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File 1040 X

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File 1040 X

File 1040 x 37. File 1040 x   Other Credits Table of Contents What's New Introduction Useful Items - You may want to see: Nonrefundable CreditsAdoption Credit Alternative Motor Vehicle Credit Alternative Fuel Vehicle Refueling Property Credit Credit to Holders of Tax Credit Bonds Foreign Tax Credit Mortgage Interest Credit Nonrefundable Credit for Prior Year Minimum Tax Plug-in Electric Drive Motor Vehicle Credit Residential Energy Credits Retirement Savings Contributions Credit (Saver's Credit) Refundable CreditsCredit for Tax on Undistributed Capital Gain Health Coverage Tax Credit Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld What's New Adoption credit. File 1040 x  The maximum adoption credit is $12,970 for 2013. File 1040 x See Adoption Credit . File 1040 x Plug-in electric vehicle credit. File 1040 x  This credit has expired. File 1040 x Credit for prior year minimum tax. File 1040 x  The refundable portion of the credit for prior year minimum tax has expired. File 1040 x Excess withholding of social security and railroad retirement tax. File 1040 x  Social security tax and tier 1 railroad retirement (RRTA) tax were both withheld during 2013 at a rate of 6. File 1040 x 2% of wages up to $113,700. File 1040 x If you worked for more than one employer and had too much social security or RRTA tax withheld during 2013, you may be entitled to a credit for the excess withholding. File 1040 x See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld . File 1040 x Introduction This chapter discusses the following nonrefundable credits. File 1040 x Adoption credit. File 1040 x Alternative motor vehicle credit. File 1040 x Alternative fuel vehicle refueling property credit. File 1040 x Credit to holders of tax credit bonds. File 1040 x Foreign tax credit. File 1040 x Mortgage interest credit. File 1040 x Nonrefundable credit for prior year minimum tax. File 1040 x Plug-in electric drive motor vehicle credit. File 1040 x Residential energy credits. File 1040 x Retirement savings contributions credit. File 1040 x This chapter also discusses the following refundable credits. File 1040 x Credit for tax on undistributed capital gain. File 1040 x Health coverage tax credit. File 1040 x Credit for excess social security tax or railroad retirement tax withheld. File 1040 x Several other credits are discussed in other chapters in this publication. File 1040 x Child and dependent care credit (chapter 32). File 1040 x Credit for the elderly or the disabled (chapter 33). File 1040 x Child tax credit (chapter 34). File 1040 x Education credits (chapter 35). File 1040 x Earned income credit (chapter 36). File 1040 x Nonrefundable credits. File 1040 x   The first part of this chapter, Nonrefundable Credits , covers ten credits that you subtract from your tax. File 1040 x These credits may reduce your tax to zero. File 1040 x If these credits are more than your tax, the excess is not refunded to you. File 1040 x Refundable credits. File 1040 x   The second part of this chapter, Refundable Credits , covers three credits that are treated as payments and are refundable to you. File 1040 x These credits are added to the federal income tax withheld and any estimated tax payments you made. File 1040 x If this total is more than your total tax, the excess will be refunded to you. File 1040 x Useful Items - You may want to see: Publication 502 Medical and Dental Expenses 514 Foreign Tax Credit for  Individuals 530 Tax Information for Homeowners 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 1116 Foreign Tax Credit 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 5695 Residential Energy Credits 8396 Mortgage Interest Credit 8801 Credit For Prior Year Minimum Tax — Individuals, Estates, and Trusts 8828 Recapture of Federal Mortgage Subsidy 8839 Qualified Adoption Expenses 8880 Credit for Qualified Retirement Savings Contributions 8885 Health Coverage Tax Credit 8910 Alternative Motor Vehicle Credit 8911 Alternative Fuel Vehicle Refueling Property Credit 8912 Credit to Holders of Tax Credit Bonds 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit Nonrefundable Credits The credits discussed in this part of the chapter can reduce your tax. File 1040 x However, if the total of these credits is more than your tax, the excess is not refunded to you. File 1040 x Adoption Credit You may be able to take a tax credit of up to $12,970 for qualified expenses paid to adopt an eligible child. File 1040 x The credit may be allowed for the adoption of a child with special needs even if you do not have any qualified expenses. File 1040 x If your modified adjusted gross income (AGI) is more than $194,580, your credit is reduced. File 1040 x If your modified AGI is $234,580 or more, you cannot take the credit. File 1040 x Qualified adoption expenses. File 1040 x   Qualified adoption expenses are reasonable and necessary expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child. File 1040 x These expenses include: Adoption fees, Court costs, Attorney fees, Travel expenses (including amounts spent for meals and lodging) while away from home, and Re-adoption expenses to adopt a foreign child. File 1040 x Nonqualified expenses. File 1040 x   Qualified adoption expenses do not include expenses: That violate state or federal law, For carrying out any surrogate parenting arrangement, For the adoption of your spouse's child, For which you received funds under any federal, state, or local program, Allowed as a credit or deduction under any other federal income tax rule, or Paid or reimbursed by your employer or any other person or organization. File 1040 x Eligible child. File 1040 x   The term “eligible child” means any individual: Under 18 years old, or Physically or mentally incapable of caring for himself or herself. File 1040 x Child with special needs. File 1040 x   An eligible child is a child with special needs if all three of the following apply. File 1040 x The child was a citizen or resident of the United States (including U. File 1040 x S. File 1040 x possessions) at the time the adoption process began. File 1040 x A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents' home. File 1040 x The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. File 1040 x Factors used by states to make this determination include: The child's ethnic background, The child's age, Whether the child is a member of a minority or sibling group, and Whether the child has a medical condition or a physical, mental, or emotional handicap. File 1040 x When to take the credit. File 1040 x   Generally, until the adoption becomes final, you take the credit in the year after your qualified expenses were paid or incurred. File 1040 x If the adoption becomes final, you take the credit in the year your expenses were paid or incurred. File 1040 x See the Instructions for Form 8839 for more specific information on when to take the credit. File 1040 x Foreign child. File 1040 x   If the child is not a U. File 1040 x S. File 1040 x citizen or resident at the time the adoption process began, you cannot take the credit unless the adoption becomes final. File 1040 x You treat all adoption expenses paid or incurred in years before the adoption becomes final as paid or incurred in the year it becomes final. File 1040 x How to take the credit. File 1040 x   Figure your 2013 nonrefundable credit and any carryforward to 2014 on Form 8839 and attach it to your Form 1040. File 1040 x Include the credit in your total for Form 1040, line 53. File 1040 x Check box c and enter “8839” on the line next to that box. File 1040 x More information. File 1040 x   For more information, see the Instructions for Form 8839. File 1040 x Alternative Motor Vehicle Credit You may be able to take this credit if you place a qualified fuel cell vehicle in service in 2013. File 1040 x Amount of credit. File 1040 x   Generally, you can rely on the manufacturer's certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies. File 1040 x In the case of a foreign manufacturer, you generally can rely on its domestic distributor's certification to the IRS. File 1040 x   Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification to the IRS of the maximum credit allowable. File 1040 x How to take the credit. File 1040 x   To take the credit, you must complete Form 8910 and attach it to your Form 1040. File 1040 x Include the credit in your total for Form 1040, line 53. File 1040 x Check box c and enter “8910” on the line next to that box. File 1040 x More information. File 1040 x   For more information on the credit, see the Instructions for Form 8910. File 1040 x Alternative Fuel Vehicle Refueling Property Credit You may be able to take a credit if you place qualified alternative fuel vehicle refueling property in service in 2013. File 1040 x Qualified alternative fuel vehicle refueling property. File 1040 x   Qualified alternative fuel vehicle refueling property is any property (other than a building or its structural components) used for either of the following. File 1040 x To store or dispense alternative fuel into the fuel tank of a motor vehicle propelled by the fuel, but only if the storage or dispensing is at the point where the fuel is delivered into that tank. File 1040 x To recharge an electric vehicle, but only if the recharging property is located at the point where the vehicle is recharged. File 1040 x   The following are alternative fuels. File 1040 x Any fuel at least 85% of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen. File 1040 x Any mixture which consists of two or more of the following: biodiesel, diesel fuel, or kerosene, and at least 20% of the volume of which consists of biodiesel determined without regard to any kerosene. File 1040 x Electricity. File 1040 x Amount of the credit. File 1040 x   For personal use property, the credit is generally the smaller of 30% of the property's cost or $1,000. File 1040 x For business use property, the credit is generally the smaller of 30% of the property's cost or $30,000. File 1040 x How to take the credit. File 1040 x   To take the credit, you must complete Form 8911 and attach it to your Form 1040. File 1040 x Include the credit in your total for Form 1040, line 53. File 1040 x Check box c and enter “8911” on the line next to that box. File 1040 x More information. File 1040 x   For more information on the credit, see the Form 8911 instructions. File 1040 x Credit to Holders of Tax Credit Bonds Tax credit bonds are bonds in which the holder receives a tax credit in lieu of some or all of the interest on the bond. File 1040 x You may be able to take a credit if you are a holder of one of the following bonds. File 1040 x Clean renewable energy bonds (issued before 2010). File 1040 x New clean renewable energy bonds. File 1040 x Qualified energy conservation bonds. File 1040 x Qualified school construction bonds. File 1040 x Qualified zone academy bonds. File 1040 x Build America bonds. File 1040 x In some instances, an issuer may elect to receive a credit for interest paid on the bond. File 1040 x If the issuer makes this election, you cannot also claim a credit. File 1040 x Interest income. File 1040 x   The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return. File 1040 x How to take the credit. File 1040 x   Complete Form 8912 and attach it to your Form 1040. File 1040 x Include the credit in your total for Form 1040, line 53. File 1040 x Check box c and enter “8912” on the line next to that box. File 1040 x More information. File 1040 x   For more information, see the Instructions for Form 8912. File 1040 x Foreign Tax Credit You generally can choose to take income taxes you paid or accrued during the year to a foreign country or U. File 1040 x S. File 1040 x possession as a credit against your U. File 1040 x S. File 1040 x income tax. File 1040 x Or, you can deduct them as an itemized deduction (see chapter 22). File 1040 x You cannot take a credit (or deduction) for foreign income taxes paid on income that you exclude from U. File 1040 x S. File 1040 x tax under any of the following. File 1040 x Foreign earned income exclusion. File 1040 x Foreign housing exclusion. File 1040 x Income from Puerto Rico exempt from U. File 1040 x S. File 1040 x tax. File 1040 x Possession exclusion. File 1040 x Limit on the credit. File 1040 x   Unless you can elect not to file Form 1116 (see Exception , later), your foreign tax credit cannot be more than your U. File 1040 x S. File 1040 x tax liability (Form 1040, line 44), multiplied by a fraction. File 1040 x The numerator of the fraction is your taxable income from sources outside the United States. File 1040 x The denominator is your total taxable income from U. File 1040 x S. File 1040 x and foreign sources. File 1040 x See Publication 514 for more information. File 1040 x How to take the credit. File 1040 x   Complete Form 1116 and attach it to your Form 1040. File 1040 x Enter the credit on Form 1040, line 47. File 1040 x Exception. File 1040 x   You do not have to complete Form 1116 to take the credit if all of the following apply. File 1040 x All of your gross foreign source income was from interest and dividends and all of that income and the foreign tax paid on it were reported to you on Form 1099-INT, Form 1099-DIV, or Schedule K-1 (or substitute statement). File 1040 x If you had dividend income from shares of stock, you held those shares for at least 16 days. File 1040 x You are not filing Form 4563 or excluding income from sources within Puerto Rico. File 1040 x The total of your foreign taxes was not more than $300 (not more than $600 if married filing jointly). File 1040 x All of your foreign taxes were: Legally owed and not eligible for a refund, and Paid to countries that are recognized by the United States and do not support terrorism. File 1040 x More information. File 1040 x   For more information on the credit and these requirements, see the Instructions for Form 1116. File 1040 x Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals own a home. File 1040 x If you qualify, you can take the credit each year for part of the home mortgage interest you pay. File 1040 x Who qualifies. File 1040 x   You may be eligible for the credit if you were issued a qualified mortgage credit certificate (MCC) from your state or local government. File 1040 x Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. File 1040 x Amount of credit. File 1040 x   Figure your credit on Form 8396. File 1040 x If your mortgage loan amount is equal to (or smaller than) the certified indebtedness (loan) amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. File 1040 x   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. File 1040 x 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. File 1040 x      Certified indebtedness amount on your MCC     Original amount of your mortgage   Limit based on credit rate. File 1040 x   If the certificate credit rate is more than 20%, the credit you are allowed cannot be more than $2,000. File 1040 x 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, this $2,000 limit must be divided based on the interest held by each person. File 1040 x See Publication 530 for more information. File 1040 x Carryforward. File 1040 x   Your credit (after applying the limit based on the credit rate) is also subject to a limit based on your tax that is figured using Form 8396. File 1040 x If your allowable credit is reduced because of this tax liability limit, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. File 1040 x   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). File 1040 x How to take the credit. File 1040 x    Figure your 2013 credit and any carryforward to 2014 on Form 8396, and attach it to your Form 1040. File 1040 x Be sure to include any credit carryforward from 2010, 2011, and 2012. File 1040 x   Include the credit in your total for Form 1040, line 53. File 1040 x Check box c and enter “8396” on the line next to that box. File 1040 x Reduced home mortgage interest deduction. File 1040 x   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. File 1040 x You must do this even if part of that amount is to be carried forward to 2014. File 1040 x For more information about the home mortgage interest deduction, see chapter 23. File 1040 x Recapture of federal mortgage subsidy. File 1040 x   If you received an MCC with your mortgage loan, you may have to recapture (pay back) all or part of the benefit you received from that program. File 1040 x The recapture may be required if you sell or dispose of your home at a gain during the first 9 years after the date you closed your mortgage loan. File 1040 x See the Instructions for Form 8828 and chapter 15 for more information. File 1040 x More information. File 1040 x   For more information on the credit, see the Form 8396 instructions. File 1040 x Nonrefundable Credit for Prior Year Minimum Tax The tax laws give special treatment to some kinds of income and allow special deductions and credits for some kinds of expenses. File 1040 x If you benefit from these laws, you may have to pay at least a minimum amount of tax in addition to any other tax on these items. File 1040 x This is called the alternative minimum tax. File 1040 x The special treatment of some items of income and expenses only allows you to postpone paying tax until a later year. File 1040 x If in prior years you paid alternative minimum tax because of these tax postponement items, you may be able to take a credit for prior year minimum tax against your current year's regular tax. File 1040 x You may be able to take a credit against your regular tax if for 2012 you had: An alternative minimum tax liability and adjustments or preferences other than exclusion items, A minimum tax credit that you are carrying forward to 2013, or An unallowed qualified electric vehicle credit. File 1040 x How to take the credit. File 1040 x    Figure your 2013 nonrefundable credit (if any), and any carryforward to 2014 on Form 8801, and attach it to your Form 1040. File 1040 x Include the credit in your total for Form 1040, line 53, and check box b. File 1040 x You can carry forward any unused credit for prior year minimum tax to later years until it is completely used. File 1040 x More information. File 1040 x   For more information on the credit, see the Instructions for Form 8801. File 1040 x Plug-in Electric Drive Motor Vehicle Credit You may be able to take this credit if you placed in service for business or personal use a qualified plug-in electric drive motor vehicle or a qualified two- or three-wheeled plug-in electric vehicle in 2013 and you meet some other requirements. File 1040 x Qualified plug-in electric drive motor vehicle. File 1040 x   This is a new vehicle with at least four wheels that: Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 4 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. File 1040 x Qualified two- or three-wheeled plug-in electric vehicle. File 1040 x   This is a new vehicle with two or three wheels that: Is capable of achieving a speed of 45 miles per hour or greater, Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 2. File 1040 x 5 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. File 1040 x Certification and other requirements. File 1040 x   Generally, you can rely on the manufacturer's (or, in the case of a foreign manufacturer, its domestic distributor's) certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and, if applicable, the amount of the credit for which it qualifies. File 1040 x However, if the IRS publishes an announcement that the certification for any specific make, model, and model year vehicle has been withdrawn, you cannot rely on the certification for such a vehicle purchased after the date of publication of the withdrawal announcement. File 1040 x   The following requirements must also be met to qualify for the credit. File 1040 x You are the owner of the vehicle. File 1040 x If the vehicle is leased, only the lessor, and not the lessee, is entitled to the credit. File 1040 x You placed the vehicle in service during 2013. File 1040 x The vehicle is manufactured primarily for use on public streets, roads, and highways. File 1040 x The original use of the vehicle began with you. File 1040 x You acquired the vehicle for your use or to lease to others, and not for resale. File 1040 x In the case of the qualified two- or three-wheeled plug-in electric vehicle, the vehicle is acquired after 2011 and before 2014. File 1040 x You use the vehicle primarily in the United States. File 1040 x How to take the credit. File 1040 x   To take the credit, you must complete Form 8936 and attach it to your Form 1040. File 1040 x Include the credit in your total for Form 1040, line 53. File 1040 x Check box c and enter “8936” on the line next to that box. File 1040 x More information. File 1040 x   For more information on the credit, see the Form 8936 instructions. File 1040 x Residential Energy Credits You may be able to take one or both of the following credits if you made energy saving improvements to your home located in the United States in 2013. File 1040 x Nonbusiness energy property credit. File 1040 x Residential energy efficient property credit. File 1040 x If you are a member of a condominium management association for a condominium you own or a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any costs of the association or corporation for purposes of these credits. File 1040 x Nonbusiness energy property credit. File 1040 x   You may be able to take a credit equal to the sum of: 10% of the amount paid or incurred for qualified energy efficiency improvements installed during 2013, and Any residential energy property costs paid or incurred in 2013. File 1040 x   There is a lifetime limit of $500 for all years after 2005, of which only $200 can be for windows; $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any item of energy efficient building property. File 1040 x    If the total of nonbusiness energy property credits you have taken in previous years (after 2005) is more than $500, you cannot take this credit in 2013. File 1040 x   Qualified energy efficiency improvements are the following improvements that are new, can be expected to remain in use at least 5 years, and meet certain requirements for energy efficiency. File 1040 x Any insulation material or system that is specifically and primarily designed to reduce heat loss or gain of a home. File 1040 x Exterior window (including skylights). File 1040 x Exterior doors. File 1040 x Any metal or asphalt roof that has appropriate pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home. File 1040 x   Residential energy property is any of the following. File 1040 x Certain electric heat pump water heaters; electric heat pumps; central air conditioners; natural gas, propane, or oil water heater; and stoves that use biomass fuel. File 1040 x Qualified natural gas, propane, or oil furnaces; and qualified natural gas, propane, or oil hot water boilers. File 1040 x Certain advanced main air circulating fans used in natural gas, propane, or oil furnaces. File 1040 x Residential energy efficient property credit. File 1040 x   You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property. File 1040 x The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property. File 1040 x Basis reduction. File 1040 x   You must reduce the basis of your home by the amount of any credit allowed. File 1040 x How to take the credit. File 1040 x   Complete Form 5695 and attach it to your Form 1040. File 1040 x Enter the credit on Form 1040, line 52. File 1040 x More information. File 1040 x   For more information on these credits, see the Form 5695 instructions. File 1040 x Retirement Savings Contributions Credit (Saver's Credit) You may be able to take this credit if you, or your spouse if filing jointly, made: Contributions (other than rollover contributions) to a traditional or Roth IRA, Elective deferrals to a 401(k) or 403(b) plan (including designated Roth contributions) or to a governmental 457, SEP, or SIMPLE plan, Voluntary employee contributions to a qualified retirement plan (including the federal Thrift Savings Plan), or Contributions to a 501(c)(18)(D) plan. File 1040 x However, you cannot take the credit if either of the following applies. File 1040 x The amount on Form 1040, line 38, or Form 1040A, line 22, is more than $29,500 ($44,250 if head of household; $59,000 if married filing jointly). File 1040 x The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1996, (b) is claimed as a dependent on someone else's 2013 tax return, or (c) was a student (defined next). File 1040 x Student. File 1040 x   You were a student if during any part of 5 calendar months of 2013 you: Were enrolled as a full-time student at a school, or Took a full-time, on-farm training course given by a school or a state, county, or local government agency. File 1040 x School. File 1040 x   A school includes a technical, trade, or mechanical school. File 1040 x It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. File 1040 x How to take the credit. File 1040 x   Figure the credit on Form 8880. File 1040 x Enter the credit on your Form 1040, line 50, or your Form 1040A, line 32, and attach Form 8880 to your return. File 1040 x More information. File 1040 x   For more information on the credit, see the Form 8880 instructions. File 1040 x Refundable Credits The credits discussed in this part of the chapter are treated as payments of tax. File 1040 x If the total of these credits, withheld federal income tax, and estimated tax payments is more than your total tax, the excess can be refunded to you. File 1040 x Credit for Tax on Undistributed Capital Gain You must include in your income any amounts that regulated investment companies (commonly called mutual funds) or real estate investment trusts (REITs) allocated to you as capital gain distributions, even if you did not actually receive them. File 1040 x If the mutual fund or REIT paid a tax on the capital gain, you are allowed a credit for the tax since it is considered paid by you. File 1040 x The mutual fund or REIT will send you Form 2439 showing your share of the undistributed capital gains and the tax paid, if any. File 1040 x How to take the credit. File 1040 x   To take the credit, attach Copy B of Form 2439 to your Form 1040. File 1040 x Include the amount from box 2 of your Form 2439 in the total for Form 1040, line 71, and check box a. File 1040 x More information. File 1040 x   See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains. File 1040 x Health Coverage Tax Credit You may be able to take this credit for any month in which all the following statements were true on the first day of the month. File 1040 x You were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient (defined later); or you were a qualified family member of one of these individuals when the individual died or you finalized a divorce with one of these individuals. File 1040 x You and/or your family members were covered by a qualified health insurance plan for which you paid the entire premiums, or your portion of the premiums, directly to your health plan or to “U. File 1040 x S. File 1040 x Treasury–HCTC. File 1040 x ” You were not enrolled in Medicare Part A, B, or C, or you were enrolled in Medicare but your family member(s) qualified for the HCTC. File 1040 x You were not enrolled in Medicaid or the Children's Health Insurance Program (CHIP). File 1040 x You were not enrolled in the Federal Employees Health Benefits program (FEHBP) or eligible to receive benefits under the U. File 1040 x S. File 1040 x military health system (TRICARE). File 1040 x You were not imprisoned under federal, state, or local authority. File 1040 x Your employer did not pay 50% or more of the cost of coverage. File 1040 x You did not receive a 65% COBRA premium reduction from your former employer or COBRA administrator. File 1040 x But, you cannot take the credit if you can be claimed as a dependent on someone else's 2013 tax return. File 1040 x If you meet all of these conditions, you may be able to take a credit of up to 72. File 1040 x 5% of the amount you paid directly to a qualified health plan for you and any qualifying family members. File 1040 x You cannot take the credit for insurance premiums on coverage that was actually paid for with a National Emergency Grant. File 1040 x The amount you paid for qualified health insurance coverage must be reduced by any Archer MSA and health savings account distributions used to pay for the coverage. File 1040 x You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. File 1040 x If the credit is paid on your behalf in advance, that amount will reduce the amount of the credit you can take on your tax return. File 1040 x TAA recipient. File 1040 x   You were an eligible TAA recipient on the first day of the month if, for any day in that month or the prior month, you: Received a trade readjustment allowance, or Would have been entitled to receive such an allowance except that you had not exhausted all rights to any unemployment insurance (except additional compensation that is funded by a state and is not reimbursed from any federal funds) to which you were entitled (or would be entitled if you applied). File 1040 x Example. File 1040 x You received a trade adjustment allowance for January 2013. File 1040 x You were an eligible TAA recipient on the first day of January and February. File 1040 x Alternative TAA recipient. File 1040 x   You were an eligible alternative TAA recipient on the first day of the month if, for that month or the prior month, you received benefits under an alternative trade adjustment assistance program for older workers established by the Department of Labor. File 1040 x Example. File 1040 x You received benefits under an alternative trade adjustment assistance program for older workers for October 2013. File 1040 x The program was established by the Department of Labor. File 1040 x You were an eligible alternative TAA recipient on the first day of October and November. File 1040 x RTAA recipient. File 1040 x   You were an eligible RTAA recipient on the first day of the month if, for that month or the prior month, you received benefits under a reemployment trade adjustment assistance program for older workers established by the Department of Labor. File 1040 x PBGC pension recipient. File 1040 x   You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply. File 1040 x You were age 55 or older on the first day of the month. File 1040 x You received a benefit for that month paid by the PBGC under title IV of the Employee Retirement Income Security Act of 1974 (ERISA). File 1040 x If you received a lump-sum payment from the PBGC after August 5, 2002, you meet item (2) above for any month that you would have received a PBGC benefit if you had not received the lump-sum payment. File 1040 x How to take the credit. File 1040 x   To take the credit, complete Form 8885 and attach it to your Form 1040. File 1040 x Include your credit in the total for Form 1040, line 71, and check box c. File 1040 x   You must attach health insurance bills (or COBRA payment coupons) and proof of payment for any amounts you include on Form 8885, line 2. File 1040 x For details, see Publication 502 or Form 8885. File 1040 x More information. File 1040 x   For definitions and special rules, including those relating to qualified health insurance plans, qualifying family members, the effect of certain life events, and employer-sponsored health insurance plans, see Publication 502 and the Form 8885 instructions. File 1040 x Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld Most employers must withhold social security tax from your wages. File 1040 x If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax. File 1040 x If you worked for two or more employers in 2013, you may have had too much social security tax withheld from your pay. File 1040 x If one or more of those employers was a railroad employer, too much tier 1 RRTA tax may also have been withheld at the 6. File 1040 x 2% rate. File 1040 x You can claim the excess social security or tier 1 RRTA tax as a credit against your income tax when you file your return. File 1040 x For the tier 1 RRTA tax, only use the portion of the tier 1 RRTA tax that was taxed at the 6. File 1040 x 2% rate when figuring if excess tier 1 RRTA tax was withheld; do not include any portion of the tier 1 RRTA tax that was withheld at the Medicare tax rate (1. File 1040 x 45%) or the Additional Medicare Tax rate (. File 1040 x 9%). File 1040 x The following table shows the maximum amount of wages subject to tax and the maximum amount of tax that should have been withheld for 2013. File 1040 x Type of tax Maximum  wages subject to tax Maximum tax that should have been withheld Social security or RRTA tier 1 $113,700 $7,049. File 1040 x 40 RRTA tier 2 $84,300 $3,709. File 1040 x 20 All wages are subject to Medicare tax withholding. File 1040 x   Use Form 843, Claim for Refund and Request for Abatement, to claim a refund of excess tier 2 RRTA tax. File 1040 x Be sure to attach a copy of all of your W-2 forms. File 1040 x Use Worksheet 3-3 in Publication 505, Tax Withholding and Estimated Tax, to help you figure the excess amount. File 1040 x Employer's error. File 1040 x   If any one employer withheld too much social security or tier 1 RRTA tax, you cannot take the excess as a credit against your income tax. File 1040 x The employer should adjust the tax for you. File 1040 x If the employer does not adjust the overcollection, you can file a claim for refund using Form 843. File 1040 x Joint return. File 1040 x   If you are filing a joint return, you cannot add the social security or tier 1 RRTA tax withheld from your spouse's wages to the amount withheld from your wages. File 1040 x Figure the withholding separately for you and your spouse to determine if either of you has excess withholding. File 1040 x How to figure the credit if you did not work for a railroad. File 1040 x   If you did not work for a railroad during 2013, figure the credit as follows: 1. File 1040 x Add all social security tax withheld (but not more than $7,049. File 1040 x 40 for each employer). File 1040 x Enter the total here   2. File 1040 x Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. File 1040 x Add lines 1 and 2. File 1040 x If $7,049. File 1040 x 40 or less, stop here. File 1040 x You cannot take  the credit   4. File 1040 x Social security tax limit 7,049. File 1040 x 40 5. File 1040 x Credit. File 1040 x Subtract line 4 from line 3. File 1040 x Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ Example. File 1040 x You are married and file a joint return with your spouse who had no gross income in 2013. File 1040 x During 2013, you worked for the Brown Technology Company and earned $60,000 in wages. File 1040 x Social security tax of $3,720 was withheld. File 1040 x You also worked for another employer in 2013 and earned $55,000 in wages. File 1040 x $3,410 of social security tax was withheld from these wages. File 1040 x Because you worked for more than one employer and your total wages were more than $113,700, you can take a credit of $80. File 1040 x 60 for the excess social security tax withheld. File 1040 x 1. File 1040 x Add all social security tax withheld (but not more than $7,049. File 1040 x 40 for each employer). File 1040 x Enter the total here $7,130. File 1040 x 00 2. File 1040 x Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT” -0- 3. File 1040 x Add lines 1 and 2. File 1040 x If $7,049. File 1040 x 40 or less, stop here. File 1040 x You cannot take the credit 7,130. File 1040 x 00 4. File 1040 x Social security tax limit 7,049. File 1040 x 40 5. File 1040 x Credit. File 1040 x Subtract line 4 from line 3. File 1040 x Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $80. File 1040 x 60 How to figure the credit if you worked for a railroad. File 1040 x   If you were a railroad employee at any time during 2013, figure the credit as follows: 1. File 1040 x Add all social security and tier 1 RRTA tax withheld at the 6. File 1040 x 2% rate (but not more than $7,049. File 1040 x 40 for each employer). File 1040 x Enter the total here   2. File 1040 x Enter any uncollected social security and tier 1 RRTA tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. File 1040 x Add lines 1 and 2. File 1040 x If $7,049. File 1040 x 40 or less, stop here. File 1040 x You cannot take  the credit   4. File 1040 x Social security and tier 1 RRTA  tax limit 7,049. File 1040 x 40 5. File 1040 x Credit. File 1040 x Subtract line 4 from line 3. File 1040 x Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ How to take the credit. File 1040 x   Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 41. File 1040 x More information. File 1040 x   For more information on the credit, see Publication 505. File 1040 x Prev  Up  Next   Home   More Online Publications
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The File 1040 X

File 1040 x 3. File 1040 x   Reporting Rental Income, Expenses, and Losses Table of Contents Which Forms To UseSchedule E (Form 1040) Schedule C (Form 1040), Profit or Loss From Business Qualified Joint Venture Limits on Rental LossesAt-Risk Rules Passive Activity Limits Casualties and Thefts Example Figuring the net income or loss for a residential rental activity may involve more than just listing the income and deductions on Schedule E (Form 1040). File 1040 x There are activities which do not qualify to use Schedule E, such as when the activity is not engaged in to make a profit or when you provide substantial services in conjunction with the property. File 1040 x There are also the limitations which may need to be applied if you have a net loss on Schedule E. File 1040 x There are two: (1) the limitation based on the amount of investment you have at risk in your rental activity, and (2) the special limits imposed on passive activities. File 1040 x You may also have a gain or loss related to your rental property from a casualty or theft. File 1040 x This is considered separately from the income and expense information you report on Schedule E. File 1040 x Which Forms To Use The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). File 1040 x However, do not use that schedule to report a not-for-profit activity. File 1040 x See Not Rented for Profit , in chapter 4. File 1040 x There are also other rental situations in which forms other than Schedule E would be used. File 1040 x Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. File 1040 x , you normally report your rental income and expenses on Schedule E, Part I. File 1040 x List your total income, expenses, and depreciation for each rental property. File 1040 x Be sure to enter the number of fair rental and personal use days on line 2. File 1040 x If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. File 1040 x Complete lines 1 and 2 for each property. File 1040 x However, fill in lines 23a through 26 on only one Schedule E. File 1040 x On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. File 1040 x To find out if you need to attach Form 4562, see Form 4562 , later. File 1040 x If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. File 1040 x Form 6198, At-Risk Limitations. File 1040 x See At-Risk Rules , later. File 1040 x Also see Publication 925. File 1040 x Form 8582, Passive Activity Loss Limitations. File 1040 x See Passive Activity Limits , later. File 1040 x Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. File 1040 x If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. File 1040 x Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). File 1040 x Form 4562. File 1040 x   You must complete and attach Form 4562 for rental activities only if you are claiming: Depreciation, including the special depreciation allowance, on property placed in service during 2013; Depreciation on listed property (such as a car), regardless of when it was placed in service; or Any other car expenses, including the standard mileage rate or lease expenses. File 1040 x Otherwise, figure your depreciation on your own worksheet. File 1040 x You do not have to attach these computations to your return, but you should keep them in your records for future reference. File 1040 x   See Publication 946 for information on preparing Form 4562. File 1040 x Schedule C (Form 1040), Profit or Loss From Business Generally, Schedule C is used when you provide substantial services in conjunction with the property or the rental is part of a trade or business as a real estate dealer. File 1040 x Providing substantial services. File 1040 x   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. File 1040 x Use Form 1065, U. File 1040 x S. File 1040 x Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). File 1040 x Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. File 1040 x For information, see Publication 334, Tax Guide for Small Business. File 1040 x Also, you may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. File 1040 x For a discussion of “substantial services,” see Real Estate Rents in Publication 334, chapter 5. File 1040 x Qualified Joint Venture If you and your spouse each materially participate (see Material participation under Passive Activity Limits, later) as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. File 1040 x This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. File 1040 x If you make this election, you must report rental real estate income on Schedule E (or Schedule C if you provide substantial services). File 1040 x You will not be required to file Form 1065 for any year the election is in effect. File 1040 x Rental real estate income generally is not included in net earnings from self-employment subject to self-employment tax and generally is subject to the passive activity limits. File 1040 x If you and your spouse filed a Form 1065 for the year prior to the election, the partnership terminates at the end of the tax year immediately preceding the year the election takes effect. File 1040 x For more information on qualified joint ventures, go to IRS. File 1040 x gov and enter “qualified joint venture” in the search box. File 1040 x Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. File 1040 x You must consider these rules in the order shown below. File 1040 x Both are discussed in this section. File 1040 x At-risk rules. File 1040 x These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. File 1040 x This applies only if the real property was placed in service after 1986. File 1040 x Passive activity limits. File 1040 x Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. File 1040 x However, there are exceptions. File 1040 x At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. File 1040 x Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. File 1040 x In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. File 1040 x You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. File 1040 x Any loss that is disallowed because of the at-risk limits is treated as a deduction from the same activity in the next tax year. File 1040 x See Publication 925 for a discussion of the at-risk rules. File 1040 x Form 6198. File 1040 x   If you are subject to the at-risk rules, file Form 6198, At-Risk Limitations, with your tax return. File 1040 x Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. File 1040 x For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. File 1040 x For a discussion of activities that are not considered rental activities, see Rental Activities in Publication 925. File 1040 x Deductions or losses from passive activities are limited. File 1040 x You generally cannot offset income, other than passive income, with losses from passive activities. File 1040 x Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. File 1040 x Any excess loss or credit is carried forward to the next tax year. File 1040 x Exceptions to the rules for figuring passive activity limits for personal use of a dwelling unit and for rental real estate with active participation are discussed later. File 1040 x For a detailed discussion of these rules, see Publication 925. File 1040 x Real estate professionals. File 1040 x   If you are a real estate professional, complete line 43 of Schedule E. File 1040 x      You qualify as a real estate professional for the tax year if you meet both of the following requirements. File 1040 x More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate. File 1040 x You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate. File 1040 x If you qualify as a real estate professional, rental real estate activities in which you materially participated are not passive activities. File 1040 x For purposes of determining whether you materially participated in your rental real estate activities, each interest in rental real estate is a separate activity unless you elect to treat all your interests in rental real estate as one activity. File 1040 x   Do not count personal services you perform as an employee in real property trades or businesses unless you are a 5% owner of your employer. File 1040 x You are a 5% owner if you own (or are considered to own) more than 5% of your employer's outstanding stock, or capital or profits interest. File 1040 x   Do not count your spouse's personal services to determine whether you met the requirements listed earlier to qualify as a real estate professional. File 1040 x However, you can count your spouse's participation in an activity in determining if you materially participated. File 1040 x Real property trades or businesses. File 1040 x   A real property trade or business is a trade or business that does any of the following with real property. File 1040 x Develops or redevelops it. File 1040 x Constructs or reconstructs it. File 1040 x Acquires it. File 1040 x Converts it. File 1040 x Rents or leases it. File 1040 x Operates or manages it. File 1040 x Brokers it. File 1040 x Choice to treat all interests as one activity. File 1040 x   If you were a real estate professional and had more than one rental real estate interest during the year, you can choose to treat all the interests as one activity. File 1040 x You can make this choice for any year that you qualify as a real estate professional. File 1040 x If you forgo making the choice for one year, you can still make it for a later year. File 1040 x   If you make the choice, it is binding for the tax year you make it and for any later year that you are a real estate professional. File 1040 x This is true even if you are not a real estate professional in any intervening year. File 1040 x (For that year, the exception for real estate professionals will not apply in determining whether your activity is subject to the passive activity rules. File 1040 x )   See the Instructions for Schedule E for information about making this choice. File 1040 x Material participation. File 1040 x   Generally, you materially participated in an activity for the tax year if you were involved in its operations on a regular, continuous, and substantial basis during the year. File 1040 x For details, see Publication 925 or the Instructions for Schedule C. File 1040 x Participating spouse. File 1040 x   If you are married, determine whether you materially participated in an activity by also counting any participation in the activity by your spouse during the year. File 1040 x Do this even if your spouse owns no interest in the activity or files a separate return for the year. File 1040 x Form 8582. File 1040 x    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. File 1040 x See Form 8582 not required , later in this chapter, to determine if you must complete Form 8582. File 1040 x   If you are required to complete Form 8582 and are also subject to the at-risk rules, include the amount from Form 6198, line 21 (deductible loss) in column (b) of Form 8582, Worksheet 1 or 3, as required. File 1040 x Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. File 1040 x Instead, follow the rules explained in chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). File 1040 x Exception for Rental Real Estate With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. File 1040 x This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. File 1040 x Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. File 1040 x Example. File 1040 x Jane is single and has $40,000 in wages, $2,000 of passive income from a limited partnership, and $3,500 of passive loss from a rental real estate activity in which she actively participated. File 1040 x $2,000 of Jane's $3,500 loss offsets her passive income. File 1040 x The remaining $1,500 loss can be deducted from her $40,000 wages. File 1040 x The special allowance is not available if you were married, lived with your spouse at any time during the year, and are filing a separate return. File 1040 x Active participation. File 1040 x   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. File 1040 x Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions. File 1040 x Example. File 1040 x Mike is single and had the following income and losses during the tax year:   Salary $42,300     Dividends 300     Interest 1,400     Rental loss (4,000)   The rental loss was from the rental of a house Mike owned. File 1040 x Mike had advertised and rented the house to the current tenant himself. File 1040 x He also collected the rents, which usually came by mail. File 1040 x All repairs were either made or contracted out by Mike. File 1040 x Although the rental loss is from a passive activity, because Mike actively participated in the rental property management he can use the entire $4,000 loss to offset his other income. File 1040 x Maximum special allowance. File 1040 x   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. File 1040 x   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. File 1040 x If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. File 1040 x   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. File 1040 x Modified adjusted gross income (MAGI). File 1040 x   This is your adjusted gross income from Form 1040, U. File 1040 x S. File 1040 x Individual Income Tax Return, line 38, or Form 1040NR, U. File 1040 x S. File 1040 x Nonresident Alien Income Tax Return, line 37, figured without taking into account: The taxable amount of social security or equivalent tier 1 railroad retirement benefits, The deductible contributions to traditional individual retirement accounts (IRAs) and section 501(c)(18) pension plans, The exclusion from income of interest from Series EE and I U. File 1040 x S. File 1040 x savings bonds used to pay higher educational expenses, The exclusion of amounts received under an employer's adoption assistance program, Any passive activity income or loss included on Form 8582, Any rental real estate loss allowed to real estate professionals, Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the Instructions for Form 8582), The deduction allowed for one-half of self-employment tax, The deduction allowed for interest paid on student loans, The deduction for qualified tuition and related fees, and The domestic production activities deduction (see the Instructions for Form 8903). File 1040 x Form 8582 not required. File 1040 x   Do not complete Form 8582 if you meet all of the following conditions. File 1040 x Your only passive activities were rental real estate activities in which you actively participated. File 1040 x Your overall net loss from these activities is $25,000 or less ($12,500 or less if married filing separately and you lived apart from your spouse all year). File 1040 x If married filing separately, you lived apart from your spouse all year. File 1040 x You have no prior year unallowed losses from these (or any other passive) activities. File 1040 x You have no current or prior year unallowed credits from passive activities. File 1040 x Your MAGI is $100,000 or less ($50,000 or less if married filing separately and you lived apart from your spouse all year). File 1040 x You do not hold any interest in a rental real estate activity as a limited partner or as a beneficiary of an estate or a trust. File 1040 x   If you meet all of the conditions listed above, your rental real estate activities are not limited by the passive activity rules and you do not have to complete Form 8582. File 1040 x On lines 23a through 23e of your Schedule E, enter the applicable amounts. File 1040 x Casualties and Thefts As a result of a casualty or theft, you may have a loss related to your rental property. File 1040 x You may be able to deduct the loss on your income tax return. File 1040 x Casualty. File 1040 x   This is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. File 1040 x Such events include a storm, fire, or earthquake. File 1040 x Theft. File 1040 x   This is defined as the unlawful taking and removing of your money or property with the intent to deprive you of it. File 1040 x Gain from casualty or theft. File 1040 x   It is also possible to have a gain from a casualty or theft if you receive money, including insurance, that is more than your adjusted basis in the property. File 1040 x Generally, you must report this gain. File 1040 x However, under certain circumstances, you may defer paying tax by choosing to postpone reporting the gain. File 1040 x To do this, you generally must buy replacement property within 2 years after the close of the first tax year in which any part of your gain is realized. File 1040 x In certain circumstances, the replacement period can be greater than 2 years; see Replacement Period in Publication 547 for more information. File 1040 x The cost of the replacement property must be equal to or more than the net insurance or other payment you received. File 1040 x More information. File 1040 x   For information on business and nonbusiness casualty and theft losses, see Publication 547. File 1040 x How to report. File 1040 x    If you had a casualty or theft that involved property used in your rental activity, figure the net gain or loss in Section B of Form 4684, Casualties and Thefts. File 1040 x Follow the Instructions for Form 4684 for where to carry your net gain or loss. File 1040 x Example In February 2008, Marie Pfister bought a rental house for $135,000 (house $120,000 and land $15,000) and immediately began renting it out. File 1040 x In 2013, she rented it all 12 months for a monthly rental fee of $1,125. File 1040 x In addition to her rental income of $13,500 (12 x $1,125), Marie had the following expenses. File 1040 x Mortgage interest $8,000 Fire insurance (1-year policy) 250 Miscellaneous repairs 400 Real estate taxes imposed and paid 500 Maintenance 200 Marie depreciates the residential rental property under MACRS GDS. File 1040 x This means using the straight line method over a recovery period of 27. File 1040 x 5 years. File 1040 x She uses Table 2-2d to find her depreciation percentage. File 1040 x Because she placed the property in service in February 2008, she continues to use that row of Table 2-2d. File 1040 x For year 6, the rate is 3. File 1040 x 636%. File 1040 x Marie figures her net rental income or loss for the house as follows: Total rental income received  ($1,125 × 12) $13,500 Minus: Expenses     Mortgage interest $8,000   Fire insurance 250   Miscellaneous repairs 400   Real estate taxes 500   Maintenance 200   Total expenses 9,350 Balance $4,150 Minus: Depreciation ($120,000 x 3. File 1040 x 636%) 4,363 Net rental (loss) for house ($213)       Marie had a net loss for the year. File 1040 x Because she actively participated in her passive rental real estate activity and her loss was less than $25,000, she can deduct the loss on her return. File 1040 x Marie also meets all of the requirements for not having to file Form 8582. File 1040 x She uses Schedule E, Part I, to report her rental income and expenses. File 1040 x She enters her income, expenses, and depreciation for the house in the column for Property A and enters her loss on line 22. File 1040 x Form 4562 is not required. 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