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State tax filing free 23. State tax filing free   Interest Expense Table of Contents Introduction Useful Items - You may want to see: Home Mortgage InterestAmount Deductible Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement Investment InterestInvestment Property Allocation of Interest Expense Limit on Deduction Items You Cannot DeductPersonal Interest Allocation of Interest How To ReportMore than one borrower. State tax filing free Mortgage proceeds used for business or investment. State tax filing free Introduction This chapter discusses what interest expenses you can deduct. State tax filing free Interest is the amount you pay for the use of borrowed money. State tax filing free The following are types of interest you can deduct as itemized deductions on Schedule A (Form 1040). State tax filing free Home mortgage interest, including certain points and mortgage insurance premiums. State tax filing free Investment interest. State tax filing free This chapter explains these deductions. State tax filing free It also explains where to deduct other types of interest and lists some types of interest you cannot deduct. State tax filing free Use Table 23-1 to find out where to get more information on various types of interest, including investment interest. State tax filing free Useful Items - You may want to see: Publication 936 Home Mortgage Interest Deduction 550 Investment Income and Expenses Home Mortgage Interest Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). State tax filing free The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. State tax filing free You can deduct home mortgage interest if all the following conditions are met. State tax filing free You file Form 1040 and itemize deductions on Schedule A (Form 1040). State tax filing free The mortgage is a secured debt on a qualified home in which you have an ownership interest. State tax filing free (Generally, your mortgage is a secured debt if you put your home up as collateral to protect the interest of the lender. State tax filing free The term “qualified home” means your main home or second home. State tax filing free For details, see Publication 936. State tax filing free )  Both you and the lender must intend that the loan be repaid. State tax filing free Amount Deductible In most cases, you can deduct all of your home mortgage interest. State tax filing free How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. State tax filing free Fully deductible interest. State tax filing free   If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. State tax filing free (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category. State tax filing free )   The three categories are as follows: Mortgages you took out on or before October 13, 1987 (called grandfathered debt). State tax filing free Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2013 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately). State tax filing free Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2013 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2). State tax filing free The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. State tax filing free   See Part II of Publication 936 for more detailed definitions of grandfathered, home acquisition, and home equity debt. State tax filing free    You can use Figure 23-A to check whether your home mortgage interest is fully deductible. State tax filing free Figure 23-A. State tax filing free Is My Home Mortgage Interest Fully Deductible? Please click here for the text description of the image. State tax filing free Figure 23-A. State tax filing free Is My Interest Fully Deductible? Limits on deduction. State tax filing free   You cannot fully deduct interest on a mortgage that does not fit into any of the three categories listed earlier. State tax filing free If this applies to you, see Part II of Publication 936 to figure the amount of interest you can deduct. State tax filing free Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. State tax filing free It also describes certain special situations that may affect your deduction. State tax filing free Late payment charge on mortgage payment. State tax filing free   You can deduct as home mortgage interest a late payment charge if it was not for a specific service performed in connection with your mortgage loan. State tax filing free Mortgage prepayment penalty. State tax filing free   If you pay off your home mortgage early, you may have to pay a penalty. State tax filing free 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. State tax filing free Sale of home. State tax filing free   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of sale. State tax filing free Example. State tax filing free John and Peggy Harris sold their home on May 7. State tax filing free Through April 30, they made home mortgage interest payments of $1,220. State tax filing free The settlement sheet for the sale of the home showed $50 interest for the 6-day period in May up to, but not including, the date of sale. State tax filing free Their mortgage interest deduction is $1,270 ($1,220 + $50). State tax filing free Prepaid interest. State tax filing free   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. State tax filing free You can deduct in each year only the interest that qualifies as home mortgage interest for that year. State tax filing free However, there is an exception that applies to points, discussed later. State tax filing free Mortgage interest credit. State tax filing free   You may be able to claim a mortgage interest credit if you were issued a mortgage credit certificate (MCC) by a state or local government. State tax filing free Figure the credit on Form 8396, Mortgage Interest Credit. State tax filing free If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. State tax filing free   For more information on the credit, see chapter 37. State tax filing free Ministers' and military housing allowance. State tax filing free   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you can still deduct your home mortgage interest. State tax filing free Hardest Hit Fund and Emergency Homeowners' Loan Programs. State tax filing free   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. State tax filing free 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. State tax filing free 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. State tax filing free 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 from payer(s) / borrower(s)), box 4 (mortgage insurance premiums) and box 5 (real property taxes). State tax filing free 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. State tax filing free Mortgage assistance payments under section 235 of the National Housing Act. State tax filing free   If you qualify for mortgage assistance payments for lower-income families under section 235 of the National Housing Act, part or all of the interest on your mortgage may be paid for you. State tax filing free You cannot deduct the interest that is paid for you. State tax filing free No other effect on taxes. State tax filing free   Do not include these mortgage assistance payments in your income. State tax filing free Also, do not use these payments to reduce other deductions, such as real estate taxes. State tax filing free Divorced or separated individuals. State tax filing free   If a divorce or separation agreement requires you or your spouse or former spouse to pay home mortgage interest on a home owned by both of you, the payment of interest may be alimony. State tax filing free See the discussion of Payments for jointly-owned home in chapter 18. State tax filing free Redeemable ground rents. State tax filing free   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. State tax filing free   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. State tax filing free For more information, see Publication 936. State tax filing free Nonredeemable ground rents. State tax filing free   Payments on a nonredeemable ground rent are not mortgage interest. State tax filing free You can deduct them as rent if they are a business expense or if they are for rental property. State tax filing free Reverse mortgages. State tax filing free   A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. State tax filing free With a reverse mortgage, you retain title to your home. State tax filing free Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. State tax filing free Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. State tax filing free Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until the loan is paid in full. State tax filing free Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Publication 936. State tax filing free Rental payments. State tax filing free   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. State tax filing free This is true even if the settlement papers call them interest. State tax filing free You cannot deduct these payments as home mortgage interest. State tax filing free Mortgage proceeds invested in tax-exempt securities. State tax filing free   You cannot deduct the home mortgage interest on grandfathered debt or home equity debt if you used the proceeds of the mortgage to buy securities or certificates that produce tax-free income. State tax filing free “Grandfathered debt” and “home equity debt” are defined earlier under Amount Deductible. State tax filing free Refunds of interest. State tax filing free   If you receive a refund of interest in the same tax year you paid it, you must reduce your interest expense by the amount refunded to you. State tax filing free If you receive a refund of interest you deducted in an earlier year, you generally must include the refund in income in the year you receive it. State tax filing free However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. State tax filing free This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. State tax filing free    If you received a refund of interest you overpaid in an earlier year, you generally will receive a Form 1098, Mortgage Interest Statement, showing the refund in box 3. State tax filing free For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. State tax filing free   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in chapter 12. State tax filing free Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. State tax filing free Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. State tax filing free A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. State tax filing free See Points paid by the seller , later. State tax filing free General Rule You generally cannot deduct the full amount of points in the year paid. State tax filing free Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. State tax filing free See Deduction Allowed Ratably , next. State tax filing free For exceptions to the general rule, see Deduction Allowed in Year Paid , later. State tax filing free Deduction Allowed Ratably If you do not meet the tests listed under Deduction Allowed in Year Paid , later, the loan is not a home improvement loan, or you choose not to deduct your points in full in the year paid, you can deduct the points ratably (equally) over the life of the loan if you meet all the following tests. State tax filing free You use the cash method of accounting. State tax filing free This means you report income in the year you receive it and deduct expenses in the year you pay them. State tax filing free Most individuals use this method. State tax filing free Your loan is secured by a home. State tax filing free (The home does not need to be your main home. State tax filing free ) Your loan period is not more than 30 years. State tax filing free If your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period. State tax filing free Either your loan amount is $250,000 or less, or the number of points is not more than: 4, if your loan period is 15 years or less, or 6, if your loan period is more than 15 years. State tax filing free Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. State tax filing free (You can use Figure 23-B as a quick guide to see whether your points are fully deductible in the year paid. State tax filing free ) Your loan is secured by your main home. State tax filing free (Your main home is the one you ordinarily live in most of the time. State tax filing free ) Paying points is an established business practice in the area where the loan was made. State tax filing free The points paid were not more than the points generally charged in that area. State tax filing free You use the cash method of accounting. State tax filing free This means you report income in the year you receive it and deduct expenses in the year you pay them. State tax filing free (If you want more information about this method, see Accounting Methods in chapter 1. State tax filing free ) 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. State tax filing free The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. State tax filing free The funds you provided are not required to have been applied to the points. State tax filing free They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. State tax filing free You cannot have borrowed these funds from your lender or mortgage broker. State tax filing free You use your loan to buy or build your main home. State tax filing free The points were computed as a percentage of the principal amount of the mortgage. State tax filing free The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. State tax filing free The points may be shown as paid from either your funds or the seller's. State tax filing free Figure 23-B. State tax filing free Are My Points Fully Deductible This Year? Please click here for the text description of the image. State tax filing free Figure 23-B. State tax filing free Are My Points Fully Deductible This Year? Note. State tax filing free If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan. State tax filing free Home improvement loan. State tax filing free   You can also fully deduct in the year paid points paid on a loan to improve your main home, if tests (1) through (6) are met. State tax filing free Second home. State tax filing free You cannot fully deduct in the year paid points you pay on loans secured by your second home. State tax filing free You can deduct these points only over the life of the loan. State tax filing free Refinancing. State tax filing free   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. State tax filing free This is true even if the new mortgage is secured by your main home. State tax filing free   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. State tax filing free You can deduct the rest of the points over the life of the loan. State tax filing free Example 1. State tax filing free In 1998, Bill Fields got a mortgage to buy a home. State tax filing free In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. State tax filing free The mortgage is secured by his home. State tax filing free To get the new loan, he had to pay three points ($3,000). State tax filing free Two points ($2,000) were for prepaid interest, and one point ($1,000) was charged for services, in place of amounts that ordinarily are stated separately on the settlement statement. State tax filing free Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. State tax filing free The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. State tax filing free Bill's first payment on the new loan was due July 1. State tax filing free He made six payments on the loan in 2013 and is a cash basis taxpayer. State tax filing free Bill used the funds from the new mortgage to repay his existing mortgage. State tax filing free Although the new mortgage loan was for Bill's continued ownership of his main home, it was not for the purchase or improvement of that home. State tax filing free He cannot deduct all of the points in 2013. State tax filing free He can deduct two points ($2,000) ratably over the life of the loan. State tax filing free He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. State tax filing free The other point ($1,000) was a fee for services and is not deductible. State tax filing free Example 2. State tax filing free The facts are the same as in Example 1, except that Bill used $25,000 of the loan proceeds to improve his home and $75,000 to repay his existing mortgage. State tax filing free Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. State tax filing free His deduction is $500 ($2,000 × 25%). State tax filing free Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. State tax filing free This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. State tax filing free The total amount Bill deducts in 2013 is $550 ($500 + $50). State tax filing free Special Situations This section describes certain special situations that may affect your deduction of points. State tax filing free Original issue discount. State tax filing free   If you do not qualify to either deduct the points in the year paid or deduct them ratably over the life of the loan, or if you choose not to use either of these methods, the points reduce the issue price of the loan. State tax filing free This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. State tax filing free Amounts charged for services. State tax filing free   Amounts charged by the lender for specific services connected to the loan are not interest. State tax filing free Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. State tax filing free You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. State tax filing free Points paid by the seller. State tax filing free   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. State tax filing free Treatment by seller. State tax filing free   The seller cannot deduct these fees as interest. State tax filing free But they are a selling expense that reduces the amount realized by the seller. State tax filing free See chapter 15 for information on selling your home. State tax filing free Treatment by buyer. State tax filing free    The buyer reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them. State tax filing free If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. State tax filing free If any of those tests are not met, the buyer deducts the points over the life of the loan. State tax filing free   For information about basis, see chapter 13. State tax filing free Funds provided are less than points. State tax filing free   If you meet all the tests in Deduction Allowed in Year Paid , earlier, 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. State tax filing free In addition, you can deduct any points paid by the seller. State tax filing free Example 1. State tax filing free When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). State tax filing free You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. State tax filing free Of the $1,000 charged for points, you can deduct $750 in the year paid. State tax filing free You spread the remaining $250 over the life of the mortgage. State tax filing free Example 2. State tax filing free 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. State tax filing free In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). State tax filing free You spread the remaining $250 over the life of the mortgage. State tax filing free You must reduce the basis of your home by the $1,000 paid by the seller. State tax filing free Excess points. State tax filing free   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the points paid were more than generally paid in your area (test (3)), you deduct in the year paid only the points that are generally charged. State tax filing free You must spread any additional points over the life of the mortgage. State tax filing free Mortgage ending early. State tax filing free   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. State tax filing free However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. State tax filing free Instead, deduct the remaining balance over the term of the new loan. State tax filing free    A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. State tax filing free Example. State tax filing free Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. State tax filing free He deducts $200 points per year. State tax filing free Through 2012, Dan has deducted $2,200 of the points. State tax filing free Dan prepaid his mortgage in full in 2013. State tax filing free He can deduct the remaining $800 of points in 2013. State tax filing free Limits on deduction. State tax filing free   You cannot fully deduct points paid on a mortgage unless the mortgage fits into one of the categories listed earlier under Fully deductible interest . State tax filing free See Publication 936 for details. State tax filing free Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. State tax filing free The insurance must be in connection with home acquisition debt and the insurance contract must have been issued after 2006. State tax filing free Qualified mortgage insurance. State tax filing free   Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). State tax filing free   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. State tax filing free If provided by the Rural Housing Service, it is commonly known as a guarantee fee. State tax filing free These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. State tax filing free Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. State tax filing free Special rules for prepaid mortgage insurance. State tax filing free   Generally, if you paid premiums for qualified mortgage insurance that are allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. State tax filing free You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. State tax filing free No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. State tax filing free This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. State tax filing free See the Example below. State tax filing free Example. State tax filing free Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. State tax filing free Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. State tax filing free Since the $9,240 in private mortgage insurance is allocable to periods after 2012, Ryan must allocate the $9,240 over the shorter of the life of the mortgage or 84 months. State tax filing free Ryan's adjusted gross income (AGI) for 2012 is $76,000. State tax filing free Ryan can deduct $880 ($9,240 ÷ 84 × 8 months) for qualified mortgage insurance premiums in 2012. State tax filing free For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 × 12 months) if his AGI is $100,000 or less. State tax filing free In this example, the mortgage insurance premiums are allocated over 84 months, which is shorter than the life of the mortgage of 15 years (180 months). State tax filing free Limit on deduction. State tax filing free   If your adjusted gross income 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 otherwise deductible is reduced and may be eliminated. State tax filing free 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. State tax filing free If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. State tax filing free Form 1098, 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, you generally will receive a Form 1098 or a similar statement from the mortgage holder. State tax filing free You will receive the statement if you pay interest to a person (including a financial institution or a cooperative housing corporation) in the course of that person's trade or business. State tax filing free A governmental unit is a person for purposes of furnishing the statement. State tax filing free The statement for each year should be sent to you by January 31 of the following year. State tax filing free A copy of this form will also be sent to the IRS. State tax filing free The statement will show the total interest you paid during the year, any mortgage insurance premiums you paid, and if you purchased a main home during the year, it also will show the deductible points paid during the year, including seller-paid points. State tax filing free However, it should not show any interest that was paid for you by a government agency. State tax filing free As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. State tax filing free However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. State tax filing free See Points , earlier, to determine whether you can deduct points not shown on Form 1098. State tax filing free Prepaid interest on Form 1098. State tax filing free   If you prepaid interest in 2013 that accrued in full by January 15, 2014, this prepaid interest may be included in box 1 of Form 1098. State tax filing free However, you cannot deduct the prepaid amount for January 2014 in 2013. State tax filing free (See Prepaid interest , earlier. State tax filing free ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. State tax filing free You will include the interest for January 2014 with the other interest you pay for 2014. State tax filing free See How To Report , later. State tax filing free Refunded interest. State tax filing free   If you received a refund of mortgage interest you overpaid in an earlier year, you generally will receive a Form 1098 showing the refund in box 3. State tax filing free See Refunds of interest , earlier. State tax filing free Mortgage insurance premiums. State tax filing free   The amount of mortgage insurance premiums you paid during 2013 may be shown in box 4 of Form 1098. State tax filing free See Mortgage Insurance Premiums, earlier. State tax filing free Investment Interest This section discusses interest expenses you may be able to deduct as an investor. State tax filing free If you borrow money to buy property you hold for investment, the interest you pay is investment interest. State tax filing free You can deduct investment interest subject to the limit discussed later. State tax filing free However, you cannot deduct interest you incurred to produce tax-exempt income. State tax filing free Nor can you deduct interest expenses on straddles. State tax filing free Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. State tax filing free Investment Property Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. State tax filing free It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). State tax filing free Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). State tax filing free Partners, shareholders, and beneficiaries. State tax filing free   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. State tax filing free Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. State tax filing free Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. State tax filing free The allocation is not affected by the use of property that secures the debt. State tax filing free Limit on Deduction Generally, your deduction for investment interest expense is limited to the amount of your net investment income. State tax filing free You can carry over the amount of investment interest that you could not deduct because of this limit to the next tax year. State tax filing free The interest carried over is treated as investment interest paid or accrued in that next year. State tax filing free You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. State tax filing free Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. State tax filing free Investment income. State tax filing free    This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). State tax filing free Investment income does not include Alaska Permanent Fund dividends. State tax filing free It also does not include qualified dividends or net capital gain unless you choose to include them. State tax filing free Choosing to include qualified dividends. State tax filing free   Investment income generally does not include qualified dividends, discussed in chapter 8. State tax filing free However, you can choose to include all or part of your qualified dividends in investment income. State tax filing free   You make this choice by completing Form 4952, line 4g, according to its instructions. State tax filing free   If you choose to include any amount of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. State tax filing free Choosing to include net capital gain. State tax filing free   Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). State tax filing free However, you can choose to include all or part of your net capital gain in investment income. State tax filing free    You make this choice by completing Form 4952, line 4g, according to its instructions. State tax filing free   If you choose to include any amount of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. State tax filing free    Before making either choice, consider the overall effect on your tax liability. State tax filing free Compare your tax if you make one or both of these choices with your tax if you do not. State tax filing free Investment income of child reported on parent's return. State tax filing free    Investment income includes the part of your child's interest and dividend income that you choose to report on your return. State tax filing free If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814, Parents' Election To Report Child's Interest and Dividends. State tax filing free Child's qualified dividends. State tax filing free   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. State tax filing free However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. State tax filing free   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). State tax filing free Child's Alaska Permanent Fund dividends. State tax filing free   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. State tax filing free To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. State tax filing free Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. State tax filing free Subtract the result from the amount on Form 8814, line 12. State tax filing free Child's capital gain distributions. State tax filing free    If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D, line 13, or Form 1040, line 13) generally does not count as investment income. State tax filing free However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. State tax filing free   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). State tax filing free Investment expenses. State tax filing free   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. State tax filing free Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. State tax filing free Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A, line 27. State tax filing free Losses from passive activities. State tax filing free   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). State tax filing free See Publication 925, Passive Activity and At-Risk Rules, for information about passive activities. State tax filing free Form 4952 Use Form 4952, Investment Interest Expense Deduction, to figure your deduction for investment interest. State tax filing free Exception to use of Form 4952. State tax filing free   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. State tax filing free Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. State tax filing free You do not have any other deductible investment expenses. State tax filing free You have no carryover of investment interest expense from 2012. State tax filing free If you meet all of these tests, you can deduct all of your investment interest. State tax filing free More Information For more information on investment interest, see Interest Expenses in chapter 3 of Publication 550. State tax filing free Items You Cannot Deduct Some interest payments are not deductible. State tax filing free Certain expenses similar to interest also are not deductible. State tax filing free Nondeductible expenses include the following items. State tax filing free Personal interest (discussed later). State tax filing free Service charges (however, see Other Expenses (Line 23) in chapter 28). State tax filing free Annual fees for credit cards. State tax filing free Loan fees. State tax filing free Credit investigation fees. State tax filing free Interest to purchase or carry tax-exempt securities. State tax filing free Penalties. State tax filing free   You cannot deduct fines and penalties paid to a government for violations of law, regardless of their nature. State tax filing free Personal Interest Personal interest is not deductible. State tax filing free Personal interest is any interest that is not home mortgage interest, investment interest, business interest, or other deductible interest. State tax filing free It includes the following items. State tax filing free Interest on car loans (unless you use the car for business). State tax filing free Interest on federal, state, or local income tax. State tax filing free Finance charges on credit cards, retail installment contracts, and revolving charge accounts incurred for personal expenses. State tax filing free Late payment charges by a public utility. State tax filing free You may be able to deduct interest you pay on a qualified student loan. State tax filing free For details, see Publication 970, Tax Benefits for Education. State tax filing free Allocation of Interest If you use the proceeds of a loan for more than one purpose (for example, personal and business), you must allocate the interest on the loan to each use. State tax filing free However, you do not have to allocate home mortgage interest if it is fully deductible, regardless of how the funds are used. State tax filing free You allocate interest (other than fully deductible home mortgage interest) on a loan in the same way as the loan itself is allocated. State tax filing free You do this by tracing disbursements of the debt proceeds to specific uses. State tax filing free For details on how to do this, see chapter 4 of Publication 535. State tax filing free How To Report You must file Form 1040 to deduct any home mortgage interest expense on your tax return. State tax filing free Where you deduct your interest expense generally depends on how you use the loan proceeds. State tax filing free See Table 23-1 for a summary of where to deduct your interest expense. State tax filing free Home mortgage interest and points. State tax filing free   Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. State tax filing free If you paid more deductible interest to the financial institution than the amount shown on Form 1098, show the larger deductible amount on line 10. State tax filing free Attach a statement explaining the difference and print “See attached” next to line 10. State tax filing free    Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. State tax filing free If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and taxpayer identification number (TIN) on the dotted lines next to line 11. State tax filing free The seller must give you this number and you must give the seller your TIN. State tax filing free A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. State tax filing free Failure to meet any of these requirements may result in a $50 penalty for each failure. State tax filing free The TIN can be either a social security number, an individual taxpayer identification number (issued by the Internal Revenue Service), or an employer identification number. State tax filing free See Social Security Number (SSN) in chapter 1 for more information about TINs. State tax filing free    If you can take a deduction for points that were not reported to you on Form 1098, deduct those points on Schedule A (Form 1040), line 12. State tax filing free   Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. State tax filing free More than one borrower. State tax filing free   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. State tax filing free Show how much of the interest each of you paid, and give the name and address of the person who received the form. State tax filing free Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. State tax filing free Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. State tax filing free   Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. State tax filing free You should let each of the other borrowers know what his or her share is. State tax filing free Mortgage proceeds used for business or investment. State tax filing free    If your home mortgage interest deduction is limited, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 23-1. State tax filing free It shows where to deduct the part of your excess interest that is for those activities. State tax filing free Investment interest. State tax filing free    Deduct investment interest, subject to certain limits discussed in Publication 550, on Schedule A (Form 1040), line 14. State tax filing free Amortization of bond premium. State tax filing free   There are various ways to treat the premium you pay to buy taxable bonds. State tax filing free See Bond Premium Amortization in Publication 550. State tax filing free Income-producing rental or royalty interest. State tax filing free   Deduct interest on a loan for income-producing rental or royalty property that is not used in your business in Part I of Schedule E (Form 1040). State tax filing free Example. State tax filing free You rent out part of your home and borrow money to make repairs. State tax filing free You can deduct only the interest payment for the rented part in Part I of Schedule E (Form 1040). State tax filing free Deduct the rest of the interest payment on Schedule A (Form 1040) if it is deductible home mortgage interest. State tax filing free Table 23-1. State tax filing free Where To Deduct Your Interest Expense IF you have . State tax filing free . State tax filing free . State tax filing free THEN deduct it on . State tax filing free . State tax filing free . State tax filing free AND for more information go to . State tax filing free . State tax filing free . State tax filing free deductible student loan interest Form 1040, line 33, or Form 1040A, line 18 Publication 970. State tax filing free deductible home mortgage interest and points reported on Form 1098 Schedule A (Form 1040), line 10 Publication 936. State tax filing free deductible home mortgage interest not reported on Form 1098 Schedule A (Form 1040), line 11 Publication 936. State tax filing free deductible points not reported on Form 1098 Schedule A (Form 1040), line 12 Publication 936. State tax filing free deductible mortgage insurance premiums Schedule A (Form 1040), line 13 Publication 936. State tax filing free deductible investment interest (other than incurred to produce rents or royalties) Schedule A (Form 1040), line 14 Publication 550. State tax filing free deductible business interest (non-farm) Schedule C or C-EZ (Form 1040) Publication 535. State tax filing free deductible farm business interest Schedule F (Form 1040) Publications 225 and 535. State tax filing free deductible interest incurred to produce rents or royalties Schedule E (Form 1040) Publications 527 and 535. State tax filing free personal interest not deductible. State tax filing free Prev  Up  Next   Home   More Online Publications
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Understanding your CP13A Notice

We made changes to your return because we found an error involving your Earned Income Credit. You're not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Review the notice and compare our changes to the information on your tax return.
  • Correct the copy of your tax return that you kept for your records.
  • You don't need to do anything if you agree with the notice.
  • If you disagree with the notice, please contact us at the toll-free number listed on its top right corner (within 60 days of its date).

You may want to...


Answers to Common Questions

What should I do if I disagree with the changes you made?
Contact us at the toll free number listed on the top right corner of your notice if you disagree with the changes we made.

What should I do if I need to make another correction to my tax return?
You'll need to file an amended return to make a correction.

What's the difference between the "Child Tax Credit" and the "Additional Child Tax Credit?" Can I qualify for both?
The Child Tax Credit is for people who have a qualifying child. The maximum amount you can claim is $1000 for each qualifying child. The Additional Child Tax Credit is for individuals who receive less than the full amount of Child Tax Credit. You may qualify for both the Child Tax Credit and the Additional Child Tax Credit.

How do I claim an Additional Child Tax Credit?
You can claim the credit by completing a Form 1040 Schedule 8812, Child Tax Credit and attaching it to your income tax return.

My child is turning 18 this year. Can I still get the Additional Child Tax Credit?
No. Your child must be under the age of 17 at the end of 2009 to qualify for both the Child Tax Credit and the Additional Child Tax Credit.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

If you have any dependent children, remember to claim the Additional Child Tax Credit the next time you file your income tax return. Complete and attach a Form 1040 Schedule 8812, Child Tax Credit to your return to claim this credit.

Use the EITC Assistant to help you complete your Schedule EIC, Earned Income Credit and claim your Earned Income Credit.

Page Last Reviewed or Updated: 20-Feb-2014

The State Tax Filing Free

State tax filing free Internal Revenue Bulletin:  2009-17  April 27, 2009  Rev. State tax filing free Proc. State tax filing free 2009-24 Table of Contents SECTION 1. State tax filing free PURPOSE SECTION 2. State tax filing free BACKGROUND SECTION 3. State tax filing free SCOPE SECTION 4. State tax filing free APPLICATION. State tax filing free 01 In General. State tax filing free . State tax filing free 02 Limitations on Depreciation Deductions for Certain Automobiles. State tax filing free . State tax filing free 03 Inclusions in Income of Lessees of Passenger Automobiles. State tax filing free SECTION 5. State tax filing free EFFECTIVE DATE SECTION 6. State tax filing free DRAFTING INFORMATION SECTION 1. State tax filing free PURPOSE . State tax filing free 01 This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2009, including a separate table of limitations on depreciation deductions for trucks and vans; and (2) the amounts to be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2009, including a separate table of inclusion amounts for lessees of trucks and vans. State tax filing free . State tax filing free 02 The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. State tax filing free SECTION 2. State tax filing free BACKGROUND . State tax filing free 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year that the passenger automobile is placed in service by the taxpayer and each succeeding year. State tax filing free Section 280F(d)(7) requires the amounts allowable as depreciation deductions to be increased by a price inflation adjustment amount for passenger automobiles placed in service after 1988. State tax filing free The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. State tax filing free This change reflects the higher rate of price inflation that trucks and vans have been subject to since 1988. State tax filing free . State tax filing free 02 Section 168(k)(1)(A) provides a 50 percent additional first year depreciation deduction for certain new property acquired by a taxpayer after December 31, 2007, and before January 1, 2010, if no written binding contract for the acquisition of the property existed before January 1, 2008. State tax filing free Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A) by $8,000 for passenger automobiles to which the 50 percent additional first year depreciation deduction applies. State tax filing free . State tax filing free 03 Section 168(k)(2)(D)(i) provides that the 50 percent additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). State tax filing free Section 168(k)(2)(D)(iii) permits a taxpayer to elect to not claim the 50 percent additional first year depreciation deduction for any class of property. State tax filing free Section 168(k)(4) permits a corporation to elect to not claim the 50 percent additional first year depreciation deduction for all eligible qualified property (that is extension property or that is not extension property, as applicable) and instead to increase the business credit limitation under § 38(c) or the alternative minimum tax credit limitation under § 53(c). State tax filing free Accordingly, this revenue procedure provides tables for passenger automobiles for which the 50 percent additional depreciation deduction applies and tables for passenger automobiles for which the 50 percent additional first year depreciation deduction does not apply, including passenger automobiles in a class of property for which the taxpayer “elects out” of the 50 percent additional first year depreciation deduction or passenger automobiles that are eligible qualified property to which the § 168(k)(4) election applies. State tax filing free . State tax filing free 04 For leased passenger automobiles, § 280F(c) requires a reduction in the deduction allowed to the lessee of the passenger automobile. State tax filing free The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. State tax filing free Under § 1. State tax filing free 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an inclusion amount determined by applying a formula to the amount obtained from a table. State tax filing free One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. State tax filing free Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. State tax filing free SECTION 3. State tax filing free SCOPE . State tax filing free 01 The limitations on depreciation deductions in section 4. State tax filing free 02(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2009, and continue to apply for each taxable year that the passenger automobile remains in service. State tax filing free . State tax filing free 02 The tables in section 4. State tax filing free 03 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2009. State tax filing free Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. State tax filing free See Rev. State tax filing free Proc. State tax filing free 2002-14, 2002-1 C. State tax filing free B. State tax filing free 450, for passenger automobiles first leased before January 1, 2003, Rev. State tax filing free Proc. State tax filing free 2003-75, 2003-2 C. State tax filing free B. State tax filing free 1018, for passenger automobiles first leased during calendar year 2003, Rev. State tax filing free Proc. State tax filing free 2004-20, 2004-1 C. State tax filing free B. State tax filing free 642, for passenger automobiles first leased during calendar year 2004, Rev. State tax filing free Proc. State tax filing free 2005-13, 2005-1 C. State tax filing free B. State tax filing free 759, for passenger automobiles first leased during calendar year 2005, Rev. State tax filing free Proc. State tax filing free 2006-18, 2006-1 C. State tax filing free B. State tax filing free 645, for passenger automobiles first leased during calendar year 2006, Rev. State tax filing free Proc. State tax filing free 2007-30, 2007-1 C. State tax filing free B. State tax filing free 1104, for passenger automobiles first leased during calendar year 2007, and Rev. State tax filing free Proc. State tax filing free 2008-22, 2008-12 I. State tax filing free R. State tax filing free B. State tax filing free 658, for passenger automobiles first leased during calendar year 2008. State tax filing free SECTION 4. State tax filing free APPLICATION . State tax filing free 01 In General. State tax filing free (1) Limitations on depreciation deductions for certain automobiles. State tax filing free The limitations on depreciation deductions for passenger automobiles placed in service by the taxpayer for the first time during calendar year 2009 are in Tables 1 through 4 in section 4. State tax filing free 02(2) of this revenue procedure. State tax filing free (2) Inclusions in income of lessees of passenger automobiles. State tax filing free A taxpayer first leasing a passenger automobile during calendar year 2009 must determine the inclusion amount that is added to gross income using Tables 5 and 6 in section 4. State tax filing free 03 of this revenue procedure. State tax filing free In addition, the taxpayer must follow the procedures of § 1. State tax filing free 280F-7(a). State tax filing free . State tax filing free 02 Limitations on Depreciation Deductions for Certain Automobiles. State tax filing free (1) Amount of the inflation adjustment. State tax filing free (a) Passenger automobiles (other than trucks or vans). State tax filing free Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. State tax filing free The term “CPI automobile component” is defined in § 280F(d)(7)(B)(ii) as the “automobile component” of the Consumer Price Index for all Urban Consumers published by the Department of Labor. State tax filing free The new car component of the CPI was 115. State tax filing free 2 for October 1987 and 134. State tax filing free 837 for October 2008. State tax filing free The October 2008 index exceeded the October 1987 index by 19. State tax filing free 637. State tax filing free The Internal Revenue Service has, therefore, determined that the automobile price inflation adjustment for 2009 for passenger automobiles (other than trucks and vans) is 17. State tax filing free 05 percent (19. State tax filing free 637/115. State tax filing free 2 x 100%). State tax filing free This adjustment is applicable to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2009. State tax filing free The dollar limitations in § 280F(a) therefore must be multiplied by a factor of 0. State tax filing free 1705, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2009. State tax filing free (b) Trucks and vans. State tax filing free To determine the dollar limitations applicable to trucks and vans first placed in service during calendar year 2009, the new truck component of the CPI is used instead of the new car component. State tax filing free The new truck component of the CPI was 112. State tax filing free 4 for October 1987 and 133. State tax filing free 640 for October 2008. State tax filing free The October 2008 index exceeded the October 1987 index by 21. State tax filing free 24. State tax filing free The Service has, therefore, determined that the automobile price inflation adjustment for 2009 for trucks and vans is 18. State tax filing free 90 percent (21. State tax filing free 24/112. State tax filing free 4 x 100%). State tax filing free This adjustment is applicable to all trucks and vans that are first placed in service in calendar year 2009. State tax filing free The dollar limitations in § 280F(a) therefore must be multiplied by a factor of 0. State tax filing free 1890, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to trucks and vans. State tax filing free (2) Amount of the limitation. State tax filing free For passenger automobiles placed in service by the taxpayer in calendar year 2009, Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year. State tax filing free Use Table 1 for a passenger automobile (other than a truck or van) placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction does not apply, including a passenger automobile (other than a truck or van) in a class of property for which the taxpayer elects out of the 50 percent additional first year depreciation deduction or a passenger automobile that is eligible qualified property to which the § 168(k)(4) election applies. State tax filing free Use Table 2 for a passenger automobile (other than a truck or van) placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction applies. State tax filing free Use Table 3 for a truck or van placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction does not apply, including a truck or van in a class of property for which the taxpayer elects out of the 50 percent additional first year depreciation deduction or a truck or van that is eligible qualified property to which the § 168(k)(4) election applies. State tax filing free Use Table 4 for a truck or van placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction applies. State tax filing free REV. State tax filing free PROC. State tax filing free 2009-24 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE BY THE TAXPAYER IN CALENDAR YEAR 2009, FOR WHICH THE 50 PERCENT ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $2,960 2nd Tax Year $4,800 3rd Tax Year $2,850 Each Succeeding Year $1,775 REV. State tax filing free PROC. State tax filing free 2009-24 TABLE 2 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE BY THE TAXPAYER IN CALENDAR YEAR 2009, FOR WHICH THE 50 PERCENT ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $10,960 2nd Tax Year $4,800 3rd Tax Year $2,850 Each Succeeding Year $1,775 REV. State tax filing free PROC. State tax filing free 2009-24 TABLE 3 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE BY THE TAXPAYER IN CALENDAR YEAR 2009, FOR WHICH THE 50 PERCENT ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. State tax filing free PROC. State tax filing free 2009-24 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE BY THE TAXPAYER IN CALENDAR YEAR 2009, FOR WHICH THE 50 PERCENT ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 . State tax filing free 03 Inclusions in Income of Lessees of Passenger Automobiles. State tax filing free The inclusion amounts for passenger automobiles first leased in calendar year 2009 are calculated under the procedures described in § 1. State tax filing free 280F-7(a). State tax filing free Lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure in applying these procedures, while lessees of trucks and vans should use Table 6 of this revenue procedure. State tax filing free REV. State tax filing free PROC. State tax filing free 2009-24 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2009 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $18,500 $19,000 9 19 28 34 38 19,000 19,500 10 21 32 38 43 19,500 20,000 11 24 36 42 48 20,000 20,500 12 27 39 46 54 20,500 21,000 13 29 43 51 58 21,000 21,500 15 31 47 55 64 21,500 22,000 16 34 50 60 68 22,000 23,000 17 38 56 66 76 23,000 24,000 20 42 64 75 86 24,000 25,000 22 47 71 84 96 25,000 26,000 24 52 78 93 107 26,000 27,000 26 58 85 101 117 27,000 28,000 29 62 93 110 127 28,000 29,000 31 67 100 119 138 29,000 30,000 33 72 108 128 147 30,000 31,000 35 77 115 137 157 31,000 32,000 38 82 122 146 167 32,000 33,000 40 87 129 155 178 33,000 34,000 42 92 137 163 188 34,000 35,000 44 97 144 172 199 35,000 36,000 47 102 151 181 208 36,000 37,000 49 107 159 189 219 37,000 38,000 51 112 166 199 228 38,000 39,000 53 117 173 208 239 39,000 40,000 56 122 180 216 250 40,000 41,000 58 127 188 225 259 41,000 42,000 60 132 195 234 269 42,000 43,000 62 137 203 242 280 43,000 44,000 65 141 210 252 290 44,000 45,000 67 146 218 260 300 45,000 46,000 69 151 225 269 311 46,000 47,000 71 157 232 278 320 47,000 48,000 74 161 240 286 331 48,000 49,000 76 166 247 296 340 49,000 50,000 78 171 255 304 351 50,000 51,000 80 176 262 313 361 51,000 52,000 83 181 269 322 371 52,000 53,000 85 186 276 331 381 53,000 54,000 87 191 284 339 392 54,000 55,000 89 196 291 349 401 55,000 56,000 92 201 298 357 412 56,000 57,000 94 206 306 365 423 57,000 58,000 96 211 313 375 432 58,000 59,000 98 216 320 384 442 59,000 60,000 101 221 327 393 452 60,000 62,000 104 228 339 406 467 62,000 64,000 109 238 353 424 488 64,000 66,000 113 248 368 441 509 66,000 68,000 118 258 382 459 529 68,000 70,000 122 268 397 476 550 70,000 72,000 127 277 413 493 570 72,000 74,000 131 288 427 511 590 74,000 76,000 136 297 442 529 610 76,000 78,000 140 307 457 546 631 78,000 80,000 145 317 471 564 651 80,000 85,000 152 335 497 595 686 85,000 90,000 164 359 534 639 737 90,000 95,000 175 384 570 683 789 95,000 100,000 186 409 607 727 839 100,000 110,000 203 446 662 793 916 110,000 120,000 226 495 736 881 1,018 120,000 130,000 248 545 809 970 1,119 130,000 140,000 271 594 883 1,058 1,220 140,000 150,000 293 644 956 1,146 1,322 150,000 160,000 316 693 1,030 1,234 1,424 160,000 170,000 338 743 1,103 1,322 1,526 170,000 180,000 361 792 1,177 1,410 1,628 180,000 190,000 383 842 1,250 1,498 1,730 190,000 200,000 406 891 1,324 1,586 1,831 200,000 210,000 428 941 1,397 1,675 1,932 210,000 220,000 451 990 1,471 1,762 2,035 220,000 230,000 473 1,040 1,544 1,851 2,136 230,000 240,000 496 1,089 1,618 1,939 2,238 240,000 And up 518 1,139 1,691 2,027 2,340 REV. State tax filing free PROC. State tax filing free 2009-24 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2009 Fair Market Value of Electric Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th and Later $18,500 $19,000 8 17 25 30 35 19,000 19,500 9 19 29 35 40 19,500 20,000 10 22 33 38 45 20,000 20,500 11 25 36 43 50 20,500 21,000 12 27 40 48 55 21,000 21,500 13 30 43 52 60 21,500 22,000 15 32 47 56 66 22,000 23,000 16 36 52 64 72 23,000 24,000 18 41 60 72 83 24,000 25,000 21 45 68 81 93 25,000 26,000 23 50 75 90 103 26,000 27,000 25 56 82 98 114 27,000 28,000 27 61 89 107 124 28,000 29,000 30 65 97 116 134 29,000 30,000 32 70 104 125 144 30,000 31,000 34 75 112 134 154 31,000 32,000 36 80 119 143 164 32,000 33,000 39 85 126 151 175 33,000 34,000 41 90 134 160 184 34,000 35,000 43 95 141 169 195 35,000 36,000 45 100 148 178 205 36,000 37,000 48 105 155 187 215 37,000 38,000 50 110 163 195 226 38,000 39,000 52 115 170 204 236 39,000 40,000 55 120 177 213 246 40,000 41,000 57 125 185 221 256 41,000 42,000 59 130 192 231 266 42,000 43,000 61 135 199 240 276 43,000 44,000 64 139 207 249 286 44,000 45,000 66 144 215 257 296 45,000 46,000 68 149 222 266 307 46,000 47,000 70 155 229 274 317 47,000 48,000 73 159 237 283 327 48,000 49,000 75 164 244 292 338 49,000 50,000 77 169 251 301 348 50,000 51,000 79 174 259 310 357 51,000 52,000 82 179 266 318 368 52,000 53,000 84 184 273 328 378 53,000 54,000 86 189 281 336 388 54,000 55,000 88 194 288 345 399 55,000 56,000 91 199 295 354 408 56,000 57,000 93 204 302 363 419 57,000 58,000 95 209 310 371 429 58,000 59,000 97 214 317 381 439 59,000 60,000 100 219 324 389 450 60,000 62,000 103 226 336 402 465 62,000 64,000 107 236 351 420 485 64,000 66,000 112 246 365 438 505 66,000 68,000 116 256 380 455 526 68,000 70,000 121 266 394 473 546 70,000 72,000 125 276 409 491 566 72,000 74,000 130 286 423 509 586 74,000 76,000 134 296 438 526 607 76,000 78,000 139 305 454 543 627 78,000 80,000 143 316 467 561 648 80,000 85,000 151 333 493 592 684 85,000 90,000 163 357 531 635 735 90,000 95,000 174 382 567 680 785 95,000 100,000 185 407 604 724 836 100,000 110,000 202 444 659 790 912 110,000 120,000 225 493 733 878 1,014 120,000 130,000 247 543 806 966 1,116 130,000 140,000 270 592 880 1,054 1,218 140,000 150,000 292 642 953 1,143 1,319 150,000 160,000 315 691 1,027 1,230 1,421 160,000 170,000 337 741 1,100 1,319 1,522 170,000 180,000 360 790 1,174 1,407 1,624 180,000 190,000 382 840 1,247 1,495 1,726 190,000 200,000 405 889 1,321 1,583 1,828 200,000 210,000 427 939 1,394 1,671 1,930 210,000 220,000 450 988 1,468 1,759 2,031 220,000 230,000 472 1,038 1,541 1,847 2,134 230,000 240,000 495 1,087 1,615 1,935 2,235 240,000 and up 517 1,137 1,688 2,024 2,336 SECTION 5. State tax filing free EFFECTIVE DATE This revenue procedure applies to passenger automobiles (other than leased passenger automobiles) that are first placed in service by a taxpayer during calendar year 2009, and to leased passenger automobiles that are first leased by a taxpayer during calendar year 2009. State tax filing free SECTION 6. State tax filing free DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. State tax filing free Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). State tax filing free For further information regarding this revenue procedure, contact Mr. State tax filing free Harvey at (202) 622-4930 (not a toll-free call). State tax filing free Prev  Up  Next   Home   More Internal Revenue Bulletins