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2011 Tax 1040 Form

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2011 Tax 1040 Form

2011 tax 1040 form Internal Revenue Bulletin:  2012-14  April 2, 2012  Rev. 2011 tax 1040 form Proc. 2011 tax 1040 form 2012-23 Table of Contents SECTION 1. 2011 tax 1040 form PURPOSE SECTION 2. 2011 tax 1040 form BACKGROUND SECTION 3. 2011 tax 1040 form SCOPE SECTION 4. 2011 tax 1040 form APPLICATION. 2011 tax 1040 form 01 Limitations on Depreciation Deductions for Certain Automobiles. 2011 tax 1040 form . 2011 tax 1040 form 02 Inclusions in Income of Lessees of Passenger Automobiles. 2011 tax 1040 form SECTION 5. 2011 tax 1040 form EFFECTIVE DATE SECTION 6. 2011 tax 1040 form DRAFTING INFORMATION SECTION 1. 2011 tax 1040 form PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2012, including separate tables of limitations on depreciation deductions for trucks and vans; and (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2012, including a separate table of inclusion amounts for lessees of trucks and vans. 2011 tax 1040 form The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. 2011 tax 1040 form SECTION 2. 2011 tax 1040 form BACKGROUND . 2011 tax 1040 form 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. 2011 tax 1040 form For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. 2011 tax 1040 form The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. 2011 tax 1040 form This change reflects the higher rate of price inflation for trucks and vans since 1988. 2011 tax 1040 form . 2011 tax 1040 form 02 Section 401(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. 2011 tax 1040 form L. 2011 tax 1040 form No. 2011 tax 1040 form 111-312, 124 Stat. 2011 tax 1040 form 3296 (Dec. 2011 tax 1040 form 17, 2010) (the “Act”) extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2013, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2013. 2011 tax 1040 form Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”) applies. 2011 tax 1040 form . 2011 tax 1040 form 03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). 2011 tax 1040 form Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. 2011 tax 1040 form Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax (“AMT”) credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2010, that is round 2 extension property (as defined in § 168(k)(4)(I)(iv)). 2011 tax 1040 form Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. 2011 tax 1040 form This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2012 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation. 2011 tax 1040 form . 2011 tax 1040 form 04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. 2011 tax 1040 form The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. 2011 tax 1040 form Under § 1. 2011 tax 1040 form 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. 2011 tax 1040 form One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. 2011 tax 1040 form Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. 2011 tax 1040 form SECTION 3. 2011 tax 1040 form SCOPE . 2011 tax 1040 form 01 The limitations on depreciation deductions in section 4. 2011 tax 1040 form 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2012, and continue to apply for each taxable year that the passenger automobile remains in service. 2011 tax 1040 form . 2011 tax 1040 form 02 The tables in section 4. 2011 tax 1040 form 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2012. 2011 tax 1040 form Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. 2011 tax 1040 form See Rev. 2011 tax 1040 form Proc. 2011 tax 1040 form 2007-30, 2007-1 C. 2011 tax 1040 form B. 2011 tax 1040 form 1104, for passenger automobiles first leased during calendar year 2007; Rev. 2011 tax 1040 form Proc. 2011 tax 1040 form 2008-22, 2008-1 C. 2011 tax 1040 form B. 2011 tax 1040 form 658, for passenger automobiles first leased during calendar year 2008; Rev. 2011 tax 1040 form Proc. 2011 tax 1040 form 2009-24, 2009-17 I. 2011 tax 1040 form R. 2011 tax 1040 form B. 2011 tax 1040 form 885, for passenger automobiles first leased during calendar year 2009; Rev. 2011 tax 1040 form Proc. 2011 tax 1040 form 2010-18, 2010-9 I. 2011 tax 1040 form R. 2011 tax 1040 form B. 2011 tax 1040 form 427, as amplified and modified by section 4. 2011 tax 1040 form 03 of Rev. 2011 tax 1040 form Proc. 2011 tax 1040 form 2011-21, 2011-12 I. 2011 tax 1040 form R. 2011 tax 1040 form B. 2011 tax 1040 form 560, for passenger automobiles first leased during calendar year 2010; and Rev. 2011 tax 1040 form Proc. 2011 tax 1040 form 2011-21, for passenger automobiles first leased during calendar year 2011. 2011 tax 1040 form SECTION 4. 2011 tax 1040 form APPLICATION . 2011 tax 1040 form 01 Limitations on Depreciation Deductions for Certain Automobiles. 2011 tax 1040 form (1) Amount of the inflation adjustment. 2011 tax 1040 form (a) Passenger automobiles (other than trucks or vans). 2011 tax 1040 form Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. 2011 tax 1040 form Section 280F(d)(7)(B)(ii) defines the term “CPI automobile component” as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. 2011 tax 1040 form The new car component of the CPI was 115. 2011 tax 1040 form 2 for October 1987 and 143. 2011 tax 1040 form 419 for October 2011. 2011 tax 1040 form The October 2011 index exceeded the October 1987 index by 28. 2011 tax 1040 form 219. 2011 tax 1040 form Therefore, the automobile price inflation adjustment for 2012 for passenger automobiles (other than trucks and vans) is 24. 2011 tax 1040 form 5 percent (28. 2011 tax 1040 form 219/115. 2011 tax 1040 form 2 x 100%). 2011 tax 1040 form The dollar limitations in § 280F(a) are multiplied by a factor of 0. 2011 tax 1040 form 245, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2012. 2011 tax 1040 form This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2012. 2011 tax 1040 form (b) Trucks and vans. 2011 tax 1040 form To determine the dollar limitations for trucks and vans first placed in service during calendar year 2012, the Service uses the new truck component of the CPI instead of the new car component. 2011 tax 1040 form The new truck component of the CPI was 112. 2011 tax 1040 form 4 for October 1987 and 146. 2011 tax 1040 form 607 for October 2011. 2011 tax 1040 form The October 2011 index exceeded the October 1987 index by 34. 2011 tax 1040 form 207. 2011 tax 1040 form Therefore, the automobile price inflation adjustment for 2012 for trucks and vans is 30. 2011 tax 1040 form 43 percent (34. 2011 tax 1040 form 207/112. 2011 tax 1040 form 4 x 100%). 2011 tax 1040 form The dollar limitations in § 280F(a) are multiplied by a factor of 0. 2011 tax 1040 form 3043, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. 2011 tax 1040 form This adjustment applies to all trucks and vans that are first placed in service in calendar year 2012. 2011 tax 1040 form (2) Amount of the limitation. 2011 tax 1040 form Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2012. 2011 tax 1040 form Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2012 for which the § 168(k) additional first year depreciation deduction applies. 2011 tax 1040 form Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2012 for which the § 168(k) additional first year depreciation deduction does not apply. 2011 tax 1040 form REV. 2011 tax 1040 form PROC. 2011 tax 1040 form 2012-23 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. 2011 tax 1040 form PROC. 2011 tax 1040 form 2012-23 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,360 2nd Tax Year $5,300 3rd Tax Year $3,150 Each Succeeding Year $1,875 REV. 2011 tax 1040 form PROC. 2011 tax 1040 form 2012-23 TABLE 3 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. 2011 tax 1040 form PROC. 2011 tax 1040 form 2012-23 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,360 2nd Tax Year $5,300 3rd Tax Year $3,150 Each Succeeding Year $1,875 . 2011 tax 1040 form 02 Inclusions in Income of Lessees of Passenger Automobiles. 2011 tax 1040 form A taxpayer must follow the procedures in § 1. 2011 tax 1040 form 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2012. 2011 tax 1040 form In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure. 2011 tax 1040 form REV. 2011 tax 1040 form PROC. 2011 tax 1040 form 2012-23 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $18,500 $19,000 2 4 5 6 8 19,000 19,500 2 4 7 7 9 19,500 20,000 2 5 8 8 10 20,000 20,500 3 5 9 10 11 20,500 21,000 3 6 9 12 12 21,000 21,500 3 7 10 12 14 21,500 22,000 3 8 11 13 16 22,000 23,000 4 8 13 15 17 23,000 24,000 4 10 15 17 20 24,000 25,000 5 11 17 19 23 25,000 26,000 6 12 19 21 26 26,000 27,000 6 14 20 24 28 27,000 28,000 7 15 22 26 31 28,000 29,000 7 16 25 28 33 29,000 30,000 8 18 25 32 35 30,000 31,000 9 19 27 34 38 31,000 32,000 9 20 30 36 41 32,000 33,000 10 21 32 38 43 33,000 34,000 10 23 33 41 46 34,000 35,000 11 24 35 43 49 35,000 36,000 12 25 37 45 52 36,000 37,000 12 27 39 47 54 37,000 38,000 13 28 41 49 57 38,000 39,000 13 29 43 52 59 39,000 40,000 14 30 45 54 62 40,000 41,000 14 32 47 56 65 41,000 42,000 15 33 49 58 68 42,000 43,000 16 34 51 61 70 43,000 44,000 16 36 52 63 73 44,000 45,000 17 37 54 66 75 45,000 46,000 17 38 57 67 78 46,000 47,000 18 39 59 70 80 47,000 48,000 19 40 61 72 83 48,000 49,000 19 42 62 75 86 49,000 50,000 20 43 64 77 89 50,000 51,000 20 45 66 79 91 51,000 52,000 21 46 68 81 94 52,000 53,000 21 47 70 84 96 53,000 54,000 22 48 72 86 99 54,000 55,000 23 49 74 88 102 55,000 56,000 23 51 76 90 104 56,000 57,000 24 52 78 92 107 57,000 58,000 24 54 79 95 110 58,000 59,000 25 55 81 97 113 59,000 60,000 26 56 83 100 115 60,000 62,000 26 58 86 103 119 62,000 64,000 28 60 90 108 124 64,000 66,000 29 63 94 112 129 66,000 68,000 30 66 97 117 135 68,000 70,000 31 68 102 121 140 70,000 72,000 32 71 105 126 145 72,000 74,000 33 74 109 130 151 74,000 76,000 35 76 113 135 156 76,000 78,000 36 78 117 140 161 78,000 80,000 37 81 120 145 166 80,000 85,000 39 86 127 152 176 85,000 90,000 42 92 137 163 189 90,000 95,000 45 98 147 175 202 95,000 100,000 48 105 155 187 215 100,000 110,000 52 115 170 203 235 110,000 120,000 58 127 189 227 262 120,000 130,000 64 140 208 250 288 130,000 140,000 70 153 227 272 315 140,000 150,000 75 166 246 296 340 150,000 160,000 81 179 265 318 368 160,000 170,000 87 192 284 341 394 170,000 180,000 93 204 304 364 420 180,000 190,000 99 217 323 387 446 190,000 200,000 105 230 342 409 473 200,000 210,000 111 243 361 432 499 210,000 220,000 116 256 380 455 526 220,000 230,000 122 269 399 478 552 230,000 240,000 128 282 418 501 578 240,000 and up 134 294 437 524 605 REV. 2011 tax 1040 form PROC. 2011 tax 1040 form 2012-23 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012 Fair Market Value of Truck or Van Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $19,000 $19,500 1 4 5 6 7 19,500 20,000 2 4 6 7 9 20,000 20,500 2 5 7 8 10 20,500 21,000 2 5 8 10 11 21,000 21,500 3 6 9 10 13 21,500 22,000 3 6 10 12 14 22,000 23,000 3 8 11 14 15 23,000 24,000 4 9 13 16 18 24,000 25,000 4 10 15 19 21 25,000 26,000 5 11 17 21 24 26,000 27,000 6 12 19 23 26 27,000 28,000 6 14 21 25 29 28,000 29,000 7 15 23 27 32 29,000 30,000 7 17 24 30 34 30,000 31,000 8 18 26 32 37 31,000 32,000 9 19 28 34 40 32,000 33,000 9 20 31 36 42 33,000 34,000 10 21 33 39 44 34,000 35,000 10 23 34 41 48 35,000 36,000 11 24 36 44 50 36,000 37,000 12 25 38 46 53 37,000 38,000 12 27 40 48 55 38,000 39,000 13 28 42 50 58 39,000 40,000 13 29 44 53 60 40,000 41,000 14 31 45 55 63 41,000 42,000 14 32 48 57 66 42,000 43,000 15 33 50 59 69 43,000 44,000 16 34 52 61 72 44,000 45,000 16 36 53 64 74 45,000 46,000 17 37 55 66 77 46,000 47,000 17 38 58 68 79 47,000 48,000 18 40 59 70 82 48,000 49,000 19 41 61 73 84 49,000 50,000 19 42 63 75 87 50,000 51,000 20 43 65 78 89 51,000 52,000 20 45 66 80 93 52,000 53,000 21 46 68 83 95 53,000 54,000 21 48 70 84 98 54,000 55,000 22 49 72 87 100 55,000 56,000 23 50 74 89 103 56,000 57,000 23 51 76 92 105 57,000 58,000 24 52 78 94 108 58,000 59,000 24 54 80 96 111 59,000 60,000 25 55 82 98 114 60,000 62,000 26 57 85 101 118 62,000 64,000 27 60 88 106 123 64,000 66,000 28 62 93 110 128 66,000 68,000 29 65 96 115 134 68,000 70,000 30 67 100 120 139 70,000 72,000 32 70 103 125 144 72,000 74,000 33 72 108 129 149 74,000 76,000 34 75 111 134 155 76,000 78,000 35 78 115 138 160 78,000 80,000 36 80 119 143 165 80,000 85,000 38 85 125 151 175 85,000 90,000 41 91 135 163 187 90,000 95,000 44 98 144 174 201 95,000 100,000 47 104 154 185 214 100,000 110,000 52 113 169 202 234 110,000 120,000 57 127 187 225 261 120,000 130,000 63 139 207 248 287 130,000 140,000 69 152 226 271 313 140,000 150,000 75 165 245 294 339 150,000 160,000 81 178 264 316 366 160,000 170,000 87 190 283 340 392 170,000 180,000 92 204 302 362 419 180,000 190,000 98 216 322 385 445 190,000 200,000 104 229 340 409 471 200,000 210,000 110 242 359 431 498 210,000 220,000 116 255 378 454 524 220,000 230,000 122 267 398 477 551 230,000 240,000 127 281 416 500 577 240,000 and up 133 294 435 523 603 SECTION 5. 2011 tax 1040 form EFFECTIVE DATE This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2012. 2011 tax 1040 form SECTION 6. 2011 tax 1040 form DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. 2011 tax 1040 form Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). 2011 tax 1040 form For further information regarding this revenue procedure, contact Mr. 2011 tax 1040 form Harvey at (202) 622-4930 (not a toll-free call). 2011 tax 1040 form Prev  Up  Next   Home   More Internal Revenue Bulletins
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The 2011 Tax 1040 Form

2011 tax 1040 form Publication 530 - Main Content Table of Contents What You Can and Cannot DeductHardest Hit Fund and Emergency Homeowners' Loan Programs Real Estate Taxes Sales Taxes Home Mortgage Interest Mortgage Insurance Premiums Mortgage Interest CreditFiguring the Credit BasisFiguring Your Basis Adjusted Basis Keeping Records How To Get Tax HelpLow Income Taxpayer Clinics What You Can and Cannot Deduct To deduct expenses of owning a home, you must file Form 1040, U. 2011 tax 1040 form S. 2011 tax 1040 form Individual Income Tax Return, and itemize your deductions on Schedule A (Form 1040). 2011 tax 1040 form If you itemize, you cannot take the standard deduction. 2011 tax 1040 form This section explains what expenses you can deduct as a homeowner. 2011 tax 1040 form It also points out expenses that you cannot deduct. 2011 tax 1040 form There are four primary discussions: real estate taxes, sales taxes, home mortgage interest, and mortgage insurance premiums. 2011 tax 1040 form Generally, your real estate taxes, home mortgage interest, and mortgage insurance premiums are included in your house payment. 2011 tax 1040 form Your house payment. 2011 tax 1040 form   If you took out a mortgage (loan) to finance the purchase of your home, you probably have to make monthly house payments. 2011 tax 1040 form Your house payment may include several costs of owning a home. 2011 tax 1040 form The only costs you can deduct are real estate taxes actually paid to the taxing authority, interest that qualifies as home mortgage interest, and mortgage insurance premiums. 2011 tax 1040 form These are discussed in more detail later. 2011 tax 1040 form   Some nondeductible expenses that may be included in your house payment include: Fire or homeowner's insurance premiums, and The amount applied to reduce the principal of the mortgage. 2011 tax 1040 form Minister's or military housing allowance. 2011 tax 1040 form   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you still can deduct your real estate taxes and your home mortgage interest. 2011 tax 1040 form You do not have to reduce your deductions by your nontaxable allowance. 2011 tax 1040 form For more information see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers, and Publication 3, Armed Forces' Tax Guide. 2011 tax 1040 form Nondeductible payments. 2011 tax 1040 form   You cannot deduct any of the following items. 2011 tax 1040 form Insurance (other than mortgage insurance premiums), including fire and comprehensive coverage, and title insurance. 2011 tax 1040 form Wages you pay for domestic help. 2011 tax 1040 form Depreciation. 2011 tax 1040 form The cost of utilities, such as gas, electricity, or water. 2011 tax 1040 form Most settlement costs. 2011 tax 1040 form See Settlement or closing costs under Cost as Basis, later, for more information. 2011 tax 1040 form Forfeited deposits, down payments, or earnest money. 2011 tax 1040 form Hardest Hit Fund and Emergency Homeowners' Loan Programs You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. 2011 tax 1040 form You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. 2011 tax 1040 form You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. 2011 tax 1040 form If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098-MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received), box 4 (mortgage insurance premiums) and box 5 (real property taxes). 2011 tax 1040 form However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. 2011 tax 1040 form Real Estate Taxes Most state and local governments charge an annual tax on the value of real property. 2011 tax 1040 form This is called a real estate tax. 2011 tax 1040 form You can deduct the tax if it is assessed uniformly at a like rate on all real property throughout the community. 2011 tax 1040 form The proceeds must be for general community or governmental purposes and not be a payment for a special privilege granted or service rendered to you. 2011 tax 1040 form Deductible Real Estate Taxes You can deduct real estate taxes imposed on you. 2011 tax 1040 form You must have paid them either at settlement or closing, or to a taxing authority (either directly or through an escrow account) during the year. 2011 tax 1040 form If you own a cooperative apartment, see Special Rules for Cooperatives , later. 2011 tax 1040 form Where to deduct real estate taxes. 2011 tax 1040 form   Enter the amount of your deductible real estate taxes on Schedule A (Form 1040), line 6. 2011 tax 1040 form Real estate taxes paid at settlement or closing. 2011 tax 1040 form   Real estate taxes are generally divided so that you and the seller each pay taxes for the part of the property tax year you owned the home. 2011 tax 1040 form Your share of these taxes is fully deductible if you itemize your deductions. 2011 tax 1040 form Division of real estate taxes. 2011 tax 1040 form   For federal income tax purposes, the seller is treated as paying the property taxes up to, but not including, the date of sale. 2011 tax 1040 form You (the buyer) are treated as paying the taxes beginning with the date of sale. 2011 tax 1040 form This applies regardless of the lien dates under local law. 2011 tax 1040 form Generally, this information is included on the settlement statement you get at closing. 2011 tax 1040 form   You and the seller each are considered to have paid your own share of the taxes, even if one or the other paid the entire amount. 2011 tax 1040 form You each can deduct your own share, if you itemize deductions, for the year the property is sold. 2011 tax 1040 form Example. 2011 tax 1040 form You bought your home on September 1. 2011 tax 1040 form The property tax year (the period to which the tax relates) in your area is the calendar year. 2011 tax 1040 form The tax for the year was $730 and was due and paid by the seller on August 15. 2011 tax 1040 form You owned your new home during the property tax year for 122 days (September 1 to December 31, including your date of purchase). 2011 tax 1040 form You figure your deduction for real estate taxes on your home as follows. 2011 tax 1040 form 1. 2011 tax 1040 form Enter the total real estate taxes for the real property tax year $730 2. 2011 tax 1040 form Enter the number of days in the property tax year that you owned the property 122 3. 2011 tax 1040 form Divide line 2 by 365 . 2011 tax 1040 form 3342 4. 2011 tax 1040 form Multiply line 1 by line 3. 2011 tax 1040 form This is your deduction. 2011 tax 1040 form Enter it on Schedule A (Form 1040), line 6 $244   You can deduct $244 on your return for the year if you itemize your deductions. 2011 tax 1040 form You are considered to have paid this amount and can deduct it on your return even if, under the contract, you did not have to reimburse the seller. 2011 tax 1040 form Delinquent taxes. 2011 tax 1040 form   Delinquent taxes are unpaid taxes that were imposed on the seller for an earlier tax year. 2011 tax 1040 form If you agree to pay delinquent taxes when you buy your home, you cannot deduct them. 2011 tax 1040 form You treat them as part of the cost of your home. 2011 tax 1040 form See Real estate taxes , later, under Basis. 2011 tax 1040 form Escrow accounts. 2011 tax 1040 form   Many monthly house payments include an amount placed in escrow (put in the care of a third party) for real estate taxes. 2011 tax 1040 form You may not be able to deduct the total you pay into the escrow account. 2011 tax 1040 form You can deduct only the real estate taxes that the lender actually paid from escrow to the taxing authority. 2011 tax 1040 form Your real estate tax bill will show this amount. 2011 tax 1040 form Refund or rebate of real estate taxes. 2011 tax 1040 form   If you receive a refund or rebate of real estate taxes this year for amounts you paid this year, you must reduce your real estate tax deduction by the amount refunded to you. 2011 tax 1040 form If the refund or rebate was for real estate taxes paid for a prior year, you may have to include some or all of the refund in your income. 2011 tax 1040 form For more information, see Recoveries in Publication 525, Taxable and Nontaxable Income. 2011 tax 1040 form Items You Cannot Deduct as Real Estate Taxes The following items are not deductible as real estate taxes. 2011 tax 1040 form Charges for services. 2011 tax 1040 form   An itemized charge for services to specific property or people is not a tax, even if the charge is paid to the taxing authority. 2011 tax 1040 form You cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged for trash collection), or A flat fee charged for a single service provided by your local government (such as a $30 charge for mowing your lawn because it had grown higher than permitted under a local ordinance). 2011 tax 1040 form    You must look at your real estate tax bill to decide if any nondeductible itemized charges, such as those listed above, are included in the bill. 2011 tax 1040 form If your taxing authority (or lender) does not furnish you a copy of your real estate tax bill, ask for it. 2011 tax 1040 form Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. 2011 tax 1040 form Assessments for local benefits. 2011 tax 1040 form   You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. 2011 tax 1040 form Local benefits include the construction of streets, sidewalks, or water and sewer systems. 2011 tax 1040 form You must add these amounts to the basis of your property. 2011 tax 1040 form   You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. 2011 tax 1040 form An example is a charge to repair an existing sidewalk and any interest included in that charge. 2011 tax 1040 form   If only a part of the assessment is for maintenance, repair, or interest charges, you must be able to show the amount of that part to claim the deduction. 2011 tax 1040 form If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. 2011 tax 1040 form   An assessment for a local benefit may be listed as an item in your real estate tax bill. 2011 tax 1040 form If so, use the rules in this section to find how much of it, if any, you can deduct. 2011 tax 1040 form Transfer taxes (or stamp taxes). 2011 tax 1040 form   You cannot deduct transfer taxes and similar taxes and charges on the sale of a personal home. 2011 tax 1040 form If you are the buyer and you pay them, include them in the cost basis of the property. 2011 tax 1040 form If you are the seller and you pay them, they are expenses of the sale and reduce the amount realized on the sale. 2011 tax 1040 form Homeowners association assessments. 2011 tax 1040 form   You cannot deduct these assessments because the homeowners association, rather than a state or local government, imposes them. 2011 tax 1040 form Special Rules for Cooperatives If you own a cooperative apartment, some special rules apply to you, though you generally receive the same tax treatment as other homeowners. 2011 tax 1040 form As an owner of a cooperative apartment, you own shares of stock in a corporation that owns or leases housing facilities. 2011 tax 1040 form You can deduct your share of the corporation's deductible real estate taxes if the cooperative housing corporation meets the following conditions: The corporation has only one class of stock outstanding, Each stockholder, solely because of ownership of the stock, can live in a house, apartment, or house trailer owned or leased by the corporation, No stockholder can receive any distribution out of capital, except on a partial or complete liquidation of the corporation, and At least one of the following: At least 80% of the corporation's gross income for the tax year was paid by the tenant-stockholders. 2011 tax 1040 form For this purpose, gross income means all income received during the entire tax year, including any received before the corporation changed to cooperative ownership. 2011 tax 1040 form At least 80% of the total square footage of the corporation's property must be available for use by the tenant-stockholders during the entire tax year. 2011 tax 1040 form At least 90% of the expenditures paid or incurred by the corporation were used for the acquisition, construction, management, maintenance, or care of the property for the benefit of the tenant-shareholders during the entire tax year. 2011 tax 1040 form Tenant-stockholders. 2011 tax 1040 form   A tenant-stockholder can be any entity (such as a corporation, trust, estate, partnership, or association) as well as an individual. 2011 tax 1040 form The tenant-stockholder does not have to live in any of the cooperative's dwelling units. 2011 tax 1040 form The units that the tenant-stockholder has the right to occupy can be rented to others. 2011 tax 1040 form Deductible taxes. 2011 tax 1040 form   You figure your share of real estate taxes in the following way. 2011 tax 1040 form Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. 2011 tax 1040 form Multiply the corporation's deductible real estate taxes by the number you figured in (1). 2011 tax 1040 form This is your share of the real estate taxes. 2011 tax 1040 form   Generally, the corporation will tell you your share of its real estate tax. 2011 tax 1040 form This is the amount you can deduct if it reasonably reflects the cost of real estate taxes for your dwelling unit. 2011 tax 1040 form Refund of real estate taxes. 2011 tax 1040 form   If the corporation receives a refund of real estate taxes it paid in an earlier year, it must reduce the amount of real estate taxes paid this year when it allocates the tax expense to you. 2011 tax 1040 form Your deduction for real estate taxes the corporation paid this year is reduced by your share of the refund the corporation received. 2011 tax 1040 form Sales Taxes Generally, you can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040). 2011 tax 1040 form Deductible sales taxes may include sales taxes paid on your home (including mobile and prefabricated), or home building materials if the tax rate was the same as the general sales tax rate. 2011 tax 1040 form For information on figuring your deduction, see the Instructions for Schedule A (Form 1040). 2011 tax 1040 form If you elect to deduct the sales taxes paid on your home, or home building materials, you cannot include them as part of your cost basis in the home. 2011 tax 1040 form Home Mortgage Interest This section of the publication gives you basic information about home mortgage interest, including information on interest paid at settlement, points, and Form 1098, Mortgage Interest Statement. 2011 tax 1040 form Most home buyers take out a mortgage (loan) to buy their home. 2011 tax 1040 form They then make monthly payments to either the mortgage holder or someone collecting the payments for the mortgage holder. 2011 tax 1040 form Usually, you can deduct the entire part of your payment that is for mortgage interest, if you itemize your deductions on Schedule A (Form 1040). 2011 tax 1040 form However, your deduction may be limited if: Your total mortgage balance is more than $1 million ($500,000 if married filing separately), or You took out a mortgage for reasons other than to buy, build, or improve your home. 2011 tax 1040 form If either of these situations applies to you, see Publication 936 for more information. 2011 tax 1040 form Also see Publication 936 if you later refinance your mortgage or buy a second home. 2011 tax 1040 form Refund of home mortgage interest. 2011 tax 1040 form   If you receive a refund of home mortgage interest that you deducted in an earlier year and that reduced your tax, you generally must include the refund in income in the year you receive it. 2011 tax 1040 form For more information, see Recoveries in Publication 525. 2011 tax 1040 form The amount of the refund will usually be shown on the mortgage interest statement you receive from your mortgage lender. 2011 tax 1040 form See Mortgage Interest Statement , later. 2011 tax 1040 form Deductible Mortgage Interest To be deductible, the interest you pay must be on a loan secured by your main home or a second home. 2011 tax 1040 form The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. 2011 tax 1040 form Prepaid interest. 2011 tax 1040 form   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. 2011 tax 1040 form Generally, you can deduct in each year only the interest that qualifies as home mortgage interest for that year. 2011 tax 1040 form An exception (discussed later) applies to points. 2011 tax 1040 form Late payment charge on mortgage payment. 2011 tax 1040 form   You can deduct as home mortgage interest a late payment charge if it was not for a specific service in connection with your mortgage loan. 2011 tax 1040 form Mortgage prepayment penalty. 2011 tax 1040 form   If you pay off your home mortgage early, you may have to pay a penalty. 2011 tax 1040 form You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. 2011 tax 1040 form Ground rent. 2011 tax 1040 form   In some states (such as Maryland), you may buy your home subject to a ground rent. 2011 tax 1040 form A ground rent is an obligation you assume to pay a fixed amount per year on the property. 2011 tax 1040 form Under this arrangement, you are leasing (rather than buying) the land on which your home is located. 2011 tax 1040 form Redeemable ground rents. 2011 tax 1040 form   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. 2011 tax 1040 form The ground rent is a redeemable ground rent only if all of the following are true. 2011 tax 1040 form Your lease, including renewal periods, is for more than 15 years. 2011 tax 1040 form You can freely assign the lease. 2011 tax 1040 form You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specified amount. 2011 tax 1040 form The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. 2011 tax 1040 form   Payments made to end the lease and buy the lessor's entire interest in the land are not redeemable ground rents. 2011 tax 1040 form You cannot deduct them. 2011 tax 1040 form Nonredeemable ground rents. 2011 tax 1040 form   Payments on a nonredeemable ground rent are not mortgage interest. 2011 tax 1040 form You can deduct them as rent only if they are a business expense or if they are for rental property. 2011 tax 1040 form Cooperative apartment. 2011 tax 1040 form   You can usually treat the interest on a loan you took out to buy stock in a cooperative housing corporation as home mortgage interest if you own a cooperative apartment, and the cooperative housing corporation meets the conditions described earlier under Special Rules for Cooperatives . 2011 tax 1040 form In addition, you can treat as home mortgage interest your share of the corporation's deductible mortgage interest. 2011 tax 1040 form Figure your share of mortgage interest the same way that is shown for figuring your share of real estate taxes in the Example under Division of real estate taxes, earlier. 2011 tax 1040 form For more information on cooperatives, see Special Rule for Tenant-Stockholders in Cooperative Housing Corporations in Publication 936. 2011 tax 1040 form Refund of cooperative's mortgage interest. 2011 tax 1040 form   You must reduce your mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. 2011 tax 1040 form The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. 2011 tax 1040 form   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. 2011 tax 1040 form Mortgage Interest Paid at Settlement One item that normally appears on a settlement or closing statement is home mortgage interest. 2011 tax 1040 form You can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). 2011 tax 1040 form This amount should be included in the mortgage interest statement provided by your lender. 2011 tax 1040 form See the discussion under Mortgage Interest Statement , later. 2011 tax 1040 form Also, if you pay interest in advance, see Prepaid interest , earlier, and Points , next. 2011 tax 1040 form Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. 2011 tax 1040 form Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points. 2011 tax 1040 form A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. 2011 tax 1040 form See Points paid by the seller , later. 2011 tax 1040 form General rule. 2011 tax 1040 form   You cannot deduct the full amount of points in the year paid. 2011 tax 1040 form They are prepaid interest, so you generally must deduct them over the life (term) of the mortgage. 2011 tax 1040 form Exception. 2011 tax 1040 form   You can deduct the full amount of points in the year paid if you meet all the following tests. 2011 tax 1040 form Your loan is secured by your main home. 2011 tax 1040 form (Generally, your main home is the one you live in most of the time. 2011 tax 1040 form ) Paying points is an established business practice in the area where the loan was made. 2011 tax 1040 form The points paid were not more than the points generally charged in that area. 2011 tax 1040 form You use the cash method of accounting. 2011 tax 1040 form This means you report income in the year you receive it and deduct expenses in the year you pay them. 2011 tax 1040 form Most individuals use this method. 2011 tax 1040 form The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. 2011 tax 1040 form The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. 2011 tax 1040 form The funds you provided are not required to have been applied to the points. 2011 tax 1040 form They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. 2011 tax 1040 form You cannot have borrowed these funds. 2011 tax 1040 form You use your loan to buy or build your main home. 2011 tax 1040 form The points were computed as a percentage of the principal amount of the mortgage. 2011 tax 1040 form The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. 2011 tax 1040 form The points may be shown as paid from either your funds or the seller's. 2011 tax 1040 form Note. 2011 tax 1040 form If you meet all of the tests listed above and you itemize your deductions in the year you get the loan, you can either deduct the full amount of points in the year paid or deduct them over the life of the loan, beginning in the year you get the loan. 2011 tax 1040 form If you do not itemize your deductions in the year you get the loan, you can spread the points over the life of the loan and deduct the appropriate amount in each future year, if any, when you do itemize your deductions. 2011 tax 1040 form Home improvement loan. 2011 tax 1040 form   You can also fully deduct in the year paid points paid on a loan to improve your main home, if you meet the first six tests listed earlier. 2011 tax 1040 form Refinanced loan. 2011 tax 1040 form   If you use part of the refinanced mortgage proceeds to improve your main home and you meet the first six tests listed earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. 2011 tax 1040 form You can deduct the rest of the points over the life of the loan. 2011 tax 1040 form Points not fully deductible in year paid. 2011 tax 1040 form    If you do not qualify under the exception to deduct the full amount of points in the year paid (or choose not to do so), see Points in Publication 936 for the rules on when and how much you can deduct. 2011 tax 1040 form Figure A. 2011 tax 1040 form   You can use Figure A, next, as a quick guide to see whether your points are fully deductible in the year paid. 2011 tax 1040 form    Please click here for the text description of the image. 2011 tax 1040 form Figure A. 2011 tax 1040 form Are my points fully deductible this year? Amounts charged for services. 2011 tax 1040 form   Amounts charged by the lender for specific services connected to the loan are not interest. 2011 tax 1040 form Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. 2011 tax 1040 form You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. 2011 tax 1040 form For information about the tax treatment of these amounts and other settlement fees and closing costs, see Basis , later. 2011 tax 1040 form Points paid by the seller. 2011 tax 1040 form   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. 2011 tax 1040 form Treatment by seller. 2011 tax 1040 form   The seller cannot deduct these fees as interest. 2011 tax 1040 form However, they are a selling expense that reduces the seller's amount realized. 2011 tax 1040 form See Publication 523 for more information. 2011 tax 1040 form Treatment by buyer. 2011 tax 1040 form   The buyer treats seller-paid points as if he or she had paid them. 2011 tax 1040 form If all the tests listed earlier under Exception are met, the buyer can deduct the points in the year paid. 2011 tax 1040 form If any of those tests are not met, the buyer must deduct the points over the life of the loan. 2011 tax 1040 form   The buyer must also reduce the basis of the home by the amount of the seller-paid points. 2011 tax 1040 form For more information about the basis of your home, see Basis , later. 2011 tax 1040 form Funds provided are less than points. 2011 tax 1040 form   If you meet all the tests listed earlier under Exception except that the funds you provided were less than the points charged to you (test 6), you can deduct the points in the year paid up to the amount of funds you provided. 2011 tax 1040 form In addition, you can deduct any points paid by the seller. 2011 tax 1040 form Example 1. 2011 tax 1040 form When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). 2011 tax 1040 form You meet all the tests for deducting points in the year paid (see Exception , earlier), except the only funds you provided were a $750 down payment. 2011 tax 1040 form Of the $1,000 you were charged for points, you can deduct $750 in the year paid. 2011 tax 1040 form You spread the remaining $250 over the life of the mortgage. 2011 tax 1040 form Example 2. 2011 tax 1040 form The facts are the same as in Example 1 , except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. 2011 tax 1040 form In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). 2011 tax 1040 form You spread the remaining $250 over the life of the mortgage. 2011 tax 1040 form You must reduce the basis of your home by the $1,000 paid by the seller. 2011 tax 1040 form Excess points. 2011 tax 1040 form   If you meet all the tests under Exception , earlier, except that the points paid were more than are generally charged in your area (test 3), you can deduct in the year paid only the points that are generally charged. 2011 tax 1040 form You must spread any additional points over the life of the mortgage. 2011 tax 1040 form Mortgage ending early. 2011 tax 1040 form   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. 2011 tax 1040 form A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. 2011 tax 1040 form Example. 2011 tax 1040 form Dan paid $3,000 in points in 2006 that he had to spread out over the 15-year life of the mortgage. 2011 tax 1040 form He had deducted $1,400 of these points through 2012. 2011 tax 1040 form Dan prepaid his mortgage in full in 2013. 2011 tax 1040 form He can deduct the remaining $1,600 of points in 2013. 2011 tax 1040 form Exception. 2011 tax 1040 form   If you refinance the mortgage with the same lender, you cannot deduct any remaining points for the year. 2011 tax 1040 form Instead, deduct them over the term of the new loan. 2011 tax 1040 form Form 1098. 2011 tax 1040 form   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your deductible points paid during the year. 2011 tax 1040 form See Mortgage Interest Statement , later. 2011 tax 1040 form Where To Deduct Home Mortgage Interest Enter on Schedule A (Form 1040), line 10, the home mortgage interest and points reported to you on Form 1098 (discussed next). 2011 tax 1040 form If you did not receive a Form 1098, enter your deductible interest on line 11, and any deductible points on line 12. 2011 tax 1040 form See Table 1 below for a summary of where to deduct home mortgage interest and real estate taxes. 2011 tax 1040 form If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and social security number (SSN) or employer identification number (EIN) on the dotted lines next to line 11. 2011 tax 1040 form The seller must give you this number and you must give the seller your SSN. 2011 tax 1040 form Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. 2011 tax 1040 form Failure to meet either of these requirements may result in a $50 penalty for each failure. 2011 tax 1040 form Table 1. 2011 tax 1040 form Where To Deduct Interest and Taxes Paid on Your Home See the text for information on what expenses are eligible. 2011 tax 1040 form IF you are eligible to deduct . 2011 tax 1040 form . 2011 tax 1040 form . 2011 tax 1040 form THEN report the amount  on Schedule A (Form 1040) . 2011 tax 1040 form . 2011 tax 1040 form . 2011 tax 1040 form real estate taxes line 6. 2011 tax 1040 form home mortgage interest and points reported on Form 1098 line 10. 2011 tax 1040 form home mortgage interest not reported on  Form 1098 line 11. 2011 tax 1040 form points not reported on Form 1098 line 12. 2011 tax 1040 form qualified mortgage insurance premiums line 13. 2011 tax 1040 form Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage to a mortgage holder in the course of that holder's trade or business, you should receive a Form 1098 or similar statement from the mortgage holder. 2011 tax 1040 form The statement will show the total interest paid on your mortgage during the year. 2011 tax 1040 form If you bought a main home during the year, it also will show the deductible points you paid and any points you can deduct that were paid by the person who sold you your home. 2011 tax 1040 form See Points , earlier. 2011 tax 1040 form The interest you paid at settlement should be included on the statement. 2011 tax 1040 form If it is not, add the interest from the settlement sheet that qualifies as home mortgage interest to the total shown on Form 1098 or similar statement. 2011 tax 1040 form Put the total on Schedule A (Form 1040), line 10, and attach a statement to your return explaining the difference. 2011 tax 1040 form Write “See attached” to the right of line 10. 2011 tax 1040 form A mortgage holder can be a financial institution, a governmental unit, or a cooperative housing corporation. 2011 tax 1040 form If a statement comes from a cooperative housing corporation, it generally will show your share of interest. 2011 tax 1040 form Your mortgage interest statement for 2013 should be provided or sent to you by January 31, 2014. 2011 tax 1040 form If it is mailed, you should allow adequate time to receive it before contacting the mortgage holder. 2011 tax 1040 form A copy of this form will be sent to the IRS also. 2011 tax 1040 form Example. 2011 tax 1040 form You bought a new home on May 3. 2011 tax 1040 form You paid no points on the purchase. 2011 tax 1040 form During the year, you made mortgage payments which included $4,480 deductible interest on your new home. 2011 tax 1040 form The settlement sheet for the purchase of the home included interest of $620 for 29 days in May. 2011 tax 1040 form The mortgage statement you receive from the lender includes total interest of $5,100 ($4,480 + $620). 2011 tax 1040 form You can deduct the $5,100 if you itemize your deductions. 2011 tax 1040 form Refund of overpaid interest. 2011 tax 1040 form   If you receive a refund of mortgage interest you overpaid in a prior year, you generally will receive a Form 1098 showing the refund in box 3. 2011 tax 1040 form Generally, you must include the refund in income in the year you receive it. 2011 tax 1040 form See Refund of home mortgage interest , earlier, under Home Mortgage Interest. 2011 tax 1040 form More than one borrower. 2011 tax 1040 form   If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. 2011 tax 1040 form Show how much of the interest each of you paid, and give the name and address of the person who received the form. 2011 tax 1040 form Deduct your share of the interest on Schedule A (Form 1040), line 11, and write “See attached” to the right of that line. 2011 tax 1040 form Mortgage Insurance Premiums You may be able to take an itemized deduction on Schedule A (Form 1040), line 13, for premiums you pay or accrue during 2013 for qualified mortgage insurance in connection with home acquisition debt on your qualified home. 2011 tax 1040 form Mortgage insurance premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as an itemized deduction. 2011 tax 1040 form Qualified Mortgage Insurance Qualified mortgage insurance is mortgage insurance provided by the Veterans Administration, the Federal Housing Administration, or the Rural Housing Administration, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). 2011 tax 1040 form Prepaid mortgage insurance premiums. 2011 tax 1040 form   If you paid premiums that are allocable to periods after 2013, you must allocate them over the shorter of: The stated term of the mortgage, or 84 months, beginning with the month the insurance was obtained. 2011 tax 1040 form The premiums are treated as paid in the year to which they were allocated. 2011 tax 1040 form If the mortgage is satisfied before its term, no deduction is allowed for the unamortized balance. 2011 tax 1040 form See Publication 936 for details. 2011 tax 1040 form Exception for certain mortgage insurance. 2011 tax 1040 form   The allocation rules, explained above, do not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Service. 2011 tax 1040 form Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home. 2011 tax 1040 form It also must be secured by that home. 2011 tax 1040 form If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. 2011 tax 1040 form Home acquisition debt limit. 2011 tax 1040 form   The total amount you can treat as home acquisition debt at any time on your home cannot be more than $1 million ($500,000 if married filing separately). 2011 tax 1040 form Discharges of qualified principal residence indebtedness. 2011 tax 1040 form   You can exclude from gross income any discharges of qualified principal residence indebtedness made after 2006 and before 2014. 2011 tax 1040 form You must reduce the basis of your principal residence (but not below zero) by the amount you exclude. 2011 tax 1040 form Principal residence. 2011 tax 1040 form   Your principal residence is the home where you ordinarily live most of the time. 2011 tax 1040 form You can have only one principal residence at any one time. 2011 tax 1040 form Qualified principal residence indebtedness. 2011 tax 1040 form   This is a mortgage that you took out to buy, build, or substantially improve your principal residence and that is secured by that residence. 2011 tax 1040 form If the amount of your original mortgage is more than the cost of your principal residence plus the cost of substantial improvements, qualified principal residence indebtedness cannot be more than the cost of your principal residence plus improvements. 2011 tax 1040 form   Any debt secured by your principal residence that you use to refinance qualified principal residence indebtedness is qualified principal residence indebtedness up to the amount of your old mortgage principal just before the refinancing. 2011 tax 1040 form Additional debt incurred to substantially improve your principal residence is also qualified principal residence indebtedness. 2011 tax 1040 form Amount you can exclude. 2011 tax 1040 form   You can only exclude debt discharged after 2006 and before 2014. 2011 tax 1040 form The most you can exclude is $2 million ($1 million if married filing separately). 2011 tax 1040 form You cannot exclude any amount that was discharged because of services performed for the lender or on account of any other factor not directly related either to a decline in the value of your residence or to your financial condition. 2011 tax 1040 form Ordering rule. 2011 tax 1040 form   If only a part of a loan is qualified principal residence indebtedness, you can exclude only the amount of the discharge that is more than the amount of the loan (immediately before the discharge) that is not qualified principal residence indebtedness. 2011 tax 1040 form Qualified Home This means your main home or your second home. 2011 tax 1040 form A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. 2011 tax 1040 form Main home. 2011 tax 1040 form   You can have only one main home at any one time. 2011 tax 1040 form This is the home where you ordinarily live most of the time. 2011 tax 1040 form Second home and other special situations. 2011 tax 1040 form   If you have a second home, use part of your home for other than residential living (such as a home office), rent out part of your home, or are having your home constructed, see Qualified Home in Publication 936. 2011 tax 1040 form Limit on Deduction If your adjusted gross income (AGI) on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are deductible is reduced and may be eliminated. 2011 tax 1040 form See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. 2011 tax 1040 form If your AGI is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. 2011 tax 1040 form Form 1098. 2011 tax 1040 form   The amount of mortgage insurance premiums you paid during 2013 should be reported in box 4. 2011 tax 1040 form See Form 1098, Mortgage Interest Statement in Publication 936. 2011 tax 1040 form Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals afford home ownership. 2011 tax 1040 form If you qualify, you can claim the credit on Form 8396 each year for part of the home mortgage interest you pay. 2011 tax 1040 form Who qualifies. 2011 tax 1040 form   You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate (MCC) from your state or local government. 2011 tax 1040 form Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. 2011 tax 1040 form The MCC will show the certificate credit rate you will use to figure your credit. 2011 tax 1040 form It also will show the certified indebtedness amount. 2011 tax 1040 form Only the interest on that amount qualifies for the credit. 2011 tax 1040 form See Figuring the Credit , later. 2011 tax 1040 form You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home. 2011 tax 1040 form Contact your state or local housing finance agency for information about the availability of MCCs in your area. 2011 tax 1040 form How to claim the credit. 2011 tax 1040 form   To claim the credit, complete Form 8396 and attach it to your Form 1040 or Form 1040NR, U. 2011 tax 1040 form S. 2011 tax 1040 form Nonresident Alien Income Tax Return. 2011 tax 1040 form Include the credit in your total for Form 1040, line 53, or Form 1040NR, line 50; be sure to check box c and write “Form 8396” on that line. 2011 tax 1040 form Reducing your home mortgage interest deduction. 2011 tax 1040 form   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. 2011 tax 1040 form You must do this even if part of that amount is to be carried forward to 2014. 2011 tax 1040 form Selling your home. 2011 tax 1040 form   If you purchase a home after 1990 using an MCC, and you sell that home within 9 years, you may have to recapture (repay) all or part of the benefit you received from the MCC program. 2011 tax 1040 form For additional information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, in Publication 523. 2011 tax 1040 form Figuring the Credit Figure your credit on Form 8396. 2011 tax 1040 form Mortgage not more than certified indebtedness. 2011 tax 1040 form   If your mortgage loan amount is equal to (or smaller than) the certified indebtedness amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. 2011 tax 1040 form Mortgage more than certified indebtedness. 2011 tax 1040 form   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. 2011 tax 1040 form To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. 2011 tax 1040 form Certified indebtedness amount on your MCC Original amount of your mortgage   The fraction will not change as long as you are entitled to take the mortgage interest credit. 2011 tax 1040 form Example. 2011 tax 1040 form Emily bought a home this year. 2011 tax 1040 form Her mortgage loan is $125,000. 2011 tax 1040 form The certified indebtedness amount on her MCC is $100,000. 2011 tax 1040 form She paid $7,500 interest this year. 2011 tax 1040 form Emily figures the interest to enter on Form 8396, line 1, as follows:   $100,000 = 80% (. 2011 tax 1040 form 80)       $125,000       $7,500 x . 2011 tax 1040 form 80 = $6,000   Emily enters $6,000 on Form 8396, line 1. 2011 tax 1040 form In each later year, she will figure her credit using only 80% of the interest she pays for that year. 2011 tax 1040 form Limits Two limits may apply to your credit. 2011 tax 1040 form A limit based on the credit rate, and A limit based on your tax. 2011 tax 1040 form Limit based on credit rate. 2011 tax 1040 form   If the certificate credit rate is higher than 20%, the credit you are allowed cannot be more than $2,000. 2011 tax 1040 form Limit based on tax. 2011 tax 1040 form   After applying the limit based on the credit rate, your credit generally cannot be more than your tax liability. 2011 tax 1040 form See the Credit Limit Worksheet in the Form 8396 instructions to calculate the limit based on tax. 2011 tax 1040 form Dividing the Credit If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, the credit must be divided based on the interest held by each person. 2011 tax 1040 form Example. 2011 tax 1040 form John and his brother, George, were issued an MCC. 2011 tax 1040 form They used it to get a mortgage on their main home. 2011 tax 1040 form John has a 60% ownership interest in the home, and George has a 40% ownership interest in the home. 2011 tax 1040 form John paid $5,400 mortgage interest this year and George paid $3,600. 2011 tax 1040 form The MCC shows a credit rate of 25% and a certified indebtedness amount of $130,000. 2011 tax 1040 form The loan amount (mortgage) on their home is $120,000. 2011 tax 1040 form The credit is limited to $2,000 because the credit rate is more than 20%. 2011 tax 1040 form John figures the credit by multiplying the mortgage interest he paid this year ($5,400) by the certificate credit rate (25%) for a total of $1,350. 2011 tax 1040 form His credit is limited to $1,200 ($2,000 × 60%). 2011 tax 1040 form George figures the credit by multiplying the mortgage interest he paid this year ($3,600) by the certificate credit rate (25%) for a total of $900. 2011 tax 1040 form His credit is limited to $800 ($2,000 × 40%). 2011 tax 1040 form Carryforward If your allowable credit is reduced because of the limit based on your tax, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. 2011 tax 1040 form Example. 2011 tax 1040 form You receive a mortgage credit certificate from State X. 2011 tax 1040 form This year, your regular tax liability is $1,100, you owe no alternative minimum tax, and your mortgage interest credit is $1,700. 2011 tax 1040 form You claim no other credits. 2011 tax 1040 form Your unused mortgage interest credit for this year is $600 ($1,700 − $1,100). 2011 tax 1040 form You can carry forward this amount to the next 3 years or until used, whichever comes first. 2011 tax 1040 form Credit rate more than 20%. 2011 tax 1040 form   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). 2011 tax 1040 form Example. 2011 tax 1040 form In the earlier example under Dividing the Credit , John and George used the entire $2,000 credit. 2011 tax 1040 form The excess   John $1,350 − $1,200 = $150     George $900 − $800 = $100   $150 for John ($1,350 − $1,200) and $100 for George ($900 − $800) cannot be carried forward to future years, despite the respective tax liabilities for John and George. 2011 tax 1040 form Refinancing If you refinance your original mortgage loan on which you had been given an MCC, you must get a new MCC to be able to claim the credit on the new loan. 2011 tax 1040 form The amount of credit you can claim on the new loan may change. 2011 tax 1040 form Table 2 below summarizes how to figure your credit if you refinance your original mortgage loan. 2011 tax 1040 form Table 2. 2011 tax 1040 form Effect of Refinancing on Your Credit IF you get a new (reissued) MCC and the amount of your new mortgage is . 2011 tax 1040 form . 2011 tax 1040 form . 2011 tax 1040 form THEN the interest you claim on Form 8396, line 1, is* . 2011 tax 1040 form . 2011 tax 1040 form . 2011 tax 1040 form smaller than or equal to the certified indebtedness amount on the new MCC all the interest paid during the year on your new mortgage. 2011 tax 1040 form larger than the certified indebtedness amount on the new MCC interest paid during the year on your new mortgage multiplied by the following fraction. 2011 tax 1040 form         certified indebtedness  amount on your new MCC       original amount of your  mortgage   *The credit using the new MCC cannot be more than the credit using the old MCC. 2011 tax 1040 form  See New MCC cannot increase your credit above. 2011 tax 1040 form An issuer may reissue an MCC after you refinance your mortgage. 2011 tax 1040 form If you did not get a new MCC, you may want to contact the state or local housing finance agency that issued your original MCC for information about whether you can get a reissued MCC. 2011 tax 1040 form Year of refinancing. 2011 tax 1040 form   In the year of refinancing, add the applicable amount of interest paid on the old mortgage and the applicable amount of interest paid on the new mortgage, and enter the total on Form 8396, line 1. 2011 tax 1040 form   If your new MCC has a credit rate different from the rate on the old MCC, you must attach a statement to Form 8396. 2011 tax 1040 form The statement must show the calculation for lines 1, 2, and 3 for the part of the year when the old MCC was in effect. 2011 tax 1040 form It must show a separate calculation for the part of the year when the new MCC was in effect. 2011 tax 1040 form Combine the amounts from both calculations for line 3, enter the total on line 3 of the form, and write “See attached” on the dotted line next to line 2. 2011 tax 1040 form New MCC cannot increase your credit. 2011 tax 1040 form   The credit that you claim with your new MCC cannot be more than the credit that you could have claimed with your old MCC. 2011 tax 1040 form   In most cases, the agency that issues your new MCC will make sure that it does not increase your credit. 2011 tax 1040 form However, if either your old loan or your new loan has a variable (adjustable) interest rate, you will need to check this yourself. 2011 tax 1040 form In that case, you will need to know the amount of the credit you could have claimed using the old MCC. 2011 tax 1040 form   There are two methods for figuring the credit you could have claimed. 2011 tax 1040 form Under one method, you figure the actual credit that would have been allowed. 2011 tax 1040 form This means you use the credit rate on the old MCC and the interest you would have paid on the old loan. 2011 tax 1040 form   If your old loan was a variable rate mortgage, you can use another method to determine the credit that you could have claimed. 2011 tax 1040 form Under this method, you figure the credit using a payment schedule of a hypothetical self-amortizing mortgage with level payments projected to the final maturity date of the old mortgage. 2011 tax 1040 form The interest rate of the hypothetical mortgage is the annual percentage rate (APR) of the new mortgage for purposes of the Federal Truth in Lending Act. 2011 tax 1040 form The principal of the hypothetical mortgage is the remaining outstanding balance of the certified mortgage indebtedness shown on the old MCC. 2011 tax 1040 form    You must choose one method and use it consistently beginning with the first tax year for which you claim the credit based on the new MCC. 2011 tax 1040 form    As part of your tax records, you should keep your old MCC and the schedule of payments for your old mortgage. 2011 tax 1040 form Basis Basis is your starting point for figuring a gain or loss if you later sell your home, or for figuring depreciation if you later use part of your home for business purposes or for rent. 2011 tax 1040 form While you own your home, you may add certain items to your basis. 2011 tax 1040 form You may subtract certain other items from your basis. 2011 tax 1040 form These items are called adjustments to basis and are explained later under Adjusted Basis . 2011 tax 1040 form It is important that you understand these terms when you first acquire your home because you must keep track of your basis and adjusted basis during the period you own your home. 2011 tax 1040 form You also must keep records of the events that affect basis or adjusted basis. 2011 tax 1040 form See Keeping Records , below. 2011 tax 1040 form Figuring Your Basis How you figure your basis depends on how you acquire your home. 2011 tax 1040 form If you buy or build your home, your cost is your basis. 2011 tax 1040 form If you receive your home as a gift, your basis is usually the same as the adjusted basis of the person who gave you the property. 2011 tax 1040 form If you inherit your home from a decedent, different rules apply depending on the date of the decedent's death. 2011 tax 1040 form Each of these topics is discussed later. 2011 tax 1040 form Property transferred from a spouse. 2011 tax 1040 form   If your home is transferred to you from your spouse, or from your former spouse as a result of a divorce, your basis is the same as your spouse's (or former spouse's) adjusted basis just before the transfer. 2011 tax 1040 form Publication 504, Divorced or Separated Individuals, fully discusses transfers between spouses. 2011 tax 1040 form Cost as Basis The cost of your home, whether you purchased it or constructed it, is the amount you paid for it, including any debt you assumed. 2011 tax 1040 form The cost of your home includes most settlement or closing costs you paid when you bought the home. 2011 tax 1040 form If you built your home, your cost includes most closing costs paid when you bought the land or settled on your mortgage. 2011 tax 1040 form See Settlement or closing costs , later. 2011 tax 1040 form If you elect to deduct the sales taxes on the purchase or construction of your home as an itemized deduction on Schedule A (Form 1040), you cannot include the sales taxes as part of your cost basis in the home. 2011 tax 1040 form Purchase. 2011 tax 1040 form   The basis of a home you bought is the amount you paid for it. 2011 tax 1040 form This usually includes your down payment and any debt you assumed. 2011 tax 1040 form The basis of a cooperative apartment is the amount you paid for your shares in the corporation that owns or controls the property. 2011 tax 1040 form This amount includes any purchase commissions or other costs of acquiring the shares. 2011 tax 1040 form Construction. 2011 tax 1040 form   If you contracted to have your home built on land that you own, your basis in the home is your basis in the land plus the amount you paid to have the home built. 2011 tax 1040 form This includes the cost of labor and materials, the amount you paid the contractor, any architect's fees, building permit charges, utility meter and connection charges, and legal fees that are directly connected with building your home. 2011 tax 1040 form If you built all or part of your home yourself, your basis is the total amount it cost you to build it. 2011 tax 1040 form You cannot include in basis the value of your own labor or any other labor for which you did not pay. 2011 tax 1040 form Real estate taxes. 2011 tax 1040 form   Real estate taxes are usually divided so that you and the seller each pay taxes for the part of the property tax year that each owned the home. 2011 tax 1040 form See the earlier discussion of Real estate taxes paid at settlement or closing , under Real Estate Taxes, earlier, to figure the real estate taxes you paid or are considered to have paid. 2011 tax 1040 form   If you pay any part of the seller's share of the real estate taxes (the taxes up to the date of sale), and the seller did not reimburse you, add those taxes to your basis in the home. 2011 tax 1040 form You cannot deduct them as taxes paid. 2011 tax 1040 form   If the seller paid any of your share of the real estate taxes (the taxes beginning with the date of sale), you can still deduct those taxes. 2011 tax 1040 form Do not include those taxes in your basis. 2011 tax 1040 form If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. 2011 tax 1040 form Example 1. 2011 tax 1040 form You bought your home on September 1. 2011 tax 1040 form The property tax year in your area is the calendar year, and the tax is due on August 15. 2011 tax 1040 form The real estate taxes on the home you bought were $1,275 for the year and had been paid by the seller on August 15. 2011 tax 1040 form You did not reimburse the seller for your share of the real estate taxes from September 1 through December 31. 2011 tax 1040 form You must reduce the basis of your home by the $426 [(122 ÷ 365) × $1,275] the seller paid for you. 2011 tax 1040 form You can deduct your $426 share of real estate taxes on your return for the year you purchased your home. 2011 tax 1040 form Example 2. 2011 tax 1040 form You bought your home on May 3, 2013. 2011 tax 1040 form The property tax year in your area is the calendar year. 2011 tax 1040 form The taxes for the previous year are assessed on January 2 and are due on May 31 and November 30. 2011 tax 1040 form Under state law, the taxes become a lien on May 31. 2011 tax 1040 form You agreed to pay all taxes due after the date of sale. 2011 tax 1040 form The taxes due in 2013 for 2012 were $1,375. 2011 tax 1040 form The taxes due in 2014 for 2013 will be $1,425. 2011 tax 1040 form You cannot deduct any of the taxes paid in 2013 because they relate to the 2012 property tax year and you did not own the home until 2013. 2011 tax 1040 form Instead, you add the $1,375 to the cost (basis) of your home. 2011 tax 1040 form You owned the home in 2013 for 243 days (May 3 to December 31), so you can take a tax deduction on your 2014 return of $949 [(243 ÷ 365) × $1,425] paid in 2014 for 2013. 2011 tax 1040 form You add the remaining $476 ($1,425 − $949) of taxes paid in 2014 to the cost (basis) of your home. 2011 tax 1040 form Settlement or closing costs. 2011 tax 1040 form   If you bought your home, you probably paid settlement or closing costs in addition to the contract price. 2011 tax 1040 form These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. 2011 tax 1040 form If you built your home, you probably paid these costs when you bought the land or settled on your mortgage. 2011 tax 1040 form   The only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. 2011 tax 1040 form You deduct them in the year you buy your home if you itemize your deductions. 2011 tax 1040 form You can add certain other settlement or closing costs to the basis of your home. 2011 tax 1040 form Items added to basis. 2011 tax 1040 form   You can include in your basis the settlement fees and closing costs you paid for buying your home. 2011 tax 1040 form A fee is for buying the home if you would have had to pay it even if you paid cash for the home. 2011 tax 1040 form   The following are some of the settlement fees and closing costs that you can include in the original basis of your home. 2011 tax 1040 form Abstract fees (abstract of title fees). 2011 tax 1040 form Charges for installing utility services. 2011 tax 1040 form Legal fees (including fees for the title search and preparation of the sales contract and deed). 2011 tax 1040 form Recording fees. 2011 tax 1040 form Surveys. 2011 tax 1040 form Transfer or stamp taxes. 2011 tax 1040 form Owner's title insurance. 2011 tax 1040 form Any amount the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, cost for improvements or repairs, and sales commissions. 2011 tax 1040 form   If the seller actually paid for any item for which you are liable and for which you can take a deduction (such as your share of the real estate taxes for the year of sale), you must reduce your basis by that amount unless you are charged for it in the settlement. 2011 tax 1040 form Items not added to basis and not deductible. 2011 tax 1040 form   Here are some settlement and closing costs that you cannot deduct or add to your basis. 2011 tax 1040 form Fire insurance premiums. 2011 tax 1040 form Charges for using utilities or other services related to occupancy of the home before closing. 2011 tax 1040 form Rent for occupying the home before closing. 2011 tax 1040 form Charges connected with getting or refinancing a mortgage loan, such as: Loan assumption fees, Cost of a credit report, and Fee for an appraisal required by a lender. 2011 tax 1040 form Points paid by seller. 2011 tax 1040 form   If you bought your home after April 3, 1994, you must reduce your basis by any points paid for your mortgage by the person who sold you your home. 2011 tax 1040 form   If you bought your home after 1990 but before April 4, 1994, you must reduce your basis by seller-paid points only if you deducted them. 2011 tax 1040 form See Points , earlier, for the rules on deducting points. 2011 tax 1040 form Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined later) to the donor just before it was given to you, its fair market value (FMV) at the time it was given to you, and any gift tax paid on it. 2011 tax 1040 form Fair market value. 2011 tax 1040 form   Fair market value (FMV) is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and who both have a reasonable knowledge of all the necessary facts. 2011 tax 1040 form Donor's adjusted basis is more than FMV. 2011 tax 1040 form   If someone gave you your home and the donor's adjusted basis, when it was given to you, was more than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis. 2011 tax 1040 form Disposition basis. 2011 tax 1040 form   If the donor's adjusted basis at the time of the gift is more than the FMV, your basis (plus or minus any required adjustments, see Adjusted Basis , later) when you dispose of the property will depend on whether you have a gain or a loss. 2011 tax 1040 form Your basis for figuring a gain is the same as the donor's adjusted basis. 2011 tax 1040 form Your basis for figuring a loss is the FMV when you received the gift. 2011 tax 1040 form If you use the donor's adjusted basis to figure a gain and it results in a loss, then you must use the FMV (at the time of the gift) to refigure the loss. 2011 tax 1040 form However, if using the FMV results in a gain, then you neither have a gain nor a loss. 2011 tax 1040 form Example 1. 2011 tax 1040 form Andrew received a house as a gift from Ishmael (the donor). 2011 tax 1040 form At the time of the gift, the home had an FMV of $80,000. 2011 tax 1040 form Ishmael's adjusted basis was $100,000. 2011 tax 1040 form After he received the house, no events occurred to increase or decrease the basis. 2011 tax 1040 form If Andrew sells the house for $120,000, he will have a $20,000 gain because he must use the donor's adjusted basis ($100,000) at the time of the gift as his basis to figure the gain. 2011 tax 1040 form Example 2. 2011 tax 1040 form Same facts as Example 1 , except this time Andrew sells the house for $70,000. 2011 tax 1040 form He will have a loss of $10,000 because he must use the FMV ($80,000) at the time of the gift as his basis to figure the loss. 2011 tax 1040 form Example 3. 2011 tax 1040 form Same facts as Example 1 , except this time Andrew sells the house for $90,000. 2011 tax 1040 form Initially, he figures the gain using Ishmael's adjusted basis ($100,000), which results in a loss of $10,000. 2011 tax 1040 form Since it is a loss, Andrew must now recalculate the loss using the FMV ($80,000), which results in a gain of $10,000. 2011 tax 1040 form So in this situation, Andrew will neither have a gain nor a loss. 2011 tax 1040 form Donor's adjusted basis equal to or less than the FMV. 2011 tax 1040 form   If someone gave you your home after 1976 and the donor's adjusted basis, when it was given to you, was equal to or less than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home. 2011 tax 1040 form Part of federal gift tax due to net increase in value. 2011 tax 1040 form   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. 2011 tax 1040 form The numerator (top part) of the fraction is the net increase in the value of the home, and the denominator (bottom part) is the value of the home for gift tax purposes after reduction for any annual exclusion and marital or charitable deduction that applies to the gift. 2011 tax 1040 form The net increase in the value of the home is its FMV minus the adjusted basis of the donor. 2011 tax 1040 form Publication 551 gives more information, including examples, on figuring your basis when you receive property as a gift. 2011 tax 1040 form Inheritance Your basis in a home you inherited is generally the fair market value of the home on the date of the decedent's death or on the alternative valuation date if the personal representative for the estate chooses to use alternative valuation. 2011 tax 1040 form If an estate tax return was filed, your basis is generally the value of the home listed on the estate tax return. 2011 tax 1040 form If an estate tax return was not filed, your basis is the appraised value of the home at the decedent's date of death for state inheritance or transmission taxes. 2011 tax 1040 form Publication 551 and Publication 559, Survivors, Executors, and Administrators, have more information on the basis of inherited property. 2011 tax 1040 form If you inherited your home from someone who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. 2011 tax 1040 form Adjusted Basis While you own your home, various events may take place that can change the original basis of your home. 2011 tax 1040 form These events can increase or decrease your original basis. 2011 tax 1040 form The result is called adjusted basis. 2011 tax 1040 form See Table 3, on this page, for a list of some of the items that can adjust your basis. 2011 tax 1040 form Table 3. 2011 tax 1040 form Adjusted Basis This table lists examples of some items that generally will increase or decrease your basis in your home. 2011 tax 1040 form It is not intended to be all-inclusive. 2011 tax 1040 form Increases to Basis Decreases to Basis Improvements: Putting an addition on your home Replacing an entire roof Paving your driveway Installing central air conditioning Rewiring your home Assessments for local improvements (see Assessments for local benefits , under What You Can and Cannot Deduct, earlier) Amounts spent to restore damaged property Insurance or other reimbursement for casualty losses Deductible casualty loss not covered by insurance Payments received for easement or right-of-way granted Depreciation allowed or allowable if home is used for business or rental purposes Value of subsidy for energy conservation measure excluded from income Improvements. 2011 tax 1040 form   An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. 2011 tax 1040 form You must add the cost of any improvements to the basis of your home. 2011 tax 1040 form You cannot deduct these costs. 2011 tax 1040 form   Improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, and paving your driveway. 2011 tax 1040 form Amount added to basis. 2011 tax 1040 form   The amount you add to your basis for improvements is your actual cost. 2011 tax 1040 form This includes all costs for material and labor, except your own labor, and all expenses related to the improvement. 2011 tax 1040 form For example, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. 2011 tax 1040 form   You also must add to your basis state and local assessments for improvements such as streets and sidewalks if they increase the value of the property. 2011 tax 1040 form These assessments are discussed earlier under Real Estate Taxes . 2011 tax 1040 form Improvements no longer part of home. 2011 tax 1040 form    Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. 2011 tax 1040 form Example. 2011 tax 1040 form You put wall-to-wall carpeting in your home 15 years ago. 2011 tax 1040 form Later, you replaced that carpeting with new wall-to-wall carpeting. 2011 tax 1040 form The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. 2011 tax 1040 form Repairs versus improvements. 2011 tax 1040 form   A repair keeps your home in an ordinary, efficient operating condition. 2011 tax 1040 form It does not add to the value of your home or prolong its life. 2011 tax 1040 form Repairs include repainting your home inside or outside, fixing your gutters or floors, fixing leaks or plastering, and replacing broken window panes. 2011 tax 1040 form You cannot deduct repair costs and generally cannot add them to the basis of your home. 2011 tax 1040 form   However, repairs that are done as part of an extensive remodeling or restoration of your home are considered improvements. 2011 tax 1040 form You add them to the basis of your home. 2011 tax 1040 form Records to keep. 2011 tax 1040 form   You can use Table 4 (at the end of the publication) as a guide to help you keep track of improvements to your home. 2011 tax 1040 form Also see Keeping Records , below. 2011 tax 1040 form Energy conservation subsidy. 2011 tax 1040 form   If a public utility gives you (directly or indirectly) a subsidy for the purchase or installation of an energy conservation measure for your home, do not include the value of that subsidy in your income. 2011 tax 1040 form You must reduce the basis of your home by that value. 2011 tax 1040 form   An energy conservation measure is an installation or modification primarily designed to reduce consumption of electricity or natural gas or to improve the management of energy demand. 2011 tax 1040 form Keeping Records Keeping full and accurate records is vital to properly report your income and expenses, to support your deductions and credits, and to know the basis or adjusted basis of your home. 2011 tax 1040 form These records include your purchase contract and settlement papers if you bought the property, or other objective evidence if you acquired it by gift, inheritance, or similar means. 2011 tax 1040 form You should keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. 2011 tax 1040 form In addition, you should keep track of any decreases to the basis such as those listed in Table 3, earlier. 2011 tax 1040 form How to keep records. 2011 tax 1040 form   How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. 2011 tax 1040 form How long to keep records. 2011 tax 1040 form   You must keep your records for as long as they are important for meeting any provision of the federal tax law. 2011 tax 1040 form   Keep records that support an item of income, a deduction, or a credit appearing on a return until the period of limitations for the return runs out. 2011 tax 1040 form (A period of limitations is the period of time after which no legal action can be brought. 2011 tax 1040 form ) For assessment of tax you owe, this is generally 3 years from the date you filed the return. 2011 tax 1040 form For filing a claim for credit or refund, this is generally 3 years from the date you filed the original return, or 2 years from the date you paid the tax, whichever is later. 2011 tax 1040 form Returns filed before the due date are treated as filed on the due date. 2011 tax 1040 form   You may need to keep records relating to the basis of property (discussed earlier) for longer than the period of limitations. 2011 tax 1040 form Keep those records as long as they are important in figuring the basis of the original or replacement property. 2011 tax 1040 form Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. 2011 tax 1040 form Table 4. 2011 tax 1040 form Record of Home Improvements Keep this for your records. 2011 tax 1040 form Also, keep receipts or other proof of improvements. 2011 tax 1040 form Remove from this record any improvements that are no longer part of your main home. 2011 tax 1040 form For example, if you put wall-to-wall carpeting in your home and later replace it with new wall-to-wall carpeting, remove the cost of the first carpeting. 2011 tax 1040 form (a) Type of Improvement (b) Date (c) Amount   (a) Type of Improvement (b) Date (c) Amount Additions:       Heating & Air  Conditioning:     Bedroom       Heating system     Bathroom       Central air conditioning     Deck       Furnace     Garage       Duct work     Porch       Central humidifier     Patio       Filtration system     Storage shed       Other     Fireplace       Electrical:     Other           Lawn & Grounds:       Lighting fixtures           Wiring upgrades     Landscaping       Other     Driveway       Plumbing:     Walkway           Fences       Water heater     Retaining wall       Soft water system     Sprinkler system       Filtration system     Swimming pool       Other     Exterior lighting       Insulation:     Other           Communications:       Attic           Walls     Satellite dish       Floors     Intercom       Pipes and duct work     Security system       Other     Other             Miscellaneous:       Interior  Improvements:     Storm windows and doors       Built-in appliances     Roof       Kitchen modernization     Central vacuum       Bathroom modernization     Other       Flooring             Wall-to-wall carpeting             Other     How To