File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

E-file 2012

1040ez InstructionsTax Form 1040 EzFree State Tax DownloadsFree Turbotax 2012Irs Gov EfileFillable Tax Forms 2011I Still Need To File My 2012 TaxesMyfreetaxes Com RochestercashFile 1040x ElectronicallyTaxes 2011 FormsTax Forms For 2012Irs Free File 20112013 Irs Form 1040 Ez1040ez Form InstructionsTax Return 20121040ez Instructions 2010Filing An Amended Tax Return For 20131040ez 2009 Tax FormFree Tax SitesFree Turbotax For MilitaryHow To File School Taxes2012 Irs Income Tax FormsTax Exemptions For Disabled VeteransFile A 2011 Tax ReturnHow To Amend Federal TaxesCan I File 1040x ElectronicallyHow Can I File Just My State Taxes For FreeFree Tax Preparation For UnemployedHow To Fill Out A 1040x AmendmentFiling State Taxes Online2012 Tax Forms 10401040ez 2012 FormWhere Can I File My Federal And State Taxes Online For Free2009 Tax ReturnFree Income Tax PreparationAmendment To Tax ReturnTax Act Online 2011How To Amend A Tax ReturnTurbotax Freedom EditionNj 1040nr Form

E-file 2012

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

Facts & Figures

Highlights of IRS statistics available on this site include:

IRS Data Books: These contain files of data on collecting revenue, enforcing the law, assisting taxpayers and managing the system. Each Data Book table is in its own file. There is also a PDF file for each year's complete Data Book.

Weekly Filing Statistics Reports: These weekly reports contain data that track the filings of individual income tax returns on a weekly basis throughout the tax return filing season with a final report available towards the end of the year.

Tax Stats Home Page: This has links to all Statistics of Income (SOI) tables and articles, in various groupings — by IRS activity (Collection, Exam, etc.), by topic or by SOI publication series.

Projections: These forecasts of the number of returns to be filed for tax forms within the individual, tax-exempt and business areas may be found in various Projections publications or SOI Bulletins.

Individual Tax Stats: These are links to individual return data assembled in various ways. In some cases — such as county data, migration data or ZIP code data — the link shows an example of the files that can be ordered and/or the procedures for ordering data from SOI. Other links — such as state income data — contain links to available SOI data.

Statistics of Income Bulletins: These quarterly Bulletins contain articles and data releases on a wide variety of topics.

Page Last Reviewed or Updated: 04-Feb-2014

The E-file 2012

E-file 2012 Part Four -   Ajustes a los Ingresos Los tres capítulos de esta sección abordan algunos de los ajustes a los ingresos que puede deducir al calcular el ingreso bruto ajustado. E-file 2012 Estos capítulos abarcan: Aportaciones a arreglos tradicionales de ahorros para la jubilación (IRA, por sus siglas en inglés), el capítulo 17 , Pensión para el cónyuge divorciado que paga, el capítulo 18 e Intereses sobre préstamos de estudios que usted paga, el capítulo 19 . E-file 2012 Otros ajustes a los ingresos se explican en otras partes de esta publicación o en otras publicaciones. E-file 2012 Vea la Tabla V que aparece a continuación. E-file 2012 Tabla V. E-file 2012 Otros Ajustes a los Ingresos  Utilice esta tabla para buscar información acerca de otros ajustes a los ingresos no abarcados en esta sección de la publicación. E-file 2012 SI busca más información sobre la deducción por. E-file 2012 . E-file 2012 . E-file 2012 ENTONCES vea. E-file 2012 . E-file 2012 . E-file 2012 Determinados gastos de negocio de personal en reserva de las Fuerzas Armadas, artistas del espectáculo y funcionarios que prestan servicios por honorarios el capítulo 26 . E-file 2012 Aportaciones a cuentas de ahorros para gastos médicos la Publicación 969, Health Savings Accounts and Other Tax-Favored Health Plans (Cuentas de ahorros para gastos médicos y otros planes para la salud con beneficios tributarios), en inglés. E-file 2012 Gastos de mudanza la Publicación 521, Moving Expenses (Gastos de mudanza), en inglés. E-file 2012 Una porción del impuesto sobre el trabajo por cuenta propia el capítulo 22 . E-file 2012 Seguro médico para personas que trabajan por cuenta propia el capítulo 21 . E-file 2012 Pagos a planes SEP, SIMPLE y planes calificados para personas que trabajan por cuenta propia la Publicación 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) (Planes de jubilación para pequeños negocios (SEP, SIMPLE y planes calificados)), en inglés. E-file 2012 Multa por retiro prematuro de ahorros el capítulo 7 . E-file 2012 Aportaciones a un plan de ahorros médicos Archer (MSA, por sus siglas en inglés) la Publicación 969, en inglés. E-file 2012 Amortización o gasto de reforestación los capítulos 7 y 8 de la Publicación 535, Business Expenses (Gastos de negocios), en inglés. E-file 2012 Aportaciones a planes de pensiones conforme a la sección 501(c)(18)(D) del Código Federal de Impuestos Internos la Publicación 525, Taxable and Nontaxable Income (Ingreso tributable y no tributable), en inglés. E-file 2012 Gastos procedentes del alquiler de bienes muebles el capítulo 12 . E-file 2012 Determinados reintegros obligatorios de prestaciones suplementarias por desempleo (sub-pago) el capítulo 12 . E-file 2012 Gastos por concepto de vivienda en el extranjero el capítulo 4 de la Publicación 54, Tax Guide for U. E-file 2012 S. E-file 2012 Citizens and Resident Aliens Abroad (Guía tributaria para ciudadanos estadounidenses y extranjeros residentes que viven en el extranjero), en inglés. E-file 2012 Pago de servicio de juraduría que se le haya entregado a su empleador el capítulo 12 . E-file 2012 Aportaciones hechas por determinados capellanes a planes conforme a la sección 403(b) del Código Federal de Impuestos Internos la Publicación 517, Social Security and Other Information for Members of the Clergy and Religious Workers (Seguro Social y otra información para miembros del clero y empleados religiosos), en inglés. E-file 2012 Honorarios de abogado y determinados costos por acciones legales con respecto a reclamaciones por discriminación ilegal y premios a denunciantes dentro de su propia empresa la Publicación 525, en inglés. E-file 2012 Deducción por actividades de producción nacional el Formulario 8903, Domestic Production Activities Deduction (Deducción por actividades de producción nacional), en inglés. E-file 2012 Table of Contents 17. E-file 2012   Arreglos de Ahorros para la Jubilación (Arreglos IRA)Qué Hay de Nuevo en el Año 2013 Recordatorios Introduction Useful Items - You may want to see: Arreglos IRA Tradicionales¿Quién Puede Abrir un Arreglo IRA Tradicional? ¿Cuándo y Cómo se Puede Abrir un Arreglo IRA Tradicional? ¿Cuánto se Puede Aportar? ¿Cuándo se Pueden Hacer Aportaciones? ¿Cuánto se Puede Deducir? Aportaciones no Deducibles Arreglos IRA Heredados ¿Puede Traspasar Activos de un Plan de Jubilación? ¿Cuándo Puede Retirar o Utilizar Activos de un Arreglo IRA? ¿Cuándo Tiene que Retirar Activos de un Arreglo IRA? (Distribuciones Mínimas Obligatorias) ¿Están Sujetas a Impuestos las Distribuciones? ¿Qué Acciones Dan Lugar a Multas o Impuestos Adicionales? Arreglos Roth IRA ¿Qué Es un Arreglo Roth IRA? ¿Cuándo se Puede Abrir un Arreglo Roth IRA? ¿Puede Hacer Aportaciones a un Arreglo Roth IRA? ¿Se Pueden Trasladar Activos a un Arreglo Roth IRA? ¿Están Sujetas a Impuestos las Distribuciones? 18. E-file 2012   Pensión para el Cónyuge DivorciadoIntroductionCónyuge o ex cónyuge. E-file 2012 Documento (instrumento) de divorcio o separación judicial. E-file 2012 Useful Items - You may want to see: Reglas GeneralesPagos hipotecarios. E-file 2012 Impuestos y seguro. E-file 2012 Otros pagos a terceros. E-file 2012 Documentos Firmados Después de 1984Pagos a terceros. E-file 2012 Excepción. E-file 2012 Pagos sustitutivos. E-file 2012 Específicamente designado como pensión para hijos menores. E-file 2012 Contingencia relacionada con su hijo. E-file 2012 Pago claramente asociado con una contingencia. E-file 2012 Cómo Deducir la Pensión para el Cónyuge Divorciado que Pagó Cómo Declarar la Pensión para el Cónyuge Divorciado Recibida Regla de Recuperación 19. E-file 2012   Ajustes Tributarios por EstudiosIntroduction Useful Items - You may want to see: Deducción por Intereses sobre Préstamos de EstudiosDefinición de los Intereses sobre Préstamos de Estudios ¿Puede Reclamar la Deducción? ¿Cuánto Puede Deducir? ¿Cómo Calcular la Deducción? Deducción por Matrícula y Cuotas Escolares¿Puede Reclamar la Deducción? Gastos que Califican Estudiante que Reúne los Requisitos Quién Puede Reclamar los Gastos de un Dependiente Cuánto se Puede Deducir Gastos del Educador Prev  Up  Next   Home   More Online Publications