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2012 Tax Form 940

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2012 Tax Form 940

2012 tax form 940 Publication 547(SP) - Introductory Material Table of Contents Qué Hay de Nuevo Recordatorios IntroductionCómo pedir formularios y publicaciones. 2012 tax form 940 Preguntas sobre los impuestos. 2012 tax form 940 Useful Items - You may want to see: Qué Hay de Nuevo Nueva Sección C en el Formulario 4684 para esquemas de inversión de tipo Ponzi (Ponzi-type schemes). 2012 tax form 940  La Sección C del Formulario 4684 (disponible en inglés) es nueva para el año 2013. 2012 tax form 940 Usted debe completar la Seción C si está reclamando una deducción de pérdida por robo debido a un esquema de inversión de tipo Ponzi (Ponzi-type scheme) y estará usando el Procedimiento Tributario (Revenue Procedure) 2009-20, según modificado por el Procedimiento Tributario (Revenue Procedure) 2011-58. 2012 tax form 940 La Sección C del Formulario 4864 reemplaza el Anexo A del Procedimiento Tributario (Revenue Procedure) 2009-20. 2012 tax form 940 No necesita completar el Anexo A. 2012 tax form 940 Para más información, vea Pérdidas provenientes de esquemas de inversión de tipo Ponzi (Ponzi-type schemes) , más adelante. 2012 tax form 940 Recordatorios Acontecimientos futuros. 2012 tax form 940  Si desea obtener la información más reciente sobre los acontecimientos relacionados con la Publicación 547(SP), tal como legislación promulgada después que ésta fue impresa, acceda a www. 2012 tax form 940 irs. 2012 tax form 940 gov/Spanish/About-Publication-547(SP). 2012 tax form 940 Fotografías de niños desaparecidos. 2012 tax form 940  El Servicio de Impuestos Internos (IRS, por sus siglas en inglés) se enorgullece en colaborar con el Centro Nacional de Niños Desaparecidos y Explotados (National Center for Missing and Exploited Children). 2012 tax form 940 En esta publicación, pueden aparecer fotografías de niños desaparecidos que han sido seleccionadas por el Centro. 2012 tax form 940 Estas fotografías aparecen en páginas que de otra manera estarían en blanco. 2012 tax form 940 Usted puede ayudar a que estos niños regresen a sus hogares si identifica alguno de ellos y llama gratis al 1-800-THE-LOST (1-800-843-5678). 2012 tax form 940 Introduction Esta publicación explica el trato tributario de casos de hechos fortuitos, robos y pérdidas de depósitos monetarios. 2012 tax form 940 Un hecho fortuito ocurre cuando su propiedad resulta dañada por causa de algún desastre, como por ejemplo, una tormenta, un incendio, un accidente automovilístico u otro suceso de esta índole. 2012 tax form 940 Un robo ocurre cuando alguien hurta sus bienes. 2012 tax form 940 La pérdida de depósitos monetarios ocurre cuando su institución bancaria se declara insolvente o en quiebra (bancarrota). 2012 tax form 940 Esta publicación aborda los siguientes temas: Definiciones de hecho fortuito, robo y pérdida de depósitos monetarios. 2012 tax form 940 Cómo calcular el monto de su pérdida o ganancia. 2012 tax form 940 Cómo se tratan tributariamente seguros y otros reembolsos que reciba. 2012 tax form 940 Límites de la deducción. 2012 tax form 940 Cómo y cuándo declarar un caso de hecho fortuito o robo. 2012 tax form 940 Reglas especiales para pérdidas en zonas de desastre. 2012 tax form 940 Formularios que tiene que presentar. 2012 tax form 940   Normalmente, si es víctima de un hecho fortuito o robo, tiene que presentar el Formulario 4684 (disponible sólo en inglés). 2012 tax form 940 Asimismo, es posible que tenga que presentar uno o más de los siguientes formularios (todos en inglés): Anexo A (Formulario 1040). 2012 tax form 940 Formulario 1040NR, Anexo A (para extranjeros no residentes). 2012 tax form 940 Anexo D. 2012 tax form 940 Formulario 4797. 2012 tax form 940 Para información adicional sobre qué formulario utilizar, vea más adelante la sección sobre Cómo Declarar Pérdidas y Ganancias . 2012 tax form 940 Expropiaciones forzosas. 2012 tax form 940   Para obtener información sobre expropiaciones forzosas de propiedades, vea el tema Involuntary Conversions (Conversiones involuntarias) en el capítulo 1 de la Publicación 544, Sales and Other Dispositions of Assets (Ventas y otras enajenaciones de activos), en inglés. 2012 tax form 940 Registros para el cálculo de pérdidas por hecho fortuito y robo. 2012 tax form 940   La Publicación 584SP, Registro de Pérdidas por Hechos Fortuitos (Imprevistos), Desastres y Robos (Propiedad de uso Personal) está a su disposición para ayudarle a hacer una lista de artículos de sus bienes de uso personal que hayan sido robados o dañados y calcular su pérdida. 2012 tax form 940 En dicha publicación se incluyen tablas para ayudarle a calcular el monto de las pérdidas de su vivienda, artículos de la misma y vehículos motorizados. 2012 tax form 940   La Publicación 584-B, Business Casualty, Disaster, and Theft Loss Workbook (Registro de pérdidas por hechos fortuitos, desastres y robos de propiedad de uso comercial), en inglés puede ayudarle a hacer una lista de artículos que hayan sido robados o dañados en su empresa o bienes de generación de ingresos, y calcular su pérdida. 2012 tax form 940 Comentarios y sugerencias. 2012 tax form 940   Agradecemos sus comentarios y sugerencias sobre esta publicación para ediciones futuras. 2012 tax form 940   Puede escribirnos a la siguiente dirección: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 2012 tax form 940 NW, IR-6526 Washington, DC 20224   Contestamos gran parte de correspondencia por teléfono. 2012 tax form 940 Por lo tanto, nos sería útil si en su correspondencia incluye el número telefónico con su código de área donde podemos ubicarlo durante el día. 2012 tax form 940   Puede enviarnos comentarios a través de www. 2012 tax form 940 irs. 2012 tax form 940 gov/formspubs, pulsando sobre “ Comment on Tax Forms and Publications ” (Comentarios sobre formularios y publicaciones tributarios) bajo el título “ Information about ” (Información sobre), en inglés. 2012 tax form 940   Aunque no podemos contestar cada uno de los comentarios, agradecemos su opinión y tendremos en cuenta sus comentarios cuando revisemos nuestros productos. 2012 tax form 940 Cómo pedir formularios y publicaciones. 2012 tax form 940   Visite el sitio web del IRS www. 2012 tax form 940 irs. 2012 tax form 940 gov/espanol y pulse sobre el enlace “Formularios y Publicaciones” para descargar formularios y publicaciones. 2012 tax form 940 Llame al 1-800-829-3676 o escriba a la dirección que aparece a continuación y recibirá respuesta a los 10 días de que el IRS reciba su solicitud: Internal Revenue Service 1201 N. 2012 tax form 940 Mitsubishi Motorway Bloomington, IL 61705-6613 Preguntas sobre los impuestos. 2012 tax form 940   Si tiene alguna pregunta acerca de sus impuestos, consulte la información disponible en IRS. 2012 tax form 940 gov/espanol o llame al número 1-800-829-1040. 2012 tax form 940 No podemos contestar preguntas sobre impuestos enviadas a las direcciones anteriores. 2012 tax form 940 Useful Items - You may want to see: Publicación 523 Selling Your Home (Venta de su vivienda), en inglés 525 Taxable and Nontaxable Income (Ingresos tributables y no tributables), en inglés 550 Investment Income and Expenses (Ingresos y gastos de inversiones), en inglés 551 Basis of Assets (Base de activos), en inglés 584SP Registro de Pérdidas por Hechos Fortuitos (Imprevistos), Desastres y Robos (Propiedad de Uso Personal) 584-B Business Casualty, Disaster, and Theft Loss Workbook (Registro de pérdidas por hechos fortuitos, desastres y robos comerciales), en inglés  Formulario (e Instrucciones) Anexo A (Formulario 1040) Itemized Deductions (Deducciones detalladas), en inglés Anexo A (Formulario 1040NR) Itemized Deductions (for nonresident aliens) (Deducciones detalladas (para extranjeros no residentes)), en inglés Anexo D (Formulario 1040) Capital Gains and Losses (Pérdidas y ganancias de capital), en inglés 4684 Casualties and Thefts (Hechos fortuitos y robos), en inglés 4797 Sales of Business Property (Ventas de bienes comerciales), en inglés  Para más información sobre cómo obtener publicaciones y formularios, vea la sección Cómo Obtener Ayuda con los Impuestos al final de esta publicación. 2012 tax form 940 Prev  Up  Next   Home   More Online Publications
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The 2012 Tax Form 940

2012 tax form 940 1. 2012 tax form 940   Rental Income and Expenses (If No Personal Use of Dwelling) Table of Contents Rental IncomeWhen To Report Types of Income Rental ExpensesWhen To Deduct Types of Expenses This chapter discusses the various types of rental income and expenses for a residential rental activity with no personal use of the dwelling. 2012 tax form 940 Generally, each year you will report all income and deduct all out-of-pocket expenses in full. 2012 tax form 940 The deduction to recover the cost of your rental property—depreciation—is taken over a prescribed number of years, and is discussed in chapter 2, Depreciation of Rental Property. 2012 tax form 940 If your rental income is from property you also use personally or rent to someone at less than a fair rental price, first read the information in chapter 5 , Personal Use of Dwelling Unit (Including Vacation Home). 2012 tax form 940 Rental Income In most cases, you must include in your gross income all amounts you receive as rent. 2012 tax form 940 Rental income is any payment you receive for the use or occupation of property. 2012 tax form 940 In addition to amounts you receive as normal rental payments, there are other amounts that may be rental income. 2012 tax form 940 When To Report When you report rental income on your tax return generally depends on whether you are a cash basis taxpayer or use an accrual method. 2012 tax form 940 Most individual taxpayers use the cash method. 2012 tax form 940 Cash method. 2012 tax form 940   You are a cash basis taxpayer if you report income on your return in the year you actually or constructively receive it, regardless of when it was earned. 2012 tax form 940 You constructively receive income when it is made available to you, for example, by being credited to your bank account. 2012 tax form 940 Accrual method. 2012 tax form 940    If you are an accrual basis taxpayer, you generally report income when you earn it, rather than when you receive it. 2012 tax form 940 You generally deduct your expenses when you incur them, rather than when you pay them. 2012 tax form 940 More information. 2012 tax form 940   See Publication 538, Accounting Periods and Methods, for more information about when you constructively receive income and accrual methods of accounting. 2012 tax form 940 Types of Income The following are common types of rental income. 2012 tax form 940 Advance rent. 2012 tax form 940   Advance rent is any amount you receive before the period that it covers. 2012 tax form 940 Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. 2012 tax form 940 Example. 2012 tax form 940 On March 18, 2013, you signed a 10-year lease to rent your property. 2012 tax form 940 During 2013, you received $9,600 for the first year's rent and $9,600 as rent for the last year of the lease. 2012 tax form 940 You must include $19,200 in your rental income in the first year. 2012 tax form 940 Canceling a lease. 2012 tax form 940   If your tenant pays you to cancel a lease, the amount you receive is rent. 2012 tax form 940 Include the payment in your income in the year you receive it regardless of your method of accounting. 2012 tax form 940 Expenses paid by tenant. 2012 tax form 940   If your tenant pays any of your expenses, those payments are rental income. 2012 tax form 940 Because you must include this amount in income, you can also deduct the expenses if they are deductible rental expenses. 2012 tax form 940 For more information, see Rental Expenses , later. 2012 tax form 940 Example 1. 2012 tax form 940 Your tenant pays the water and sewage bill for your rental property and deducts the amount from the normal rent payment. 2012 tax form 940 Under the terms of the lease, your tenant does not have to pay this bill. 2012 tax form 940 Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income. 2012 tax form 940 You can deduct the utility payment made by your tenant as a rental expense. 2012 tax form 940 Example 2. 2012 tax form 940 While you are out of town, the furnace in your rental property stops working. 2012 tax form 940 Your tenant pays for the necessary repairs and deducts the repair bill from the rent payment. 2012 tax form 940 Include the repair bill paid by the tenant and any amount received as a rent payment in your rental income. 2012 tax form 940 You can deduct the repair payment made by your tenant as a rental expense. 2012 tax form 940 Property or services. 2012 tax form 940   If you receive property or services as rent, instead of money, include the fair market value of the property or services in your rental income. 2012 tax form 940   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. 2012 tax form 940 Example. 2012 tax form 940 Your tenant is a house painter. 2012 tax form 940 He offers to paint your rental property instead of paying 2 months rent. 2012 tax form 940 You accept his offer. 2012 tax form 940 Include in your rental income the amount the tenant would have paid for 2 months rent. 2012 tax form 940 You can deduct that same amount as a rental expense for painting your property. 2012 tax form 940 Security deposits. 2012 tax form 940   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. 2012 tax form 940 But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. 2012 tax form 940    If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. 2012 tax form 940 Include it in your income when you receive it. 2012 tax form 940 Other Sources of Rental Income Lease with option to buy. 2012 tax form 940   If the rental agreement gives your tenant the right to buy your rental property, the payments you receive under the agreement are generally rental income. 2012 tax form 940 If your tenant exercises the right to buy the property, the payments you receive for the period after the date of sale are considered part of the selling price. 2012 tax form 940 Part interest. 2012 tax form 940   If you own a part interest in rental property, you must report your part of the rental income from the property. 2012 tax form 940 Rental of property also used as your home. 2012 tax form 940   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. 2012 tax form 940 However, you can deduct on Schedule A (Form 1040), Itemized Deductions, the interest, taxes, and casualty and theft losses that are allowed for nonrental property. 2012 tax form 940 See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). 2012 tax form 940 Rental Expenses In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. 2012 tax form 940 Personal use of rental property. 2012 tax form 940   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. 2012 tax form 940 Also, your rental expense deductions may be limited. 2012 tax form 940 See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). 2012 tax form 940 Part interest. 2012 tax form 940   If you own a part interest in rental property, you can deduct expenses you paid according to your percentage of ownership. 2012 tax form 940 Example. 2012 tax form 940 Roger owns a one-half undivided interest in a rental house. 2012 tax form 940 Last year he paid $968 for necessary repairs on the property. 2012 tax form 940 Roger can deduct $484 (50% × $968) as a rental expense. 2012 tax form 940 He is entitled to reimbursement for the remaining half from the co-owner. 2012 tax form 940 When To Deduct You generally deduct your rental expenses in the year you pay them. 2012 tax form 940 If you use the accrual method, see Publication 538 for more information. 2012 tax form 940 Types of Expenses Listed below are the most common rental expenses. 2012 tax form 940 Advertising. 2012 tax form 940 Auto and travel expenses. 2012 tax form 940 Cleaning and maintenance. 2012 tax form 940 Commissions. 2012 tax form 940 Depreciation. 2012 tax form 940 Insurance. 2012 tax form 940 Interest (other). 2012 tax form 940 Legal and other professional fees. 2012 tax form 940 Local transportation expenses. 2012 tax form 940 Management fees. 2012 tax form 940 Mortgage interest paid to banks, etc. 2012 tax form 940 Points. 2012 tax form 940 Rental payments. 2012 tax form 940 Repairs. 2012 tax form 940 Taxes. 2012 tax form 940 Utilities. 2012 tax form 940 Some of these expenses, as well as other less common ones, are discussed below. 2012 tax form 940 Depreciation. 2012 tax form 940   Depreciation is a capital expense. 2012 tax form 940 It is the mechanism for recovering your cost in an income producing property and must be taken over the expected life of the property. 2012 tax form 940   You can begin to depreciate rental property when it is ready and available for rent. 2012 tax form 940 See Placed in Service under When Does Depreciation Begin and End in chapter 2. 2012 tax form 940 Insurance premiums paid in advance. 2012 tax form 940   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. 2012 tax form 940 You cannot deduct the total premium in the year you pay it. 2012 tax form 940 See chapter 6 of Publication 535 for information on deductible premiums. 2012 tax form 940 Interest expense. 2012 tax form 940   You can deduct mortgage interest you pay on your rental property. 2012 tax form 940 When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. 2012 tax form 940 Chapter 4 of Publication 535 explains mortgage interest in detail. 2012 tax form 940 Expenses paid to obtain a mortgage. 2012 tax form 940   Certain expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. 2012 tax form 940 These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property. 2012 tax form 940 Form 1098, Mortgage Interest Statement. 2012 tax form 940   If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098 or similar statement showing the interest you paid for the year. 2012 tax form 940 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, the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. 2012 tax form 940 Attach a statement to your return showing the name and address of the other person. 2012 tax form 940 On the dotted line next to line 13, enter “See attached. 2012 tax form 940 ” Legal and other professional fees. 2012 tax form 940   You can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. 2012 tax form 940 For example, on your 2013 Schedule E you can deduct fees paid in 2013 to prepare Part I of your 2012 Schedule E. 2012 tax form 940 You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. 2012 tax form 940 Local benefit taxes. 2012 tax form 940   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. 2012 tax form 940 These charges are nondepreciable capital expenditures and must be added to the basis of your property. 2012 tax form 940 However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. 2012 tax form 940 Local transportation expenses. 2012 tax form 940   You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. 2012 tax form 940 However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. 2012 tax form 940 See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. 2012 tax form 940   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. 2012 tax form 940 For 2013, the standard mileage rate for business use is 56. 2012 tax form 940 5 cents per mile. 2012 tax form 940 For more information, see chapter 4 of Publication 463. 2012 tax form 940    To deduct car expenses under either method, you must keep records that follow the rules in chapter 5 of Publication 463. 2012 tax form 940 In addition, you must complete Form 4562, Part V, and attach it to your tax return. 2012 tax form 940 Pre-rental expenses. 2012 tax form 940   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. 2012 tax form 940 Rental of equipment. 2012 tax form 940   You can deduct the rent you pay for equipment that you use for rental purposes. 2012 tax form 940 However, in some cases, lease contracts are actually purchase contracts. 2012 tax form 940 If so, you cannot deduct these payments. 2012 tax form 940 You can recover the cost of purchased equipment through depreciation. 2012 tax form 940 Rental of property. 2012 tax form 940   You can deduct the rent you pay for property that you use for rental purposes. 2012 tax form 940 If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. 2012 tax form 940 Travel expenses. 2012 tax form 940   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. 2012 tax form 940 You must properly allocate your expenses between rental and nonrental activities. 2012 tax form 940 You cannot deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. 2012 tax form 940 The cost of improvements is recovered by taking depreciation. 2012 tax form 940 For information on travel expenses, see chapter 1 of Publication 463. 2012 tax form 940    To deduct travel expenses, you must keep records that follow the rules in chapter 5 of Publication 463. 2012 tax form 940 Uncollected rent. 2012 tax form 940   If you are a cash basis taxpayer, do not deduct uncollected rent. 2012 tax form 940 Because you have not included it in your income, it is not deductible. 2012 tax form 940   If you use an accrual method, report income when you earn it. 2012 tax form 940 If you are unable to collect the rent, you may be able to deduct it as a business bad debt. 2012 tax form 940 See chapter 10 of Publication 535 for more information about business bad debts. 2012 tax form 940 Vacant rental property. 2012 tax form 940   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. 2012 tax form 940 However, you cannot deduct any loss of rental income for the period the property is vacant. 2012 tax form 940 Vacant while listed for sale. 2012 tax form 940   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. 2012 tax form 940 If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. 2012 tax form 940 Points The term “points” is often used to describe some of the charges paid, or treated as paid, by a borrower to take out a loan or a mortgage. 2012 tax form 940 These charges are also called loan origination fees, maximum loan charges, or premium charges. 2012 tax form 940 Any of these charges (points) that are solely for the use of money are interest. 2012 tax form 940 Because points are prepaid interest, you generally cannot deduct the full amount in the year paid, but must deduct the interest over the term of the loan. 2012 tax form 940 The method used to figure the amount of points you can deduct each year follows the original issue discount (OID) rules. 2012 tax form 940 In this case, points are equivalent to OID, which is the difference between: The amount borrowed (redemption price at maturity, or principal) and The proceeds (issue price). 2012 tax form 940 The first step is to determine whether your total OID (which you may have on bonds or other investments in addition to the mortgage loan), including the OID resulting from the points, is insignificant or de minimis. 2012 tax form 940 If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct. 2012 tax form 940 De minimis OID. 2012 tax form 940   The OID is de minimis if it is less than one-fourth of 1% (. 2012 tax form 940 0025) of the stated redemption price at maturity (principal amount of the loan) multiplied by the number of full years from the date of original issue to maturity (term of the loan). 2012 tax form 940   If the OID is de minimis, you can choose one of the following ways to figure the amount of points you can deduct each year. 2012 tax form 940 On a constant-yield basis over the term of the loan. 2012 tax form 940 On a straight line basis over the term of the loan. 2012 tax form 940 In proportion to stated interest payments. 2012 tax form 940 In its entirety at maturity of the loan. 2012 tax form 940 You make this choice by deducting the OID (points) in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued. 2012 tax form 940 Example. 2012 tax form 940 Carol Madison took out a $100,000 mortgage loan on January 1, 2013, to buy a house she will use as a rental during 2013. 2012 tax form 940 The loan is to be repaid over 30 years. 2012 tax form 940 During 2013, Carol paid $10,000 of mortgage interest (stated interest) to the lender. 2012 tax form 940 When the loan was made, she paid $1,500 in points to the lender. 2012 tax form 940 The points reduced the principal amount of the loan from $100,000 to $98,500, resulting in $1,500 of OID. 2012 tax form 940 Carol determines that the points (OID) she paid are de minimis based on the following computation. 2012 tax form 940 Redemption price at maturity (principal amount of the loan) $100,000 Multiplied by: The term of the  loan in complete years ×30 Multiplied by ×. 2012 tax form 940 0025 De minimis amount $7,500 The points (OID) she paid ($1,500) are less than the de minimis amount ($7,500). 2012 tax form 940 Therefore, Carol has de minimis OID and she can choose one of the four ways discussed earlier to figure the amount she can deduct each year. 2012 tax form 940 Under the straight line method, she can deduct $50 each year for 30 years. 2012 tax form 940 Constant-yield method. 2012 tax form 940   If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. 2012 tax form 940   You figure your deduction for the first year in the following manner. 2012 tax form 940 Determine the issue price of the loan. 2012 tax form 940 If you paid points on the loan, the issue price generally is the difference between the principal and the points. 2012 tax form 940 Multiply the result in (1) by the yield to maturity (defined later). 2012 tax form 940 Subtract any qualified stated interest payments (defined later) from the result in (2). 2012 tax form 940 This is the OID you can deduct in the first year. 2012 tax form 940 Yield to maturity (YTM). 2012 tax form 940   This rate is generally shown in the literature you receive from your lender. 2012 tax form 940 If you do not have this information, consult your lender or tax advisor. 2012 tax form 940 In general, the YTM is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan. 2012 tax form 940 Qualified stated interest (QSI). 2012 tax form 940   In general, this is the stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a fixed rate. 2012 tax form 940 Example—Year 1. 2012 tax form 940 The facts are the same as in the previous example. 2012 tax form 940 The yield to maturity on Carol's loan is 10. 2012 tax form 940 2467%, compounded annually. 2012 tax form 940 She figured the amount of points (OID) she could deduct in 2013 as follows. 2012 tax form 940 Principal amount of the loan $100,000 Minus: Points (OID) –1,500 Issue price of the loan $98,500 Multiplied by: YTM × . 2012 tax form 940 102467 Total 10,093 Minus: QSI –10,000 Points (OID) deductible in 2013 $93 To figure your deduction in any subsequent year, you start with the adjusted issue price. 2012 tax form 940 To get the adjusted issue price, add to the issue price figured in Year 1 any OID previously deducted. 2012 tax form 940 Then follow steps (2) and (3), earlier. 2012 tax form 940 Example—Year 2. 2012 tax form 940 Carol figured the deduction for 2014 as follows. 2012 tax form 940 Issue price $98,500 Plus: Points (OID) deducted  in 2013 +93 Adjusted issue price $98,593 Multiplied by: YTM × . 2012 tax form 940 102467 Total 10,103 Minus: QSI –10,000 Points (OID) deductible in 2014 $103 Loan or mortgage ends. 2012 tax form 940    If your loan or mortgage ends, you may be able to deduct any remaining points (OID) in the tax year in which the loan or mortgage ends. 2012 tax form 940 A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event. 2012 tax form 940 However, if the refinancing is with the same lender, the remaining points (OID) generally are not deductible in the year in which the refinancing occurs, but may be deductible over the term of the new mortgage or loan. 2012 tax form 940 Points when loan refinance is more than the previous outstanding balance. 2012 tax form 940   When you refinance a rental property for more than the previous outstanding balance, the portion of the points allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. 2012 tax form 940 For example, if an individual refinanced a loan with a balance of $100,000, the amount of the new loan was $120,000, and the taxpayer used $20,000 to purchase a car, points allocable to the $20,000 would be treated as nondeductible personal interest. 2012 tax form 940 Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. 2012 tax form 940 Improvements. 2012 tax form 940   You must capitalize any expense you pay to improve your rental property. 2012 tax form 940 An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. 2012 tax form 940 Betterments. 2012 tax form 940   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. 2012 tax form 940 Restoration. 2012 tax form 940   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. 2012 tax form 940 Adaptation. 2012 tax form 940   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. 2012 tax form 940 Separate the costs of repairs and improvements, and keep accurate records. 2012 tax form 940 You will need to know the cost of improvements when you sell or depreciate your property. 2012 tax form 940 The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. 2012 tax form 940 Table 1-1. 2012 tax form 940 Examples of Improvements Additions Bedroom Bathroom Deck Garage Porch Patio  Lawn & Grounds Landscaping Driveway Walkway Fence Retaining wall Sprinkler system Swimming pool Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system   Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances Kitchen modernization Flooring Wall-to-wall carpeting  Insulation Attic Walls, floor Pipes, duct work Prev  Up  Next   Home   More Online Publications