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H&r Block Online Taxes

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H&r Block Online Taxes

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

H&r block online taxes 9. H&r block online taxes   Rental Income and Expenses Table of Contents Introduction Useful Items - You may want to see: Rental Income Rental ExpensesVacant while listed for sale. H&r block online taxes Repairs and Improvements Other Expenses Property Changed to Rental Use Renting Part of Property Not Rented for Profit Personal Use of Dwelling Unit (Including Vacation Home)Example. H&r block online taxes Dividing Expenses Dwelling Unit Used as a Home Reporting Income and Deductions DepreciationChanging your accounting method to deduct unclaimed depreciation. H&r block online taxes Limits on Rental LossesAt-Risk Rules Passive Activity Limits How To Report Rental Income and ExpensesSchedule E (Form 1040) Introduction This chapter discusses rental income and expenses. H&r block online taxes It also covers the following topics. H&r block online taxes Personal use of dwelling unit (including vacation home). H&r block online taxes Depreciation. H&r block online taxes Limits on rental losses. H&r block online taxes How to report your rental income and expenses. H&r block online taxes If you sell or otherwise dispose of your rental property, see Publication 544, Sales and Other Dispositions of Assets. H&r block online taxes If you have a loss from damage to, or theft of, rental property, see Publication 547, Casualties, Disasters, and Thefts. H&r block online taxes If you rent a condominium or a cooperative apartment, some special rules apply to you even though you receive the same tax treatment as other owners of rental property. H&r block online taxes See Publication 527, Residential Rental Property, for more information. H&r block online taxes Useful Items - You may want to see: Publication 527 Residential Rental Property 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 925 Passive Activity and At-Risk Rules 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 6251 Alternative Minimum Tax—Individuals 8582 Passive Activity Loss Limitations Schedule E (Form 1040) Supplemental Income and Loss Rental Income In most cases, you must include in your gross income all amounts you receive as rent. H&r block online taxes Rental income is any payment you receive for the use or occupation of property. H&r block online taxes In addition to amounts you receive as normal rent payments, there are other amounts that may be rental income. H&r block online taxes When to report. H&r block online taxes   If you are a cash-basis taxpayer, you report rental income on your return for the year you actually or constructively receive it. H&r block online taxes You are a cash-basis taxpayer if you report income in the year you receive it, regardless of when it was earned. H&r block online taxes You constructively receive income when it is made available to you, for example, by being credited to your bank account. H&r block online taxes   For more information about when you constructively receive income, see Accounting Methods in chapter 1. H&r block online taxes Advance rent. H&r block online taxes   Advance rent is any amount you receive before the period that it covers. H&r block online taxes Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. H&r block online taxes Example. H&r block online taxes You sign a 10-year lease to rent your property. H&r block online taxes In the first year, you receive $5,000 for the first year's rent and $5,000 as rent for the last year of the lease. H&r block online taxes You must include $10,000 in your income in the first year. H&r block online taxes Canceling a lease. H&r block online taxes   If your tenant pays you to cancel a lease, the amount you receive is rent. H&r block online taxes Include the payment in your income in the year you receive it regardless of your method of accounting. H&r block online taxes Expenses paid by tenant. H&r block online taxes   If your tenant pays any of your expenses, the payments are rental income. H&r block online taxes Because you must include this amount in income, you can deduct the expenses if they are deductible rental expenses. H&r block online taxes See Rental Expenses , later, for more information. H&r block online taxes Property or services. H&r block online taxes   If you receive property or services, instead of money, as rent, include the fair market value of the property or services in your rental income. H&r block online taxes   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. H&r block online taxes Security deposits. H&r block online taxes   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. H&r block online taxes But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. H&r block online taxes   If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. H&r block online taxes Include it in your income when you receive it. H&r block online taxes Part interest. H&r block online taxes   If you own a part interest in rental property, you must report your part of the rental income from the property. H&r block online taxes Rental of property also used as your home. H&r block online taxes   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. H&r block online taxes However, you can deduct on Schedule A (Form 1040) the interest, taxes, and casualty and theft losses that are allowed for nonrental property. H&r block online taxes See Personal Use of Dwelling Unit (Including Vacation Home) , later. H&r block online taxes Rental Expenses This part discusses expenses of renting property that you ordinarily can deduct from your rental income. H&r block online taxes It includes information on the expenses you can deduct if you rent part of your property, or if you change your property to rental use. H&r block online taxes Depreciation , which you can also deduct from your rental income, is discussed later. H&r block online taxes Personal use of rental property. H&r block online taxes   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. H&r block online taxes Also, your rental expense deductions may be limited. H&r block online taxes See Personal Use of Dwelling Unit (Including Vacation Home) , later. H&r block online taxes Part interest. H&r block online taxes   If you own a part interest in rental property, you can deduct expenses that you paid according to your percentage of ownership. H&r block online taxes When to deduct. H&r block online taxes   If you are a cash-basis taxpayer, you generally deduct your rental expenses in the year you pay them. H&r block online taxes Depreciation. H&r block online taxes   You can begin to depreciate rental property when it is ready and available for rent. H&r block online taxes See Placed-in-Service under When Does Depreciation Begin and End in chapter 2 of Publication 527. H&r block online taxes Pre-rental expenses. H&r block online taxes   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. H&r block online taxes Uncollected rent. H&r block online taxes   If you are a cash-basis taxpayer, do not deduct uncollected rent. H&r block online taxes Because you have not included it in your income, it is not deductible. H&r block online taxes Vacant rental property. H&r block online taxes   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. H&r block online taxes However, you cannot deduct any loss of rental income for the period the property is vacant. H&r block online taxes Vacant while listed for sale. H&r block online taxes   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. H&r block online taxes If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. H&r block online taxes Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. H&r block online taxes Improvements. H&r block online taxes   You must capitalize any expense you pay to improve your rental property. H&r block online taxes An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. H&r block online taxes Betterments. H&r block online taxes   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. H&r block online taxes Restoration. H&r block online taxes   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. H&r block online taxes Adaptation. H&r block online taxes   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. H&r block online taxes Separate the costs of repairs and improvements, and keep accurate records. H&r block online taxes You will need to know the cost of improvements when you sell or depreciate your property. H&r block online taxes The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. H&r block online taxes Other Expenses Other expenses you can deduct from your rental income include advertising, cleaning and maintenance, utilities, fire and liability insurance, taxes, interest, commissions for the collection of rent, ordinary and necessary travel and transportation, and other expenses, discussed next. H&r block online taxes Insurance premiums paid in advance. H&r block online taxes   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. H&r block online taxes You cannot deduct the total premium in the year you pay it. H&r block online taxes Legal and other professional fees. H&r block online taxes   You can deduct, as a rental expense, legal and other professional expenses, such as tax return preparation fees you paid to prepare Schedule E (Form 1040), Part I. H&r block online taxes For example, on your 2013 Schedule E, you can deduct fees paid in 2013 to prepare your 2012 Schedule E, Part I. H&r block online taxes You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. H&r block online taxes Local benefit taxes. H&r block online taxes   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. H&r block online taxes These charges are nondepreciable capital expenditures, and must be added to the basis of your property. H&r block online taxes However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. H&r block online taxes Local transportation expenses. H&r block online taxes    You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. H&r block online taxes However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. H&r block online taxes See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. H&r block online taxes   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. H&r block online taxes For 2013, the standard mileage rate for business use is 56. H&r block online taxes 5 cents per mile. H&r block online taxes For more information, see chapter 26. H&r block online taxes    To deduct car expenses under either method, you must keep records that follow the rules in chapter 26. H&r block online taxes In addition, you must complete Form 4562, Part V, and attach it to your tax return. H&r block online taxes Rental of equipment. H&r block online taxes   You can deduct the rent you pay for equipment that you use for rental purposes. H&r block online taxes However, in some cases, lease contracts are actually purchase contracts. H&r block online taxes If so, you cannot deduct these payments. H&r block online taxes You can recover the cost of purchased equipment through depreciation. H&r block online taxes Rental of property. H&r block online taxes   You can deduct the rent you pay for property that you use for rental purposes. H&r block online taxes If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. H&r block online taxes Travel expenses. H&r block online taxes   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. H&r block online taxes You must properly allocate your expenses between rental and nonrental activities. H&r block online taxes You cannot deduct the cost of traveling away from home if the primary purpose of the trip was to improve your property. H&r block online taxes You recover the cost of improvements by taking depreciation. H&r block online taxes For information on travel expenses, see chapter 26. H&r block online taxes    To deduct travel expenses, you must keep records that follow the rules in chapter 26. H&r block online taxes   See Rental Expenses in Publication 527 for more information. H&r block online taxes Property Changed to Rental Use If you change your home or other property (or a part of it) to rental use at any time other than the beginning of your tax year, you must divide yearly expenses, such as taxes and insurance, between rental use and personal use. H&r block online taxes You can deduct as rental expenses only the part of the expense that is for the part of the year the property was used or held for rental purposes. H&r block online taxes You cannot deduct depreciation or insurance for the part of the year the property was held for personal use. H&r block online taxes However, you can include the home mortgage interest, qualified mortgage insurance premiums, and real estate tax expenses for the part of the year the property was held for personal use as an itemized deduction on Schedule A (Form 1040). H&r block online taxes Example. H&r block online taxes Your tax year is the calendar year. H&r block online taxes You moved from your home in May and started renting it out on June 1. H&r block online taxes You can deduct as rental expenses seven-twelfths of your yearly expenses, such as taxes and insurance. H&r block online taxes Starting with June, you can deduct as rental expenses the amounts you pay for items generally billed monthly, such as utilities. H&r block online taxes Renting Part of Property If you rent part of your property, you must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes, as though you actually had two separate pieces of property. H&r block online taxes You can deduct the expenses related to the part of the property used for rental purposes, such as home mortgage interest, qualified mortgage insurance premiums, and real estate taxes, as rental expenses on Schedule E (Form 1040). H&r block online taxes You can also deduct as rental expenses a portion of other expenses that normally are nondeductible personal expenses, such as expenses for electricity or painting the outside of your house. H&r block online taxes There is no change in the types of expenses deductible for the personal-use part of your property. H&r block online taxes Generally, these expenses may be deducted only if you itemize your deductions on Schedule A (Form 1040). H&r block online taxes You cannot deduct any part of the cost of the first phone line even if your tenants have unlimited use of it. H&r block online taxes You do not have to divide the expenses that belong only to the rental part of your property. H&r block online taxes For example, if you paint a room that you rent, or if you pay premiums for liability insurance in connection with renting a room in your home, your entire cost is a rental expense. H&r block online taxes If you install a second phone line strictly for your tenants' use, all of the cost of the second line is deductible as a rental expense. H&r block online taxes You can deduct depreciation, discussed later, on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes. H&r block online taxes How to divide expenses. H&r block online taxes   If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between the rental use and the personal use. H&r block online taxes You can use any reasonable method for dividing the expense. H&r block online taxes It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. H&r block online taxes The two most common methods for dividing an expense are based on (1) the number of rooms in your home, and (2) the square footage of your home. H&r block online taxes Not Rented for Profit If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. H&r block online taxes You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year. H&r block online taxes For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Publication 535. H&r block online taxes Where to report. H&r block online taxes   Report your not-for-profit rental income on Form 1040, line 21. H&r block online taxes For example, you can include your mortgage interest and any qualified mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses on the appropriate lines of Schedule A (Form 1040) if you itemize your deductions. H&r block online taxes   If you itemize your deductions, claim your other rental expenses, subject to the rules explained in chapter 1 of Publication 535, as miscellaneous itemized deductions on Form 1040, Schedule A, line 23. H&r block online taxes You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income. H&r block online taxes Personal Use of Dwelling Unit (Including Vacation Home) If you have any personal use of a dwelling unit (including a vacation home) that you rent, you must divide your expenses between rental use and personal use. H&r block online taxes In general, your rental expenses will be no more than your total expenses multiplied by a fraction; the denominator of which is the total number of days the dwelling unit is used and the numerator of which is the total number of days actually rented at a fair rental price. H&r block online taxes Only your rental expenses may be deducted on Schedule E (Form 1040). H&r block online taxes Some of your personal expenses may be deductible if you itemize your deductions on Schedule A (Form 1040). H&r block online taxes You must also determine if the dwelling unit is considered a home. H&r block online taxes The amount of rental expenses that you can deduct may be limited if the dwelling unit is considered a home. H&r block online taxes Whether a dwelling unit is considered a home depends on how many days during the year are considered to be days of personal use. H&r block online taxes There is a special rule if you used the dwelling unit as a home and you rented it for less than 15 days during the year. H&r block online taxes Dwelling unit. H&r block online taxes   A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. H&r block online taxes It also includes all structures or other property belonging to the dwelling unit. H&r block online taxes A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. H&r block online taxes   A dwelling unit does not include property used solely as a hotel, motel, inn, or similar establishment. H&r block online taxes Property is used solely as a hotel, motel, inn, or similar establishment if it is regularly available for occupancy by paying customers and is not used by an owner as a home during the year. H&r block online taxes Example. H&r block online taxes   You rent a room in your home that is always available for short-term occupancy by paying customers. H&r block online taxes You do not use the room yourself, and you allow only paying customers to use the room. H&r block online taxes The room is used solely as a hotel, motel, inn, or similar establishment and is not a dwelling unit. H&r block online taxes Dividing Expenses If you use a dwelling unit for both rental and personal purposes, divide your expenses between the rental use and the personal use based on the number of days used for each purpose. H&r block online taxes When dividing your expenses, follow these rules. H&r block online taxes Any day that the unit is rented at a fair rental price is a day of rental use even if you used the unit for personal purposes that day. H&r block online taxes This rule does not apply when determining whether you used the unit as a home. H&r block online taxes Any day that the unit is available for rent but not actually rented is not a day of rental use. H&r block online taxes Example. H&r block online taxes Your beach cottage was available for rent from June 1 through August 31 (92 days). H&r block online taxes During that time, except for the first week in August (7 days) when you were unable to find a renter, you rented the cottage at a fair rental price. H&r block online taxes The person who rented the cottage for July allowed you to use it over the weekend (2 days) without any reduction in or refund of rent. H&r block online taxes Your family also used the cottage during the last 2 weeks of May (14 days). H&r block online taxes The cottage was not used at all before May 17 or after August 31. H&r block online taxes You figure the part of the cottage expenses to treat as rental expenses as follows. H&r block online taxes The cottage was used for rental a total of 85 days (92 − 7). H&r block online taxes The days it was available for rent but not rented (7 days) are not days of rental use. H&r block online taxes The July weekend (2 days) you used it is rental use because you received a fair rental price for the weekend. H&r block online taxes You used the cottage for personal purposes for 14 days (the last 2 weeks in May). H&r block online taxes The total use of the cottage was 99 days (14 days personal use + 85 days rental use). H&r block online taxes Your rental expenses are 85/99 (86%) of the cottage expenses. H&r block online taxes Note. H&r block online taxes When determining whether you used the cottage as a home, the July weekend (2 days) you used it is considered personal use even though you received a fair rental price for the weekend. H&r block online taxes Therefore, you had 16 days of personal use and 83 days of rental use for this purpose. H&r block online taxes Because you used the cottage for personal purposes more than 14 days and more than 10% of the days of rental use (8 days), you used it as a home. H&r block online taxes If you have a net loss, you may not be able to deduct all of the rental expenses. H&r block online taxes See Dwelling Unit Used as a Home, next. H&r block online taxes Dwelling Unit Used as a Home If you use a dwelling unit for both rental and personal purposes, the tax treatment of the rental expenses you figured earlier under Dividing Expenses and rental income depends on whether you are considered to be using the dwelling unit as a home. H&r block online taxes You use a dwelling unit as a home during the tax year if you use it for personal purposes more than the greater of: 14 days, or 10% of the total days it is rented to others at a fair rental price. H&r block online taxes See What is a day of personal use , later. H&r block online taxes Fair rental price. H&r block online taxes   A fair rental price for your property generally is the amount of rent that a person who is not related to you would be willing to pay. H&r block online taxes The rent you charge is not a fair rental price if it is substantially less than the rents charged for other properties that are similar to your property in your area. H&r block online taxes   If a dwelling unit is used for personal purposes on a day it is rented at a fair rental price, do not count that day as a day of rental use in applying (2) above. H&r block online taxes Instead, count it as a day of personal use in applying both (1) and (2) above. H&r block online taxes What is a day of personal use?   A day of personal use of a dwelling unit is any day that the unit is used by any of the following persons. H&r block online taxes You or any other person who has an interest in the unit, unless you rent it to another owner as his or her main home under a shared equity financing agreement (defined later). H&r block online taxes However, see Days used as a main home before or after renting , later. H&r block online taxes A member of your family or a member of the family of any other person who owns an interest in the unit, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. H&r block online taxes Family includes only your spouse, brothers and sisters, half-brothers and half-sisters, ancestors (parents, grandparents, etc. H&r block online taxes ), and lineal descendants (children, grandchildren, etc. H&r block online taxes ). H&r block online taxes Anyone under an arrangement that lets you use some other dwelling unit. H&r block online taxes Anyone at less than a fair rental price. H&r block online taxes Main home. H&r block online taxes   If the other person or member of the family in (1) or (2) above has more than one home, his or her main home is ordinarily the one he or she lived in most of the time. H&r block online taxes Shared equity financing agreement. H&r block online taxes   This is an agreement under which two or more persons acquire undivided interests for more than 50 years in an entire dwelling unit, including the land, and one or more of the co-owners is entitled to occupy the unit as his or her main home upon payment of rent to the other co-owner or owners. H&r block online taxes Donation of use of property. H&r block online taxes   You use a dwelling unit for personal purposes if: You donate the use of the unit to a charitable organization, The organization sells the use of the unit at a fund-raising event, and The “purchaser” uses the unit. H&r block online taxes Examples. H&r block online taxes   The following examples show how to determine days of personal use. H&r block online taxes Example 1. H&r block online taxes You and your neighbor are co-owners of a condominium at the beach. H&r block online taxes Last year, you rented the unit to vacationers whenever possible. H&r block online taxes The unit was not used as a main home by anyone. H&r block online taxes Your neighbor used the unit for 2 weeks last year; you did not use it at all. H&r block online taxes Because your neighbor has an interest in the unit, both of you are considered to have used the unit for personal purposes during those 2 weeks. H&r block online taxes Example 2. H&r block online taxes You and your neighbors are co-owners of a house under a shared equity financing agreement. H&r block online taxes Your neighbors live in the house and pay you a fair rental price. H&r block online taxes Even though your neighbors have an interest in the house, the days your neighbors live there are not counted as days of personal use by you. H&r block online taxes This is because your neighbors rent the house as their main home under a shared equity financing agreement. H&r block online taxes Example 3. H&r block online taxes You own a rental property that you rent to your son. H&r block online taxes Your son does not own any interest in this property. H&r block online taxes He uses it as his main home and pays you a fair rental price. H&r block online taxes Your son's use of the property is not personal use by you because your son is using it as his main home, he owns no interest in the property, and he is paying you a fair rental price. H&r block online taxes Example 4. H&r block online taxes You rent your beach house to Joshua. H&r block online taxes Joshua rents his cabin in the mountains to you. H&r block online taxes You each pay a fair rental price. H&r block online taxes You are using your house for personal purposes on the days that Joshua uses it because your house is used by Joshua under an arrangement that allows you to use his house. H&r block online taxes Days used for repairs and maintenance. H&r block online taxes   Any day that you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. H&r block online taxes Do not count such a day as a day of personal use even if family members use the property for recreational purposes on the same day. H&r block online taxes Days used as a main home before or after renting. H&r block online taxes   For purposes of determining whether a dwelling unit was used as a home, you may not have to count days you used the property as your main home before or after renting it or offering it for rent as days of personal use. H&r block online taxes Do not count them as days of personal use if: You rented or tried to rent the property for 12 or more consecutive months. H&r block online taxes You rented or tried to rent the property for a period of less than 12 consecutive months and the period ended because you sold or exchanged the property. H&r block online taxes However, this special rule does not apply when dividing expenses between rental and personal use. H&r block online taxes Examples. H&r block online taxes   The following examples show how to determine whether you used your rental property as a home. H&r block online taxes Example 1. H&r block online taxes You converted the basement of your home into an apartment with a bedroom, a bathroom, and a small kitchen. H&r block online taxes You rented the basement apartment at a fair rental price to college students during the regular school year. H&r block online taxes You rented to them on a 9-month lease (273 days). H&r block online taxes You figured 10% of the total days rented to others at a fair rental price is 27 days. H&r block online taxes During June (30 days), your brothers stayed with you and lived in the basement apartment rent free. H&r block online taxes Your basement apartment was used as a home because you used it for personal purposes for 30 days. H&r block online taxes Rent-free use by your brothers is considered personal use. H&r block online taxes Your personal use (30 days) is more than the greater of 14 days or 10% of the total days it was rented (27 days). H&r block online taxes Example 2. H&r block online taxes You rented the guest bedroom in your home at a fair rental price during the local college's homecoming, commencement, and football weekends (a total of 27 days). H&r block online taxes Your sister-in-law stayed in the room, rent free, for the last 3 weeks (21 days) in July. H&r block online taxes You figured 10% of the total days rented to others at a fair rental price is 3 days. H&r block online taxes The room was used as a home because you used it for personal purposes for 21 days. H&r block online taxes That is more than the greater of 14 days or 10% of the 27 days it was rented (3 days). H&r block online taxes Example 3. H&r block online taxes You own a condominium apartment in a resort area. H&r block online taxes You rented it at a fair rental price for a total of 170 days during the year. H&r block online taxes For 12 of those days, the tenant was not able to use the apartment and allowed you to use it even though you did not refund any of the rent. H&r block online taxes Your family actually used the apartment for 10 of those days. H&r block online taxes Therefore, the apartment is treated as having been rented for 160 (170 − 10) days. H&r block online taxes You figured 10% of the total days rented to others at a fair rental price is 16 days. H&r block online taxes Your family also used the apartment for 7 other days during the year. H&r block online taxes You used the apartment as a home because you used it for personal purposes for 17 days. H&r block online taxes That is more than the greater of 14 days or 10% of the 160 days it was rented (16 days). H&r block online taxes Minimal rental use. H&r block online taxes   If you use the dwelling unit as a home and you rent it less than 15 days during the year, that period is not treated as rental activity. H&r block online taxes See Used as a home but rented less than 15 days , later, for more information. H&r block online taxes Limit on deductions. H&r block online taxes   Renting a dwelling unit that is considered a home is not a passive activity. H&r block online taxes Instead, if your rental expenses are more than your rental income, some or all of the excess expenses cannot be used to offset income from other sources. H&r block online taxes The excess expenses that cannot be used to offset income from other sources are carried forward to the next year and treated as rental expenses for the same property. H&r block online taxes Any expenses carried forward to the next year will be subject to any limits that apply for that year. H&r block online taxes This limitation will apply to expenses carried forward to another year even if you do not use the property as your home for that subsequent year. H&r block online taxes   To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 9-1. H&r block online taxes Reporting Income and Deductions Property not used for personal purposes. H&r block online taxes   If you do not use a dwelling unit for personal purposes, see How To Report Rental Income and Expenses , later, for how to report your rental income and expenses. H&r block online taxes Property used for personal purposes. H&r block online taxes   If you do use a dwelling unit for personal purposes, then how you report your rental income and expenses depends on whether you used the dwelling unit as a home. H&r block online taxes Not used as a home. H&r block online taxes   If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. H&r block online taxes Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in Dividing Expenses . H&r block online taxes The expenses for personal use are not deductible as rental expenses. H&r block online taxes   Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses , later. H&r block online taxes Used as a home but rented less than 15 days. H&r block online taxes   If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function is not considered to be rental and it should not be reported on Schedule E (Form 1040). H&r block online taxes You are not required to report the rental income and rental expenses from this activity. H&r block online taxes The expenses, including qualified mortgage interest, property taxes, and any qualified casualty loss will be reported as normally allowed on Schedule A (Form 1040). H&r block online taxes See the Instructions for Schedule A (Form 1040) for more information on deducting these expenses. H&r block online taxes Used as a home and rented 15 days or more. H&r block online taxes   If you use a dwelling unit as a home and rent it 15 days or more during the year, include all your rental income in your income. H&r block online taxes Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in Dividing Expenses . H&r block online taxes The expenses for personal use are not deductible as rental expenses. H&r block online taxes   If you had a net profit from renting the dwelling unit for the year (that is, if your rental income is more than the total of your rental expenses, including depreciation), deduct all of your rental expenses. H&r block online taxes You do not need to use Worksheet 9-1. H&r block online taxes   However, if you had a net loss from renting the dwelling unit for the year, your deduction for certain rental expenses is limited. H&r block online taxes To figure your deductible rental expenses and any carryover to next year, use Worksheet 9-1. H&r block online taxes Depreciation You recover the cost of income-producing property through yearly tax deductions. H&r block online taxes You do this by depreciating the property; that is, by deducting some of the cost each year on your tax return. H&r block online taxes Three factors determine how much depreciation you can deduct each year: (1) your basis in the property, (2) the recovery period for the property, and (3) the depreciation method used. H&r block online taxes You cannot simply deduct your mortgage or principal payments, or the cost of furniture, fixtures, and equipment, as an expense. H&r block online taxes You can deduct depreciation only on the part of your property used for rental purposes. H&r block online taxes Depreciation reduces your basis for figuring gain or loss on a later sale or exchange. H&r block online taxes You may have to use Form 4562 to figure and report your depreciation. H&r block online taxes See How To Report Rental Income and Expenses , later. H&r block online taxes Alternative minimum tax (AMT). H&r block online taxes    If you use accelerated depreciation, you may be subject to the AMT. H&r block online taxes Accelerated depreciation allows you to deduct more depreciation earlier in the recovery period than you could deduct using a straight line method (same deduction each year). H&r block online taxes Claiming the correct amount of depreciation. H&r block online taxes   You should claim the correct amount of depreciation each tax year. H&r block online taxes If you did not claim all the depreciation you were entitled to deduct, you must still reduce your basis in the property by the full amount of depreciation that you could have deducted. H&r block online taxes   If you deducted an incorrect amount of depreciation for property in any year, you may be able to make a correction by filing Form 1040X, Amended U. H&r block online taxes S Individual Income Tax Return. H&r block online taxes If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amount of depreciation. H&r block online taxes See Claiming the correct amount of depreciation in chapter 2 of Publication 527 for more information. H&r block online taxes Changing your accounting method to deduct unclaimed depreciation. H&r block online taxes   To change your accounting method, you generally must file Form 3115, Application for Change in Accounting Method, to get the consent of the IRS. H&r block online taxes In some instances, that consent is automatic. H&r block online taxes For more information, see chapter 1 of Publication 946. H&r block online taxes Land. H&r block online taxes   You cannot depreciate the cost of land because land generally does not wear out, become obsolete, or get used up. H&r block online taxes The costs of clearing, grading, planting, and landscaping are usually all part of the cost of land and cannot be depreciated. H&r block online taxes More information. H&r block online taxes   See Publication 527 for more information about depreciating rental property and see Publication 946 for more information about depreciation. H&r block online taxes Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. H&r block online taxes You must consider these rules in the order shown below. H&r block online taxes At-risk rules. H&r block online taxes These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. H&r block online taxes This applies only if the real property was placed in service after 1986. H&r block online taxes Passive activity limits. H&r block online taxes Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. H&r block online taxes However, there are exceptions. H&r block online taxes At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. H&r block online taxes Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. H&r block online taxes In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. H&r block online taxes You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. H&r block online taxes See Publication 925 for more information. H&r block online taxes Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. H&r block online taxes For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. H&r block online taxes Limits on passive activity deductions and credits. H&r block online taxes    Deductions or losses from passive activities are limited. H&r block online taxes You generally cannot offset income, other than passive income, with losses from passive activities. H&r block online taxes Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. H&r block online taxes Any excess loss or credit is carried forward to the next tax year. H&r block online taxes   For a detailed discussion of these rules, see Publication 925. H&r block online taxes    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. H&r block online taxes Real estate professionals. H&r block online taxes   Rental activities in which you materially participated during the year are not passive activities if, for that year, you were a real estate professional. H&r block online taxes For a detailed discussion of the requirements, see Publication 527. H&r block online taxes For a detailed discussion of material participation, see Publication 925. H&r block online taxes Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. H&r block online taxes Instead, follow the rules explained in Personal Use of Dwelling Unit (Including Vacation Home), earlier. H&r block online taxes Exception for Rental Real Estate Activities With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. H&r block online taxes This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. H&r block online taxes Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. H&r block online taxes Active participation. H&r block online taxes   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. H&r block online taxes Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions. H&r block online taxes Maximum special allowance. H&r block online taxes   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. H&r block online taxes   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. H&r block online taxes If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. H&r block online taxes   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. H&r block online taxes More information. H&r block online taxes   See Publication 925 for more information on the passive loss limits, including information on the treatment of unused disallowed passive losses and credits and the treatment of gains and losses realized on the disposition of a passive activity. H&r block online taxes How To Report Rental Income and Expenses The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). H&r block online taxes However, do not use that schedule to report a not-for-profit activity. H&r block online taxes See Not Rented for Profit, earlier. H&r block online taxes Providing substantial services. H&r block online taxes   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business (Sole Proprietorship). H&r block online taxes Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. H&r block online taxes For information, see Publication 334, Tax Guide for Small Business. H&r block online taxes You also may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. H&r block online taxes   Use Form 1065, U. H&r block online taxes S. H&r block online taxes Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). H&r block online taxes Qualified joint venture. H&r block online taxes   If you and your spouse each materially participate as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. H&r block online taxes This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. H&r block online taxes For more information, see Publication 527. H&r block online taxes Form 1098, Mortgage Interest Statement. H&r block online taxes    If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098, or similar statement showing the interest you paid for the year. H&r block online taxes If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. H&r block online taxes Attach a statement to your return showing the name and address of the other person. H&r block online taxes In the left margin of Schedule E, next to line 13, enter “See attached. H&r block online taxes ” Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. H&r block online taxes , you normally report your rental income and expenses on Schedule E, Part I. H&r block online taxes List your total income, expenses, and depreciation for each rental property. H&r block online taxes Be sure to enter the number of fair rental and personal use days on line 2. H&r block online taxes If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. H&r block online taxes Complete lines 1 and 2 for each property. H&r block online taxes However, fill in lines 23a through 26 on only one Schedule E. H&r block online taxes On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. H&r block online taxes To find out if you need to attach Form 4562, see Form 4562, in chapter 3 of Publication 527. H&r block online taxes If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. H&r block online taxes Form 6198, At-Risk Limitations. H&r block online taxes See At-Risk Rules , earlier. H&r block online taxes Also see Publication 925. H&r block online taxes Form 8582, Passive Activity Loss Limitations. H&r block online taxes See Passive Activity Limits , earlier. H&r block online taxes Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. H&r block online taxes If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. H&r block online taxes Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). H&r block online taxes Worksheet 9-1. H&r block online taxes Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Use this worksheet only if you answer “yes” to all of the following questions. H&r block online taxes Did you use the dwelling unit as a home this year? (See Dwelling Unit Used as a Home . H&r block online taxes ) Did you rent the dwelling unit at a fair rental price 15 days or more this year? Is the total of your rental expenses and depreciation more than your rental income? PART I. H&r block online taxes Rental Use Percentage A. H&r block online taxes Total days available for rent at fair rental price A. H&r block online taxes       B. H&r block online taxes Total days available for rent (line A) but not rented B. H&r block online taxes       C. H&r block online taxes Total days of rental use. H&r block online taxes Subtract line B from line A C. H&r block online taxes       D. H&r block online taxes Total days of personal use (including days rented at less than fair rental price) D. H&r block online taxes       E. H&r block online taxes Total days of rental and personal use. H&r block online taxes Add lines C and D E. H&r block online taxes       F. H&r block online taxes Percentage of expenses allowed for rental. H&r block online taxes Divide line C by line E     F. H&r block online taxes   PART II. H&r block online taxes Allowable Rental Expenses 1. H&r block online taxes Enter rents received 1. H&r block online taxes   2a. H&r block online taxes Enter the rental portion of deductible home mortgage interest and qualified mortgage insurance premiums (see instructions) 2a. H&r block online taxes       b. H&r block online taxes Enter the rental portion of real estate taxes b. H&r block online taxes       c. H&r block online taxes Enter the rental portion of deductible casualty and theft losses (see instructions) c. H&r block online taxes       d. H&r block online taxes Enter direct rental expenses (see instructions) d. H&r block online taxes       e. H&r block online taxes Fully deductible rental expenses. H&r block online taxes Add lines 2a–2d. H&r block online taxes Enter here and  on the appropriate lines on Schedule E (see instructions) 2e. H&r block online taxes   3. H&r block online taxes Subtract line 2e from line 1. H&r block online taxes If zero or less, enter -0- 3. H&r block online taxes   4a. H&r block online taxes Enter the rental portion of expenses directly related to operating or maintaining  the dwelling unit (such as repairs, insurance, and utilities) 4a. H&r block online taxes       b. H&r block online taxes Enter the rental portion of excess mortgage interest and qualified mortgage insurance premiums (see instructions) b. H&r block online taxes       c. H&r block online taxes Carryover of operating expenses from 2012 worksheet c. H&r block online taxes       d. H&r block online taxes Add lines 4a–4c d. H&r block online taxes       e. H&r block online taxes Allowable expenses. H&r block online taxes Enter the smaller of line 3 or line 4d (see instructions) 4e. H&r block online taxes   5. H&r block online taxes Subtract line 4e from line 3. H&r block online taxes If zero or less, enter -0- 5. H&r block online taxes   6a. H&r block online taxes Enter the rental portion of excess casualty and theft losses (see instructions) 6a. H&r block online taxes       b. H&r block online taxes Enter the rental portion of depreciation of the dwelling unit b. H&r block online taxes       c. H&r block online taxes Carryover of excess casualty losses and depreciation from 2012 worksheet c. H&r block online taxes       d. H&r block online taxes Add lines 6a–6c d. H&r block online taxes       e. H&r block online taxes Allowable excess casualty and theft losses and depreciation. H&r block online taxes Enter the smaller of  line 5 or line 6d (see instructions) 6e. H&r block online taxes   PART III. H&r block online taxes Carryover of Unallowed Expenses to Next Year 7a. H&r block online taxes Operating expenses to be carried over to next year. H&r block online taxes Subtract line 4e from line 4d 7a. H&r block online taxes   b. H&r block online taxes Excess casualty and theft losses and depreciation to be carried over to next year. H&r block online taxes  Subtract line 6e from line 6d b. H&r block online taxes   Worksheet 9-1 Instructions. H&r block online taxes Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Caution. H&r block online taxes Use the percentage determined in Part I, line F, to figure the rental portions to enter on lines 2a–2c, 4a–4b, and 6a–6b of  Part II. H&r block online taxes Line 2a. H&r block online taxes Figure the mortgage interest on the dwelling unit that you could deduct on Schedule A as if you had not rented the unit. H&r block online taxes Do not include interest on a loan that did not benefit the dwelling unit. H&r block online taxes For example, do not include interest on a home equity loan used to pay off credit cards or other personal loans, buy a car, or pay college tuition. H&r block online taxes Include interest on a loan used to buy, build, or improve the dwelling unit, or to refinance such a loan. H&r block online taxes Include the rental portion of this interest in the total you enter on line 2a of the worksheet. H&r block online taxes   Figure the qualified mortgage insurance premiums on the dwelling unit that you could deduct on line 13 of Schedule A as if you had not rented the unit. H&r block online taxes See the Schedule A instructions. H&r block online taxes However, figure your adjusted gross income (Form 1040, line 38) without your rental income and expenses from the dwelling unit. H&r block online taxes See Line 4b to deduct the part of the qualified mortgage insurance premiums not allowed because of the adjusted gross income limit. H&r block online taxes Include the rental portion of the amount from Schedule A, line 13, in the total you enter on line 2a of the worksheet. H&r block online taxes   Note. H&r block online taxes Do not file this Schedule A or use it to figure the amount to deduct on line 13 of that schedule. H&r block online taxes Instead, figure the personal portion on a separate Schedule A. H&r block online taxes If you have deducted mortgage interest or qualified mortgage insurance premiums on the dwelling unit on other forms, such as Schedule C or F, remember to reduce your Schedule A deduction by that amount. H&r block online taxes           Line 2c. H&r block online taxes Figure the casualty and theft losses related to the dwelling unit that you could deduct on Schedule A as if you had not rented the dwelling unit. H&r block online taxes To do this, complete Section A of Form 4684, Casualties and Thefts, treating the losses as personal losses. H&r block online taxes If any of the loss is due to a federally declared disaster, see the Instructions for Form 4684. H&r block online taxes On Form 4684, line 17, enter 10% of your adjusted gross income figured without your rental income and expenses from the dwelling unit. H&r block online taxes Enter the rental portion of the result from Form 4684, line 18, on line 2c of this worksheet. H&r block online taxes   Note. H&r block online taxes Do not file this Form 4684 or use it to figure your personal losses on Schedule A. H&r block online taxes Instead, figure the personal portion on a separate Form 4684. H&r block online taxes           Line 2d. H&r block online taxes Enter the total of your rental expenses that are directly related only to the rental activity. H&r block online taxes These include interest on loans used for rental activities other than to buy, build, or improve the dwelling unit. H&r block online taxes Also include rental agency fees, advertising, office supplies, and depreciation on office equipment used in your rental activity. H&r block online taxes           Line 2e. H&r block online taxes You can deduct the amounts on lines 2a, 2b, 2c, and 2d as rental expenses on Schedule E even if your rental expenses are more than your rental income. H&r block online taxes Enter the amounts on lines 2a, 2b, 2c, and 2d on the appropriate lines of Schedule E. H&r block online taxes           Line 4b. H&r block online taxes On line 2a, you entered the rental portion of the mortgage interest and qualified mortgage insurance premiums you could deduct on Schedule A if you had not rented the dwelling unit. H&r block online taxes If you had additional mortgage interest and qualified mortgage insurance premiums that would not be deductible on Schedule A because of limits imposed on them, enter on line 4b of this worksheet the rental portion of those excess amounts. H&r block online taxes Do not include interest on a loan that did not benefit the dwelling unit (as explained in the line 2a instructions). H&r block online taxes           Line 4e. H&r block online taxes You can deduct the amounts on lines 4a, 4b, and 4c as rental expenses on Schedule E only to the extent they are not more than the amount on line 4e. H&r block online taxes *           Line 6a. H&r block online taxes To find the rental portion of excess casualty and theft losses, use the Form 4684 you prepared for line 2c of this worksheet. H&r block online taxes   A. H&r block online taxes Enter the amount from Form 4684, line 10       B. H&r block online taxes Enter the rental portion of line A       C. H&r block online taxes Enter the amount from line 2c of this worksheet       D. H&r block online taxes Subtract line C from line B. H&r block online taxes Enter the result here and on line 6a of this worksheet               Line 6e. H&r block online taxes You can deduct the amounts on lines 6a, 6b, and 6c as rental expenses on Schedule E only to the extent they are not more than the amount on line 6e. H&r block online taxes * *Allocating the limited deduction. H&r block online taxes If you cannot deduct all of the amount on line 4d or 6d this year, you can allocate the allowable deduction in any way you wish among the expenses included on line 4d or 6d. H&r block online taxes Enter the amount you allocate to each expense on the appropriate line of Schedule E, Part I. H&r block online taxes Prev  Up  Next   Home   More Online Publications