irs amendment form Improvements no longer part of home. Irs amendment form    Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. Irs amendment form Example. Irs amendment form You put wall-to-wall carpeting in your home 15 years ago. Irs amendment form Later, you replaced that carpeting with new wall-to-wall carpeting. Irs amendment form The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. Irs amendment form Repairs versus improvements. Irs amendment form   A repair keeps your home in an ordinary, efficient operating condition. Irs amendment form It does not add to the value of your home or prolong its life. Irs amendment form Repairs include repainting your home inside or outside, fixing your gutters or floors, fixing leaks or plastering, and replacing broken window panes. Irs amendment form You cannot deduct repair costs and generally cannot add them to the basis of your home. Irs amendment form   However, repairs that are done as part of an extensive remodeling or restoration of your home are considered improvements. Irs amendment form You add them to the basis of your home. Irs amendment form Records to keep. Irs amendment form   You can use Table 4 (at the end of the publication) as a guide to help you keep track of improvements to your home. Irs amendment form Also see Keeping Records , below. Irs amendment form Energy conservation subsidy. Irs amendment form   If a public utility gives you (directly or indirectly) a subsidy for the purchase or installation of an energy conservation measure for your home, do not include the value of that subsidy in your income. Irs amendment form You must reduce the basis of your home by that value. Irs amendment form   An energy conservation measure is an installation or modification primarily designed to reduce consumption of electricity or natural gas or to improve the management of energy demand. Irs amendment form Keeping Records Keeping full and accurate records is vital to properly report your income and expenses, to support your deductions and credits, and to know the basis or adjusted basis of your home. Irs amendment form These records include your purchase contract and settlement papers if you bought the property, or other objective evidence if you acquired it by gift, inheritance, or similar means. Irs amendment form You should keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. Irs amendment form In addition, you should keep track of any decreases to the basis such as those listed in Table 3, earlier. Irs amendment form How to keep records. Irs amendment form   How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. Irs amendment form How long to keep records. Irs amendment form   You must keep your records for as long as they are important for meeting any provision of the federal tax law. Irs amendment form   Keep records that support an item of income, a deduction, or a credit appearing on a return until the period of limitations for the return runs out. Irs amendment form (A period of limitations is the period of time after which no legal action can be brought. Irs amendment form ) For assessment of tax you owe, this is generally 3 years from the date you filed the return. Irs amendment form For filing a claim for credit or refund, this is generally 3 years from the date you filed the original return, or 2 years from the date you paid the tax, whichever is later. Irs amendment form Returns filed before the due date are treated as filed on the due date. Irs amendment form   You may need to keep records relating to the basis of property (discussed earlier) for longer than the period of limitations. Irs amendment form Keep those records as long as they are important in figuring the basis of the original or replacement property. Irs amendment form Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. Irs amendment form Table 4. Irs amendment form Record of Home Improvements Keep this for your records. Irs amendment form Also, keep receipts or other proof of improvements. Irs amendment form Remove from this record any improvements that are no longer part of your main home. Irs amendment form For example, if you put wall-to-wall carpeting in your home and later replace it with new wall-to-wall carpeting, remove the cost of the first carpeting. Irs amendment form (a) Type of Improvement (b) Date (c) Amount   (a) Type of Improvement (b) Date (c) Amount Additions:       Heating & Air  Conditioning:     Bedroom       Heating system     Bathroom       Central air conditioning     Deck       Furnace     Garage       Duct work     Porch       Central humidifier     Patio       Filtration system     Storage shed       Other     Fireplace       Electrical:     Other           Lawn & Grounds:       Lighting fixtures           Wiring upgrades     Landscaping       Other     Driveway       Plumbing:     Walkway           Fences       Water heater     Retaining wall       Soft water system     Sprinkler system       Filtration system     Swimming pool       Other     Exterior lighting       Insulation:     Other           Communications:       Attic           Walls     Satellite dish       Floors     Intercom       Pipes and duct work     Security system       Other     Other             Miscellaneous:       Interior  Improvements:     Storm windows and doors       Built-in appliances     Roof       Kitchen modernization     Central vacuum       Bathroom modernization     Other       Flooring             Wall-to-wall carpeting             Other     How To