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Www. Www.taxact.com taxact. Www.taxact.com com Publication 517 - Introductory Material Table of Contents What's New Reminders IntroductionOrdering forms and publications. Www.taxact.com Tax questions. Www.taxact.com Useful Items - You may want to see: What's New SE tax rate. Www.taxact.com  For 2013 and 2014, the Old Age, Survivors, and Disability Insurance (OASDI) portion of the SE tax is 12. Www.taxact.com 4%. Www.taxact.com The Medicare (HI) portion of the SE tax remains 2. Www.taxact.com 9%. Www.taxact.com As a result, the SE tax rate returns to 15. Www.taxact.com 3%. Www.taxact.com For more information, see the Instructions for Schedule SE (Form 1040). Www.taxact.com Earnings subject to social security. Www.taxact.com  For 2013, the maximum wages and self-employment income subject to social security tax increases from $110,100 to $113,700. Www.taxact.com For 2014, the maximum wages and self-employment income subject to social security tax is $117,000. Www.taxact.com Additional Medicare Tax. Www.taxact.com  Beginning in 2013, a 0. Www.taxact.com 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 for any other filing status. Www.taxact.com For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Www.taxact.com Modified AGI limit for traditional IRA contributions increased. Www.taxact.com  For 2013, you may be able to take an IRA deduction if you were covered by a retirement plan at work and your modified AGI is: Less than $115,000 if married filing jointly or qualifying widow(er), Less than $69,000 if single or head of household, or Less than $10,000 if married filing separately. Www.taxact.com If you file a joint return and either you or your spouse was not covered by a retirement plan at work, you may be able to take an IRA deduction if your modified AGI is less than $188,000. Www.taxact.com Modified AGI limit for Roth IRA contributions increased. Www.taxact.com  For 2013, you may be able to contribute to your Roth IRA if your modified AGI is: Less than $188,000 if married filing jointly or qualifying widow(er), Less than $127,000 if single, head of household, or married filing separately and you did not live with your spouse at any time during the year, or Less than $10,000 if married filing separately and you lived with your spouse at any time during the year. Www.taxact.com Earned income credit (EIC). Www.taxact.com  For 2013, the maximum amount of income you can earn and still claim the EIC has increased. Www.taxact.com You may be able to take the EIC if you earned less than $46,227 ($51,567 for married filing jointly) and you have three or more qualifying children; $43,038 ($48,378 for married filing jointly) and you have two qualifying children; $37,870 ($43,210 for married filing jointly) and you have one qualifying child; and $14,340 ($19,680 for married filing jointly) and you do not have any qualifying children. Www.taxact.com Reminders Future developments. Www.taxact.com . Www.taxact.com   For the latest information about developments related to Publication 517, such as legislation enacted after it was published, go to www. Www.taxact.com irs. Www.taxact.com gov/pub517. Www.taxact.com Photographs of missing children. Www.taxact.com  The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children. Www.taxact.com Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Www.taxact.com 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. Www.taxact.com Introduction Three federal taxes are paid on wages and self-employment income—income tax, social security tax, and Medicare tax. Www.taxact.com Social security and Medicare taxes are collected under one of two systems. Www.taxact.com Under the Self-Employment Contributions Act (SECA), the self-employed person pays all the taxes. Www.taxact.com Under the Federal Insurance Contributions Act (FICA), the employee and the employer each pay half of the social security and Medicare taxes. Www.taxact.com No earnings are subject to both systems. Www.taxact.com Table 1. Www.taxact.com Are Your Ministerial Earnings* Covered Under FICA or SECA? Find the class to which you belong in the left column and read across the table to find if you are covered under FICA or SECA. Www.taxact.com Do not rely on this table alone. Www.taxact.com Also read the discussion for the class in the following pages. Www.taxact.com Class Covered under FICA? Covered under SECA? Minister NO. Www.taxact.com Your ministerial earnings are exempt. Www.taxact.com YES, if you do not have an approved exemption from the IRS. Www.taxact.com   NO, if you have an approved exemption. Www.taxact.com Member of a religious order who has not taken a vow of poverty NO. Www.taxact.com Your ministerial earnings are exempt. Www.taxact.com YES, if you do not have an approved exemption from the IRS. Www.taxact.com   NO, if you have an approved exemption. Www.taxact.com Member of a religious order who has taken a vow of poverty YES, if: Your order elected FICA coverage for its members, or You worked outside the order and the work was not required by, or done on behalf of, the order. Www.taxact.com   NO, if neither of the above applies. Www.taxact.com NO. Www.taxact.com Your ministerial earnings are exempt. Www.taxact.com Christian Science practitioner or reader NO. Www.taxact.com Your ministerial earnings are exempt. Www.taxact.com YES, if you do not have an approved exemption from the IRS. Www.taxact.com   NO, if you have an approved exemption. Www.taxact.com Religious worker (church employee) YES, if your employer did not elect to exclude you. Www.taxact.com    NO, if your employer elected to exclude you. Www.taxact.com YES, if your employer elected to exclude you from FICA. Www.taxact.com   NO, if you are covered under FICA. Www.taxact.com Member of a recognized religious sect YES, if you are an employee and do not have an approved exemption from the IRS. Www.taxact.com    NO, if you have an approved exemption. Www.taxact.com YES, if you are self-employed and do not have an approved exemption from the IRS. Www.taxact.com   NO, if you have an approved exemption. Www.taxact.com * Ministerial earnings are the self-employment earnings that result from ministerial services, defined and discussed later. Www.taxact.com In addition, all wages and self-employment income that are subject to Medicare tax are subject to a 0. Www.taxact.com 9% Additional Medicare Tax if they are paid in excess of the applicable threshold for an individual's filing status. Www.taxact.com 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 for any other filing status. Www.taxact.com Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Www.taxact.com A self-employment loss is not considered for purposes of this tax. Www.taxact.com RRTA compensation is separately compared to the threshold. Www.taxact.com There is no employer match for Additional Medicare Tax. Www.taxact.com For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Www.taxact.com This publication contains information for the following classes of taxpayers. Www.taxact.com Ministers. Www.taxact.com Members of a religious order. Www.taxact.com Christian Science practitioners and readers. Www.taxact.com Religious workers (church employees). Www.taxact.com Members of a recognized religious sect. Www.taxact.com Note. Www.taxact.com Unless otherwise noted, in this publication references to members of the clergy include ministers, members of a religious order (but not members of a recognized religious sect), and Christian Science practitioners and readers. Www.taxact.com This publication covers the following topics about the collection of social security and Medicare taxes from members of the clergy, religious workers, and members of a recognized religious sect. Www.taxact.com Which earnings are taxed under FICA and which under SECA. Www.taxact.com See Table 1 above. Www.taxact.com How a member of the clergy can apply for an exemption from self-employment tax. Www.taxact.com How a member of a recognized religious sect can apply for an exemption from both self-employment tax and FICA taxes. Www.taxact.com How a member of the clergy or religious worker figures net earnings from self-employment. Www.taxact.com This publication also covers certain income tax rules of interest to ministers and members of a religious order. Www.taxact.com A Comprehensive Example shows filled-in forms for a minister who has income taxed under SECA, other income taxed under FICA, and income tax reporting of items specific to a minister. Www.taxact.com In the back of Publication 517 is a set of worksheets that you can use to figure the amount of your taxable ministerial income and allowable deductions. Www.taxact.com You will find these worksheets right after the Comprehensive Example . Www.taxact.com Note. Www.taxact.com In this publication, the term “church” is generally used in its generic sense and not in reference to any particular religion. Www.taxact.com Comments and suggestions. Www.taxact.com   We welcome your comments about this publication and your suggestions for future editions. Www.taxact.com   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Www.taxact.com NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Www.taxact.com Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Www.taxact.com   You can send your comments from www. Www.taxact.com irs. Www.taxact.com gov/formspubs/. Www.taxact.com Click on “More Information” and then on “Give us feedback”. Www.taxact.com   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. Www.taxact.com Ordering forms and publications. Www.taxact.com   Visit www. Www.taxact.com irs. Www.taxact.com 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. Www.taxact.com Internal Revenue Service 1201 N. Www.taxact.com Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Www.taxact.com   If you have a tax question, check the information available on IRS. Www.taxact.com gov or call 1-800-829-1040. Www.taxact.com We cannot answer tax questions sent to either of the above addresses. Www.taxact.com Useful Items - You may want to see: Publication 54 Tax Guide for U. Www.taxact.com S. Www.taxact.com Citizens and Resident Aliens Abroad 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 590 Individual Retirement Arrangements (IRAs) 596 Earned Income Credit (EIC) Form (and Instructions) SS-8 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding SS-16 Certificate of Election of Coverage Under the Federal Insurance Contributions Act Schedule C (Form 1040) Profit or Loss From Business (Sole Proprietorship) Schedule C-EZ (Form 1040) Net Profit From Business (Sole Proprietorship) Schedule SE (Form 1040) Self-Employment Tax 1040-ES Estimated Tax for Individuals 1040X Amended U. Www.taxact.com S. Www.taxact.com Individual Income Tax Return 4029 Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits 4361 Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners 8274 Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption From Employer Social Security and Medicare Taxes 8959 Additional Medicare Tax Ordering publications and forms. Www.taxact.com   See How To Get Tax Help , near the end of this publication, for information about getting these publications and forms. Www.taxact.com Prev  Up  Next   Home   More Online Publications
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Contact My Local Office in Idaho

Face-to-Face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City  Street Address  Days/Hours of Service  Telephone* 
Boise  550 W. Fort St.
Boise, ID 83724 

Monday-Friday - 8:30 a.m.- 4:30 p.m.

 

Services Provided

(208) 387-2847 
Idaho Falls  1820 E. 17th St.
Idaho Falls, ID 83404 

Monday-Friday - 8:30 a.m.- 4:30 p.m. 
(Closed for lunch 12:00 noon-1:00 p.m.) 

 

Services Provided

(208) 523-8041 
Pocatello  275 S. 5th Ave.
Pocatello, ID 83201 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:00 noon-1:00 p.m.)

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(208) 236-6795 

* Note: The phone numbers in the chart above are not toll free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

For information on where to file your tax return please see Where to File Addresses.

The Taxpayer Advocate Service: Call 208-363-8900 in the Boise area or 1-877-777-4778 elsewhere, or see  Publication 1546, The Taxpayer Advocate Service of the IRS. For further information, see Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
550 W. Fort Street, MS 6610BOI
Boise, ID 83724

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

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Www. Www.taxact.com taxact. Www.taxact.com com 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. Www.taxact.com S. Www.taxact.com Individual Income Tax Return, and itemize your deductions on Schedule A (Form 1040). Www.taxact.com If you itemize, you cannot take the standard deduction. Www.taxact.com This section explains what expenses you can deduct as a homeowner. Www.taxact.com It also points out expenses that you cannot deduct. Www.taxact.com There are four primary discussions: real estate taxes, sales taxes, home mortgage interest, and mortgage insurance premiums. Www.taxact.com Generally, your real estate taxes, home mortgage interest, and mortgage insurance premiums are included in your house payment. Www.taxact.com Your house payment. Www.taxact.com   If you took out a mortgage (loan) to finance the purchase of your home, you probably have to make monthly house payments. Www.taxact.com Your house payment may include several costs of owning a home. Www.taxact.com 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. Www.taxact.com These are discussed in more detail later. Www.taxact.com   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. Www.taxact.com Minister's or military housing allowance. Www.taxact.com   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. Www.taxact.com You do not have to reduce your deductions by your nontaxable allowance. Www.taxact.com 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. Www.taxact.com Nondeductible payments. Www.taxact.com   You cannot deduct any of the following items. Www.taxact.com Insurance (other than mortgage insurance premiums), including fire and comprehensive coverage, and title insurance. Www.taxact.com Wages you pay for domestic help. Www.taxact.com Depreciation. Www.taxact.com The cost of utilities, such as gas, electricity, or water. Www.taxact.com Most settlement costs. Www.taxact.com See Settlement or closing costs under Cost as Basis, later, for more information. Www.taxact.com Forfeited deposits, down payments, or earnest money. Www.taxact.com 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. Www.taxact.com 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. Www.taxact.com 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. Www.taxact.com 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). Www.taxact.com 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. Www.taxact.com Real Estate Taxes Most state and local governments charge an annual tax on the value of real property. Www.taxact.com This is called a real estate tax. Www.taxact.com You can deduct the tax if it is assessed uniformly at a like rate on all real property throughout the community. Www.taxact.com 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. Www.taxact.com Deductible Real Estate Taxes You can deduct real estate taxes imposed on you. Www.taxact.com 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. Www.taxact.com If you own a cooperative apartment, see Special Rules for Cooperatives , later. Www.taxact.com Where to deduct real estate taxes. Www.taxact.com   Enter the amount of your deductible real estate taxes on Schedule A (Form 1040), line 6. Www.taxact.com Real estate taxes paid at settlement or closing. Www.taxact.com   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. Www.taxact.com Your share of these taxes is fully deductible if you itemize your deductions. Www.taxact.com Division of real estate taxes. Www.taxact.com   For federal income tax purposes, the seller is treated as paying the property taxes up to, but not including, the date of sale. Www.taxact.com You (the buyer) are treated as paying the taxes beginning with the date of sale. Www.taxact.com This applies regardless of the lien dates under local law. Www.taxact.com Generally, this information is included on the settlement statement you get at closing. Www.taxact.com   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. Www.taxact.com You each can deduct your own share, if you itemize deductions, for the year the property is sold. Www.taxact.com Example. Www.taxact.com You bought your home on September 1. Www.taxact.com The property tax year (the period to which the tax relates) in your area is the calendar year. Www.taxact.com The tax for the year was $730 and was due and paid by the seller on August 15. Www.taxact.com You owned your new home during the property tax year for 122 days (September 1 to December 31, including your date of purchase). Www.taxact.com You figure your deduction for real estate taxes on your home as follows. Www.taxact.com 1. Www.taxact.com Enter the total real estate taxes for the real property tax year $730 2. Www.taxact.com Enter the number of days in the property tax year that you owned the property 122 3. Www.taxact.com Divide line 2 by 365 . Www.taxact.com 3342 4. Www.taxact.com Multiply line 1 by line 3. Www.taxact.com This is your deduction. Www.taxact.com 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. Www.taxact.com 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. Www.taxact.com Delinquent taxes. Www.taxact.com   Delinquent taxes are unpaid taxes that were imposed on the seller for an earlier tax year. Www.taxact.com If you agree to pay delinquent taxes when you buy your home, you cannot deduct them. Www.taxact.com You treat them as part of the cost of your home. Www.taxact.com See Real estate taxes , later, under Basis. Www.taxact.com Escrow accounts. Www.taxact.com   Many monthly house payments include an amount placed in escrow (put in the care of a third party) for real estate taxes. Www.taxact.com You may not be able to deduct the total you pay into the escrow account. Www.taxact.com You can deduct only the real estate taxes that the lender actually paid from escrow to the taxing authority. Www.taxact.com Your real estate tax bill will show this amount. Www.taxact.com Refund or rebate of real estate taxes. Www.taxact.com   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. Www.taxact.com 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. Www.taxact.com For more information, see Recoveries in Publication 525, Taxable and Nontaxable Income. Www.taxact.com Items You Cannot Deduct as Real Estate Taxes The following items are not deductible as real estate taxes. Www.taxact.com Charges for services. Www.taxact.com   An itemized charge for services to specific property or people is not a tax, even if the charge is paid to the taxing authority. Www.taxact.com 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). Www.taxact.com    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. Www.taxact.com If your taxing authority (or lender) does not furnish you a copy of your real estate tax bill, ask for it. Www.taxact.com Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. Www.taxact.com Assessments for local benefits. Www.taxact.com   You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. Www.taxact.com Local benefits include the construction of streets, sidewalks, or water and sewer systems. Www.taxact.com You must add these amounts to the basis of your property. Www.taxact.com   You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. Www.taxact.com An example is a charge to repair an existing sidewalk and any interest included in that charge. Www.taxact.com   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. Www.taxact.com If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. Www.taxact.com   An assessment for a local benefit may be listed as an item in your real estate tax bill. Www.taxact.com If so, use the rules in this section to find how much of it, if any, you can deduct. Www.taxact.com Transfer taxes (or stamp taxes). Www.taxact.com   You cannot deduct transfer taxes and similar taxes and charges on the sale of a personal home. Www.taxact.com If you are the buyer and you pay them, include them in the cost basis of the property. Www.taxact.com If you are the seller and you pay them, they are expenses of the sale and reduce the amount realized on the sale. Www.taxact.com Homeowners association assessments. Www.taxact.com   You cannot deduct these assessments because the homeowners association, rather than a state or local government, imposes them. Www.taxact.com 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. Www.taxact.com As an owner of a cooperative apartment, you own shares of stock in a corporation that owns or leases housing facilities. Www.taxact.com 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. Www.taxact.com For this purpose, gross income means all income received during the entire tax year, including any received before the corporation changed to cooperative ownership. Www.taxact.com 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. Www.taxact.com 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. Www.taxact.com Tenant-stockholders. Www.taxact.com   A tenant-stockholder can be any entity (such as a corporation, trust, estate, partnership, or association) as well as an individual. Www.taxact.com The tenant-stockholder does not have to live in any of the cooperative's dwelling units. Www.taxact.com The units that the tenant-stockholder has the right to occupy can be rented to others. Www.taxact.com Deductible taxes. Www.taxact.com   You figure your share of real estate taxes in the following way. Www.taxact.com Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. Www.taxact.com Multiply the corporation's deductible real estate taxes by the number you figured in (1). Www.taxact.com This is your share of the real estate taxes. Www.taxact.com   Generally, the corporation will tell you your share of its real estate tax. Www.taxact.com This is the amount you can deduct if it reasonably reflects the cost of real estate taxes for your dwelling unit. Www.taxact.com Refund of real estate taxes. Www.taxact.com   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. Www.taxact.com Your deduction for real estate taxes the corporation paid this year is reduced by your share of the refund the corporation received. Www.taxact.com 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). Www.taxact.com 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. Www.taxact.com For information on figuring your deduction, see the Instructions for Schedule A (Form 1040). Www.taxact.com 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. Www.taxact.com 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. Www.taxact.com Most home buyers take out a mortgage (loan) to buy their home. Www.taxact.com They then make monthly payments to either the mortgage holder or someone collecting the payments for the mortgage holder. Www.taxact.com 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). Www.taxact.com 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. Www.taxact.com If either of these situations applies to you, see Publication 936 for more information. Www.taxact.com Also see Publication 936 if you later refinance your mortgage or buy a second home. Www.taxact.com Refund of home mortgage interest. Www.taxact.com   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. Www.taxact.com For more information, see Recoveries in Publication 525. Www.taxact.com The amount of the refund will usually be shown on the mortgage interest statement you receive from your mortgage lender. Www.taxact.com See Mortgage Interest Statement , later. Www.taxact.com Deductible Mortgage Interest To be deductible, the interest you pay must be on a loan secured by your main home or a second home. Www.taxact.com The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. Www.taxact.com Prepaid interest. Www.taxact.com   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. Www.taxact.com Generally, you can deduct in each year only the interest that qualifies as home mortgage interest for that year. Www.taxact.com An exception (discussed later) applies to points. Www.taxact.com Late payment charge on mortgage payment. Www.taxact.com   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. Www.taxact.com Mortgage prepayment penalty. Www.taxact.com   If you pay off your home mortgage early, you may have to pay a penalty. Www.taxact.com 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. Www.taxact.com Ground rent. Www.taxact.com   In some states (such as Maryland), you may buy your home subject to a ground rent. Www.taxact.com A ground rent is an obligation you assume to pay a fixed amount per year on the property. Www.taxact.com Under this arrangement, you are leasing (rather than buying) the land on which your home is located. Www.taxact.com Redeemable ground rents. Www.taxact.com   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. Www.taxact.com The ground rent is a redeemable ground rent only if all of the following are true. Www.taxact.com Your lease, including renewal periods, is for more than 15 years. Www.taxact.com You can freely assign the lease. Www.taxact.com 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. Www.taxact.com The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. Www.taxact.com   Payments made to end the lease and buy the lessor's entire interest in the land are not redeemable ground rents. Www.taxact.com You cannot deduct them. Www.taxact.com Nonredeemable ground rents. Www.taxact.com   Payments on a nonredeemable ground rent are not mortgage interest. Www.taxact.com You can deduct them as rent only if they are a business expense or if they are for rental property. Www.taxact.com Cooperative apartment. Www.taxact.com   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 . Www.taxact.com In addition, you can treat as home mortgage interest your share of the corporation's deductible mortgage interest. Www.taxact.com 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. Www.taxact.com For more information on cooperatives, see Special Rule for Tenant-Stockholders in Cooperative Housing Corporations in Publication 936. Www.taxact.com Refund of cooperative's mortgage interest. Www.taxact.com   You must reduce your mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. Www.taxact.com The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. Www.taxact.com   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. Www.taxact.com Mortgage Interest Paid at Settlement One item that normally appears on a settlement or closing statement is home mortgage interest. Www.taxact.com You can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). Www.taxact.com This amount should be included in the mortgage interest statement provided by your lender. Www.taxact.com See the discussion under Mortgage Interest Statement , later. Www.taxact.com Also, if you pay interest in advance, see Prepaid interest , earlier, and Points , next. Www.taxact.com Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Www.taxact.com Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points. Www.taxact.com A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Www.taxact.com See Points paid by the seller , later. Www.taxact.com General rule. Www.taxact.com   You cannot deduct the full amount of points in the year paid. Www.taxact.com They are prepaid interest, so you generally must deduct them over the life (term) of the mortgage. Www.taxact.com Exception. Www.taxact.com   You can deduct the full amount of points in the year paid if you meet all the following tests. Www.taxact.com Your loan is secured by your main home. Www.taxact.com (Generally, your main home is the one you live in most of the time. Www.taxact.com ) Paying points is an established business practice in the area where the loan was made. Www.taxact.com The points paid were not more than the points generally charged in that area. Www.taxact.com You use the cash method of accounting. Www.taxact.com This means you report income in the year you receive it and deduct expenses in the year you pay them. Www.taxact.com Most individuals use this method. Www.taxact.com 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. Www.taxact.com The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Www.taxact.com The funds you provided are not required to have been applied to the points. Www.taxact.com They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Www.taxact.com You cannot have borrowed these funds. Www.taxact.com You use your loan to buy or build your main home. Www.taxact.com The points were computed as a percentage of the principal amount of the mortgage. Www.taxact.com The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. Www.taxact.com The points may be shown as paid from either your funds or the seller's. Www.taxact.com Note. Www.taxact.com 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. Www.taxact.com 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. Www.taxact.com Home improvement loan. Www.taxact.com   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. Www.taxact.com Refinanced loan. Www.taxact.com   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. Www.taxact.com You can deduct the rest of the points over the life of the loan. Www.taxact.com Points not fully deductible in year paid. Www.taxact.com    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. Www.taxact.com Figure A. Www.taxact.com   You can use Figure A, next, as a quick guide to see whether your points are fully deductible in the year paid. Www.taxact.com    Please click here for the text description of the image. Www.taxact.com Figure A. Www.taxact.com Are my points fully deductible this year? Amounts charged for services. Www.taxact.com   Amounts charged by the lender for specific services connected to the loan are not interest. Www.taxact.com Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Www.taxact.com You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Www.taxact.com For information about the tax treatment of these amounts and other settlement fees and closing costs, see Basis , later. Www.taxact.com Points paid by the seller. Www.taxact.com   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Www.taxact.com Treatment by seller. Www.taxact.com   The seller cannot deduct these fees as interest. Www.taxact.com However, they are a selling expense that reduces the seller's amount realized. Www.taxact.com See Publication 523 for more information. Www.taxact.com Treatment by buyer. Www.taxact.com   The buyer treats seller-paid points as if he or she had paid them. Www.taxact.com If all the tests listed earlier under Exception are met, the buyer can deduct the points in the year paid. Www.taxact.com If any of those tests are not met, the buyer must deduct the points over the life of the loan. Www.taxact.com   The buyer must also reduce the basis of the home by the amount of the seller-paid points. Www.taxact.com For more information about the basis of your home, see Basis , later. Www.taxact.com Funds provided are less than points. Www.taxact.com   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. Www.taxact.com In addition, you can deduct any points paid by the seller. Www.taxact.com Example 1. Www.taxact.com When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Www.taxact.com 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. Www.taxact.com Of the $1,000 you were charged for points, you can deduct $750 in the year paid. Www.taxact.com You spread the remaining $250 over the life of the mortgage. Www.taxact.com Example 2. Www.taxact.com 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. Www.taxact.com In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Www.taxact.com You spread the remaining $250 over the life of the mortgage. Www.taxact.com You must reduce the basis of your home by the $1,000 paid by the seller. Www.taxact.com Excess points. Www.taxact.com   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. Www.taxact.com You must spread any additional points over the life of the mortgage. Www.taxact.com Mortgage ending early. Www.taxact.com   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. Www.taxact.com A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Www.taxact.com Example. Www.taxact.com Dan paid $3,000 in points in 2006 that he had to spread out over the 15-year life of the mortgage. Www.taxact.com He had deducted $1,400 of these points through 2012. Www.taxact.com Dan prepaid his mortgage in full in 2013. Www.taxact.com He can deduct the remaining $1,600 of points in 2013. Www.taxact.com Exception. Www.taxact.com   If you refinance the mortgage with the same lender, you cannot deduct any remaining points for the year. Www.taxact.com Instead, deduct them over the term of the new loan. Www.taxact.com Form 1098. Www.taxact.com   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. Www.taxact.com See Mortgage Interest Statement , later. Www.taxact.com 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). Www.taxact.com If you did not receive a Form 1098, enter your deductible interest on line 11, and any deductible points on line 12. Www.taxact.com See Table 1 below for a summary of where to deduct home mortgage interest and real estate taxes. Www.taxact.com 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. Www.taxact.com The seller must give you this number and you must give the seller your SSN. Www.taxact.com Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Www.taxact.com Failure to meet either of these requirements may result in a $50 penalty for each failure. Www.taxact.com Table 1. Www.taxact.com Where To Deduct Interest and Taxes Paid on Your Home See the text for information on what expenses are eligible. Www.taxact.com IF you are eligible to deduct . Www.taxact.com . Www.taxact.com . Www.taxact.com THEN report the amount  on Schedule A (Form 1040) . Www.taxact.com . Www.taxact.com . Www.taxact.com real estate taxes line 6. Www.taxact.com home mortgage interest and points reported on Form 1098 line 10. Www.taxact.com home mortgage interest not reported on  Form 1098 line 11. Www.taxact.com points not reported on Form 1098 line 12. Www.taxact.com qualified mortgage insurance premiums line 13. Www.taxact.com 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. Www.taxact.com The statement will show the total interest paid on your mortgage during the year. Www.taxact.com 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. Www.taxact.com See Points , earlier. Www.taxact.com The interest you paid at settlement should be included on the statement. Www.taxact.com 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. Www.taxact.com Put the total on Schedule A (Form 1040), line 10, and attach a statement to your return explaining the difference. Www.taxact.com Write “See attached” to the right of line 10. Www.taxact.com A mortgage holder can be a financial institution, a governmental unit, or a cooperative housing corporation. Www.taxact.com If a statement comes from a cooperative housing corporation, it generally will show your share of interest. Www.taxact.com Your mortgage interest statement for 2013 should be provided or sent to you by January 31, 2014. Www.taxact.com If it is mailed, you should allow adequate time to receive it before contacting the mortgage holder. Www.taxact.com A copy of this form will be sent to the IRS also. Www.taxact.com Example. Www.taxact.com You bought a new home on May 3. Www.taxact.com You paid no points on the purchase. Www.taxact.com During the year, you made mortgage payments which included $4,480 deductible interest on your new home. Www.taxact.com The settlement sheet for the purchase of the home included interest of $620 for 29 days in May. Www.taxact.com The mortgage statement you receive from the lender includes total interest of $5,100 ($4,480 + $620). Www.taxact.com You can deduct the $5,100 if you itemize your deductions. Www.taxact.com Refund of overpaid interest. Www.taxact.com   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. Www.taxact.com Generally, you must include the refund in income in the year you receive it. Www.taxact.com See Refund of home mortgage interest , earlier, under Home Mortgage Interest. Www.taxact.com More than one borrower. Www.taxact.com   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. Www.taxact.com Show how much of the interest each of you paid, and give the name and address of the person who received the form. Www.taxact.com Deduct your share of the interest on Schedule A (Form 1040), line 11, and write “See attached” to the right of that line. Www.taxact.com 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. Www.taxact.com Mortgage insurance premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as an itemized deduction. Www.taxact.com 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). Www.taxact.com Prepaid mortgage insurance premiums. Www.taxact.com   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. Www.taxact.com The premiums are treated as paid in the year to which they were allocated. Www.taxact.com If the mortgage is satisfied before its term, no deduction is allowed for the unamortized balance. Www.taxact.com See Publication 936 for details. Www.taxact.com Exception for certain mortgage insurance. Www.taxact.com   The allocation rules, explained above, do not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Service. Www.taxact.com 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. Www.taxact.com It also must be secured by that home. Www.taxact.com 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. Www.taxact.com Home acquisition debt limit. Www.taxact.com   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). Www.taxact.com Discharges of qualified principal residence indebtedness. Www.taxact.com   You can exclude from gross income any discharges of qualified principal residence indebtedness made after 2006 and before 2014. Www.taxact.com You must reduce the basis of your principal residence (but not below zero) by the amount you exclude. Www.taxact.com Principal residence. Www.taxact.com   Your principal residence is the home where you ordinarily live most of the time. Www.taxact.com You can have only one principal residence at any one time. Www.taxact.com Qualified principal residence indebtedness. Www.taxact.com   This is a mortgage that you took out to buy, build, or substantially improve your principal residence and that is secured by that residence. Www.taxact.com 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. Www.taxact.com   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. Www.taxact.com Additional debt incurred to substantially improve your principal residence is also qualified principal residence indebtedness. Www.taxact.com Amount you can exclude. Www.taxact.com   You can only exclude debt discharged after 2006 and before 2014. Www.taxact.com The most you can exclude is $2 million ($1 million if married filing separately). Www.taxact.com 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. Www.taxact.com Ordering rule. Www.taxact.com   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. Www.taxact.com Qualified Home This means your main home or your second home. Www.taxact.com A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. Www.taxact.com Main home. Www.taxact.com   You can have only one main home at any one time. Www.taxact.com This is the home where you ordinarily live most of the time. Www.taxact.com Second home and other special situations. Www.taxact.com   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. Www.taxact.com 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. Www.taxact.com 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. Www.taxact.com If your AGI is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Www.taxact.com Form 1098. Www.taxact.com   The amount of mortgage insurance premiums you paid during 2013 should be reported in box 4. Www.taxact.com See Form 1098, Mortgage Interest Statement in Publication 936. Www.taxact.com Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals afford home ownership. Www.taxact.com If you qualify, you can claim the credit on Form 8396 each year for part of the home mortgage interest you pay. Www.taxact.com Who qualifies. Www.taxact.com   You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate (MCC) from your state or local government. Www.taxact.com Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. Www.taxact.com The MCC will show the certificate credit rate you will use to figure your credit. Www.taxact.com It also will show the certified indebtedness amount. Www.taxact.com Only the interest on that amount qualifies for the credit. Www.taxact.com See Figuring the Credit , later. Www.taxact.com You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home. Www.taxact.com Contact your state or local housing finance agency for information about the availability of MCCs in your area. Www.taxact.com How to claim the credit. Www.taxact.com   To claim the credit, complete Form 8396 and attach it to your Form 1040 or Form 1040NR, U. Www.taxact.com S. Www.taxact.com Nonresident Alien Income Tax Return. Www.taxact.com 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. Www.taxact.com Reducing your home mortgage interest deduction. Www.taxact.com   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. Www.taxact.com You must do this even if part of that amount is to be carried forward to 2014. Www.taxact.com Selling your home. Www.taxact.com   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. Www.taxact.com For additional information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, in Publication 523. Www.taxact.com Figuring the Credit Figure your credit on Form 8396. Www.taxact.com Mortgage not more than certified indebtedness. Www.taxact.com   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. Www.taxact.com Mortgage more than certified indebtedness. Www.taxact.com   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. Www.taxact.com 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. Www.taxact.com 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. Www.taxact.com Example. Www.taxact.com Emily bought a home this year. Www.taxact.com Her mortgage loan is $125,000. Www.taxact.com The certified indebtedness amount on her MCC is $100,000. Www.taxact.com She paid $7,500 interest this year. Www.taxact.com Emily figures the interest to enter on Form 8396, line 1, as follows:   $100,000 = 80% (. Www.taxact.com 80)       $125,000       $7,500 x . Www.taxact.com 80 = $6,000   Emily enters $6,000 on Form 8396, line 1. Www.taxact.com In each later year, she will figure her credit using only 80% of the interest she pays for that year. Www.taxact.com Limits Two limits may apply to your credit. Www.taxact.com A limit based on the credit rate, and A limit based on your tax. Www.taxact.com Limit based on credit rate. Www.taxact.com   If the certificate credit rate is higher than 20%, the credit you are allowed cannot be more than $2,000. Www.taxact.com Limit based on tax. Www.taxact.com   After applying the limit based on the credit rate, your credit generally cannot be more than your tax liability. Www.taxact.com See the Credit Limit Worksheet in the Form 8396 instructions to calculate the limit based on tax. Www.taxact.com 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. Www.taxact.com Example. Www.taxact.com John and his brother, George, were issued an MCC. Www.taxact.com They used it to get a mortgage on their main home. Www.taxact.com John has a 60% ownership interest in the home, and George has a 40% ownership interest in the home. Www.taxact.com John paid $5,400 mortgage interest this year and George paid $3,600. Www.taxact.com The MCC shows a credit rate of 25% and a certified indebtedness amount of $130,000. Www.taxact.com The loan amount (mortgage) on their home is $120,000. Www.taxact.com The credit is limited to $2,000 because the credit rate is more than 20%. Www.taxact.com 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. Www.taxact.com His credit is limited to $1,200 ($2,000 × 60%). Www.taxact.com 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. Www.taxact.com His credit is limited to $800 ($2,000 × 40%). Www.taxact.com 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. Www.taxact.com Example. Www.taxact.com You receive a mortgage credit certificate from State X. Www.taxact.com This year, your regular tax liability is $1,100, you owe no alternative minimum tax, and your mortgage interest credit is $1,700. Www.taxact.com You claim no other credits. Www.taxact.com Your unused mortgage interest credit for this year is $600 ($1,700 − $1,100). Www.taxact.com You can carry forward this amount to the next 3 years or until used, whichever comes first. Www.taxact.com Credit rate more than 20%. Www.taxact.com   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). Www.taxact.com Example. Www.taxact.com In the earlier example under Dividing the Credit , John and George used the entire $2,000 credit. Www.taxact.com 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. Www.taxact.com 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. Www.taxact.com The amount of credit you can claim on the new loan may change. Www.taxact.com Table 2 below summarizes how to figure your credit if you refinance your original mortgage loan. Www.taxact.com Table 2. Www.taxact.com Effect of Refinancing on Your Credit IF you get a new (reissued) MCC and the amount of your new mortgage is . Www.taxact.com . Www.taxact.com . Www.taxact.com THEN the interest you claim on Form 8396, line 1, is* . Www.taxact.com . Www.taxact.com . Www.taxact.com smaller than or equal to the certified indebtedness amount on the new MCC all the interest paid during the year on your new mortgage. Www.taxact.com larger than the certified indebtedness amount on the new MCC interest paid during the year on your new mortgage multiplied by the following fraction. Www.taxact.com         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. Www.taxact.com  See New MCC cannot increase your credit above. Www.taxact.com An issuer may reissue an MCC after you refinance your mortgage. Www.taxact.com 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. Www.taxact.com Year of refinancing. Www.taxact.com   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. Www.taxact.com   If your new MCC has a credit rate different from the rate on the old MCC, you must attach a statement to Form 8396. Www.taxact.com 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. Www.taxact.com It must show a separate calculation for the part of the year when the new MCC was in effect. Www.taxact.com 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. Www.taxact.com New MCC cannot increase your credit. Www.taxact.com   The credit that you claim with your new MCC cannot be more than the credit that you could have claimed with your old MCC. Www.taxact.com   In most cases, the agency that issues your new MCC will make sure that it does not increase your credit. Www.taxact.com However, if either your old loan or your new loan has a variable (adjustable) interest rate, you will need to check this yourself. Www.taxact.com In that case, you will need to know the amount of the credit you could have claimed using the old MCC. Www.taxact.com   There are two methods for figuring the credit you could have claimed. Www.taxact.com Under one method, you figure the actual credit that would have been allowed. Www.taxact.com This means you use the credit rate on the old MCC and the interest you would have paid on the old loan. Www.taxact.com   If your old loan was a variable rate mortgage, you can use another method to determine the credit that you could have claimed. Www.taxact.com 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. Www.taxact.com 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. Www.taxact.com The principal of the hypothetical mortgage is the remaining outstanding balance of the certified mortgage indebtedness shown on the old MCC. Www.taxact.com    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. Www.taxact.com    As part of your tax records, you should keep your old MCC and the schedule of payments for your old mortgage. Www.taxact.com 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. Www.taxact.com While you own your home, you may add certain items to your basis. Www.taxact.com You may subtract certain other items from your basis. Www.taxact.com These items are called adjustments to basis and are explained later under Adjusted Basis . Www.taxact.com 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. Www.taxact.com You also must keep records of the events that affect basis or adjusted basis. Www.taxact.com See Keeping Records , below. Www.taxact.com Figuring Your Basis How you figure your basis depends on how you acquire your home. Www.taxact.com If you buy or build your home, your cost is your basis. Www.taxact.com 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. Www.taxact.com If you inherit your home from a decedent, different rules apply depending on the date of the decedent's death. Www.taxact.com Each of these topics is discussed later. Www.taxact.com Property transferred from a spouse. Www.taxact.com   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. Www.taxact.com Publication 504, Divorced or Separated Individuals, fully discusses transfers between spouses. Www.taxact.com 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. Www.taxact.com The cost of your home includes most settlement or closing costs you paid when you bought the home. Www.taxact.com If you built your home, your cost includes most closing costs paid when you bought the land or settled on your mortgage. Www.taxact.com See Settlement or closing costs , later. Www.taxact.com 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. Www.taxact.com Purchase. Www.taxact.com   The basis of a home you bought is the amount you paid for it. Www.taxact.com This usually includes your down payment and any debt you assumed. Www.taxact.com The basis of a cooperative apartment is the amount you paid for your shares in the corporation that owns or controls the property. Www.taxact.com This amount includes any purchase commissions or other costs of acquiring the shares. Www.taxact.com Construction. Www.taxact.com   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. Www.taxact.com 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. Www.taxact.com If you built all or part of your home yourself, your basis is the total amount it cost you to build it. Www.taxact.com You cannot include in basis the value of your own labor or any other labor for which you did not pay. Www.taxact.com Real estate taxes. Www.taxact.com   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. Www.taxact.com 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. Www.taxact.com   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. Www.taxact.com You cannot deduct them as taxes paid. Www.taxact.com   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. Www.taxact.com Do not include those taxes in your basis. Www.taxact.com If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Www.taxact.com Example 1. Www.taxact.com You bought your home on September 1. Www.taxact.com The property tax year in your area is the calendar year, and the tax is due on August 15. Www.taxact.com 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. Www.taxact.com You did not reimburse the seller for your share of the real estate taxes from September 1 through December 31. Www.taxact.com You must reduce the basis of your home by the $426 [(122 ÷ 365) × $1,275] the seller paid for you. Www.taxact.com You can deduct your $426 share of real estate taxes on your return for the year you purchased your home. Www.taxact.com Example 2. Www.taxact.com You bought your home on May 3, 2013. Www.taxact.com The property tax year in your area is the calendar year. Www.taxact.com The taxes for the previous year are assessed on January 2 and are due on May 31 and November 30. Www.taxact.com Under state law, the taxes become a lien on May 31. Www.taxact.com You agreed to pay all taxes due after the date of sale. Www.taxact.com The taxes due in 2013 for 2012 were $1,375. Www.taxact.com The taxes due in 2014 for 2013 will be $1,425. Www.taxact.com 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. Www.taxact.com Instead, you add the $1,375 to the cost (basis) of your home. Www.taxact.com 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. Www.taxact.com You add the remaining $476 ($1,425 − $949) of taxes paid in 2014 to the cost (basis) of your home. Www.taxact.com Settlement or closing costs. Www.taxact.com   If you bought your home, you probably paid settlement or closing costs in addition to the contract price. Www.taxact.com These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. Www.taxact.com If you built your home, you probably paid these costs when you bought the land or settled on your mortgage. Www.taxact.com   The only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. Www.taxact.com You deduct them in the year you buy your home if you itemize your deductions. Www.taxact.com You can add certain other settlement or closing costs to the basis of your home. Www.taxact.com Items added to basis. Www.taxact.com   You can include in your basis the settlement fees and closing costs you paid for buying your home. Www.taxact.com A fee is for buying the home if you would have had to pay it even if you paid cash for the home. Www.taxact.com   The following are some of the settlement fees and closing costs that you can include in the original basis of your home. Www.taxact.com Abstract fees (abstract of title fees). Www.taxact.com Charges for installing utility services. Www.taxact.com Legal fees (including fees for the title search and preparation of the sales contract and deed). Www.taxact.com Recording fees. Www.taxact.com Surveys. Www.taxact.com Transfer or stamp taxes. Www.taxact.com Owner's title insurance. Www.taxact.com 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. Www.taxact.com   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. Www.taxact.com Items not added to basis and not deductible. Www.taxact.com   Here are some settlement and closing costs that you cannot deduct or add to your basis. Www.taxact.com Fire insurance premiums. Www.taxact.com Charges for using utilities or other services related to occupancy of the home before closing. Www.taxact.com Rent for occupying the home before closing. Www.taxact.com 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. Www.taxact.com Points paid by seller. Www.taxact.com   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. Www.taxact.com   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. Www.taxact.com See Points , earlier, for the rules on deducting points. Www.taxact.com 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. Www.taxact.com Fair market value. Www.taxact.com   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. Www.taxact.com Donor's adjusted basis is more than FMV. Www.taxact.com   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. Www.taxact.com Disposition basis. Www.taxact.com   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. Www.taxact.com Your basis for figuring a gain is the same as the donor's adjusted basis. Www.taxact.com Your basis for figuring a loss is the FMV when you received the gift. Www.taxact.com 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. Www.taxact.com However, if using the FMV results in a gain, then you neither have a gain nor a loss. Www.taxact.com Example 1. Www.taxact.com Andrew received a house as a gift from Ishmael (the donor). Www.taxact.com At the time of the gift, the home had an FMV of $80,000. Www.taxact.com Ishmael's adjusted basis was $100,000. Www.taxact.com After he received the house, no events occurred to increase or decrease the basis. Www.taxact.com 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. Www.taxact.com Example 2. Www.taxact.com Same facts as Example 1 , except this time Andrew sells the house for $70,000. Www.taxact.com 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. Www.taxact.com Example 3. Www.taxact.com Same facts as Example 1 , except this time Andrew sells the house for $90,000. Www.taxact.com Initially, he figures the gain using Ishmael's adjusted basis ($100,000), which results in a loss of $10,000. Www.taxact.com Since it is a loss, Andrew must now recalculate the loss using the FMV ($80,000), which results in a gain of $10,000. Www.taxact.com So in this situation, Andrew will neither have a gain nor a loss. Www.taxact.com Donor's adjusted basis equal to or less than the FMV. Www.taxact.com   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. Www.taxact.com Part of federal gift tax due to net increase in value. Www.taxact.com   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. Www.taxact.com 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. Www.taxact.com The net increase in the value of the home is its FMV minus the adjusted basis of the donor. Www.taxact.com Publication 551 gives more information, including examples, on figuring your basis when you receive property as a gift. Www.taxact.com 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. Www.taxact.com If an estate tax return was filed, your basis is generally the value of the home listed on the estate tax return. Www.taxact.com 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. Www.taxact.com Publication 551 and Publication 559, Survivors, Executors, and Administrators, have more information on the basis of inherited property. Www.taxact.com 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. Www.taxact.com Adjusted Basis While you own your home, various events may take place that can change the original basis of your home. Www.taxact.com These events can increase or decrease your original basis. Www.taxact.com The result is called adjusted basis. Www.taxact.com See Table 3, on this page, for a list of some of the items that can adjust your basis. Www.taxact.com Table 3. Www.taxact.com Adjusted Basis This table lists examples of some items that generally will increase or decrease your basis in your home. Www.taxact.com It is not intended to be all-inclusive. Www.taxact.com 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. Www.taxact.com   An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. Www.taxact.com You must add the cost of any improvements to the basis of your home. Www.taxact.com You cannot deduct these costs. Www.taxact.com   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. Www.taxact.com Amount added to basis. Www.taxact.com   The amount you add to your basis for improvements is your actual cost. Www.taxact.com This includes all costs for material and labor, except your own labor, and all expenses related to the improvement. Www.taxact.com 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. Www.taxact.com   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. Www.taxact.com These assessments are discussed earlier under Real Estate Taxes . Www.taxact.com Improvements no longer part of home. Www.taxact.com    Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. Www.taxact.com Example. Www.taxact.com You put wall-to-wall carpeting in your home 15 years ago. Www.taxact.com Later, you replaced that carpeting with new wall-to-wall carpeting. Www.taxact.com The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. Www.taxact.com Repairs versus improvements. Www.taxact.com   A repair keeps your home in an ordinary, efficient operating condition. Www.taxact.com It does not add to the value of your home or prolong its life. Www.taxact.com Repairs include repainting your home inside or outside, fixing your gutters or floors, fixing leaks or plastering, and replacing broken window panes. Www.taxact.com You cannot deduct repair costs and generally cannot add them to the basis of your home. Www.taxact.com   However, repairs that are done as part of an extensive remodeling or restoration of your home are considered improvements. Www.taxact.com You add them to the basis of your home. Www.taxact.com Records to keep. Www.taxact.com   You can use Table 4 (at the end of the publication) as a guide to help you keep track of improvements to your home. Www.taxact.com Also see Keeping Records , below. Www.taxact.com Energy conservation subsidy. Www.taxact.com   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. Www.taxact.com You must reduce the basis of your home by that value. Www.taxact.com   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. Www.taxact.com 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. Www.taxact.com 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. Www.taxact.com You should keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. Www.taxact.com In addition, you should keep track of any decreases to the basis such as those listed in Table 3, earlier. Www.taxact.com How to keep records. Www.taxact.com   How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. Www.taxact.com How long to keep records. Www.taxact.com   You must keep your records for as long as they are important for meeting any provision of the federal tax law. Www.taxact.com   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. Www.taxact.com (A period of limitations is the period of time after which no legal action can be brought. Www.taxact.com ) For assessment of tax you owe, this is generally 3 years from the date you filed the return. Www.taxact.com 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. Www.taxact.com Returns filed before the due date are treated as filed on the due date. Www.taxact.com   You may need to keep records relating to the basis of property (discussed earlier) for longer than the period of limitations. Www.taxact.com Keep those records as long as they are important in figuring the basis of the original or replacement property. Www.taxact.com 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. Www.taxact.com Table 4. Www.taxact.com Record of Home Improvements Keep this for your records. Www.taxact.com Also, keep receipts or other proof of improvements. Www.taxact.com Remove from this record any improvements that are no longer part of your main home. Www.taxact.com 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. Www.taxact.com (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