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Filing An Amendment To Taxes

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Filing An Amendment To Taxes

Filing an amendment to taxes 12. Filing an amendment to taxes   Other Income Table of Contents Introduction Useful Items - You may want to see: Bartering Canceled DebtsInterest included in canceled debt. Filing an amendment to taxes Exceptions Host or Hostess Life Insurance ProceedsSurviving spouse. Filing an amendment to taxes Endowment Contract Proceeds Accelerated Death Benefits Public Safety Officer Killed in the Line of Duty Partnership Income S Corporation Income RecoveriesItemized Deduction Recoveries Rents from Personal Property RepaymentsMethod 1. Filing an amendment to taxes Method 2. Filing an amendment to taxes RoyaltiesDepletion. Filing an amendment to taxes Coal and iron ore. Filing an amendment to taxes Sale of property interest. Filing an amendment to taxes Part of future production sold. Filing an amendment to taxes Unemployment BenefitsTypes of unemployment compensation. Filing an amendment to taxes Governmental program. Filing an amendment to taxes Repayment of unemployment compensation. Filing an amendment to taxes Tax withholding. Filing an amendment to taxes Repayment of benefits. Filing an amendment to taxes Welfare and Other Public Assistance Benefits Other IncomeEmotional distress. Filing an amendment to taxes Deduction for costs involved in unlawful discrimination suits. Filing an amendment to taxes Energy conservation measure. Filing an amendment to taxes Dwelling unit. Filing an amendment to taxes Current income required to be distributed. Filing an amendment to taxes Current income not required to be distributed. Filing an amendment to taxes How to report. Filing an amendment to taxes Losses. Filing an amendment to taxes Grantor trust. Filing an amendment to taxes Nonemployee compensation. Filing an amendment to taxes Corporate director. Filing an amendment to taxes Personal representatives. Filing an amendment to taxes Manager of trade or business for bankruptcy estate. Filing an amendment to taxes Notary public. Filing an amendment to taxes Election precinct official. Filing an amendment to taxes Difficulty-of-care payments. Filing an amendment to taxes Maintaining space in home. Filing an amendment to taxes Reporting taxable payments. Filing an amendment to taxes Lotteries and raffles. Filing an amendment to taxes Form W-2G. Filing an amendment to taxes Reporting winnings and recordkeeping. Filing an amendment to taxes Inherited pension or IRA. Filing an amendment to taxes Employee awards or bonuses. Filing an amendment to taxes Pulitzer, Nobel, and similar prizes. Filing an amendment to taxes Payment for services. Filing an amendment to taxes VA payments. Filing an amendment to taxes Prizes. Filing an amendment to taxes Strike and lockout benefits. Filing an amendment to taxes Introduction You must include on your return all items of income you receive in the form of money, property, and services unless the tax law states that you do not include them. Filing an amendment to taxes Some items, however, are only partly excluded from income. Filing an amendment to taxes This chapter discusses many kinds of income and explains whether they are taxable or nontaxable. Filing an amendment to taxes Income that is taxable must be reported on your tax return and is subject to tax. Filing an amendment to taxes Income that is nontaxable may have to be shown on your tax return but is not taxable. Filing an amendment to taxes This chapter begins with discussions of the following income items. Filing an amendment to taxes Bartering. Filing an amendment to taxes Canceled debts. Filing an amendment to taxes Sales parties at which you are the host or hostess. Filing an amendment to taxes Life insurance proceeds. Filing an amendment to taxes Partnership income. Filing an amendment to taxes S Corporation income. Filing an amendment to taxes Recoveries (including state income tax refunds). Filing an amendment to taxes Rents from personal property. Filing an amendment to taxes Repayments. Filing an amendment to taxes Royalties. Filing an amendment to taxes Unemployment benefits. Filing an amendment to taxes Welfare and other public assistance benefits. Filing an amendment to taxes These discussions are followed by brief discussions of other income items. Filing an amendment to taxes Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 544 Sales and Other Dispositions of Assets 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Bartering Bartering is an exchange of property or services. Filing an amendment to taxes You must include in your income, at the time received, the fair market value of property or services you receive in bartering. Filing an amendment to taxes If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise. Filing an amendment to taxes Generally, you report this income on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Filing an amendment to taxes However, if the barter involves an exchange of something other than services, such as in Example 3 below, you may have to use another form or schedule instead. Filing an amendment to taxes Example 1. Filing an amendment to taxes You are a self-employed attorney who performs legal services for a client, a small corporation. Filing an amendment to taxes The corporation gives you shares of its stock as payment for your services. Filing an amendment to taxes You must include the fair market value of the shares in your income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) in the year you receive them. Filing an amendment to taxes Example 2. Filing an amendment to taxes You are self-employed and a member of a barter club. Filing an amendment to taxes The club uses “credit units” as a means of exchange. Filing an amendment to taxes It adds credit units to your account for goods or services you provide to members, which you can use to purchase goods or services offered by other members of the barter club. Filing an amendment to taxes The club subtracts credit units from your account when you receive goods or services from other members. Filing an amendment to taxes You must include in your income the value of the credit units that are added to your account, even though you may not actually receive goods or services from other members until a later tax year. Filing an amendment to taxes Example 3. Filing an amendment to taxes You own a small apartment building. Filing an amendment to taxes In return for 6 months rent-free use of an apartment, an artist gives you a work of art she created. Filing an amendment to taxes You must report as rental income on Schedule E (Form 1040), Supplemental Income and Loss, the fair market value of the artwork, and the artist must report as income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) the fair rental value of the apartment. Filing an amendment to taxes Form 1099-B from barter exchange. Filing an amendment to taxes   If you exchanged property or services through a barter exchange, Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a similar statement from the barter exchange should be sent to you by February 18, 2014. Filing an amendment to taxes It should show the value of cash, property, services, credits, or scrip you received from exchanges during 2013. Filing an amendment to taxes The IRS also will receive a copy of Form 1099-B. Filing an amendment to taxes Canceled Debts In most cases, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income. Filing an amendment to taxes You have no income from the canceled debt if it is intended as a gift to you. Filing an amendment to taxes A debt includes any indebtedness for which you are liable or which attaches to property you hold. Filing an amendment to taxes If the debt is a nonbusiness debt, report the canceled amount on Form 1040, line 21. Filing an amendment to taxes If it is a business debt, report the amount on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) (or on Schedule F (Form 1040), Profit or Loss From Farming, if the debt is farm debt and you are a farmer). Filing an amendment to taxes Form 1099-C. Filing an amendment to taxes   If a Federal Government agency, financial institution, or credit union cancels or forgives a debt you owe of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. Filing an amendment to taxes The amount of the canceled debt is shown in box 2. Filing an amendment to taxes Interest included in canceled debt. Filing an amendment to taxes   If any interest is forgiven and included in the amount of canceled debt in box 2, the amount of interest also will be shown in box 3. Filing an amendment to taxes Whether or not you must include the interest portion of the canceled debt in your income depends on whether the interest would be deductible when you paid it. Filing an amendment to taxes See Deductible debt under Exceptions, later. Filing an amendment to taxes   If the interest would not be deductible (such as interest on a personal loan), include in your income the amount from Form 1099-C, box 2. Filing an amendment to taxes If the interest would be deductible (such as on a business loan), include in your income the net amount of the canceled debt (the amount shown in box 2 less the interest amount shown in box 3). Filing an amendment to taxes Discounted mortgage loan. Filing an amendment to taxes   If your financial institution offers a discount for the early payment of your mortgage loan, the amount of the discount is canceled debt. Filing an amendment to taxes You must include the canceled amount in your income. Filing an amendment to taxes Mortgage relief upon sale or other disposition. Filing an amendment to taxes   If you are personally liable for a mortgage (recourse debt), and you are relieved of the mortgage when you dispose of the property, you may realize gain or loss up to the fair market value of the property. Filing an amendment to taxes To the extent the mortgage discharge exceeds the fair market value of the property, it is income from discharge of indebtedness unless it qualifies for exclusion under Excluded debt , later. Filing an amendment to taxes Report any income from discharge of indebtedness on nonbusiness debt that does not qualify for exclusion as other income on Form 1040, line 21. Filing an amendment to taxes    You may be able to exclude part of the mortgage relief on your principal residence. Filing an amendment to taxes See Excluded debt, later. Filing an amendment to taxes   If you are not personally liable for a mortgage (nonrecourse debt), and you are relieved of the mortgage when you dispose of the property (such as through foreclosure), that relief is included in the amount you realize. Filing an amendment to taxes You may have a taxable gain if the amount you realize exceeds your adjusted basis in the property. Filing an amendment to taxes Report any gain on nonbusiness property as a capital gain. Filing an amendment to taxes   See Publication 4681 for more information. Filing an amendment to taxes Stockholder debt. Filing an amendment to taxes   If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution that is generally dividend income to you. Filing an amendment to taxes For more information, see Publication 542, Corporations. Filing an amendment to taxes   If you are a stockholder in a corporation and you cancel a debt owed to you by the corporation, you generally do not realize income. Filing an amendment to taxes This is because the canceled debt is considered as a contribution to the capital of the corporation equal to the amount of debt principal that you canceled. Filing an amendment to taxes Repayment of canceled debt. Filing an amendment to taxes   If you included a canceled amount in your income and later pay the debt, you may be able to file a claim for refund for the year the amount was included in income. Filing an amendment to taxes You can file a claim on Form 1040X if the statute of limitations for filing a claim is still open. Filing an amendment to taxes The statute of limitations generally does not end until 3 years after the due date of your original return. Filing an amendment to taxes Exceptions There are several exceptions to the inclusion of canceled debt in income. Filing an amendment to taxes These are explained next. Filing an amendment to taxes Student loans. Filing an amendment to taxes   Certain student loans contain a provision that all or part of the debt incurred to attend the qualified educational institution will be canceled if you work for a certain period of time in certain professions for any of a broad class of employers. Filing an amendment to taxes   You do not have income if your student loan is canceled after you agreed to this provision and then performed the services required. Filing an amendment to taxes To qualify, the loan must have been made by: The Federal Government, a state or local government, or an instrumentality, agency, or subdivision thereof, A tax-exempt public benefit corporation that has assumed control of a state, county, or municipal hospital, and whose employees are considered public employees under state law, or An educational institution: Under an agreement with an entity described in (1) or (2) that provided the funds to the institution to make the loan, or As part of a program of the institution designed to encourage its students to serve in occupations with unmet needs or in areas with unmet needs and under which the services provided by the students (or former students) are for or under the direction of a governmental unit or a tax-exempt organization described in section 501(c)(3). Filing an amendment to taxes   A loan to refinance a qualified student loan also will qualify if it was made by an educational institution or a qualified tax-exempt organization under its program designed as described in (3)(b) above. Filing an amendment to taxes Education loan repayment assistance. Filing an amendment to taxes   Education loan repayments made to you by the National Health Service Corps Loan Repayment Program (NHSC Loan Repayment Program), a state education loan repayment program eligible for funds under the Public Health Service Act, or any other state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health services in underserved or health professional shortage areas are not taxable. Filing an amendment to taxes    The provision relating to the “other state loan repayment or loan forgiveness program” was added to this exclusion for amounts received in tax years beginning after December 31, 2008. Filing an amendment to taxes If you included these amounts in income in 2010, 2011, or 2012, you should file an amended tax return to exclude this income. Filing an amendment to taxes See Form 1040X and its instructions for details on filing. Filing an amendment to taxes Deductible debt. Filing an amendment to taxes   You do not have income from the cancellation of a debt if your payment of the debt would be deductible. Filing an amendment to taxes This exception applies only if you use the cash method of accounting. Filing an amendment to taxes For more information, see chapter 5 of Publication 334, Tax Guide for Small Business. Filing an amendment to taxes Price reduced after purchase. Filing an amendment to taxes   In most cases, if the seller reduces the amount of debt you owe for property you purchased, you do not have income from the reduction. Filing an amendment to taxes The reduction of the debt is treated as a purchase price adjustment and reduces your basis in the property. Filing an amendment to taxes Excluded debt. Filing an amendment to taxes   Do not include a canceled debt in your gross income in the following situations. Filing an amendment to taxes The debt is canceled in a bankruptcy case under title 11 of the U. Filing an amendment to taxes S. Filing an amendment to taxes Code. Filing an amendment to taxes See Publication 908, Bankruptcy Tax Guide. Filing an amendment to taxes The debt is canceled when you are insolvent. Filing an amendment to taxes However, you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent. Filing an amendment to taxes See Publication 908. Filing an amendment to taxes The debt is qualified farm debt and is canceled by a qualified person. Filing an amendment to taxes See chapter 3 of Publication 225, Farmer's Tax Guide. Filing an amendment to taxes The debt is qualified real property business debt. Filing an amendment to taxes See chapter 5 of Publication 334. Filing an amendment to taxes The cancellation is intended as a gift. Filing an amendment to taxes The debt is qualified principal residence indebtedness. Filing an amendment to taxes See Publication 525 for additional information. Filing an amendment to taxes Host or Hostess If you host a party or event at which sales are made, any gift or gratuity you receive for giving the event is a payment for helping a direct seller make sales. Filing an amendment to taxes You must report this item as income at its fair market value. Filing an amendment to taxes Your out-of-pocket party expenses are subject to the 50% limit for meal and entertainment expenses. Filing an amendment to taxes These expenses are deductible as miscellaneous itemized deductions subject to the 2%-of-AGI limit on Schedule A (Form 1040), but only up to the amount of income you receive for giving the party. Filing an amendment to taxes For more information about the 50% limit for meal and entertainment expenses, see chapter 26. Filing an amendment to taxes Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. Filing an amendment to taxes This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. Filing an amendment to taxes However, interest income received as a result of life insurance proceeds may be taxable. Filing an amendment to taxes Proceeds not received in installments. Filing an amendment to taxes   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. Filing an amendment to taxes If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. Filing an amendment to taxes Proceeds received in installments. Filing an amendment to taxes   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. Filing an amendment to taxes   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. Filing an amendment to taxes Include anything over this excluded part in your income as interest. Filing an amendment to taxes Surviving spouse. Filing an amendment to taxes   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude up to $1,000 a year of the interest included in the installments. Filing an amendment to taxes If you remarry, you can continue to take the exclusion. Filing an amendment to taxes Surrender of policy for cash. Filing an amendment to taxes   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Filing an amendment to taxes In most cases, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. Filing an amendment to taxes    You should receive a Form 1099-R showing the total proceeds and the taxable part. Filing an amendment to taxes Report these amounts on lines 16a and 16b of Form 1040 or lines 12a and 12b of Form 1040A. Filing an amendment to taxes More information. Filing an amendment to taxes   For more information, see Life Insurance Proceeds in Publication 525. Filing an amendment to taxes Endowment Contract Proceeds An endowment contract is a policy under which you are paid a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. Filing an amendment to taxes Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. Filing an amendment to taxes To determine your cost, subtract any amount that you previously received under the contract and excluded from your income from the total premiums (or other consideration) paid for the contract. Filing an amendment to taxes Include the part of the lump sum payment that is more than your cost in your income. Filing an amendment to taxes Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are excluded from income if the insured is terminally or chronically ill. Filing an amendment to taxes Viatical settlement. Filing an amendment to taxes   This is the sale or assignment of any part of the death benefit under a life insurance contract to a viatical settlement provider. Filing an amendment to taxes A viatical settlement provider is a person who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill and who meets the requirements of section 101(g)(2)(B) of the Internal Revenue Code. Filing an amendment to taxes Exclusion for terminal illness. Filing an amendment to taxes    Accelerated death benefits are fully excludable if the insured is a terminally ill individual. Filing an amendment to taxes This is a person who has been certified by a physician as having an illness or physical condition that can reasonably be expected to result in death within 24 months from the date of the certification. Filing an amendment to taxes Exclusion for chronic illness. Filing an amendment to taxes    If the insured is a chronically ill individual who is not terminally ill, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. Filing an amendment to taxes Accelerated death benefits paid on a per diem or other periodic basis are excludable up to a limit. Filing an amendment to taxes This limit applies to the total of the accelerated death benefits and any periodic payments received from long-term care insurance contracts. Filing an amendment to taxes For information on the limit and the definitions of chronically ill individual, qualified long-term care services, and long-term care insurance contracts, see Long-Term Care Insurance Contracts under Sickness and Injury Benefits in Publication 525. Filing an amendment to taxes Exception. Filing an amendment to taxes   The exclusion does not apply to any amount paid to a person (other than the insured) who has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the person, or Has a financial interest in the person's business. Filing an amendment to taxes Form 8853. Filing an amendment to taxes   To claim an exclusion for accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. Filing an amendment to taxes You do not have to file Form 8853 to exclude accelerated death benefits paid on the basis of actual expenses incurred. Filing an amendment to taxes Public Safety Officer Killed in the Line of Duty If you are a survivor of a public safety officer who was killed in the line of duty, you may be able to exclude from income certain amounts you receive. Filing an amendment to taxes For this purpose, the term public safety officer includes law enforcement officers, firefighters, chaplains, and rescue squad and ambulance crew members. Filing an amendment to taxes For more information, see Publication 559, Survivors, Executors, and Administrators. Filing an amendment to taxes Partnership Income A partnership generally is not a taxable entity. Filing an amendment to taxes The income, gains, losses, deductions, and credits of a partnership are passed through to the partners based on each partner's distributive share of these items. Filing an amendment to taxes Schedule K-1 (Form 1065). Filing an amendment to taxes    Although a partnership generally pays no tax, it must file an information return on Form 1065, U. Filing an amendment to taxes S. Filing an amendment to taxes Return of Partnership Income, and send Schedule K-1 (Form 1065) to each partner. Filing an amendment to taxes In addition, the partnership will send each partner a copy of the Partner's Instructions for Schedule K-1 (Form 1065) to help each partner report his or her share of the partnership's income, deductions, credits, and tax preference items. Filing an amendment to taxes Keep Schedule K-1 (Form 1065) for your records. Filing an amendment to taxes Do not attach it to your Form 1040, unless you are specifically required to do so. Filing an amendment to taxes For more information on partnerships, see Publication 541, Partnerships. Filing an amendment to taxes Qualified joint venture. Filing an amendment to taxes   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Filing an amendment to taxes To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Filing an amendment to taxes For further information on how to make the election and which schedule(s) to file, see the instructions for your individual tax return. Filing an amendment to taxes S Corporation Income In most cases, an S corporation does not pay tax on its income. Filing an amendment to taxes Instead, the income, losses, deductions, and credits of the corporation are passed through to the shareholders based on each shareholder's pro rata share. Filing an amendment to taxes Schedule K-1 (Form 1120S). Filing an amendment to taxes   An S corporation must file a return on Form 1120S, U. Filing an amendment to taxes S. Filing an amendment to taxes Income Tax Return for an S Corporation, and send Schedule K-1 (Form 1120S) to each shareholder. Filing an amendment to taxes In addition, the S corporation will send each shareholder a copy of the Shareholder's Instructions for Schedule K-1 (Form 1120S) to help each shareholder report his or her share of the S corporation's income, losses, credits, and deductions. Filing an amendment to taxes Keep Schedule K-1 (Form 1120S) for your records. Filing an amendment to taxes Do not attach it to your Form 1040, unless you are specifically required to do so. Filing an amendment to taxes For more information on S corporations and their shareholders, see the Instructions for Form 1120S. Filing an amendment to taxes Recoveries A recovery is a return of an amount you deducted or took a credit for in an earlier year. Filing an amendment to taxes The most common recoveries are refunds, reimbursements, and rebates of deductions itemized on Schedule A (Form 1040). Filing an amendment to taxes You also may have recoveries of non-itemized deductions (such as payments on previously deducted bad debts) and recoveries of items for which you previously claimed a tax credit. Filing an amendment to taxes Tax benefit rule. Filing an amendment to taxes   You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. Filing an amendment to taxes For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year. Filing an amendment to taxes For more information, see Publication 525. Filing an amendment to taxes Federal income tax refund. Filing an amendment to taxes   Refunds of federal income taxes are not included in your income because they are never allowed as a deduction from income. Filing an amendment to taxes State tax refund. Filing an amendment to taxes   If you received a state or local income tax refund (or credit or offset) in 2013, you generally must include it in income if you deducted the tax in an earlier year. Filing an amendment to taxes The payer should send Form 1099-G, Certain Government Payments, to you by January 31, 2014. Filing an amendment to taxes The IRS also will receive a copy of the Form 1099-G. Filing an amendment to taxes If you file Form 1040, use the State and Local Income Tax Refund Worksheet in the 2013 Form 1040 instructions for line 10 to figure the amount (if any) to include in your income. Filing an amendment to taxes See Publication 525 for when you must use another worksheet. Filing an amendment to taxes   If you could choose to deduct for a tax year either: State and local income taxes, or State and local general sales taxes, then the maximum refund that you may have to include in income is limited to the excess of the tax you chose to deduct for that year over the tax you did not choose to deduct for that year. Filing an amendment to taxes For examples, see Publication 525. Filing an amendment to taxes Mortgage interest refund. Filing an amendment to taxes    If you received a refund or credit in 2013 of mortgage interest paid in an earlier year, the amount should be shown in box 3 of your Form 1098, Mortgage Interest Statement. Filing an amendment to taxes Do not subtract the refund amount from the interest you paid in 2013. Filing an amendment to taxes You may have to include it in your income under the rules explained in the following discussions. Filing an amendment to taxes Interest on recovery. Filing an amendment to taxes   Interest on any of the amounts you recover must be reported as interest income in the year received. Filing an amendment to taxes For example, report any interest you received on state or local income tax refunds on Form 1040, line 8a. Filing an amendment to taxes Recovery and expense in same year. Filing an amendment to taxes   If the refund or other recovery and the expense occur in the same year, the recovery reduces the deduction or credit and is not reported as income. Filing an amendment to taxes Recovery for 2 or more years. Filing an amendment to taxes   If you receive a refund or other recovery that is for amounts you paid in 2 or more separate years, you must allocate, on a pro rata basis, the recovered amount between the years in which you paid it. Filing an amendment to taxes This allocation is necessary to determine the amount of recovery from any earlier years and to determine the amount, if any, of your allowable deduction for this item for the current year. Filing an amendment to taxes For information on how to compute the allocation, see Recoveries in Publication 525. Filing an amendment to taxes Itemized Deduction Recoveries If you recover any amount that you deducted in an earlier year on Schedule A (Form 1040), you generally must include the full amount of the recovery in your income in the year you receive it. Filing an amendment to taxes Where to report. Filing an amendment to taxes   Enter your state or local income tax refund on Form 1040, line 10, and the total of all other recoveries as other income on Form 1040, line 21. Filing an amendment to taxes You cannot use Form 1040A or Form 1040EZ. Filing an amendment to taxes Standard deduction limit. Filing an amendment to taxes   You generally are allowed to claim the standard deduction if you do not itemize your deductions. Filing an amendment to taxes Only your itemized deductions that are more than your standard deduction are subject to the recovery rule (unless you are required to itemize your deductions). Filing an amendment to taxes If your total deductions on the earlier year return were not more than your income for that year, include in your income this year the lesser of: Your recoveries, or The amount by which your itemized deductions exceeded the standard deduction. Filing an amendment to taxes Example. Filing an amendment to taxes For 2012, you filed a joint return. Filing an amendment to taxes Your taxable income was $60,000 and you were not entitled to any tax credits. Filing an amendment to taxes Your standard deduction was $11,900, and you had itemized deductions of $14,000. Filing an amendment to taxes In 2013, you received the following recoveries for amounts deducted on your 2012 return: Medical expenses $200 State and local income tax refund 400 Refund of mortgage interest 325 Total recoveries $925 None of the recoveries were more than the deductions taken for 2012. Filing an amendment to taxes The difference between the state and local income tax you deducted and your local general sales tax was more than $400. Filing an amendment to taxes Your total recoveries are less than the amount by which your itemized deductions exceeded the standard deduction ($14,000 − 11,900 = $2,100), so you must include your total recoveries in your income for 2013. Filing an amendment to taxes Report the state and local income tax refund of $400 on Form 1040, line 10, and the balance of your recoveries, $525, on Form 1040, line 21. Filing an amendment to taxes Standard deduction for earlier years. Filing an amendment to taxes   To determine if amounts recovered in 2013 must be included in your income, you must know the standard deduction for your filing status for the year the deduction was claimed. Filing an amendment to taxes Look in the instructions for your tax return from prior years to locate the standard deduction for the filing status for that prior year. Filing an amendment to taxes Example. Filing an amendment to taxes You filed a joint return on Form 1040 for 2012 with taxable income of $45,000. Filing an amendment to taxes Your itemized deductions were $12,350. Filing an amendment to taxes The standard deduction that you could have claimed was $11,900. Filing an amendment to taxes In 2013, you recovered $2,100 of your 2012 itemized deductions. Filing an amendment to taxes None of the recoveries were more than the actual deductions for 2012. Filing an amendment to taxes Include $450 of the recoveries in your 2013 income. Filing an amendment to taxes This is the smaller of your recoveries ($2,100) or the amount by which your itemized deductions were more than the standard deduction ($12,350 − $11,900 = $450). Filing an amendment to taxes Recovery limited to deduction. Filing an amendment to taxes   You do not include in your income any amount of your recovery that is more than the amount you deducted in the earlier year. Filing an amendment to taxes The amount you include in your income is limited to the smaller of: The amount deducted on Schedule A (Form 1040), or The amount recovered. Filing an amendment to taxes Example. Filing an amendment to taxes During 2012 you paid $1,700 for medical expenses. Filing an amendment to taxes From this amount you subtracted $1,500, which was 7. Filing an amendment to taxes 5% of your adjusted gross income. Filing an amendment to taxes Your actual medical expense deduction was $200. Filing an amendment to taxes In 2013, you received a $500 reimbursement from your medical insurance for your 2012 expenses. Filing an amendment to taxes The only amount of the $500 reimbursement that must be included in your income for 2013 is $200—the amount actually deducted. Filing an amendment to taxes Other recoveries. Filing an amendment to taxes   See Recoveries in Publication 525 if: You have recoveries of items other than itemized deductions, or You received a recovery for an item for which you claimed a tax credit (other than investment credit or foreign tax credit) in a prior year. Filing an amendment to taxes Rents from Personal Property If you rent out personal property, such as equipment or vehicles, how you report your income and expenses is in most cases determined by: Whether or not the rental activity is a business, and Whether or not the rental activity is conducted for profit. Filing an amendment to taxes In most cases, if your primary purpose is income or profit and you are involved in the rental activity with continuity and regularity, your rental activity is a business. Filing an amendment to taxes See Publication 535, Business Expenses, for details on deducting expenses for both business and not-for-profit activities. Filing an amendment to taxes Reporting business income and expenses. Filing an amendment to taxes    If you are in the business of renting personal property, report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Filing an amendment to taxes The form instructions have information on how to complete them. Filing an amendment to taxes Reporting nonbusiness income. Filing an amendment to taxes   If you are not in the business of renting personal property, report your rental income on Form 1040, line 21. Filing an amendment to taxes List the type and amount of the income on the dotted line next to line 21. Filing an amendment to taxes Reporting nonbusiness expenses. Filing an amendment to taxes   If you rent personal property for profit, include your rental expenses in the total amount you enter on Form 1040, line 36. Filing an amendment to taxes Also enter the amount and “PPR” on the dotted line next to line 36. Filing an amendment to taxes   If you do not rent personal property for profit, your deductions are limited and you cannot report a loss to offset other income. Filing an amendment to taxes See Activity not for profit , under Other Income, later. Filing an amendment to taxes Repayments If you had to repay an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income for the year in which you repaid it. Filing an amendment to taxes Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. Filing an amendment to taxes Generally, you can claim a deduction or credit only if the repayment qualifies as an expense or loss incurred in your trade or business or in a for-profit transaction. Filing an amendment to taxes Type of deduction. Filing an amendment to taxes   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. Filing an amendment to taxes You generally deduct the repayment on the same form or schedule on which you previously reported it as income. Filing an amendment to taxes For example, if you reported it as self-employment income, deduct it as a business expense on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). Filing an amendment to taxes If you reported it as a capital gain, deduct it as a capital loss as explained in the Instructions for Schedule D (Form 1040). Filing an amendment to taxes If you reported it as wages, unemployment compensation, or other nonbusiness income, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040). Filing an amendment to taxes Repaid social security benefits. Filing an amendment to taxes   If you repaid social security benefits or equivalent railroad retirement benefits, see Repayment of benefits in chapter 11. Filing an amendment to taxes Repayment of $3,000 or less. Filing an amendment to taxes   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Filing an amendment to taxes If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 23. Filing an amendment to taxes Repayment over $3,000. Filing an amendment to taxes   If the amount you repaid was more than $3,000, you can deduct the repayment (as explained under Type of deduction , earlier). Filing an amendment to taxes However, you can choose instead to take a tax credit for the year of repayment if you included the income under a claim of right. Filing an amendment to taxes This means that at the time you included the income, it appeared that you had an unrestricted right to it. Filing an amendment to taxes If you qualify for this choice, figure your tax under both methods and compare the results. Filing an amendment to taxes Use the method (deduction or credit) that results in less tax. Filing an amendment to taxes When determining whether the amount you repaid was more or less than $3,000, consider the total amount being repaid on the return. Filing an amendment to taxes Each instance of repayment is not considered separately. Filing an amendment to taxes Method 1. Filing an amendment to taxes   Figure your tax for 2013 claiming a deduction for the repaid amount. Filing an amendment to taxes If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 28. Filing an amendment to taxes Method 2. Filing an amendment to taxes   Figure your tax for 2013 claiming a credit for the repaid amount. Filing an amendment to taxes Follow these steps. Filing an amendment to taxes Figure your tax for 2013 without deducting the repaid amount. Filing an amendment to taxes Refigure your tax from the earlier year without including in income the amount you repaid in 2013. Filing an amendment to taxes Subtract the tax in (2) from the tax shown on your return for the earlier year. Filing an amendment to taxes This is the credit. Filing an amendment to taxes Subtract the answer in (3) from the tax for 2013 figured without the deduction (Step 1). Filing an amendment to taxes   If method 1 results in less tax, deduct the amount repaid. Filing an amendment to taxes If method 2 results in less tax, claim the credit figured in (3) above on Form 1040, line 71, by adding the amount of the credit to any other credits on this line, and entering “I. Filing an amendment to taxes R. Filing an amendment to taxes C. Filing an amendment to taxes 1341” in the column to the right of line 71. Filing an amendment to taxes   An example of this computation can be found in Publication 525. Filing an amendment to taxes Repaid wages subject to social security and Medicare taxes. Filing an amendment to taxes   If you had to repay an amount that you included in your wages or compensation in an earlier year on which social security, Medicare, or tier 1 RRTA taxes were paid, ask your employer to refund the excess amount to you. Filing an amendment to taxes If the employer refuses to refund the taxes, ask for a statement indicating the amount of the overcollection to support your claim. Filing an amendment to taxes File a claim for refund using Form 843, Claim for Refund and Request for Abatement. Filing an amendment to taxes Repaid wages subject to Additional Medicare Tax. Filing an amendment to taxes   Employers cannot make an adjustment or file a claim for refund for Additional Medicare Tax withholding when there is a repayment of wages received by an employee in a prior year because the employee determines liability for Additional Medicare Tax on the employee's income tax return for the prior year. Filing an amendment to taxes If you had to repay an amount that you included in your wages or compensation in an earlier year, and on which Additional Medicare Tax was paid, you may be able to recover the Additional Medicare Tax paid on the amount. Filing an amendment to taxes To recover Additional Medicare Tax on the repaid wages or compensation, you must file Form 1040X, Amended U. Filing an amendment to taxes S. Filing an amendment to taxes Individual Income Tax Return, for the prior year in which the wages or compensation were originally received. Filing an amendment to taxes See the Instructions for Form 1040X. Filing an amendment to taxes Royalties Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income. Filing an amendment to taxes In most cases you report royalties in Part I of Schedule E (Form 1040). Filing an amendment to taxes However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc. Filing an amendment to taxes , report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Filing an amendment to taxes Copyrights and patents. Filing an amendment to taxes   Royalties from copyrights on literary, musical, or artistic works, and similar property, or from patents on inventions, are amounts paid to you for the right to use your work over a specified period of time. Filing an amendment to taxes Royalties generally are based on the number of units sold, such as the number of books, tickets to a performance, or machines sold. Filing an amendment to taxes Oil, gas, and minerals. Filing an amendment to taxes   Royalty income from oil, gas, and mineral properties is the amount you receive when natural resources are extracted from your property. Filing an amendment to taxes The royalties are based on units, such as barrels, tons, etc. Filing an amendment to taxes , and are paid to you by a person or company who leases the property from you. Filing an amendment to taxes Depletion. Filing an amendment to taxes   If you are the owner of an economic interest in mineral deposits or oil and gas wells, you can recover your investment through the depletion allowance. Filing an amendment to taxes For information on this subject, see chapter 9 of Publication 535. Filing an amendment to taxes Coal and iron ore. Filing an amendment to taxes   Under certain circumstances, you can treat amounts you receive from the disposal of coal and iron ore as payments from the sale of a capital asset, rather than as royalty income. Filing an amendment to taxes For information about gain or loss from the sale of coal and iron ore, see Publication 544. Filing an amendment to taxes Sale of property interest. Filing an amendment to taxes   If you sell your complete interest in oil, gas, or mineral rights, the amount you receive is considered payment for the sale of property used in a trade or business under section 1231, not royalty income. Filing an amendment to taxes Under certain circumstances, the sale is subject to capital gain or loss treatment as explained in the Instructions for Schedule D (Form 1040). Filing an amendment to taxes For more information on selling section 1231 property, see chapter 3 of Publication 544. Filing an amendment to taxes   If you retain a royalty, an overriding royalty, or a net profit interest in a mineral property for the life of the property, you have made a lease or a sublease, and any cash you receive for the assignment of other interests in the property is ordinary income subject to a depletion allowance. Filing an amendment to taxes Part of future production sold. Filing an amendment to taxes   If you own mineral property but sell part of the future production, in most cases you treat the money you receive from the buyer at the time of the sale as a loan from the buyer. Filing an amendment to taxes Do not include it in your income or take depletion based on it. Filing an amendment to taxes   When production begins, you include all the proceeds in your income, deduct all the production expenses, and deduct depletion from that amount to arrive at your taxable income from the property. Filing an amendment to taxes Unemployment Benefits The tax treatment of unemployment benefits you receive depends on the type of program paying the benefits. Filing an amendment to taxes Unemployment compensation. Filing an amendment to taxes   You must include in income all unemployment compensation you receive. Filing an amendment to taxes You should receive a Form 1099-G showing in box 1 the total unemployment compensation paid to you. Filing an amendment to taxes In most cases, you enter unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Filing an amendment to taxes Types of unemployment compensation. Filing an amendment to taxes   Unemployment compensation generally includes any amount received under an unemployment compensation law of the United States or of a state. Filing an amendment to taxes It includes the following benefits. Filing an amendment to taxes Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund. Filing an amendment to taxes State unemployment insurance benefits. Filing an amendment to taxes Railroad unemployment compensation benefits. Filing an amendment to taxes Disability payments from a government program paid as a substitute for unemployment compensation. Filing an amendment to taxes (Amounts received as workers' compensation for injuries or illness are not unemployment compensation. Filing an amendment to taxes See chapter 5 for more information. Filing an amendment to taxes ) Trade readjustment allowances under the Trade Act of 1974. Filing an amendment to taxes Unemployment assistance under the Disaster Relief and Emergency Assistance Act. Filing an amendment to taxes Unemployment assistance under the Airline Deregulation Act of 1974 Program. Filing an amendment to taxes Governmental program. Filing an amendment to taxes   If you contribute to a governmental unemployment compensation program and your contributions are not deductible, amounts you receive under the program are not included as unemployment compensation until you recover your contributions. Filing an amendment to taxes If you deducted all of your contributions to the program, the entire amount you receive under the program is included in your income. Filing an amendment to taxes Repayment of unemployment compensation. Filing an amendment to taxes   If you repaid in 2013 unemployment compensation you received in 2013, subtract the amount you repaid from the total amount you received and enter the difference on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Filing an amendment to taxes On the dotted line next to your entry enter “Repaid” and the amount you repaid. Filing an amendment to taxes If you repaid unemployment compensation in 2013 that you included in income in an earlier year, you can deduct the amount repaid on Schedule A (Form 1040), line 23, if you itemize deductions. Filing an amendment to taxes If the amount is more than $3,000, see Repayments , earlier. Filing an amendment to taxes Tax withholding. Filing an amendment to taxes   You can choose to have federal income tax withheld from your unemployment compensation. Filing an amendment to taxes To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. Filing an amendment to taxes Tax will be withheld at 10% of your payment. Filing an amendment to taxes    If you do not choose to have tax withheld from your unemployment compensation, you may be liable for estimated tax. Filing an amendment to taxes If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. Filing an amendment to taxes For more information on estimated tax, see chapter 4. Filing an amendment to taxes Supplemental unemployment benefits. Filing an amendment to taxes   Benefits received from an employer-financed fund (to which the employees did not contribute) are not unemployment compensation. Filing an amendment to taxes They are taxable as wages and are subject to withholding for income tax. Filing an amendment to taxes They may be subject to social security and Medicare taxes. Filing an amendment to taxes For more information, see Supplemental Unemployment Benefits in section 5 of Publication 15-A, Employer's Supplemental Tax Guide. Filing an amendment to taxes Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Filing an amendment to taxes Repayment of benefits. Filing an amendment to taxes   You may have to repay some of your supplemental unemployment benefits to qualify for trade readjustment allowances under the Trade Act of 1974. Filing an amendment to taxes If you repay supplemental unemployment benefits in the same year you receive them, reduce the total benefits by the amount you repay. Filing an amendment to taxes If you repay the benefits in a later year, you must include the full amount of the benefits received in your income for the year you received them. Filing an amendment to taxes   Deduct the repayment in the later year as an adjustment to gross income on Form 1040. Filing an amendment to taxes (You cannot use Form 1040A or Form 1040EZ. Filing an amendment to taxes ) Include the repayment on Form 1040, line 36, and enter “Sub-Pay TRA” and the amount on the dotted line next to line 36. Filing an amendment to taxes If the amount you repay in a later year is more than $3,000, you may be able to take a credit against your tax for the later year instead of deducting the amount repaid. Filing an amendment to taxes For more information on this, see Repayments , earlier. Filing an amendment to taxes Private unemployment fund. Filing an amendment to taxes   Unemployment benefit payments from a private (nonunion) fund to which you voluntarily contribute are taxable only if the amounts you receive are more than your total payments into the fund. Filing an amendment to taxes Report the taxable amount on Form 1040, line 21. Filing an amendment to taxes Payments by a union. Filing an amendment to taxes   Benefits paid to you as an unemployed member of a union from regular union dues are included in your income on Form 1040, line 21. Filing an amendment to taxes However, if you contribute to a special union fund and your payments to the fund are not deductible, the unemployment benefits you receive from the fund are includible in your income only to the extent they are more than your contributions. Filing an amendment to taxes Guaranteed annual wage. Filing an amendment to taxes   Payments you receive from your employer during periods of unemployment, under a union agreement that guarantees you full pay during the year, are taxable as wages. Filing an amendment to taxes Include them on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Filing an amendment to taxes State employees. Filing an amendment to taxes   Payments similar to a state's unemployment compensation may be made by the state to its employees who are not covered by the state's unemployment compensation law. Filing an amendment to taxes Although the payments are fully taxable, do not report them as unemployment compensation. Filing an amendment to taxes Report these payments on Form 1040, line 21. Filing an amendment to taxes Welfare and Other Public Assistance Benefits Do not include in your income governmental benefit payments from a public welfare fund based upon need, such as payments to blind individuals under a state public assistance law. Filing an amendment to taxes Payments from a state fund for the victims of crime should not be included in the victims' incomes if they are in the nature of welfare payments. Filing an amendment to taxes Do not deduct medical expenses that are reimbursed by such a fund. Filing an amendment to taxes You must include in your income any welfare payments that are compensation for services or that are obtained fraudulently. Filing an amendment to taxes Reemployment Trade Adjustment Assistance (RTAA) payments. Filing an amendment to taxes   RTAA payments received from a state must be included in your income. Filing an amendment to taxes The state must send you Form 1099-G to advise you of the amount you should include in income. Filing an amendment to taxes The amount should be reported on Form 1040, line 21. Filing an amendment to taxes Persons with disabilities. Filing an amendment to taxes   If you have a disability, you must include in income compensation you receive for services you perform unless the compensation is otherwise excluded. Filing an amendment to taxes However, you do not include in income the value of goods, services, and cash that you receive, not in return for your services, but for your training and rehabilitation because you have a disability. Filing an amendment to taxes Excludable amounts include payments for transportation and attendant care, such as interpreter services for the deaf, reader services for the blind, and services to help individuals with an intellectual disability do their work. Filing an amendment to taxes Disaster relief grants. Filing an amendment to taxes    Do not include post-disaster grants received under the Robert T. Filing an amendment to taxes Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, child care, or funeral expenses. Filing an amendment to taxes Do not deduct casualty losses or medical expenses that are specifically reimbursed by these disaster relief grants. Filing an amendment to taxes If you have deducted a casualty loss for the loss of your personal residence and you later receive a disaster relief grant for the loss of the same residence, you may have to include part or all of the grant in your taxable income. Filing an amendment to taxes See Recoveries , earlier. Filing an amendment to taxes Unemployment assistance payments under the Act are taxable unemployment compensation. Filing an amendment to taxes See Unemployment compensation under Unemployment Benefits, earlier. Filing an amendment to taxes Disaster relief payments. Filing an amendment to taxes   You can exclude from income any amount you receive that is a qualified disaster relief payment. Filing an amendment to taxes A qualified disaster relief payment is an amount paid to you: To reimburse or pay reasonable and necessary personal, family, living, or funeral expenses that result from a qualified disaster; To reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of your home or repair or replacement of its contents to the extent it is due to a qualified disaster; By a person engaged in the furnishing or sale of transportation as a common carrier because of the death or personal physical injuries incurred as a result of a qualified disaster; or By a federal, state, or local government, or agency, or instrumentality in connection with a qualified disaster in order to promote the general welfare. Filing an amendment to taxes You can exclude this amount only to the extent any expense it pays for is not paid for by insurance or otherwise. Filing an amendment to taxes The exclusion does not apply if you were a participant or conspirator in a terrorist action or a representative of one. Filing an amendment to taxes   A qualified disaster is: A disaster which results from a terrorist or military action; A federally declared disaster; or A disaster which results from an accident involving a common carrier, or from any other event, which is determined to be catastrophic by the Secretary of the Treasury or his or her delegate. Filing an amendment to taxes   For amounts paid under item (4), a disaster is qualified if it is determined by an applicable federal, state, or local authority to warrant assistance from the federal, state, or local government, agency, or instrumentality. Filing an amendment to taxes Disaster mitigation payments. Filing an amendment to taxes   You also can exclude from income any amount you receive that is a qualified disaster mitigation payment. Filing an amendment to taxes Qualified disaster mitigation payments are also most commonly paid to you in the period immediately following damage to property as a result of a natural disaster. Filing an amendment to taxes However, disaster mitigation payments are used to mitigate (reduce the severity of) potential damage from future natural disasters. Filing an amendment to taxes They are paid to you through state and local governments based on the provisions of the Robert T. Filing an amendment to taxes Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act. Filing an amendment to taxes   You cannot increase the basis or adjusted basis of your property for improvements made with nontaxable disaster mitigation payments. Filing an amendment to taxes Home Affordable Modification Program (HAMP). Filing an amendment to taxes   If you benefit from Pay-for-Performance Success Payments under HAMP, the payments are not taxable. Filing an amendment to taxes Mortgage assistance payments under section 235 of the National Housing Act. Filing an amendment to taxes   Payments made under section 235 of the National Housing Act for mortgage assistance are not included in the homeowner's income. Filing an amendment to taxes Interest paid for the homeowner under the mortgage assistance program cannot be deducted. Filing an amendment to taxes Medicare. Filing an amendment to taxes   Medicare benefits received under title XVIII of the Social Security Act are not includible in the gross income of the individuals for whom they are paid. Filing an amendment to taxes This includes basic (part A (Hospital Insurance Benefits for the Aged)) and supplementary (part B (Supplementary Medical Insurance Benefits for the Aged)). Filing an amendment to taxes Old-age, survivors, and disability insurance benefits (OASDI). Filing an amendment to taxes   Generally, OASDI payments under section 202 of title II of the Social Security Act are not includible in the gross income of the individuals to whom they are paid. Filing an amendment to taxes This applies to old-age insurance benefits, and insurance benefits for wives, husbands, children, widows, widowers, mothers and fathers, and parents, as well as the lump-sum death payment. Filing an amendment to taxes Nutrition Program for the Elderly. Filing an amendment to taxes    Food benefits you receive under the Nutrition Program for the Elderly are not taxable. Filing an amendment to taxes If you prepare and serve free meals for the program, include in your income as wages the cash pay you receive, even if you are also eligible for food benefits. Filing an amendment to taxes Payments to reduce cost of winter energy. Filing an amendment to taxes   Payments made by a state to qualified people to reduce their cost of winter energy use are not taxable. Filing an amendment to taxes Other Income The following brief discussions are arranged in alphabetical order. Filing an amendment to taxes Other income items briefly discussed below are referenced to publications which provide more topical information. Filing an amendment to taxes Activity not for profit. Filing an amendment to taxes   You must include on your return income from an activity from which you do not expect to make a profit. Filing an amendment to taxes An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. Filing an amendment to taxes Enter this income on Form 1040, line 21. Filing an amendment to taxes Deductions for expenses related to the activity are limited. Filing an amendment to taxes They cannot total more than the income you report and can be taken only if you itemize deductions on Schedule A (Form 1040). Filing an amendment to taxes See Not-for-Profit Activities in chapter 1 of Publication 535 for information on whether an activity is considered carried on for a profit. Filing an amendment to taxes Alaska Permanent Fund dividend. Filing an amendment to taxes   If you received a payment from Alaska's mineral income fund (Alaska Permanent Fund dividend), report it as income on line 21 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Filing an amendment to taxes The state of Alaska sends each recipient a document that shows the amount of the payment with the check. Filing an amendment to taxes The amount also is reported to IRS. Filing an amendment to taxes Alimony. Filing an amendment to taxes   Include in your income on Form 1040, line 11, any alimony payments you receive. Filing an amendment to taxes Amounts you receive for child support are not income to you. Filing an amendment to taxes Alimony and child support payments are discussed in chapter 18. Filing an amendment to taxes Bribes. Filing an amendment to taxes   If you receive a bribe, include it in your income. Filing an amendment to taxes Campaign contributions. Filing an amendment to taxes   These contributions are not income to a candidate unless they are diverted to his or her personal use. Filing an amendment to taxes To be exempt from tax, the contributions must be spent for campaign purposes or kept in a fund for use in future campaigns. Filing an amendment to taxes However, interest earned on bank deposits, dividends received on contributed securities, and net gains realized on sales of contributed securities are taxable and must be reported on Form 1120-POL, U. Filing an amendment to taxes S. Filing an amendment to taxes Income Tax Return for Certain Political Organizations. Filing an amendment to taxes Excess campaign funds transferred to an office account must be included in the officeholder's income on Form 1040, line 21, in the year transferred. Filing an amendment to taxes Car pools. Filing an amendment to taxes   Do not include in your income amounts you receive from the passengers for driving a car in a car pool to and from work. Filing an amendment to taxes These amounts are considered reimbursement for your expenses. Filing an amendment to taxes However, this rule does not apply if you have developed car pool arrangements into a profit-making business of transporting workers for hire. Filing an amendment to taxes Cash rebates. Filing an amendment to taxes   A cash rebate you receive from a dealer or manufacturer of an item you buy is not income, but you must reduce your basis by the amount of the rebate. Filing an amendment to taxes Example. Filing an amendment to taxes You buy a new car for $24,000 cash and receive a $2,000 rebate check from the manufacturer. Filing an amendment to taxes The $2,000 is not income to you. Filing an amendment to taxes Your basis in the car is $22,000. Filing an amendment to taxes This is the basis on which you figure gain or loss if you sell the car and depreciation if you use it for business. Filing an amendment to taxes Casualty insurance and other reimbursements. Filing an amendment to taxes   You generally should not report these reimbursements on your return unless you are figuring gain or loss from the casualty or theft. Filing an amendment to taxes See chapter 25 for more information. Filing an amendment to taxes Child support payments. Filing an amendment to taxes   You should not report these payments on your return. Filing an amendment to taxes See chapter 18 for more information. Filing an amendment to taxes Court awards and damages. Filing an amendment to taxes   To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. Filing an amendment to taxes The character of the income as ordinary income or capital gain depends on the nature of the underlying claim. Filing an amendment to taxes Include the following as ordinary income. Filing an amendment to taxes Interest on any award. Filing an amendment to taxes Compensation for lost wages or lost profits in most cases. Filing an amendment to taxes Punitive damages, in most cases. Filing an amendment to taxes It does not matter if they relate to a physical injury or physical sickness. Filing an amendment to taxes Amounts received in settlement of pension rights (if you did not contribute to the plan). Filing an amendment to taxes Damages for: Patent or copyright infringement, Breach of contract, or Interference with business operations. Filing an amendment to taxes Back pay and damages for emotional distress received to satisfy a claim under title VII of the Civil Rights Act of 1964. Filing an amendment to taxes Attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income. Filing an amendment to taxes   Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments). Filing an amendment to taxes Emotional distress. Filing an amendment to taxes   Emotional distress itself is not a physical injury or physical sickness, but damages you receive for emotional distress due to a physical injury or sickness are treated as received for the physical injury or sickness. Filing an amendment to taxes Do not include them in your income. Filing an amendment to taxes   If the emotional distress is due to a personal injury that is not due to a physical injury or sickness (for example, employment discrimination or injury to reputation), you must include the damages in your income, except for any damages you receive for medical care due to that emotional distress. Filing an amendment to taxes Emotional distress includes physical symptoms that result from emotional distress, such as headaches, insomnia, and stomach disorders. Filing an amendment to taxes Deduction for costs involved in unlawful discrimination suits. Filing an amendment to taxes   You may be able to deduct attorney fees and court costs paid to recover a judgment or settlement for a claim of unlawful discrimination under various provisions of federal, state, and local law listed in Internal Revenue Code section 62(e), a claim against the United States government, or a claim under section 1862(b)(3)(A) of the Social Security Act. Filing an amendment to taxes For more information, see Publication 525. Filing an amendment to taxes Credit card insurance. Filing an amendment to taxes   In most cases, if you receive benefits under a credit card disability or unemployment insurance plan, the benefits are taxable to you. Filing an amendment to taxes These plans make the minimum monthly payment on your credit card account if you cannot make the payment due to injury, illness, disability, or unemployment. Filing an amendment to taxes Report on Form 1040, line 21, the amount of benefits you received during the year that is more than the amount of the premiums you paid during the year. Filing an amendment to taxes Down payment assistance. Filing an amendment to taxes   If you purchase a home and receive assistance from a nonprofit corporation to make the down payment, that assistance is not included in your income. Filing an amendment to taxes If the corporation qualifies as a tax-exempt charitable organization, the assistance is treated as a gift and is included in your basis of the house. Filing an amendment to taxes If the corporation does not qualify, the assistance is treated as a rebate or reduction of the purchase price and is not included in your basis. Filing an amendment to taxes Employment agency fees. Filing an amendment to taxes   If you get a job through an employment agency, and the fee is paid by your employer, the fee is not includible in your income if you are not liable for it. Filing an amendment to taxes However, if you pay it and your employer reimburses you for it, it is includible in your income. Filing an amendment to taxes Energy conservation subsidies. Filing an amendment to taxes   You can exclude from gross income any subsidy provided, either directly or indirectly, by public utilities for the purchase or installation of an energy conservation measure for a dwelling unit. Filing an amendment to taxes Energy conservation measure. Filing an amendment to taxes   This includes installations or modifications that are primarily designed to reduce consumption of electricity or natural gas, or improve the management of energy demand. Filing an amendment to taxes Dwelling unit. Filing an amendment to taxes   This includes a house, apartment, condominium, mobile home, boat, or similar property. Filing an amendment to taxes If a building or structure contains both dwelling and other units, any subsidy must be properly allocated. Filing an amendment to taxes Estate and trust income. Filing an amendment to taxes    An estate or trust, unlike a partnership, may have to pay federal income tax. Filing an amendment to taxes If you are a beneficiary of an estate or trust, you may be taxed on your share of its income distributed or required to be distributed to you. Filing an amendment to taxes However, there is never a double tax. Filing an amendment to taxes Estates and trusts file their returns on Form 1041, U. Filing an amendment to taxes S. Filing an amendment to taxes Income Tax Return for Estates and Trusts, and your share of the income is reported to you on Schedule K-1 (Form 1041). Filing an amendment to taxes Current income required to be distributed. Filing an amendment to taxes   If you are the beneficiary of an estate or trust that must distribute all of its current income, you must report your share of the distributable net income, whether or not you actually received it. Filing an amendment to taxes Current income not required to be distributed. Filing an amendment to taxes    If you are the beneficiary of an estate or trust and the fiduciary has the choice of whether to distribute all or part of the current income, you must report: All income that is required to be distributed to you, whether or not it is actually distributed, plus All other amounts actually paid or credited to you, up to the amount of your share of distributable net income. Filing an amendment to taxes How to report. Filing an amendment to taxes   Treat each item of income the same way that the estate or trust would treat it. Filing an amendment to taxes For example, if a trust's dividend income is distributed to you, you report the distribution as dividend income on your return. Filing an amendment to taxes The same rule applies to distributions of tax-exempt interest and capital gains. Filing an amendment to taxes   The fiduciary of the estate or trust must tell you the type of items making up your share of the estate or trust income and any credits you are allowed on your individual income tax return. Filing an amendment to taxes Losses. Filing an amendment to taxes   Losses of estates and trusts generally are not deductible by the beneficiaries. Filing an amendment to taxes Grantor trust. Filing an amendment to taxes   Income earned by a grantor trust is taxable to the grantor, not the beneficiary, if the grantor keeps certain control over the trust. Filing an amendment to taxes (The grantor is the one who transferred property to the trust. Filing an amendment to taxes ) This rule applies if the property (or income from the property) put into the trust will or may revert (be returned) to the grantor or the grantor's spouse. Filing an amendment to taxes   Generally, a trust is a grantor trust if the grantor has a reversionary interest valued (at the date of transfer) at more than 5% of the value of the transferred property. Filing an amendment to taxes Expenses paid by another. Filing an amendment to taxes   If your personal expenses are paid for by another person, such as a corporation, the payment may be taxable to you depending upon your relationship with that person and the nature of the payment. Filing an amendment to taxes But if the payment makes up for a loss caused by that person, and only restores you to the position you were in before the loss, the payment is not includible in your income. Filing an amendment to taxes Fees for services. Filing an amendment to taxes   Include all fees for your services in your income. Filing an amendment to taxes Examples of these fees are amounts you receive for services you perform as: A corporate director, An executor, administrator, or personal representative of an estate, A manager of a trade or business you operated before declaring Chapter 11 bankruptcy, A notary public, or An election precinct official. Filing an amendment to taxes Nonemployee compensation. Filing an amendment to taxes   If you are not an employee and the fees for your services from the same payer total $600 or more for the year, you may receive a Form 1099-MISC. Filing an amendment to taxes You may need to report your fees as self-employment income. Filing an amendment to taxes See Self-Employed Persons , in chapter 1, for a discussion of when you are considered self-employed. Filing an amendment to taxes Corporate director. Filing an amendment to taxes   Corporate director fees are self-employment income. Filing an amendment to taxes Report these payments on Schedule C or Schedule C-EZ (Form 1040). Filing an amendment to taxes Personal representatives. Filing an amendment to taxes   All personal representatives must include in their gross income fees paid to them from an estate. Filing an amendment to taxes If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on Form 1040, line 21. Filing an amendment to taxes If you are in the trade or business of being an executor, report these fees as self-employment income on Schedule C or Schedule C-EZ (Form 1040). Filing an amendment to taxes The fee is not includible in income if it is waived. Filing an amendment to taxes Manager of trade or business for bankruptcy estate. Filing an amendment to taxes   Include in your income all payments received from your bankruptcy estate for managing or operating a trade or business that you operated before you filed for bankruptcy. Filing an amendment to taxes Report this income on Form 1040, line 21. Filing an amendment to taxes Notary public. Filing an amendment to taxes    Report payments for these services on Schedule C or Schedule C-EZ (Form 1040). Filing an amendment to taxes These payments are not subject to self-employment tax. Filing an amendment to taxes See the separate instructions for Schedule SE (Form 1040) for details. Filing an amendment to taxes Election precinct official. Filing an amendment to taxes    You should receive a Form W-2 showing payments for services performed as an election official or election worker. Filing an amendment to taxes Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Filing an amendment to taxes Foster care providers. Filing an amendment to taxes   Payments you receive from a state, political subdivision, or a qualified foster care placement agency for providing care to qualified foster individuals in your home generally are not included in your income. Filing an amendment to taxes However, you must include in your income payments received for the care of more than 5 individuals age 19 or older and certain difficulty-of-care payments. Filing an amendment to taxes   A qualified foster individual is a person who: Is living in a foster family home, and Was placed there by: An agency of a state or one of its political subdivisions, or A qualified foster care placement agency. Filing an amendment to taxes Difficulty-of-care payments. Filing an amendment to taxes   These are additional payments that are designated by the payer as compensation for providing the additional care that is required for physically, mentally, or emotionally handicapped qualified foster individuals. Filing an amendment to taxes A state must determine that the additional compensation is needed, and the care for which the payments are made must be provided in your home. Filing an amendment to taxes   You must include in your income difficulty-of-care payments received for more than: 10 qualified foster individuals under age 19, or 5 qualified foster individuals age 19 or older. Filing an amendment to taxes Maintaining space in home. Filing an amendment to taxes   If you are paid to maintain space in your home for emergency foster care, you must include the payment in your income. Filing an amendment to taxes Reporting taxable payments. Filing an amendment to taxes    If you receive payments that you must include in your income, you are in business as a foster care provider and you are self-employed. Filing an amendment to taxes Report the payments on Schedule C or Schedule C-EZ (Form 1040). Filing an amendment to taxes See Publication 587, Business Use of Your Home, to help you determine the amount you can deduct for the use of your home. Filing an amendment to taxes Found property. Filing an amendment to taxes   If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession. Filing an amendment to taxes Free tour. Filing an amendment to taxes   If you received a free tour from a travel agency for organizing a group of tourists, you must include its value in your income. Filing an amendment to taxes Report the fair market value of the tour on Form 1040, line 21, if you are not in the trade or business of organizing tours. Filing an amendment to taxes You cannot deduct your expenses in serving as the voluntary leader of the group at the group's request. Filing an amendment to taxes If you organize tours as a trade or business, report the tour's value on Schedule C or Schedule C-EZ (Form 1040). Filing an amendment to taxes Gambling winnings. Filing an amendment to taxes   You must include your gambling winnings in income on Form 1040, line 21. Filing an amendment to taxes If you itemize your deductions on Schedule A (Form 1040), you can deduct gambling losses you had during the year, but only up to the amount of your winnings. Filing an amendment to taxes Lotteries and raffles. Filing an amendment to taxes   Winnings from lotteries and raffles are gambling winnings. Filing an amendment to taxes In addition to cash winnings, you must include in your income the fair market value of bonds, cars, houses, and other noncash prizes. Filing an amendment to taxes    If you win a state lottery prize payable in installments, see Publication 525 for more information. Filing an amendment to taxes Form W-2G. Filing an amendment to taxes   You may have received a Form W-2G, Certain Gambling Winnings, showing the amount of your gambling winnings and any tax taken out of them. Filing an amendment to taxes Include the amount from box 1 on Form 1040, line 21. Filing an amendment to taxes Include the amount shown in box 4 on Form 1040, line 62, as federal income tax withheld. Filing an amendment to taxes Reporting winnings and recordkeeping. Filing an amendment to taxes   For more information on reporting gam
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LP 68 Frequently Asked Questions (FAQs)

What is the notice telling me?

We have released the Notice of Levy sent to you previously regarding the taxpayer named in the letter.

What do I have to do?

You are no longer required to turn over any money, property, or rights to property belonging to this taxpayer.

How much time do I have?

The levy release is effective immediately upon receipt by you. No other action is required on your part.

Who should I contact?

There is no need to contact us regarding the release. You may inform the taxpayer that you received the release of levy.

Page Last Reviewed or Updated: 30-Jan-2014

The Filing An Amendment To Taxes

Filing an amendment to taxes 23. Filing an amendment to taxes   Interest Expense Table of Contents Introduction Useful Items - You may want to see: Home Mortgage InterestAmount Deductible Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement Investment InterestInvestment Property Allocation of Interest Expense Limit on Deduction Items You Cannot DeductPersonal Interest Allocation of Interest How To ReportMore than one borrower. Filing an amendment to taxes Mortgage proceeds used for business or investment. Filing an amendment to taxes Introduction This chapter discusses what interest expenses you can deduct. Filing an amendment to taxes Interest is the amount you pay for the use of borrowed money. Filing an amendment to taxes The following are types of interest you can deduct as itemized deductions on Schedule A (Form 1040). Filing an amendment to taxes Home mortgage interest, including certain points and mortgage insurance premiums. Filing an amendment to taxes Investment interest. Filing an amendment to taxes This chapter explains these deductions. Filing an amendment to taxes It also explains where to deduct other types of interest and lists some types of interest you cannot deduct. Filing an amendment to taxes Use Table 23-1 to find out where to get more information on various types of interest, including investment interest. Filing an amendment to taxes Useful Items - You may want to see: Publication 936 Home Mortgage Interest Deduction 550 Investment Income and Expenses Home Mortgage Interest Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). Filing an amendment to taxes The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. Filing an amendment to taxes You can deduct home mortgage interest if all the following conditions are met. Filing an amendment to taxes You file Form 1040 and itemize deductions on Schedule A (Form 1040). Filing an amendment to taxes The mortgage is a secured debt on a qualified home in which you have an ownership interest. Filing an amendment to taxes (Generally, your mortgage is a secured debt if you put your home up as collateral to protect the interest of the lender. Filing an amendment to taxes The term “qualified home” means your main home or second home. Filing an amendment to taxes For details, see Publication 936. Filing an amendment to taxes )  Both you and the lender must intend that the loan be repaid. Filing an amendment to taxes Amount Deductible In most cases, you can deduct all of your home mortgage interest. Filing an amendment to taxes How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. Filing an amendment to taxes Fully deductible interest. Filing an amendment to taxes   If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. Filing an amendment to taxes (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category. Filing an amendment to taxes )   The three categories are as follows: Mortgages you took out on or before October 13, 1987 (called grandfathered debt). Filing an amendment to taxes Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2013 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately). Filing an amendment to taxes Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2013 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2). Filing an amendment to taxes The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. Filing an amendment to taxes   See Part II of Publication 936 for more detailed definitions of grandfathered, home acquisition, and home equity debt. Filing an amendment to taxes    You can use Figure 23-A to check whether your home mortgage interest is fully deductible. Filing an amendment to taxes Figure 23-A. Filing an amendment to taxes Is My Home Mortgage Interest Fully Deductible? Please click here for the text description of the image. Filing an amendment to taxes Figure 23-A. Filing an amendment to taxes Is My Interest Fully Deductible? Limits on deduction. Filing an amendment to taxes   You cannot fully deduct interest on a mortgage that does not fit into any of the three categories listed earlier. Filing an amendment to taxes If this applies to you, see Part II of Publication 936 to figure the amount of interest you can deduct. Filing an amendment to taxes Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. Filing an amendment to taxes It also describes certain special situations that may affect your deduction. Filing an amendment to taxes Late payment charge on mortgage payment. Filing an amendment to taxes   You can deduct as home mortgage interest a late payment charge if it was not for a specific service performed in connection with your mortgage loan. Filing an amendment to taxes Mortgage prepayment penalty. Filing an amendment to taxes   If you pay off your home mortgage early, you may have to pay a penalty. Filing an amendment to 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. Filing an amendment to taxes Sale of home. Filing an amendment to taxes   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of sale. Filing an amendment to taxes Example. Filing an amendment to taxes John and Peggy Harris sold their home on May 7. Filing an amendment to taxes Through April 30, they made home mortgage interest payments of $1,220. Filing an amendment to taxes The settlement sheet for the sale of the home showed $50 interest for the 6-day period in May up to, but not including, the date of sale. Filing an amendment to taxes Their mortgage interest deduction is $1,270 ($1,220 + $50). Filing an amendment to taxes Prepaid interest. Filing an amendment to 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. Filing an amendment to taxes You can deduct in each year only the interest that qualifies as home mortgage interest for that year. Filing an amendment to taxes However, there is an exception that applies to points, discussed later. Filing an amendment to taxes Mortgage interest credit. Filing an amendment to taxes   You may be able to claim a mortgage interest credit if you were issued a mortgage credit certificate (MCC) by a state or local government. Filing an amendment to taxes Figure the credit on Form 8396, Mortgage Interest Credit. Filing an amendment to taxes If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. Filing an amendment to taxes   For more information on the credit, see chapter 37. Filing an amendment to taxes Ministers' and military housing allowance. Filing an amendment to taxes   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you can still deduct your home mortgage interest. Filing an amendment to taxes Hardest Hit Fund and Emergency Homeowners' Loan Programs. Filing an amendment to taxes   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. Filing an amendment to 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. Filing an amendment to 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. Filing an amendment to 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 from payer(s) / borrower(s)), box 4 (mortgage insurance premiums) and box 5 (real property taxes). Filing an amendment to 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. Filing an amendment to taxes Mortgage assistance payments under section 235 of the National Housing Act. Filing an amendment to taxes   If you qualify for mortgage assistance payments for lower-income families under section 235 of the National Housing Act, part or all of the interest on your mortgage may be paid for you. Filing an amendment to taxes You cannot deduct the interest that is paid for you. Filing an amendment to taxes No other effect on taxes. Filing an amendment to taxes   Do not include these mortgage assistance payments in your income. Filing an amendment to taxes Also, do not use these payments to reduce other deductions, such as real estate taxes. Filing an amendment to taxes Divorced or separated individuals. Filing an amendment to taxes   If a divorce or separation agreement requires you or your spouse or former spouse to pay home mortgage interest on a home owned by both of you, the payment of interest may be alimony. Filing an amendment to taxes See the discussion of Payments for jointly-owned home in chapter 18. Filing an amendment to taxes Redeemable ground rents. Filing an amendment to taxes   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. Filing an amendment to taxes   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. Filing an amendment to taxes For more information, see Publication 936. Filing an amendment to taxes Nonredeemable ground rents. Filing an amendment to taxes   Payments on a nonredeemable ground rent are not mortgage interest. Filing an amendment to taxes You can deduct them as rent if they are a business expense or if they are for rental property. Filing an amendment to taxes Reverse mortgages. Filing an amendment to taxes   A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. Filing an amendment to taxes With a reverse mortgage, you retain title to your home. Filing an amendment to taxes Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. Filing an amendment to taxes Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Filing an amendment to taxes Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until the loan is paid in full. Filing an amendment to taxes Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Publication 936. Filing an amendment to taxes Rental payments. Filing an amendment to taxes   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. Filing an amendment to taxes This is true even if the settlement papers call them interest. Filing an amendment to taxes You cannot deduct these payments as home mortgage interest. Filing an amendment to taxes Mortgage proceeds invested in tax-exempt securities. Filing an amendment to taxes   You cannot deduct the home mortgage interest on grandfathered debt or home equity debt if you used the proceeds of the mortgage to buy securities or certificates that produce tax-free income. Filing an amendment to taxes “Grandfathered debt” and “home equity debt” are defined earlier under Amount Deductible. Filing an amendment to taxes Refunds of interest. Filing an amendment to taxes   If you receive a refund of interest in the same tax year you paid it, you must reduce your interest expense by the amount refunded to you. Filing an amendment to taxes If you receive a refund of interest you deducted in an earlier year, you generally must include the refund in income in the year you receive it. Filing an amendment to taxes However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. Filing an amendment to taxes This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. Filing an amendment to taxes    If you received a refund of interest you overpaid in an earlier year, you generally will receive a Form 1098, Mortgage Interest Statement, showing the refund in box 3. Filing an amendment to taxes For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. Filing an amendment to taxes   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in chapter 12. Filing an amendment to taxes Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Filing an amendment to taxes Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Filing an amendment to taxes A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Filing an amendment to taxes See Points paid by the seller , later. Filing an amendment to taxes General Rule You generally cannot deduct the full amount of points in the year paid. Filing an amendment to taxes Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. Filing an amendment to taxes See Deduction Allowed Ratably , next. Filing an amendment to taxes For exceptions to the general rule, see Deduction Allowed in Year Paid , later. Filing an amendment to taxes Deduction Allowed Ratably If you do not meet the tests listed under Deduction Allowed in Year Paid , later, the loan is not a home improvement loan, or you choose not to deduct your points in full in the year paid, you can deduct the points ratably (equally) over the life of the loan if you meet all the following tests. Filing an amendment to taxes You use the cash method of accounting. Filing an amendment to taxes This means you report income in the year you receive it and deduct expenses in the year you pay them. Filing an amendment to taxes Most individuals use this method. Filing an amendment to taxes Your loan is secured by a home. Filing an amendment to taxes (The home does not need to be your main home. Filing an amendment to taxes ) Your loan period is not more than 30 years. Filing an amendment to taxes If your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period. Filing an amendment to taxes Either your loan amount is $250,000 or less, or the number of points is not more than: 4, if your loan period is 15 years or less, or 6, if your loan period is more than 15 years. Filing an amendment to taxes Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. Filing an amendment to taxes (You can use Figure 23-B as a quick guide to see whether your points are fully deductible in the year paid. Filing an amendment to taxes ) Your loan is secured by your main home. Filing an amendment to taxes (Your main home is the one you ordinarily live in most of the time. Filing an amendment to taxes ) Paying points is an established business practice in the area where the loan was made. Filing an amendment to taxes The points paid were not more than the points generally charged in that area. Filing an amendment to taxes You use the cash method of accounting. Filing an amendment to taxes This means you report income in the year you receive it and deduct expenses in the year you pay them. Filing an amendment to taxes (If you want more information about this method, see Accounting Methods in chapter 1. Filing an amendment to 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. Filing an amendment to taxes The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Filing an amendment to taxes The funds you provided are not required to have been applied to the points. Filing an amendment to taxes They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Filing an amendment to taxes You cannot have borrowed these funds from your lender or mortgage broker. Filing an amendment to taxes You use your loan to buy or build your main home. Filing an amendment to taxes The points were computed as a percentage of the principal amount of the mortgage. Filing an amendment to taxes The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. Filing an amendment to taxes The points may be shown as paid from either your funds or the seller's. Filing an amendment to taxes Figure 23-B. Filing an amendment to taxes Are My Points Fully Deductible This Year? Please click here for the text description of the image. Filing an amendment to taxes Figure 23-B. Filing an amendment to taxes Are My Points Fully Deductible This Year? Note. Filing an amendment to taxes If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan. Filing an amendment to taxes Home improvement loan. Filing an amendment to taxes   You can also fully deduct in the year paid points paid on a loan to improve your main home, if tests (1) through (6) are met. Filing an amendment to taxes Second home. Filing an amendment to taxes You cannot fully deduct in the year paid points you pay on loans secured by your second home. Filing an amendment to taxes You can deduct these points only over the life of the loan. Filing an amendment to taxes Refinancing. Filing an amendment to taxes   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. Filing an amendment to taxes This is true even if the new mortgage is secured by your main home. Filing an amendment to taxes   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Filing an amendment to taxes You can deduct the rest of the points over the life of the loan. Filing an amendment to taxes Example 1. Filing an amendment to taxes In 1998, Bill Fields got a mortgage to buy a home. Filing an amendment to taxes In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. Filing an amendment to taxes The mortgage is secured by his home. Filing an amendment to taxes To get the new loan, he had to pay three points ($3,000). Filing an amendment to taxes Two points ($2,000) were for prepaid interest, and one point ($1,000) was charged for services, in place of amounts that ordinarily are stated separately on the settlement statement. Filing an amendment to taxes Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. Filing an amendment to taxes The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. Filing an amendment to taxes Bill's first payment on the new loan was due July 1. Filing an amendment to taxes He made six payments on the loan in 2013 and is a cash basis taxpayer. Filing an amendment to taxes Bill used the funds from the new mortgage to repay his existing mortgage. Filing an amendment to taxes Although the new mortgage loan was for Bill's continued ownership of his main home, it was not for the purchase or improvement of that home. Filing an amendment to taxes He cannot deduct all of the points in 2013. Filing an amendment to taxes He can deduct two points ($2,000) ratably over the life of the loan. Filing an amendment to taxes He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. Filing an amendment to taxes The other point ($1,000) was a fee for services and is not deductible. Filing an amendment to taxes Example 2. Filing an amendment to taxes The facts are the same as in Example 1, except that Bill used $25,000 of the loan proceeds to improve his home and $75,000 to repay his existing mortgage. Filing an amendment to taxes Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. Filing an amendment to taxes His deduction is $500 ($2,000 × 25%). Filing an amendment to taxes Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. Filing an amendment to taxes This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. Filing an amendment to taxes The total amount Bill deducts in 2013 is $550 ($500 + $50). Filing an amendment to taxes Special Situations This section describes certain special situations that may affect your deduction of points. Filing an amendment to taxes Original issue discount. Filing an amendment to taxes   If you do not qualify to either deduct the points in the year paid or deduct them ratably over the life of the loan, or if you choose not to use either of these methods, the points reduce the issue price of the loan. Filing an amendment to taxes This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. Filing an amendment to taxes Amounts charged for services. Filing an amendment to taxes   Amounts charged by the lender for specific services connected to the loan are not interest. Filing an amendment to taxes Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Filing an amendment to taxes You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Filing an amendment to taxes Points paid by the seller. Filing an amendment to taxes   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Filing an amendment to taxes Treatment by seller. Filing an amendment to taxes   The seller cannot deduct these fees as interest. Filing an amendment to taxes But they are a selling expense that reduces the amount realized by the seller. Filing an amendment to taxes See chapter 15 for information on selling your home. Filing an amendment to taxes Treatment by buyer. Filing an amendment to taxes    The buyer reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them. Filing an amendment to taxes If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. Filing an amendment to taxes If any of those tests are not met, the buyer deducts the points over the life of the loan. Filing an amendment to taxes   For information about basis, see chapter 13. Filing an amendment to taxes Funds provided are less than points. Filing an amendment to taxes   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the funds you provided were less than the points charged to you (test (6)), you can deduct the points in the year paid, up to the amount of funds you provided. Filing an amendment to taxes In addition, you can deduct any points paid by the seller. Filing an amendment to taxes Example 1. Filing an amendment to taxes When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Filing an amendment to taxes You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. Filing an amendment to taxes Of the $1,000 charged for points, you can deduct $750 in the year paid. Filing an amendment to taxes You spread the remaining $250 over the life of the mortgage. Filing an amendment to taxes Example 2. Filing an amendment to 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. Filing an amendment to 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). Filing an amendment to taxes You spread the remaining $250 over the life of the mortgage. Filing an amendment to taxes You must reduce the basis of your home by the $1,000 paid by the seller. Filing an amendment to taxes Excess points. Filing an amendment to taxes   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the points paid were more than generally paid in your area (test (3)), you deduct in the year paid only the points that are generally charged. Filing an amendment to taxes You must spread any additional points over the life of the mortgage. Filing an amendment to taxes Mortgage ending early. Filing an amendment to 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. Filing an amendment to taxes However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. Filing an amendment to taxes Instead, deduct the remaining balance over the term of the new loan. Filing an amendment to taxes    A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Filing an amendment to taxes Example. Filing an amendment to taxes Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. Filing an amendment to taxes He deducts $200 points per year. Filing an amendment to taxes Through 2012, Dan has deducted $2,200 of the points. Filing an amendment to taxes Dan prepaid his mortgage in full in 2013. Filing an amendment to taxes He can deduct the remaining $800 of points in 2013. Filing an amendment to taxes Limits on deduction. Filing an amendment to taxes   You cannot fully deduct points paid on a mortgage unless the mortgage fits into one of the categories listed earlier under Fully deductible interest . Filing an amendment to taxes See Publication 936 for details. Filing an amendment to taxes Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. Filing an amendment to taxes The insurance must be in connection with home acquisition debt and the insurance contract must have been issued after 2006. Filing an amendment to taxes Qualified mortgage insurance. Filing an amendment to taxes   Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). Filing an amendment to taxes   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. Filing an amendment to taxes If provided by the Rural Housing Service, it is commonly known as a guarantee fee. Filing an amendment to taxes These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Filing an amendment to taxes Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. Filing an amendment to taxes Special rules for prepaid mortgage insurance. Filing an amendment to taxes   Generally, if you paid premiums for qualified mortgage insurance that are allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. Filing an amendment to taxes You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. Filing an amendment to taxes No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. Filing an amendment to taxes This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. Filing an amendment to taxes See the Example below. Filing an amendment to taxes Example. Filing an amendment to taxes Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. Filing an amendment to taxes Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Filing an amendment to taxes Since the $9,240 in private mortgage insurance is allocable to periods after 2012, Ryan must allocate the $9,240 over the shorter of the life of the mortgage or 84 months. Filing an amendment to taxes Ryan's adjusted gross income (AGI) for 2012 is $76,000. Filing an amendment to taxes Ryan can deduct $880 ($9,240 ÷ 84 × 8 months) for qualified mortgage insurance premiums in 2012. Filing an amendment to taxes For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 × 12 months) if his AGI is $100,000 or less. Filing an amendment to taxes In this example, the mortgage insurance premiums are allocated over 84 months, which is shorter than the life of the mortgage of 15 years (180 months). Filing an amendment to taxes Limit on deduction. Filing an amendment to taxes   If your adjusted gross income on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. Filing an amendment to 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. Filing an amendment to taxes If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Filing an amendment to taxes Form 1098, Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage, you generally will receive a Form 1098 or a similar statement from the mortgage holder. Filing an amendment to taxes You will receive the statement if you pay interest to a person (including a financial institution or a cooperative housing corporation) in the course of that person's trade or business. Filing an amendment to taxes A governmental unit is a person for purposes of furnishing the statement. Filing an amendment to taxes The statement for each year should be sent to you by January 31 of the following year. Filing an amendment to taxes A copy of this form will also be sent to the IRS. Filing an amendment to taxes The statement will show the total interest you paid during the year, any mortgage insurance premiums you paid, and if you purchased a main home during the year, it also will show the deductible points paid during the year, including seller-paid points. Filing an amendment to taxes However, it should not show any interest that was paid for you by a government agency. Filing an amendment to taxes As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Filing an amendment to taxes However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. Filing an amendment to taxes See Points , earlier, to determine whether you can deduct points not shown on Form 1098. Filing an amendment to taxes Prepaid interest on Form 1098. Filing an amendment to taxes   If you prepaid interest in 2013 that accrued in full by January 15, 2014, this prepaid interest may be included in box 1 of Form 1098. Filing an amendment to taxes However, you cannot deduct the prepaid amount for January 2014 in 2013. Filing an amendment to taxes (See Prepaid interest , earlier. Filing an amendment to taxes ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. Filing an amendment to taxes You will include the interest for January 2014 with the other interest you pay for 2014. Filing an amendment to taxes See How To Report , later. Filing an amendment to taxes Refunded interest. Filing an amendment to taxes   If you received a refund of mortgage interest you overpaid in an earlier year, you generally will receive a Form 1098 showing the refund in box 3. Filing an amendment to taxes See Refunds of interest , earlier. Filing an amendment to taxes Mortgage insurance premiums. Filing an amendment to taxes   The amount of mortgage insurance premiums you paid during 2013 may be shown in box 4 of Form 1098. Filing an amendment to taxes See Mortgage Insurance Premiums, earlier. Filing an amendment to taxes Investment Interest This section discusses interest expenses you may be able to deduct as an investor. Filing an amendment to taxes If you borrow money to buy property you hold for investment, the interest you pay is investment interest. Filing an amendment to taxes You can deduct investment interest subject to the limit discussed later. Filing an amendment to taxes However, you cannot deduct interest you incurred to produce tax-exempt income. Filing an amendment to taxes Nor can you deduct interest expenses on straddles. Filing an amendment to taxes Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. Filing an amendment to taxes Investment Property Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. Filing an amendment to taxes It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). Filing an amendment to taxes Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). Filing an amendment to taxes Partners, shareholders, and beneficiaries. Filing an amendment to taxes   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. Filing an amendment to taxes Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. Filing an amendment to taxes Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. Filing an amendment to taxes The allocation is not affected by the use of property that secures the debt. Filing an amendment to taxes Limit on Deduction Generally, your deduction for investment interest expense is limited to the amount of your net investment income. Filing an amendment to taxes You can carry over the amount of investment interest that you could not deduct because of this limit to the next tax year. Filing an amendment to taxes The interest carried over is treated as investment interest paid or accrued in that next year. Filing an amendment to taxes You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. Filing an amendment to taxes Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. Filing an amendment to taxes Investment income. Filing an amendment to taxes    This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). Filing an amendment to taxes Investment income does not include Alaska Permanent Fund dividends. Filing an amendment to taxes It also does not include qualified dividends or net capital gain unless you choose to include them. Filing an amendment to taxes Choosing to include qualified dividends. Filing an amendment to taxes   Investment income generally does not include qualified dividends, discussed in chapter 8. Filing an amendment to taxes However, you can choose to include all or part of your qualified dividends in investment income. Filing an amendment to taxes   You make this choice by completing Form 4952, line 4g, according to its instructions. Filing an amendment to taxes   If you choose to include any amount of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. Filing an amendment to taxes Choosing to include net capital gain. Filing an amendment to taxes   Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). Filing an amendment to taxes However, you can choose to include all or part of your net capital gain in investment income. Filing an amendment to taxes    You make this choice by completing Form 4952, line 4g, according to its instructions. Filing an amendment to taxes   If you choose to include any amount of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. Filing an amendment to taxes    Before making either choice, consider the overall effect on your tax liability. Filing an amendment to taxes Compare your tax if you make one or both of these choices with your tax if you do not. Filing an amendment to taxes Investment income of child reported on parent's return. Filing an amendment to taxes    Investment income includes the part of your child's interest and dividend income that you choose to report on your return. Filing an amendment to taxes If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814, Parents' Election To Report Child's Interest and Dividends. Filing an amendment to taxes Child's qualified dividends. Filing an amendment to taxes   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. Filing an amendment to taxes However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. Filing an amendment to taxes   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). Filing an amendment to taxes Child's Alaska Permanent Fund dividends. Filing an amendment to taxes   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. Filing an amendment to taxes To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. Filing an amendment to taxes Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. Filing an amendment to taxes Subtract the result from the amount on Form 8814, line 12. Filing an amendment to taxes Child's capital gain distributions. Filing an amendment to taxes    If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D, line 13, or Form 1040, line 13) generally does not count as investment income. Filing an amendment to taxes However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. Filing an amendment to taxes   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). Filing an amendment to taxes Investment expenses. Filing an amendment to taxes   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. Filing an amendment to taxes Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. Filing an amendment to taxes Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A, line 27. Filing an amendment to taxes Losses from passive activities. Filing an amendment to taxes   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). Filing an amendment to taxes See Publication 925, Passive Activity and At-Risk Rules, for information about passive activities. Filing an amendment to taxes Form 4952 Use Form 4952, Investment Interest Expense Deduction, to figure your deduction for investment interest. Filing an amendment to taxes Exception to use of Form 4952. Filing an amendment to taxes   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. Filing an amendment to taxes Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. Filing an amendment to taxes You do not have any other deductible investment expenses. Filing an amendment to taxes You have no carryover of investment interest expense from 2012. Filing an amendment to taxes If you meet all of these tests, you can deduct all of your investment interest. Filing an amendment to taxes More Information For more information on investment interest, see Interest Expenses in chapter 3 of Publication 550. Filing an amendment to taxes Items You Cannot Deduct Some interest payments are not deductible. Filing an amendment to taxes Certain expenses similar to interest also are not deductible. Filing an amendment to taxes Nondeductible expenses include the following items. Filing an amendment to taxes Personal interest (discussed later). Filing an amendment to taxes Service charges (however, see Other Expenses (Line 23) in chapter 28). Filing an amendment to taxes Annual fees for credit cards. Filing an amendment to taxes Loan fees. Filing an amendment to taxes Credit investigation fees. Filing an amendment to taxes Interest to purchase or carry tax-exempt securities. Filing an amendment to taxes Penalties. Filing an amendment to taxes   You cannot deduct fines and penalties paid to a government for violations of law, regardless of their nature. Filing an amendment to taxes Personal Interest Personal interest is not deductible. Filing an amendment to taxes Personal interest is any interest that is not home mortgage interest, investment interest, business interest, or other deductible interest. Filing an amendment to taxes It includes the following items. Filing an amendment to taxes Interest on car loans (unless you use the car for business). Filing an amendment to taxes Interest on federal, state, or local income tax. Filing an amendment to taxes Finance charges on credit cards, retail installment contracts, and revolving charge accounts incurred for personal expenses. Filing an amendment to taxes Late payment charges by a public utility. Filing an amendment to taxes You may be able to deduct interest you pay on a qualified student loan. Filing an amendment to taxes For details, see Publication 970, Tax Benefits for Education. Filing an amendment to taxes Allocation of Interest If you use the proceeds of a loan for more than one purpose (for example, personal and business), you must allocate the interest on the loan to each use. Filing an amendment to taxes However, you do not have to allocate home mortgage interest if it is fully deductible, regardless of how the funds are used. Filing an amendment to taxes You allocate interest (other than fully deductible home mortgage interest) on a loan in the same way as the loan itself is allocated. Filing an amendment to taxes You do this by tracing disbursements of the debt proceeds to specific uses. Filing an amendment to taxes For details on how to do this, see chapter 4 of Publication 535. Filing an amendment to taxes How To Report You must file Form 1040 to deduct any home mortgage interest expense on your tax return. Filing an amendment to taxes Where you deduct your interest expense generally depends on how you use the loan proceeds. Filing an amendment to taxes See Table 23-1 for a summary of where to deduct your interest expense. Filing an amendment to taxes Home mortgage interest and points. Filing an amendment to taxes   Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. Filing an amendment to taxes If you paid more deductible interest to the financial institution than the amount shown on Form 1098, show the larger deductible amount on line 10. Filing an amendment to taxes Attach a statement explaining the difference and print “See attached” next to line 10. Filing an amendment to taxes    Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. Filing an amendment to taxes If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and taxpayer identification number (TIN) on the dotted lines next to line 11. Filing an amendment to taxes The seller must give you this number and you must give the seller your TIN. Filing an amendment to taxes A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Filing an amendment to taxes Failure to meet any of these requirements may result in a $50 penalty for each failure. Filing an amendment to taxes The TIN can be either a social security number, an individual taxpayer identification number (issued by the Internal Revenue Service), or an employer identification number. Filing an amendment to taxes See Social Security Number (SSN) in chapter 1 for more information about TINs. Filing an amendment to taxes    If you can take a deduction for points that were not reported to you on Form 1098, deduct those points on Schedule A (Form 1040), line 12. Filing an amendment to taxes   Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. Filing an amendment to taxes More than one borrower. Filing an amendment to 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. Filing an amendment to taxes Show how much of the interest each of you paid, and give the name and address of the person who received the form. Filing an amendment to taxes Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Filing an amendment to taxes Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. Filing an amendment to taxes   Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Filing an amendment to taxes You should let each of the other borrowers know what his or her share is. Filing an amendment to taxes Mortgage proceeds used for business or investment. Filing an amendment to taxes    If your home mortgage interest deduction is limited, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 23-1. Filing an amendment to taxes It shows where to deduct the part of your excess interest that is for those activities. Filing an amendment to taxes Investment interest. Filing an amendment to taxes    Deduct investment interest, subject to certain limits discussed in Publication 550, on Schedule A (Form 1040), line 14. Filing an amendment to taxes Amortization of bond premium. Filing an amendment to taxes   There are various ways to treat the premium you pay to buy taxable bonds. Filing an amendment to taxes See Bond Premium Amortization in Publication 550. Filing an amendment to taxes Income-producing rental or royalty interest. Filing an amendment to taxes   Deduct interest on a loan for income-producing rental or royalty property that is not used in your business in Part I of Schedule E (Form 1040). Filing an amendment to taxes Example. Filing an amendment to taxes You rent out part of your home and borrow money to make repairs. Filing an amendment to taxes You can deduct only the interest payment for the rented part in Part I of Schedule E (Form 1040). Filing an amendment to taxes Deduct the rest of the interest payment on Schedule A (Form 1040) if it is deductible home mortgage interest. Filing an amendment to taxes Table 23-1. Filing an amendment to taxes Where To Deduct Your Interest Expense IF you have . Filing an amendment to taxes . Filing an amendment to taxes . Filing an amendment to taxes THEN deduct it on . Filing an amendment to taxes . Filing an amendment to taxes . Filing an amendment to taxes AND for more information go to . Filing an amendment to taxes . Filing an amendment to taxes . Filing an amendment to taxes deductible student loan interest Form 1040, line 33, or Form 1040A, line 18 Publication 970. Filing an amendment to taxes deductible home mortgage interest and points reported on Form 1098 Schedule A (Form 1040), line 10 Publication 936. Filing an amendment to taxes deductible home mortgage interest not reported on Form 1098 Schedule A (Form 1040), line 11 Publication 936. Filing an amendment to taxes deductible points not reported on Form 1098 Schedule A (Form 1040), line 12 Publication 936. Filing an amendment to taxes deductible mortgage insurance premiums Schedule A (Form 1040), line 13 Publication 936. Filing an amendment to taxes deductible investment interest (other than incurred to produce rents or royalties) Schedule A (Form 1040), line 14 Publication 550. Filing an amendment to taxes deductible business interest (non-farm) Schedule C or C-EZ (Form 1040) Publication 535. Filing an amendment to taxes deductible farm business interest Schedule F (Form 1040) Publications 225 and 535. Filing an amendment to taxes deductible interest incurred to produce rents or royalties Schedule E (Form 1040) Publications 527 and 535. Filing an amendment to taxes personal interest not deductible. Filing an amendment to taxes Prev  Up  Next   Home   More Online Publications