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Can You Amend A Tax Return

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Can You Amend A Tax Return

Can you amend a tax return 5. Can you amend a tax return   Credits Table of Contents Credit for the Elderly or the DisabledCan You Take the Credit? Figuring the Credit Child and Dependent Care Credit Earned Income Credit (EIC)Do You Qualify for the Earned Income Credit (EIC)? Figuring the EIC This chapter briefly discusses the credit for the elderly or disabled, the child and dependent care credit, and the earned income credit. Can you amend a tax return You may be able to reduce your federal income tax by claiming one or more of these credits. Can you amend a tax return Credit for the Elderly or the Disabled This section explains who qualifies for the credit for the elderly or the disabled and how to figure this credit. Can you amend a tax return For more information, see Publication 524, Credit for the Elderly or the Disabled. Can you amend a tax return You can take the credit only if you file Form 1040 or Form 1040A. Can you amend a tax return You cannot take the credit if you file Form 1040EZ or Form 1040NR. Can you amend a tax return Can You Take the Credit? You can take the credit for the elderly or the disabled if you meet both of the following requirements. Can you amend a tax return You are a qualified individual. Can you amend a tax return Your income is not more than certain limits. Can you amend a tax return  You can use Figure 5-A and Figure 5-B as guides to see if you are eligible for the credit. Can you amend a tax return   Qualified Individual You are a qualified individual for this credit if you are a U. Can you amend a tax return S. Can you amend a tax return citizen or resident alien, and either of the following applies. Can you amend a tax return You were age 65 or older at the end of 2013. Can you amend a tax return You were under age 65 at the end of 2013 and all three of the following statements are true. Can you amend a tax return You retired on permanent and total disability (explained later). Can you amend a tax return You received taxable disability income for 2013. Can you amend a tax return On January 1, 2013, you had not reached mandatory retirement age (defined later under Disability income ). Can you amend a tax return Age 65. Can you amend a tax return You are considered to be age 65 on the day before your 65th birthday. Can you amend a tax return Therefore, you are considered to be age 65 at the end of 2013 if you were born before January 2, 1949. Can you amend a tax return Figure 5-A. Can you amend a tax return Are You a Qualified Individual? This image is too large to be displayed in the current screen. Can you amend a tax return Please click the link to view the image. Can you amend a tax return Figure 5-A, Are you a qualified individual? U. Can you amend a tax return S. Can you amend a tax return citizen or resident alien. Can you amend a tax return   You must be a U. Can you amend a tax return S. Can you amend a tax return citizen or resident alien (or be treated as a resident alien) to take the credit. Can you amend a tax return Generally, you cannot take the credit if you were a nonresident alien at any time during the tax year. Can you amend a tax return Exceptions. Can you amend a tax return   You may be able to take the credit if you are a nonresident alien who is married to a U. Can you amend a tax return S. Can you amend a tax return citizen or resident alien at the end of the tax year and you and your spouse choose to treat you as a U. Can you amend a tax return S. Can you amend a tax return resident alien. Can you amend a tax return If you make that choice, both you and your spouse are taxed on your worldwide income. Can you amend a tax return   If you were a nonresident alien at the beginning of the year and a resident alien at the end of the year, and you were married to a U. Can you amend a tax return S. Can you amend a tax return citizen or resident alien at the end of the year, you may be able to choose to be treated as a U. Can you amend a tax return S. Can you amend a tax return resident alien for the entire year. Can you amend a tax return In that case, you may be allowed to take the credit. Can you amend a tax return   For information on these choices, see chapter 1 of Publication 519, U. Can you amend a tax return S. Can you amend a tax return Tax Guide for Aliens. Can you amend a tax return Married persons. Can you amend a tax return   Generally, if you are married at the end of the tax year, you and your spouse must file a joint return to take the credit. Can you amend a tax return However, if you and your spouse did not live in the same household at any time during the tax year, you can file either a joint return or separate returns and still take the credit. Can you amend a tax return Head of household. Can you amend a tax return   You can file as head of household and qualify to take the credit even if your spouse lived with you during the first 6 months of the year if you meet certain tests. Can you amend a tax return See Publication 524 and Publication 501. Can you amend a tax return Under age 65. Can you amend a tax return   If you are under age 65 at the end of 2013, you can qualify for the credit only if you are retired on permanent and total disability and have taxable disability income (discussed later under Disability income ). Can you amend a tax return You are considered to be under age 65 at the end of 2013 if you were born after January 1, 1949. Can you amend a tax return You are retired on permanent and total disability if: You were permanently and totally disabled when you retired, and You retired on disability before the end of the tax year. Can you amend a tax return   Even if you do not retire formally, you may be considered retired on disability when you have stopped working because of your disability. Can you amend a tax return If you retired on disability before 1977 and were not permanently and totally disabled at the time, you can qualify for the credit if you were permanently and totally disabled on January 1, 1976, or January 1, 1977. Can you amend a tax return Permanent and total disability. Can you amend a tax return   You are permanently and totally disabled if you cannot engage in any substantial gainful activity because of your physical or mental condition. Can you amend a tax return A physician must certify that the condition has lasted or can be expected to last continuously for 12 months or more, or that the condition can be expected to result in death. Can you amend a tax return See Physician's statement , later. Can you amend a tax return Substantial gainful activity. Can you amend a tax return   Substantial gainful activity is the performance of significant duties over a reasonable period of time while working for pay or profit, or in work generally done for pay or profit. Can you amend a tax return   Full-time work (or part-time work done at the employer's convenience) in a competitive work situation for at least the minimum wage conclusively shows that you are able to engage in substantial gainful activity. Can you amend a tax return   Substantial gainful activity is not work you do to take care of yourself or your home. Can you amend a tax return It is not unpaid work on hobbies, institutional therapy or training, school attendance, clubs, social programs, and similar activities. Can you amend a tax return However, doing this kind of work may show that you are able to engage in substantial gainful activity. Can you amend a tax return    Figure 5-B. Can you amend a tax return Income Limits IF your filing status is. Can you amend a tax return . Can you amend a tax return . Can you amend a tax return THEN even if you qualify (see Figure 5-A), you CANNOT take the credit if: Your adjusted gross income (AGI)* is equal to or more than. Can you amend a tax return . Can you amend a tax return . Can you amend a tax return OR the total of your nontaxable social security and other nontaxable pension(s), annuities, or disability income is equal to or more than. Can you amend a tax return . Can you amend a tax return . Can you amend a tax return single, head of household, or qualifying widow(er) with dependent child $17,500 $5,000 married filing jointly and only one spouse qualifies in Figure 5-A $20,000 $5,000 married filing jointly and both spouses qualify in Figure 5-A $25,000 $7,500 married filing separately and you lived apart from your spouse for all of 2013 $12,500 $3,750 *AGI is the amount on Form 1040A, line 22, or Form 1040, line 38      The fact that you have not worked for some time is not, of itself, conclusive evidence that you cannot engage in substantial gainful activity. Can you amend a tax return Physician's statement. Can you amend a tax return   If you are under age 65, you must have your physician complete a statement certifying that you were permanently and totally disabled on the date you retired. Can you amend a tax return   You do not have to file this statement with your tax return, but you must keep it for your records. Can you amend a tax return The Instructions for Schedule R (Form 1040A or 1040) include a statement your physician can complete and that you can keep for your records. Can you amend a tax return Veterans. Can you amend a tax return   If the Department of Veterans Affairs (VA) certifies that you are permanently and totally disabled, you can substitute VA Form 21-0172, Certification of Permanent and Total Disability, for the physician's statement you are required to keep. Can you amend a tax return VA Form 21-0172 must be signed by a person authorized by the VA to do so. Can you amend a tax return You can get this form from your local VA regional office. Can you amend a tax return Physician's statement obtained in earlier year. Can you amend a tax return   If you got a physician's statement in an earlier year and, due to your continued disabled condition, you were unable to engage in any substantial gainful activity during 2013, you may not need to get another physician's statement for 2013. Can you amend a tax return For a detailed explanation of the conditions you must meet, see the instructions for Schedule R (Form 1040A or 1040), Part II. Can you amend a tax return If you meet the required conditions, you must check the box on Schedule R (Form 1040A or 1040), Part II, line 2. Can you amend a tax return   If you checked Schedule R (Form 1040A or 1040), Part I, box 4, 5, or 6, print in the space above the box in Part II, line 2, the first name(s) of the spouse(s) for whom the box is checked. Can you amend a tax return Disability income. Can you amend a tax return   If you are under age 65, you must also have taxable disability income to qualify for the credit. Can you amend a tax return   Disability income must meet the following two requirements. Can you amend a tax return It must be paid under your employer's accident or health plan or pension plan. Can you amend a tax return It must be included in your income as wages (or payments in lieu of wages) for the time you are absent from work because of permanent and total disability. Can you amend a tax return Payments that are not disability income. Can you amend a tax return   Any payment you receive from a plan that does not provide for disability retirement is not disability income. Can you amend a tax return Any lump-sum payment for accrued annual leave that you receive when you retire on disability is a salary payment and is not disability income. Can you amend a tax return   For purposes of the credit for the elderly or the disabled, disability income does not include amounts you receive after you reach mandatory retirement age. Can you amend a tax return Mandatory retirement age is the age set by your employer at which you would have had to retire had you not become disabled. Can you amend a tax return Figuring the Credit You can figure the credit yourself, or the IRS will figure it for you. Can you amend a tax return Figuring the credit yourself. Can you amend a tax return   If you figure the credit yourself, fill out the front of Schedule R (Form 1040A or 1040). Can you amend a tax return Next, fill out Schedule R (Form 1040A or 1040), Part III. Can you amend a tax return Credit figured for you. Can you amend a tax return   If you can take the credit and you want the IRS to figure the credit for you, see Publication 524 or the Instructions for Schedule R (Form 1040A or 1040). Can you amend a tax return If you want the IRS to figure your tax, see chapter 30 of Publication 17, Your Federal Income Tax. Can you amend a tax return Child and Dependent Care Credit You may be able to claim this credit if you pay someone to care for your dependent who is under age 13 or for your spouse or dependent who is not able to care for himself or herself. Can you amend a tax return The credit can be up to 35% of your expenses. Can you amend a tax return To qualify, you must pay these expenses so you can work or look for work. Can you amend a tax return If you claim this credit, you must include on your return the name and taxpayer identification number (generally the social security number) of each qualifying person for whom care is provided. Can you amend a tax return If the correct information is not shown, the credit may be reduced or disallowed. Can you amend a tax return You also must show on your return the name, address, and the taxpayer identification number of the person(s) or organization(s) that provided the care. Can you amend a tax return For more information, see Publication 503, Child and Dependent Care Expenses. Can you amend a tax return Earned Income Credit (EIC) The earned income credit (EIC) is a refundable tax credit for certain people who work and have earned income under $51,567. Can you amend a tax return The EIC is available to persons with or without a qualifying child. Can you amend a tax return Credit has no effect on certain welfare benefits. Can you amend a tax return   Any refund you receive because of the EIC cannot be counted as income when determining whether you or anyone else is eligible for benefits or assistance, or how much you or anyone else can receive, under any federal program or under any state or local program financed in whole or in part with federal funds. Can you amend a tax return These programs include the following. Can you amend a tax return Medicaid and supplemental security income (SSI). Can you amend a tax return Supplemental Nutrition Assistance Program (food stamps). Can you amend a tax return Low-income housing. Can you amend a tax return Temporary Assistance for Needy Families (TANF). Can you amend a tax return  In addition, when determining eligibility, the refund cannot be counted as a resource for at least 12 months after you receive it. Can you amend a tax return Check with your local benefit coordinator to find out if your refund will affect your benefits. Can you amend a tax return Do You Qualify for the Earned Income Credit (EIC)? Use Table 5-1 as an initial guide to the rules you must meet in order to qualify for the EIC. Can you amend a tax return The specific rules you must meet depend on whether you have a qualifying child. Can you amend a tax return If you have a qualifying child, the rules in Parts A, B, and D apply to you. Can you amend a tax return If you do not have a qualifying child, the rules in Parts A, C, and D apply to you. Can you amend a tax return  If, after reading all the rules in each part that applies to you, you think you may qualify for the credit, see Publication 596, Earned Income Credit, for more details about the EIC. Can you amend a tax return You can also find information about the EIC in the instructions for Form 1040 (line 64a), Form 1040A (line 38a), or Form 1040EZ (line 8a). Can you amend a tax return The sections that follow provide additional information for some of the rules. Can you amend a tax return Adjusted gross income (AGI). Can you amend a tax return   Under Rule 1, you cannot claim the EIC unless your AGI is less than the applicable limit shown in Part A of Table 5-1. Can you amend a tax return Your AGI is the amount on line 37 (Form 1040), line 21 (Form 1040A), or line 4 (Form 1040EZ). Can you amend a tax return Table 5-1. Can you amend a tax return Earned Income Credit (EIC) in a Nutshell First, you must meet all the rules in this column. Can you amend a tax return Second, you must meet all the rules in one of these columns, whichever applies. Can you amend a tax return Third, you must meet the rule in this column. Can you amend a tax return Part A. Can you amend a tax return  Rules for Everyone Part B. Can you amend a tax return  Rules If You Have a Qualifying Child Part C. Can you amend a tax return  Rules If You Do Not Have a Qualifying Child Part D. Can you amend a tax return  Figuring and Claiming the EIC 1. Can you amend a tax return Your adjusted gross income (AGI) must be less than: •$46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, •$43,038 ($48,378 for married filing jointly) if you have two qualifying children, •$37,870 ($43,210 for married filing jointly) if you have one qualifying child, or  •$14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Can you amend a tax return 2. Can you amend a tax return You must have a valid social security number. Can you amend a tax return  3. Can you amend a tax return Your filing status cannot be “Married filing separately. Can you amend a tax return ” 4. Can you amend a tax return You must be a U. Can you amend a tax return S. Can you amend a tax return citizen or resident alien all year. Can you amend a tax return  5. Can you amend a tax return You cannot file Form 2555 or Form 2555-EZ (relating to foreign earned income). Can you amend a tax return  6. Can you amend a tax return Your investment income must be $3,300 or less. Can you amend a tax return  7. Can you amend a tax return You must have earned income. Can you amend a tax return 8. Can you amend a tax return Your child must meet the relationship, age, residency, and joint return tests. Can you amend a tax return  9. Can you amend a tax return Your qualifying child cannot be used by more than one person to claim the EIC. Can you amend a tax return  10. Can you amend a tax return You generally cannot be a qualifying child of another person. Can you amend a tax return 11. Can you amend a tax return You must be at least age 25 but under age 65. Can you amend a tax return  12. Can you amend a tax return You cannot be the dependent of another person. Can you amend a tax return  13. Can you amend a tax return You generally cannot be a qualifying child of another person. Can you amend a tax return  14. Can you amend a tax return You must have lived in the United States more than half of the year. Can you amend a tax return 15. Can you amend a tax return Your earned income must be less than: •$46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, •$43,038 ($48,378 for married filing jointly) if you have two qualifying children, •$37,870 ($43,210 for married filing jointly) if you have one qualifying child, or •$14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Can you amend a tax return Social security number. Can you amend a tax return   Under Rule 2, you (and your spouse if you are married filing jointly) must have a valid social security number (SSN) issued by the Social Security Administration (SSA). Can you amend a tax return Any qualifying child listed on Schedule EIC also must have a valid SSN. Can you amend a tax return (See Qualifying child , later, if you have a qualifying child. Can you amend a tax return )   If your social security card (or your spouse's if you are married filing jointly) says “Not valid for employment” and your SSN was issued so that you (or your spouse) could get a federally funded benefit, you cannot get the EIC. Can you amend a tax return An example of a federally funded benefit is Medicaid. Can you amend a tax return Investment income. Can you amend a tax return   Under Rule 6, you cannot claim the EIC unless your investment income is $3,300 or less. Can you amend a tax return If your investment income is more than $3,300, you cannot claim the credit. Can you amend a tax return For most people, investment income is the total of the following amounts. Can you amend a tax return Taxable interest (line 8a of Form 1040 or 1040A). Can you amend a tax return Tax-exempt interest (line 8b of Form 1040 or 1040A). Can you amend a tax return Dividend income (line 9a of Form 1040 or 1040A). Can you amend a tax return Capital gain net income (line 13 of Form 1040, if more than zero, or line 10 of Form 1040A). Can you amend a tax return  If you file Form 1040EZ, your investment income is the total of the amount of line 2 and the amount of any tax-exempt interest you wrote to the right of the words “Form 1040EZ” on line 2. Can you amend a tax return   For more information about investment income, see Publication 596, Earned Income Credit. Can you amend a tax return Earned income. Can you amend a tax return   Under Rule 7, you must have earned income to claim the EIC. Can you amend a tax return Under Rule 15, you cannot claim the EIC unless your earned income is less than the applicable limit shown in Table 5-1, Part D. Can you amend a tax return Earned income includes all of the following types of income. Can you amend a tax return Wages, salaries, tips, and other taxable employee pay. Can you amend a tax return Employee pay is earned income only if it is taxable. Can you amend a tax return Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. Can you amend a tax return But there is an exception for nontaxable combat pay, which you can choose to include in earned income. Can you amend a tax return Net earnings from self-employment. Can you amend a tax return Gross income received as a statutory employee. Can you amend a tax return Gross income defined. Can you amend a tax return   Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). Can you amend a tax return Do not include any social security benefits unless (a) you are married filing a separate tax return and you lived with your spouse at any time in 2013, or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). Can you amend a tax return If (a) or (b) applies, see the instructions for Form 1040, lines 20a and 20b to figure the taxable part of social security benefits you must include in gross income. Can you amend a tax return Self-employed persons. Can you amend a tax return   If you are self-employed and your net earnings are $400 or more, be sure to correctly fill out Schedule SE (Form 1040), Self-Employment Tax, and pay the proper amount of self-employment tax. Can you amend a tax return If you do not, you may not get all the credit to which you are entitled. Can you amend a tax return Disability benefits. Can you amend a tax return   If you retired on disability, taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. Can you amend a tax return Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. Can you amend a tax return Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income. Can you amend a tax return   Payments you received from a disability insurance policy that you paid the premiums for are not earned income. Can you amend a tax return It does not matter whether you have reached minimum retirement age. Can you amend a tax return If this policy is through your employer, the amount may be shown in box 12 of your Form W-2 with code J. Can you amend a tax return Income that is not earned income. Can you amend a tax return   Examples of items that are not earned income under Rule 7 include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits — except for payments covered under Disability benefits earlier), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. Can you amend a tax return Do not include any of these items in your earned income. Can you amend a tax return Workfare payments. Can you amend a tax return   Nontaxable workfare payments are not earned income for the EIC. Can you amend a tax return These are cash payments certain people receive from a state or local agency that administers public assistance programs funded under the federal Temporary Assistance for Needy Families (TANF) program in return for certain work activities such as (1) work experience activities (including remodeling or repairing public housing) if sufficient private sector employment is not available, or (2) community service program activities. Can you amend a tax return Qualifying child. Can you amend a tax return   Under Rule 8, your child is a qualifying child if your child meets four tests. Can you amend a tax return The four tests are: Relationship, Age, Residency, and Joint return. Can you amend a tax return   The four tests are illustrated in Figure 5-C. Can you amend a tax return See Publication 596 for more information about each test. Can you amend a tax return Figure 5-C. Can you amend a tax return Tests for Qualifying Child A qualifying child for the EIC is a child who is your. Can you amend a tax return . Can you amend a tax return . Can you amend a tax return Son, daughter, stepchild, foster child,  or a descendant of any of them (for example, your grandchild) OR Brother, sister, half brother, half sister, stepbrother,  stepsister, or a descendant of any of them (for example, your  niece or nephew) was . Can you amend a tax return . Can you amend a tax return . Can you amend a tax return Under age 19 at the end of 2013 and younger than you (or your spouse if filing jointly) OR Under age 24 at the end of 2013, a student, and younger than you (or your spouse if filing jointly) OR Permanently and totally disabled at any time during the year, regardless of age who. Can you amend a tax return . Can you amend a tax return . Can you amend a tax return Is not filing a joint return for 2013  (or is filing a joint return for 2013 only as a claim for refund of income tax withheld or estimated tax paid) who. Can you amend a tax return . Can you amend a tax return . Can you amend a tax return Lived with you in the United States for more than half of 2013. Can you amend a tax return  If the child did not live with you for the required time, see Publication 596 for more information. Can you amend a tax return Figuring the EIC To figure the amount of your credit, you have two choices. Can you amend a tax return Have the IRS figure the EIC for you. Can you amend a tax return If you want to do this, see IRS Will Figure the EIC for You in Publication 596. Can you amend a tax return Figure the EIC yourself. Can you amend a tax return If you want to do this, see How To Figure the EIC Yourself in Publication 596. Can you amend a tax return Prev  Up  Next   Home   More Online Publications
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Personal Finance

Find government information in managing your finances, including credit, debt, home ownership, money management, retirement and estate planning and more.

The Can You Amend A Tax Return

Can you amend a tax return Publication 936 - Main Content Table of Contents Part I. Can you amend a tax return Home Mortgage InterestSecured Debt Qualified Home Special Situations Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement How To Report Special Rule for Tenant-Stockholders in Cooperative Housing Corporations Part II. Can you amend a tax return Limits on Home Mortgage Interest DeductionHome Acquisition Debt Home Equity Debt Grandfathered Debt Table 1 Instructions How To Get Tax HelpLow Income Taxpayer Clinics Part I. Can you amend a tax return Home Mortgage Interest This part explains what you can deduct as home mortgage interest. Can you amend a tax return It includes discussions on points, mortgage insurance premiums, and how to report deductible interest on your tax return. Can you amend a tax return Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). Can you amend a tax return The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. Can you amend a tax return You can deduct home mortgage interest if all the following conditions are met. Can you amend a tax return You file Form 1040 and itemize deductions on Schedule A (Form 1040). Can you amend a tax return The mortgage is a secured debt on a qualified home in which you have an ownership interest. Can you amend a tax return Secured Debt and Qualified Home are explained later. Can you amend a tax return  Both you and the lender must intend that the loan be repaid. Can you amend a tax return Fully deductible interest. Can you amend a tax return   In most cases, you can deduct all of your home mortgage interest. Can you amend a tax return How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. Can you amend a tax return   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. Can you amend a tax return (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. Can you amend a tax return ) If one or more of your mortgages does not fit into any of these categories, use Part II of this publication to figure the amount of interest you can deduct. Can you amend a tax return   The three categories are as follows. Can you amend a tax return Mortgages you took out on or before October 13, 1987 (called grandfathered debt). Can you amend a tax return 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). Can you amend a tax return 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). Can you amend a tax return The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. Can you amend a tax return   See Part II for more detailed definitions of grandfathered, home acquisition, and home equity debt. Can you amend a tax return    You can use Figure A to check whether your home mortgage interest is fully deductible. Can you amend a tax return This image is too large to be displayed in the current screen. Can you amend a tax return Please click the link to view the image. Can you amend a tax return Figure A. Can you amend a tax return Is My Home Mortgage Interest Fully Deductible? Secured Debt You can deduct your home mortgage interest only if your mortgage is a secured debt. Can you amend a tax return A secured debt is one in which you sign an instrument (such as a mortgage, deed of trust, or land contract) that: Makes your ownership in a qualified home security for payment of the debt, Provides, in case of default, that your home could satisfy the debt, and Is recorded or is otherwise perfected under any state or local law that applies. Can you amend a tax return In other words, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. Can you amend a tax return If you cannot pay the debt, your home can then serve as payment to the lender to satisfy (pay) the debt. Can you amend a tax return In this publication, mortgage will refer to secured debt. Can you amend a tax return Debt not secured by home. Can you amend a tax return   A debt is not secured by your home if it is secured solely because of a lien on your general assets or if it is a security interest that attaches to the property without your consent (such as a mechanic's lien or judgment lien). Can you amend a tax return   A debt is not secured by your home if it once was, but is no longer secured by your home. Can you amend a tax return Wraparound mortgage. Can you amend a tax return   This is not a secured debt unless it is recorded or otherwise perfected under state law. Can you amend a tax return Example. Can you amend a tax return Beth owns a home subject to a mortgage of $40,000. Can you amend a tax return She sells the home for $100,000 to John, who takes it subject to the $40,000 mortgage. Can you amend a tax return Beth continues to make the payments on the $40,000 note. Can you amend a tax return John pays $10,000 down and gives Beth a $90,000 note secured by a wraparound mortgage on the home. Can you amend a tax return Beth does not record or otherwise perfect the $90,000 mortgage under the state law that applies. Can you amend a tax return Therefore, the mortgage is not a secured debt and John cannot deduct any of the interest he pays on it as home mortgage interest. Can you amend a tax return Choice to treat the debt as not secured by your home. Can you amend a tax return   You can choose to treat any debt secured by your qualified home as not secured by the home. Can you amend a tax return This treatment begins with the tax year for which you make the choice and continues for all later tax years. Can you amend a tax return You can revoke your choice only with the consent of the Internal Revenue Service (IRS). Can you amend a tax return   You may want to treat a debt as not secured by your home if the interest on that debt is fully deductible (for example, as a business expense) whether or not it qualifies as home mortgage interest. Can you amend a tax return This may allow you, if the limits in Part II apply, more of a deduction for interest on other debts that are deductible only as home mortgage interest. Can you amend a tax return Cooperative apartment owner. Can you amend a tax return   If you own stock in a cooperative housing corporation, see the Special Rule for Tenant-Stockholders in Cooperative Housing Corporations , near the end of this Part I. Can you amend a tax return Qualified Home For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. Can you amend a tax return This means your main home or your second home. Can you amend a tax return A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. Can you amend a tax return The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Can you amend a tax return Otherwise, it is considered personal interest and is not deductible. Can you amend a tax return Main home. Can you amend a tax return   You can have only one main home at any one time. Can you amend a tax return This is the home where you ordinarily live most of the time. Can you amend a tax return Second home. Can you amend a tax return   A second home is a home that you choose to treat as your second home. Can you amend a tax return Second home not rented out. Can you amend a tax return   If you have a second home that you do not hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. Can you amend a tax return You do not have to use the home during the year. Can you amend a tax return Second home rented out. Can you amend a tax return   If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. Can you amend a tax return You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer. Can you amend a tax return If you do not use the home long enough, it is considered rental property and not a second home. Can you amend a tax return For information on residential rental property, see Publication 527. Can you amend a tax return More than one second home. Can you amend a tax return   If you have more than one second home, you can treat only one as the qualified second home during any year. Can you amend a tax return However, you can change the home you treat as a second home during the year in the following situations. Can you amend a tax return If you get a new home during the year, you can choose to treat the new home as your second home as of the day you buy it. Can you amend a tax return If your main home no longer qualifies as your main home, you can choose to treat it as your second home as of the day you stop using it as your main home. Can you amend a tax return If your second home is sold during the year or becomes your main home, you can choose a new second home as of the day you sell the old one or begin using it as your main home. Can you amend a tax return Divided use of your home. Can you amend a tax return   The only part of your home that is considered a qualified home is the part you use for residential living. Can you amend a tax return If you use part of your home for other than residential living, such as a home office, you must allocate the use of your home. Can you amend a tax return You must then divide both the cost and fair market value of your home between the part that is a qualified home and the part that is not. Can you amend a tax return Dividing the cost may affect the amount of your home acquisition debt, which is limited to the cost of your home plus the cost of any improvements. Can you amend a tax return (See Home Acquisition Debt in Part II. Can you amend a tax return ) Dividing the fair market value may affect your home equity debt limit, also explained in Part II . Can you amend a tax return Renting out part of home. Can you amend a tax return   If you rent out part of a qualified home to another person (tenant), you can treat the rented part as being used by you for residential living only if all of the following conditions apply. Can you amend a tax return The rented part of your home is used by the tenant primarily for residential living. Can you amend a tax return The rented part of your home is not a self-contained residential unit having separate sleeping, cooking, and toilet facilities. Can you amend a tax return You do not rent (directly or by sublease) the same or different parts of your home to more than two tenants at any time during the tax year. Can you amend a tax return If two persons (and dependents of either) share the same sleeping quarters, they are treated as one tenant. Can you amend a tax return Office in home. Can you amend a tax return   If you have an office in your home that you use in your business, see Publication 587, Business Use of Your Home. Can you amend a tax return It explains how to figure your deduction for the business use of your home, which includes the business part of your home mortgage interest. Can you amend a tax return Home under construction. Can you amend a tax return   You can treat a home under construction as a qualified home for a period of up to 24 months, but only if it becomes your qualified home at the time it is ready for occupancy. Can you amend a tax return   The 24-month period can start any time on or after the day construction begins. Can you amend a tax return Home destroyed. Can you amend a tax return   You may be able to continue treating your home as a qualified home even after it is destroyed in a fire, storm, tornado, earthquake, or other casualty. Can you amend a tax return This means you can continue to deduct the interest you pay on your home mortgage, subject to the limits described in this publication. Can you amend a tax return   You can continue treating a destroyed home as a qualified home if, within a reasonable period of time after the home is destroyed, you: Rebuild the destroyed home and move into it, or Sell the land on which the home was located. Can you amend a tax return   This rule applies to your main home and to a second home that you treat as a qualified home. Can you amend a tax return Time-sharing arrangements. Can you amend a tax return   You can treat a home you own under a time-sharing plan as a qualified home if it meets all the requirements. Can you amend a tax return A time-sharing plan is an arrangement between two or more people that limits each person's interest in the home or right to use it to a certain part of the year. Can you amend a tax return Rental of time-share. Can you amend a tax return   If you rent out your time-share, it qualifies as a second home only if you also use it as a home during the year. Can you amend a tax return See Second home rented out , earlier, for the use requirement. Can you amend a tax return To know whether you meet that requirement, count your days of use and rental of the home only during the time you have a right to use it or to receive any benefits from the rental of it. Can you amend a tax return Married taxpayers. Can you amend a tax return   If you are married and file a joint return, your qualified home(s) can be owned either jointly or by only one spouse. Can you amend a tax return Separate returns. Can you amend a tax return   If you are married filing separately and you and your spouse own more than one home, you can each take into account only one home as a qualified home. Can you amend a tax return However, if you both consent in writing, then one spouse can take both the main home and a second home into account. Can you amend a tax return Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. Can you amend a tax return It also describes certain special situations that may affect your deduction. Can you amend a tax return Late payment charge on mortgage payment. Can you amend a tax return   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. Can you amend a tax return Mortgage prepayment penalty. Can you amend a tax return   If you pay off your home mortgage early, you may have to pay a penalty. Can you amend a tax return 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. Can you amend a tax return Sale of home. Can you amend a tax return   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 the sale. Can you amend a tax return Example. Can you amend a tax return John and Peggy Harris sold their home on May 7. Can you amend a tax return Through April 30, they made home mortgage interest payments of $1,220. Can you amend a tax return 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. Can you amend a tax return Their mortgage interest deduction is $1,270 ($1,220 + $50). Can you amend a tax return Prepaid interest. Can you amend a tax return   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. Can you amend a tax return You can deduct in each year only the interest that qualifies as home mortgage interest for that year. Can you amend a tax return However, there is an exception that applies to points, discussed later. Can you amend a tax return Mortgage interest credit. Can you amend a tax return    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. Can you amend a tax return Figure the credit on Form 8396, Mortgage Interest Credit. Can you amend a tax return If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. Can you amend a tax return   See Form 8396 and Publication 530 for more information on the mortgage interest credit. Can you amend a tax return Ministers' and military housing allowance. Can you amend a tax return   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. Can you amend a tax return Hardest Hit Fund and Emergency Homeowners' Loan Programs. Can you amend a tax return   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. Can you amend a tax return 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. Can you amend a tax return 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. Can you amend a tax return 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 (other information including real property taxes paid). Can you amend a tax return 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. Can you amend a tax return Mortgage assistance payments under section 235 of the National Housing Act. Can you amend a tax return   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. Can you amend a tax return You cannot deduct the interest that is paid for you. Can you amend a tax return No other effect on taxes. Can you amend a tax return   Do not include these mortgage assistance payments in your income. Can you amend a tax return Also, do not use these payments to reduce other deductions, such as real estate taxes. Can you amend a tax return Divorced or separated individuals. Can you amend a tax return   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. Can you amend a tax return See the discussion of Payments for jointly-owned home under Alimony in Publication 504, Divorced or Separated Individuals. Can you amend a tax return Redeemable ground rents. Can you amend a tax return   In some states (such as Maryland), you can buy your home subject to a ground rent. Can you amend a tax return A ground rent is an obligation you assume to pay a fixed amount per year on the property. Can you amend a tax return Under this arrangement, you are leasing (rather than buying) the land on which your home is located. Can you amend a tax return   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. Can you amend a tax return   A ground rent is a redeemable ground rent if all of the following are true. Can you amend a tax return Your lease, including renewal periods, is for more than 15 years. Can you amend a tax return You can freely assign the lease. Can you amend a tax return You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specific amount. Can you amend a tax return The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. Can you amend a tax return   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. Can you amend a tax return Nonredeemable ground rents. Can you amend a tax return   Payments on a nonredeemable ground rent are not mortgage interest. Can you amend a tax return You can deduct them as rent if they are a business expense or if they are for rental property. Can you amend a tax return Reverse mortgages. Can you amend a tax return   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. Can you amend a tax return With a reverse mortgage, you retain title to your home. Can you amend a tax return 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. Can you amend a tax return Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Can you amend a tax return Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until you actually pay it, which is usually when you pay off the loan in full. Can you amend a tax return Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Part II. Can you amend a tax return Rental payments. Can you amend a tax return   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. Can you amend a tax return This is true even if the settlement papers call them interest. Can you amend a tax return You cannot deduct these payments as home mortgage interest. Can you amend a tax return Mortgage proceeds invested in tax-exempt securities. Can you amend a tax return   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. Can you amend a tax return “Grandfathered debt” and “home equity debt” are defined in Part II of this publication. Can you amend a tax return Refunds of interest. Can you amend a tax return   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. Can you amend a tax return 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. Can you amend a tax return However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. Can you amend a tax return This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. Can you amend a tax return If you need to include the refund in income, report it on Form 1040, line 21. Can you amend a tax return   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. Can you amend a tax return For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. Can you amend a tax return   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in Publication 525, Taxable and Nontaxable Income. Can you amend a tax return Cooperative apartment owner. Can you amend a tax return   If you own a cooperative apartment, you must reduce your home mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. Can you amend a tax return The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. Can you amend a tax return   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. Can you amend a tax return Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Can you amend a tax return Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Can you amend a tax return This image is too large to be displayed in the current screen. Can you amend a tax return Please click the link to view the image. Can you amend a tax return Figure B. Can you amend a tax return Are My Points Fully Deductible This Year? A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Can you amend a tax return See Points paid by the seller , later. Can you amend a tax return General Rule You generally cannot deduct the full amount of points in the year paid. Can you amend a tax return Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. Can you amend a tax return See Deduction Allowed Ratably , next. Can you amend a tax return For exceptions to the general rule, see Deduction Allowed in Year Paid , later. Can you amend a tax return 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. Can you amend a tax return You use the cash method of accounting. Can you amend a tax return This means you report income in the year you receive it and deduct expenses in the year you pay them. Can you amend a tax return Most individuals use this method. Can you amend a tax return Your loan is secured by a home. Can you amend a tax return (The home does not need to be your main home. Can you amend a tax return ) Your loan period is not more than 30 years. Can you amend a tax return 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. Can you amend a tax return 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. Can you amend a tax return Example. Can you amend a tax return You use the cash method of accounting. Can you amend a tax return In 2013, you took out a $100,000 loan payable over 20 years. Can you amend a tax return The terms of the loan are the same as for other 20-year loans offered in your area. Can you amend a tax return You paid $4,800 in points. Can you amend a tax return You made 3 monthly payments on the loan in 2013. Can you amend a tax return You can deduct $60 [($4,800 ÷ 240 months) x 3 payments] in 2013. Can you amend a tax return In 2014, if you make all twelve payments, you will be able to deduct $240 ($20 x 12). Can you amend a tax return Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. Can you amend a tax return (You can use Figure B as a quick guide to see whether your points are fully deductible in the year paid. Can you amend a tax return ) Your loan is secured by your main home. Can you amend a tax return (Your main home is the one you ordinarily live in most of the time. Can you amend a tax return ) Paying points is an established business practice in the area where the loan was made. Can you amend a tax return The points paid were not more than the points generally charged in that area. Can you amend a tax return You use the cash method of accounting. Can you amend a tax return This means you report income in the year you receive it and deduct expenses in the year you pay them. Can you amend a tax return Most individuals use this method. Can you amend a tax return 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. Can you amend a tax return The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Can you amend a tax return The funds you provided are not required to have been applied to the points. Can you amend a tax return They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Can you amend a tax return You cannot have borrowed these funds from your lender or mortgage broker. Can you amend a tax return You use your loan to buy or build your main home. Can you amend a tax return The points were computed as a percentage of the principal amount of the mortgage. Can you amend a tax return The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. Can you amend a tax return The points may be shown as paid from either your funds or the seller's. Can you amend a tax return Note. Can you amend a tax return 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. Can you amend a tax return Home improvement loan. Can you amend a tax return   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. Can you amend a tax return Second home. Can you amend a tax return You cannot fully deduct in the year paid points you pay on loans secured by your second home. Can you amend a tax return You can deduct these points only over the life of the loan. Can you amend a tax return Refinancing. Can you amend a tax return   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. Can you amend a tax return This is true even if the new mortgage is secured by your main home. Can you amend a tax return   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 , you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Can you amend a tax return You can deduct the rest of the points over the life of the loan. Can you amend a tax return Example 1. Can you amend a tax return In 1998, Bill Fields got a mortgage to buy a home. Can you amend a tax return In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. Can you amend a tax return The mortgage is secured by his home. Can you amend a tax return To get the new loan, he had to pay three points ($3,000). Can you amend a tax return 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. Can you amend a tax return Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. Can you amend a tax return The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. Can you amend a tax return Bill's first payment on the new loan was due July 1. Can you amend a tax return He made six payments on the loan in 2013 and is a cash basis taxpayer. Can you amend a tax return Bill used the funds from the new mortgage to repay his existing mortgage. Can you amend a tax return 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. Can you amend a tax return He cannot deduct all of the points in 2013. Can you amend a tax return He can deduct two points ($2,000) ratably over the life of the loan. Can you amend a tax return He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. Can you amend a tax return The other point ($1,000) was a fee for services and is not deductible. Can you amend a tax return Example 2. Can you amend a tax return 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. Can you amend a tax return Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. Can you amend a tax return His deduction is $500 ($2,000 × 25%). Can you amend a tax return Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. Can you amend a tax return This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. Can you amend a tax return The total amount Bill deducts in 2013 is $550 ($500 + $50). Can you amend a tax return Special Situations This section describes certain special situations that may affect your deduction of points. Can you amend a tax return Original issue discount. Can you amend a tax return   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. Can you amend a tax return This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. Can you amend a tax return Amounts charged for services. Can you amend a tax return    Amounts charged by the lender for specific services connected to the loan are not interest. Can you amend a tax return Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Can you amend a tax return  You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Can you amend a tax return Points paid by the seller. Can you amend a tax return   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Can you amend a tax return Treatment by seller. Can you amend a tax return   The seller cannot deduct these fees as interest. Can you amend a tax return But they are a selling expense that reduces the amount realized by the seller. Can you amend a tax return See Publication 523 for information on selling your home. Can you amend a tax return Treatment by buyer. Can you amend a tax return   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. Can you amend a tax return If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. Can you amend a tax return If any of those tests are not met, the buyer deducts the points over the life of the loan. Can you amend a tax return   If you need information about the basis of your home, see Publication 523 or Publication 530. Can you amend a tax return Funds provided are less than points. Can you amend a tax return   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. Can you amend a tax return In addition, you can deduct any points paid by the seller. Can you amend a tax return Example 1. Can you amend a tax return When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Can you amend a tax return You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. Can you amend a tax return Of the $1,000 charged for points, you can deduct $750 in the year paid. Can you amend a tax return You spread the remaining $250 over the life of the mortgage. Can you amend a tax return Example 2. Can you amend a tax return 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. Can you amend a tax return In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Can you amend a tax return You spread the remaining $250 over the life of the mortgage. Can you amend a tax return You must reduce the basis of your home by the $1,000 paid by the seller. Can you amend a tax return Excess points. Can you amend a tax return   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. Can you amend a tax return You must spread any additional points over the life of the mortgage. Can you amend a tax return Mortgage ending early. Can you amend a tax return   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. Can you amend a tax return However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. Can you amend a tax return Instead, deduct the remaining balance over the term of the new loan. Can you amend a tax return   A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Can you amend a tax return Example. Can you amend a tax return Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. Can you amend a tax return He deducts $200 points per year. Can you amend a tax return Through 2012, Dan has deducted $2,200 of the points. Can you amend a tax return Dan prepaid his mortgage in full in 2013. Can you amend a tax return He can deduct the remaining $800 of points in 2013. Can you amend a tax return Limits on deduction. Can you amend a tax return   You cannot fully deduct points paid on a mortgage that exceeds the limits discussed in Part II . Can you amend a tax return See the Table 1 Instructions for line 10. Can you amend a tax return Form 1098. Can you amend a tax return    The mortgage interest statement you receive should show not only the total interest paid during the year, but also your deductible points paid during the year. Can you amend a tax return See Form 1098, Mortgage Interest Statement , later. Can you amend a tax return Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. Can you amend a tax return The insurance must be in connection with home acquisition debt, and the insurance contract must have been issued after 2006. Can you amend a tax return Qualified mortgage insurance. Can you amend a tax return   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). Can you amend a tax return   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. Can you amend a tax return If provided by the Rural Housing Service, it is commonly known as a guarantee fee. Can you amend a tax return The funding fee and guarantee fee can either be included in the amount of the loan or paid in full at the time of closing. Can you amend a tax return These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Can you amend a tax return Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. Can you amend a tax return Special rules for prepaid mortgage insurance. Can you amend a tax return   Generally, if you paid premiums for qualified mortgage insurance that are properly allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. Can you amend a tax return 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. Can you amend a tax return No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. Can you amend a tax return This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. Can you amend a tax return Example. Can you amend a tax return Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. Can you amend a tax return Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Can you amend a tax return 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. Can you amend a tax return Ryan's adjusted gross income (AGI) for 2012 is $76,000. Can you amend a tax return Ryan can deduct $880 ($9,240 ÷ 84 x 8 months) for qualified mortgage insurance premiums in 2012. Can you amend a tax return For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 x 12 months) if his AGI is $100,000 or less. Can you amend a tax return 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). Can you amend a tax return Limit on deduction. Can you amend a tax return   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. Can you amend a tax return 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. Can you amend a tax return If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Can you amend a tax return Form 1098. Can you amend a tax return   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your mortgage insurance premiums paid during the year, which may qualify to be treated as deductible mortgage interest. Can you amend a tax return See Form 1098, Mortgage Interest Statement, next. Can you amend a tax return 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. Can you amend a tax return You will receive the statement if you pay interest to a person (including a financial institution or cooperative housing corporation) in the course of that person's trade or business. Can you amend a tax return A governmental unit is a person for purposes of furnishing the statement. Can you amend a tax return The statement for each year should be sent to you by January 31 of the following year. Can you amend a tax return A copy of this form will also be sent to the IRS. Can you amend a tax return 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. Can you amend a tax return However, it should not show any interest that was paid for you by a government agency. Can you amend a tax return As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Can you amend a tax return However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. Can you amend a tax return See the earlier discussion of Points to determine whether you can deduct points not shown on Form 1098. Can you amend a tax return Prepaid interest on Form 1098. Can you amend a tax return   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. Can you amend a tax return However, you cannot deduct the prepaid amount for January 2014 in 2013. Can you amend a tax return (See Prepaid interest , earlier. Can you amend a tax return ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. Can you amend a tax return You will include the interest for January 2014 with other interest you pay for 2014. Can you amend a tax return Refunded interest. Can you amend a tax return   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. Can you amend a tax return See Refunds of interest , earlier. Can you amend a tax return Mortgage insurance premiums. Can you amend a tax return   The amount of mortgage insurance premiums you paid during 2013 may be shown in Box 4 of Form 1098. Can you amend a tax return See Mortgage Insurance Premiums , earlier. Can you amend a tax return How To Report Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. Can you amend a tax return 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. Can you amend a tax return Attach a statement explaining the difference and print “See attached” next to line 10. Can you amend a tax return Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. Can you amend a tax return 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. Can you amend a tax return The seller must give you this number and you must give the seller your TIN. Can you amend a tax return A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Can you amend a tax return Failure to meet any of these requirements may result in a $50 penalty for each failure. Can you amend a tax return 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. Can you amend a tax return 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. Can you amend a tax return Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. Can you amend a tax return More than one borrower. Can you amend a tax return   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. Can you amend a tax return Show how much of the interest each of you paid, and give the name and address of the person who received the form. Can you amend a tax return Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Can you amend a tax return Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. Can you amend a tax return   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. Can you amend a tax return Let each of the other borrowers know what his or her share is. Can you amend a tax return Mortgage proceeds used for business or investment. Can you amend a tax return   If your home mortgage interest deduction is limited under the rules explained in Part II , but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 2 near the end of this publication. Can you amend a tax return It shows where to deduct the part of your excess interest that is for those activities. Can you amend a tax return The Table 1 Instructions for line 13 in Part II explain how to divide the excess interest among the activities for which the mortgage proceeds were used. Can you amend a tax return Special Rule for Tenant-Stockholders in Cooperative Housing Corporations A qualified home includes stock in a cooperative housing corporation owned by a tenant-stockholder. Can you amend a tax return This applies only if the tenant-stockholder is entitled to live in the house or apartment because of owning stock in the cooperative. Can you amend a tax return Cooperative housing corporation. Can you amend a tax return   This is a corporation that meets all of the following conditions. Can you amend a tax return Has only one class of stock outstanding, Has no stockholders other than those who own the stock that can live in a house, apartment, or house trailer owned or leased by the corporation, Has no stockholders who can receive any distribution out of capital other than on a liquidation of the corporation, and Meets at least one of the following requirements. Can you amend a tax return Receives at least 80% of its gross income for the year in which the mortgage interest is paid or incurred from tenant-stockholders. Can you amend a tax return For this purpose, gross income is all income received during the entire year, including amounts received before the corporation changed to cooperative ownership. Can you amend a tax return At all times during the year, at least 80% of the total square footage of the corporation's property is used or available for use by the tenant-stockholders for residential or residential-related use. Can you amend a tax return At least 90% of the corporation's expenditures paid or incurred during the year are for the acquisition, construction, management, maintenance, or care of corporate property for the benefit of the tenant-stockholders. Can you amend a tax return Stock used to secure debt. Can you amend a tax return   In some cases, you cannot use your cooperative housing stock to secure a debt because of either: Restrictions under local or state law, or Restrictions in the cooperative agreement (other than restrictions in which the main purpose is to permit the tenant- stockholder to treat unsecured debt as secured debt). Can you amend a tax return However, you can treat a debt as secured by the stock to the extent that the proceeds are used to buy the stock under the allocation of interest rules. Can you amend a tax return See chapter 4 of Publication 535 for details on these rules. Can you amend a tax return Figuring deductible home mortgage interest. Can you amend a tax return   Generally, if you are a tenant-stockholder, you can deduct payments you make for your share of the interest paid or incurred by the cooperative. Can you amend a tax return The interest must be on a debt to buy, build, change, improve, or maintain the cooperative's housing, or on a debt to buy the land. Can you amend a tax return   Figure your share of this interest by multiplying the total by the following fraction. Can you amend a tax return      Your shares of stock in the cooperative   The total shares of stock in the cooperative Limits on deduction. Can you amend a tax return   To figure how the limits discussed in Part II apply to you, treat your share of the cooperative's debt as debt incurred by you. Can you amend a tax return The cooperative should determine your share of its grandfathered debt, its home acquisition debt, and its home equity debt. Can you amend a tax return (Your share of each of these types of debt is equal to the average balance of each debt multiplied by the fraction just given. Can you amend a tax return ) After your share of the average balance of each type of debt is determined, you include it with the average balance of that type of debt secured by your stock. Can you amend a tax return Form 1098. Can you amend a tax return    The cooperative should give you a Form 1098 showing your share of the interest. Can you amend a tax return Use the rules in this publication to determine your deductible mortgage interest. Can you amend a tax return Part II. Can you amend a tax return Limits on Home Mortgage Interest Deduction This part of the publication discusses the limits on deductible home mortgage interest. Can you amend a tax return These limits apply to your home mortgage interest expense if you have a home mortgage that does not fit into any of the three categories listed at the beginning of Part I under Fully deductible interest . Can you amend a tax return Your home mortgage interest deduction is limited to the interest on the part of your home mortgage debt that is not more than your qualified loan limit. Can you amend a tax return This is the part of your home mortgage debt that is grandfathered debt or that is not more than the limits for home acquisition debt and home equity debt. Can you amend a tax return Table 1 can help you figure your qualified loan limit and your deductible home mortgage interest. Can you amend a tax return Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home (your main or second home). Can you amend a tax return It also must be secured by that home. Can you amend a tax return If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. Can you amend a tax return The additional debt may qualify as home equity debt (discussed later). Can you amend a tax return Home acquisition debt limit. Can you amend a tax return   The total amount you can treat as home acquisition debt at any time on your main home and second home cannot be more than $1 million ($500,000 if married filing separately). Can you amend a tax return This limit is reduced (but not below zero) by the amount of your grandfathered debt (discussed later). Can you amend a tax return Debt over this limit may qualify as home equity debt (also discussed later). Can you amend a tax return Refinanced home acquisition debt. Can you amend a tax return   Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt. Can you amend a tax return However, the new debt will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing. Can you amend a tax return Any additional debt not used to buy, build, or substantially improve a qualified home is not home acquisition debt, but may qualify as home equity debt (discussed later). Can you amend a tax return Mortgage that qualifies later. Can you amend a tax return   A mortgage that does not qualify as home acquisition debt because it does not meet all the requirements may qualify at a later time. Can you amend a tax return For example, a debt that you use to buy your home may not qualify as home acquisition debt because it is not secured by the home. Can you amend a tax return However, if the debt is later secured by the home, it may qualify as home acquisition debt after that time. Can you amend a tax return Similarly, a debt that you use to buy property may not qualify because the property is not a qualified home. Can you amend a tax return However, if the property later becomes a qualified home, the debt may qualify after that time. Can you amend a tax return Mortgage treated as used to buy, build, or improve home. Can you amend a tax return   A mortgage secured by a qualified home may be treated as home acquisition debt, even if you do not actually use the proceeds to buy, build, or substantially improve the home. Can you amend a tax return This applies in the following situations. Can you amend a tax return You buy your home within 90 days before or after the date you take out the mortgage. Can you amend a tax return The home acquisition debt is limited to the home's cost, plus the cost of any substantial improvements within the limit described below in (2) or (3). Can you amend a tax return (See Example 1 later. Can you amend a tax return ) You build or improve your home and take out the mortgage before the work is completed. Can you amend a tax return The home acquisition debt is limited to the amount of the expenses incurred within 24 months before the date of the mortgage. Can you amend a tax return You build or improve your home and take out the mortgage within 90 days after the work is completed. Can you amend a tax return The home acquisition debt is limited to the amount of the expenses incurred within the period beginning 24 months before the work is completed and ending on the date of the mortgage. Can you amend a tax return (See Example 2 later. Can you amend a tax return ) Example 1. Can you amend a tax return You bought your main home on June 3 for $175,000. Can you amend a tax return You paid for the home with cash you got from the sale of your old home. Can you amend a tax return On July 15, you took out a mortgage of $150,000 secured by your main home. Can you amend a tax return You used the $150,000 to invest in stocks. Can you amend a tax return You can treat the mortgage as taken out to buy your home because you bought the home within 90 days before you took out the mortgage. Can you amend a tax return The entire mortgage qualifies as home acquisition debt because it was not more than the home's cost. Can you amend a tax return Example 2. Can you amend a tax return On January 31, John began building a home on the lot that he owned. Can you amend a tax return He used $45,000 of his personal funds to build the home. Can you amend a tax return The home was completed on October 31. Can you amend a tax return On November 21, John took out a $36,000 mortgage that was secured by the home. Can you amend a tax return The mortgage can be treated as used to build the home because it was taken out within 90 days after the home was completed. Can you amend a tax return The entire mortgage qualifies as home acquisition debt because it was not more than the expenses incurred within the period beginning 24 months before the home was completed. Can you amend a tax return This is illustrated by Figure C. Can you amend a tax return   Please click here for the text description of the image. Can you amend a tax return Figure C. Can you amend a tax return John's example Date of the mortgage. Can you amend a tax return   The date you take out your mortgage is the day the loan proceeds are disbursed. Can you amend a tax return This is generally the closing date. Can you amend a tax return You can treat the day you apply in writing for your mortgage as the date you take it out. Can you amend a tax return However, this applies only if you receive the loan proceeds within a reasonable time (such as within 30 days) after your application is approved. Can you amend a tax return If a timely application you make is rejected, a reasonable additional time will be allowed to make a new application. Can you amend a tax return Cost of home or improvements. Can you amend a tax return   To determine your cost, include amounts paid to acquire any interest in a qualified home or to substantially improve the home. Can you amend a tax return   The cost of building or substantially improving a qualified home includes the costs to acquire real property and building materials, fees for architects and design plans, and required building permits. Can you amend a tax return Substantial improvement. Can you amend a tax return   An improvement is substantial if it: Adds to the value of your home, Prolongs your home's useful life, or Adapts your home to new uses. Can you amend a tax return    Repairs that maintain your home in good condition, such as repainting your home, are not substantial improvements. Can you amend a tax return However, if you paint your home as part of a renovation that substantially improves your qualified home, you can include the painting costs in the cost of the improvements. Can you amend a tax return Acquiring an interest in a home because of a divorce. Can you amend a tax return   If you incur debt to acquire the interest of a spouse or former spouse in a home, because of a divorce or legal separation, you can treat that debt as home acquisition debt. Can you amend a tax return Part of home not a qualified home. Can you amend a tax return    To figure your home acquisition debt, you must divide the cost of your home and improvements between the part of your home that is a qualified home and any part that is not a qualified home. Can you amend a tax return See Divided use of your home under Qualified Home in Part I. Can you amend a tax return Home Equity Debt If you took out a loan for reasons other than to buy, build, or substantially improve your home, it may qualify as home equity debt. Can you amend a tax return In addition, debt you incurred to buy, build, or substantially improve your home, to the extent it is more than the home acquisition debt limit (discussed earlier), may qualify as home equity debt. Can you amend a tax return Home equity debt is a mortgage you took out after October 13, 1987, that: Does not qualify as home acquisition debt or as grandfathered debt, and Is secured by your qualified home. Can you amend a tax return Example. Can you amend a tax return You bought your home for cash 10 years ago. Can you amend a tax return You did not have a mortgage on your home until last year, when you took out a $50,000 loan, secured by your home, to pay for your daughter's college tuition and your father's medical bills. Can you amend a tax return This loan is home equity debt. Can you amend a tax return Home equity debt limit. Can you amend a tax return   There is a limit on the amount of debt that can be treated as home equity debt. Can you amend a tax return The total home equity debt on your main home and second home is limited to the smaller of: $100,000 ($50,000 if married filing separately), or The total of each home's fair market value (FMV) reduced (but not below zero) by the amount of its home acquisition debt and grandfathered debt. Can you amend a tax return Determine the FMV and the outstanding home acquisition and grandfathered debt for each home on the date that the last debt was secured by the home. Can you amend a tax return Example. Can you amend a tax return You own one home that you bought in 2000. Can you amend a tax return Its FMV now is $110,000, and the current balance on your original mortgage (home acquisition debt) is $95,000. Can you amend a tax return Bank M offers you a home mortgage loan of 125% of the FMV of the home less any outstanding mortgages or other liens. Can you amend a tax return To consolidate some of your other debts, you take out a $42,500 home mortgage loan [(125% × $110,000) − $95,000] with Bank M. Can you amend a tax return Your home equity debt is limited to $15,000. Can you amend a tax return This is the smaller of: $100,000, the maximum limit, or $15,000, the amount that the FMV of $110,000 exceeds the amount of home acquisition debt of $95,000. Can you amend a tax return Debt higher than limit. Can you amend a tax return   Interest on amounts over the home equity debt limit (such as the interest on $27,500 [$42,500 − $15,000] in the preceding example) generally is treated as personal interest and is not deductible. Can you amend a tax return But if the proceeds of the loan were used for investment, business, or other deductible purposes, the interest may be deductible. Can you amend a tax return If it is, see the Table 1 Instructions for line 13 for an explanation of how to allocate the excess interest. Can you amend a tax return Part of home not a qualified home. Can you amend a tax return   To figure the limit on your home equity debt, you must divide the FMV of your home between the part that is a qualified home and any part that is not a qualified home. Can you amend a tax return See Divided use of your home under Qualified Home in Part I. Can you amend a tax return Fair market value (FMV). Can you amend a tax return    This is the price at which the home would change hands between you and a buyer, neither having to sell or buy, and both having reasonable knowledge of all relevant facts. Can you amend a tax return Sales of similar homes in your area, on about the same date your last debt was secured by the home, may be helpful in figuring the FMV. Can you amend a tax return Grandfathered Debt If you took out a mortgage on your home before October 14, 1987, or you refinanced such a mortgage, it may qualify as grandfathered debt. Can you amend a tax return To qualify, it must have been secured by your qualified home on October 13, 1987, and at all times after that date. Can you amend a tax return How you used the proceeds does not matter. Can you amend a tax return Grandfathered debt is not limited. Can you amend a tax return All of the interest you paid on grandfathered debt is fully deductible home mortgage interest. Can you amend a tax return However, the amount of your grandfathered debt reduces the $1 million limit for home acquisition debt and the limit based on your home's fair market value for home equity debt. Can you amend a tax return Refinanced grandfathered debt. Can you amend a tax return   If you refinanced grandfathered debt after October 13, 1987, for an amount that was not more than the mortgage principal left on the debt, then you still treat it as grandfathered debt. Can you amend a tax return To the extent the new debt is more than that mortgage principal, it is treated as home acquisition or home equity debt, and the mortgage is a mixed-use mortgage (discussed later under Average Mortgage Balance in the Table 1 instructions). Can you amend a tax return The debt must be secured by the qualified home. Can you amend a tax return   You treat grandfathered debt that was refinanced after October 13, 1987, as grandfathered debt only for the term left on the debt that was refinanced. Can you amend a tax return After that, you treat it as home acquisition debt or home equity debt, depending on how you used the proceeds. Can you amend a tax return Exception. Can you amend a tax return   If the debt before refinancing was like a balloon note (the principal on the debt was not amortized over the term of the debt), then you treat the refinanced debt as grandfathered debt for the term of the first refinancing. Can you amend a tax return This term cannot be more than 30 years. Can you amend a tax return Example. Can you amend a tax return Chester took out a $200,000 first mortgage on his home in 1986. Can you amend a tax return The mortgage was a five-year balloon note and the entire balance on the note was due in 1991. Can you amend a tax return Chester refinanced the debt in 1991 with a new 20-year mortgage. Can you amend a tax return The refinanced debt is treated as grandfathered debt for its entire term (20 years). Can you amend a tax return Line-of-credit mortgage. Can you amend a tax return    If you had a line-of-credit mortgage on October 13, 1987, and borrowed additional amounts against it after that date, then the additional amounts are either home acquisition debt or home equity debt depending on how you used the proceeds. Can you amend a tax return The balance on the mortgage before you borrowed the additional amounts is grandfathered debt. Can you amend a tax return The newly borrowed amounts are not grandfathered debt because the funds were borrowed after October 13, 1987. Can you amend a tax return See Average Mortgage Balance in the Table 1 Instructions that follow. Can you amend a tax return Table 1 Instructions Unless you are subject to the overall limit on itemized deductions, you can deduct all of the interest you paid during the year on mortgages secured by your main home or second home in either of the following two situations. Can you amend a tax return All the mortgages are grandfathered debt. Can you amend a tax return The total of the mortgage balances for the entire year is within the limits discussed earlier under Home Acquisition Debt and Home Equity Debt . Can you amend a tax return In either of those cases, you do not need Table 1. Can you amend a tax return Otherwise, you can use Table 1 to determine your qualified loan limit and deductible home mortgage interest. Can you amend a tax return Fill out only one Table 1 for both your main and second home regardless of how many mortgages you have. Can you amend a tax return Table 1. Can you amend a tax return Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. Can you amend a tax return Part I Qualified Loan Limit 1. Can you amend a tax return Enter the average balance of all your grandfathered debt. Can you amend a tax return See line 1 instructions 1. Can you amend a tax return   2. Can you amend a tax return Enter the average balance of all your home acquisition debt. Can you amend a tax return See line 2 instructions 2. Can you amend a tax return   3. Can you amend a tax return Enter $1,000,000 ($500,000 if married filing separately) 3. Can you amend a tax return   4. Can you amend a tax return Enter the larger of the amount on line 1 or the amount on line 3 4. Can you amend a tax return   5. Can you amend a tax return Add the amounts on lines 1 and 2. Can you amend a tax return Enter the total here 5. Can you amend a tax return   6. Can you amend a tax return Enter the smaller of the amount on line 4 or the amount on line 5 6. Can you amend a tax return   7. Can you amend a tax return If you have home equity debt, enter the smaller of $100,000 ($50,000 if married filing separately) or your limited amount. Can you amend a tax return See the line 7 instructions for the limit which may apply to you. Can you amend a tax return 7. Can you amend a tax return   8. Can you amend a tax return Add the amounts on lines 6 and 7. Can you amend a tax return Enter the total. Can you amend a tax return This is your qualified loan limit. Can you amend a tax return 8. Can you amend a tax return   Part II Deductible Home Mortgage Interest 9. Can you amend a tax return Enter the total of the average balances of all mortgages on all qualified homes. Can you amend a tax return  See line 9 instructions 9. Can you amend a tax return     If line 8 is less than line 9, go on to line 10. Can you amend a tax return If line 8 is equal to or more than line 9, stop here. Can you amend a tax return All of your interest on all the mortgages included on line 9 is deductible as home mortgage interest on Schedule A (Form 1040). Can you amend a tax return     10. Can you amend a tax return Enter the total amount of interest that you paid. Can you amend a tax return See line 10 instructions 10. Can you amend a tax return   11. Can you amend a tax return Divide the amount on line 8 by the amount on line 9. Can you amend a tax return Enter the result as a decimal amount (rounded to three places) 11. Can you amend a tax return × . Can you amend a tax return 12. Can you amend a tax return Multiply the amount on line 10 by the decimal amount on line 11. Can you amend a tax return Enter the result. Can you amend a tax return This is your deductible home mortgage interest. Can you amend a tax return Enter this amount on Schedule A (Form 1040) 12. Can you amend a tax return   13. Can you amend a tax return Subtract the amount on line 12 from the amount on line 10. Can you amend a tax return Enter the result. Can you amend a tax return This is not home mortgage interest. Can you amend a tax return See line 13 instructions 13. Can you amend a tax return   Home equity debt only. Can you amend a tax return   If all of your mortgages are home equity debt, do not fill in lines 1 through 5. Can you amend a tax return Enter zero on line 6 and complete the rest of Table 1. Can you amend a tax return Average Mortgage Balance You have to figure the average balance of each mortgage to determine your qualified loan limit. Can you amend a tax return You need these amounts to complete lines 1, 2, and 9 of Table 1. Can you amend a tax return You can use the highest mortgage balances during the year, but you may benefit most by using the average balances. Can you amend a tax return The following are methods you can use to figure your average mortgage balances. Can you amend a tax return However, if a mortgage has more than one category of debt, see Mixed-use mortgages , later, in this section. Can you amend a tax return Average of first and last balance method. Can you amend a tax return   You can use this method if all the following apply. Can you amend a tax return You did not borrow any new amounts on the mortgage during the year. Can you amend a tax return (This does not include borrowing the original mortgage amount. Can you amend a tax return ) You did not prepay more than one month's principal during the year. Can you amend a tax return (This includes prepayment by refinancing your home or by applying proceeds from its sale. Can you amend a tax return ) You had to make level payments at fixed equal intervals on at least a semi-annual basis. Can you amend a tax return You treat your payments as level even if they were adjusted from time to time because of changes in the interest rate. Can you amend a tax return    To figure your average balance, complete the following worksheet. Can you amend a tax return    1. Can you amend a tax return Enter the balance as of the first day of the year that the mortgage was secured by your qualified home during the year (generally January 1)   2. Can you amend a tax return Enter the balance as of the last day of the year that the mortgage was secured by your qualified home during the year (generally December 31)   3. Can you amend a tax return Add amounts on lines 1 and 2   4. Can you amend a tax return Divide the amount on line 3 by 2. Can you amend a tax return Enter the result   Interest paid divided by interest rate method. Can you amend a tax return   You can use this method if at all times in 2013 the mortgage was secured by your qualified home and the interest was paid at least monthly. Can you amend a tax return    Complete the following worksheet to figure your average balance. Can you amend a tax return    1. Can you amend a tax return Enter the interest paid in 2013. Can you amend a tax return Do not include points, mortgage insurance premiums, or any interest paid in 2013 that is for a year after 2013. Can you amend a tax return However, do include interest that is for 2013 but was paid in an earlier year   2. Can you amend a tax return Enter the annual interest rate on the mortgage. Can you amend a tax return If the interest rate varied in 2013, use the lowest rate for the year   3. Can you amend a tax return Divide the amount on line 1 by the amount on line 2. Can you amend a tax return Enter the result   Example. Can you amend a tax return Mr. Can you amend a tax return Blue had a line of credit secured by his main home all year. Can you amend a tax return He paid interest of $2,500 on this loan. Can you amend a tax return The interest rate on the loan was 9% (. Can you amend a tax return 09) all year. Can you amend a tax return His average balance using this method is $27,778, figured as follows. Can you amend a tax return 1. Can you amend a tax return Enter the interest paid in 2013. Can you amend a tax return Do not include points, mortgage insurance premiums, or any interest paid in 2013 that is for a year after 2013. Can you amend a tax return However, do include interest that is for 2013 but was paid in an earlier year $2,500 2. Can you amend a tax return Enter the annual interest rate on the mortgage. Can you amend a tax return If the interest rate varied in 2013, use the lowest rate for the year . Can you amend a tax return 09 3. Can you amend a tax return Divide the amount on line 1 by the amount on line 2. Can you amend a tax return Enter the result $27,778 Statements provided by your lender. Can you amend a tax return   If you receive monthly statements showing the closing balance or the average balance for the month, you can use either to figure your average balance for the year. Can you amend a tax return You can treat the balance as zero for any month the mortgage was not secured by your qualified home. Can you amend a tax return   For each mortgage, figure your average balance by adding your monthly closing or average balances and dividing that total by the number of months the home secured by that mortgage was a qualified home during the year. Can you amend a tax return   If your lender can give you your average balance for the year, you can use that amount. Can you amend a tax return Example. Can you amend a tax return Ms. Can you amend a tax return Brown had a home equity loan secured by her main home all year. Can you amend a tax return She received monthly statements showing her average balance for each month. Can you amend a tax return She can figure her average balance for the year by adding her monthly average balances and dividing the total by 12. Can you amend a tax return Mixed-use mortgages. Can you amend a tax return   A mixed-use mortgage is a loan that consists of more than one of the three categories of debt (grandfathered debt, home acquisition debt, and home equity debt). Can you amend a tax return For example, a mortgage you took out during the year is a mixed-use mortgage if you used its proceeds partly to refinance a mortgage that you took out in an earlier year to buy your home (home acquisition debt) and partly to buy a car (home equity debt). Can you amend a tax return   Complete lines 1 and 2 of Table 1 by including the separate average balances of any grandfathered debt and home acquisition debt in your mixed-use mortgage. Can you amend a tax return Do not use the methods described earlier in this section to figure the average balance of either category. Can you amend a tax return Instead, for each category, use the following method. Can you amend a tax return Figure the balance of that category of debt for each month. Can you amend a tax return This is the amount of the loan proceeds allocated to that category, reduced by your principal payments on the mortgage previously applied to that category. Can you amend a tax return Principal payments on a mixed-use mortgage are applied in full to each category of debt, until its balance is zero, in the following order: First, any home equity debt, Next, any grandfathered debt, and Finally, any home acquisition debt. Can you amend a tax return Add together the monthly balances figured in (1). Can you amend a tax return Divide the result in (2) by 12. Can you amend a tax return   Complete line 9 of Table 1 by including the average balance of the entire mixed-use mortgage, figured under one of the methods described earlier in this section. Can you amend a tax return Example 1. Can you amend a tax return In 1986, Sharon took out a $1,400,000 mortgage to buy her main home (grandfathered debt). Can you amend a tax return On March 2, 2013, when the home had a fair market value of $1,700,000 and she owed $1,100,000 on the mortgage, Sharon took out a second mortgage for $200,000. Can you amend a tax return She used $180,000 of the proceeds to make substantial improvements to her home (home acquisition debt) and the remaining $20,000 to buy a car (home equity debt). Can you amend a tax return Under the loan agreement, Sharon must make principal payments of $1,000 at the end of each month. Can you amend a tax return During 2013, her principal payments on the second mortgage totaled $10,000. Can you amend a tax return To complete Table 1, line 2, Sharon must figure a separate average balance for the part of her second mortgage that is home acquisition debt. Can you amend a tax return The January and February balances were zero. Can you amend a tax return The March through December balances were all $180,000, because none of her principal payments are applied to the home acquisition debt. Can you amend a tax return (They are all applied to the home equity debt, reducing it to $10,000 [$20,000 − $10,000]. Can you amend a tax return ) The monthly balances of the home acquisition debt total $1,800,000 ($180,000 × 10). Can you amend a tax return Therefore, the average balance of the home acquisition debt for 2013 was $150,000 ($1,800,000 ÷ 12). Can you amend a tax return Example 2. Can you amend a tax return The facts are the same as in Example 1. Can you amend a tax return In 2014, Sharon's January through October principal payments on her second mortgage are applied to the home equity debt, reducing it to zero. Can you amend a tax return The balance of the home acquisition debt remains $180,000 for each of those months. Can you amend a tax return Because her November and December principal payments are applied to the home acquisition debt, the November balance is $179,000 ($180,000 − $1,000) and the December balance is $178,000 ($180,000 − $2,000). Can you amend a tax return The monthly balances total $2,157,000 [($180,000 × 10) + $179,000 + $178,000]. Can you amend a tax return Therefore, the average balance of the home acquisition debt for 2014 is $179,750 ($2,157,000 ÷ 12). Can you amend a tax return L