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Do Taxes Online 2010

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Do Taxes Online 2010

Do taxes online 2010 Publication 517 - Introductory Material Table of Contents What's New Reminders IntroductionOrdering forms and publications. Do taxes online 2010 Tax questions. Do taxes online 2010 Useful Items - You may want to see: What's New SE tax rate. Do taxes online 2010  For 2013 and 2014, the Old Age, Survivors, and Disability Insurance (OASDI) portion of the SE tax is 12. Do taxes online 2010 4%. Do taxes online 2010 The Medicare (HI) portion of the SE tax remains 2. Do taxes online 2010 9%. Do taxes online 2010 As a result, the SE tax rate returns to 15. Do taxes online 2010 3%. Do taxes online 2010 For more information, see the Instructions for Schedule SE (Form 1040). Do taxes online 2010 Earnings subject to social security. Do taxes online 2010  For 2013, the maximum wages and self-employment income subject to social security tax increases from $110,100 to $113,700. Do taxes online 2010 For 2014, the maximum wages and self-employment income subject to social security tax is $117,000. Do taxes online 2010 Additional Medicare Tax. Do taxes online 2010  Beginning in 2013, a 0. Do taxes online 2010 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Do taxes online 2010 For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Do taxes online 2010 Modified AGI limit for traditional IRA contributions increased. Do taxes online 2010  For 2013, you may be able to take an IRA deduction if you were covered by a retirement plan at work and your modified AGI is: Less than $115,000 if married filing jointly or qualifying widow(er), Less than $69,000 if single or head of household, or Less than $10,000 if married filing separately. Do taxes online 2010 If you file a joint return and either you or your spouse was not covered by a retirement plan at work, you may be able to take an IRA deduction if your modified AGI is less than $188,000. Do taxes online 2010 Modified AGI limit for Roth IRA contributions increased. Do taxes online 2010  For 2013, you may be able to contribute to your Roth IRA if your modified AGI is: Less than $188,000 if married filing jointly or qualifying widow(er), Less than $127,000 if single, head of household, or married filing separately and you did not live with your spouse at any time during the year, or Less than $10,000 if married filing separately and you lived with your spouse at any time during the year. Do taxes online 2010 Earned income credit (EIC). Do taxes online 2010  For 2013, the maximum amount of income you can earn and still claim the EIC has increased. Do taxes online 2010 You may be able to take the EIC if you earned less than $46,227 ($51,567 for married filing jointly) and you have three or more qualifying children; $43,038 ($48,378 for married filing jointly) and you have two qualifying children; $37,870 ($43,210 for married filing jointly) and you have one qualifying child; and $14,340 ($19,680 for married filing jointly) and you do not have any qualifying children. Do taxes online 2010 Reminders Future developments. Do taxes online 2010 . Do taxes online 2010   For the latest information about developments related to Publication 517, such as legislation enacted after it was published, go to www. Do taxes online 2010 irs. Do taxes online 2010 gov/pub517. Do taxes online 2010 Photographs of missing children. Do taxes online 2010  The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children. Do taxes online 2010 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Do taxes online 2010 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Do taxes online 2010 Introduction Three federal taxes are paid on wages and self-employment income—income tax, social security tax, and Medicare tax. Do taxes online 2010 Social security and Medicare taxes are collected under one of two systems. Do taxes online 2010 Under the Self-Employment Contributions Act (SECA), the self-employed person pays all the taxes. Do taxes online 2010 Under the Federal Insurance Contributions Act (FICA), the employee and the employer each pay half of the social security and Medicare taxes. Do taxes online 2010 No earnings are subject to both systems. Do taxes online 2010 Table 1. Do taxes online 2010 Are Your Ministerial Earnings* Covered Under FICA or SECA? Find the class to which you belong in the left column and read across the table to find if you are covered under FICA or SECA. Do taxes online 2010 Do not rely on this table alone. Do taxes online 2010 Also read the discussion for the class in the following pages. Do taxes online 2010 Class Covered under FICA? Covered under SECA? Minister NO. Do taxes online 2010 Your ministerial earnings are exempt. Do taxes online 2010 YES, if you do not have an approved exemption from the IRS. Do taxes online 2010   NO, if you have an approved exemption. Do taxes online 2010 Member of a religious order who has not taken a vow of poverty NO. Do taxes online 2010 Your ministerial earnings are exempt. Do taxes online 2010 YES, if you do not have an approved exemption from the IRS. Do taxes online 2010   NO, if you have an approved exemption. Do taxes online 2010 Member of a religious order who has taken a vow of poverty YES, if: Your order elected FICA coverage for its members, or You worked outside the order and the work was not required by, or done on behalf of, the order. Do taxes online 2010   NO, if neither of the above applies. Do taxes online 2010 NO. Do taxes online 2010 Your ministerial earnings are exempt. Do taxes online 2010 Christian Science practitioner or reader NO. Do taxes online 2010 Your ministerial earnings are exempt. Do taxes online 2010 YES, if you do not have an approved exemption from the IRS. Do taxes online 2010   NO, if you have an approved exemption. Do taxes online 2010 Religious worker (church employee) YES, if your employer did not elect to exclude you. Do taxes online 2010    NO, if your employer elected to exclude you. Do taxes online 2010 YES, if your employer elected to exclude you from FICA. Do taxes online 2010   NO, if you are covered under FICA. Do taxes online 2010 Member of a recognized religious sect YES, if you are an employee and do not have an approved exemption from the IRS. Do taxes online 2010    NO, if you have an approved exemption. Do taxes online 2010 YES, if you are self-employed and do not have an approved exemption from the IRS. Do taxes online 2010   NO, if you have an approved exemption. Do taxes online 2010 * Ministerial earnings are the self-employment earnings that result from ministerial services, defined and discussed later. Do taxes online 2010 In addition, all wages and self-employment income that are subject to Medicare tax are subject to a 0. Do taxes online 2010 9% Additional Medicare Tax if they are paid in excess of the applicable threshold for an individual's filing status. Do taxes online 2010 Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Do taxes online 2010 Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Do taxes online 2010 A self-employment loss is not considered for purposes of this tax. Do taxes online 2010 RRTA compensation is separately compared to the threshold. Do taxes online 2010 There is no employer match for Additional Medicare Tax. Do taxes online 2010 For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Do taxes online 2010 This publication contains information for the following classes of taxpayers. Do taxes online 2010 Ministers. Do taxes online 2010 Members of a religious order. Do taxes online 2010 Christian Science practitioners and readers. Do taxes online 2010 Religious workers (church employees). Do taxes online 2010 Members of a recognized religious sect. Do taxes online 2010 Note. Do taxes online 2010 Unless otherwise noted, in this publication references to members of the clergy include ministers, members of a religious order (but not members of a recognized religious sect), and Christian Science practitioners and readers. Do taxes online 2010 This publication covers the following topics about the collection of social security and Medicare taxes from members of the clergy, religious workers, and members of a recognized religious sect. Do taxes online 2010 Which earnings are taxed under FICA and which under SECA. Do taxes online 2010 See Table 1 above. Do taxes online 2010 How a member of the clergy can apply for an exemption from self-employment tax. Do taxes online 2010 How a member of a recognized religious sect can apply for an exemption from both self-employment tax and FICA taxes. Do taxes online 2010 How a member of the clergy or religious worker figures net earnings from self-employment. Do taxes online 2010 This publication also covers certain income tax rules of interest to ministers and members of a religious order. Do taxes online 2010 A Comprehensive Example shows filled-in forms for a minister who has income taxed under SECA, other income taxed under FICA, and income tax reporting of items specific to a minister. Do taxes online 2010 In the back of Publication 517 is a set of worksheets that you can use to figure the amount of your taxable ministerial income and allowable deductions. Do taxes online 2010 You will find these worksheets right after the Comprehensive Example . Do taxes online 2010 Note. Do taxes online 2010 In this publication, the term “church” is generally used in its generic sense and not in reference to any particular religion. Do taxes online 2010 Comments and suggestions. Do taxes online 2010   We welcome your comments about this publication and your suggestions for future editions. Do taxes online 2010   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Do taxes online 2010 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Do taxes online 2010 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Do taxes online 2010   You can send your comments from www. Do taxes online 2010 irs. Do taxes online 2010 gov/formspubs/. Do taxes online 2010 Click on “More Information” and then on “Give us feedback”. Do taxes online 2010   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Do taxes online 2010 Ordering forms and publications. Do taxes online 2010   Visit www. Do taxes online 2010 irs. Do taxes online 2010 gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Do taxes online 2010 Internal Revenue Service 1201 N. Do taxes online 2010 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Do taxes online 2010   If you have a tax question, check the information available on IRS. Do taxes online 2010 gov or call 1-800-829-1040. Do taxes online 2010 We cannot answer tax questions sent to either of the above addresses. Do taxes online 2010 Useful Items - You may want to see: Publication 54 Tax Guide for U. Do taxes online 2010 S. Do taxes online 2010 Citizens and Resident Aliens Abroad 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 590 Individual Retirement Arrangements (IRAs) 596 Earned Income Credit (EIC) Form (and Instructions) SS-8 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding SS-16 Certificate of Election of Coverage Under the Federal Insurance Contributions Act Schedule C (Form 1040) Profit or Loss From Business (Sole Proprietorship) Schedule C-EZ (Form 1040) Net Profit From Business (Sole Proprietorship) Schedule SE (Form 1040) Self-Employment Tax 1040-ES Estimated Tax for Individuals 1040X Amended U. Do taxes online 2010 S. Do taxes online 2010 Individual Income Tax Return 4029 Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits 4361 Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners 8274 Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption From Employer Social Security and Medicare Taxes 8959 Additional Medicare Tax Ordering publications and forms. Do taxes online 2010   See How To Get Tax Help , near the end of this publication, for information about getting these publications and forms. Do taxes online 2010 Prev  Up  Next   Home   More Online Publications
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Understanding Your CP2531 Notice

You need to contact us. We’ve received information not reported on your tax return.

What you need to do

  • Read your notice carefully – it explains the information we received. Complete the notice response form to indicate if you agree or disagree with the information reported.
  • Compare the information in the two columns - "Shown on return" and "Reported to IRS by others". Did you receive the income? If you received the income, was it reported on your tax return? IRS employees search the tax return to locate all income, but they may be unable to determine the source if some items are combined.
  • If it wasn't reported on your tax return, you don't need to file an amended return to report the income. Simply check the box indicating that you agree with the information reported by others, sign and date the CP 2531 response page and return it.
  • If you don't agree with the information we sent you, check the box indicating that you don’t agree with some or all of the information on the CP 2531 response page and return it with a signed statement explaining each item of discrepancy. If applicable, attach copies of documents to support the entries on the original return behind this.  

You may want to

  • Send us the name, address and taxpayer identification number of the other party that received the income if it isn't yours.  
  • Notify the payers to correct their records to show the name and taxpayer identification number of the person or business who actually received the income, so that future reports to us are accurate.  

Answers to Common Questions

Is this notice a bill?


No. It informs you about the information we’ve received.

Why did it take you so long to contact me about this matter?

Tax years generally end on Dec. 31, but we don't receive information from banks, businesses, and other payers until much later. Once we receive all the tax returns and payer information, we compare the information you reported with the information the third party payers provided to us. It can take 8 months or more to complete the review.

Should I call with my response or mail it in?

If you have a simple response, such as directing us to a specific line on your original return where you reported the income, you can call a Customer Service Representative and provide the information. A toll-free number is listed in the top right hand corner of the notice.   

A written response may be required if the issue is more involved, especially if you disagree with some of the proposed changes. You may want to mail copies of payer information documents, such as Form(s) 1099 or Schedule(s) K-1. Include any other letters or documents that support your position. You should submit a written statement to fully explain any unusual tax situations.

I need more time to find my records and go through them all.  Will you allow me additional time to respond?

Your response is due by the date shown on the notice or we'll use the proposed changes to continue processing the case. If you need more time to research your records, you can call the toll-free number at the top of your notice to request a 30 day extension. We may also provide additional time to respond if you have unusual circumstances.  

What should I do to avoid problems like this in the future?

Keep accurate payment information from banks and other payers to verify you've received all payment information for filing your return. Review the documents to be sure they show your most current address.  

Take the following actions when filing your tax return to avoid similar issues in the future:

  • Report specific income type on the correct line on the Form 1120, U.S. Corporation Income Tax Return. For example, rental income should be claimed on Form 1120, line 6 (Gross Rents).  For additional information, please see the reporting instructions for Form 1120.
  • If you report income on a line not traditionally reserved for that type of income, please provide us with a statement indicating where the income was reported. For example, your business is related to investment activity and you're reporting all interest income (including amounts reported to the IRS on Form 1099-INT, Interest Income) with your gross receipts on Form 1120, line 1.
  • Always attach a statement identifying the source of the amount reported on Form 1120, line 10 (Other Income).
  • Provide an attached statement explaining your percentage of gross proceeds (ex; reported to us on Form 1099-MISC) that you would be liable to claim on your tax return. 
  • Generally, if you receive a Form 1099 for amounts that actually belong to another person, you are considered a nominee recipient.  You must file a Form 1099 with the IRS (the same type of Form 1099 you received) for each of the other owners showing the amounts applicable to each.  

Tax publications you may find useful

 

Page Last Reviewed or Updated: 28-Feb-2014

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Do Taxes Online 2010

Do taxes online 2010 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. Do taxes online 2010 S. Do taxes online 2010 Individual Income Tax Return, and itemize your deductions on Schedule A (Form 1040). Do taxes online 2010 If you itemize, you cannot take the standard deduction. Do taxes online 2010 This section explains what expenses you can deduct as a homeowner. Do taxes online 2010 It also points out expenses that you cannot deduct. Do taxes online 2010 There are four primary discussions: real estate taxes, sales taxes, home mortgage interest, and mortgage insurance premiums. Do taxes online 2010 Generally, your real estate taxes, home mortgage interest, and mortgage insurance premiums are included in your house payment. Do taxes online 2010 Your house payment. Do taxes online 2010   If you took out a mortgage (loan) to finance the purchase of your home, you probably have to make monthly house payments. Do taxes online 2010 Your house payment may include several costs of owning a home. Do taxes online 2010 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. Do taxes online 2010 These are discussed in more detail later. Do taxes online 2010   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. Do taxes online 2010 Minister's or military housing allowance. Do taxes online 2010   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. Do taxes online 2010 You do not have to reduce your deductions by your nontaxable allowance. Do taxes online 2010 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. Do taxes online 2010 Nondeductible payments. Do taxes online 2010   You cannot deduct any of the following items. Do taxes online 2010 Insurance (other than mortgage insurance premiums), including fire and comprehensive coverage, and title insurance. Do taxes online 2010 Wages you pay for domestic help. Do taxes online 2010 Depreciation. Do taxes online 2010 The cost of utilities, such as gas, electricity, or water. Do taxes online 2010 Most settlement costs. Do taxes online 2010 See Settlement or closing costs under Cost as Basis, later, for more information. Do taxes online 2010 Forfeited deposits, down payments, or earnest money. Do taxes online 2010 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. Do taxes online 2010 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. Do taxes online 2010 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. Do taxes online 2010 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). Do taxes online 2010 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. Do taxes online 2010 Real Estate Taxes Most state and local governments charge an annual tax on the value of real property. Do taxes online 2010 This is called a real estate tax. Do taxes online 2010 You can deduct the tax if it is assessed uniformly at a like rate on all real property throughout the community. Do taxes online 2010 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. Do taxes online 2010 Deductible Real Estate Taxes You can deduct real estate taxes imposed on you. Do taxes online 2010 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. Do taxes online 2010 If you own a cooperative apartment, see Special Rules for Cooperatives , later. Do taxes online 2010 Where to deduct real estate taxes. Do taxes online 2010   Enter the amount of your deductible real estate taxes on Schedule A (Form 1040), line 6. Do taxes online 2010 Real estate taxes paid at settlement or closing. Do taxes online 2010   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. Do taxes online 2010 Your share of these taxes is fully deductible if you itemize your deductions. Do taxes online 2010 Division of real estate taxes. Do taxes online 2010   For federal income tax purposes, the seller is treated as paying the property taxes up to, but not including, the date of sale. Do taxes online 2010 You (the buyer) are treated as paying the taxes beginning with the date of sale. Do taxes online 2010 This applies regardless of the lien dates under local law. Do taxes online 2010 Generally, this information is included on the settlement statement you get at closing. Do taxes online 2010   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. Do taxes online 2010 You each can deduct your own share, if you itemize deductions, for the year the property is sold. Do taxes online 2010 Example. Do taxes online 2010 You bought your home on September 1. Do taxes online 2010 The property tax year (the period to which the tax relates) in your area is the calendar year. Do taxes online 2010 The tax for the year was $730 and was due and paid by the seller on August 15. Do taxes online 2010 You owned your new home during the property tax year for 122 days (September 1 to December 31, including your date of purchase). Do taxes online 2010 You figure your deduction for real estate taxes on your home as follows. Do taxes online 2010 1. Do taxes online 2010 Enter the total real estate taxes for the real property tax year $730 2. Do taxes online 2010 Enter the number of days in the property tax year that you owned the property 122 3. Do taxes online 2010 Divide line 2 by 365 . Do taxes online 2010 3342 4. Do taxes online 2010 Multiply line 1 by line 3. Do taxes online 2010 This is your deduction. Do taxes online 2010 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. Do taxes online 2010 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. Do taxes online 2010 Delinquent taxes. Do taxes online 2010   Delinquent taxes are unpaid taxes that were imposed on the seller for an earlier tax year. Do taxes online 2010 If you agree to pay delinquent taxes when you buy your home, you cannot deduct them. Do taxes online 2010 You treat them as part of the cost of your home. Do taxes online 2010 See Real estate taxes , later, under Basis. Do taxes online 2010 Escrow accounts. Do taxes online 2010   Many monthly house payments include an amount placed in escrow (put in the care of a third party) for real estate taxes. Do taxes online 2010 You may not be able to deduct the total you pay into the escrow account. Do taxes online 2010 You can deduct only the real estate taxes that the lender actually paid from escrow to the taxing authority. Do taxes online 2010 Your real estate tax bill will show this amount. Do taxes online 2010 Refund or rebate of real estate taxes. Do taxes online 2010   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. Do taxes online 2010 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. Do taxes online 2010 For more information, see Recoveries in Publication 525, Taxable and Nontaxable Income. Do taxes online 2010 Items You Cannot Deduct as Real Estate Taxes The following items are not deductible as real estate taxes. Do taxes online 2010 Charges for services. Do taxes online 2010   An itemized charge for services to specific property or people is not a tax, even if the charge is paid to the taxing authority. Do taxes online 2010 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). Do taxes online 2010    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. Do taxes online 2010 If your taxing authority (or lender) does not furnish you a copy of your real estate tax bill, ask for it. Do taxes online 2010 Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. Do taxes online 2010 Assessments for local benefits. Do taxes online 2010   You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. Do taxes online 2010 Local benefits include the construction of streets, sidewalks, or water and sewer systems. Do taxes online 2010 You must add these amounts to the basis of your property. Do taxes online 2010   You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. Do taxes online 2010 An example is a charge to repair an existing sidewalk and any interest included in that charge. Do taxes online 2010   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. Do taxes online 2010 If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. Do taxes online 2010   An assessment for a local benefit may be listed as an item in your real estate tax bill. Do taxes online 2010 If so, use the rules in this section to find how much of it, if any, you can deduct. Do taxes online 2010 Transfer taxes (or stamp taxes). Do taxes online 2010   You cannot deduct transfer taxes and similar taxes and charges on the sale of a personal home. Do taxes online 2010 If you are the buyer and you pay them, include them in the cost basis of the property. Do taxes online 2010 If you are the seller and you pay them, they are expenses of the sale and reduce the amount realized on the sale. Do taxes online 2010 Homeowners association assessments. Do taxes online 2010   You cannot deduct these assessments because the homeowners association, rather than a state or local government, imposes them. Do taxes online 2010 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. Do taxes online 2010 As an owner of a cooperative apartment, you own shares of stock in a corporation that owns or leases housing facilities. Do taxes online 2010 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. Do taxes online 2010 For this purpose, gross income means all income received during the entire tax year, including any received before the corporation changed to cooperative ownership. Do taxes online 2010 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. Do taxes online 2010 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. Do taxes online 2010 Tenant-stockholders. Do taxes online 2010   A tenant-stockholder can be any entity (such as a corporation, trust, estate, partnership, or association) as well as an individual. Do taxes online 2010 The tenant-stockholder does not have to live in any of the cooperative's dwelling units. Do taxes online 2010 The units that the tenant-stockholder has the right to occupy can be rented to others. Do taxes online 2010 Deductible taxes. Do taxes online 2010   You figure your share of real estate taxes in the following way. Do taxes online 2010 Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. Do taxes online 2010 Multiply the corporation's deductible real estate taxes by the number you figured in (1). Do taxes online 2010 This is your share of the real estate taxes. Do taxes online 2010   Generally, the corporation will tell you your share of its real estate tax. Do taxes online 2010 This is the amount you can deduct if it reasonably reflects the cost of real estate taxes for your dwelling unit. Do taxes online 2010 Refund of real estate taxes. Do taxes online 2010   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. Do taxes online 2010 Your deduction for real estate taxes the corporation paid this year is reduced by your share of the refund the corporation received. Do taxes online 2010 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). Do taxes online 2010 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. Do taxes online 2010 For information on figuring your deduction, see the Instructions for Schedule A (Form 1040). Do taxes online 2010 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. Do taxes online 2010 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. Do taxes online 2010 Most home buyers take out a mortgage (loan) to buy their home. Do taxes online 2010 They then make monthly payments to either the mortgage holder or someone collecting the payments for the mortgage holder. Do taxes online 2010 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). Do taxes online 2010 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. Do taxes online 2010 If either of these situations applies to you, see Publication 936 for more information. Do taxes online 2010 Also see Publication 936 if you later refinance your mortgage or buy a second home. Do taxes online 2010 Refund of home mortgage interest. Do taxes online 2010   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. Do taxes online 2010 For more information, see Recoveries in Publication 525. Do taxes online 2010 The amount of the refund will usually be shown on the mortgage interest statement you receive from your mortgage lender. Do taxes online 2010 See Mortgage Interest Statement , later. Do taxes online 2010 Deductible Mortgage Interest To be deductible, the interest you pay must be on a loan secured by your main home or a second home. Do taxes online 2010 The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. Do taxes online 2010 Prepaid interest. Do taxes online 2010   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. Do taxes online 2010 Generally, you can deduct in each year only the interest that qualifies as home mortgage interest for that year. Do taxes online 2010 An exception (discussed later) applies to points. Do taxes online 2010 Late payment charge on mortgage payment. Do taxes online 2010   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. Do taxes online 2010 Mortgage prepayment penalty. Do taxes online 2010   If you pay off your home mortgage early, you may have to pay a penalty. Do taxes online 2010 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. Do taxes online 2010 Ground rent. Do taxes online 2010   In some states (such as Maryland), you may buy your home subject to a ground rent. Do taxes online 2010 A ground rent is an obligation you assume to pay a fixed amount per year on the property. Do taxes online 2010 Under this arrangement, you are leasing (rather than buying) the land on which your home is located. Do taxes online 2010 Redeemable ground rents. Do taxes online 2010   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. Do taxes online 2010 The ground rent is a redeemable ground rent only if all of the following are true. Do taxes online 2010 Your lease, including renewal periods, is for more than 15 years. Do taxes online 2010 You can freely assign the lease. Do taxes online 2010 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. Do taxes online 2010 The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. Do taxes online 2010   Payments made to end the lease and buy the lessor's entire interest in the land are not redeemable ground rents. Do taxes online 2010 You cannot deduct them. Do taxes online 2010 Nonredeemable ground rents. Do taxes online 2010   Payments on a nonredeemable ground rent are not mortgage interest. Do taxes online 2010 You can deduct them as rent only if they are a business expense or if they are for rental property. Do taxes online 2010 Cooperative apartment. Do taxes online 2010   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 . Do taxes online 2010 In addition, you can treat as home mortgage interest your share of the corporation's deductible mortgage interest. Do taxes online 2010 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. Do taxes online 2010 For more information on cooperatives, see Special Rule for Tenant-Stockholders in Cooperative Housing Corporations in Publication 936. Do taxes online 2010 Refund of cooperative's mortgage interest. Do taxes online 2010   You must reduce your mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. Do taxes online 2010 The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. Do taxes online 2010   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. Do taxes online 2010 Mortgage Interest Paid at Settlement One item that normally appears on a settlement or closing statement is home mortgage interest. Do taxes online 2010 You can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). Do taxes online 2010 This amount should be included in the mortgage interest statement provided by your lender. Do taxes online 2010 See the discussion under Mortgage Interest Statement , later. Do taxes online 2010 Also, if you pay interest in advance, see Prepaid interest , earlier, and Points , next. Do taxes online 2010 Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Do taxes online 2010 Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points. Do taxes online 2010 A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Do taxes online 2010 See Points paid by the seller , later. Do taxes online 2010 General rule. Do taxes online 2010   You cannot deduct the full amount of points in the year paid. Do taxes online 2010 They are prepaid interest, so you generally must deduct them over the life (term) of the mortgage. Do taxes online 2010 Exception. Do taxes online 2010   You can deduct the full amount of points in the year paid if you meet all the following tests. Do taxes online 2010 Your loan is secured by your main home. Do taxes online 2010 (Generally, your main home is the one you live in most of the time. Do taxes online 2010 ) Paying points is an established business practice in the area where the loan was made. Do taxes online 2010 The points paid were not more than the points generally charged in that area. Do taxes online 2010 You use the cash method of accounting. Do taxes online 2010 This means you report income in the year you receive it and deduct expenses in the year you pay them. Do taxes online 2010 Most individuals use this method. Do taxes online 2010 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. Do taxes online 2010 The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Do taxes online 2010 The funds you provided are not required to have been applied to the points. Do taxes online 2010 They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Do taxes online 2010 You cannot have borrowed these funds. Do taxes online 2010 You use your loan to buy or build your main home. Do taxes online 2010 The points were computed as a percentage of the principal amount of the mortgage. Do taxes online 2010 The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. Do taxes online 2010 The points may be shown as paid from either your funds or the seller's. Do taxes online 2010 Note. Do taxes online 2010 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. Do taxes online 2010 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. Do taxes online 2010 Home improvement loan. Do taxes online 2010   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. Do taxes online 2010 Refinanced loan. Do taxes online 2010   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. Do taxes online 2010 You can deduct the rest of the points over the life of the loan. Do taxes online 2010 Points not fully deductible in year paid. Do taxes online 2010    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. Do taxes online 2010 Figure A. Do taxes online 2010   You can use Figure A, next, as a quick guide to see whether your points are fully deductible in the year paid. Do taxes online 2010    Please click here for the text description of the image. Do taxes online 2010 Figure A. Do taxes online 2010 Are my points fully deductible this year? Amounts charged for services. Do taxes online 2010   Amounts charged by the lender for specific services connected to the loan are not interest. Do taxes online 2010 Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Do taxes online 2010 You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Do taxes online 2010 For information about the tax treatment of these amounts and other settlement fees and closing costs, see Basis , later. Do taxes online 2010 Points paid by the seller. Do taxes online 2010   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Do taxes online 2010 Treatment by seller. Do taxes online 2010   The seller cannot deduct these fees as interest. Do taxes online 2010 However, they are a selling expense that reduces the seller's amount realized. Do taxes online 2010 See Publication 523 for more information. Do taxes online 2010 Treatment by buyer. Do taxes online 2010   The buyer treats seller-paid points as if he or she had paid them. Do taxes online 2010 If all the tests listed earlier under Exception are met, the buyer can deduct the points in the year paid. Do taxes online 2010 If any of those tests are not met, the buyer must deduct the points over the life of the loan. Do taxes online 2010   The buyer must also reduce the basis of the home by the amount of the seller-paid points. Do taxes online 2010 For more information about the basis of your home, see Basis , later. Do taxes online 2010 Funds provided are less than points. Do taxes online 2010   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. Do taxes online 2010 In addition, you can deduct any points paid by the seller. Do taxes online 2010 Example 1. Do taxes online 2010 When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Do taxes online 2010 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. Do taxes online 2010 Of the $1,000 you were charged for points, you can deduct $750 in the year paid. Do taxes online 2010 You spread the remaining $250 over the life of the mortgage. Do taxes online 2010 Example 2. Do taxes online 2010 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. Do taxes online 2010 In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Do taxes online 2010 You spread the remaining $250 over the life of the mortgage. Do taxes online 2010 You must reduce the basis of your home by the $1,000 paid by the seller. Do taxes online 2010 Excess points. Do taxes online 2010   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. Do taxes online 2010 You must spread any additional points over the life of the mortgage. Do taxes online 2010 Mortgage ending early. Do taxes online 2010   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. Do taxes online 2010 A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Do taxes online 2010 Example. Do taxes online 2010 Dan paid $3,000 in points in 2006 that he had to spread out over the 15-year life of the mortgage. Do taxes online 2010 He had deducted $1,400 of these points through 2012. Do taxes online 2010 Dan prepaid his mortgage in full in 2013. Do taxes online 2010 He can deduct the remaining $1,600 of points in 2013. Do taxes online 2010 Exception. Do taxes online 2010   If you refinance the mortgage with the same lender, you cannot deduct any remaining points for the year. Do taxes online 2010 Instead, deduct them over the term of the new loan. Do taxes online 2010 Form 1098. Do taxes online 2010   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. Do taxes online 2010 See Mortgage Interest Statement , later. Do taxes online 2010 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). Do taxes online 2010 If you did not receive a Form 1098, enter your deductible interest on line 11, and any deductible points on line 12. Do taxes online 2010 See Table 1 below for a summary of where to deduct home mortgage interest and real estate taxes. Do taxes online 2010 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. Do taxes online 2010 The seller must give you this number and you must give the seller your SSN. Do taxes online 2010 Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Do taxes online 2010 Failure to meet either of these requirements may result in a $50 penalty for each failure. Do taxes online 2010 Table 1. Do taxes online 2010 Where To Deduct Interest and Taxes Paid on Your Home See the text for information on what expenses are eligible. Do taxes online 2010 IF you are eligible to deduct . Do taxes online 2010 . Do taxes online 2010 . Do taxes online 2010 THEN report the amount  on Schedule A (Form 1040) . Do taxes online 2010 . Do taxes online 2010 . Do taxes online 2010 real estate taxes line 6. Do taxes online 2010 home mortgage interest and points reported on Form 1098 line 10. Do taxes online 2010 home mortgage interest not reported on  Form 1098 line 11. Do taxes online 2010 points not reported on Form 1098 line 12. Do taxes online 2010 qualified mortgage insurance premiums line 13. Do taxes online 2010 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. Do taxes online 2010 The statement will show the total interest paid on your mortgage during the year. Do taxes online 2010 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. Do taxes online 2010 See Points , earlier. Do taxes online 2010 The interest you paid at settlement should be included on the statement. Do taxes online 2010 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. Do taxes online 2010 Put the total on Schedule A (Form 1040), line 10, and attach a statement to your return explaining the difference. Do taxes online 2010 Write “See attached” to the right of line 10. Do taxes online 2010 A mortgage holder can be a financial institution, a governmental unit, or a cooperative housing corporation. Do taxes online 2010 If a statement comes from a cooperative housing corporation, it generally will show your share of interest. Do taxes online 2010 Your mortgage interest statement for 2013 should be provided or sent to you by January 31, 2014. Do taxes online 2010 If it is mailed, you should allow adequate time to receive it before contacting the mortgage holder. Do taxes online 2010 A copy of this form will be sent to the IRS also. Do taxes online 2010 Example. Do taxes online 2010 You bought a new home on May 3. Do taxes online 2010 You paid no points on the purchase. Do taxes online 2010 During the year, you made mortgage payments which included $4,480 deductible interest on your new home. Do taxes online 2010 The settlement sheet for the purchase of the home included interest of $620 for 29 days in May. Do taxes online 2010 The mortgage statement you receive from the lender includes total interest of $5,100 ($4,480 + $620). Do taxes online 2010 You can deduct the $5,100 if you itemize your deductions. Do taxes online 2010 Refund of overpaid interest. Do taxes online 2010   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. Do taxes online 2010 Generally, you must include the refund in income in the year you receive it. Do taxes online 2010 See Refund of home mortgage interest , earlier, under Home Mortgage Interest. Do taxes online 2010 More than one borrower. Do taxes online 2010   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. Do taxes online 2010 Show how much of the interest each of you paid, and give the name and address of the person who received the form. Do taxes online 2010 Deduct your share of the interest on Schedule A (Form 1040), line 11, and write “See attached” to the right of that line. Do taxes online 2010 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. Do taxes online 2010 Mortgage insurance premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as an itemized deduction. Do taxes online 2010 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). Do taxes online 2010 Prepaid mortgage insurance premiums. Do taxes online 2010   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. Do taxes online 2010 The premiums are treated as paid in the year to which they were allocated. Do taxes online 2010 If the mortgage is satisfied before its term, no deduction is allowed for the unamortized balance. Do taxes online 2010 See Publication 936 for details. Do taxes online 2010 Exception for certain mortgage insurance. Do taxes online 2010   The allocation rules, explained above, do not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Service. Do taxes online 2010 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. Do taxes online 2010 It also must be secured by that home. Do taxes online 2010 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. Do taxes online 2010 Home acquisition debt limit. Do taxes online 2010   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). Do taxes online 2010 Discharges of qualified principal residence indebtedness. Do taxes online 2010   You can exclude from gross income any discharges of qualified principal residence indebtedness made after 2006 and before 2014. Do taxes online 2010 You must reduce the basis of your principal residence (but not below zero) by the amount you exclude. Do taxes online 2010 Principal residence. Do taxes online 2010   Your principal residence is the home where you ordinarily live most of the time. Do taxes online 2010 You can have only one principal residence at any one time. Do taxes online 2010 Qualified principal residence indebtedness. Do taxes online 2010   This is a mortgage that you took out to buy, build, or substantially improve your principal residence and that is secured by that residence. Do taxes online 2010 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. Do taxes online 2010   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. Do taxes online 2010 Additional debt incurred to substantially improve your principal residence is also qualified principal residence indebtedness. Do taxes online 2010 Amount you can exclude. Do taxes online 2010   You can only exclude debt discharged after 2006 and before 2014. Do taxes online 2010 The most you can exclude is $2 million ($1 million if married filing separately). Do taxes online 2010 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. Do taxes online 2010 Ordering rule. Do taxes online 2010   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. Do taxes online 2010 Qualified Home This means your main home or your second home. Do taxes online 2010 A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. Do taxes online 2010 Main home. Do taxes online 2010   You can have only one main home at any one time. Do taxes online 2010 This is the home where you ordinarily live most of the time. Do taxes online 2010 Second home and other special situations. Do taxes online 2010   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. Do taxes online 2010 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. Do taxes online 2010 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. Do taxes online 2010 If your AGI is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Do taxes online 2010 Form 1098. Do taxes online 2010   The amount of mortgage insurance premiums you paid during 2013 should be reported in box 4. Do taxes online 2010 See Form 1098, Mortgage Interest Statement in Publication 936. Do taxes online 2010 Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals afford home ownership. Do taxes online 2010 If you qualify, you can claim the credit on Form 8396 each year for part of the home mortgage interest you pay. Do taxes online 2010 Who qualifies. Do taxes online 2010   You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate (MCC) from your state or local government. Do taxes online 2010 Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. Do taxes online 2010 The MCC will show the certificate credit rate you will use to figure your credit. Do taxes online 2010 It also will show the certified indebtedness amount. Do taxes online 2010 Only the interest on that amount qualifies for the credit. Do taxes online 2010 See Figuring the Credit , later. Do taxes online 2010 You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home. Do taxes online 2010 Contact your state or local housing finance agency for information about the availability of MCCs in your area. Do taxes online 2010 How to claim the credit. Do taxes online 2010   To claim the credit, complete Form 8396 and attach it to your Form 1040 or Form 1040NR, U. Do taxes online 2010 S. Do taxes online 2010 Nonresident Alien Income Tax Return. Do taxes online 2010 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. Do taxes online 2010 Reducing your home mortgage interest deduction. Do taxes online 2010   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. Do taxes online 2010 You must do this even if part of that amount is to be carried forward to 2014. Do taxes online 2010 Selling your home. Do taxes online 2010   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. Do taxes online 2010 For additional information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, in Publication 523. Do taxes online 2010 Figuring the Credit Figure your credit on Form 8396. Do taxes online 2010 Mortgage not more than certified indebtedness. Do taxes online 2010   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. Do taxes online 2010 Mortgage more than certified indebtedness. Do taxes online 2010   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. Do taxes online 2010 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. Do taxes online 2010 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. Do taxes online 2010 Example. Do taxes online 2010 Emily bought a home this year. Do taxes online 2010 Her mortgage loan is $125,000. Do taxes online 2010 The certified indebtedness amount on her MCC is $100,000. Do taxes online 2010 She paid $7,500 interest this year. Do taxes online 2010 Emily figures the interest to enter on Form 8396, line 1, as follows:   $100,000 = 80% (. Do taxes online 2010 80)       $125,000       $7,500 x . Do taxes online 2010 80 = $6,000   Emily enters $6,000 on Form 8396, line 1. Do taxes online 2010 In each later year, she will figure her credit using only 80% of the interest she pays for that year. Do taxes online 2010 Limits Two limits may apply to your credit. Do taxes online 2010 A limit based on the credit rate, and A limit based on your tax. Do taxes online 2010 Limit based on credit rate. Do taxes online 2010   If the certificate credit rate is higher than 20%, the credit you are allowed cannot be more than $2,000. Do taxes online 2010 Limit based on tax. Do taxes online 2010   After applying the limit based on the credit rate, your credit generally cannot be more than your tax liability. Do taxes online 2010 See the Credit Limit Worksheet in the Form 8396 instructions to calculate the limit based on tax. Do taxes online 2010 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. Do taxes online 2010 Example. Do taxes online 2010 John and his brother, George, were issued an MCC. Do taxes online 2010 They used it to get a mortgage on their main home. Do taxes online 2010 John has a 60% ownership interest in the home, and George has a 40% ownership interest in the home. Do taxes online 2010 John paid $5,400 mortgage interest this year and George paid $3,600. Do taxes online 2010 The MCC shows a credit rate of 25% and a certified indebtedness amount of $130,000. Do taxes online 2010 The loan amount (mortgage) on their home is $120,000. Do taxes online 2010 The credit is limited to $2,000 because the credit rate is more than 20%. Do taxes online 2010 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. Do taxes online 2010 His credit is limited to $1,200 ($2,000 × 60%). Do taxes online 2010 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. Do taxes online 2010 His credit is limited to $800 ($2,000 × 40%). Do taxes online 2010 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. Do taxes online 2010 Example. Do taxes online 2010 You receive a mortgage credit certificate from State X. Do taxes online 2010 This year, your regular tax liability is $1,100, you owe no alternative minimum tax, and your mortgage interest credit is $1,700. Do taxes online 2010 You claim no other credits. Do taxes online 2010 Your unused mortgage interest credit for this year is $600 ($1,700 − $1,100). Do taxes online 2010 You can carry forward this amount to the next 3 years or until used, whichever comes first. Do taxes online 2010 Credit rate more than 20%. Do taxes online 2010   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). Do taxes online 2010 Example. Do taxes online 2010 In the earlier example under Dividing the Credit , John and George used the entire $2,000 credit. Do taxes online 2010 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. Do taxes online 2010 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. Do taxes online 2010 The amount of credit you can claim on the new loan may change. Do taxes online 2010 Table 2 below summarizes how to figure your credit if you refinance your original mortgage loan. Do taxes online 2010 Table 2. Do taxes online 2010 Effect of Refinancing on Your Credit IF you get a new (reissued) MCC and the amount of your new mortgage is . Do taxes online 2010 . Do taxes online 2010 . Do taxes online 2010 THEN the interest you claim on Form 8396, line 1, is* . Do taxes online 2010 . Do taxes online 2010 . Do taxes online 2010 smaller than or equal to the certified indebtedness amount on the new MCC all the interest paid during the year on your new mortgage. Do taxes online 2010 larger than the certified indebtedness amount on the new MCC interest paid during the year on your new mortgage multiplied by the following fraction. Do taxes online 2010         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. Do taxes online 2010  See New MCC cannot increase your credit above. Do taxes online 2010 An issuer may reissue an MCC after you refinance your mortgage. Do taxes online 2010 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. Do taxes online 2010 Year of refinancing. Do taxes online 2010   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. Do taxes online 2010   If your new MCC has a credit rate different from the rate on the old MCC, you must attach a statement to Form 8396. Do taxes online 2010 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. Do taxes online 2010 It must show a separate calculation for the part of the year when the new MCC was in effect. Do taxes online 2010 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. Do taxes online 2010 New MCC cannot increase your credit. Do taxes online 2010   The credit that you claim with your new MCC cannot be more than the credit that you could have claimed with your old MCC. Do taxes online 2010   In most cases, the agency that issues your new MCC will make sure that it does not increase your credit. Do taxes online 2010 However, if either your old loan or your new loan has a variable (adjustable) interest rate, you will need to check this yourself. Do taxes online 2010 In that case, you will need to know the amount of the credit you could have claimed using the old MCC. Do taxes online 2010   There are two methods for figuring the credit you could have claimed. Do taxes online 2010 Under one method, you figure the actual credit that would have been allowed. Do taxes online 2010 This means you use the credit rate on the old MCC and the interest you would have paid on the old loan. Do taxes online 2010   If your old loan was a variable rate mortgage, you can use another method to determine the credit that you could have claimed. Do taxes online 2010 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. Do taxes online 2010 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. Do taxes online 2010 The principal of the hypothetical mortgage is the remaining outstanding balance of the certified mortgage indebtedness shown on the old MCC. Do taxes online 2010    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. Do taxes online 2010    As part of your tax records, you should keep your old MCC and the schedule of payments for your old mortgage. Do taxes online 2010 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. Do taxes online 2010 While you own your home, you may add certain items to your basis. Do taxes online 2010 You may subtract certain other items from your basis. Do taxes online 2010 These items are called adjustments to basis and are explained later under Adjusted Basis . Do taxes online 2010 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. Do taxes online 2010 You also must keep records of the events that affect basis or adjusted basis. Do taxes online 2010 See Keeping Records , below. Do taxes online 2010 Figuring Your Basis How you figure your basis depends on how you acquire your home. Do taxes online 2010 If you buy or build your home, your cost is your basis. Do taxes online 2010 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. Do taxes online 2010 If you inherit your home from a decedent, different rules apply depending on the date of the decedent's death. Do taxes online 2010 Each of these topics is discussed later. Do taxes online 2010 Property transferred from a spouse. Do taxes online 2010   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. Do taxes online 2010 Publication 504, Divorced or Separated Individuals, fully discusses transfers between spouses. Do taxes online 2010 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. Do taxes online 2010 The cost of your home includes most settlement or closing costs you paid when you bought the home. Do taxes online 2010 If you built your home, your cost includes most closing costs paid when you bought the land or settled on your mortgage. Do taxes online 2010 See Settlement or closing costs , later. Do taxes online 2010 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. Do taxes online 2010 Purchase. Do taxes online 2010   The basis of a home you bought is the amount you paid for it. Do taxes online 2010 This usually includes your down payment and any debt you assumed. Do taxes online 2010 The basis of a cooperative apartment is the amount you paid for your shares in the corporation that owns or controls the property. Do taxes online 2010 This amount includes any purchase commissions or other costs of acquiring the shares. Do taxes online 2010 Construction. Do taxes online 2010   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. Do taxes online 2010 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. Do taxes online 2010 If you built all or part of your home yourself, your basis is the total amount it cost you to build it. Do taxes online 2010 You cannot include in basis the value of your own labor or any other labor for which you did not pay. Do taxes online 2010 Real estate taxes. Do taxes online 2010   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. Do taxes online 2010 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. Do taxes online 2010   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. Do taxes online 2010 You cannot deduct them as taxes paid. Do taxes online 2010   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. Do taxes online 2010 Do not include those taxes in your basis. Do taxes online 2010 If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Do taxes online 2010 Example 1. Do taxes online 2010 You bought your home on September 1. Do taxes online 2010 The property tax year in your area is the calendar year, and the tax is due on August 15. Do taxes online 2010 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. Do taxes online 2010 You did not reimburse the seller for your share of the real estate taxes from September 1 through December 31. Do taxes online 2010 You must reduce the basis of your home by the $426 [(122 ÷ 365) × $1,275] the seller paid for you. Do taxes online 2010 You can deduct your $426 share of real estate taxes on your return for the year you purchased your home. Do taxes online 2010 Example 2. Do taxes online 2010 You bought your home on May 3, 2013. Do taxes online 2010 The property tax year in your area is the calendar year. Do taxes online 2010 The taxes for the previous year are assessed on January 2 and are due on May 31 and November 30. Do taxes online 2010 Under state law, the taxes become a lien on May 31. Do taxes online 2010 You agreed to pay all taxes due after the date of sale. Do taxes online 2010 The taxes due in 2013 for 2012 were $1,375. Do taxes online 2010 The taxes due in 2014 for 2013 will be $1,425. Do taxes online 2010 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. Do taxes online 2010 Instead, you add the $1,375 to the cost (basis) of your home. Do taxes online 2010 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. Do taxes online 2010 You add the remaining $476 ($1,425 − $949) of taxes paid in 2014 to the cost (basis) of your home. Do taxes online 2010 Settlement or closing costs. Do taxes online 2010   If you bought your home, you probably paid settlement or closing costs in addition to the contract price. Do taxes online 2010 These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. Do taxes online 2010 If you built your home, you probably paid these costs when you bought the land or settled on your mortgage. Do taxes online 2010   The only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. Do taxes online 2010 You deduct them in the year you buy your home if you itemize your deductions. Do taxes online 2010 You can add certain other settlement or closing costs to the basis of your home. Do taxes online 2010 Items added to basis. Do taxes online 2010   You can include in your basis the settlement fees and closing costs you paid for buying your home. Do taxes online 2010 A fee is for buying the home if you would have had to pay it even if you paid cash for the home. Do taxes online 2010   The following are some of the settlement fees and closing costs that you can include in the original basis of your home. Do taxes online 2010 Abstract fees (abstract of title fees). Do taxes online 2010 Charges for installing utility services. Do taxes online 2010 Legal fees (including fees for the title search and preparation of the sales contract and deed). Do taxes online 2010 Recording fees. Do taxes online 2010 Surveys. Do taxes online 2010 Transfer or stamp taxes. Do taxes online 2010 Owner's title insurance. Do taxes online 2010 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. Do taxes online 2010   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. Do taxes online 2010 Items not added to basis and not deductible. Do taxes online 2010   Here are some settlement and closing costs that you cannot deduct or add to your basis. Do taxes online 2010 Fire insurance premiums. Do taxes online 2010 Charges for using utilities or other services related to occupancy of the home before closing. Do taxes online 2010 Rent for occupying the home before closing. Do taxes online 2010 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. Do taxes online 2010 Points paid by seller. Do taxes online 2010   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. Do taxes online 2010   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. Do taxes online 2010 See Points , earlier, for the rules on deducting points. Do taxes online 2010 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. Do taxes online 2010 Fair market value. Do taxes online 2010   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. Do taxes online 2010 Donor's adjusted basis is more than FMV. Do taxes online 2010   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. Do taxes online 2010 Disposition basis. Do taxes online 2010   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. Do taxes online 2010 Your basis for figuring a gain is the same as the donor's adjusted basis. Do taxes online 2010 Your basis for figuring a loss is the FMV when you received the gift. Do taxes online 2010 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. Do taxes online 2010 However, if using the FMV results in a gain, then you neither have a gain nor a loss. Do taxes online 2010 Example 1. Do taxes online 2010 Andrew received a house as a gift from Ishmael (the donor). Do taxes online 2010 At the time of the gift, the home had an FMV of $80,000. Do taxes online 2010 Ishmael's adjusted basis was $100,000. Do taxes online 2010 After he received the house, no events occurred to increase or decrease the basis. Do taxes online 2010 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. Do taxes online 2010 Example 2. Do taxes online 2010 Same facts as Example 1 , except this time Andrew sells the house for $70,000. Do taxes online 2010 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. Do taxes online 2010 Example 3. Do taxes online 2010 Same facts as Example 1 , except this time Andrew sells the house for $90,000. Do taxes online 2010 Initially, he figures the gain using Ishmael's adjusted basis ($100,000), which results in a loss of $10,000. Do taxes online 2010 Since it is a loss, Andrew must now recalculate the loss using the FMV ($80,000), which results in a gain of $10,000. Do taxes online 2010 So in this situation, Andrew will neither have a gain nor a loss. Do taxes online 2010 Donor's adjusted basis equal to or less than the FMV. Do taxes online 2010   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. Do taxes online 2010 Part of federal gift tax due to net increase in value. Do taxes online 2010   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. Do taxes online 2010 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. Do taxes online 2010 The net increase in the value of the home is its FMV minus the adjusted basis of the donor. Do taxes online 2010 Publication 551 gives more information, including examples, on figuring your basis when you receive property as a gift. Do taxes online 2010 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. Do taxes online 2010 If an estate tax return was filed, your basis is generally the value of the home listed on the estate tax return. Do taxes online 2010 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. Do taxes online 2010 Publication 551 and Publication 559, Survivors, Executors, and Administrators, have more information on the basis of inherited property. Do taxes online 2010 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. Do taxes online 2010 Adjusted Basis While you own your home, various events may take place that can change the original basis of your home. Do taxes online 2010 These events can increase or decrease your original basis. Do taxes online 2010 The result is called adjusted basis. Do taxes online 2010 See Table 3, on this page, for a list of some of the items that can adjust your basis. Do taxes online 2010 Table 3. Do taxes online 2010 Adjusted Basis This table lists examples of some items that generally will increase or decrease your basis in your home. Do taxes online 2010 It is not intended to be all-inclusive. Do taxes online 2010 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. Do taxes online 2010   An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. Do taxes online 2010 You must add the cost of any improvements to the basis of your home. Do taxes online 2010 You cannot deduct these costs. Do taxes online 2010   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. Do taxes online 2010 Amount added to basis. Do taxes online 2010   The amount you add to your basis for improvements is your actual cost. Do taxes online 2010 This includes all costs for material and labor, except your own labor, and all expenses related to the improvement. Do taxes online 2010 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. Do taxes online 2010   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. Do taxes online 2010 These assessments are discussed earlier under Real Estate Taxes . Do taxes online 2010 Improvements no longer part of home. Do taxes online 2010    Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. Do taxes online 2010 Example. Do taxes online 2010 You put wall-to-wall carpeting in your home 15 years ago. Do taxes online 2010 Later, you replaced that carpeting with new wall-to-wall carpeting. Do taxes online 2010 The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. Do taxes online 2010 Repairs versus improvements. Do taxes online 2010   A repair keeps your home in an ordinary, efficient operating condition. Do taxes online 2010 It does not add to the value of your home or prolong its life. Do taxes online 2010 Repairs include repainting your home inside or outside, fixing your gutters or floors, fixing leaks or plastering, and replacing broken window panes. Do taxes online 2010 You cannot deduct repair costs and generally cannot add them to the basis of your home. Do taxes online 2010   However, repairs that are done as part of an extensive remodeling or restoration of your home are considered improvements. Do taxes online 2010 You add them to the basis of your home. Do taxes online 2010 Records to keep. Do taxes online 2010   You can use Table 4 (at the end of the publication) as a guide to help you keep track of improvements to your home. Do taxes online 2010 Also see Keeping Records , below. Do taxes online 2010 Energy conservation subsidy. Do taxes online 2010   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. Do taxes online 2010 You must reduce the basis of your home by that value. Do taxes online 2010   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. Do taxes online 2010 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. Do taxes online 2010 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. Do taxes online 2010 You should keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. Do taxes online 2010 In addition, you should keep track of any decreases to the basis such as those listed in Table 3, earlier. Do taxes online 2010 How to keep records. Do taxes online 2010   How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. Do taxes online 2010 How long to keep records. Do taxes online 2010   You must keep your records for as long as they are important for meeting any provision of the federal tax law. Do taxes online 2010   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. Do taxes online 2010 (A period of limitations is the period of time after which no legal action can be brought. Do taxes online 2010 ) For assessment of tax you owe, this is generally 3 years from the date you filed the return. Do taxes online 2010 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. Do taxes online 2010 Returns filed before the due date are treated as filed on the due date. Do taxes online 2010   You may need to keep records relating to the basis of property (discussed earlier) for longer than the period of limitations. Do taxes online 2010 Keep those records as long as they are important in figuring the basis of the original or replacement property. Do taxes online 2010 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. Do taxes online 2010 Table 4. Do taxes online 2010 Record of Home Improvements Keep this for your records. Do taxes online 2010 Also, keep receipts or other proof of improvements. Do taxes online 2010 Remove from this record any improvements that are no longer part of your main home. Do taxes online 2010 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. Do taxes online 2010 (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