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Federal Tax Extension Form

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Federal Tax Extension Form

Federal tax extension form 9. Federal tax extension form   Worksheets Table of Contents When Should I Figure MAC?Checking the Previous Year's Contributions Available Worksheets Chapter 2 introduced you to the term maximum amount contributable (MAC). Federal tax extension form Generally, your MAC is the lesser of your: Limit on annual additions (chapter 3), or Limit on elective deferrals (chapter 4). Federal tax extension form The worksheets in this chapter can help you figure the cost of incidental life insurance, your includible compensation, your limit on annual additions, your limit on elective deferrals, your limit on catch-up contributions, and your MAC. Federal tax extension form After completing the worksheets, you should maintain them with your 403(b) records for that year. Federal tax extension form Do not attach them to your tax return. Federal tax extension form At the end of the year or the beginning of the next year, you should compare your estimated compensation figures with your actual figures. Federal tax extension form If your compensation is the same as, or more than, the projected amounts and the calculations are correct, then you should simply file these worksheets with your other tax records for the year. Federal tax extension form If your compensation was lower than your estimated figures, you will need to check the amount contributed during the year to determine if contributions are more than your MAC. Federal tax extension form When Should I Figure MAC? At the beginning of each year, you should figure your MAC using a conservative estimate of your compensation. Federal tax extension form Should your income change during the year, you should refigure your MAC based on a revised conservative estimate. Federal tax extension form By doing this, you will be able to determine if contributions to your 403(b) account should be increased or decreased for the year. Federal tax extension form Checking the Previous Year's Contributions At the beginning of the following year, you should refigure your MAC based on your actual earned income. Federal tax extension form At the end of the current year or the beginning of the next year, you should check your contributions to be sure you did not exceed your MAC. Federal tax extension form This means refiguring your limit based on your actual compensation figures for the year. Federal tax extension form This will allow you to determine if the amount contributed is more than the allowable amounts, and possibly avoid additional taxes. Federal tax extension form Available Worksheets The following worksheets have been provided to help you figure your MAC. Federal tax extension form Worksheet A. Federal tax extension form Cost of Incidental Life Insurance. Federal tax extension form Worksheet B. Federal tax extension form Includible Compensation for Your Most Recent Year of Service Worksheet C. Federal tax extension form Limit on Catch-Up Contributions. Federal tax extension form ??? Worksheet 1. Federal tax extension form Maximum Amount Contributable (MAC). Federal tax extension form Worksheet A. Federal tax extension form Cost of Incidental Life Insurance Note. Federal tax extension form Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. Federal tax extension form This amount will be used to figure includible compensation for your most recent year of service. Federal tax extension form 1. Federal tax extension form Enter the value of the contract (amount payable upon your death) 1. Federal tax extension form   2. Federal tax extension form Enter the cash value in the contract at the end of the year 2. Federal tax extension form   3. Federal tax extension form Subtract line 2 from line 1. Federal tax extension form This is the value of your current life insurance protection 3. Federal tax extension form   4. Federal tax extension form Enter your age on your birthday nearest the beginning of the policy year 4. Federal tax extension form   5. Federal tax extension form Enter the 1-year term premium for $1,000 of life insurance based on your age. Federal tax extension form (From Figure 3-1) 5. Federal tax extension form   6. Federal tax extension form Divide line 3 by $1,000 6. Federal tax extension form   7. Federal tax extension form Multiply line 6 by line 5. Federal tax extension form This is the cost of your incidental life insurance 7. Federal tax extension form   Worksheet B. Federal tax extension form Includible Compensation for Your Most Recent Year of Service1 Note. Federal tax extension form Use this worksheet to figure includible compensation for your most recent year of service. Federal tax extension form 1. Federal tax extension form Enter your includible wages from the employer maintaining your 403(b) account for your most recent year of service 1. Federal tax extension form   2. Federal tax extension form Enter elective deferrals excluded from your gross income for your most recent year of service2 2. Federal tax extension form   3. Federal tax extension form Enter amounts contributed or deferred by your employer under a cafeteria plan for your most recent year of service 3. Federal tax extension form   4. Federal tax extension form Enter amounts contributed or deferred by your employer according to your election to your 457 account (a nonqualified plan of a state or local government or of a tax-exempt organization) for your most recent year of service 4. Federal tax extension form   5. Federal tax extension form Enter pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan for your most recent year of service 5. Federal tax extension form   6. Federal tax extension form Enter your foreign earned income exclusion for your most recent year of service 6. Federal tax extension form   7. Federal tax extension form Add lines 1, 2, 3, 4, 5, and 6 7. Federal tax extension form   8. Federal tax extension form Enter the cost of incidental life insurance that is part of your annuity contract for your most recent year of service 8. Federal tax extension form   9. Federal tax extension form Enter compensation that was both: Earned during your most recent year of service, and Earned while your employer was not qualified to maintain a 403(b) plan 9. Federal tax extension form   10. Federal tax extension form Add lines 8 and 9 10. Federal tax extension form   11. Federal tax extension form Subtract line 10 from line 7. Federal tax extension form This is your includible compensation for your most recent year of service 11. Federal tax extension form   1Use estimated amounts if figuring includible compensation before the end of the year. Federal tax extension form  2Elective deferrals made to a designated Roth account are not excluded from your gross income and should not be included on this line. Federal tax extension form Worksheet C. Federal tax extension form Limit on Catch-Up Contributions Note. Federal tax extension form If you will be age 50 or older by the end of the year, use this worksheet to figure your limit on catch-up contributions. Federal tax extension form 1. Federal tax extension form Maximum catch-up contributions 1. Federal tax extension form $5,500 2. Federal tax extension form Enter your includible compensation for your most recent year of service 2. Federal tax extension form   3. Federal tax extension form Enter your elective deferrals 3. Federal tax extension form   4. Federal tax extension form Subtract line 3 from line 2 4. Federal tax extension form   5. Federal tax extension form Enter the lesser of line 1 or line 4. Federal tax extension form This is your limit on catch-up contributions 5. Federal tax extension form   Worksheet 1. Federal tax extension form Maximum Amount Contributable (MAC) Note. Federal tax extension form Use this worksheet to figure your MAC. Federal tax extension form Part I. Federal tax extension form Limit on Annual Additions     1. Federal tax extension form Enter your includible compensation for your most recent year of service 1. Federal tax extension form   2. Federal tax extension form Maximum1: For 2013, enter $51,000 For 2014, enter $52,000 2. Federal tax extension form   3. Federal tax extension form Enter the lesser of line 1 or line 2. Federal tax extension form This is your limit on annual additions 3. Federal tax extension form     Caution: If you had only nonelective contributions, skip Part II and enter the amount from line 3 on line 18. Federal tax extension form     Part II. Federal tax extension form Limit on Elective Deferrals     4. Federal tax extension form Maximum contribution: For 2013, enter $17,500 For 2014, enter $17,500 4. Federal tax extension form     Note. Federal tax extension form If you have at least 15 years of service with a qualifying organization, complete lines 5 through 17. Federal tax extension form If not, enter zero (-0-) on line 16 and go to line 17. Federal tax extension form     5. Federal tax extension form Amount per year of service 5. Federal tax extension form $ 5,000 6. Federal tax extension form Enter your years of service 6. Federal tax extension form   7. Federal tax extension form Multiply line 5 by line 6 7. Federal tax extension form   8. Federal tax extension form Enter the total of all elective deferrals made for you by the qualifying organization for prior years 8. Federal tax extension form   9. Federal tax extension form Subtract line 8 from line 7. Federal tax extension form If zero or less, enter zero (-0-) 9. Federal tax extension form   10. Federal tax extension form Maximum increase in limit for long service 10. Federal tax extension form $15,000 11. Federal tax extension form Enter the total of additional pre-tax elective deferrals made in prior years under the 15-year rule 11. Federal tax extension form   12. Federal tax extension form Enter the aggregate amount of all designated Roth contributions permitted for prior years under the 15-year rule 12. Federal tax extension form   13. Federal tax extension form Add line 11 and line 12 13. Federal tax extension form   14. Federal tax extension form Subtract line 13 from line 10 14. Federal tax extension form   15. Federal tax extension form Maximum additional contributions 15. Federal tax extension form $ 3,000 16. Federal tax extension form Enter the least of lines 9, 14, or 15. Federal tax extension form This is your increase in the limit for long service 16. Federal tax extension form   17. Federal tax extension form Add lines 4 and 16. Federal tax extension form This is your limit on elective deferrals 17. Federal tax extension form     Part III. Federal tax extension form Maximum Amount Contributable     18. Federal tax extension form If you had only nonelective contributions, enter the amount from line 3. Federal tax extension form This is your MAC. Federal tax extension form    If you had only elective deferrals, enter the lesser of lines 3 or 17. Federal tax extension form This is your MAC. Federal tax extension form    If you had both elective deferrals and nonelective contributions, enter the amount from line 3. Federal tax extension form This is your MAC. Federal tax extension form (Use the amount on line 17 to determine if you have excess elective deferrals as explained in chapter 7. Federal tax extension form ) 18. Federal tax extension form   1If you participate in a 403(b) plan and a qualified plan, you must combine contributions made to your 403(b) account with contributions to a qualified plan and simplified employee pension plans of all corporations, partnerships, and sole proprietorships in which you have more than 50% control. Federal tax extension form You must also combine the contributions made to all 403(b) accounts on your behalf by your employer. Federal tax extension form Prev  Up  Next   Home   More Online Publications
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Tax Scams - How to Report Them

Participating in an illegal scheme to avoid paying taxes can result in imprisonment and fines, as well as the repayment of taxes owed with penalties and interest. If you become aware of any abusive tax scams, please report them to the appropriate contact below.

Reporting Tax Scams

Promoters of Abusive Tax Schemes or Preparers of Fraudulent Returns

Common abusive tax scams include anti-tax law, home-based business, trust, and off-shore schemes.

To report promoters of these scheme types or any other types you are aware of that are not listed here, please send a completed referral form, along with any promotional materials to the Lead Development Center:

Mail:
Internal Revenue Service Lead Development Center
Stop MS5040
24000 Avila Road
Laguna Niguel, California 92677-3405

Fax: (877) 477-9135

Abusive Transaction Involving a Retirement Plan

The Abusive Transaction Hotline provides people a way to share information (anonymously, if preferred) about abusive tax shelters and emerging issues that may be abusive in retirement plans.

Find out which listed transactions have been determined by the IRS to be tax avoidance transactions and how to report them.

Abusive Transaction Involving an Exempt Organization

Exempt organizations are, at times, used by for-profit entities as accommodation parties in abusive tax avoidance transactions.

Visit the Exempt Organization Abusive Tax Avoidance Transactions page for information on how to report these schemes using Form 13909, Tax-Exempt Organization Complaint (Referral) Form.

Abusive Tax Shelters and Transactions

The IRS maintains an abusive tax shelter hotline that people can use to provide information (anonymously, if preferred) about abusive tax shelters. Office of Tax Shelter Analysis is primarily interested in potentially abusive transactions that may be employed by many taxpayers and could pose a significant compliance risk to the IRS.

How Do You Report Suspected Tax Fraud Activity?

Quick reference chart outlines how to report suspected tax fraud activity in different situations.

Information for Tax Professionals on the Common Types of Schemes

Page Last Reviewed or Updated: 15-Nov-2013

The Federal Tax Extension Form

Federal tax extension form Publication 530 - Main Content Table of Contents What You Can and Cannot DeductHardest Hit Fund and Emergency Homeowners' Loan Programs Real Estate Taxes Sales Taxes Home Mortgage Interest Mortgage Insurance Premiums Mortgage Interest CreditFiguring the Credit BasisFiguring Your Basis Adjusted Basis Keeping Records How To Get Tax HelpLow Income Taxpayer Clinics What You Can and Cannot Deduct To deduct expenses of owning a home, you must file Form 1040, U. Federal tax extension form S. Federal tax extension form Individual Income Tax Return, and itemize your deductions on Schedule A (Form 1040). Federal tax extension form If you itemize, you cannot take the standard deduction. Federal tax extension form This section explains what expenses you can deduct as a homeowner. Federal tax extension form It also points out expenses that you cannot deduct. Federal tax extension form There are four primary discussions: real estate taxes, sales taxes, home mortgage interest, and mortgage insurance premiums. Federal tax extension form Generally, your real estate taxes, home mortgage interest, and mortgage insurance premiums are included in your house payment. Federal tax extension form Your house payment. Federal tax extension form   If you took out a mortgage (loan) to finance the purchase of your home, you probably have to make monthly house payments. Federal tax extension form Your house payment may include several costs of owning a home. Federal tax extension form The only costs you can deduct are real estate taxes actually paid to the taxing authority, interest that qualifies as home mortgage interest, and mortgage insurance premiums. Federal tax extension form These are discussed in more detail later. Federal tax extension form   Some nondeductible expenses that may be included in your house payment include: Fire or homeowner's insurance premiums, and The amount applied to reduce the principal of the mortgage. Federal tax extension form Minister's or military housing allowance. Federal tax extension form   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you still can deduct your real estate taxes and your home mortgage interest. Federal tax extension form You do not have to reduce your deductions by your nontaxable allowance. Federal tax extension form For more information see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers, and Publication 3, Armed Forces' Tax Guide. Federal tax extension form Nondeductible payments. Federal tax extension form   You cannot deduct any of the following items. Federal tax extension form Insurance (other than mortgage insurance premiums), including fire and comprehensive coverage, and title insurance. Federal tax extension form Wages you pay for domestic help. Federal tax extension form Depreciation. Federal tax extension form The cost of utilities, such as gas, electricity, or water. Federal tax extension form Most settlement costs. Federal tax extension form See Settlement or closing costs under Cost as Basis, later, for more information. Federal tax extension form Forfeited deposits, down payments, or earnest money. Federal tax extension form Hardest Hit Fund and Emergency Homeowners' Loan Programs 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. Federal tax extension form 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. Federal tax extension form 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. Federal tax extension form 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), box 4 (mortgage insurance premiums) and box 5 (real property taxes). Federal tax extension form 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. Federal tax extension form Real Estate Taxes Most state and local governments charge an annual tax on the value of real property. Federal tax extension form This is called a real estate tax. Federal tax extension form You can deduct the tax if it is assessed uniformly at a like rate on all real property throughout the community. Federal tax extension form The proceeds must be for general community or governmental purposes and not be a payment for a special privilege granted or service rendered to you. Federal tax extension form Deductible Real Estate Taxes You can deduct real estate taxes imposed on you. Federal tax extension form You must have paid them either at settlement or closing, or to a taxing authority (either directly or through an escrow account) during the year. Federal tax extension form If you own a cooperative apartment, see Special Rules for Cooperatives , later. Federal tax extension form Where to deduct real estate taxes. Federal tax extension form   Enter the amount of your deductible real estate taxes on Schedule A (Form 1040), line 6. Federal tax extension form Real estate taxes paid at settlement or closing. Federal tax extension form   Real estate taxes are generally divided so that you and the seller each pay taxes for the part of the property tax year you owned the home. Federal tax extension form Your share of these taxes is fully deductible if you itemize your deductions. Federal tax extension form Division of real estate taxes. Federal tax extension form   For federal income tax purposes, the seller is treated as paying the property taxes up to, but not including, the date of sale. Federal tax extension form You (the buyer) are treated as paying the taxes beginning with the date of sale. Federal tax extension form This applies regardless of the lien dates under local law. Federal tax extension form Generally, this information is included on the settlement statement you get at closing. Federal tax extension form   You and the seller each are considered to have paid your own share of the taxes, even if one or the other paid the entire amount. Federal tax extension form You each can deduct your own share, if you itemize deductions, for the year the property is sold. Federal tax extension form Example. Federal tax extension form You bought your home on September 1. Federal tax extension form The property tax year (the period to which the tax relates) in your area is the calendar year. Federal tax extension form The tax for the year was $730 and was due and paid by the seller on August 15. Federal tax extension form You owned your new home during the property tax year for 122 days (September 1 to December 31, including your date of purchase). Federal tax extension form You figure your deduction for real estate taxes on your home as follows. Federal tax extension form 1. Federal tax extension form Enter the total real estate taxes for the real property tax year $730 2. Federal tax extension form Enter the number of days in the property tax year that you owned the property 122 3. Federal tax extension form Divide line 2 by 365 . Federal tax extension form 3342 4. Federal tax extension form Multiply line 1 by line 3. Federal tax extension form This is your deduction. Federal tax extension form Enter it on Schedule A (Form 1040), line 6 $244   You can deduct $244 on your return for the year if you itemize your deductions. Federal tax extension form You are considered to have paid this amount and can deduct it on your return even if, under the contract, you did not have to reimburse the seller. Federal tax extension form Delinquent taxes. Federal tax extension form   Delinquent taxes are unpaid taxes that were imposed on the seller for an earlier tax year. Federal tax extension form If you agree to pay delinquent taxes when you buy your home, you cannot deduct them. Federal tax extension form You treat them as part of the cost of your home. Federal tax extension form See Real estate taxes , later, under Basis. Federal tax extension form Escrow accounts. Federal tax extension form   Many monthly house payments include an amount placed in escrow (put in the care of a third party) for real estate taxes. Federal tax extension form You may not be able to deduct the total you pay into the escrow account. Federal tax extension form You can deduct only the real estate taxes that the lender actually paid from escrow to the taxing authority. Federal tax extension form Your real estate tax bill will show this amount. Federal tax extension form Refund or rebate of real estate taxes. Federal tax extension form   If you receive a refund or rebate of real estate taxes this year for amounts you paid this year, you must reduce your real estate tax deduction by the amount refunded to you. Federal tax extension form If the refund or rebate was for real estate taxes paid for a prior year, you may have to include some or all of the refund in your income. Federal tax extension form For more information, see Recoveries in Publication 525, Taxable and Nontaxable Income. Federal tax extension form Items You Cannot Deduct as Real Estate Taxes The following items are not deductible as real estate taxes. Federal tax extension form Charges for services. Federal tax extension form   An itemized charge for services to specific property or people is not a tax, even if the charge is paid to the taxing authority. Federal tax extension form You cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged for trash collection), or A flat fee charged for a single service provided by your local government (such as a $30 charge for mowing your lawn because it had grown higher than permitted under a local ordinance). Federal tax extension form    You must look at your real estate tax bill to decide if any nondeductible itemized charges, such as those listed above, are included in the bill. Federal tax extension form If your taxing authority (or lender) does not furnish you a copy of your real estate tax bill, ask for it. Federal tax extension form Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. Federal tax extension form Assessments for local benefits. Federal tax extension form   You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. Federal tax extension form Local benefits include the construction of streets, sidewalks, or water and sewer systems. Federal tax extension form You must add these amounts to the basis of your property. Federal tax extension form   You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. Federal tax extension form An example is a charge to repair an existing sidewalk and any interest included in that charge. Federal tax extension form   If only a part of the assessment is for maintenance, repair, or interest charges, you must be able to show the amount of that part to claim the deduction. Federal tax extension form If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. Federal tax extension form   An assessment for a local benefit may be listed as an item in your real estate tax bill. Federal tax extension form If so, use the rules in this section to find how much of it, if any, you can deduct. Federal tax extension form Transfer taxes (or stamp taxes). Federal tax extension form   You cannot deduct transfer taxes and similar taxes and charges on the sale of a personal home. Federal tax extension form If you are the buyer and you pay them, include them in the cost basis of the property. Federal tax extension form If you are the seller and you pay them, they are expenses of the sale and reduce the amount realized on the sale. Federal tax extension form Homeowners association assessments. Federal tax extension form   You cannot deduct these assessments because the homeowners association, rather than a state or local government, imposes them. Federal tax extension form Special Rules for Cooperatives If you own a cooperative apartment, some special rules apply to you, though you generally receive the same tax treatment as other homeowners. Federal tax extension form As an owner of a cooperative apartment, you own shares of stock in a corporation that owns or leases housing facilities. Federal tax extension form You can deduct your share of the corporation's deductible real estate taxes if the cooperative housing corporation meets the following conditions: The corporation has only one class of stock outstanding, Each stockholder, solely because of ownership of the stock, can live in a house, apartment, or house trailer owned or leased by the corporation, No stockholder can receive any distribution out of capital, except on a partial or complete liquidation of the corporation, and At least one of the following: At least 80% of the corporation's gross income for the tax year was paid by the tenant-stockholders. Federal tax extension form For this purpose, gross income means all income received during the entire tax year, including any received before the corporation changed to cooperative ownership. Federal tax extension form At least 80% of the total square footage of the corporation's property must be available for use by the tenant-stockholders during the entire tax year. Federal tax extension form At least 90% of the expenditures paid or incurred by the corporation were used for the acquisition, construction, management, maintenance, or care of the property for the benefit of the tenant-shareholders during the entire tax year. Federal tax extension form Tenant-stockholders. Federal tax extension form   A tenant-stockholder can be any entity (such as a corporation, trust, estate, partnership, or association) as well as an individual. Federal tax extension form The tenant-stockholder does not have to live in any of the cooperative's dwelling units. Federal tax extension form The units that the tenant-stockholder has the right to occupy can be rented to others. Federal tax extension form Deductible taxes. Federal tax extension form   You figure your share of real estate taxes in the following way. Federal tax extension form Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. Federal tax extension form Multiply the corporation's deductible real estate taxes by the number you figured in (1). Federal tax extension form This is your share of the real estate taxes. Federal tax extension form   Generally, the corporation will tell you your share of its real estate tax. Federal tax extension form This is the amount you can deduct if it reasonably reflects the cost of real estate taxes for your dwelling unit. Federal tax extension form Refund of real estate taxes. Federal tax extension form   If the corporation receives a refund of real estate taxes it paid in an earlier year, it must reduce the amount of real estate taxes paid this year when it allocates the tax expense to you. Federal tax extension form Your deduction for real estate taxes the corporation paid this year is reduced by your share of the refund the corporation received. Federal tax extension form Sales Taxes Generally, you can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040). Federal tax extension form Deductible sales taxes may include sales taxes paid on your home (including mobile and prefabricated), or home building materials if the tax rate was the same as the general sales tax rate. Federal tax extension form For information on figuring your deduction, see the Instructions for Schedule A (Form 1040). Federal tax extension form If you elect to deduct the sales taxes paid on your home, or home building materials, you cannot include them as part of your cost basis in the home. Federal tax extension form Home Mortgage Interest This section of the publication gives you basic information about home mortgage interest, including information on interest paid at settlement, points, and Form 1098, Mortgage Interest Statement. Federal tax extension form Most home buyers take out a mortgage (loan) to buy their home. Federal tax extension form They then make monthly payments to either the mortgage holder or someone collecting the payments for the mortgage holder. Federal tax extension form Usually, you can deduct the entire part of your payment that is for mortgage interest, if you itemize your deductions on Schedule A (Form 1040). Federal tax extension form However, your deduction may be limited if: Your total mortgage balance is more than $1 million ($500,000 if married filing separately), or You took out a mortgage for reasons other than to buy, build, or improve your home. Federal tax extension form If either of these situations applies to you, see Publication 936 for more information. Federal tax extension form Also see Publication 936 if you later refinance your mortgage or buy a second home. Federal tax extension form Refund of home mortgage interest. Federal tax extension form   If you receive a refund of home mortgage interest that you deducted in an earlier year and that reduced your tax, you generally must include the refund in income in the year you receive it. Federal tax extension form For more information, see Recoveries in Publication 525. Federal tax extension form The amount of the refund will usually be shown on the mortgage interest statement you receive from your mortgage lender. Federal tax extension form See Mortgage Interest Statement , later. Federal tax extension form Deductible Mortgage Interest To be deductible, the interest you pay must be on a loan secured by your main home or a second home. Federal tax extension form The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. Federal tax extension form Prepaid interest. Federal tax extension form   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. Federal tax extension form Generally, you can deduct in each year only the interest that qualifies as home mortgage interest for that year. Federal tax extension form An exception (discussed later) applies to points. Federal tax extension form Late payment charge on mortgage payment. Federal tax extension form   You can deduct as home mortgage interest a late payment charge if it was not for a specific service in connection with your mortgage loan. Federal tax extension form Mortgage prepayment penalty. Federal tax extension form   If you pay off your home mortgage early, you may have to pay a penalty. Federal tax extension form 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. Federal tax extension form Ground rent. Federal tax extension form   In some states (such as Maryland), you may buy your home subject to a ground rent. Federal tax extension form A ground rent is an obligation you assume to pay a fixed amount per year on the property. Federal tax extension form Under this arrangement, you are leasing (rather than buying) the land on which your home is located. Federal tax extension form Redeemable ground rents. Federal tax extension form   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. Federal tax extension form The ground rent is a redeemable ground rent only if all of the following are true. Federal tax extension form Your lease, including renewal periods, is for more than 15 years. Federal tax extension form You can freely assign the lease. Federal tax extension form 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 specified amount. Federal tax extension form The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. Federal tax extension form   Payments made to end the lease and buy the lessor's entire interest in the land are not redeemable ground rents. Federal tax extension form You cannot deduct them. Federal tax extension form Nonredeemable ground rents. Federal tax extension form   Payments on a nonredeemable ground rent are not mortgage interest. Federal tax extension form You can deduct them as rent only if they are a business expense or if they are for rental property. Federal tax extension form Cooperative apartment. Federal tax extension form   You can usually treat the interest on a loan you took out to buy stock in a cooperative housing corporation as home mortgage interest if you own a cooperative apartment, and the cooperative housing corporation meets the conditions described earlier under Special Rules for Cooperatives . Federal tax extension form In addition, you can treat as home mortgage interest your share of the corporation's deductible mortgage interest. Federal tax extension form Figure your share of mortgage interest the same way that is shown for figuring your share of real estate taxes in the Example under Division of real estate taxes, earlier. Federal tax extension form For more information on cooperatives, see Special Rule for Tenant-Stockholders in Cooperative Housing Corporations in Publication 936. Federal tax extension form Refund of cooperative's mortgage interest. Federal tax extension form   You must reduce your mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. Federal tax extension form The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. Federal tax extension form   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. Federal tax extension form Mortgage Interest Paid at Settlement One item that normally appears on a settlement or closing statement is home mortgage interest. Federal tax extension form You can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). Federal tax extension form This amount should be included in the mortgage interest statement provided by your lender. Federal tax extension form See the discussion under Mortgage Interest Statement , later. Federal tax extension form Also, if you pay interest in advance, see Prepaid interest , earlier, and Points , next. Federal tax extension form Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Federal tax extension form Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points. Federal tax extension form A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Federal tax extension form See Points paid by the seller , later. Federal tax extension form General rule. Federal tax extension form   You cannot deduct the full amount of points in the year paid. Federal tax extension form They are prepaid interest, so you generally must deduct them over the life (term) of the mortgage. Federal tax extension form Exception. Federal tax extension form   You can deduct the full amount of points in the year paid if you meet all the following tests. Federal tax extension form Your loan is secured by your main home. Federal tax extension form (Generally, your main home is the one you live in most of the time. Federal tax extension form ) Paying points is an established business practice in the area where the loan was made. Federal tax extension form The points paid were not more than the points generally charged in that area. Federal tax extension form You use the cash method of accounting. Federal tax extension form This means you report income in the year you receive it and deduct expenses in the year you pay them. Federal tax extension form Most individuals use this method. Federal tax extension form 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. Federal tax extension form The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Federal tax extension form The funds you provided are not required to have been applied to the points. Federal tax extension form They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Federal tax extension form You cannot have borrowed these funds. Federal tax extension form You use your loan to buy or build your main home. Federal tax extension form The points were computed as a percentage of the principal amount of the mortgage. Federal tax extension form The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. Federal tax extension form The points may be shown as paid from either your funds or the seller's. Federal tax extension form Note. Federal tax extension form If you meet all of the tests listed above and you itemize your deductions in the year you get the loan, you can either deduct the full amount of points in the year paid or deduct them over the life of the loan, beginning in the year you get the loan. Federal tax extension form If you do not itemize your deductions in the year you get the loan, you can spread the points over the life of the loan and deduct the appropriate amount in each future year, if any, when you do itemize your deductions. Federal tax extension form Home improvement loan. Federal tax extension form   You can also fully deduct in the year paid points paid on a loan to improve your main home, if you meet the first six tests listed earlier. Federal tax extension form Refinanced loan. Federal tax extension form   If you use part of the refinanced mortgage proceeds to improve your main home and you meet the first six tests listed earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Federal tax extension form You can deduct the rest of the points over the life of the loan. Federal tax extension form Points not fully deductible in year paid. Federal tax extension form    If you do not qualify under the exception to deduct the full amount of points in the year paid (or choose not to do so), see Points in Publication 936 for the rules on when and how much you can deduct. Federal tax extension form Figure A. Federal tax extension form   You can use Figure A, next, as a quick guide to see whether your points are fully deductible in the year paid. Federal tax extension form    Please click here for the text description of the image. Federal tax extension form Figure A. Federal tax extension form Are my points fully deductible this year? Amounts charged for services. Federal tax extension form   Amounts charged by the lender for specific services connected to the loan are not interest. Federal tax extension form Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Federal tax extension form You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Federal tax extension form For information about the tax treatment of these amounts and other settlement fees and closing costs, see Basis , later. Federal tax extension form Points paid by the seller. Federal tax extension form   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Federal tax extension form Treatment by seller. Federal tax extension form   The seller cannot deduct these fees as interest. Federal tax extension form However, they are a selling expense that reduces the seller's amount realized. Federal tax extension form See Publication 523 for more information. Federal tax extension form Treatment by buyer. Federal tax extension form   The buyer treats seller-paid points as if he or she had paid them. Federal tax extension form If all the tests listed earlier under Exception are met, the buyer can deduct the points in the year paid. Federal tax extension form If any of those tests are not met, the buyer must deduct the points over the life of the loan. Federal tax extension form   The buyer must also reduce the basis of the home by the amount of the seller-paid points. Federal tax extension form For more information about the basis of your home, see Basis , later. Federal tax extension form Funds provided are less than points. Federal tax extension form   If you meet all the tests listed earlier under Exception 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. Federal tax extension form In addition, you can deduct any points paid by the seller. Federal tax extension form Example 1. Federal tax extension form When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Federal tax extension form You meet all the tests for deducting points in the year paid (see Exception , earlier), except the only funds you provided were a $750 down payment. Federal tax extension form Of the $1,000 you were charged for points, you can deduct $750 in the year paid. Federal tax extension form You spread the remaining $250 over the life of the mortgage. Federal tax extension form Example 2. Federal tax extension form 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. Federal tax extension form In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Federal tax extension form You spread the remaining $250 over the life of the mortgage. Federal tax extension form You must reduce the basis of your home by the $1,000 paid by the seller. Federal tax extension form Excess points. Federal tax extension form   If you meet all the tests under Exception , earlier, except that the points paid were more than are generally charged in your area (test 3), you can deduct in the year paid only the points that are generally charged. Federal tax extension form You must spread any additional points over the life of the mortgage. Federal tax extension form Mortgage ending early. Federal tax extension form   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. Federal tax extension form A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Federal tax extension form Example. Federal tax extension form Dan paid $3,000 in points in 2006 that he had to spread out over the 15-year life of the mortgage. Federal tax extension form He had deducted $1,400 of these points through 2012. Federal tax extension form Dan prepaid his mortgage in full in 2013. Federal tax extension form He can deduct the remaining $1,600 of points in 2013. Federal tax extension form Exception. Federal tax extension form   If you refinance the mortgage with the same lender, you cannot deduct any remaining points for the year. Federal tax extension form Instead, deduct them over the term of the new loan. Federal tax extension form Form 1098. Federal tax extension form   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. Federal tax extension form See Mortgage Interest Statement , later. Federal tax extension form Where To Deduct Home Mortgage Interest Enter on Schedule A (Form 1040), line 10, the home mortgage interest and points reported to you on Form 1098 (discussed next). Federal tax extension form If you did not receive a Form 1098, enter your deductible interest on line 11, and any deductible points on line 12. Federal tax extension form See Table 1 below for a summary of where to deduct home mortgage interest and real estate taxes. Federal tax extension form If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and social security number (SSN) or employer identification number (EIN) on the dotted lines next to line 11. Federal tax extension form The seller must give you this number and you must give the seller your SSN. Federal tax extension form Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Federal tax extension form Failure to meet either of these requirements may result in a $50 penalty for each failure. Federal tax extension form Table 1. Federal tax extension form Where To Deduct Interest and Taxes Paid on Your Home See the text for information on what expenses are eligible. Federal tax extension form IF you are eligible to deduct . Federal tax extension form . Federal tax extension form . Federal tax extension form THEN report the amount  on Schedule A (Form 1040) . Federal tax extension form . Federal tax extension form . Federal tax extension form real estate taxes line 6. Federal tax extension form home mortgage interest and points reported on Form 1098 line 10. Federal tax extension form home mortgage interest not reported on  Form 1098 line 11. Federal tax extension form points not reported on Form 1098 line 12. Federal tax extension form qualified mortgage insurance premiums line 13. Federal tax extension form 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 to a mortgage holder in the course of that holder's trade or business, you should receive a Form 1098 or similar statement from the mortgage holder. Federal tax extension form The statement will show the total interest paid on your mortgage during the year. Federal tax extension form If you bought a main home during the year, it also will show the deductible points you paid and any points you can deduct that were paid by the person who sold you your home. Federal tax extension form See Points , earlier. Federal tax extension form The interest you paid at settlement should be included on the statement. Federal tax extension form If it is not, add the interest from the settlement sheet that qualifies as home mortgage interest to the total shown on Form 1098 or similar statement. Federal tax extension form Put the total on Schedule A (Form 1040), line 10, and attach a statement to your return explaining the difference. Federal tax extension form Write “See attached” to the right of line 10. Federal tax extension form A mortgage holder can be a financial institution, a governmental unit, or a cooperative housing corporation. Federal tax extension form If a statement comes from a cooperative housing corporation, it generally will show your share of interest. Federal tax extension form Your mortgage interest statement for 2013 should be provided or sent to you by January 31, 2014. Federal tax extension form If it is mailed, you should allow adequate time to receive it before contacting the mortgage holder. Federal tax extension form A copy of this form will be sent to the IRS also. Federal tax extension form Example. Federal tax extension form You bought a new home on May 3. Federal tax extension form You paid no points on the purchase. Federal tax extension form During the year, you made mortgage payments which included $4,480 deductible interest on your new home. Federal tax extension form The settlement sheet for the purchase of the home included interest of $620 for 29 days in May. Federal tax extension form The mortgage statement you receive from the lender includes total interest of $5,100 ($4,480 + $620). Federal tax extension form You can deduct the $5,100 if you itemize your deductions. Federal tax extension form Refund of overpaid interest. Federal tax extension form   If you receive a refund of mortgage interest you overpaid in a prior year, you generally will receive a Form 1098 showing the refund in box 3. Federal tax extension form Generally, you must include the refund in income in the year you receive it. Federal tax extension form See Refund of home mortgage interest , earlier, under Home Mortgage Interest. Federal tax extension form More than one borrower. Federal tax extension form   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. Federal tax extension form Show how much of the interest each of you paid, and give the name and address of the person who received the form. Federal tax extension form Deduct your share of the interest on Schedule A (Form 1040), line 11, and write “See attached” to the right of that line. Federal tax extension form Mortgage Insurance Premiums You may be able to take an itemized deduction on Schedule A (Form 1040), line 13, for premiums you pay or accrue during 2013 for qualified mortgage insurance in connection with home acquisition debt on your qualified home. Federal tax extension form Mortgage insurance premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as an itemized deduction. Federal tax extension form Qualified Mortgage Insurance Qualified mortgage insurance is mortgage insurance provided by the Veterans Administration, the Federal Housing Administration, or the Rural Housing Administration, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). Federal tax extension form Prepaid mortgage insurance premiums. Federal tax extension form   If you paid premiums that are allocable to periods after 2013, you must allocate them over the shorter of: The stated term of the mortgage, or 84 months, beginning with the month the insurance was obtained. Federal tax extension form The premiums are treated as paid in the year to which they were allocated. Federal tax extension form If the mortgage is satisfied before its term, no deduction is allowed for the unamortized balance. Federal tax extension form See Publication 936 for details. Federal tax extension form Exception for certain mortgage insurance. Federal tax extension form   The allocation rules, explained above, do not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Service. Federal tax extension form 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. Federal tax extension form It also must be secured by that home. Federal tax extension form 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. Federal tax extension form Home acquisition debt limit. Federal tax extension form   The total amount you can treat as home acquisition debt at any time on your home cannot be more than $1 million ($500,000 if married filing separately). Federal tax extension form Discharges of qualified principal residence indebtedness. Federal tax extension form   You can exclude from gross income any discharges of qualified principal residence indebtedness made after 2006 and before 2014. Federal tax extension form You must reduce the basis of your principal residence (but not below zero) by the amount you exclude. Federal tax extension form Principal residence. Federal tax extension form   Your principal residence is the home where you ordinarily live most of the time. Federal tax extension form You can have only one principal residence at any one time. Federal tax extension form Qualified principal residence indebtedness. Federal tax extension form   This is a mortgage that you took out to buy, build, or substantially improve your principal residence and that is secured by that residence. Federal tax extension form If the amount of your original mortgage is more than the cost of your principal residence plus the cost of substantial improvements, qualified principal residence indebtedness cannot be more than the cost of your principal residence plus improvements. Federal tax extension form   Any debt secured by your principal residence that you use to refinance qualified principal residence indebtedness is qualified principal residence indebtedness up to the amount of your old mortgage principal just before the refinancing. Federal tax extension form Additional debt incurred to substantially improve your principal residence is also qualified principal residence indebtedness. Federal tax extension form Amount you can exclude. Federal tax extension form   You can only exclude debt discharged after 2006 and before 2014. Federal tax extension form The most you can exclude is $2 million ($1 million if married filing separately). Federal tax extension form You cannot exclude any amount that was discharged because of services performed for the lender or on account of any other factor not directly related either to a decline in the value of your residence or to your financial condition. Federal tax extension form Ordering rule. Federal tax extension form   If only a part of a loan is qualified principal residence indebtedness, you can exclude only the amount of the discharge that is more than the amount of the loan (immediately before the discharge) that is not qualified principal residence indebtedness. Federal tax extension form Qualified Home This means your main home or your second home. Federal tax extension form A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. Federal tax extension form Main home. Federal tax extension form   You can have only one main home at any one time. Federal tax extension form This is the home where you ordinarily live most of the time. Federal tax extension form Second home and other special situations. Federal tax extension form   If you have a second home, use part of your home for other than residential living (such as a home office), rent out part of your home, or are having your home constructed, see Qualified Home in Publication 936. Federal tax extension form Limit on Deduction If your adjusted gross income (AGI) 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 deductible is reduced and may be eliminated. Federal tax extension form 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. Federal tax extension form If your AGI is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Federal tax extension form Form 1098. Federal tax extension form   The amount of mortgage insurance premiums you paid during 2013 should be reported in box 4. Federal tax extension form See Form 1098, Mortgage Interest Statement in Publication 936. Federal tax extension form Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals afford home ownership. Federal tax extension form If you qualify, you can claim the credit on Form 8396 each year for part of the home mortgage interest you pay. Federal tax extension form Who qualifies. Federal tax extension form   You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate (MCC) from your state or local government. Federal tax extension form Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. Federal tax extension form The MCC will show the certificate credit rate you will use to figure your credit. Federal tax extension form It also will show the certified indebtedness amount. Federal tax extension form Only the interest on that amount qualifies for the credit. Federal tax extension form See Figuring the Credit , later. Federal tax extension form You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home. Federal tax extension form Contact your state or local housing finance agency for information about the availability of MCCs in your area. Federal tax extension form How to claim the credit. Federal tax extension form   To claim the credit, complete Form 8396 and attach it to your Form 1040 or Form 1040NR, U. Federal tax extension form S. Federal tax extension form Nonresident Alien Income Tax Return. Federal tax extension form Include the credit in your total for Form 1040, line 53, or Form 1040NR, line 50; be sure to check box c and write “Form 8396” on that line. Federal tax extension form Reducing your home mortgage interest deduction. Federal tax extension form   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. Federal tax extension form You must do this even if part of that amount is to be carried forward to 2014. Federal tax extension form Selling your home. Federal tax extension form   If you purchase a home after 1990 using an MCC, and you sell that home within 9 years, you may have to recapture (repay) all or part of the benefit you received from the MCC program. Federal tax extension form For additional information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, in Publication 523. Federal tax extension form Figuring the Credit Figure your credit on Form 8396. Federal tax extension form Mortgage not more than certified indebtedness. Federal tax extension form   If your mortgage loan amount is equal to (or smaller than) the certified indebtedness amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. Federal tax extension form Mortgage more than certified indebtedness. Federal tax extension form   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. Federal tax extension form To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. Federal tax extension form Certified indebtedness amount on your MCC Original amount of your mortgage   The fraction will not change as long as you are entitled to take the mortgage interest credit. Federal tax extension form Example. Federal tax extension form Emily bought a home this year. Federal tax extension form Her mortgage loan is $125,000. Federal tax extension form The certified indebtedness amount on her MCC is $100,000. Federal tax extension form She paid $7,500 interest this year. Federal tax extension form Emily figures the interest to enter on Form 8396, line 1, as follows:   $100,000 = 80% (. Federal tax extension form 80)       $125,000       $7,500 x . Federal tax extension form 80 = $6,000   Emily enters $6,000 on Form 8396, line 1. Federal tax extension form In each later year, she will figure her credit using only 80% of the interest she pays for that year. Federal tax extension form Limits Two limits may apply to your credit. Federal tax extension form A limit based on the credit rate, and A limit based on your tax. Federal tax extension form Limit based on credit rate. Federal tax extension form   If the certificate credit rate is higher than 20%, the credit you are allowed cannot be more than $2,000. Federal tax extension form Limit based on tax. Federal tax extension form   After applying the limit based on the credit rate, your credit generally cannot be more than your tax liability. Federal tax extension form See the Credit Limit Worksheet in the Form 8396 instructions to calculate the limit based on tax. Federal tax extension form Dividing the Credit If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, the credit must be divided based on the interest held by each person. Federal tax extension form Example. Federal tax extension form John and his brother, George, were issued an MCC. Federal tax extension form They used it to get a mortgage on their main home. Federal tax extension form John has a 60% ownership interest in the home, and George has a 40% ownership interest in the home. Federal tax extension form John paid $5,400 mortgage interest this year and George paid $3,600. Federal tax extension form The MCC shows a credit rate of 25% and a certified indebtedness amount of $130,000. Federal tax extension form The loan amount (mortgage) on their home is $120,000. Federal tax extension form The credit is limited to $2,000 because the credit rate is more than 20%. Federal tax extension form John figures the credit by multiplying the mortgage interest he paid this year ($5,400) by the certificate credit rate (25%) for a total of $1,350. Federal tax extension form His credit is limited to $1,200 ($2,000 × 60%). Federal tax extension form George figures the credit by multiplying the mortgage interest he paid this year ($3,600) by the certificate credit rate (25%) for a total of $900. Federal tax extension form His credit is limited to $800 ($2,000 × 40%). Federal tax extension form Carryforward If your allowable credit is reduced because of the limit based on your tax, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. Federal tax extension form Example. Federal tax extension form You receive a mortgage credit certificate from State X. Federal tax extension form This year, your regular tax liability is $1,100, you owe no alternative minimum tax, and your mortgage interest credit is $1,700. Federal tax extension form You claim no other credits. Federal tax extension form Your unused mortgage interest credit for this year is $600 ($1,700 − $1,100). Federal tax extension form You can carry forward this amount to the next 3 years or until used, whichever comes first. Federal tax extension form Credit rate more than 20%. Federal tax extension form   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). Federal tax extension form Example. Federal tax extension form In the earlier example under Dividing the Credit , John and George used the entire $2,000 credit. Federal tax extension form The excess   John $1,350 − $1,200 = $150     George $900 − $800 = $100   $150 for John ($1,350 − $1,200) and $100 for George ($900 − $800) cannot be carried forward to future years, despite the respective tax liabilities for John and George. Federal tax extension form Refinancing If you refinance your original mortgage loan on which you had been given an MCC, you must get a new MCC to be able to claim the credit on the new loan. Federal tax extension form The amount of credit you can claim on the new loan may change. Federal tax extension form Table 2 below summarizes how to figure your credit if you refinance your original mortgage loan. Federal tax extension form Table 2. Federal tax extension form Effect of Refinancing on Your Credit IF you get a new (reissued) MCC and the amount of your new mortgage is . Federal tax extension form . Federal tax extension form . Federal tax extension form THEN the interest you claim on Form 8396, line 1, is* . Federal tax extension form . Federal tax extension form . Federal tax extension form smaller than or equal to the certified indebtedness amount on the new MCC all the interest paid during the year on your new mortgage. Federal tax extension form larger than the certified indebtedness amount on the new MCC interest paid during the year on your new mortgage multiplied by the following fraction. Federal tax extension form         certified indebtedness  amount on your new MCC       original amount of your  mortgage   *The credit using the new MCC cannot be more than the credit using the old MCC. Federal tax extension form  See New MCC cannot increase your credit above. Federal tax extension form An issuer may reissue an MCC after you refinance your mortgage. Federal tax extension form If you did not get a new MCC, you may want to contact the state or local housing finance agency that issued your original MCC for information about whether you can get a reissued MCC. Federal tax extension form Year of refinancing. Federal tax extension form   In the year of refinancing, add the applicable amount of interest paid on the old mortgage and the applicable amount of interest paid on the new mortgage, and enter the total on Form 8396, line 1. Federal tax extension form   If your new MCC has a credit rate different from the rate on the old MCC, you must attach a statement to Form 8396. Federal tax extension form The statement must show the calculation for lines 1, 2, and 3 for the part of the year when the old MCC was in effect. Federal tax extension form It must show a separate calculation for the part of the year when the new MCC was in effect. Federal tax extension form Combine the amounts from both calculations for line 3, enter the total on line 3 of the form, and write “See attached” on the dotted line next to line 2. Federal tax extension form New MCC cannot increase your credit. Federal tax extension form   The credit that you claim with your new MCC cannot be more than the credit that you could have claimed with your old MCC. Federal tax extension form   In most cases, the agency that issues your new MCC will make sure that it does not increase your credit. Federal tax extension form However, if either your old loan or your new loan has a variable (adjustable) interest rate, you will need to check this yourself. Federal tax extension form In that case, you will need to know the amount of the credit you could have claimed using the old MCC. Federal tax extension form   There are two methods for figuring the credit you could have claimed. Federal tax extension form Under one method, you figure the actual credit that would have been allowed. Federal tax extension form This means you use the credit rate on the old MCC and the interest you would have paid on the old loan. Federal tax extension form   If your old loan was a variable rate mortgage, you can use another method to determine the credit that you could have claimed. Federal tax extension form Under this method, you figure the credit using a payment schedule of a hypothetical self-amortizing mortgage with level payments projected to the final maturity date of the old mortgage. Federal tax extension form The interest rate of the hypothetical mortgage is the annual percentage rate (APR) of the new mortgage for purposes of the Federal Truth in Lending Act. Federal tax extension form The principal of the hypothetical mortgage is the remaining outstanding balance of the certified mortgage indebtedness shown on the old MCC. Federal tax extension form    You must choose one method and use it consistently beginning with the first tax year for which you claim the credit based on the new MCC. Federal tax extension form    As part of your tax records, you should keep your old MCC and the schedule of payments for your old mortgage. Federal tax extension form Basis Basis is your starting point for figuring a gain or loss if you later sell your home, or for figuring depreciation if you later use part of your home for business purposes or for rent. Federal tax extension form While you own your home, you may add certain items to your basis. Federal tax extension form You may subtract certain other items from your basis. Federal tax extension form These items are called adjustments to basis and are explained later under Adjusted Basis . Federal tax extension form It is important that you understand these terms when you first acquire your home because you must keep track of your basis and adjusted basis during the period you own your home. Federal tax extension form You also must keep records of the events that affect basis or adjusted basis. Federal tax extension form See Keeping Records , below. Federal tax extension form Figuring Your Basis How you figure your basis depends on how you acquire your home. Federal tax extension form If you buy or build your home, your cost is your basis. Federal tax extension form If you receive your home as a gift, your basis is usually the same as the adjusted basis of the person who gave you the property. Federal tax extension form If you inherit your home from a decedent, different rules apply depending on the date of the decedent's death. Federal tax extension form Each of these topics is discussed later. Federal tax extension form Property transferred from a spouse. Federal tax extension form   If your home is transferred to you from your spouse, or from your former spouse as a result of a divorce, your basis is the same as your spouse's (or former spouse's) adjusted basis just before the transfer. Federal tax extension form Publication 504, Divorced or Separated Individuals, fully discusses transfers between spouses. Federal tax extension form Cost as Basis The cost of your home, whether you purchased it or constructed it, is the amount you paid for it, including any debt you assumed. Federal tax extension form The cost of your home includes most settlement or closing costs you paid when you bought the home. Federal tax extension form If you built your home, your cost includes most closing costs paid when you bought the land or settled on your mortgage. Federal tax extension form See Settlement or closing costs , later. Federal tax extension form If you elect to deduct the sales taxes on the purchase or construction of your home as an itemized deduction on Schedule A (Form 1040), you cannot include the sales taxes as part of your cost basis in the home. Federal tax extension form Purchase. Federal tax extension form   The basis of a home you bought is the amount you paid for it. Federal tax extension form This usually includes your down payment and any debt you assumed. Federal tax extension form The basis of a cooperative apartment is the amount you paid for your shares in the corporation that owns or controls the property. Federal tax extension form This amount includes any purchase commissions or other costs of acquiring the shares. Federal tax extension form Construction. Federal tax extension form   If you contracted to have your home built on land that you own, your basis in the home is your basis in the land plus the amount you paid to have the home built. Federal tax extension form This includes the cost of labor and materials, the amount you paid the contractor, any architect's fees, building permit charges, utility meter and connection charges, and legal fees that are directly connected with building your home. Federal tax extension form If you built all or part of your home yourself, your basis is the total amount it cost you to build it. Federal tax extension form You cannot include in basis the value of your own labor or any other labor for which you did not pay. Federal tax extension form Real estate taxes. Federal tax extension form   Real estate taxes are usually divided so that you and the seller each pay taxes for the part of the property tax year that each owned the home. Federal tax extension form See the earlier discussion of Real estate taxes paid at settlement or closing , under Real Estate Taxes, earlier, to figure the real estate taxes you paid or are considered to have paid. Federal tax extension form   If you pay any part of the seller's share of the real estate taxes (the taxes up to the date of sale), and the seller did not reimburse you, add those taxes to your basis in the home. Federal tax extension form You cannot deduct them as taxes paid. Federal tax extension form   If the seller paid any of your share of the real estate taxes (the taxes beginning with the date of sale), you can still deduct those taxes. Federal tax extension form Do not include those taxes in your basis. Federal tax extension form If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. Federal tax extension form Example 1. Federal tax extension form You bought your home on September 1. Federal tax extension form The property tax year in your area is the calendar year, and the tax is due on August 15. Federal tax extension form The real estate taxes on the home you bought were $1,275 for the year and had been paid by the seller on August 15. Federal tax extension form You did not reimburse the seller for your share of the real estate taxes from September 1 through December 31. Federal tax extension form You must reduce the basis of your home by the $426 [(122 ÷ 365) × $1,275] the seller paid for you. Federal tax extension form You can deduct your $426 share of real estate taxes on your return for the year you purchased your home. Federal tax extension form Example 2. Federal tax extension form You bought your home on May 3, 2013. Federal tax extension form The property tax year in your area is the calendar year. Federal tax extension form The taxes for the previous year are assessed on January 2 and are due on May 31 and November 30. Federal tax extension form Under state law, the taxes become a lien on May 31. Federal tax extension form You agreed to pay all taxes due after the date of sale. Federal tax extension form The taxes due in 2013 for 2012 were $1,375. Federal tax extension form The taxes due in 2014 for 2013 will be $1,425. Federal tax extension form You cannot deduct any of the taxes paid in 2013 because they relate to the 2012 property tax year and you did not own the home until 2013. Federal tax extension form Instead, you add the $1,375 to the cost (basis) of your home. Federal tax extension form You owned the home in 2013 for 243 days (May 3 to December 31), so you can take a tax deduction on your 2014 return of $949 [(243 ÷ 365) × $1,425] paid in 2014 for 2013. Federal tax extension form You add the remaining $476 ($1,425 − $949) of taxes paid in 2014 to the cost (basis) of your home. Federal tax extension form Settlement or closing costs. Federal tax extension form   If you bought your home, you probably paid settlement or closing costs in addition to the contract price. Federal tax extension form These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. Federal tax extension form If you built your home, you probably paid these costs when you bought the land or settled on your mortgage. Federal tax extension form   The only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. Federal tax extension form You deduct them in the year you buy your home if you itemize your deductions. Federal tax extension form You can add certain other settlement or closing costs to the basis of your home. Federal tax extension form Items added to basis. Federal tax extension form   You can include in your basis the settlement fees and closing costs you paid for buying your home. Federal tax extension form A fee is for buying the home if you would have had to pay it even if you paid cash for the home. Federal tax extension form   The following are some of the settlement fees and closing costs that you can include in the original basis of your home. Federal tax extension form Abstract fees (abstract of title fees). Federal tax extension form Charges for installing utility services. Federal tax extension form Legal fees (including fees for the title search and preparation of the sales contract and deed). Federal tax extension form Recording fees. Federal tax extension form Surveys. Federal tax extension form Transfer or stamp taxes. Federal tax extension form Owner's title insurance. Federal tax extension form Any amount the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, cost for improvements or repairs, and sales commissions. Federal tax extension form   If the seller actually paid for any item for which you are liable and for which you can take a deduction (such as your share of the real estate taxes for the year of sale), you must reduce your basis by that amount unless you are charged for it in the settlement. Federal tax extension form Items not added to basis and not deductible. Federal tax extension form   Here are some settlement and closing costs that you cannot deduct or add to your basis. Federal tax extension form Fire insurance premiums. Federal tax extension form Charges for using utilities or other services related to occupancy of the home before closing. Federal tax extension form Rent for occupying the home before closing. Federal tax extension form Charges connected with getting or refinancing a mortgage loan, such as: Loan assumption fees, Cost of a credit report, and Fee for an appraisal required by a lender. Federal tax extension form Points paid by seller. Federal tax extension form   If you bought your home after April 3, 1994, you must reduce your basis by any points paid for your mortgage by the person who sold you your home. Federal tax extension form   If you bought your home after 1990 but before April 4, 1994, you must reduce your basis by seller-paid points only if you deducted them. Federal tax extension form See Points , earlier, for the rules on deducting points. Federal tax extension form Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined later) to the donor just before it was given to you, its fair market value (FMV) at the time it was given to you, and any gift tax paid on it. Federal tax extension form Fair market value. Federal tax extension form   Fair market value (FMV) is the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and who both have a reasonable knowledge of all the necessary facts. Federal tax extension form Donor's adjusted basis is more than FMV. Federal tax extension form   If someone gave you your home and the donor's adjusted basis, when it was given to you, was more than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis. Federal tax extension form Disposition basis. Federal tax extension form   If the donor's adjusted basis at the time of the gift is more than the FMV, your basis (plus or minus any required adjustments, see Adjusted Basis , later) when you dispose of the property will depend on whether you have a gain or a loss. Federal tax extension form Your basis for figuring a gain is the same as the donor's adjusted basis. Federal tax extension form Your basis for figuring a loss is the FMV when you received the gift. Federal tax extension form If you use the donor's adjusted basis to figure a gain and it results in a loss, then you must use the FMV (at the time of the gift) to refigure the loss. Federal tax extension form However, if using the FMV results in a gain, then you neither have a gain nor a loss. Federal tax extension form Example 1. Federal tax extension form Andrew received a house as a gift from Ishmael (the donor). Federal tax extension form At the time of the gift, the home had an FMV of $80,000. Federal tax extension form Ishmael's adjusted basis was $100,000. Federal tax extension form After he received the house, no events occurred to increase or decrease the basis. Federal tax extension form If Andrew sells the house for $120,000, he will have a $20,000 gain because he must use the donor's adjusted basis ($100,000) at the time of the gift as his basis to figure the gain. Federal tax extension form Example 2. Federal tax extension form Same facts as Example 1 , except this time Andrew sells the house for $70,000. Federal tax extension form He will have a loss of $10,000 because he must use the FMV ($80,000) at the time of the gift as his basis to figure the loss. Federal tax extension form Example 3. Federal tax extension form Same facts as Example 1 , except this time Andrew sells the house for $90,000. Federal tax extension form Initially, he figures the gain using Ishmael's adjusted basis ($100,000), which results in a loss of $10,000. Federal tax extension form Since it is a loss, Andrew must now recalculate the loss using the FMV ($80,000), which results in a gain of $10,000. Federal tax extension form So in this situation, Andrew will neither have a gain nor a loss. Federal tax extension form Donor's adjusted basis equal to or less than the FMV. Federal tax extension form   If someone gave you your home after 1976 and the donor's adjusted basis, when it was given to you, was equal to or less than the FMV, your basis at the time of receipt is the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home. Federal tax extension form Part of federal gift tax due to net increase in value. Federal tax extension form   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. Federal tax extension form The numerator (top part) of the fraction is the net increase in the value of the home, and the denominator (bottom part) is the value of the home for gift tax purposes after reduction for any annual exclusion and marital or charitable deduction that applies to the gift. Federal tax extension form The net increase in the value of the home is its FMV minus the adjusted basis of the donor. Federal tax extension form Publication 551 gives more information, including examples, on figuring your basis when you receive property as a gift. Federal tax extension form Inheritance Your basis in a home you inherited is generally the fair market value of the home on the date of the decedent's death or on the alternative valuation date if the personal representative for the estate chooses to use alternative valuation. Federal tax extension form If an estate tax return was filed, your basis is generally the value of the home listed on the estate tax return. Federal tax extension form If an estate tax return was not filed, your basis is the appraised value of the home at the decedent's date of death for state inheritance or transmission taxes. Federal tax extension form Publication 551 and Publication 559, Survivors, Executors, and Administrators, have more information on the basis of inherited property. Federal tax extension form If you inherited your home from someone who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010. Federal tax extension form Adjusted Basis While you own your home, various events may take place that can change the original basis of your home. Federal tax extension form These events can increase or decrease your original basis. Federal tax extension form The result is called adjusted basis. Federal tax extension form See Table 3, on this page, for a list of some of the items that can adjust your basis. Federal tax extension form Table 3. Federal tax extension form Adjusted Basis This table lists examples of some items that generally will increase or decrease your basis in your home. Federal tax extension form It is not intended to be all-inclusive. Federal tax extension form Increases to Basis Decreases to Basis Improvements: Putting an addition on your home Replacing an entire roof Paving your driveway Installing central air conditioning Rewiring your home Assessments for local improvements (see Assessments for local benefits , under What You Can and Cannot Deduct, earlier) Amounts spent to restore damaged property Insurance or other reimbursement for casualty losses Deductible casualty loss not covered by insurance Payments received for easement or right-of-way granted Depreciation allowed or allowable if home is used for business or rental purposes Value of subsidy for energy conservation measure excluded from income Improvements. Federal tax extension form   An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. Federal tax extension form You must add the cost of any improvements to the basis of your home. Federal tax extension form You cannot deduct these costs. Federal tax extension form   Improvements include putting a recreation room in your unfinished basement, adding another bathroom or bedroom, putting up a fence, putting in new plumbing or wiring, installing a new roof, and paving your driveway. Federal tax extension form Amount added to basis. Federal tax extension form   The amount you add to your basis for improvements is your actual cost. Federal tax extension form This includes all costs for material and labor, except your own labor, and all expenses related to the improvement. Federal tax extension form For example, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. Federal tax extension form   You also must add to your basis state and local assessments for improvements such as streets and sidewalks if they increase the value of the property. Federal tax extension form These assessments are discussed earlier under Real Estate Taxes . Federal tax extension form Improvements no longer part of home. Federal tax extension form    Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. Federal tax extension form Example. Federal tax extension form You put wall-to-wall carpeting in your home 15 years ago. Federal tax extension form Later, you replaced that carpeting with new wall-to-wall carpeting. Federal tax extension form The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. Federal tax extension form Repairs versus improvements. Federal tax extension form   A repair keeps your home in an ordinary, efficient operating condition. Federal tax extension form It does not add to the value of your home or prolong its life. Federal tax extension form Repairs include repainting your home inside or outside, fixing your gutters or floors, fixing leaks or plastering, and replacing broken window panes. Federal tax extension form You cannot deduct repair costs and generally cannot add them to the basis of your home. Federal tax extension form   However, repairs that are done as part of an extensive remodeling or restoration of your home are considered improvements. Federal tax extension form You add them to the basis of your home. Federal tax extension form Records to keep. Federal tax extension form   You can use Table 4 (at the end of the publication) as a guide to help you keep track of improvements to your home. Federal tax extension form Also see Keeping Records , below. Federal tax extension form Energy conservation subsidy. Federal tax extension form   If a public utility gives you (directly or indirectly) a subsidy for the purchase or installation of an energy conservation measure for your home, do not include the value of that subsidy in your income. Federal tax extension form You must reduce the basis of your home by that value. Federal tax extension form   An energy conservation measure is an installation or modification primarily designed to reduce consumption of electricity or natural gas or to improve the management of energy demand. Federal tax extension form Keeping Records Keeping full and accurate records is vital to properly report your income and expenses, to support your deductions and credits, and to know the basis or adjusted basis of your home. Federal tax extension form These records include your purchase contract and settlement papers if you bought the property, or other objective evidence if you acquired it by gift, inheritance, or similar means. Federal tax extension form You should keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. Federal tax extension form In addition, you should keep track of any decreases to the basis such as those listed in Table 3, earlier. Federal tax extension form How to keep records. Federal tax extension form   How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. Federal tax extension form How long to keep records. Federal tax extension form   You must keep your records for as long as they are important for meeting any provision of the federal tax law. Federal tax extension form   Keep records that support an item of income, a deduction, or a credit appearing on a return until the period of limitations for the return runs out. Federal tax extension form (A period of limitations is the period of time after which no legal action can be brought. Federal tax extension form ) For assessment of tax you owe, this is generally 3 years from the date you filed the return. Federal tax extension form For filing a claim for credit or refund, this is generally 3 years from the date you filed the original return, or 2 years from the date you paid the tax, whichever is later. Federal tax extension form Returns filed before the due date are treated as filed on the due date. Federal tax extension form   You may need to keep records relating to the basis of property (discussed earlier) for longer than the period of limitations. Federal tax extension form Keep those records as long as they are important in figuring the basis of the original or replacement property. Federal tax extension form Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. Federal tax extension form Table 4. Federal tax extension form Record of Home Improvements Keep this for your records. Federal tax extension form Also, keep receipts or other proof of improvements. Federal tax extension form Remove from this record any improvements that are no longer part of your main home. Federal tax extension form For example, if you put wall-to-wall carpeting in your home and later replace it with new wall-to-wall carpeting, remove the cost of the first carpeting. Federal tax extension form (a) Type of Improvement (b) Date (c) Amount   (a) Type of Improvement (b) Date (c) Amount Additions:       Heating & Air  Conditioning:     Bedroom       Heating system     Bathroom       Central air conditioning     Deck       Furnace     Garage       Duct work     Porch       Central humidifier     Patio       Filtration system     Storage shed       Other     Fireplace       Electrical:     Other           Lawn & Grounds:       Lighting fixtures           Wiring upgrades     Landscaping       Other     Driveway       Plumbing:     Walkway           Fences       Water heater     Retaining wall       Soft water system     Sprinkler system       Filtration system     Swimming pool       Other     Exterior lighting       Insulation:     Other           Communications:       Attic           Walls     Satellite dish       Floors     Intercom       Pipes and duct work     Security system       Other     Other             Miscellaneous:       Interior  Improvements:     Storm windows and doors       Built-in appliances     Roof       Kitchen modernization     Central vacuum       Bathroom modernization     Other       Flooring             Wall-to-wall carpeting             Other     How To