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Irs Forms 1040x Instructions

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Irs Forms 1040x Instructions

Irs forms 1040x instructions Publication 915 - Introductory Material Table of Contents Reminders IntroductionOrdering forms and publications. Irs forms 1040x instructions Tax questions. Irs forms 1040x instructions Useful Items - You may want to see: Reminders Future developments. Irs forms 1040x instructions  The IRS has created a page on IRS. Irs forms 1040x instructions gov for information about Publication 915, at www. Irs forms 1040x instructions irs. Irs forms 1040x instructions gov/pub915. Irs forms 1040x instructions Information about any future developments affecting Publication 915 (such as legislation enacted after we release it) will be posted on that page. Irs forms 1040x instructions Photographs of missing children. Irs forms 1040x instructions  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Irs forms 1040x instructions Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Irs forms 1040x instructions You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Irs forms 1040x instructions Introduction This publication explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits. Irs forms 1040x instructions It is prepared through the joint efforts of the Internal Revenue Service (IRS), the Social Security Administration (SSA), and the U. Irs forms 1040x instructions S. Irs forms 1040x instructions Railroad Retirement Board (RRB). Irs forms 1040x instructions Social security benefits include monthly retirement, survivor, and disability benefits. Irs forms 1040x instructions They do not include supplemental security income (SSI) payments, which are not taxable. Irs forms 1040x instructions Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. Irs forms 1040x instructions They are commonly called the social security equivalent benefit (SSEB) portion of tier 1 benefits. Irs forms 1040x instructions If you received these benefits during 2013, you should have received a Form SSA-1099, Social Security Benefit Statement, or Form RRB-1099, Payments by the Railroad Retirement Board, showing the amount. Irs forms 1040x instructions (If you are a nonresident alien, you should have received Form SSA-1042S, Social Security Benefit Statement, or Form RRB-1042S, Statement for Nonresident Alien Recipients of: Payments by the Railroad Retirement Board. Irs forms 1040x instructions ) Note. Irs forms 1040x instructions When the term “benefits” is used in this publication, it applies to both social security benefits and the SSEB portion of tier 1 railroad retirement benefits. Irs forms 1040x instructions What is covered in this publication. Irs forms 1040x instructions   This publication covers the following topics: Whether any of your benefits are taxable, How much is taxable, How to report taxable benefits, How to treat lump-sum benefit payments, and Deductions related to your benefits, including a deduction or credit you can claim if your repayments are more than your gross benefits. Irs forms 1040x instructions The Appendix at the end of this publication explains items shown on your Form SSA-1099, SSA-1042S, RRB-1099, or RRB-1042S. Irs forms 1040x instructions What is not covered in this publication. Irs forms 1040x instructions   This publication does not cover the tax rules for the following railroad retirement benefits: Non-social security equivalent benefit (NSSEB) portion of tier 1 benefits, Tier 2 benefits, Vested dual benefits, and Supplemental annuity benefits. Irs forms 1040x instructions For information on these taxable pension benefits, see Publication 575, Pension and Annuity Income. Irs forms 1040x instructions   This publication also does not cover the tax rules for foreign social security benefits. Irs forms 1040x instructions These benefits are taxable as annuities, unless they are exempt from U. Irs forms 1040x instructions S. Irs forms 1040x instructions tax or treated as a U. Irs forms 1040x instructions S. Irs forms 1040x instructions social security benefit under a tax treaty. Irs forms 1040x instructions Comments and suggestions. Irs forms 1040x instructions   We welcome your comments about this publication and your suggestions for future editions. Irs forms 1040x instructions   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Irs forms 1040x instructions NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Irs forms 1040x instructions Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Irs forms 1040x instructions   You can send your comments from www. Irs forms 1040x instructions irs. Irs forms 1040x instructions gov/formspubs/. Irs forms 1040x instructions Click on “More Information” and then on “Comment on Tax Forms and Publications”. Irs forms 1040x instructions   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Irs forms 1040x instructions Ordering forms and publications. Irs forms 1040x instructions   Visit www. Irs forms 1040x instructions irs. Irs forms 1040x instructions gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Irs forms 1040x instructions Internal Revenue Service 1201 N. Irs forms 1040x instructions Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Irs forms 1040x instructions   If you have a tax question, check the information available on IRS. Irs forms 1040x instructions gov or call 1-800-829-1040. Irs forms 1040x instructions We cannot answer tax questions sent to either of the above addresses. Irs forms 1040x instructions Useful Items - You may want to see: Publication 505 Tax Withholding and Estimated Tax 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) Forms (and Instructions) 1040-ES Estimated Tax for Individuals SSA-1099 Social Security Benefit Statement RRB-1099 Payments by the Railroad Retirement Board W-4V Voluntary Withholding Request See How To Get Tax Help near the end of this publication for information about getting these publications and forms. Irs forms 1040x instructions Prev  Up  Next   Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Departmento de Asuntos Del Consumidor

Website: Departmento de Asuntos Del Consumidor

Address: Departmento de Asuntos Del Consumidor
Apartado 41059
Minillas Station
Santurce, PR 00940

Phone Number: 787-722-7555

Toll-free: 1-866-520-3226 (PR)

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Oficina del Comisionado de Instituciones Financieras

Website: Oficina del Comisionado de Instituciones Financieras

Address: Oficina del Comisionado de Instituciones Financieras
PO Box 11855
San Juan, PR 00910-3855

Phone Number: 787-723-3131

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Office of the Commissioner of Insurance

Website: Office of the Commissioner of Insurance

Address: Office of the Commissioner of Insurance
B5 Calle Tabonuco, Suite 216 PMB 356
Guaynabo, PR 00968-3029

Phone Number: 787-304-8686

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Office of the Commissioner of Financial Institutions

Website: Office of the Commissioner of Financial Institutions

Address: Office of the Commissioner of Financial Institutions
Securities Division
PO Box 11855
San Juan, PR 00910-3855

Phone Number: 787-723-3131

TTY: 1-800-981-7711 (Consumers)

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Public Service Commission

Website: Public Service Commission

Address: Public Service Commission
PO Box 190870
San Juan, PR 00918

Phone Number: 787-756-1919

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The Irs Forms 1040x Instructions

Irs forms 1040x instructions 4. Irs forms 1040x instructions   Special Situations Table of Contents Condominiums CooperativesDepreciation Property Changed to Rental UseBasis of Property Changed to Rental Use Figuring the Depreciation Deduction Renting Part of Property Not Rented for ProfitPostponing decision. Irs forms 1040x instructions Example—Property Changed to Rental Use This chapter discusses some rental real estate activities that are subject to additional rules. Irs forms 1040x instructions Condominiums A condominium is most often a dwelling unit in a multi-unit building, but can also take other forms, such as a townhouse or garden apartment. Irs forms 1040x instructions If you own a condominium, you also own a share of the common elements, such as land, lobbies, elevators, and service areas. Irs forms 1040x instructions You and the other condominium owners may pay dues or assessments to a special corporation that is organized to take care of the common elements. Irs forms 1040x instructions Special rules apply if you rent your condominium to others. Irs forms 1040x instructions You can deduct as rental expenses all the expenses discussed in chapters 1 and 2. Irs forms 1040x instructions In addition, you can deduct any dues or assessments paid for maintenance of the common elements. Irs forms 1040x instructions You cannot deduct special assessments you pay to a condominium management corporation for improvements. Irs forms 1040x instructions However, you may be able to recover your share of the cost of any improvement by taking depreciation. Irs forms 1040x instructions Cooperatives If you live in a cooperative, you do not own your apartment. Irs forms 1040x instructions Instead, a corporation owns the apartments and you are a tenant-stockholder in the cooperative housing corporation. Irs forms 1040x instructions If you rent your apartment to others, you usually can deduct, as a rental expense, all the maintenance fees you pay to the cooperative housing corporation. Irs forms 1040x instructions In addition to the maintenance fees paid to the cooperative housing corporation, you can deduct your direct payments for repairs, upkeep, and other rental expenses, including interest paid on a loan used to buy your stock in the corporation. Irs forms 1040x instructions Depreciation You will be depreciating your stock in the corporation rather than the apartment itself. Irs forms 1040x instructions Figure your depreciation deduction as follows. Irs forms 1040x instructions Figure the depreciation for all the depreciable real property owned by the corporation. Irs forms 1040x instructions (Depreciation methods are discussed in chapter 2 of this publication and Publication 946. Irs forms 1040x instructions ) If you bought your cooperative stock after its first offering, figure the depreciable basis of this property as follows. Irs forms 1040x instructions Multiply your cost per share by the total number of outstanding shares. Irs forms 1040x instructions Add to the amount figured in (a) any mortgage debt on the property on the date you bought the stock. Irs forms 1040x instructions Subtract from the amount figured in (b) any mortgage debt that is not for the depreciable real property, such as the part for the land. Irs forms 1040x instructions Subtract from the amount figured in (1) any depreciation for space owned by the corporation that can be rented but cannot be lived in by tenant-stockholders. Irs forms 1040x instructions Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. Irs forms 1040x instructions Multiply the result of (2) by the percentage you figured in (3). Irs forms 1040x instructions This is your depreciation on the stock. Irs forms 1040x instructions Your depreciation deduction for the year cannot be more than the part of your adjusted basis (defined in chapter 2) in the stock of the corporation that is allocable to your rental property. Irs forms 1040x instructions Payments added to capital account. Irs forms 1040x instructions   Payments earmarked for a capital asset or improvement, or otherwise charged to the corporation's capital account are added to the basis of your stock in the corporation. Irs forms 1040x instructions For example, you cannot deduct a payment used to pave a community parking lot, install a new roof, or pay the principal of the corporation's mortgage. Irs forms 1040x instructions   Treat as a capital cost the amount you were assessed for capital items. Irs forms 1040x instructions This cannot be more than the amount by which your payments to the corporation exceeded your share of the corporation's mortgage interest and real estate taxes. Irs forms 1040x instructions   Your share of interest and taxes is the amount the corporation elected to allocate to you, if it reasonably reflects those expenses for your apartment. Irs forms 1040x instructions Otherwise, figure your share in the following manner. Irs forms 1040x instructions Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. Irs forms 1040x instructions Multiply the corporation's deductible interest by the number you figured in (1). Irs forms 1040x instructions This is your share of the interest. Irs forms 1040x instructions Multiply the corporation's deductible taxes by the number you figured in (1). Irs forms 1040x instructions This is your share of the taxes. Irs forms 1040x instructions Property Changed to Rental Use If you change your home or other property (or a part of it) to rental use at any time other than the beginning of your tax year, you must divide yearly expenses, such as taxes and insurance, between rental use and personal use. Irs forms 1040x instructions You can deduct as rental expenses only the part of the expense that is for the part of the year the property was used or held for rental purposes. Irs forms 1040x instructions You cannot deduct depreciation or insurance for the part of the year the property was held for personal use. Irs forms 1040x instructions However, you can include the home mortgage interest, qualified mortgage insurance premiums, and real estate tax expenses for the part of the year the property was held for personal use as an itemized deduction on Schedule A (Form 1040). Irs forms 1040x instructions Example. Irs forms 1040x instructions Your tax year is the calendar year. Irs forms 1040x instructions You moved from your home in May and started renting it out on June 1. Irs forms 1040x instructions You can deduct as rental expenses seven-twelfths of your yearly expenses, such as taxes and insurance. Irs forms 1040x instructions Starting with June, you can deduct as rental expenses the amounts you pay for items generally billed monthly, such as utilities. Irs forms 1040x instructions When figuring depreciation, treat the property as placed in service on June 1. Irs forms 1040x instructions Basis of Property Changed to Rental Use When you change property you held for personal use to rental use (for example, you rent your former home), the basis for depreciation will be the lesser of fair market value or adjusted basis on the date of conversion. Irs forms 1040x instructions Fair market value. Irs forms 1040x instructions   This is the price at which the property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. Irs forms 1040x instructions Sales of similar property, on or about the same date, may be helpful in figuring the fair market value of the property. Irs forms 1040x instructions Figuring the basis. Irs forms 1040x instructions   The basis for depreciation is the lesser of: The fair market value of the property on the date you changed it to rental use, or Your adjusted basis on the date of the change—that is, your original cost or other basis of the property, plus the cost of permanent additions or improvements since you acquired it, minus deductions for any casualty or theft losses claimed on earlier years' income tax returns and other decreases to basis. Irs forms 1040x instructions For other increases and decreases to basis, see Adjusted Basis in chapter 2. Irs forms 1040x instructions Example. Irs forms 1040x instructions Several years ago you built your home for $140,000 on a lot that cost you $14,000. Irs forms 1040x instructions Before changing the property to rental use this year, you added $28,000 of permanent improvements to the house and claimed a $3,500 casualty loss deduction for damage to the house. Irs forms 1040x instructions Part of the improvements qualified for a $500 residential energy credit, which you claimed on your 2010 tax return. Irs forms 1040x instructions Because land is not depreciable, you can only include the cost of the house when figuring the basis for depreciation. Irs forms 1040x instructions The adjusted basis of the house at the time of the change in its use was $164,000 ($140,000 + $28,000 − $3,500 − $500). Irs forms 1040x instructions On the date of the change in use, your property had a fair market value of $168,000, of which $21,000 was for the land and $147,000 was for the house. Irs forms 1040x instructions The basis for depreciation on the house is the fair market value on the date of the change ($147,000), because it is less than your adjusted basis ($164,000). Irs forms 1040x instructions Cooperatives If you change your cooperative apartment to rental use, figure your allowable depreciation as explained earlier. Irs forms 1040x instructions (Depreciation methods are discussed in chapter 2 of this publication and Publication 946. Irs forms 1040x instructions ) The basis of all the depreciable real property owned by the cooperative housing corporation is the smaller of the following amounts. Irs forms 1040x instructions The fair market value of the property on the date you change your apartment to rental use. Irs forms 1040x instructions This is considered to be the same as the corporation's adjusted basis minus straight line depreciation, unless this value is unrealistic. Irs forms 1040x instructions The corporation's adjusted basis in the property on that date. Irs forms 1040x instructions Do not subtract depreciation when figuring the corporation's adjusted basis. Irs forms 1040x instructions If you bought the stock after its first offering, the corporation's adjusted basis in the property is the amount figured in (1) under Depreciation (under Cooperatives, near the beginning of this chapter). Irs forms 1040x instructions The fair market value of the property is considered to be the same as the corporation's adjusted basis figured in this way minus straight line depreciation, unless the value is unrealistic. Irs forms 1040x instructions Figuring the Depreciation Deduction To figure the deduction, use the depreciation system in effect when you convert your residence to rental use. Irs forms 1040x instructions Generally, that will be MACRS for any conversion after 1986. Irs forms 1040x instructions Treat the property as placed in service on the conversion date. Irs forms 1040x instructions Example. Irs forms 1040x instructions Your converted residence (see previous example under Figuring the basis) was available for rent on August 1. Irs forms 1040x instructions Using Table 2-2d (see chapter 2), the percentage for Year 1 beginning in August is 1. Irs forms 1040x instructions 364% and the depreciation deduction for Year 1 is $2,005 ($147,000 × . Irs forms 1040x instructions 01364). Irs forms 1040x instructions Renting Part of Property If you rent part of your property, you must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes, as though you actually had two separate pieces of property. Irs forms 1040x instructions You can deduct the expenses related to the part of the property used for rental purposes, such as home mortgage interest, qualified mortgage insurance premiums, and real estate taxes, as rental expenses on Schedule E (Form 1040). Irs forms 1040x instructions You can also deduct as rental expenses a portion of other expenses that normally are nondeductible personal expenses, such as expenses for electricity, or painting the outside of the house. Irs forms 1040x instructions There is no change in the types of expenses deductible for the personal-use part of your property. Irs forms 1040x instructions Generally, these expenses may be deducted only if you itemize your deductions on Schedule A (Form 1040). Irs forms 1040x instructions You cannot deduct any part of the cost of the first phone line even if your tenants have unlimited use of it. Irs forms 1040x instructions You do not have to divide the expenses that belong only to the rental part of your property. Irs forms 1040x instructions For example, if you paint a room that you rent, or if you pay premiums for liability insurance in connection with renting a room in your home, your entire cost is a rental expense. Irs forms 1040x instructions If you install a second phone line strictly for your tenant's use, all of the cost of the second line is deductible as a rental expense. Irs forms 1040x instructions You can deduct depreciation on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes. Irs forms 1040x instructions How to divide expenses. Irs forms 1040x instructions   If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between rental use and personal use. Irs forms 1040x instructions You can use any reasonable method for dividing the expense. Irs forms 1040x instructions It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. Irs forms 1040x instructions The two most common methods for dividing an expense are (1) the number of rooms in your home, and (2) the square footage of your home. Irs forms 1040x instructions Example. Irs forms 1040x instructions You rent a room in your house. Irs forms 1040x instructions The room is 12 × 15 feet, or 180 square feet. Irs forms 1040x instructions Your entire house has 1,800 square feet of floor space. Irs forms 1040x instructions You can deduct as a rental expense 10% of any expense that must be divided between rental use and personal use. Irs forms 1040x instructions If your heating bill for the year for the entire house was $600, $60 ($600 × . Irs forms 1040x instructions 10) is a rental expense. Irs forms 1040x instructions The balance, $540, is a personal expense that you cannot deduct. Irs forms 1040x instructions Duplex. Irs forms 1040x instructions   A common situation is the duplex where you live in one unit and rent out the other. Irs forms 1040x instructions Certain expenses apply to the entire property, such as mortgage interest and real estate taxes, and must be split to determine rental and personal expenses. Irs forms 1040x instructions Example. Irs forms 1040x instructions You own a duplex and live in one half, renting the other half. Irs forms 1040x instructions Both units are approximately the same size. Irs forms 1040x instructions Last year, you paid a total of $10,000 mortgage interest and $2,000 real estate taxes for the entire property. Irs forms 1040x instructions You can deduct $5,000 mortgage interest and $1,000 real estate taxes on Schedule E (Form 1040), and if you itemize your deductions, you can deduct the other $5,000 mortgage interest and $1,000 real estate taxes on Schedule A (Form 1040). Irs forms 1040x instructions Not Rented for Profit If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. Irs forms 1040x instructions You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year. Irs forms 1040x instructions Where to report. Irs forms 1040x instructions   Report your not-for-profit rental income on Form 1040 or 1040NR, line 21. Irs forms 1040x instructions For example, if you are filing Form 1040, you can include your mortgage interest and any qualified mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses on the appropriate lines of Schedule A (Form 1040) if you itemize your deductions. Irs forms 1040x instructions   If you itemize your deductions, claim your other rental expenses, subject to the rules explained in chapter 1 of Publication 535, as miscellaneous itemized deductions on Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9. Irs forms 1040x instructions You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income. Irs forms 1040x instructions Presumption of profit. Irs forms 1040x instructions   If your rental income is more than your rental expenses for at least 3 years out of a period of 5 consecutive years, you are presumed to be renting your property to make a profit. Irs forms 1040x instructions Postponing decision. Irs forms 1040x instructions   If you are starting your rental activity and do not have 3 years showing a profit, you can elect to have the presumption made after you have the 5 years of experience required by the test. Irs forms 1040x instructions You may choose to postpone the decision of whether the rental is for profit by filing Form 5213. Irs forms 1040x instructions You must file Form 5213 within 3 years after the due date of your return (determined without extensions) for the year in which you first carried on the activity or, if earlier, within 60 days after receiving written notice from the Internal Revenue Service proposing to disallow deductions attributable to the activity. Irs forms 1040x instructions More information. Irs forms 1040x instructions   For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Publication 535. Irs forms 1040x instructions Example—Property Changed to Rental Use In January, Eileen Johnson bought a condominium apartment to live in. Irs forms 1040x instructions Instead of selling the house she had been living in, she decided to change it to rental property. Irs forms 1040x instructions Eileen selected a tenant and started renting the house on February 1. Irs forms 1040x instructions Eileen charges $750 a month for rent and collects it herself. Irs forms 1040x instructions Eileen also received a $750 security deposit from her tenant. Irs forms 1040x instructions Because she plans to return it to her tenant at the end of the lease, she does not include it in her income. Irs forms 1040x instructions Her rental expenses for the year are as follows. Irs forms 1040x instructions   Mortgage interest $1,800     Fire insurance (1-year policy) 100     Miscellaneous repairs (after renting) 297     Real estate taxes imposed and paid 1,200   Eileen must divide the real estate taxes, mortgage interest, and fire insurance between the personal use of the property and the rental use of the property. Irs forms 1040x instructions She can deduct eleven-twelfths of these expenses as rental expenses. Irs forms 1040x instructions She can include the balance of the allowable taxes and mortgage interest on Schedule A (Form 1040) if she itemizes. Irs forms 1040x instructions She cannot deduct the balance of the fire insurance because it is a personal expense. Irs forms 1040x instructions Eileen bought this house in 1984 for $35,000. Irs forms 1040x instructions Her property tax was based on assessed values of $10,000 for the land and $25,000 for the house. Irs forms 1040x instructions Before changing it to rental property, Eileen added several improvements to the house. Irs forms 1040x instructions She figures her adjusted basis as follows:   Improvements Cost     House $25,000     Remodeled kitchen 4,200     Recreation room 5,800     New roof 1,600     Patio and deck 2,400     Adjusted basis $39,000   On February 1, when Eileen changed her house to rental property, the property had a fair market value of $152,000. Irs forms 1040x instructions Of this amount, $35,000 was for the land and $117,000 was for the house. Irs forms 1040x instructions Because Eileen's adjusted basis is less than the fair market value on the date of the change, Eileen uses $39,000 as her basis for depreciation. Irs forms 1040x instructions As specified for residential rental property, Eileen must use the straight line method of depreciation over the GDS or ADS recovery period. Irs forms 1040x instructions She chooses the GDS recovery period of 27. Irs forms 1040x instructions 5 years. Irs forms 1040x instructions She uses Table 2-2d to find her depreciation percentage. Irs forms 1040x instructions Since she placed the property in service in February, the percentage is 3. Irs forms 1040x instructions 182%. Irs forms 1040x instructions On April 1, Eileen bought a new dishwasher for the rental property at a cost of $425. Irs forms 1040x instructions The dishwasher is personal property used in a rental real estate activity, which has a 5-year recovery period. Irs forms 1040x instructions She uses Table 2-2a to find the percentage for Year 1 under “Half-year convention” (20%) to figure her depreciation deduction. Irs forms 1040x instructions On May 1, Eileen paid $4,000 to have a furnace installed in the house. Irs forms 1040x instructions The furnace is residential rental property. Irs forms 1040x instructions Because she placed the property in service in May, the percentage from Table 2-2d is 2. Irs forms 1040x instructions 273%. Irs forms 1040x instructions Eileen figures her net rental income or loss for the house as follows: Total rental income received  ($750 × 11) $8,250 Minus: Expenses     Mortgage interest ($1,800 × 11/12) $1,650   Fire insurance ($100 × 11/12) 92   Miscellaneous repairs 297   Real estate taxes ($1,200 × 11/12) 1,100   Total expenses 3,139 Balance $5,111 Minus: Depreciation     House ($39,000 × . Irs forms 1040x instructions 03182) $1,241   Dishwasher ($425 × . Irs forms 1040x instructions 20) 85   Furnace ($4,000 × . Irs forms 1040x instructions 02273) 91   Total depreciation 1,417 Net rental income for house   $3,694       Eileen uses Schedule E, Part I, to report her rental income and expenses. Irs forms 1040x instructions She enters her income, expenses, and depreciation for the house in the column for Property A. Irs forms 1040x instructions Since all property was placed in service this year, Eileen must use Form 4562 to figure the depreciation. Irs forms 1040x instructions See the Instructions for Form 4562 for more information on preparing the form. Irs forms 1040x instructions Prev  Up  Next   Home   More Online Publications