2011 Tax Form 10401040x Online Software2013 Ohio 1040ez InstructionsCan I Efile A 1040xNeed To File My 2012 TaxesHrblock EfileIrs Tax Forms 2010How To File Taxes From 2009State Tax Form 2013Amend 2012 TaxesCan I Efile My State Taxes For FreeTax Form 1040xOnline Tax PreparationHow To File An Amended Federal Tax ReturnIrs E FileFile Amended 2012 Tax ReturnFiling An Amended Tax Return2014 Ez Tax Forms2012 Tax Forms 1040ezFile Extension 2012 TaxesFree Income Tax PreparationIrs Tax Forms 2009H&r Block Free Tax PrepState Tax2012 Amended Tax FormsFree 1040ez FormsTax Form 2010How To Make A Tax Amendment1042 EzFile Past Years Tax ReturnHow Can I File My 2010 TaxesFree State Tax Only E Filing1040ez Tax Form And BookletIt 1040ez2012 Irs Form 1040 Ez1040 Irs Tax Forms 2012Free E File State Tax Return2009 1040 FormsFile Amended ReturnTax Credits For Students
1040nr Index A Additional Medicare Tax, What's New for 2013, What's New, Employment Taxes, Additional Medicare Tax. 1040nr Advertising, Advertising expenses. 1040nr Amortization Anti-abuse rule, Anti-abuse rule. 1040nr Anti-churning rules, Anti-Churning Rules Atmospheric pollution control facilities, Pollution Control Facilities Corporate organization costs, Costs of Organizing a Corporation Dispositions of section 197 intangibles, Disposition of Section 197 Intangibles Experimental costs, Research and Experimental Costs Geological and geophysical costs, Geological and Geophysical Costs How to deduct, How To Deduct Amortization Incorrect amount deducted, Incorrect Amount of Amortization Deducted Partnership organization costs, Costs of Organizing a Partnership Pollution control facilities, Pollution Control Facilities Reforestation costs, Reforestation Costs Reforestation expenses, Reforestation Costs Related person, Related person. 1040nr Research costs, Research and Experimental Costs Section 197 intangibles defined, Section 197 Intangibles Defined Start-up costs, Business Start-Up Costs Starting a businesscosts, Starting a Business Anticipated liabilities, Anticipated liabilities. 1040nr Assessments, local, Taxes for local benefits. 1040nr Assistance (see Tax help) At-risk limits, At-risk limits. 1040nr Attorney fees, Legal and professional fees. 1040nr Awards, Achievement awards. 1040nr , Length-of-service award. 1040nr , Safety achievement award. 1040nr B Bad debts Defined, Definition of Business Bad Debt How to treat, How To Claim a Business Bad Debt Recovery, Recovery of a Bad Debt Types of, Types of Business Bad Debts When worthless, When a Debt Becomes Worthless Bonuses Employee, Bonuses Royalties, Bonuses and advanced royalties. 1040nr Bribes, Bribes and kickbacks. 1040nr Business Assets, Business Assets Books and records, Business books and records, etc. 1040nr Meal expenses, Meals and Entertainment Use of car, Business use of your car. 1040nr , Car and truck expenses. 1040nr Use of home, Business use of your home. 1040nr C Campaign contribution, Political contributions. 1040nr Capital expenses, Capital Expenses, Capital versus Deductible Expenses Capitalization of interest, Capitalization of Interest Car allowance, Car allowance. 1040nr Car and truck expenses, Car and truck expenses. 1040nr Carrying charges, Carrying Charges Charitable contributions, Charitable contributions. 1040nr Circulation costs, newspapers and periodicals, Circulation Costs Club dues, Club dues and membership fees. 1040nr Comments on publication, Comments and suggestions. 1040nr Commitment fees, Commitment fees or standby charges. 1040nr Computer software, Computer software. 1040nr Constant-yield method, OID, Constant-yield method. 1040nr Contested liability, Contested liability. 1040nr Contributions Charitable, Charitable contributions. 1040nr Political, Political contributions. 1040nr Copyrights, Patents, copyrights, etc. 1040nr Cost depletion, Cost Depletion Cost of getting lease, Cost of Getting a Lease, Getting a Lease Cost of goods sold, Cost of Goods Sold Cost recovery, Cost recovery. 1040nr Covenant not to compete, Covenant not to compete. 1040nr Credit card convenience fees, Credit card convenience fees. 1040nr D De minimis OID, De minimis OID. 1040nr Debt-financed distributions, Debt-financed distribution. 1040nr Definitions Business bad debt, Definition of Business Bad Debt Necessary expense, What Can I Deduct? Ordinary expense, What Can I Deduct? Section 197 intangibles, Section 197 Intangibles Defined Demolition expenses, Demolition expenses or losses. 1040nr Depletion Mineral property, Mineral Property Oil and gas wells, Oil and Gas Wells Percentage table, Mines and other natural deposits. 1040nr Timber, Timber Who can claim, Who Can Claim Depletion? Depreciation (see Cost recovery) Development costs, miners, Development Costs Disabled, improvements for, Barrier Removal Costs Drilling and development costs, Intangible Drilling Costs Dues, membership, Club dues and membership fees. 1040nr E Economic interest, Who Can Claim Depletion? Economic performance, Economic performance. 1040nr Education expenses, Education Expenses, Education expenses. 1040nr Elderly, improvements for, Barrier Removal Costs Employee benefit programs, Employee benefit programs. 1040nr Employment taxes, Employment Taxes Entertainment, Reimbursement of Travel, Meals, and Entertainment Excise taxes, Excise taxes. 1040nr Experimentation costs, Research and Experimental Costs, Research and Experimental Costs Exploration costs, Exploration Costs F Fees Commitment, Commitment fees or standby charges. 1040nr Legal and professional, Legal and professional fees. 1040nr Regulatory, Licenses and regulatory fees. 1040nr Tax return preparation, Tax preparation fees. 1040nr Fines, Penalties and fines. 1040nr Forgone, Forgone interest. 1040nr Forgone interest, Forgone interest. 1040nr Form 3115, Form 3115. 1040nr , Changing Your Accounting Method 4562, How To Deduct Amortization 5213, Using the presumption later. 1040nr 8826, Disabled access credit. 1040nr 8885, Health coverage tax credit. 1040nr T, Form T. 1040nr Franchise, Franchise, trademark, or trade name. 1040nr , Franchise, trademark, trade name. 1040nr Franchise taxes, Franchise taxes. 1040nr Free tax services, Free help with your tax return. 1040nr Fringe benefits, Fringe Benefits Fuel taxes, Fuel taxes. 1040nr G Gas wells, Natural Gas Wells Geological and geophysical costs Development, oil and gas, Geological and Geophysical Costs Exploration, oil and gas, Geological and Geophysical Costs Geothermal wells, Intangible Drilling Costs, Mines and Geothermal Deposits Gifts, nominal value, Gifts of nominal value. 1040nr Going into business, Going Into Business, Starting a Business Goodwill, Goodwill. 1040nr Gross income, not-for-profit activity, Gross Income H Health insurance, deduction for self-employed, Self-Employed Health Insurance Deduction Heating equipment, Heating equipment. 1040nr Help (see Tax help) Home, business use of, Business use of your home. 1040nr I Impairment-related expenses, Impairment-related expenses. 1040nr Improvements, Improvements By lessee, Improvements by Lessee For disabled and elderly, Barrier Removal Costs Income taxes, Income Taxes Incorrect amount of amortization deducted, Incorrect Amount of Amortization Deducted Insurance Capitalized premiums, Capitalized Premiums Deductible premiums, Deductible Premiums Nondeductible premiums, Nondeductible Premiums Self-employed individuals, Self-Employed Health Insurance Deduction Intangible drilling costs, Intangible Drilling Costs Intangibles, amortization, Section 197 Intangibles Interest, Forgone interest. 1040nr Allocation of, Allocation of Interest Below-market, Below-Market Loans Business expense for, Interest Capitalized, Capitalized interest. 1040nr , Capitalization of Interest Carrying charge, Carrying Charges Deductible, Interest You Can Deduct Life insurance policies, Interest on loans with respect to life insurance policies. 1040nr Not deductible, Interest You Cannot Deduct Refunds of, Refunds of interest. 1040nr When to deduct, When To Deduct Interest Internet-related expenses, Internet-related expenses. 1040nr Interview expenses, Interview expense allowances. 1040nr K Key person, Who is a key person? Kickbacks, Bribes and kickbacks. 1040nr L Leases Canceling, Canceling a lease. 1040nr Cost of getting, Cost of Getting a Lease, Getting a Lease Improvements by lessee, Improvements by Lessee Leveraged, Leveraged leases. 1040nr Mineral, Bonuses and advanced royalties. 1040nr Oil and gas, Bonuses and advanced royalties. 1040nr Sales distinguished, Lease or purchase. 1040nr Taxes on, Taxes on Leased Property Legal and professional fees, Legal and professional fees. 1040nr Licenses, Government-granted license, permit, etc. 1040nr , Licenses and regulatory fees. 1040nr Life insurance coverage, Life insurance coverage. 1040nr Limit on deductions, Not-for-Profit Activities Line of credit, Line of credit (continuous borrowings). 1040nr Loans Below-market interestrate, Below-Market Loans Discounted, Discounted loan. 1040nr Loans or Advances, Loans or Advances Lobbying expenses, Lobbying expenses. 1040nr Long-term care insurance, Qualified long-term care insurance. 1040nr Losses, Limits on losses. 1040nr , Not-for-Profit Activities At-risk limits, At-risk limits. 1040nr Net operating, Net operating loss. 1040nr Passive activities, Passive activities. 1040nr M Machinery parts, Machinery parts. 1040nr Meals, Reimbursement of Travel, Meals, and Entertainment Meals and entertainment, Meals and Entertainment Meals and lodging, Meals and lodging. 1040nr Methods of accounting, When Can I Deduct an Expense? Mining Depletion, Mines and Geothermal Deposits Development costs, Development Costs Exploration costs, Exploration Costs Mortgage, Mortgage. 1040nr , Expenses paid to obtain a mortgage. 1040nr Moving expenses, machinery, Moving machinery. 1040nr N Natural gas, Natural Gas Wells Nonqualifying intangibles, Assets That Are Not Section 197 Intangibles Not-for-profit activities, Not-for-Profit Activities Not-for-profit activity, gross income, Gross Income O Office in home, Business use of your home. 1040nr Oil and gas wells Depletion, Oil and Gas Wells Drilling costs, Intangible Drilling Costs Partnerships, Partnerships and S Corporations S corporations, Partnerships and S Corporations Optional safe harbor method, Optional safe harbor method. 1040nr Optional write-off method Circulation costs, Optional Write-off of Certain Tax Preferences Experimental costs, Optional Write-off of Certain Tax Preferences Intangible drilling and development costs, Optional Write-off of Certain Tax Preferences Mining exploration and development costs, Optional Write-off of Certain Tax Preferences Research costs, Optional Write-off of Certain Tax Preferences Organization costs Corporate, Costs of Organizing a Corporation Partnership, Costs of Organizing a Partnership Organizational costs, Business Start-Up and Organizational Costs Original issue discount, Original issue discount (OID). 1040nr Outplacement services, Outplacement services. 1040nr P Passive activities, Passive activities. 1040nr Payments in kind, Payments in kind. 1040nr Penalties, Prepayment penalty. 1040nr Deductible, Penalties and fines. 1040nr Nondeductible, Penalties and fines. 1040nr Prepayment, Prepayment penalty. 1040nr Per diem and car allowances, Per Diem and Car Allowances Percentage depletion, Percentage Depletion Personal property tax, Personal property tax. 1040nr Political contributions, Political contributions. 1040nr Pollution control facilities, Pollution Control Facilities Prepaid expense, Prepayment. 1040nr Extends useful life, Prepayment. 1040nr Interest, Prepaid interest. 1040nr , Prepaid interest. 1040nr Rent, Rent paid in advance. 1040nr Prepayment penalty, Prepayment penalty. 1040nr Presumption of profit, Not-for-Profit Activities Publications (see Tax help) R Real estate taxes, Real Estate Taxes Recapture Exploration expenses, Recapture of exploration expenses. 1040nr Timber property, Recapture. 1040nr Recordkeeping, Partnerships and S Corporations Recovery of amount deducted, Recovery of amount deducted (tax benefit rule). 1040nr Refiners who cannot claim percentage depletion, Refiners who cannot claim percentage depletion. 1040nr Reforestation costs, Reforestation Costs, Reforestation Costs Regulatory fees, Licenses and regulatory fees. 1040nr Reimbursements, Reimbursements Business expenses, Reimbursements for Business Expenses Mileage, Per Diem and Car Allowances Nonaccountable plan, Nonaccountable Plans Per diem , Per Diem and Car Allowances Related persons Anti-churning rules, Related person. 1040nr Coal or iron ore, Disposal to related person. 1040nr Payments to, Related person. 1040nr , Related person. 1040nr Refiners, Related person. 1040nr Unreasonable rent, Unreasonable rent. 1040nr Removal, Retired Asset Removal Costs, Barrier Removal Costs Rent expense, capitalizing, Capitalizing Rent Expenses Repairs, Repairs. 1040nr Repayments (claim of right), Repayments. 1040nr Research costs, Research and Experimental Costs, Research and Experimental Costs Retiree drug subsidy, What's New for 2013, What's New S Sales taxes, Sales tax. 1040nr Section 179 expense deduction (see Cost recovery) Self-employed health insurance deduction, Self-Employed Health Insurance Deduction Self-employment tax, Self-employment tax. 1040nr Self-insurance, reserve for, Nondeductible Premiums Sick pay, Sick and Vacation Pay Standard meal allowance, Standard meal allowance. 1040nr Standard mileage rate, Car allowance. 1040nr (see Business use of your car) Standby charges, Commitment fees or standby charges. 1040nr Start-up costs, Business Start-Up and Organizational Costs, Business Start-Up Costs Subscriptions, Subscriptions. 1040nr Suggestions for publication, Comments and suggestions. 1040nr Supplies and materials, Supplies and materials. 1040nr T Tax help, How To Get Tax Help Tax preparation fees, Tax preparation fees. 1040nr Taxes, Taxes on Leased Property Carrying charge, Carrying Charges Employment, Employment Taxes Excise, Excise taxes. 1040nr Franchise, Franchise taxes. 1040nr Fuel, Fuel taxes. 1040nr Income, Income Taxes Leased property, Taxes on Leased Property Personal property, Personal property tax. 1040nr Real estate, Real Estate Taxes Sales, Sales tax. 1040nr Unemployment fund, Unemployment fund taxes. 1040nr Telephone, Telephone. 1040nr Timber, Reforestation Costs, Timber Tools, Tools. 1040nr Trademark, trade name, Franchise, trademark, or trade name. 1040nr , Franchise, trademark, trade name. 1040nr Travel, Reimbursement of Travel, Meals, and Entertainment TTY/TDD information, How To Get Tax Help U Unemployment fund taxes, Unemployment fund taxes. 1040nr Unpaid expenses, related person, Related person. 1040nr Utilities, Utilities. 1040nr V Vacation pay, Sick and Vacation Pay W Wages Property, Property Tests for deducting pay, Tests for Deducting Pay Welfare benefit funds, Welfare benefit funds. 1040nr Prev Up Home More Online Publications
Special Identity Theft Enforcement Efforts - 2013
Identity theft perpetrators are hitting credit card companies, banks and other financial institutions. Unfortunately, the tax system isn't immune. This is not something the IRS takes lightly, and we've dramatically stepped up efforts to stop refund fraud as well as identity theft prevention and detection across the entire tax system.
Our goal is to detect these attempts at refund fraud before they occur and prevent them from happening in the first place, including detecting new schemes.
The IRS is utilizing the full capabilities and resources of our Criminal Investigation division to investigate those who steal from American taxpayers through identity theft.
Page Last Reviewed or Updated: 06-Dec-2013
1040nr 3. 1040nr Reporting Rental Income, Expenses, and Losses Table of Contents Which Forms To UseSchedule E (Form 1040) Schedule C (Form 1040), Profit or Loss From Business Qualified Joint Venture Limits on Rental LossesAt-Risk Rules Passive Activity Limits Casualties and Thefts Example Figuring the net income or loss for a residential rental activity may involve more than just listing the income and deductions on Schedule E (Form 1040). 1040nr There are activities which do not qualify to use Schedule E, such as when the activity is not engaged in to make a profit or when you provide substantial services in conjunction with the property. 1040nr There are also the limitations which may need to be applied if you have a net loss on Schedule E. 1040nr There are two: (1) the limitation based on the amount of investment you have at risk in your rental activity, and (2) the special limits imposed on passive activities. 1040nr You may also have a gain or loss related to your rental property from a casualty or theft. 1040nr This is considered separately from the income and expense information you report on Schedule E. 1040nr Which Forms To Use The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). 1040nr However, do not use that schedule to report a not-for-profit activity. 1040nr See Not Rented for Profit , in chapter 4. 1040nr There are also other rental situations in which forms other than Schedule E would be used. 1040nr Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. 1040nr , you normally report your rental income and expenses on Schedule E, Part I. 1040nr List your total income, expenses, and depreciation for each rental property. 1040nr Be sure to enter the number of fair rental and personal use days on line 2. 1040nr If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. 1040nr Complete lines 1 and 2 for each property. 1040nr However, fill in lines 23a through 26 on only one Schedule E. 1040nr On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. 1040nr To find out if you need to attach Form 4562, see Form 4562 , later. 1040nr If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. 1040nr Form 6198, At-Risk Limitations. 1040nr See At-Risk Rules , later. 1040nr Also see Publication 925. 1040nr Form 8582, Passive Activity Loss Limitations. 1040nr See Passive Activity Limits , later. 1040nr Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. 1040nr If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. 1040nr Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). 1040nr Form 4562. 1040nr You must complete and attach Form 4562 for rental activities only if you are claiming: Depreciation, including the special depreciation allowance, on property placed in service during 2013; Depreciation on listed property (such as a car), regardless of when it was placed in service; or Any other car expenses, including the standard mileage rate or lease expenses. 1040nr Otherwise, figure your depreciation on your own worksheet. 1040nr You do not have to attach these computations to your return, but you should keep them in your records for future reference. 1040nr See Publication 946 for information on preparing Form 4562. 1040nr Schedule C (Form 1040), Profit or Loss From Business Generally, Schedule C is used when you provide substantial services in conjunction with the property or the rental is part of a trade or business as a real estate dealer. 1040nr Providing substantial services. 1040nr If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. 1040nr Use Form 1065, U. 1040nr S. 1040nr Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). 1040nr Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. 1040nr For information, see Publication 334, Tax Guide for Small Business. 1040nr Also, you may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. 1040nr For a discussion of “substantial services,” see Real Estate Rents in Publication 334, chapter 5. 1040nr Qualified Joint Venture If you and your spouse each materially participate (see Material participation under Passive Activity Limits, later) as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. 1040nr This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. 1040nr If you make this election, you must report rental real estate income on Schedule E (or Schedule C if you provide substantial services). 1040nr You will not be required to file Form 1065 for any year the election is in effect. 1040nr Rental real estate income generally is not included in net earnings from self-employment subject to self-employment tax and generally is subject to the passive activity limits. 1040nr If you and your spouse filed a Form 1065 for the year prior to the election, the partnership terminates at the end of the tax year immediately preceding the year the election takes effect. 1040nr For more information on qualified joint ventures, go to IRS. 1040nr gov and enter “qualified joint venture” in the search box. 1040nr Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. 1040nr You must consider these rules in the order shown below. 1040nr Both are discussed in this section. 1040nr At-risk rules. 1040nr These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. 1040nr This applies only if the real property was placed in service after 1986. 1040nr Passive activity limits. 1040nr Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. 1040nr However, there are exceptions. 1040nr At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. 1040nr Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. 1040nr In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. 1040nr You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. 1040nr Any loss that is disallowed because of the at-risk limits is treated as a deduction from the same activity in the next tax year. 1040nr See Publication 925 for a discussion of the at-risk rules. 1040nr Form 6198. 1040nr If you are subject to the at-risk rules, file Form 6198, At-Risk Limitations, with your tax return. 1040nr Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. 1040nr For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. 1040nr For a discussion of activities that are not considered rental activities, see Rental Activities in Publication 925. 1040nr Deductions or losses from passive activities are limited. 1040nr You generally cannot offset income, other than passive income, with losses from passive activities. 1040nr Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. 1040nr Any excess loss or credit is carried forward to the next tax year. 1040nr Exceptions to the rules for figuring passive activity limits for personal use of a dwelling unit and for rental real estate with active participation are discussed later. 1040nr For a detailed discussion of these rules, see Publication 925. 1040nr Real estate professionals. 1040nr If you are a real estate professional, complete line 43 of Schedule E. 1040nr You qualify as a real estate professional for the tax year if you meet both of the following requirements. 1040nr More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate. 1040nr You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate. 1040nr If you qualify as a real estate professional, rental real estate activities in which you materially participated are not passive activities. 1040nr For purposes of determining whether you materially participated in your rental real estate activities, each interest in rental real estate is a separate activity unless you elect to treat all your interests in rental real estate as one activity. 1040nr Do not count personal services you perform as an employee in real property trades or businesses unless you are a 5% owner of your employer. 1040nr You are a 5% owner if you own (or are considered to own) more than 5% of your employer's outstanding stock, or capital or profits interest. 1040nr Do not count your spouse's personal services to determine whether you met the requirements listed earlier to qualify as a real estate professional. 1040nr However, you can count your spouse's participation in an activity in determining if you materially participated. 1040nr Real property trades or businesses. 1040nr A real property trade or business is a trade or business that does any of the following with real property. 1040nr Develops or redevelops it. 1040nr Constructs or reconstructs it. 1040nr Acquires it. 1040nr Converts it. 1040nr Rents or leases it. 1040nr Operates or manages it. 1040nr Brokers it. 1040nr Choice to treat all interests as one activity. 1040nr If you were a real estate professional and had more than one rental real estate interest during the year, you can choose to treat all the interests as one activity. 1040nr You can make this choice for any year that you qualify as a real estate professional. 1040nr If you forgo making the choice for one year, you can still make it for a later year. 1040nr If you make the choice, it is binding for the tax year you make it and for any later year that you are a real estate professional. 1040nr This is true even if you are not a real estate professional in any intervening year. 1040nr (For that year, the exception for real estate professionals will not apply in determining whether your activity is subject to the passive activity rules. 1040nr ) See the Instructions for Schedule E for information about making this choice. 1040nr Material participation. 1040nr Generally, you materially participated in an activity for the tax year if you were involved in its operations on a regular, continuous, and substantial basis during the year. 1040nr For details, see Publication 925 or the Instructions for Schedule C. 1040nr Participating spouse. 1040nr If you are married, determine whether you materially participated in an activity by also counting any participation in the activity by your spouse during the year. 1040nr Do this even if your spouse owns no interest in the activity or files a separate return for the year. 1040nr Form 8582. 1040nr You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. 1040nr See Form 8582 not required , later in this chapter, to determine if you must complete Form 8582. 1040nr If you are required to complete Form 8582 and are also subject to the at-risk rules, include the amount from Form 6198, line 21 (deductible loss) in column (b) of Form 8582, Worksheet 1 or 3, as required. 1040nr Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. 1040nr Instead, follow the rules explained in chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). 1040nr Exception for Rental Real Estate With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. 1040nr This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. 1040nr Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. 1040nr Example. 1040nr Jane is single and has $40,000 in wages, $2,000 of passive income from a limited partnership, and $3,500 of passive loss from a rental real estate activity in which she actively participated. 1040nr $2,000 of Jane's $3,500 loss offsets her passive income. 1040nr The remaining $1,500 loss can be deducted from her $40,000 wages. 1040nr The special allowance is not available if you were married, lived with your spouse at any time during the year, and are filing a separate return. 1040nr Active participation. 1040nr You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. 1040nr Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions. 1040nr Example. 1040nr Mike is single and had the following income and losses during the tax year: Salary $42,300 Dividends 300 Interest 1,400 Rental loss (4,000) The rental loss was from the rental of a house Mike owned. 1040nr Mike had advertised and rented the house to the current tenant himself. 1040nr He also collected the rents, which usually came by mail. 1040nr All repairs were either made or contracted out by Mike. 1040nr Although the rental loss is from a passive activity, because Mike actively participated in the rental property management he can use the entire $4,000 loss to offset his other income. 1040nr Maximum special allowance. 1040nr The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. 1040nr If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. 1040nr If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. 1040nr Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. 1040nr Modified adjusted gross income (MAGI). 1040nr This is your adjusted gross income from Form 1040, U. 1040nr S. 1040nr Individual Income Tax Return, line 38, or Form 1040NR, U. 1040nr S. 1040nr Nonresident Alien Income Tax Return, line 37, figured without taking into account: The taxable amount of social security or equivalent tier 1 railroad retirement benefits, The deductible contributions to traditional individual retirement accounts (IRAs) and section 501(c)(18) pension plans, The exclusion from income of interest from Series EE and I U. 1040nr S. 1040nr savings bonds used to pay higher educational expenses, The exclusion of amounts received under an employer's adoption assistance program, Any passive activity income or loss included on Form 8582, Any rental real estate loss allowed to real estate professionals, Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the Instructions for Form 8582), The deduction allowed for one-half of self-employment tax, The deduction allowed for interest paid on student loans, The deduction for qualified tuition and related fees, and The domestic production activities deduction (see the Instructions for Form 8903). 1040nr Form 8582 not required. 1040nr Do not complete Form 8582 if you meet all of the following conditions. 1040nr Your only passive activities were rental real estate activities in which you actively participated. 1040nr Your overall net loss from these activities is $25,000 or less ($12,500 or less if married filing separately and you lived apart from your spouse all year). 1040nr If married filing separately, you lived apart from your spouse all year. 1040nr You have no prior year unallowed losses from these (or any other passive) activities. 1040nr You have no current or prior year unallowed credits from passive activities. 1040nr Your MAGI is $100,000 or less ($50,000 or less if married filing separately and you lived apart from your spouse all year). 1040nr You do not hold any interest in a rental real estate activity as a limited partner or as a beneficiary of an estate or a trust. 1040nr If you meet all of the conditions listed above, your rental real estate activities are not limited by the passive activity rules and you do not have to complete Form 8582. 1040nr On lines 23a through 23e of your Schedule E, enter the applicable amounts. 1040nr Casualties and Thefts As a result of a casualty or theft, you may have a loss related to your rental property. 1040nr You may be able to deduct the loss on your income tax return. 1040nr Casualty. 1040nr This is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. 1040nr Such events include a storm, fire, or earthquake. 1040nr Theft. 1040nr This is defined as the unlawful taking and removing of your money or property with the intent to deprive you of it. 1040nr Gain from casualty or theft. 1040nr It is also possible to have a gain from a casualty or theft if you receive money, including insurance, that is more than your adjusted basis in the property. 1040nr Generally, you must report this gain. 1040nr However, under certain circumstances, you may defer paying tax by choosing to postpone reporting the gain. 1040nr To do this, you generally must buy replacement property within 2 years after the close of the first tax year in which any part of your gain is realized. 1040nr In certain circumstances, the replacement period can be greater than 2 years; see Replacement Period in Publication 547 for more information. 1040nr The cost of the replacement property must be equal to or more than the net insurance or other payment you received. 1040nr More information. 1040nr For information on business and nonbusiness casualty and theft losses, see Publication 547. 1040nr How to report. 1040nr If you had a casualty or theft that involved property used in your rental activity, figure the net gain or loss in Section B of Form 4684, Casualties and Thefts. 1040nr Follow the Instructions for Form 4684 for where to carry your net gain or loss. 1040nr Example In February 2008, Marie Pfister bought a rental house for $135,000 (house $120,000 and land $15,000) and immediately began renting it out. 1040nr In 2013, she rented it all 12 months for a monthly rental fee of $1,125. 1040nr In addition to her rental income of $13,500 (12 x $1,125), Marie had the following expenses. 1040nr Mortgage interest $8,000 Fire insurance (1-year policy) 250 Miscellaneous repairs 400 Real estate taxes imposed and paid 500 Maintenance 200 Marie depreciates the residential rental property under MACRS GDS. 1040nr This means using the straight line method over a recovery period of 27. 1040nr 5 years. 1040nr She uses Table 2-2d to find her depreciation percentage. 1040nr Because she placed the property in service in February 2008, she continues to use that row of Table 2-2d. 1040nr For year 6, the rate is 3. 1040nr 636%. 1040nr Marie figures her net rental income or loss for the house as follows: Total rental income received ($1,125 × 12) $13,500 Minus: Expenses Mortgage interest $8,000 Fire insurance 250 Miscellaneous repairs 400 Real estate taxes 500 Maintenance 200 Total expenses 9,350 Balance $4,150 Minus: Depreciation ($120,000 x 3. 1040nr 636%) 4,363 Net rental (loss) for house ($213) Marie had a net loss for the year. 1040nr Because she actively participated in her passive rental real estate activity and her loss was less than $25,000, she can deduct the loss on her return. 1040nr Marie also meets all of the requirements for not having to file Form 8582. 1040nr She uses Schedule E, Part I, to report her rental income and expenses. 1040nr She enters her income, expenses, and depreciation for the house in the column for Property A and enters her loss on line 22. 1040nr Form 4562 is not required. 1040nr Prev Up Next Home More Online Publications