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File 2012 And 2013 Taxes

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File 2012 And 2013 Taxes

File 2012 and 2013 taxes Publication 557 - Additional Material Table of Contents Appendix. File 2012 and 2013 taxes Sample Articles of Organization, continued Organization Reference Chart Section of 1986 Code Description of organization General nature of activities Application  Form Annual return required to be  filed Contributions  allowable 501(c)(1) Corporations Organized under Act of Congress (including Federal Credit Unions) Instrumentalities of the  United States No Form None Yes, if made for exclusively public purposes 501(c)(2) Title Holding Corporation For Exempt Organization Holding title to property of an  exempt organization 1024 9901 or 990-EZ8 No2 501(c)(3) Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations Activities of nature implied by description of class of organization 1023 9901 or 990-EZ8, or 990-PF Yes, generally 501(c)(4) Civic Leagues, Social Welfare Organizations, and Local Associations of Employees Promotion of community welfare; charitable, educational, or recreational 1024 9901 or 990-EZ8 No, generally 2, 3 501(c)(5) Labor, Agricultural, and Horticultural Organizations Educational or instructive, the  purpose being to improve conditions of work, and to improve products of efficiency 1024 9901 or 990-EZ8 No2 501(c)(6) Business Leagues, Chambers of Commerce, Real Estate Boards, etc. File 2012 and 2013 taxes Improvement of business  conditions of one or more lines of business 1024 9901 or 990-EZ8 No2 501(c)(7) Social and Recreational Clubs Pleasure, recreation, social activities 1024 9901 or 990-EZ8 No2 501(c)(8) Fraternal Beneficiary Societies  and Associations Lodge providing for payment of life, sickness, accident or other benefits  to members 1024 9901 or 990-EZ8 Yes, if for certain Sec. File 2012 and 2013 taxes 501(c)(3) purposes 501(c)(9) Voluntary Employees Beneficiary Associations Providing for payment of life, sickness, accident, or other benefits to members 1024 9901 or 990-EZ8 No2 501(c)(10) Domestic Fraternal Societies  and Associations Lodge devoting its net earnings to charitable, fraternal, and other  specified purposes. File 2012 and 2013 taxes No life, sickness, or accident benefits to members 1024 9901 or 990-EZ8 Yes, if for certain Sec. File 2012 and 2013 taxes 501(c)(3) purposes 501(c)(11) Teachers' Retirement Fund Associations Teachers' association for payment of retirement benefits Letter6 9901 or 990-EZ8 No2 501(c)(12) Benevolent Life Insurance Associations, Mutual Ditch or  Irrigation Companies, Mutual or Cooperative Telephone Companies, etc. File 2012 and 2013 taxes Activities of a mutually beneficial  nature similar to those implied by the description of class of organization 1024 9901 or 990-EZ8 No2 501(c)(13) Cemetery Companies Burials and incidental activities 1024 9901 or 990-EZ8 Yes, generally 501(c)(14) State-Chartered Credit Unions,  Mutual Reserve Funds Loans to members Letter6 9901 or 990-EZ8 No2 501(c)(15) Mutual Insurance Companies or Associations Providing insurance to members substantially at cost 1024 9901 or 990-EZ8 No2 501(c)(16) Cooperative Organizations to  Finance Crop Operations Financing crop operations in  conjunction with activities of a marketing  or purchasing association Form 1120-C6 9901 or 990-EZ8 No2 501(c)(17) Supplemental Unemployment  Benefit Trusts Provides for payment of  supplemental unemployment compensation benefits 1024 9901 or 990-EZ8 No2 501(c)(18) Employee Funded Pension Trust (created before June 25, 1959) Payment of benefits under a  pension plan funded by employees Letter6 9901 or 990-EZ8 No2 501(c)(19) Post or Organization of Past or  Present Members of the Armed Forces Activities implied by nature of organization 1024 9901 or 990-EZ8 No, generally7 501(c)(21) Black Lung Benefit Trusts Funded by coal mine operators to satisfy their liability for disability or  death due to black lung diseases Letter6 990-BL No4 501(c)(22) Withdrawal Liability Payment Fund To provide funds to meet the  liability of employers withdrawing from  a multi-employer pension fund Letter6 9901 or 990-EZ8 No5 501(c)(23) Veterans' Organization (created before 1880) To provide insurance and other  benefits to veterans Letter6 9901 or 990-EZ8 No, generally7 501(c)(25) Title Holding Corporations or Trusts with Multiple Parent Corporations Holding title and paying over  income from property to 35 or fewer parents or beneficiaries 1024 9901 or 990-EZ8 No 501(c)(26) State-Sponsored Organization Providing Health Coverage for High-Risk Individuals Provides health care coverage to high-risk individuals Letter6 9901 or 990-EZ8 No 501(c)(27) State-Sponsored Workers' Compensation Reinsurance Organization Reimburses members for losses  under workers' compensation acts Letter6 9901 or 990-EZ8 No 501(c)(28) National Railroad Retirement Investment Trust Manages and invests the assets of the Railroad Retirement Account No Form 99011 No11 501(c)(29) CO-OP health insurance issuers A qualified health insurance issuer which has received a loan or grant under the CO-OP program Letter and Form 871814 9901 No13 501(d) Religious and Apostolic Associations Regular business activities;  Communal religious community No Form 10659 No2 501(e) Cooperative Hospital Service Organizations Performs cooperative services for hospitals 1023 9901 or 990-EZ8 Yes 501(f) Cooperative Service Organizations  of Operating Educational Organizations Performs collective investment  services for educational organizations 1023 9901 or 990-EZ8 Yes 501(k) Child Care Organizations Provides care for children 1023 9901 or 990-EZ8 Yes 501(n) Charitable Risk Pools Pools certain insurance risks of sec. File 2012 and 2013 taxes 501(c)(3) organizations 1023 9901 or 990-EZ8 Yes 501(q) Credit Counseling Organization Credit counseling services 1023 102312 No 521(a) Farmers' Cooperative Associations Cooperative marketing and  purchasing for agricultural procedures 1028 1120-C No 527 Political organizations A party, committee, fund,  association, etc. File 2012 and 2013 taxes , that directly or indirectly accepts contributions or makes expenditures for political campaigns 8871 1120-POL10 9901 or 990-EZ8 No 1For exceptions to the filing requirement, see chapter 2 and the form instructions. File 2012 and 2013 taxes Note: For annual tax periods beginning after 2006, most tax-exempt organizations, other than churches, are required to file an annual Form 990, 990-EZ, or 990-PF with the IRS or to submit an annual electronic notice, Form 990-N (e-Postcard), to the IRS. File 2012 and 2013 taxes Tax-exempt organizations failing to file an annual return or submit an annual notice as required for 3 consecutive years will automatically lose their tax-exempt status. File 2012 and 2013 taxes    2An organization exempt under a subsection of section 501 other than 501(c)(3) can establish a charitable fund, contributions to which are deductible. File 2012 and 2013 taxes Such a fund must itself meet the requirements of section 501(c)(3) and the related notice requirements of section 508(a). File 2012 and 2013 taxes    3Contributions to volunteer fire companies and similar organizations are deductible, but only if made for exclusively public purposes. File 2012 and 2013 taxes    4Deductible as a business expense to the extent allowed by section 192. File 2012 and 2013 taxes    5Deductible as a business expense to the extent allowed by section 194A. File 2012 and 2013 taxes 6Application is by letter to the address shown on Form 8718. File 2012 and 2013 taxes A copy of the organizing document should be attached and the letter should be signed by an officer. File 2012 and 2013 taxes    7Contributions to these organizations are deductible only if 90% or more of the organization's members are war veterans. File 2012 and 2013 taxes    8For limits on the use of Form 990-EZ, see chapter 2 and the general instructions for Form 990-EZ (or Form 990). File 2012 and 2013 taxes    9Although the organization files a partnership return, all distributions are deemed dividends. File 2012 and 2013 taxes The members are not entitled to pass through treatment of the organization's income or expenses. File 2012 and 2013 taxes    10Form 1120-POL is required only if the organization has taxable income as defined in section 527(c). File 2012 and 2013 taxes    11Only required to annually file so much of the Form 990 that relates to the names and addresses of the officers, directors, trustees, and key employees, and their titles, compensation, and hours devoted to their positions (Part VII of Form 990), and to complete Item I in the Heading of Form 990 to confirm its tax-exempt status under section 501(c)(28). File 2012 and 2013 taxes    12See section 501(q) if the organization provides credit counseling services and seeks recognition of exemption under section 501(c)(4). File 2012 and 2013 taxes Use Form 1024 if applying for recognition under section 501(c)(4). File 2012 and 2013 taxes    13See section 501(c)(29) for details. File 2012 and 2013 taxes    14See Revenue Procedure 2012-11, sec. File 2012 and 2013 taxes 4. File 2012 and 2013 taxes 01, 2012-7 I. File 2012 and 2013 taxes R. File 2012 and 2013 taxes B. File 2012 and 2013 taxes 368, for details. File 2012 and 2013 taxes Appendix. File 2012 and 2013 taxes Sample Articles of Organization The following are examples of Articles of Incorporation (Draft A) and a declaration of trust (Draft B) that contain the required information as to purposes and powers of an organization and disposition of its assets upon dissolution. File 2012 and 2013 taxes You should bear in mind that requirements for these instruments may vary under applicable state law. File 2012 and 2013 taxes See Private Foundations and Public Charities , earlier for the special provisions required in a private foundation's governing instrument in order for it to qualify for exemption. File 2012 and 2013 taxes DRAFT A  Articles of Incorporation of the undersigned, a majority of whom are citizens of the United States, desiring to form a Non-Profit Corporation under the Non-Profit Corporation Law of , do hereby certify: First: The name of the Corporation shall be . File 2012 and 2013 taxes Second: The place in this state where the principal office of the Corporation is to be located is the City of , County. File 2012 and 2013 taxes Third: Said corporation is organized exclusively for charitable, religious, educational, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. File 2012 and 2013 taxes Fourth: The names and addresses of the persons who are the initial trustees of the corporation are as follows: Name , Address Fifth: No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to its members, trustees, officers, or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in Article Third hereof. File 2012 and 2013 taxes No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office. File 2012 and 2013 taxes Notwithstanding any other provision of these articles, the corporation shall not carry on any other activities not permitted to be carried on (a) by a corporation exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or (b) by a corporation, contributions to which are deductible under section 170(c)(2) of the Internal Revenue Code, or the corresponding section of any future federal tax code. File 2012 and 2013 taxes   If reference to federal law in articles of incorporation imposes a limitation that is invalid in your state, you may wish to substitute the following for the last sentence of the preceding paragraph: “Notwithstanding any other provision of these articles, this corporation shall not, except to an insubstantial degree, engage in any activities or exercise any powers that are not in furtherance of the purposes of this corporation. File 2012 and 2013 taxes ” Sixth: Upon the dissolution of the corporation, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. File 2012 and 2013 taxes Any such assets not so disposed of shall be disposed of by a Court of Competent Jurisdiction of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes. File 2012 and 2013 taxes   In witness whereof, we have hereunto subscribed our names this day of , 20. File 2012 and 2013 taxes Appendix. File 2012 and 2013 taxes Sample Articles of Organization, continued Draft B The Charitable Trust. File 2012 and 2013 taxes Declaration of Trust made as of the day of , 20 , by , of , and , of , who hereby declare and agree that they have received this day from , as Donor, the sum of Ten Dollars ($10) and that they will hold and manage the same, and any additions to it, in trust, as follows: First: This trust shall be called “The Charitable Trust. File 2012 and 2013 taxes ” Second: The trustees may receive and accept property, whether real, personal, or mixed, by way of gift, bequest, or devise, from any person, firm, trust, or corporation, to be held, administered, and disposed of in accordance with and pursuant to the provisions of this Declaration of Trust; but no gift, bequest, or devise of any such property shall be received and accepted if it is conditioned or limited in such manner as to require the disposition of the income or its principal to any person or organization other than a “charitable organization” or for other than “charitable purposes” within the meaning of such terms as defined in Article Third of this Declaration of Trust, or as shall, in the opinion of the trustees, jeopardize the federal income tax exemption of this trust pursuant to section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. File 2012 and 2013 taxes Third: a) The principal and income of all property received and accepted by the trustees to be administered under this Declaration of Trust shall be held in trust by them, and the trustees may make payments or distributions from income or principal, or both, to or for the use of such charitable organizations, within the meaning of that term as defined in paragraph C, in such amounts and for such charitable purposes of the trust as the trustees shall from time to time select and determine; and the trustees may make payments or distributions from income or principal, or both, directly for such charitable purposes, within the meaning of that term as defined in paragraph D, in such amounts as the trustees shall from time to time select and determine without making use of any other charitable organization. File 2012 and 2013 taxes The trustees may also make payments or distributions of all or any part of the income or principal to states, territories, or possessions of the United States, any political subdivision of any of the foregoing, or to the United States or the District of Columbia but only for charitable purposes within the meaning of that term as defined in paragraph D. File 2012 and 2013 taxes Income or principal derived from contributions by corporations shall be distributed by the trustees for use solely within the United States or its possessions. File 2012 and 2013 taxes No part of the net earnings of this trust shall inure or be payable to or for the benefit of any private shareholder or individual, and no substantial part of the activities of this trust shall be the carrying on of propaganda, or otherwise attempting to influence legislation. File 2012 and 2013 taxes No part of the activities of this trust shall be the participation in, or intervention in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office. File 2012 and 2013 taxes b) The trust shall continue forever unless the trustees terminate it and distribute all of the principal and income, which action may be taken by the trustees in their discretion at any time. File 2012 and 2013 taxes On such termination, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. File 2012 and 2013 taxes The donor authorizes and empowers the trustees to form and organize a nonprofit corporation limited to the uses and purposes provided for in this Declaration of Trust, such corporation to be organized under the laws of any state or under the laws of the United States as may be determined by the trustees; such corporation when organized to have power to administer and control the affairs and property and to carry out the uses, objects, and purposes of this trust. File 2012 and 2013 taxes Upon the creation and organization of such corporation, the trustees are authorized and empowered to convey, transfer, and deliver to such corporation all the property and assets to which this trust may be or become entitled. File 2012 and 2013 taxes The charter, bylaws, and other provisions for the organization and management of such corporation and its affairs and property shall be such as the trustees shall determine, consistent with the provisions of this paragraph. File 2012 and 2013 taxes c) In this Declaration of Trust and in any amendments to it, references to “charitable organizations” or “charitable organization” mean corporations, trusts, funds, foundations, or community chests created or organized in the United States or in any of its possessions, whether under the laws of the United States, any state or territory, the District of Columbia, or any possession of the United States, organized and operated exclusively for charitable purposes, no part of the net earnings of which inures or is payable to or for the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation, and which do not participate in or intervene in (including the publishing or distributing of statements) any political campaign on behalf of or in opposition to any candidate for public office. File 2012 and 2013 taxes It is intended that the organization described in this paragraph C shall be entitled to exemption from federal income tax under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. File 2012 and 2013 taxes d) In this Declaration of Trust and in any amendments to it, the term “charitable purposes” shall be limited to and shall include only religious, charitable, scientific, literary, or educational purposes within the meaning of those terms as used in section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, but only such purposes as also constitute public charitable purposes under the law of trusts of the State of. File 2012 and 2013 taxes Fourth: This Declaration of Trust may be amended at any time or times by written instrument or instruments signed and sealed by the trustees, and acknowledged by any of the trustees, provided that no amendment shall authorize the trustees to conduct the affairs of this trust in any manner or for any purpose contrary to the provisions of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. File 2012 and 2013 taxes An amendment of the provisions of this Article Fourth (or any amendment to it) shall be valid only if and to the extent that such amendment further restricts the trustees' amending power. File 2012 and 2013 taxes All instruments amending this Declaration of Trust shall be noted upon or kept attached to the executed original of this Declaration of Trust held by the trustees. File 2012 and 2013 taxes Fifth: Any trustee under this Declaration of Trust may, by written instrument, signed and acknowledged, resign his office. File 2012 and 2013 taxes The number of trustees shall be at all times not less than two, and whenever for any reason the number is reduced to one, there shall be, and at any other time there may be, appointed one or more additional trustees. File 2012 and 2013 taxes Appointments shall be made by the trustee or trustees for the time in office by written instruments signed and acknowledged. File 2012 and 2013 taxes Any succeeding or additional trustee shall, upon his or her acceptance of the office by written instrument signed and acknowledged, have the same powers, rights, and duties, and the same title to the trust estate jointly with the surviving or remaining trustee or trustees as if originally appointed. File 2012 and 2013 taxes  None of the trustees shall be required to furnish any bond or surety. File 2012 and 2013 taxes None of them shall be responsible or liable for the acts or omissions of any other of the trustees or of any predecessor or of a custodian, agent, depositary, or counsel selected with reasonable care. File 2012 and 2013 taxes  The one or more trustees, whether original or successor, for the time being in office, shall have full authority to act even though one or more vacancies may exist. File 2012 and 2013 taxes A trustee may, by appropriate written instrument, delegate all or any part of his or her powers to another or others of the trustees for such periods and subject to such conditions as such delegating trustee may determine. File 2012 and 2013 taxes  The trustees serving under this Declaration of Trust are authorized to pay to themselves amounts for reasonable expenses incurred and reasonable compensation for services rendered in the administration of this trust, but in no event shall any trustee who has made a contribution to this trust ever receive any compensation thereafter. File 2012 and 2013 taxes Sixth: In extension and not in limitation of the common law and statutory powers of trustees and other powers granted in this Declaration of Trust, the trustees shall have the following discretionary powers. File 2012 and 2013 taxes a) To invest and reinvest the principal and income of the trust in such property, real, personal, or mixed, and in such manner as they shall deem proper, and from time to time to change investments as they shall deem advisable; to invest in or retain any stocks, shares, bonds, notes, obligations, or personal or real property (including without limitation any interests in or obligations of any corporation, association, business trust, investment trust, common trust fund, or investment company) although some or all of the property so acquired or retained is of a kind or size which but for this express authority would not be considered proper and although all of the trust funds are invested in the securities of one company. File 2012 and 2013 taxes No principal or income, however, shall be loaned, directly or indirectly, to any trustee or to anyone else, corporate or otherwise, who has at any time made a contribution to this trust, nor to anyone except on the basis of an adequate interest charge and with adequate security. File 2012 and 2013 taxes b) To sell, lease, or exchange any personal, mixed, or real property, at public auction or by private contract, for such consideration and on such terms as to credit or otherwise, and to make such contracts and enter into such undertakings relating to the trust property, as they consider advisable, whether or not such leases or contracts may extend beyond the duration of the trust. File 2012 and 2013 taxes c) To borrow money for such periods, at such rates of interest, and upon such terms as the trustees consider advisable, and as security for such loans to mortgage or pledge any real or personal property with or without power of sale; to acquire or hold any real or personal property, subject to any mortgage or pledge on or of property acquired or held by this trust. File 2012 and 2013 taxes d) To execute and deliver deeds, assignments, transfers, mortgages, pledges, leases, covenants, contracts, promissory notes, releases, and other instruments, sealed or unsealed, incident to any transaction in which they engage. File 2012 and 2013 taxes e) To vote, to give proxies, to participate in the reorganization, merger, or consolidation of any concern, or in the sale, lease, disposition, or distribution of its assets; to join with other security holders in acting through a committee, depositary, voting trustees, or otherwise, and in this connection to delegate authority to such committee, depositary, or trustees and to deposit securities with them or transfer securities to them; to pay assessments levied on securities or to exercise subscription rights in respect of securities. File 2012 and 2013 taxes f) To employ a bank or trust company as custodian of any funds or securities and to delegate to it such powers as they deem appropriate; to hold trust property without indication of fiduciary capacity but only in the name of a registered nominee, provided the trust property is at all times identified as such on the books of the trust; to keep any or all of the trust property or funds in any place or places in the United States of America; to employ clerks, accountants, investment counsel, investment agents, and any special services, and to pay the reasonable compensation and expenses of all such services in addition to the compensation of the trustees. File 2012 and 2013 taxes Seventh: The trustees' powers are exercisable solely in the fiduciary capacity consistent with and in furtherance of the charitable purposes of this trust as specified in Article Third and not otherwise. File 2012 and 2013 taxes Eighth: In this Declaration of Trust and in any amendment to it, references to “trustees” mean the one or more trustees, whether original or successor, for the time being in office. File 2012 and 2013 taxes Ninth: Any person may rely on a copy, certified by a notary public, of the executed original of this Declaration of Trust held by the trustees, and of any of the notations on it and writings attached to it, as fully as he might rely on the original documents themselves. File 2012 and 2013 taxes Any such person may rely fully on any statements of fact certified by anyone who appears from such original documents or from such certified copy to be a trustee under this Declaration of Trust. File 2012 and 2013 taxes No one dealing with the trustees need inquire concerning the validity of anything the trustees purport to do. File 2012 and 2013 taxes No one dealing with the trustees need see to the application of anything paid or transferred to or upon the order of the trustees of the trust. File 2012 and 2013 taxes Tenth: This Declaration of Trust is to be governed in all respects by the laws of the State of . File 2012 and 2013 taxes Trustee Trustee Prev  Up  Next   Home   More Online Publications
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The File 2012 And 2013 Taxes

File 2012 and 2013 taxes 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. File 2012 and 2013 taxes S. File 2012 and 2013 taxes Individual Income Tax Return, and itemize your deductions on Schedule A (Form 1040). File 2012 and 2013 taxes If you itemize, you cannot take the standard deduction. File 2012 and 2013 taxes This section explains what expenses you can deduct as a homeowner. File 2012 and 2013 taxes It also points out expenses that you cannot deduct. File 2012 and 2013 taxes There are four primary discussions: real estate taxes, sales taxes, home mortgage interest, and mortgage insurance premiums. File 2012 and 2013 taxes Generally, your real estate taxes, home mortgage interest, and mortgage insurance premiums are included in your house payment. File 2012 and 2013 taxes Your house payment. File 2012 and 2013 taxes   If you took out a mortgage (loan) to finance the purchase of your home, you probably have to make monthly house payments. File 2012 and 2013 taxes Your house payment may include several costs of owning a home. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes These are discussed in more detail later. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Minister's or military housing allowance. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes You do not have to reduce your deductions by your nontaxable allowance. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Nondeductible payments. File 2012 and 2013 taxes   You cannot deduct any of the following items. File 2012 and 2013 taxes Insurance (other than mortgage insurance premiums), including fire and comprehensive coverage, and title insurance. File 2012 and 2013 taxes Wages you pay for domestic help. File 2012 and 2013 taxes Depreciation. File 2012 and 2013 taxes The cost of utilities, such as gas, electricity, or water. File 2012 and 2013 taxes Most settlement costs. File 2012 and 2013 taxes See Settlement or closing costs under Cost as Basis, later, for more information. File 2012 and 2013 taxes Forfeited deposits, down payments, or earnest money. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes 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). File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Real Estate Taxes Most state and local governments charge an annual tax on the value of real property. File 2012 and 2013 taxes This is called a real estate tax. File 2012 and 2013 taxes You can deduct the tax if it is assessed uniformly at a like rate on all real property throughout the community. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Deductible Real Estate Taxes You can deduct real estate taxes imposed on you. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes If you own a cooperative apartment, see Special Rules for Cooperatives , later. File 2012 and 2013 taxes Where to deduct real estate taxes. File 2012 and 2013 taxes   Enter the amount of your deductible real estate taxes on Schedule A (Form 1040), line 6. File 2012 and 2013 taxes Real estate taxes paid at settlement or closing. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Your share of these taxes is fully deductible if you itemize your deductions. File 2012 and 2013 taxes Division of real estate taxes. File 2012 and 2013 taxes   For federal income tax purposes, the seller is treated as paying the property taxes up to, but not including, the date of sale. File 2012 and 2013 taxes You (the buyer) are treated as paying the taxes beginning with the date of sale. File 2012 and 2013 taxes This applies regardless of the lien dates under local law. File 2012 and 2013 taxes Generally, this information is included on the settlement statement you get at closing. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes You each can deduct your own share, if you itemize deductions, for the year the property is sold. File 2012 and 2013 taxes Example. File 2012 and 2013 taxes You bought your home on September 1. File 2012 and 2013 taxes The property tax year (the period to which the tax relates) in your area is the calendar year. File 2012 and 2013 taxes The tax for the year was $730 and was due and paid by the seller on August 15. File 2012 and 2013 taxes You owned your new home during the property tax year for 122 days (September 1 to December 31, including your date of purchase). File 2012 and 2013 taxes You figure your deduction for real estate taxes on your home as follows. File 2012 and 2013 taxes 1. File 2012 and 2013 taxes Enter the total real estate taxes for the real property tax year $730 2. File 2012 and 2013 taxes Enter the number of days in the property tax year that you owned the property 122 3. File 2012 and 2013 taxes Divide line 2 by 365 . File 2012 and 2013 taxes 3342 4. File 2012 and 2013 taxes Multiply line 1 by line 3. File 2012 and 2013 taxes This is your deduction. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Delinquent taxes. File 2012 and 2013 taxes   Delinquent taxes are unpaid taxes that were imposed on the seller for an earlier tax year. File 2012 and 2013 taxes If you agree to pay delinquent taxes when you buy your home, you cannot deduct them. File 2012 and 2013 taxes You treat them as part of the cost of your home. File 2012 and 2013 taxes See Real estate taxes , later, under Basis. File 2012 and 2013 taxes Escrow accounts. File 2012 and 2013 taxes   Many monthly house payments include an amount placed in escrow (put in the care of a third party) for real estate taxes. File 2012 and 2013 taxes You may not be able to deduct the total you pay into the escrow account. File 2012 and 2013 taxes You can deduct only the real estate taxes that the lender actually paid from escrow to the taxing authority. File 2012 and 2013 taxes Your real estate tax bill will show this amount. File 2012 and 2013 taxes Refund or rebate of real estate taxes. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes For more information, see Recoveries in Publication 525, Taxable and Nontaxable Income. File 2012 and 2013 taxes Items You Cannot Deduct as Real Estate Taxes The following items are not deductible as real estate taxes. File 2012 and 2013 taxes Charges for services. File 2012 and 2013 taxes   An itemized charge for services to specific property or people is not a tax, even if the charge is paid to the taxing authority. File 2012 and 2013 taxes 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). File 2012 and 2013 taxes    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. File 2012 and 2013 taxes If your taxing authority (or lender) does not furnish you a copy of your real estate tax bill, ask for it. File 2012 and 2013 taxes Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. File 2012 and 2013 taxes Assessments for local benefits. File 2012 and 2013 taxes   You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. File 2012 and 2013 taxes Local benefits include the construction of streets, sidewalks, or water and sewer systems. File 2012 and 2013 taxes You must add these amounts to the basis of your property. File 2012 and 2013 taxes   You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. File 2012 and 2013 taxes An example is a charge to repair an existing sidewalk and any interest included in that charge. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it. File 2012 and 2013 taxes   An assessment for a local benefit may be listed as an item in your real estate tax bill. File 2012 and 2013 taxes If so, use the rules in this section to find how much of it, if any, you can deduct. File 2012 and 2013 taxes Transfer taxes (or stamp taxes). File 2012 and 2013 taxes   You cannot deduct transfer taxes and similar taxes and charges on the sale of a personal home. File 2012 and 2013 taxes If you are the buyer and you pay them, include them in the cost basis of the property. File 2012 and 2013 taxes If you are the seller and you pay them, they are expenses of the sale and reduce the amount realized on the sale. File 2012 and 2013 taxes Homeowners association assessments. File 2012 and 2013 taxes   You cannot deduct these assessments because the homeowners association, rather than a state or local government, imposes them. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes As an owner of a cooperative apartment, you own shares of stock in a corporation that owns or leases housing facilities. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes For this purpose, gross income means all income received during the entire tax year, including any received before the corporation changed to cooperative ownership. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Tenant-stockholders. File 2012 and 2013 taxes   A tenant-stockholder can be any entity (such as a corporation, trust, estate, partnership, or association) as well as an individual. File 2012 and 2013 taxes The tenant-stockholder does not have to live in any of the cooperative's dwelling units. File 2012 and 2013 taxes The units that the tenant-stockholder has the right to occupy can be rented to others. File 2012 and 2013 taxes Deductible taxes. File 2012 and 2013 taxes   You figure your share of real estate taxes in the following way. File 2012 and 2013 taxes Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. File 2012 and 2013 taxes Multiply the corporation's deductible real estate taxes by the number you figured in (1). File 2012 and 2013 taxes This is your share of the real estate taxes. File 2012 and 2013 taxes   Generally, the corporation will tell you your share of its real estate tax. File 2012 and 2013 taxes This is the amount you can deduct if it reasonably reflects the cost of real estate taxes for your dwelling unit. File 2012 and 2013 taxes Refund of real estate taxes. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Your deduction for real estate taxes the corporation paid this year is reduced by your share of the refund the corporation received. File 2012 and 2013 taxes 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). File 2012 and 2013 taxes 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. File 2012 and 2013 taxes For information on figuring your deduction, see the Instructions for Schedule A (Form 1040). File 2012 and 2013 taxes 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. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Most home buyers take out a mortgage (loan) to buy their home. File 2012 and 2013 taxes They then make monthly payments to either the mortgage holder or someone collecting the payments for the mortgage holder. File 2012 and 2013 taxes 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). File 2012 and 2013 taxes 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. File 2012 and 2013 taxes If either of these situations applies to you, see Publication 936 for more information. File 2012 and 2013 taxes Also see Publication 936 if you later refinance your mortgage or buy a second home. File 2012 and 2013 taxes Refund of home mortgage interest. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes For more information, see Recoveries in Publication 525. File 2012 and 2013 taxes The amount of the refund will usually be shown on the mortgage interest statement you receive from your mortgage lender. File 2012 and 2013 taxes See Mortgage Interest Statement , later. File 2012 and 2013 taxes Deductible Mortgage Interest To be deductible, the interest you pay must be on a loan secured by your main home or a second home. File 2012 and 2013 taxes The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. File 2012 and 2013 taxes Prepaid interest. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Generally, you can deduct in each year only the interest that qualifies as home mortgage interest for that year. File 2012 and 2013 taxes An exception (discussed later) applies to points. File 2012 and 2013 taxes Late payment charge on mortgage payment. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Mortgage prepayment penalty. File 2012 and 2013 taxes   If you pay off your home mortgage early, you may have to pay a penalty. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Ground rent. File 2012 and 2013 taxes   In some states (such as Maryland), you may buy your home subject to a ground rent. File 2012 and 2013 taxes A ground rent is an obligation you assume to pay a fixed amount per year on the property. File 2012 and 2013 taxes Under this arrangement, you are leasing (rather than buying) the land on which your home is located. File 2012 and 2013 taxes Redeemable ground rents. File 2012 and 2013 taxes   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. File 2012 and 2013 taxes The ground rent is a redeemable ground rent only if all of the following are true. File 2012 and 2013 taxes Your lease, including renewal periods, is for more than 15 years. File 2012 and 2013 taxes You can freely assign the lease. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. File 2012 and 2013 taxes   Payments made to end the lease and buy the lessor's entire interest in the land are not redeemable ground rents. File 2012 and 2013 taxes You cannot deduct them. File 2012 and 2013 taxes Nonredeemable ground rents. File 2012 and 2013 taxes   Payments on a nonredeemable ground rent are not mortgage interest. File 2012 and 2013 taxes You can deduct them as rent only if they are a business expense or if they are for rental property. File 2012 and 2013 taxes Cooperative apartment. File 2012 and 2013 taxes   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 . File 2012 and 2013 taxes In addition, you can treat as home mortgage interest your share of the corporation's deductible mortgage interest. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes For more information on cooperatives, see Special Rule for Tenant-Stockholders in Cooperative Housing Corporations in Publication 936. File 2012 and 2013 taxes Refund of cooperative's mortgage interest. File 2012 and 2013 taxes   You must reduce your mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. File 2012 and 2013 taxes The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. File 2012 and 2013 taxes   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. File 2012 and 2013 taxes Mortgage Interest Paid at Settlement One item that normally appears on a settlement or closing statement is home mortgage interest. File 2012 and 2013 taxes You can deduct the interest that you pay at settlement if you itemize your deductions on Schedule A (Form 1040). File 2012 and 2013 taxes This amount should be included in the mortgage interest statement provided by your lender. File 2012 and 2013 taxes See the discussion under Mortgage Interest Statement , later. File 2012 and 2013 taxes Also, if you pay interest in advance, see Prepaid interest , earlier, and Points , next. File 2012 and 2013 taxes Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. File 2012 and 2013 taxes Points also may be called loan origination fees, maximum loan charges, loan discount, or discount points. File 2012 and 2013 taxes A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. File 2012 and 2013 taxes See Points paid by the seller , later. File 2012 and 2013 taxes General rule. File 2012 and 2013 taxes   You cannot deduct the full amount of points in the year paid. File 2012 and 2013 taxes They are prepaid interest, so you generally must deduct them over the life (term) of the mortgage. File 2012 and 2013 taxes Exception. File 2012 and 2013 taxes   You can deduct the full amount of points in the year paid if you meet all the following tests. File 2012 and 2013 taxes Your loan is secured by your main home. File 2012 and 2013 taxes (Generally, your main home is the one you live in most of the time. File 2012 and 2013 taxes ) Paying points is an established business practice in the area where the loan was made. File 2012 and 2013 taxes The points paid were not more than the points generally charged in that area. File 2012 and 2013 taxes You use the cash method of accounting. File 2012 and 2013 taxes This means you report income in the year you receive it and deduct expenses in the year you pay them. File 2012 and 2013 taxes Most individuals use this method. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. File 2012 and 2013 taxes The funds you provided are not required to have been applied to the points. File 2012 and 2013 taxes They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. File 2012 and 2013 taxes You cannot have borrowed these funds. File 2012 and 2013 taxes You use your loan to buy or build your main home. File 2012 and 2013 taxes The points were computed as a percentage of the principal amount of the mortgage. File 2012 and 2013 taxes The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. File 2012 and 2013 taxes The points may be shown as paid from either your funds or the seller's. File 2012 and 2013 taxes Note. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Home improvement loan. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Refinanced loan. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes You can deduct the rest of the points over the life of the loan. File 2012 and 2013 taxes Points not fully deductible in year paid. File 2012 and 2013 taxes    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. File 2012 and 2013 taxes Figure A. File 2012 and 2013 taxes   You can use Figure A, next, as a quick guide to see whether your points are fully deductible in the year paid. File 2012 and 2013 taxes    Please click here for the text description of the image. File 2012 and 2013 taxes Figure A. File 2012 and 2013 taxes Are my points fully deductible this year? Amounts charged for services. File 2012 and 2013 taxes   Amounts charged by the lender for specific services connected to the loan are not interest. File 2012 and 2013 taxes Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. File 2012 and 2013 taxes You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. File 2012 and 2013 taxes For information about the tax treatment of these amounts and other settlement fees and closing costs, see Basis , later. File 2012 and 2013 taxes Points paid by the seller. File 2012 and 2013 taxes   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. File 2012 and 2013 taxes Treatment by seller. File 2012 and 2013 taxes   The seller cannot deduct these fees as interest. File 2012 and 2013 taxes However, they are a selling expense that reduces the seller's amount realized. File 2012 and 2013 taxes See Publication 523 for more information. File 2012 and 2013 taxes Treatment by buyer. File 2012 and 2013 taxes   The buyer treats seller-paid points as if he or she had paid them. File 2012 and 2013 taxes If all the tests listed earlier under Exception are met, the buyer can deduct the points in the year paid. File 2012 and 2013 taxes If any of those tests are not met, the buyer must deduct the points over the life of the loan. File 2012 and 2013 taxes   The buyer must also reduce the basis of the home by the amount of the seller-paid points. File 2012 and 2013 taxes For more information about the basis of your home, see Basis , later. File 2012 and 2013 taxes Funds provided are less than points. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes In addition, you can deduct any points paid by the seller. File 2012 and 2013 taxes Example 1. File 2012 and 2013 taxes When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Of the $1,000 you were charged for points, you can deduct $750 in the year paid. File 2012 and 2013 taxes You spread the remaining $250 over the life of the mortgage. File 2012 and 2013 taxes Example 2. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). File 2012 and 2013 taxes You spread the remaining $250 over the life of the mortgage. File 2012 and 2013 taxes You must reduce the basis of your home by the $1,000 paid by the seller. File 2012 and 2013 taxes Excess points. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes You must spread any additional points over the life of the mortgage. File 2012 and 2013 taxes Mortgage ending early. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. File 2012 and 2013 taxes Example. File 2012 and 2013 taxes Dan paid $3,000 in points in 2006 that he had to spread out over the 15-year life of the mortgage. File 2012 and 2013 taxes He had deducted $1,400 of these points through 2012. File 2012 and 2013 taxes Dan prepaid his mortgage in full in 2013. File 2012 and 2013 taxes He can deduct the remaining $1,600 of points in 2013. File 2012 and 2013 taxes Exception. File 2012 and 2013 taxes   If you refinance the mortgage with the same lender, you cannot deduct any remaining points for the year. File 2012 and 2013 taxes Instead, deduct them over the term of the new loan. File 2012 and 2013 taxes Form 1098. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes See Mortgage Interest Statement , later. File 2012 and 2013 taxes 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). File 2012 and 2013 taxes If you did not receive a Form 1098, enter your deductible interest on line 11, and any deductible points on line 12. File 2012 and 2013 taxes See Table 1 below for a summary of where to deduct home mortgage interest and real estate taxes. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes The seller must give you this number and you must give the seller your SSN. File 2012 and 2013 taxes Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. File 2012 and 2013 taxes Failure to meet either of these requirements may result in a $50 penalty for each failure. File 2012 and 2013 taxes Table 1. File 2012 and 2013 taxes Where To Deduct Interest and Taxes Paid on Your Home See the text for information on what expenses are eligible. File 2012 and 2013 taxes IF you are eligible to deduct . File 2012 and 2013 taxes . File 2012 and 2013 taxes . File 2012 and 2013 taxes THEN report the amount  on Schedule A (Form 1040) . File 2012 and 2013 taxes . File 2012 and 2013 taxes . File 2012 and 2013 taxes real estate taxes line 6. File 2012 and 2013 taxes home mortgage interest and points reported on Form 1098 line 10. File 2012 and 2013 taxes home mortgage interest not reported on  Form 1098 line 11. File 2012 and 2013 taxes points not reported on Form 1098 line 12. File 2012 and 2013 taxes qualified mortgage insurance premiums line 13. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes The statement will show the total interest paid on your mortgage during the year. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes See Points , earlier. File 2012 and 2013 taxes The interest you paid at settlement should be included on the statement. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Put the total on Schedule A (Form 1040), line 10, and attach a statement to your return explaining the difference. File 2012 and 2013 taxes Write “See attached” to the right of line 10. File 2012 and 2013 taxes A mortgage holder can be a financial institution, a governmental unit, or a cooperative housing corporation. File 2012 and 2013 taxes If a statement comes from a cooperative housing corporation, it generally will show your share of interest. File 2012 and 2013 taxes Your mortgage interest statement for 2013 should be provided or sent to you by January 31, 2014. File 2012 and 2013 taxes If it is mailed, you should allow adequate time to receive it before contacting the mortgage holder. File 2012 and 2013 taxes A copy of this form will be sent to the IRS also. File 2012 and 2013 taxes Example. File 2012 and 2013 taxes You bought a new home on May 3. File 2012 and 2013 taxes You paid no points on the purchase. File 2012 and 2013 taxes During the year, you made mortgage payments which included $4,480 deductible interest on your new home. File 2012 and 2013 taxes The settlement sheet for the purchase of the home included interest of $620 for 29 days in May. File 2012 and 2013 taxes The mortgage statement you receive from the lender includes total interest of $5,100 ($4,480 + $620). File 2012 and 2013 taxes You can deduct the $5,100 if you itemize your deductions. File 2012 and 2013 taxes Refund of overpaid interest. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Generally, you must include the refund in income in the year you receive it. File 2012 and 2013 taxes See Refund of home mortgage interest , earlier, under Home Mortgage Interest. File 2012 and 2013 taxes More than one borrower. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Show how much of the interest each of you paid, and give the name and address of the person who received the form. File 2012 and 2013 taxes Deduct your share of the interest on Schedule A (Form 1040), line 11, and write “See attached” to the right of that line. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Mortgage insurance premiums you paid or accrued on any mortgage insurance contract issued before January 1, 2007, are not deductible as an itemized deduction. File 2012 and 2013 taxes 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). File 2012 and 2013 taxes Prepaid mortgage insurance premiums. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes The premiums are treated as paid in the year to which they were allocated. File 2012 and 2013 taxes If the mortgage is satisfied before its term, no deduction is allowed for the unamortized balance. File 2012 and 2013 taxes See Publication 936 for details. File 2012 and 2013 taxes Exception for certain mortgage insurance. File 2012 and 2013 taxes   The allocation rules, explained above, do not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or Rural Housing Service. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes It also must be secured by that home. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Home acquisition debt limit. File 2012 and 2013 taxes   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). File 2012 and 2013 taxes Discharges of qualified principal residence indebtedness. File 2012 and 2013 taxes   You can exclude from gross income any discharges of qualified principal residence indebtedness made after 2006 and before 2014. File 2012 and 2013 taxes You must reduce the basis of your principal residence (but not below zero) by the amount you exclude. File 2012 and 2013 taxes Principal residence. File 2012 and 2013 taxes   Your principal residence is the home where you ordinarily live most of the time. File 2012 and 2013 taxes You can have only one principal residence at any one time. File 2012 and 2013 taxes Qualified principal residence indebtedness. File 2012 and 2013 taxes   This is a mortgage that you took out to buy, build, or substantially improve your principal residence and that is secured by that residence. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Additional debt incurred to substantially improve your principal residence is also qualified principal residence indebtedness. File 2012 and 2013 taxes Amount you can exclude. File 2012 and 2013 taxes   You can only exclude debt discharged after 2006 and before 2014. File 2012 and 2013 taxes The most you can exclude is $2 million ($1 million if married filing separately). File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Ordering rule. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Qualified Home This means your main home or your second home. File 2012 and 2013 taxes A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. File 2012 and 2013 taxes Main home. File 2012 and 2013 taxes   You can have only one main home at any one time. File 2012 and 2013 taxes This is the home where you ordinarily live most of the time. File 2012 and 2013 taxes Second home and other special situations. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes If your AGI is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. File 2012 and 2013 taxes Form 1098. File 2012 and 2013 taxes   The amount of mortgage insurance premiums you paid during 2013 should be reported in box 4. File 2012 and 2013 taxes See Form 1098, Mortgage Interest Statement in Publication 936. File 2012 and 2013 taxes Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals afford home ownership. File 2012 and 2013 taxes If you qualify, you can claim the credit on Form 8396 each year for part of the home mortgage interest you pay. File 2012 and 2013 taxes Who qualifies. File 2012 and 2013 taxes   You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate (MCC) from your state or local government. File 2012 and 2013 taxes Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. File 2012 and 2013 taxes The MCC will show the certificate credit rate you will use to figure your credit. File 2012 and 2013 taxes It also will show the certified indebtedness amount. File 2012 and 2013 taxes Only the interest on that amount qualifies for the credit. File 2012 and 2013 taxes See Figuring the Credit , later. File 2012 and 2013 taxes You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home. File 2012 and 2013 taxes Contact your state or local housing finance agency for information about the availability of MCCs in your area. File 2012 and 2013 taxes How to claim the credit. File 2012 and 2013 taxes   To claim the credit, complete Form 8396 and attach it to your Form 1040 or Form 1040NR, U. File 2012 and 2013 taxes S. File 2012 and 2013 taxes Nonresident Alien Income Tax Return. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Reducing your home mortgage interest deduction. File 2012 and 2013 taxes   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 2012 and 2013 taxes You must do this even if part of that amount is to be carried forward to 2014. File 2012 and 2013 taxes Selling your home. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes For additional information, see Recapturing (Paying Back) a Federal Mortgage Subsidy, in Publication 523. File 2012 and 2013 taxes Figuring the Credit Figure your credit on Form 8396. File 2012 and 2013 taxes Mortgage not more than certified indebtedness. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Mortgage more than certified indebtedness. File 2012 and 2013 taxes   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 2012 and 2013 taxes 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 2012 and 2013 taxes 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. File 2012 and 2013 taxes Example. File 2012 and 2013 taxes Emily bought a home this year. File 2012 and 2013 taxes Her mortgage loan is $125,000. File 2012 and 2013 taxes The certified indebtedness amount on her MCC is $100,000. File 2012 and 2013 taxes She paid $7,500 interest this year. File 2012 and 2013 taxes Emily figures the interest to enter on Form 8396, line 1, as follows:   $100,000 = 80% (. File 2012 and 2013 taxes 80)       $125,000       $7,500 x . File 2012 and 2013 taxes 80 = $6,000   Emily enters $6,000 on Form 8396, line 1. File 2012 and 2013 taxes In each later year, she will figure her credit using only 80% of the interest she pays for that year. File 2012 and 2013 taxes Limits Two limits may apply to your credit. File 2012 and 2013 taxes A limit based on the credit rate, and A limit based on your tax. File 2012 and 2013 taxes Limit based on credit rate. File 2012 and 2013 taxes   If the certificate credit rate is higher than 20%, the credit you are allowed cannot be more than $2,000. File 2012 and 2013 taxes Limit based on tax. File 2012 and 2013 taxes   After applying the limit based on the credit rate, your credit generally cannot be more than your tax liability. File 2012 and 2013 taxes See the Credit Limit Worksheet in the Form 8396 instructions to calculate the limit based on tax. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Example. File 2012 and 2013 taxes John and his brother, George, were issued an MCC. File 2012 and 2013 taxes They used it to get a mortgage on their main home. File 2012 and 2013 taxes John has a 60% ownership interest in the home, and George has a 40% ownership interest in the home. File 2012 and 2013 taxes John paid $5,400 mortgage interest this year and George paid $3,600. File 2012 and 2013 taxes The MCC shows a credit rate of 25% and a certified indebtedness amount of $130,000. File 2012 and 2013 taxes The loan amount (mortgage) on their home is $120,000. File 2012 and 2013 taxes The credit is limited to $2,000 because the credit rate is more than 20%. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes His credit is limited to $1,200 ($2,000 × 60%). File 2012 and 2013 taxes 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. File 2012 and 2013 taxes His credit is limited to $800 ($2,000 × 40%). File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Example. File 2012 and 2013 taxes You receive a mortgage credit certificate from State X. File 2012 and 2013 taxes This year, your regular tax liability is $1,100, you owe no alternative minimum tax, and your mortgage interest credit is $1,700. File 2012 and 2013 taxes You claim no other credits. File 2012 and 2013 taxes Your unused mortgage interest credit for this year is $600 ($1,700 − $1,100). File 2012 and 2013 taxes You can carry forward this amount to the next 3 years or until used, whichever comes first. File 2012 and 2013 taxes Credit rate more than 20%. File 2012 and 2013 taxes   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 2012 and 2013 taxes Example. File 2012 and 2013 taxes In the earlier example under Dividing the Credit , John and George used the entire $2,000 credit. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes The amount of credit you can claim on the new loan may change. File 2012 and 2013 taxes Table 2 below summarizes how to figure your credit if you refinance your original mortgage loan. File 2012 and 2013 taxes Table 2. File 2012 and 2013 taxes Effect of Refinancing on Your Credit IF you get a new (reissued) MCC and the amount of your new mortgage is . File 2012 and 2013 taxes . File 2012 and 2013 taxes . File 2012 and 2013 taxes THEN the interest you claim on Form 8396, line 1, is* . File 2012 and 2013 taxes . File 2012 and 2013 taxes . File 2012 and 2013 taxes smaller than or equal to the certified indebtedness amount on the new MCC all the interest paid during the year on your new mortgage. File 2012 and 2013 taxes larger than the certified indebtedness amount on the new MCC interest paid during the year on your new mortgage multiplied by the following fraction. File 2012 and 2013 taxes         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. File 2012 and 2013 taxes  See New MCC cannot increase your credit above. File 2012 and 2013 taxes An issuer may reissue an MCC after you refinance your mortgage. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Year of refinancing. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes   If your new MCC has a credit rate different from the rate on the old MCC, you must attach a statement to Form 8396. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes It must show a separate calculation for the part of the year when the new MCC was in effect. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes New MCC cannot increase your credit. File 2012 and 2013 taxes   The credit that you claim with your new MCC cannot be more than the credit that you could have claimed with your old MCC. File 2012 and 2013 taxes   In most cases, the agency that issues your new MCC will make sure that it does not increase your credit. File 2012 and 2013 taxes However, if either your old loan or your new loan has a variable (adjustable) interest rate, you will need to check this yourself. File 2012 and 2013 taxes In that case, you will need to know the amount of the credit you could have claimed using the old MCC. File 2012 and 2013 taxes   There are two methods for figuring the credit you could have claimed. File 2012 and 2013 taxes Under one method, you figure the actual credit that would have been allowed. File 2012 and 2013 taxes This means you use the credit rate on the old MCC and the interest you would have paid on the old loan. File 2012 and 2013 taxes   If your old loan was a variable rate mortgage, you can use another method to determine the credit that you could have claimed. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes The principal of the hypothetical mortgage is the remaining outstanding balance of the certified mortgage indebtedness shown on the old MCC. File 2012 and 2013 taxes    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. File 2012 and 2013 taxes    As part of your tax records, you should keep your old MCC and the schedule of payments for your old mortgage. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes While you own your home, you may add certain items to your basis. File 2012 and 2013 taxes You may subtract certain other items from your basis. File 2012 and 2013 taxes These items are called adjustments to basis and are explained later under Adjusted Basis . File 2012 and 2013 taxes 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. File 2012 and 2013 taxes You also must keep records of the events that affect basis or adjusted basis. File 2012 and 2013 taxes See Keeping Records , below. File 2012 and 2013 taxes Figuring Your Basis How you figure your basis depends on how you acquire your home. File 2012 and 2013 taxes If you buy or build your home, your cost is your basis. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes If you inherit your home from a decedent, different rules apply depending on the date of the decedent's death. File 2012 and 2013 taxes Each of these topics is discussed later. File 2012 and 2013 taxes Property transferred from a spouse. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Publication 504, Divorced or Separated Individuals, fully discusses transfers between spouses. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes The cost of your home includes most settlement or closing costs you paid when you bought the home. File 2012 and 2013 taxes If you built your home, your cost includes most closing costs paid when you bought the land or settled on your mortgage. File 2012 and 2013 taxes See Settlement or closing costs , later. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Purchase. File 2012 and 2013 taxes   The basis of a home you bought is the amount you paid for it. File 2012 and 2013 taxes This usually includes your down payment and any debt you assumed. File 2012 and 2013 taxes The basis of a cooperative apartment is the amount you paid for your shares in the corporation that owns or controls the property. File 2012 and 2013 taxes This amount includes any purchase commissions or other costs of acquiring the shares. File 2012 and 2013 taxes Construction. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes If you built all or part of your home yourself, your basis is the total amount it cost you to build it. File 2012 and 2013 taxes You cannot include in basis the value of your own labor or any other labor for which you did not pay. File 2012 and 2013 taxes Real estate taxes. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes You cannot deduct them as taxes paid. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Do not include those taxes in your basis. File 2012 and 2013 taxes If you did not reimburse the seller, you must reduce your basis by the amount of those taxes. File 2012 and 2013 taxes Example 1. File 2012 and 2013 taxes You bought your home on September 1. File 2012 and 2013 taxes The property tax year in your area is the calendar year, and the tax is due on August 15. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes You did not reimburse the seller for your share of the real estate taxes from September 1 through December 31. File 2012 and 2013 taxes You must reduce the basis of your home by the $426 [(122 ÷ 365) × $1,275] the seller paid for you. File 2012 and 2013 taxes You can deduct your $426 share of real estate taxes on your return for the year you purchased your home. File 2012 and 2013 taxes Example 2. File 2012 and 2013 taxes You bought your home on May 3, 2013. File 2012 and 2013 taxes The property tax year in your area is the calendar year. File 2012 and 2013 taxes The taxes for the previous year are assessed on January 2 and are due on May 31 and November 30. File 2012 and 2013 taxes Under state law, the taxes become a lien on May 31. File 2012 and 2013 taxes You agreed to pay all taxes due after the date of sale. File 2012 and 2013 taxes The taxes due in 2013 for 2012 were $1,375. File 2012 and 2013 taxes The taxes due in 2014 for 2013 will be $1,425. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Instead, you add the $1,375 to the cost (basis) of your home. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes You add the remaining $476 ($1,425 − $949) of taxes paid in 2014 to the cost (basis) of your home. File 2012 and 2013 taxes Settlement or closing costs. File 2012 and 2013 taxes   If you bought your home, you probably paid settlement or closing costs in addition to the contract price. File 2012 and 2013 taxes These costs are divided between you and the seller according to the sales contract, local custom, or understanding of the parties. File 2012 and 2013 taxes If you built your home, you probably paid these costs when you bought the land or settled on your mortgage. File 2012 and 2013 taxes   The only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. File 2012 and 2013 taxes You deduct them in the year you buy your home if you itemize your deductions. File 2012 and 2013 taxes You can add certain other settlement or closing costs to the basis of your home. File 2012 and 2013 taxes Items added to basis. File 2012 and 2013 taxes   You can include in your basis the settlement fees and closing costs you paid for buying your home. File 2012 and 2013 taxes A fee is for buying the home if you would have had to pay it even if you paid cash for the home. File 2012 and 2013 taxes   The following are some of the settlement fees and closing costs that you can include in the original basis of your home. File 2012 and 2013 taxes Abstract fees (abstract of title fees). File 2012 and 2013 taxes Charges for installing utility services. File 2012 and 2013 taxes Legal fees (including fees for the title search and preparation of the sales contract and deed). File 2012 and 2013 taxes Recording fees. File 2012 and 2013 taxes Surveys. File 2012 and 2013 taxes Transfer or stamp taxes. File 2012 and 2013 taxes Owner's title insurance. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Items not added to basis and not deductible. File 2012 and 2013 taxes   Here are some settlement and closing costs that you cannot deduct or add to your basis. File 2012 and 2013 taxes Fire insurance premiums. File 2012 and 2013 taxes Charges for using utilities or other services related to occupancy of the home before closing. File 2012 and 2013 taxes Rent for occupying the home before closing. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Points paid by seller. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes See Points , earlier, for the rules on deducting points. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Fair market value. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Donor's adjusted basis is more than FMV. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Disposition basis. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Your basis for figuring a gain is the same as the donor's adjusted basis. File 2012 and 2013 taxes Your basis for figuring a loss is the FMV when you received the gift. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes However, if using the FMV results in a gain, then you neither have a gain nor a loss. File 2012 and 2013 taxes Example 1. File 2012 and 2013 taxes Andrew received a house as a gift from Ishmael (the donor). File 2012 and 2013 taxes At the time of the gift, the home had an FMV of $80,000. File 2012 and 2013 taxes Ishmael's adjusted basis was $100,000. File 2012 and 2013 taxes After he received the house, no events occurred to increase or decrease the basis. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Example 2. File 2012 and 2013 taxes Same facts as Example 1 , except this time Andrew sells the house for $70,000. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Example 3. File 2012 and 2013 taxes Same facts as Example 1 , except this time Andrew sells the house for $90,000. File 2012 and 2013 taxes Initially, he figures the gain using Ishmael's adjusted basis ($100,000), which results in a loss of $10,000. File 2012 and 2013 taxes Since it is a loss, Andrew must now recalculate the loss using the FMV ($80,000), which results in a gain of $10,000. File 2012 and 2013 taxes So in this situation, Andrew will neither have a gain nor a loss. File 2012 and 2013 taxes Donor's adjusted basis equal to or less than the FMV. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Part of federal gift tax due to net increase in value. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes The net increase in the value of the home is its FMV minus the adjusted basis of the donor. File 2012 and 2013 taxes Publication 551 gives more information, including examples, on figuring your basis when you receive property as a gift. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes If an estate tax return was filed, your basis is generally the value of the home listed on the estate tax return. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Publication 551 and Publication 559, Survivors, Executors, and Administrators, have more information on the basis of inherited property. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Adjusted Basis While you own your home, various events may take place that can change the original basis of your home. File 2012 and 2013 taxes These events can increase or decrease your original basis. File 2012 and 2013 taxes The result is called adjusted basis. File 2012 and 2013 taxes See Table 3, on this page, for a list of some of the items that can adjust your basis. File 2012 and 2013 taxes Table 3. File 2012 and 2013 taxes Adjusted Basis This table lists examples of some items that generally will increase or decrease your basis in your home. File 2012 and 2013 taxes It is not intended to be all-inclusive. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes   An improvement materially adds to the value of your home, considerably prolongs its useful life, or adapts it to new uses. File 2012 and 2013 taxes You must add the cost of any improvements to the basis of your home. File 2012 and 2013 taxes You cannot deduct these costs. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes Amount added to basis. File 2012 and 2013 taxes   The amount you add to your basis for improvements is your actual cost. File 2012 and 2013 taxes This includes all costs for material and labor, except your own labor, and all expenses related to the improvement. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes These assessments are discussed earlier under Real Estate Taxes . File 2012 and 2013 taxes Improvements no longer part of home. File 2012 and 2013 taxes    Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. File 2012 and 2013 taxes Example. File 2012 and 2013 taxes You put wall-to-wall carpeting in your home 15 years ago. File 2012 and 2013 taxes Later, you replaced that carpeting with new wall-to-wall carpeting. File 2012 and 2013 taxes The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. File 2012 and 2013 taxes Repairs versus improvements. File 2012 and 2013 taxes   A repair keeps your home in an ordinary, efficient operating condition. File 2012 and 2013 taxes It does not add to the value of your home or prolong its life. File 2012 and 2013 taxes Repairs include repainting your home inside or outside, fixing your gutters or floors, fixing leaks or plastering, and replacing broken window panes. File 2012 and 2013 taxes You cannot deduct repair costs and generally cannot add them to the basis of your home. File 2012 and 2013 taxes   However, repairs that are done as part of an extensive remodeling or restoration of your home are considered improvements. File 2012 and 2013 taxes You add them to the basis of your home. File 2012 and 2013 taxes Records to keep. File 2012 and 2013 taxes   You can use Table 4 (at the end of the publication) as a guide to help you keep track of improvements to your home. File 2012 and 2013 taxes Also see Keeping Records , below. File 2012 and 2013 taxes Energy conservation subsidy. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes You must reduce the basis of your home by that value. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes You should keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis. File 2012 and 2013 taxes In addition, you should keep track of any decreases to the basis such as those listed in Table 3, earlier. File 2012 and 2013 taxes How to keep records. File 2012 and 2013 taxes   How you keep records is up to you, but they must be clear and accurate and must be available to the IRS. File 2012 and 2013 taxes How long to keep records. File 2012 and 2013 taxes   You must keep your records for as long as they are important for meeting any provision of the federal tax law. File 2012 and 2013 taxes   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. File 2012 and 2013 taxes (A period of limitations is the period of time after which no legal action can be brought. File 2012 and 2013 taxes ) For assessment of tax you owe, this is generally 3 years from the date you filed the return. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Returns filed before the due date are treated as filed on the due date. File 2012 and 2013 taxes   You may need to keep records relating to the basis of property (discussed earlier) for longer than the period of limitations. File 2012 and 2013 taxes Keep those records as long as they are important in figuring the basis of the original or replacement property. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes Table 4. File 2012 and 2013 taxes Record of Home Improvements Keep this for your records. File 2012 and 2013 taxes Also, keep receipts or other proof of improvements. File 2012 and 2013 taxes Remove from this record any improvements that are no longer part of your main home. File 2012 and 2013 taxes 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. File 2012 and 2013 taxes (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