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Fle 2012 Taxes Late Online Tax Filing

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Fle 2012 Taxes Late Online Tax Filing

Fle 2012 taxes late online tax filing Publication 971 - Introductory Material Table of Contents What's New IntroductionOrdering forms and publications. Fle 2012 taxes late online tax filing Questions about innocent spouse relief. Fle 2012 taxes late online tax filing Useful Items - You may want to see: What's New Expanded filing deadline for equitable relief. Fle 2012 taxes late online tax filing  The period of time in which you may request equitable relief has been expanded. Fle 2012 taxes late online tax filing See How To Request Relief later. Fle 2012 taxes late online tax filing More information. Fle 2012 taxes late online tax filing   For more information about the latest developments on Publication 971, go to www. Fle 2012 taxes late online tax filing irs. Fle 2012 taxes late online tax filing gov/pub971. Fle 2012 taxes late online tax filing Introduction When you file a joint income tax return, the law makes both you and your spouse responsible for the entire tax liability. Fle 2012 taxes late online tax filing This is called joint and several liability. Fle 2012 taxes late online tax filing Joint and several liability applies not only to the tax liability you show on the return but also to any additional tax liability the IRS determines to be due, even if the additional tax is due to income, deductions, or credits of your spouse or former spouse. Fle 2012 taxes late online tax filing You remain jointly and severally liable for the taxes, and the IRS still can collect from you, even if you later divorce and the divorce decree states that your former spouse will be solely responsible for the tax. Fle 2012 taxes late online tax filing In some cases, a spouse (or former spouse) will be relieved of the tax, interest, and penalties on a joint tax return. Fle 2012 taxes late online tax filing Three types of relief are available to married persons who filed joint returns. Fle 2012 taxes late online tax filing Innocent spouse relief. Fle 2012 taxes late online tax filing Separation of liability relief. Fle 2012 taxes late online tax filing Equitable relief. Fle 2012 taxes late online tax filing Married persons who did not file joint returns, but who live in community property states, may also qualify for relief. Fle 2012 taxes late online tax filing See Community Property Laws , later. Fle 2012 taxes late online tax filing This publication explains these types of relief, who may qualify for them, and how to get them. Fle 2012 taxes late online tax filing You can also use the Innocent Spouse Tax Relief Eligibility Explorer at IRS. Fle 2012 taxes late online tax filing gov by entering “Innocent Spouse” in the search box. Fle 2012 taxes late online tax filing What this publication does not cover. Fle 2012 taxes late online tax filing   This publication does not discuss injured spouse relief. Fle 2012 taxes late online tax filing You are an injured spouse if your share of the overpayment shown on your joint return was, or is expected to be, applied (offset) against your spouse's legally enforceable past-due federal taxes, state income taxes, state unemployment compensation debts, child or spousal support payments, or a federal nontax debt, such as a student loan. Fle 2012 taxes late online tax filing If you are an injured spouse, you may be entitled to receive a refund of your share of the overpayment. Fle 2012 taxes late online tax filing For more information, see Form 8379, Injured Spouse Allocation. Fle 2012 taxes late online tax filing Comments and suggestions. Fle 2012 taxes late online tax filing   We welcome your comments about this publication and your suggestions for future editions. Fle 2012 taxes late online tax filing   You can write to us at the following address:  Internal Revenue Service Individual Forms and Publications Branch SE:W:CAR:MP:T:I 1111 Constitution Ave. Fle 2012 taxes late online tax filing NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Fle 2012 taxes late online tax filing Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Fle 2012 taxes late online tax filing   You can email us at taxforms@irs. Fle 2012 taxes late online tax filing gov. Fle 2012 taxes late online tax filing Please put “Publications Comment” on the subject line. Fle 2012 taxes late online tax filing You can also send us comments from www. Fle 2012 taxes late online tax filing irs. Fle 2012 taxes late online tax filing gov/formspubs/, select “Comment on Tax Forms and Publications” under “Information about. Fle 2012 taxes late online tax filing ”   Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products. Fle 2012 taxes late online tax filing Ordering forms and publications. Fle 2012 taxes late online tax filing   Visit www. Fle 2012 taxes late online tax filing irs. Fle 2012 taxes late online tax filing gov/formspubs to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. Fle 2012 taxes late online tax filing  Internal Revenue Service 1201 N. Fle 2012 taxes late online tax filing Mitsubishi Motorway Bloomington, IL 61705-6613 Questions about innocent spouse relief. Fle 2012 taxes late online tax filing The IRS can help you with your request for innocent spouse relief. Fle 2012 taxes late online tax filing If you are working with an IRS employee, you can ask that employee, or you can call 866-897-4270. Fle 2012 taxes late online tax filing Useful Items - You may want to see: Publications 504 Divorced or Separated Individuals 555 Community Property 556 Examination of Returns, Appeal Rights, and Claims for Refund 594 The IRS Collection Process Forms (and Instructions) 8857 Request for Innocent Spouse Relief Prev  Up  Next   Home   More Online Publications
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Fle 2012 taxes late online tax filing Publication 936 - Main Content Table of Contents Part I. Fle 2012 taxes late online tax filing Home Mortgage InterestSecured Debt Qualified Home Special Situations Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement How To Report Special Rule for Tenant-Stockholders in Cooperative Housing Corporations Part II. Fle 2012 taxes late online tax filing Limits on Home Mortgage Interest DeductionHome Acquisition Debt Home Equity Debt Grandfathered Debt Table 1 Instructions How To Get Tax HelpLow Income Taxpayer Clinics Part I. Fle 2012 taxes late online tax filing Home Mortgage Interest This part explains what you can deduct as home mortgage interest. Fle 2012 taxes late online tax filing It includes discussions on points, mortgage insurance premiums, and how to report deductible interest on your tax return. Fle 2012 taxes late online tax filing Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). Fle 2012 taxes late online tax filing The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. Fle 2012 taxes late online tax filing You can deduct home mortgage interest if all the following conditions are met. Fle 2012 taxes late online tax filing You file Form 1040 and itemize deductions on Schedule A (Form 1040). Fle 2012 taxes late online tax filing The mortgage is a secured debt on a qualified home in which you have an ownership interest. Fle 2012 taxes late online tax filing Secured Debt and Qualified Home are explained later. Fle 2012 taxes late online tax filing  Both you and the lender must intend that the loan be repaid. Fle 2012 taxes late online tax filing Fully deductible interest. Fle 2012 taxes late online tax filing   In most cases, you can deduct all of your home mortgage interest. Fle 2012 taxes late online tax filing How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing (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. Fle 2012 taxes late online tax filing ) If one or more of your mortgages does not fit into any of these categories, use Part II of this publication to figure the amount of interest you can deduct. Fle 2012 taxes late online tax filing   The three categories are as follows. Fle 2012 taxes late online tax filing Mortgages you took out on or before October 13, 1987 (called grandfathered debt). Fle 2012 taxes late online tax filing 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). Fle 2012 taxes late online tax filing 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). Fle 2012 taxes late online tax filing The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. Fle 2012 taxes late online tax filing   See Part II for more detailed definitions of grandfathered, home acquisition, and home equity debt. Fle 2012 taxes late online tax filing    You can use Figure A to check whether your home mortgage interest is fully deductible. Fle 2012 taxes late online tax filing This image is too large to be displayed in the current screen. Fle 2012 taxes late online tax filing Please click the link to view the image. Fle 2012 taxes late online tax filing Figure A. Fle 2012 taxes late online tax filing Is My Home Mortgage Interest Fully Deductible? Secured Debt You can deduct your home mortgage interest only if your mortgage is a secured debt. Fle 2012 taxes late online tax filing A secured debt is one in which you sign an instrument (such as a mortgage, deed of trust, or land contract) that: Makes your ownership in a qualified home security for payment of the debt, Provides, in case of default, that your home could satisfy the debt, and Is recorded or is otherwise perfected under any state or local law that applies. Fle 2012 taxes late online tax filing In other words, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. Fle 2012 taxes late online tax filing If you cannot pay the debt, your home can then serve as payment to the lender to satisfy (pay) the debt. Fle 2012 taxes late online tax filing In this publication, mortgage will refer to secured debt. Fle 2012 taxes late online tax filing Debt not secured by home. Fle 2012 taxes late online tax filing   A debt is not secured by your home if it is secured solely because of a lien on your general assets or if it is a security interest that attaches to the property without your consent (such as a mechanic's lien or judgment lien). Fle 2012 taxes late online tax filing   A debt is not secured by your home if it once was, but is no longer secured by your home. Fle 2012 taxes late online tax filing Wraparound mortgage. Fle 2012 taxes late online tax filing   This is not a secured debt unless it is recorded or otherwise perfected under state law. Fle 2012 taxes late online tax filing Example. Fle 2012 taxes late online tax filing Beth owns a home subject to a mortgage of $40,000. Fle 2012 taxes late online tax filing She sells the home for $100,000 to John, who takes it subject to the $40,000 mortgage. Fle 2012 taxes late online tax filing Beth continues to make the payments on the $40,000 note. Fle 2012 taxes late online tax filing John pays $10,000 down and gives Beth a $90,000 note secured by a wraparound mortgage on the home. Fle 2012 taxes late online tax filing Beth does not record or otherwise perfect the $90,000 mortgage under the state law that applies. Fle 2012 taxes late online tax filing Therefore, the mortgage is not a secured debt and John cannot deduct any of the interest he pays on it as home mortgage interest. Fle 2012 taxes late online tax filing Choice to treat the debt as not secured by your home. Fle 2012 taxes late online tax filing   You can choose to treat any debt secured by your qualified home as not secured by the home. Fle 2012 taxes late online tax filing This treatment begins with the tax year for which you make the choice and continues for all later tax years. Fle 2012 taxes late online tax filing You can revoke your choice only with the consent of the Internal Revenue Service (IRS). Fle 2012 taxes late online tax filing   You may want to treat a debt as not secured by your home if the interest on that debt is fully deductible (for example, as a business expense) whether or not it qualifies as home mortgage interest. Fle 2012 taxes late online tax filing This may allow you, if the limits in Part II apply, more of a deduction for interest on other debts that are deductible only as home mortgage interest. Fle 2012 taxes late online tax filing Cooperative apartment owner. Fle 2012 taxes late online tax filing   If you own stock in a cooperative housing corporation, see the Special Rule for Tenant-Stockholders in Cooperative Housing Corporations , near the end of this Part I. Fle 2012 taxes late online tax filing Qualified Home For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. Fle 2012 taxes late online tax filing This means your main home or your second home. Fle 2012 taxes late online tax filing A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. Fle 2012 taxes late online tax filing The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Fle 2012 taxes late online tax filing Otherwise, it is considered personal interest and is not deductible. Fle 2012 taxes late online tax filing Main home. Fle 2012 taxes late online tax filing   You can have only one main home at any one time. Fle 2012 taxes late online tax filing This is the home where you ordinarily live most of the time. Fle 2012 taxes late online tax filing Second home. Fle 2012 taxes late online tax filing   A second home is a home that you choose to treat as your second home. Fle 2012 taxes late online tax filing Second home not rented out. Fle 2012 taxes late online tax filing   If you have a second home that you do not hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. Fle 2012 taxes late online tax filing You do not have to use the home during the year. Fle 2012 taxes late online tax filing Second home rented out. Fle 2012 taxes late online tax filing   If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. Fle 2012 taxes late online tax filing You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer. Fle 2012 taxes late online tax filing If you do not use the home long enough, it is considered rental property and not a second home. Fle 2012 taxes late online tax filing For information on residential rental property, see Publication 527. Fle 2012 taxes late online tax filing More than one second home. Fle 2012 taxes late online tax filing   If you have more than one second home, you can treat only one as the qualified second home during any year. Fle 2012 taxes late online tax filing However, you can change the home you treat as a second home during the year in the following situations. Fle 2012 taxes late online tax filing If you get a new home during the year, you can choose to treat the new home as your second home as of the day you buy it. Fle 2012 taxes late online tax filing If your main home no longer qualifies as your main home, you can choose to treat it as your second home as of the day you stop using it as your main home. Fle 2012 taxes late online tax filing If your second home is sold during the year or becomes your main home, you can choose a new second home as of the day you sell the old one or begin using it as your main home. Fle 2012 taxes late online tax filing Divided use of your home. Fle 2012 taxes late online tax filing   The only part of your home that is considered a qualified home is the part you use for residential living. Fle 2012 taxes late online tax filing If you use part of your home for other than residential living, such as a home office, you must allocate the use of your home. Fle 2012 taxes late online tax filing You must then divide both the cost and fair market value of your home between the part that is a qualified home and the part that is not. Fle 2012 taxes late online tax filing Dividing the cost may affect the amount of your home acquisition debt, which is limited to the cost of your home plus the cost of any improvements. Fle 2012 taxes late online tax filing (See Home Acquisition Debt in Part II. Fle 2012 taxes late online tax filing ) Dividing the fair market value may affect your home equity debt limit, also explained in Part II . Fle 2012 taxes late online tax filing Renting out part of home. Fle 2012 taxes late online tax filing   If you rent out part of a qualified home to another person (tenant), you can treat the rented part as being used by you for residential living only if all of the following conditions apply. Fle 2012 taxes late online tax filing The rented part of your home is used by the tenant primarily for residential living. Fle 2012 taxes late online tax filing The rented part of your home is not a self-contained residential unit having separate sleeping, cooking, and toilet facilities. Fle 2012 taxes late online tax filing You do not rent (directly or by sublease) the same or different parts of your home to more than two tenants at any time during the tax year. Fle 2012 taxes late online tax filing If two persons (and dependents of either) share the same sleeping quarters, they are treated as one tenant. Fle 2012 taxes late online tax filing Office in home. Fle 2012 taxes late online tax filing   If you have an office in your home that you use in your business, see Publication 587, Business Use of Your Home. Fle 2012 taxes late online tax filing It explains how to figure your deduction for the business use of your home, which includes the business part of your home mortgage interest. Fle 2012 taxes late online tax filing Home under construction. Fle 2012 taxes late online tax filing   You can treat a home under construction as a qualified home for a period of up to 24 months, but only if it becomes your qualified home at the time it is ready for occupancy. Fle 2012 taxes late online tax filing   The 24-month period can start any time on or after the day construction begins. Fle 2012 taxes late online tax filing Home destroyed. Fle 2012 taxes late online tax filing   You may be able to continue treating your home as a qualified home even after it is destroyed in a fire, storm, tornado, earthquake, or other casualty. Fle 2012 taxes late online tax filing This means you can continue to deduct the interest you pay on your home mortgage, subject to the limits described in this publication. Fle 2012 taxes late online tax filing   You can continue treating a destroyed home as a qualified home if, within a reasonable period of time after the home is destroyed, you: Rebuild the destroyed home and move into it, or Sell the land on which the home was located. Fle 2012 taxes late online tax filing   This rule applies to your main home and to a second home that you treat as a qualified home. Fle 2012 taxes late online tax filing Time-sharing arrangements. Fle 2012 taxes late online tax filing   You can treat a home you own under a time-sharing plan as a qualified home if it meets all the requirements. Fle 2012 taxes late online tax filing A time-sharing plan is an arrangement between two or more people that limits each person's interest in the home or right to use it to a certain part of the year. Fle 2012 taxes late online tax filing Rental of time-share. Fle 2012 taxes late online tax filing   If you rent out your time-share, it qualifies as a second home only if you also use it as a home during the year. Fle 2012 taxes late online tax filing See Second home rented out , earlier, for the use requirement. Fle 2012 taxes late online tax filing To know whether you meet that requirement, count your days of use and rental of the home only during the time you have a right to use it or to receive any benefits from the rental of it. Fle 2012 taxes late online tax filing Married taxpayers. Fle 2012 taxes late online tax filing   If you are married and file a joint return, your qualified home(s) can be owned either jointly or by only one spouse. Fle 2012 taxes late online tax filing Separate returns. Fle 2012 taxes late online tax filing   If you are married filing separately and you and your spouse own more than one home, you can each take into account only one home as a qualified home. Fle 2012 taxes late online tax filing However, if you both consent in writing, then one spouse can take both the main home and a second home into account. Fle 2012 taxes late online tax filing Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. Fle 2012 taxes late online tax filing It also describes certain special situations that may affect your deduction. Fle 2012 taxes late online tax filing Late payment charge on mortgage payment. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing Mortgage prepayment penalty. Fle 2012 taxes late online tax filing   If you pay off your home mortgage early, you may have to pay a penalty. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing Sale of home. Fle 2012 taxes late online tax filing   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of the sale. Fle 2012 taxes late online tax filing Example. Fle 2012 taxes late online tax filing John and Peggy Harris sold their home on May 7. Fle 2012 taxes late online tax filing Through April 30, they made home mortgage interest payments of $1,220. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing Their mortgage interest deduction is $1,270 ($1,220 + $50). Fle 2012 taxes late online tax filing Prepaid interest. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing You can deduct in each year only the interest that qualifies as home mortgage interest for that year. Fle 2012 taxes late online tax filing However, there is an exception that applies to points, discussed later. Fle 2012 taxes late online tax filing Mortgage interest credit. Fle 2012 taxes late online tax filing    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. Fle 2012 taxes late online tax filing Figure the credit on Form 8396, Mortgage Interest Credit. Fle 2012 taxes late online tax filing If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. Fle 2012 taxes late online tax filing   See Form 8396 and Publication 530 for more information on the mortgage interest credit. Fle 2012 taxes late online tax filing Ministers' and military housing allowance. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing Hardest Hit Fund and Emergency Homeowners' Loan Programs. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098–MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received from payer(s) / borrower(s)), box 4 (mortgage insurance premiums), and box 5 (other information including real property taxes paid). Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing Mortgage assistance payments under section 235 of the National Housing Act. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing You cannot deduct the interest that is paid for you. Fle 2012 taxes late online tax filing No other effect on taxes. Fle 2012 taxes late online tax filing   Do not include these mortgage assistance payments in your income. Fle 2012 taxes late online tax filing Also, do not use these payments to reduce other deductions, such as real estate taxes. Fle 2012 taxes late online tax filing Divorced or separated individuals. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing See the discussion of Payments for jointly-owned home under Alimony in Publication 504, Divorced or Separated Individuals. Fle 2012 taxes late online tax filing Redeemable ground rents. Fle 2012 taxes late online tax filing   In some states (such as Maryland), you can buy your home subject to a ground rent. Fle 2012 taxes late online tax filing A ground rent is an obligation you assume to pay a fixed amount per year on the property. Fle 2012 taxes late online tax filing Under this arrangement, you are leasing (rather than buying) the land on which your home is located. Fle 2012 taxes late online tax filing   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. Fle 2012 taxes late online tax filing   A ground rent is a redeemable ground rent if all of the following are true. Fle 2012 taxes late online tax filing Your lease, including renewal periods, is for more than 15 years. Fle 2012 taxes late online tax filing You can freely assign the lease. Fle 2012 taxes late online tax filing You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specific amount. Fle 2012 taxes late online tax filing The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. Fle 2012 taxes late online tax filing   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. Fle 2012 taxes late online tax filing Nonredeemable ground rents. Fle 2012 taxes late online tax filing   Payments on a nonredeemable ground rent are not mortgage interest. Fle 2012 taxes late online tax filing You can deduct them as rent if they are a business expense or if they are for rental property. Fle 2012 taxes late online tax filing Reverse mortgages. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing With a reverse mortgage, you retain title to your home. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Fle 2012 taxes late online tax filing Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until you actually pay it, which is usually when you pay off the loan in full. Fle 2012 taxes late online tax filing Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Part II. Fle 2012 taxes late online tax filing Rental payments. Fle 2012 taxes late online tax filing   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. Fle 2012 taxes late online tax filing This is true even if the settlement papers call them interest. Fle 2012 taxes late online tax filing You cannot deduct these payments as home mortgage interest. Fle 2012 taxes late online tax filing Mortgage proceeds invested in tax-exempt securities. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing “Grandfathered debt” and “home equity debt” are defined in Part II of this publication. Fle 2012 taxes late online tax filing Refunds of interest. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. Fle 2012 taxes late online tax filing This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. Fle 2012 taxes late online tax filing If you need to include the refund in income, report it on Form 1040, line 21. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. Fle 2012 taxes late online tax filing   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in Publication 525, Taxable and Nontaxable Income. Fle 2012 taxes late online tax filing Cooperative apartment owner. Fle 2012 taxes late online tax filing   If you own a cooperative apartment, you must reduce your home mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. Fle 2012 taxes late online tax filing The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. Fle 2012 taxes late online tax filing   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. Fle 2012 taxes late online tax filing Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Fle 2012 taxes late online tax filing Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Fle 2012 taxes late online tax filing This image is too large to be displayed in the current screen. Fle 2012 taxes late online tax filing Please click the link to view the image. Fle 2012 taxes late online tax filing Figure B. Fle 2012 taxes late online tax filing Are My Points Fully Deductible This Year? A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Fle 2012 taxes late online tax filing See Points paid by the seller , later. Fle 2012 taxes late online tax filing General Rule You generally cannot deduct the full amount of points in the year paid. Fle 2012 taxes late online tax filing Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. Fle 2012 taxes late online tax filing See Deduction Allowed Ratably , next. Fle 2012 taxes late online tax filing For exceptions to the general rule, see Deduction Allowed in Year Paid , later. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing You use the cash method of accounting. Fle 2012 taxes late online tax filing This means you report income in the year you receive it and deduct expenses in the year you pay them. Fle 2012 taxes late online tax filing Most individuals use this method. Fle 2012 taxes late online tax filing Your loan is secured by a home. Fle 2012 taxes late online tax filing (The home does not need to be your main home. Fle 2012 taxes late online tax filing ) Your loan period is not more than 30 years. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing Example. Fle 2012 taxes late online tax filing You use the cash method of accounting. Fle 2012 taxes late online tax filing In 2013, you took out a $100,000 loan payable over 20 years. Fle 2012 taxes late online tax filing The terms of the loan are the same as for other 20-year loans offered in your area. Fle 2012 taxes late online tax filing You paid $4,800 in points. Fle 2012 taxes late online tax filing You made 3 monthly payments on the loan in 2013. Fle 2012 taxes late online tax filing You can deduct $60 [($4,800 ÷ 240 months) x 3 payments] in 2013. Fle 2012 taxes late online tax filing In 2014, if you make all twelve payments, you will be able to deduct $240 ($20 x 12). Fle 2012 taxes late online tax filing Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. Fle 2012 taxes late online tax filing (You can use Figure B as a quick guide to see whether your points are fully deductible in the year paid. Fle 2012 taxes late online tax filing ) Your loan is secured by your main home. Fle 2012 taxes late online tax filing (Your main home is the one you ordinarily live in most of the time. Fle 2012 taxes late online tax filing ) Paying points is an established business practice in the area where the loan was made. Fle 2012 taxes late online tax filing The points paid were not more than the points generally charged in that area. Fle 2012 taxes late online tax filing You use the cash method of accounting. Fle 2012 taxes late online tax filing This means you report income in the year you receive it and deduct expenses in the year you pay them. Fle 2012 taxes late online tax filing Most individuals use this method. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Fle 2012 taxes late online tax filing The funds you provided are not required to have been applied to the points. Fle 2012 taxes late online tax filing They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Fle 2012 taxes late online tax filing You cannot have borrowed these funds from your lender or mortgage broker. Fle 2012 taxes late online tax filing You use your loan to buy or build your main home. Fle 2012 taxes late online tax filing The points were computed as a percentage of the principal amount of the mortgage. Fle 2012 taxes late online tax filing The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. Fle 2012 taxes late online tax filing The points may be shown as paid from either your funds or the seller's. Fle 2012 taxes late online tax filing Note. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing Home improvement loan. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing Second home. Fle 2012 taxes late online tax filing You cannot fully deduct in the year paid points you pay on loans secured by your second home. Fle 2012 taxes late online tax filing You can deduct these points only over the life of the loan. Fle 2012 taxes late online tax filing Refinancing. Fle 2012 taxes late online tax filing   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. Fle 2012 taxes late online tax filing This is true even if the new mortgage is secured by your main home. Fle 2012 taxes late online tax filing   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Fle 2012 taxes late online tax filing You can deduct the rest of the points over the life of the loan. Fle 2012 taxes late online tax filing Example 1. Fle 2012 taxes late online tax filing In 1998, Bill Fields got a mortgage to buy a home. Fle 2012 taxes late online tax filing In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. Fle 2012 taxes late online tax filing The mortgage is secured by his home. Fle 2012 taxes late online tax filing To get the new loan, he had to pay three points ($3,000). Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. Fle 2012 taxes late online tax filing The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. Fle 2012 taxes late online tax filing Bill's first payment on the new loan was due July 1. Fle 2012 taxes late online tax filing He made six payments on the loan in 2013 and is a cash basis taxpayer. Fle 2012 taxes late online tax filing Bill used the funds from the new mortgage to repay his existing mortgage. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing He cannot deduct all of the points in 2013. Fle 2012 taxes late online tax filing He can deduct two points ($2,000) ratably over the life of the loan. Fle 2012 taxes late online tax filing He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. Fle 2012 taxes late online tax filing The other point ($1,000) was a fee for services and is not deductible. Fle 2012 taxes late online tax filing Example 2. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. Fle 2012 taxes late online tax filing His deduction is $500 ($2,000 × 25%). Fle 2012 taxes late online tax filing Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. Fle 2012 taxes late online tax filing This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. Fle 2012 taxes late online tax filing The total amount Bill deducts in 2013 is $550 ($500 + $50). Fle 2012 taxes late online tax filing Special Situations This section describes certain special situations that may affect your deduction of points. Fle 2012 taxes late online tax filing Original issue discount. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. Fle 2012 taxes late online tax filing Amounts charged for services. Fle 2012 taxes late online tax filing    Amounts charged by the lender for specific services connected to the loan are not interest. Fle 2012 taxes late online tax filing Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Fle 2012 taxes late online tax filing  You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Fle 2012 taxes late online tax filing Points paid by the seller. Fle 2012 taxes late online tax filing   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Fle 2012 taxes late online tax filing Treatment by seller. Fle 2012 taxes late online tax filing   The seller cannot deduct these fees as interest. Fle 2012 taxes late online tax filing But they are a selling expense that reduces the amount realized by the seller. Fle 2012 taxes late online tax filing See Publication 523 for information on selling your home. Fle 2012 taxes late online tax filing Treatment by buyer. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. Fle 2012 taxes late online tax filing If any of those tests are not met, the buyer deducts the points over the life of the loan. Fle 2012 taxes late online tax filing   If you need information about the basis of your home, see Publication 523 or Publication 530. Fle 2012 taxes late online tax filing Funds provided are less than points. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing In addition, you can deduct any points paid by the seller. Fle 2012 taxes late online tax filing Example 1. Fle 2012 taxes late online tax filing When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Fle 2012 taxes late online tax filing You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. Fle 2012 taxes late online tax filing Of the $1,000 charged for points, you can deduct $750 in the year paid. Fle 2012 taxes late online tax filing You spread the remaining $250 over the life of the mortgage. Fle 2012 taxes late online tax filing Example 2. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Fle 2012 taxes late online tax filing You spread the remaining $250 over the life of the mortgage. Fle 2012 taxes late online tax filing You must reduce the basis of your home by the $1,000 paid by the seller. Fle 2012 taxes late online tax filing Excess points. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing You must spread any additional points over the life of the mortgage. Fle 2012 taxes late online tax filing Mortgage ending early. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. Fle 2012 taxes late online tax filing Instead, deduct the remaining balance over the term of the new loan. Fle 2012 taxes late online tax filing   A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Fle 2012 taxes late online tax filing Example. Fle 2012 taxes late online tax filing Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. Fle 2012 taxes late online tax filing He deducts $200 points per year. Fle 2012 taxes late online tax filing Through 2012, Dan has deducted $2,200 of the points. Fle 2012 taxes late online tax filing Dan prepaid his mortgage in full in 2013. Fle 2012 taxes late online tax filing He can deduct the remaining $800 of points in 2013. Fle 2012 taxes late online tax filing Limits on deduction. Fle 2012 taxes late online tax filing   You cannot fully deduct points paid on a mortgage that exceeds the limits discussed in Part II . Fle 2012 taxes late online tax filing See the Table 1 Instructions for line 10. Fle 2012 taxes late online tax filing Form 1098. Fle 2012 taxes late online tax filing    The mortgage interest statement you receive should show not only the total interest paid during the year, but also your deductible points paid during the year. Fle 2012 taxes late online tax filing See Form 1098, Mortgage Interest Statement , later. Fle 2012 taxes late online tax filing Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. Fle 2012 taxes late online tax filing The insurance must be in connection with home acquisition debt, and the insurance contract must have been issued after 2006. Fle 2012 taxes late online tax filing Qualified mortgage insurance. Fle 2012 taxes late online tax filing   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). Fle 2012 taxes late online tax filing   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. Fle 2012 taxes late online tax filing If provided by the Rural Housing Service, it is commonly known as a guarantee fee. Fle 2012 taxes late online tax filing The funding fee and guarantee fee can either be included in the amount of the loan or paid in full at the time of closing. Fle 2012 taxes late online tax filing These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Fle 2012 taxes late online tax filing Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. Fle 2012 taxes late online tax filing Special rules for prepaid mortgage insurance. Fle 2012 taxes late online tax filing   Generally, if you paid premiums for qualified mortgage insurance that are properly allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. Fle 2012 taxes late online tax filing This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. Fle 2012 taxes late online tax filing Example. Fle 2012 taxes late online tax filing Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. Fle 2012 taxes late online tax filing Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing Ryan's adjusted gross income (AGI) for 2012 is $76,000. Fle 2012 taxes late online tax filing Ryan can deduct $880 ($9,240 ÷ 84 x 8 months) for qualified mortgage insurance premiums in 2012. Fle 2012 taxes late online tax filing For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 x 12 months) if his AGI is $100,000 or less. Fle 2012 taxes late online tax filing 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). Fle 2012 taxes late online tax filing Limit on deduction. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Fle 2012 taxes late online tax filing Form 1098. Fle 2012 taxes late online tax filing   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your mortgage insurance premiums paid during the year, which may qualify to be treated as deductible mortgage interest. Fle 2012 taxes late online tax filing See Form 1098, Mortgage Interest Statement, next. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing You will receive the statement if you pay interest to a person (including a financial institution or cooperative housing corporation) in the course of that person's trade or business. Fle 2012 taxes late online tax filing A governmental unit is a person for purposes of furnishing the statement. Fle 2012 taxes late online tax filing The statement for each year should be sent to you by January 31 of the following year. Fle 2012 taxes late online tax filing A copy of this form will also be sent to the IRS. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing However, it should not show any interest that was paid for you by a government agency. Fle 2012 taxes late online tax filing As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Fle 2012 taxes late online tax filing However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. Fle 2012 taxes late online tax filing See the earlier discussion of Points to determine whether you can deduct points not shown on Form 1098. Fle 2012 taxes late online tax filing Prepaid interest on Form 1098. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing However, you cannot deduct the prepaid amount for January 2014 in 2013. Fle 2012 taxes late online tax filing (See Prepaid interest , earlier. Fle 2012 taxes late online tax filing ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. Fle 2012 taxes late online tax filing You will include the interest for January 2014 with other interest you pay for 2014. Fle 2012 taxes late online tax filing Refunded interest. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing See Refunds of interest , earlier. Fle 2012 taxes late online tax filing Mortgage insurance premiums. Fle 2012 taxes late online tax filing   The amount of mortgage insurance premiums you paid during 2013 may be shown in Box 4 of Form 1098. Fle 2012 taxes late online tax filing See Mortgage Insurance Premiums , earlier. Fle 2012 taxes late online tax filing How To Report Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing Attach a statement explaining the difference and print “See attached” next to line 10. Fle 2012 taxes late online tax filing Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing The seller must give you this number and you must give the seller your TIN. Fle 2012 taxes late online tax filing A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Fle 2012 taxes late online tax filing Failure to meet any of these requirements may result in a $50 penalty for each failure. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing 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. Fle 2012 taxes late online tax filing Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. Fle 2012 taxes late online tax filing More than one borrower. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing Show how much of the interest each of you paid, and give the name and address of the person who received the form. Fle 2012 taxes late online tax filing Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Fle 2012 taxes late online tax filing Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. Fle 2012 taxes late online tax filing   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. Fle 2012 taxes late online tax filing Let each of the other borrowers know what his or her share is. Fle 2012 taxes late online tax filing Mortgage proceeds used for business or investment. Fle 2012 taxes late online tax filing   If your home mortgage interest deduction is limited under the rules explained in Part II , but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 2 near the end of this publication. Fle 2012 taxes late online tax filing It shows where to deduct the part of your excess interest that is for those activities. Fle 2012 taxes late online tax filing The Table 1 Instructions for line 13 in Part II explain how to divide the excess interest among the activities for which the mortgage proceeds were used. Fle 2012 taxes late online tax filing Special Rule for Tenant-Stockholders in Cooperative Housing Corporations A qualified home includes stock in a cooperative housing corporation owned by a tenant-stockholder. Fle 2012 taxes late online tax filing This applies only if the tenant-stockholder is entitled to live in the house or apartment because of owning stock in the cooperative. Fle 2012 taxes late online tax filing Cooperative housing corporation. Fle 2012 taxes late online tax filing   This is a corporation that meets all of the following conditions. Fle 2012 taxes late online tax filing Has only one class of stock outstanding, Has no stockholders other than those who own the stock that can live in a house, apartment, or house trailer owned or leased by the corporation, Has no stockholders who can receive any distribution out of capital other than on a liquidation of the corporation, and Meets at least one of the following requirements. Fle 2012 taxes late online tax filing Receives at least 80% of its gross income for the year in which the mortgage interest is paid or incurred from tenant-stockholders. Fle 2012 taxes late online tax filing For this purpose, gross income is all income received during the entire year, including amounts received before the corporation changed to cooperative ownership. Fle 2012 taxes late online tax filing At all times during the year, at least 80% of the total square footage of the corporation's property is used or available for use by the tenant-stockholders for residential or residential-related use. Fle 2012 taxes late online tax filing At least 90% of the corporation's expenditures paid or incurred during the year are for the acquisition, construction, management, maintenance, or care of corporate property for the benefit of the tenant-stockholders. Fle 2012 taxes late online tax filing Stock used to secure debt. Fle 2012 taxes late online tax filing   In some cases, you cannot use your cooperative housing stock to secure a debt because of either: Restrictions under local or state law, or Restrictions in the cooperative agreement (other than restrictions in which the main purpose is to permit the tenant- stockholder to treat unsecured debt as secured debt). Fle 2012 taxes late online tax filing However, you can treat a debt as secured by the stock to the extent that the proceeds are used to buy the stock under the allocation of interest rules. Fle 2012 taxes late online tax filing See chapter 4 of Publication 535 for details on these rules. Fle 2012 taxes late online tax filing Figuring deductible home mortgage interest. Fle 2012 taxes late online tax filing   Generally, if you are a tenant-stockholder, you can deduct payments you make for your share of the interest paid or incurred by the cooperative. Fle 2012 taxes late online tax filing The interest must be on a debt to buy, build, change, improve, or maintain the cooperative's housing, or on a debt to buy the land. Fle 2012 taxes late online tax filing   Figure your share of this interest by multiplying the total by the following fraction. Fle 2012 taxes late online tax filing      Your shares of stock in the cooperative   The total shares of stock in the cooperative Limits on deduction. Fle 2012 taxes late online tax filing   To figure how the limits discussed in Part II apply to you, treat your share of the cooperative's debt as debt incurred by you. Fle 2012 taxes late online tax filing The cooperative should determine your share of its grandfathered debt, its home acquisition debt, and its home equity debt. Fle 2012 taxes late online tax filing (Your share of each of these types of debt is equal to the average balance of each debt multiplied by the fraction just given. Fle 2012 taxes late online tax filing ) After your share of the average balance of each type of debt is determined, you include it with the average balance of that type of debt secured by your stock. Fle 2012 taxes late online tax filing Form 1098. Fle 2012 taxes late online tax filing    The cooperative should give you a Form 1098 showing your share of the interest. Fle 2012 taxes late online tax filing Use the rules in this publication to determine your deductible mortgage interest. Fle 2012 taxes late online tax filing Part II. Fle 2012 taxes late online tax filing Limits on Home Mortgage Interest Deduction This part of the publication discusses the limits on deductible home mortgage interest. Fle 2012 taxes late online tax filing These limits apply to your home mortgage interest expense if you have a home mortgage that does not fit into any of the three categories listed at the beginning of Part I under Fully deductible interest . Fle 2012 taxes late online tax filing Your home mortgage interest deduction is limited to the interest on the part of your home mortgage debt that is not more than your qualified loan limit. Fle 2012 taxes late online tax filing This is the part of your home mortgage debt that is grandfathered debt or that is not more than the limits for home acquisition debt and home equity debt. Fle 2012 taxes late online tax filing Table 1 can help you figure your qualified loan limit and your deductible home mortgage interest. Fle 2012 taxes late online tax filing Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home (your main or second home). Fle 2012 taxes late online tax filing It also must be secured by that home. Fle 2012 taxes late online tax filing If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. Fle 2012 taxes late online tax filing The additional debt may qualify as home equity debt (discussed later). Fle 2012 taxes late online tax filing Home acquisition debt limit. Fle 2012 taxes late online tax filing   The total amount you can treat as home acquisition debt at any time on your main home and second home cannot be more than $1 million ($500,000 if married filing separately). Fle 2012 taxes late online tax filing This limit is reduced (but not below zero) by the amount of your grandfathered debt (discussed later). Fle 2012 taxes late online tax filing Debt over this limit may qualify as home equity debt (also discussed later). Fle 2012 taxes late online tax filing Refinanced home acquisition debt. Fle 2012 taxes late online tax filing   Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt. Fle 2012 taxes late online tax filing However, the new debt will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing. Fle 2012 taxes late online tax filing Any additional debt not used to buy, build, or substantially improve a qualified home is not home acquisition debt, but may qualify as home equity debt (discussed later). Fle 2012 taxes late online tax filing Mortgage that qualifies later. Fle 2012 taxes late online tax filing   A mortgage that does not qualify as home acquisition debt because it does not meet all the requirements may qualify at a later time. Fle 2012 taxes late online tax filing For example, a debt that you use to buy your home may not qualify as home acquisition debt because it is not secured by the home. Fle 2012 taxes late online tax filing However, if the debt is later secured by the home, it may qualify as home acquisition debt after that time. Fle 2012 taxes late online tax filing Similarly, a debt that you use to buy property may not qualify because the property is not a qualified home. Fle 2012 taxes late online tax filing However, if the property later becomes a qualified home, the debt may qualify after that time. Fle 2012 taxes late online tax filing Mortgage treated as used to buy, build, or improve home. Fle 2012 taxes late online tax filing   A mortgage secured by a qualified home may be treated as home acquisition debt, even if you do not actually use the proceeds to buy, build, or substantially improve the home. Fle 2012 taxes late online tax filing This applies in the following situations. Fle 2012 taxes late online tax filing You buy your home within 90 days before or after the date you take out the mortgage. Fle 2012 taxes late online tax filing The home acquisition debt is limited to the home's cost, plus the cost of any substantial improvements within the limit described below in (2) or (3). Fle 2012 taxes late online tax filing (See Example 1 later. Fle 2012 taxes late online tax filing ) You build or improve your home and take out the mortgage before the work is completed. Fle 2012 taxes late online tax filing The home acquisition debt is limited to the amount of the expenses incurred within 24 months before the date of the mortgage. Fle 2012 taxes late online tax filing You build or improve your home and take out the mortgage within 90 days after the work is completed. Fle 2012 taxes late online tax filing The home acquisition debt is limited to the amount of the expenses incurred within the period beginning 24 months before the work is completed and ending on the date of the mortgage. Fle 2012 taxes late online tax filing (See Example 2 later. Fle 2012 taxes late online tax filing ) Example 1. Fle 2012 taxes late online tax filing You bought your main home on June 3 for $175,000. Fle 2012 taxes late online tax filing You paid for the home with cash you got from the sale of your old home. Fle 2012 taxes late online tax filing On July 15, you took out a mortgage of $150,000 secured by your main home. Fle 2012 taxes late online tax filing You used the $150,000 to invest in stocks. Fle 2012 taxes late online tax filing You can treat the mortgage as taken out to buy your home because you bought the home within 90 days before you took out the mortgage. Fle 2012 taxes late online tax filing The entire mortgage qualifies as home acquisition debt because it was not more than the home's cost. Fle 2012 taxes late online tax filing Example 2. Fle 2012 taxes late online tax filing On January 31, John began building a home on the lot that he owned. Fle 2012 taxes late online tax filing He used $45,000 of his personal funds to build the home. Fle 2012 taxes late online tax filing The home was completed on October 31. Fle 2012 taxes late online tax filing On November 21, John took out a $36,000 mortgage that was secured by the home. Fle 2012 taxes late online tax filing The mortgage can be treated as used to build the home because it was taken out within 90 days after the home was completed. Fle 2012 taxes late online tax filing The entire mortgage qualifies as home acquisition debt because it was not more than the expenses incurred within the period beginning 24 months before the home was completed. Fle 2012 taxes late online tax filing This is illustrated by Figure C. Fle 2012 taxes late online tax filing   Please click here for the text description of the image. Fle 2012 taxes late online tax filing Figure C. Fle 2012 taxes late online tax filing John's example Date of the mortgage. Fle 2012 taxes late online tax filing   The date you take out your mortgage is the day the loan proceeds are disbursed. Fle 2012 taxes late online tax filing This is generally the closing date. Fle 2012 taxes late online tax filing You can treat the day you apply in writing for your mortgage as the date you take it out. Fle 2012 taxes late online tax filing However, this applies only if you receive the loan proceeds within a reasonable time (such as within 30 days) after your application is approved. Fle 2012 taxes late online tax filing If a timely application you make is rejected, a reasonable additional time will be allowed to make a new application. Fle 2012 taxes late online tax filing Cost of home or improvements. Fle 2012 taxes late online tax filing   To determine your cost, include amounts paid to acquire any interest in a qualified home or to substantially improve the home. Fle 2012 taxes late online tax filing   The cost of building or substantially improving a qualified home includes the costs to acquire real property and building materials, fees for architects and design plans, and required building permits. Fle 2012 taxes late online tax filing Substantial improvement. Fle 2012 taxes late online tax filing   An improvement is substantial if it: Adds to the value of your home, Prolongs your home's useful life, or Adapts your home to new uses. Fle 2012 taxes late online tax filing    Repairs that maintain your home in good condition, such as repainting your home, are not substantial improvements. Fle 2012 taxes late online tax filing However, if you paint your home as part of a renovation that substantially improves your qualified home, you can include the painting costs in the cost of the improvements. Fle 2012 taxes late online tax filing Acquiring an interest in a home because of a divorce. Fle 2012 taxes late online tax filing   If you incur debt to acquire the interest of a spouse or former spouse in a home, because of a divorce or legal separation, you can treat that debt as home acquisition debt. Fle 2012 taxes late online tax filing Part of home not a qualified home. Fle 2012 taxes late online tax filing    To figure your home acquisition debt, you must divide the cost of your home and improvements between the part of your home that is a qualified home and any part that is not a qualified home. Fle 2012 taxes late online tax filing See Divided use of your home under Qualified Home in Part I. Fle 2012 taxes late online tax filing Home Equity Debt If you took out a loan for reasons other than to buy, build, or substantially improve your home, it may qualify as home equity debt. Fle 2012 taxes late online tax filing In addition, debt you incurred to buy, build, or substantially improve your home, to the extent it is more than the home acquisition debt limit (discussed earlier), may qualify as home equity debt. Fle 2012 taxes late online tax filing Home equity debt is a mortgage you took out after October 13, 1987, that: Does not qualify as home acquisition debt or as grandfathered debt, and Is secured by your qualified home. Fle 2012 taxes late online tax filing Example. Fle 2012 taxes late online tax filing You bought your home for cash 10 years ago. Fle 2012 taxes late online tax filing You did not have a mortgage on your home until last year, when you took out a $50,000 loan, secured by your home, to pay for your daughter's college tuition and your father's medical bills. Fle 2012 taxes late online tax filing This loan is home equity debt. Fle 2012 taxes late online tax filing Home equity debt limit. Fle 2012 taxes late online tax filing   There is a limit on the amount of debt that can be treated as home equity debt. Fle 2012 taxes late online tax filing The total home equity debt on your main home and second home is limited to the smaller of: $100,000 ($50,000 if married filing separately), or The total of each home's fair market value (FMV) reduced (but not below zero) by the amount of its home acquisition debt and grandfathered debt. Fle 2012 taxes late online tax filing Determine the FMV and the outstanding home acquisition and grandfathered debt for each home on the date that the last debt was secured by the home. Fle 2012 taxes late online tax filing Example. Fle 2012 taxes late online tax filing You own one home that you bought in 2000. Fle 2012 taxes late online tax filing Its FMV now is $110,000, and the current balance on your original mortgage (home acquisition debt) is $95,000. Fle 2012 taxes late online tax filing Bank M offers you a home mortgage loan of 125% of the FMV of the home less any outstanding mortgages or other liens. Fle 2012 taxes late online tax filing To consolidate some of your other debts, you take out a $42,500 home mortgage loan [(125% × $110,000) − $95,000] with Bank M. Fle 2012 taxes late online tax filing Your home equity debt is limited to $15,000. Fle 2012 taxes late online tax filing This is the smaller of: $100,000, the maximum limit, or $15,000, the amount that the FMV of $110,000 exceeds the amount of home acquisition debt of $95,000. Fle 2012 taxes late online tax filing Debt higher than limit. Fle 2012 taxes late online tax filing   Interest on amounts over the home equity debt limit (such as the interest on $27,500 [$42,500 − $15,000] in the preceding example) generally is treated as personal interest and is not deductible. Fle 2012 taxes late online tax filing But if the proceeds of the loan were used for investment, business, or other deductible purposes, the interest may be deductible. Fle 2012 taxes late online tax filing If it is, see the Table 1 Instructions for line 13 for an explanation of how to allocate the excess interest. Fle 2012 taxes late online tax filing Part of home not a qualified home. Fle 2012 taxes late online tax filing   To figure the limit on your home equity debt, you must divide the FMV of your home between the part that is a qualified home and any part that is not a qualified home. Fle 2012 taxes late online tax filing See Divided use of your home under Qualified Home in Part I. Fle 2012 taxes late online tax filing Fair market value (FMV). Fle 2012 taxes late online tax filing    This is the price at which the home would change hands between you and a buyer, neither having to sell or buy, and both having reasonable knowledge of all relevant facts. Fle 2012 taxes late online tax filing Sales of similar homes in your area, on about the same date your last debt was secured by the home, may be helpful in figuring the FMV. Fle 2012 taxes late online tax filing Grandfathered Debt If you took out a mortgage on your home before October 14, 1987, or you refinanced such a mortgage, it may qualify as grandfathered debt. Fle 2012 taxes late online tax filing To qualify, it must have been secured by your qualified home on October 13, 1987, and at all times after that date. Fle 2012 taxes late online tax filing How you used the proceeds does not matter. Fle 2012 taxes late online tax filing Grandfathered debt is not limited. Fle 2012 taxes late online tax filing All of the interest you paid on grandfathered debt is fully deductible home mortgage interest. Fle 2012 taxes late online tax filing However, the amount of your grandfathered debt reduces the $1 million limit for home acquisition debt and the limit based on your home's fair market value for home equity debt. Fle 2012 taxes late online tax filing Refinanced grandfathered debt. Fle 2012 taxes late online tax filing   If you refinanced grandfathered debt after October 13, 1987, for an amount that was not more than the mortgage principal left on the debt, then you still treat it as grandfathered debt. Fle 2012 taxes late online tax filing To the extent the new debt is more than that mortgage principal, it is treated as home acquisition or home equity debt, and the mortgage is a mixed-use mortgage (discussed later under Average Mortgage Balance in the Table 1 instructions). Fle 2012 taxes late online tax filing The debt must be secured by the qualified home. Fle 2012 taxes late online tax filing   You treat grandfathered debt that was refinanced after October 13, 1987, as grandfathered debt only for the term left on the debt that was refinanced. Fle 2012 taxes late online tax filing After that, you treat it as home acquisition debt or home equity debt, depending on how you used the proceeds. Fle 2012 taxes late online tax filing Exception. Fle 2012 taxes late online tax filing   If the debt before refinancing was like a balloon note (the principal on the debt was not amortized over the term of the debt), then you treat the refinanced debt as grandfathered debt for the term of the first refinancing. Fle 2012 taxes late online tax filing This term cannot be more than 30 years. Fle 2012 taxes late online tax filing Example. Fle 2012 taxes late online tax filing Chester took out a $200,000 first mortgage on his home in 1986. Fle 2012 taxes late online tax filing The mortgage was a five-year balloon note and the entire balance on the note was due in 1991. Fle 2012 taxes late online tax filing Chester refinanced the debt in 1991 with a new 20-year mortgage. Fle 2012 taxes late online tax filing The refinanced debt is treated as grandfathered debt for its entire term (20 years). Fle 2012 taxes late online tax filing Line-of-credit mortgage. Fle 2012 taxes late online tax filing    If you had a line-of-credit mortgage on October 13, 1987, and borrowed additional amounts against it after that date, then the additional amounts are either home acquisition debt or home equity debt depending on how you used the proceeds. Fle 2012 taxes late online tax filing The balance on the mortgage before you borrowed the additional amounts is grandfathered debt. Fle 2012 taxes late online tax filing The newly borrowed amounts are not grandfathered debt because the funds were borrowed after October 13, 1987. Fle 2012 taxes late online tax filing See Average Mortgage Balance in the Table 1 Instructions that follow. Fle 2012 taxes late online tax filing Table 1 Instructions Unless you are subject to the overall limit on itemized deductions, you can deduct all of the interest you paid during the year on mortgages secured by your main home or second home in either of the following two situations. Fle 2012 taxes late online tax filing All the mortgages are grandfathered debt. Fle 2012 taxes late online tax filing The total of the mortgage balances for the entire year is within the limits discussed earlier under Home Acquisition Debt and Home Equity Debt . Fle 2012 taxes late online tax filing In either of those cases, you do not need Table 1. Fle 2012 taxes late online tax filing Otherwise, you can use Table 1 to determine your qualified loan limit and deductible home mortgage interest. Fle 2012 taxes late online tax filing Fill out only one Table 1 for both your main and second home regardless of how many mortgages you have. Fle 2012 taxes late online tax filing Table 1. Fle 2012 taxes late online tax filing Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. Fle 2012 taxes late online tax filing Part I Qualified Loan Limit 1. Fle 2012 taxes late online tax filing Enter the average balance of all your grandfathered debt. Fle 2012 taxes late online tax filing See line 1 instructions 1. Fle 2012 taxes late online tax filing   2. Fle 2012 taxes late online tax filing Enter the average balance of all your home acquisition debt. Fle 2012 taxes late online tax filing See line 2 instructions 2. Fle 2012 taxes late online tax filing   3. Fle 2012 taxes late online tax filing Enter $1,000,000 ($500,000 if married filing separately) 3. Fle 2012 taxes late online tax filing   4. Fle 2012 taxes late online tax filing Enter the larger of the amount on line 1 or the amount on line 3 4. Fle 2012 taxes late online tax filing   5. Fle 2012 taxes late online tax filing Add the amounts on lines 1 and 2. Fle 2012 taxes late online tax filing Enter the total here 5. Fle 2012 taxes late online tax filing   6. Fle 2012 taxes late online tax filing Enter the smaller of the amount on line 4 or the amount on line 5 6. Fle 2012 taxes late online tax filing   7. Fle 2012 taxes late online tax filing If you have home equity debt, enter the smaller of $100,000 ($50,000 if married filing separately) or your limited amount. Fle 2012 taxes late online tax filing See the line 7 instructions for the limit which may apply to you. Fle 2012 taxes late online tax filing 7. Fle 2012 taxes late online tax filing   8. Fle 2012 taxes late online tax filing Add the amounts on lines 6 and 7. Fle 2012 taxes late online tax filing Enter the total. Fle 2012 taxes late online tax filing This is your qualified loan limit. Fle 2012 taxes late online tax filing 8. Fle 2012 taxes late online tax filing   Part II Deductible Home Mortgage Interest 9. Fle 2012 taxes late online tax filing Enter the total of the average balances of all mortgages on all qualified homes. Fle 2012 taxes late online tax filing  See line 9 instructions 9. Fle 2012 taxes late online tax filing     If line 8 is less than line 9, go on to line 10. Fle 2012 taxes late online tax filing If line 8 is equal to or more than line 9, stop here. Fle 2012 taxes late online tax filing All of your interest on all the mortgages included on line 9 is deductible as home mortgage interest on Schedule A (Form 1040). Fle 2012 taxes late online tax filing     10. Fle 2012 taxes late online tax filing Enter the total amount of interest that you paid. Fle 2012 taxes late online tax filing See line 10 instructions 10. Fle 2012 taxes late online tax filing   11. Fle 2012 taxes late online tax filing Divide the amount on line 8 by the amount on line 9. Fle 2012 taxes late online tax filing Enter the result as a decimal amount (rounded to three places) 11. Fle 2012 taxes late online tax filing × . Fle 2012 taxes late online tax filing 12. Fle 2012 taxes late online tax filing Multiply the amount on line 10 by the decimal amount on line 11. Fle 2012 taxes late online tax filing Enter the result. Fle 2012 taxes late online tax filing This is your deductible home mortgage interest. Fle 2012 taxes late online tax filing Enter this amount on Schedule A (Form 1040) 12. Fle 2012 taxes late online tax filing   13. Fle 2012 taxes late online tax filing Subtract the amount on line 12 from the amount on line 10. Fle 2012 taxes late online tax filing Enter the result. Fle 2012 taxes late online tax filing This is not home mortgage interest. Fle 2012 taxes late online tax filing See line 13 instructions 13. Fle 2012 taxes late online tax filing   Home equity debt only. Fle 2012 taxes late online tax filing   If all of your mortgages are home equity debt, do not fill in lines 1 through 5. Fle 2012 taxes late online tax filing Enter zero on line 6 and complete the rest of Table 1. Fle 2012 taxes late online tax filing Average Mortgage Balance You have to figure the average balance of each mortgage to determine your qualified loan limit. Fle 2012 taxes late online tax filing You need these amounts to complete lines 1, 2, and 9 of Table 1. Fle 2012 taxes late online tax filing You can use the highest mortgage balances during the year, but you may benefit most by using the average balances. Fle 2012 taxes late online tax filing The following are methods you can use to figure your average mortgage balances. Fle 2012 taxes late online tax filing However, if a mortgage has more than one category of debt, see Mixed-use mortgages , later, in this section. Fle 2012 taxes late online tax filing Average of first and last balance method. Fle 2012 taxes late online tax filing   You can use this method if all the following apply. Fle 2012 taxes late online tax filing You did not borrow any new amounts on the mortgage during the year. Fle 2012 taxes late online tax filing (This does not include borrowing the original mortgage amount. Fle 2012 taxes late online tax filing ) You did not prepay more than one month's principal during the year. Fle 2012 taxes late online tax filing (This includes prepayment by refinancing your home or by applying proceeds from its sale. Fle 2012 taxes late online tax filing ) You had to make level payments at fixed equal intervals on at least a semi-annual basis. Fle 2012 taxes late online tax filing You treat your payments as level even if they were adjusted from time to time because of changes in the interest rate. Fle 2012 taxes late online tax filing    To figure your average balance, complete the following worksheet. Fle 2012 taxes late online tax filing    1. Fle 2012 taxes late online tax filing Enter the balance as of the first day of the year that the mortgage was secured by your qualified home during the year (generally January 1)   2. Fle 2012 taxes late online tax filing Enter the balance as of the last day of the year that the mortgage was secured by your qualified home during the year (generally December 31)   3. Fle 2012 taxes late online tax filing Add amounts on lines 1 and 2   4. Fle 2012 taxes late online tax filing Divide the amount on line 3 by 2. Fle 2012 taxes late online tax filing Enter the result   Interest paid divided by interest rate method. Fle 2012 taxes late online tax filing   You can use this method if at all times in 2013 the mortgage was secured by your qualified home and the interest was paid at least monthly. Fle 2012 taxes late online tax filing    Complete the following worksheet to figure your average balance. Fle 2012 taxes late online tax filing    1. Fle 2012 taxes late online tax filing Enter the interest paid in 2013. Fle 2012 taxes late online tax filing Do not include points, mortgage insurance premiums, or any interest paid in 2013 that is for a year after 2013. Fle 2012 taxes late online tax filing However, do include interest that is for 2013 but was paid in an earlier year   2. Fle 2012 taxes late online tax filing Enter the annual interest rate on the mortgage. Fle 2012 taxes late online tax filing If the interest rate varied in 2013, use the lowest rate for the year   3. Fle 2012 taxes late online tax filing Divide the amount on line 1 by the amount on line 2. Fle 2012 taxes late online tax filing Enter the result   Example. Fle 2012 taxes late online tax filing Mr. Fle 2012 taxes late online tax filing Blue had a line of credit secured by his main home all year. Fle 2012 taxes late online tax filing He paid interest of $2,500 on this loan. Fle 2012 taxes late online tax filing The interest rate on the loan was 9% (. Fle 2012 taxes late online tax filing 09) all year. Fle 2012 taxes late online tax filing His average balance using this method is $27,778, figured as follows. Fle 2012 taxes late online tax filing 1. Fle 2012 taxes late online tax filing Enter the interest paid in 2013. Fle 2012 taxes late online tax filing Do not include points, mortgage insurance premiums, or any interest paid in 2013 that is for a year after 2013. Fle 2012 taxes late online tax filing However, do include interest that is for 2013 but was paid in an earlier year $2,500 2. Fle 2012 taxes late online tax filing Enter the annual interest rate on the mortgage. Fle 2012 taxes late online tax filing If the interest rate varied in 2013, use the lowest rate for the year . Fle 2012 taxes late online tax filing 09 3. Fle 2012 taxes late online tax filing Divide the amount on line 1 by the amount on line 2. Fle 2012 taxes late online tax filing Enter the result $27,778 Statements provided by your lender. Fle 2012 taxes late online tax filing   If you receive monthly statements showing the closing balance or the average balance for the month, you can use either to figure your average balance for the year. Fle 2012 taxes late online tax filing You can treat the balance as zero for any month the mortgage was not secured by your qualified home. Fle 2012 taxes late online tax filing   For each mortgage, figure your average balance by adding your monthly closing or average balances and dividing that total by the number of months the home secured by that mortgage was a qualified home during the year. Fle 2012 taxes late online tax filing   If your lender can give you your average balance for the year, you can use that amount. Fle 2012 taxes late online tax filing Example. Fle 2012 taxes late online tax filing Ms. Fle 2012 taxes late online tax filing Brown had a home equity loan secured by her main home all year. Fle 2012 taxes late online tax filing She received monthly statements showing her average balance for each month. Fle 2012 taxes late online tax filing She can figure her average balance for the year by adding her monthly average balances and dividing the total by 12. Fle 2012 taxes late online tax filing Mixed-use mortgages. Fle 2012 taxes late online tax filing   A mixed-use mortgage is a loan that consists of more than one of the three categories of debt (grandfathered debt, home acquisition debt, and home equity debt). Fle 2012 taxes late online tax filing For example, a mortgage you took out during the year is a mixed-use mortgage if you used its proceeds partly to refinance a mortgage that you took out in an earlier year to buy your home (home acquisition debt) and partly to buy a car (home equity debt). Fle 2012 taxes late online tax filing   Complete lines 1 and 2 of Table 1 by including the separate average balances of any grandfathered debt and home acquisition debt in your mixed-use mortgage. Fle 2012 taxes late online tax filing Do not use the methods described earlier in this section to figure the average balance of either category. Fle 2012 taxes late online tax filing Instead, for each category, use the following method. Fle 2012 taxes late online tax filing Figure the balance of that category of debt for each month. Fle 2012 taxes late online tax filing This is the amount of the loan proceeds allocated to that category, reduced by your principal payments on the mortgage previously applied to that category. Fle 2012 taxes late online tax filing Principal payments on a mixed-use mortgage are applied in full to each category of debt, until its balance is zero, in the following order: First, any home equity debt, Next, any grandfathered debt, and Finally, any home acquisition debt. Fle 2012 taxes late online tax filing Add together the monthly balances figured in (1). Fle 2012 taxes late online tax filing Divide the result in (2) by 12. Fle 2012 taxes late online tax filing   Complete line 9 of Table 1 by including the average balance of the entire mixed-use mortgage, figured under one of the methods described earlier in this section. Fle 2012 taxes late online tax filing Example 1. Fle 2012 taxes late online tax filing In 1986, Sharon took out a $1,400,000 mortgage to buy her main home (grandfathered debt). Fle 2012 taxes late online tax filing On March 2, 2013, when the home had a fair market value of $1,700,000 and she owed $1,100,000 on the mortgage, Sharon took out a second mortgage for $200,000. Fle 2012 taxes late online tax filing She used $180,000 of the proceeds to make substantial improvements to her home (home acquisition debt) and the remaining $20,000 to buy a car (home equity debt). Fle 2012 taxes late online tax filing Under the loan agreement, Sharon must make principal payments of $1,000 at the end of each month. Fle 2012 taxes late online tax filing During 2013, her principal payments on the second mortgage totaled $10,000. Fle 2012 taxes late online tax filing To complete Table 1, line 2, Sharon must figure a separate average balance for the part of her second mortgage that is home acquisition debt. Fle 2012 taxes late online tax filing The January and February balances were zero. Fle 2012 taxes late online tax filing The March through December balances were all $180,000, because none of her principal payments are applied to the home acquisition debt. Fle 2012 taxes late online tax filing (They are all applied to the home equity debt, reducing it to $10,000 [$20,000 − $10,000]. Fle 2012 taxes late online tax filing ) The monthly balances of the home acquisition debt total $1,800,000 ($180,000 × 10). Fle 2012 taxes late online tax filing Therefore, the average balance of the home acquisition debt for 2013 was $150,000 ($1,800,000 ÷ 12). Fle 2012 taxes late online tax filing Example 2. Fle 2012 taxes late online tax filing The facts are the same as in Example 1. Fle 2012 taxes late online tax filing In 2014, Sharon's January through October principal payments on her second mortgage are applied to the home equity debt, reducing it to zero. Fle 2012 taxes late online tax filing The balance of the home acquisition debt remains $180,000 for each of those months. Fle 2012 taxes late online tax filing Because her November and December principal payments are applied to the home acquisition debt, the November balance is $179,000 ($180,000 − $1,000) and the December balance is $178,000 ($180,000 − $2,000). Fle 2012 taxes late online tax filing The monthly balances total $2,157,000 [($180,000 × 10) + $179,000 + $178,000]. Fle 2012 taxes late online tax filing Therefore, the average balance of the home acquisition debt for 2014 is $179,750 ($2,157,000 ÷ 12). Fle 2012 taxes late online tax filing L