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Cheap tax software 6. Cheap tax software   Tax Treaty Benefits Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Purpose of Tax Treaties Common Benefits Competent Authority AssistanceAdditional filing. Cheap tax software Obtaining Copies of Tax Treaties Topics - This chapter discusses: Some common tax treaty benefits, How to get help in certain situations, and How to get copies of tax treaties. Cheap tax software Useful Items - You may want to see: Publication 597 Information on the United States—Canada Income Tax Treaty 901 U. Cheap tax software S. Cheap tax software Tax Treaties See chapter 7 for information about getting these publications. Cheap tax software Purpose of Tax Treaties The United States has tax treaties or conventions with many countries. Cheap tax software See Table 6-1 at the end of this chapter for a list of these countries. Cheap tax software Under these treaties and conventions, citizens and residents of the United States who are subject to taxes imposed by the foreign countries are entitled to certain credits, deductions, exemptions, and reductions in the rate of taxes of those foreign countries. Cheap tax software If a foreign country with which the United States has a treaty imposes a tax on you, you may be entitled to benefits under the treaty. Cheap tax software Treaty benefits generally are available to residents of the United States. Cheap tax software They generally are not available to U. Cheap tax software S. Cheap tax software citizens who do not reside in the United States. Cheap tax software However, certain treaty benefits and safeguards, such as the nondiscrimination provisions, are available to U. Cheap tax software S. Cheap tax software citizens residing in the treaty countries. Cheap tax software U. Cheap tax software S. Cheap tax software citizens residing in a foreign country also may be entitled to benefits under that country's tax treaties with third countries. Cheap tax software Certification of U. Cheap tax software S. Cheap tax software residency. Cheap tax software   Use Form 8802, Application for United States Residency Certification, to request certification of U. Cheap tax software S. Cheap tax software residency for purposes of claiming benefits under a tax treaty. Cheap tax software Certification can be requested for the current and any prior calendar years. Cheap tax software You should examine the specific treaty articles to find if you are entitled to a tax credit, tax exemption, reduced rate of tax, or other treaty benefit or safeguard. Cheap tax software Common Benefits Some common tax treaty benefits are explained below. Cheap tax software The credits, deductions, exemptions, reductions in rate, and other benefits provided by tax treaties are subject to conditions and various restrictions. Cheap tax software Benefits provided by certain treaties are not provided by others. Cheap tax software Personal service income. Cheap tax software If you are a U. Cheap tax software S. Cheap tax software resident who is in a treaty country for a limited number of days in the tax year and you meet certain other requirements, the payment you receive for personal services performed in that country may be exempt from that country's income tax. Cheap tax software Professors and teachers. Cheap tax software If you are a U. Cheap tax software S. Cheap tax software resident, the payment you receive for the first 2 or 3 years that you are teaching or doing research in a treaty country may be exempt from that country's income tax. Cheap tax software Students, trainees, and apprentices. Cheap tax software If you are a U. Cheap tax software S. Cheap tax software resident, amounts you receive from the United States for study, research, or business, professional and technical training may be exempt from a treaty country's income tax. Cheap tax software Some treaties exempt grants, allowances, and awards received from governmental and certain nonprofit organizations. Cheap tax software Also, under certain circumstances, a limited amount of pay received by students, trainees, and apprentices may be exempt from the income tax of many treaty countries. Cheap tax software Pensions and annuities. Cheap tax software If you are a U. Cheap tax software S. Cheap tax software resident, nongovernment pensions and annuities you receive may be exempt from the income tax of treaty countries. Cheap tax software Most treaties contain separate provisions for exempting government pensions and annuities from treaty country income tax, and some treaties provide exemption from the treaty country's income tax for social security payments. Cheap tax software Investment income. Cheap tax software If you are a U. Cheap tax software S. Cheap tax software resident, investment income, such as interest and dividends, that you receive from sources in a treaty country may be exempt from that country's income tax or taxed at a reduced rate. Cheap tax software Several treaties provide exemption for capital gains (other than from sales of real property in most cases) if specified requirements are met. Cheap tax software Tax credit provisions. Cheap tax software If you are a U. Cheap tax software S. Cheap tax software resident who receives income from or owns capital in a foreign country, you may be taxed on that income or capital by both the United States and the treaty country. Cheap tax software Most treaties allow you to take a credit against or deduction from the treaty country's taxes based on the U. Cheap tax software S. Cheap tax software tax on the income. Cheap tax software Nondiscrimination provisions. Cheap tax software Most U. Cheap tax software S. Cheap tax software tax treaties provide that the treaty country cannot discriminate by imposing more burdensome taxes on U. Cheap tax software S. Cheap tax software citizens who are residents of the treaty country than it imposes on its own citizens in the same circumstances. Cheap tax software Saving clauses. Cheap tax software U. Cheap tax software S. Cheap tax software treaties contain saving clauses that provide that the treaties do not affect the U. Cheap tax software S. Cheap tax software taxation of its own citizens and residents. Cheap tax software As a result, U. Cheap tax software S. Cheap tax software citizens and residents generally cannot use the treaty to reduce their U. Cheap tax software S. Cheap tax software tax liability. Cheap tax software However, most treaties provide exceptions to saving clauses that allow certain provisions of the treaty to be claimed by U. Cheap tax software S. Cheap tax software citizens or residents. Cheap tax software It is important that you examine the applicable saving clause to determine if an exception applies. Cheap tax software More information on treaties. Cheap tax software   Publication 901 contains an explanation of treaty provisions that apply to amounts received by teachers, students, workers, and government employees and pensioners who are alien nonresidents or residents of the United States. Cheap tax software Since treaty provisions generally are reciprocal, you usually can substitute “United States” for the name of the treaty country whenever it appears, and vice versa when “U. Cheap tax software S. Cheap tax software ” appears in the treaty exemption discussions in Publication 901. Cheap tax software   Publication 597 contains an explanation of a number of frequently-used provisions of the United States–Canada income tax treaty. Cheap tax software Competent Authority Assistance If you are a U. Cheap tax software S. Cheap tax software citizen or resident alien, you can request assistance from the U. Cheap tax software S. Cheap tax software competent authority if you think that the actions of the United States, a treaty country, or both, cause or will cause a tax situation not intended by the treaty between the two countries. Cheap tax software You should read any treaty articles, including the mutual agreement procedure article, that apply in your situation. Cheap tax software The U. Cheap tax software S. Cheap tax software competent authority cannot consider requests involving countries with which the United States does not have a tax treaty. Cheap tax software Effect of request for assistance. Cheap tax software   If your request provides a basis for competent authority assistance, the U. Cheap tax software S. Cheap tax software competent authority generally will consult with the treaty country competent authority on how to resolve the situation. Cheap tax software How to make your request. Cheap tax software   It is important that you make your request for competent authority consideration as soon as either of the following occurs. Cheap tax software You are denied treaty benefits. Cheap tax software Actions taken by both the United States and the foreign country result in double taxation or will result in taxation not intended by the treaty. Cheap tax software   In addition to making a request for assistance, you should take steps so that any agreement reached by the competent authorities is not barred by administrative, legal, or procedural barriers. Cheap tax software Some of the steps you should consider taking include the following. Cheap tax software Filing a protective claim for credit or refund of U. Cheap tax software S. Cheap tax software taxes. Cheap tax software Delaying the expiration of any period of limitations on the making of a refund or other tax adjustment. Cheap tax software Avoiding the lapse or termination of your right to appeal any tax determination. Cheap tax software Complying with all applicable procedures for invoking competent authority consideration. Cheap tax software Contesting an adjustment or seeking an appropriate correlative adjustment with respect to the U. Cheap tax software S. Cheap tax software or treaty country tax. Cheap tax software Taxpayers can consult with the U. Cheap tax software S. Cheap tax software competent authority to determine whether they need to take protective steps and when any required steps need to be taken. Cheap tax software   The request should contain all essential items of information, including the following items. Cheap tax software A reference to the treaty and the treaty provisions on which the request is based. Cheap tax software The years and amounts involved in both U. Cheap tax software S. Cheap tax software dollars and foreign currency. Cheap tax software A brief description of the issues for which competent authority assistance is requested. Cheap tax software   A complete listing of the information that must be included with the request can be found in Revenue Procedure 2006-54, or its successor. Cheap tax software Revenue Procedure 2006-54 is available at www. Cheap tax software irs. Cheap tax software gov/irb/2006-49_IRB/ar13. Cheap tax software html. Cheap tax software   Also, see Notice 2013-78, which provides proposed updates to the procedures for requesting U. Cheap tax software S. Cheap tax software competent authority assistance under tax treaties. Cheap tax software As noted, Revenue Procedure 2006-54 will be superseded by a revenue procedure to be published in the future. Cheap tax software    Your request for competent authority consideration should be addressed to:   Deputy Commissioner (International) Large Business and International Division Internal Revenue Service 1111 Constitution Avenue, NW Routing M4-365 Washington, DC 20224 Attn: TAIT Additional filing. Cheap tax software   In the case of U. Cheap tax software S. Cheap tax software - initiated adjustments, you also must file a copy of the request with the IRS office where your case is pending. Cheap tax software If the request is filed after the matter has been designated for litigation or while a suit contesting your relevant tax liability is pending in a United States court, a copy of the request, with a separate statement attached identifying the court where the suit is pending and the docket number of the action, also must be filed with the: Office of Associate Chief Counsel (International) Internal Revenue Service 1111 Constitution Avenue, NW Washington, DC 20224 Additional details on the procedures for requesting competent authority assistance are included in Revenue Procedure 2006-54, or its successor. Cheap tax software Obtaining Copies of Tax Treaties Table 6-1 lists those countries with which the United States has income tax treaties. Cheap tax software This table is updated through October 31, 2013. Cheap tax software You can get complete information about treaty provisions from the taxing authority in the country from which you receive income or from the treaty itself. Cheap tax software You can obtain the text of most U. Cheap tax software S. Cheap tax software treaties at IRS. Cheap tax software gov. Cheap tax software You also can request the text of treaties from the Department of Treasury at the following address. Cheap tax software Department of Treasury Office of Business and Public Liaison Rm. Cheap tax software 3411 1500 Pennsylvania Avenue, NW  Washington, DC 20220 If you have questions about a treaty and you are in the United States, Puerto Rico, or the U. Cheap tax software S. Cheap tax software Virgin Islands, you can call the IRS at 1-800-829-1040. Cheap tax software Table 6–1. Cheap tax software List of Tax Treaties (Updated through October 31, 2013) Country Official Text  Symbol1 General  Effective Date Citation Applicable Treasury Explanations  or Treasury Decision (T. Cheap tax software D. Cheap tax software ) Australia TIAS 10773 Dec. Cheap tax software 1, 1983 1986-2 C. Cheap tax software B. Cheap tax software 220 1986-2 C. Cheap tax software B. Cheap tax software 246 Protocol TIAS Jan. Cheap tax software 1, 2004     Austria TIAS Jan. Cheap tax software 1, 1999     Bangladesh TIAS Jan. Cheap tax software 1, 2007     Barbados TIAS 11090 Jan. Cheap tax software 1, 1984 1991-2 C. Cheap tax software B. Cheap tax software 436 1991-2 C. Cheap tax software B. Cheap tax software 466 Protocol TIAS Jan. Cheap tax software 1, 2005     Belgium TIAS Jan. Cheap tax software 1, 2008     Bulgaria TIAS Jan. Cheap tax software 1, 2009     Canada2 TIAS 11087 Jan. Cheap tax software 1, 1985 1986-2 C. Cheap tax software B. Cheap tax software 258 1987-2 C. Cheap tax software B. Cheap tax software 298 Protocol TIAS Jan. Cheap tax software 1, 2009     China, People's Republic of TIAS 12065 Jan. Cheap tax software 1, 1987 1988-1 C. Cheap tax software B. Cheap tax software 414 1988-1 C. Cheap tax software B. Cheap tax software 447 Commonwealth of Independent States3 TIAS 8225 Jan. Cheap tax software 1, 1976 1976-2 C. Cheap tax software B. Cheap tax software 463 1976-2 C. Cheap tax software B. Cheap tax software 475 Cyprus TIAS 10965 Jan. Cheap tax software 1, 1986 1989-2 C. Cheap tax software B. Cheap tax software 280 1989-2 C. Cheap tax software B. Cheap tax software 314 Czech Republic TIAS Jan. Cheap tax software 1, 1993     Denmark TIAS Jan. Cheap tax software 1, 2001     Protocol TIAS Jan. Cheap tax software 1, 2008     Egypt TIAS 10149 Jan. Cheap tax software 1, 1982 1982-1 C. Cheap tax software B. Cheap tax software 219 1982-1 C. Cheap tax software B. Cheap tax software 243 Estonia TIAS Jan. Cheap tax software 1, 2000     Finland TIAS 12101 Jan. Cheap tax software 1, 1991     Protocol TIAS Jan. Cheap tax software 1, 2008     France TIAS Jan. Cheap tax software 1, 1996     Protocol TIAS Jan. Cheap tax software 1, 2009     Germany TIAS Jan. Cheap tax software 1, 1990     Protocol TIAS Jan. Cheap tax software 1, 2008     Greece TIAS 2902 Jan. Cheap tax software 1, 1953 1958-2 C. Cheap tax software B. Cheap tax software 1054 T. Cheap tax software D. Cheap tax software 6109, 1954-2 C. Cheap tax software B. Cheap tax software 638 Hungary TIAS 9560 Jan. Cheap tax software 1, 1980 1980-1 C. Cheap tax software B. Cheap tax software 333 1980-1 C. Cheap tax software B. Cheap tax software 354 Iceland TIAS 8151 Jan. Cheap tax software 1, 2009     India TIAS Jan. Cheap tax software 1, 1991     Indonesia TIAS 11593 Jan. Cheap tax software 1, 1990     Ireland TIAS Jan. Cheap tax software 1, 1998     Israel TIAS Jan. Cheap tax software 1, 1995     Italy TIAS Jan. Cheap tax software 1, 2010     Jamaica TIAS 10207 Jan. Cheap tax software 1, 1982 1982-1 C. Cheap tax software B. Cheap tax software 257 1982-1 C. Cheap tax software B. Cheap tax software 291 Japan TIAS Jan. Cheap tax software 1, 2005     Kazakhstan TIAS Jan. Cheap tax software 1, 1996     Korea, South TIAS 9506 Jan. Cheap tax software 1, 1980 1979-2 C. Cheap tax software B. Cheap tax software 435 1979-2 C. Cheap tax software B. Cheap tax software 458 Latvia TIAS Jan. Cheap tax software 1, 2000     Lithuania TIAS Jan. Cheap tax software 1, 2000     Luxembourg TIAS Jan. Cheap tax software 1, 2001     Malta TIAS Jan. Cheap tax software 1, 2011     Mexico TIAS Jan. Cheap tax software 1,1994     Protocol TIAS Jan. Cheap tax software 1, 2004               Table 6–1 (continued). Cheap tax software Country Official Text  Symbol1 General  Effective Date Citation Applicable Treasury Explanations  or Treasury Decision (T. Cheap tax software D. Cheap tax software ) Morocco TIAS 10195 Jan. Cheap tax software 1, 1981 1982-2 C. Cheap tax software B. Cheap tax software 405 1982-2 C. Cheap tax software B. Cheap tax software 427 Netherlands TIAS Jan. Cheap tax software 1, 1994     Protocol TIAS Jan. Cheap tax software 1, 2005     New Zealand TIAS 10772 Nov. Cheap tax software 2, 1983 1990-2 C. Cheap tax software B. Cheap tax software 274 1990-2 C. Cheap tax software B. Cheap tax software 303 Protocol TIAS Jan. Cheap tax software 1, 2011     Norway TIAS 7474 Jan. Cheap tax software 1, 1971 1973-1 C. Cheap tax software B. Cheap tax software 669 1973-1 C. Cheap tax software B. Cheap tax software 693 Protocol TIAS 10205 Jan. Cheap tax software 1, 1982 1982-2 C. Cheap tax software B. Cheap tax software 440 1982-2 C. Cheap tax software B. Cheap tax software 454 Pakistan TIAS 4232 Jan. Cheap tax software 1, 1959 1960-2 C. Cheap tax software B. Cheap tax software 646 T. Cheap tax software D. Cheap tax software 6431, 1960-1 C. Cheap tax software B. Cheap tax software 755 Philippines TIAS 10417 Jan. Cheap tax software 1, 1983 1984-2 C. Cheap tax software B. Cheap tax software 384 1984-2 C. Cheap tax software B. Cheap tax software 412 Poland TIAS 8486 Jan. Cheap tax software 1, 1974 1977-1 C. Cheap tax software B. Cheap tax software 416 1977-1 C. Cheap tax software B. Cheap tax software 427 Portugal TIAS Jan. Cheap tax software 1, 1996     Romania TIAS 8228 Jan. Cheap tax software 1, 1974 1976-2 C. Cheap tax software B. Cheap tax software 492 1976-2 C. Cheap tax software B. Cheap tax software 504 Russia TIAS Jan. Cheap tax software 1, 1994     Slovak Republic TIAS Jan. Cheap tax software 1, 1993     Slovenia TIAS Jan. Cheap tax software 1, 2002     South Africa TIAS Jan. Cheap tax software 1, 1998     Spain TIAS Jan. Cheap tax software 1, 1991     Sri Lanka TIAS Jan. Cheap tax software 1, 2004     Sweden TIAS Jan. Cheap tax software 1, 1996     Protocol TIAS Jan. Cheap tax software 1, 2007     Switzerland TIAS Jan. Cheap tax software 1, 1998     Thailand TIAS Jan. Cheap tax software 1, 1998     Trinidad and Tobago TIAS 7047 Jan. Cheap tax software 1, 1970 1971-2 C. Cheap tax software B. Cheap tax software 479   Tunisia TIAS Jan. Cheap tax software 1, 1990     Turkey TIAS Jan. Cheap tax software 1, 1998     Ukraine TIAS Jan. Cheap tax software 1, 2001     United Kingdom TIAS Jan. Cheap tax software 1, 2004     Venezuela TIAS Jan. Cheap tax software 1, 2000      1(TIAS) — Treaties and Other International Act Series. Cheap tax software  2Information on the treaty can be found in Publication 597, Information on the United States—Canada Income Tax Treaty. Cheap tax software 3The U. Cheap tax software S. Cheap tax software -U. Cheap tax software S. Cheap tax software S. Cheap tax software R. Cheap tax software income tax treaty applies to the countries of Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan. 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Get the Facts About Renting

A lease is an agreement that outlines the obligations of the owner and the tenants of a house or apartment. It is a legally binding document that courts will generally uphold in legal proceedings, so it is important for you to know the exact terms of the lease agreement before you sign it. Before agreeing to lease a home to you, a landlord may review your credit report, so you may want to get a copy before you start your apartment search. Some things to look for in a lease:

  • Clauses that allow the landlord to change the terms of the lease after it is signed
  • Requirements/responsibilities of the tenants to do routine repairs such as lawn maintenance, cleaning or notification of repairs
  • Restrictions that would prevent you from living normally or comfortably in the home
  • Term of the lease and any important dates such as when the rent is due, or garbage pick up days
  • Extra fees for parking spaces or storage, garbage collection, and pets
  • Information regarding utility providers, how to arrange for service and whether you or the landlord is responsible for those bills.

Read the lease carefully and discuss anything you don't understand or issues you might have. All landlord responsibilities should be clearly stated. Always get a copy of the signed lease to keep in your records. Any clause or terms in the agreement affects ALL parties who sign.

Tenants who lease or rent property are protected against discrimination by The Fair Housing Act. If you think your rights have been violated, you may write a letter or telephone the HUD office nearest you. You have one year after the alleged violation to file a complaint with HUD, but you should file as soon as possible.

Each state has its own tenant rights, laws and protections. Contact HUD for a state-by-state directory. You can also find public housing that is available from the Department of Housing and Urban Development. The agency offers several housing assistance programs for tenants and landlords as well as information of displaced residents.

Ten Tips for Renters

  • The best way to win over a prospective landlord is to be prepared by bringing a completed rental application; written references from previous landlords, employers, friends and colleagues; and a current copy of your credit report with you.
  • Carefully review all the important conditions of the lease before you sign.
  • To avoid disputes or misunderstandings with your landlord, get everything in writing.
  • Know your rights to live in a habitable rental unit-and don't give them up.
  • Keep communication open with your landlord.
  • Ask about your privacy rights before you sign the lease.
  • Purchase renter's insurance to cover your valuables.
  • Make sure the security deposit refund procedures are spelled out in your lease or rental agreement.
  • Learn whether your building and neighborhood are safe, and what you can expect your landlord to do about it if they aren't.
  • Know when to fight an eviction notice and when to move. Unless you have the law and provable facts on your side, fighting an eviction notice is usually shortsighted.

The Cheap Tax Software

Cheap tax software 3. Cheap tax software   Abandonments Table of Contents You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership but without passing it on to anyone else. Cheap tax software Whether an abandonment has occurred is determined in light of all the facts and circumstances. Cheap tax software You must both show an intention to abandon the property and affirmatively act to abandon the property. Cheap tax software A voluntary conveyance of the property in lieu of foreclosure is not an abandonment and is treated as the exchange of property to satisfy a debt. Cheap tax software For more information, see Sales and Exchanges in Publication 544. Cheap tax software The tax consequences of abandonment of property that secures a debt depend on whether you were personally liable for the debt (recourse debt) or were not personally liable for the debt (nonrecourse debt). Cheap tax software See Publication 544 if you abandoned property that did not secure debt. Cheap tax software This publication only discusses the tax consequences of abandoning property that secured a debt. Cheap tax software Abandonment of property securing recourse debt. Cheap tax software    In most cases, if you abandon property that secures debt for which you are personally liable (recourse debt), you do not have gain or loss until the later foreclosure is completed. Cheap tax software For details on figuring gain or loss on the foreclosure, see chapter 2. Cheap tax software Example 1—abandonment of personal-use property securing recourse debt. Cheap tax software In 2009, Anne purchased a home for $200,000. Cheap tax software She borrowed the entire purchase price, for which she was personally liable, and gave the bank a mortgage on the home. Cheap tax software In 2013, Anne lost her job and was unable to continue making her mortgage loan payments. Cheap tax software Because her mortgage loan balance was $185,000 and the FMV of her home was only $150,000, Anne decided to abandon her home by permanently moving out on August 1, 2013. Cheap tax software Because Anne was personally liable for the debt and the bank did not complete a foreclosure of the property in 2013, Anne has neither gain nor loss in tax year 2013 from abandoning the home. Cheap tax software If the bank sells the house at a foreclosure sale in 2014, Anne will have to figure her gain or nondeductible loss for tax year 2014 as discussed earlier in chapter 2. Cheap tax software Example 2—abandonment of business or investment property securing recourse debt. Cheap tax software In 2009, Sue purchased business property for $200,000. Cheap tax software She borrowed the entire purchase price, for which she was personally liable, and gave the lender a security interest in the property. Cheap tax software In 2013, Sue was unable to continue making her loan payments. Cheap tax software Because her loan balance was $185,000 and the FMV of the property was only $150,000, Sue abandoned the property on August 1, 2013. Cheap tax software Because Sue was personally liable for the debt and the lender did not complete a foreclosure of the property in 2013, Sue has neither gain nor loss in tax year 2013 from abandoning the property. Cheap tax software If the lender sells the property at a foreclosure sale in 2014, Sue will have to figure her gain or deductible loss for tax year 2014 as discussed earlier in chapter 2. Cheap tax software Abandonment of property securing nonrecourse debt. Cheap tax software    If you abandon property that secures debt for which you are not personally liable (nonrecourse debt), the abandonment is treated as a sale or exchange. Cheap tax software   The amount you realize on the abandonment of property that secured nonrecourse debt is the amount of the nonrecourse debt. Cheap tax software If the amount you realize is more than your adjusted basis, then you have a gain. Cheap tax software If your adjusted basis is more than the amount you realize, then you have a loss. Cheap tax software For more information on how to figure gain and loss, see Gain or Loss from Sales or Exchanges in Publication 544. Cheap tax software   Loss from abandonment of business or investment property is deductible as a loss. Cheap tax software The character of the loss depends on the character of the property. Cheap tax software The amount of deductible capital loss may be limited. Cheap tax software For more information, see Treatment of Capital Losses in Publication 544. Cheap tax software You cannot deduct any loss from abandonment of your home or other property held for personal use. Cheap tax software Example 1—abandonment of personal-use property securing nonrecourse debt. Cheap tax software In 2009, Timothy purchased a home for $200,000. Cheap tax software He borrowed the entire purchase price, for which he was not personally liable, and gave the bank a mortgage on the home. Cheap tax software In 2013, Timothy lost his job and was unable to continue making his mortgage loan payments. Cheap tax software Because his mortgage loan balance was $185,000 and the FMV of his home was only $150,000, Timothy decided to abandon his home by permanently moving out on August 1, 2013. Cheap tax software Because Timothy was not personally liable for the debt, the abandonment is treated as a sale or exchange of the home in tax year 2013. Cheap tax software Timothy's amount realized is $185,000 and his adjusted basis in the home is $200,000. Cheap tax software Timothy has a $15,000 nondeductible loss in tax year 2013. Cheap tax software (Had Timothy’s adjusted basis been less than the amount realized, Timothy would have had a gain that he would have to include in gross income. Cheap tax software ) The bank sells the house at a foreclosure sale in 2014. Cheap tax software Timothy has neither gain nor loss from the foreclosure sale. Cheap tax software Because he was not personally liable for the debt, he also has no cancellation of debt income. Cheap tax software Example 2—abandonment of business or investment property securing nonrecourse debt. Cheap tax software In 2009, Robert purchased business property for $200,000. Cheap tax software He borrowed the entire purchase price, for which he was not personally liable, and gave the lender a security interest in the property. Cheap tax software In 2013, Robert was unable to continue making his loan payments. Cheap tax software Because his loan balance was $185,000 and the FMV of the property was only $150,000, Robert decided to abandon the property on August 1, 2013. Cheap tax software Because Robert was not personally liable for the debt, the abandonment is treated as a sale or exchange of the property in tax year 2013. Cheap tax software Robert's amount realized is $185,000 and his adjusted basis in the property is $180,000 (as a result of $20,000 of depreciation deductions on the property). Cheap tax software Robert has a $5,000 gain in tax year 2013. Cheap tax software (Had Robert’s adjusted basis been greater than the amount realized, he would have had a deductible loss. Cheap tax software ) The lender sells the property at a foreclosure sale in 2014. Cheap tax software Robert has neither gain nor loss from the foreclosure sale. Cheap tax software Because he was not personally liable for the debt, he also has no cancellation of debt income. Cheap tax software Canceled debt. Cheap tax software    If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you will realize ordinary income equal to the canceled debt. Cheap tax software This income is separate from any amount realized from abandonment of the property. Cheap tax software You must report this income on your return unless one of the exceptions or exclusions described in chapter 1 applies. Cheap tax software See chapter 1 for more details. Cheap tax software Forms 1099-A and 1099-C. Cheap tax software    In most cases, if you abandon real property (such as a home), intangible property, or tangible personal property held (wholly or partly) for use in a trade or business or for investment, that secures a loan and the lender knows the property has been abandoned, the lender should send you Form 1099-A showing information you need to figure your gain or loss from the abandonment. Cheap tax software Also, if your debt is canceled and the lender must file Form 1099-C, the lender can include the information about the abandonment on that form instead of on Form 1099-A. Cheap tax software The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. Cheap tax software For abandonments of property and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. Cheap tax software Prev  Up  Next   Home   More Online Publications