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How To File Tax Extention

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How To File Tax Extention

How to file tax extention Publication 587 - Main Content Table of Contents Qualifying for a DeductionExclusive Use Regular Use Trade or Business Use Principal Place of Business Place To Meet Patients, Clients, or Customers Separate Structure Figuring the DeductionUsing Actual Expenses Using the Simplified Method Daycare Facility Standard meal and snack rates. How to file tax extention Sale or Exchange of Your HomeGain on Sale Depreciation Basis Adjustment Reporting the Sale More Information Business Furniture and EquipmentListed Property Property Bought for Business Use Personal Property Converted to Business Use Recordkeeping Where To DeductSelf-Employed Persons Employees Partners How To Get Tax HelpLow Income Taxpayer Clinics Worksheet To Figure the Deduction for Business Use of Your HomeInstructions for the Worksheet Worksheets To Figure the Deduction for Business Use of Your Home (Simplified Method) Instructions for the Simplified Method Worksheet Instructions for the Daycare Facility Worksheet Instructions for the Area Adjustment Worksheet Qualifying for a Deduction Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. How to file tax extention However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. How to file tax extention Even then, the deductible amount of these types of expenses may be limited. How to file tax extention Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. How to file tax extention To qualify to deduct expenses for business use of your home, you must use part of your home: Exclusively and regularly as your principal place of business (defined later), Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, In the case of a separate structure which is not attached to your home, in connection with your trade or business, On a regular basis for certain storage use (see Storage of inventory or product samples , later), For rental use (see Publication 527), or As a daycare facility (see Daycare Facility , later). How to file tax extention Additional tests for employee use. How to file tax extention   If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. How to file tax extention You must meet the tests discussed earlier plus: Your business use must be for the convenience of your employer, and You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer. How to file tax extention If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. How to file tax extention Exclusive Use To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. How to file tax extention The area used for business can be a room or other separately identifiable space. How to file tax extention The space does not need to be marked off by a permanent partition. How to file tax extention You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. How to file tax extention Example. How to file tax extention You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. How to file tax extention Your family also uses the den for recreation. How to file tax extention The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. How to file tax extention Exceptions to Exclusive Use You do not have to meet the exclusive use test if either of the following applies. How to file tax extention You use part of your home for the storage of inventory or product samples (discussed next). How to file tax extention You use part of your home as a daycare facility, discussed later under Daycare Facility . How to file tax extention Note. How to file tax extention With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. How to file tax extention Storage of inventory or product samples. How to file tax extention    If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. How to file tax extention However, you must meet all the following tests. How to file tax extention You sell products at wholesale or retail as your trade or business. How to file tax extention You keep the inventory or product samples in your home for use in your trade or business. How to file tax extention Your home is the only fixed location of your trade or business. How to file tax extention You use the storage space on a regular basis. How to file tax extention The space you use is a separately identifiable space suitable for storage. How to file tax extention Example. How to file tax extention Your home is the only fixed location of your business of selling mechanics' tools at retail. How to file tax extention You regularly use half of your basement for storage of inventory and product samples. How to file tax extention You sometimes use the area for personal purposes. How to file tax extention The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. How to file tax extention Regular Use To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. How to file tax extention Incidental or occasional business use is not regular use. How to file tax extention You must consider all facts and circumstances in determining whether your use is on a regular basis. How to file tax extention Trade or Business Use To qualify under the trade-or-business-use test, you must use part of your home in connection with a trade or business. How to file tax extention If you use your home for a profit-seeking activity that is not a trade or business, you cannot take a deduction for its business use. How to file tax extention Example. How to file tax extention You use part of your home exclusively and regularly to read financial periodicals and reports, clip bond coupons, and carry out similar activities related to your own investments. How to file tax extention You do not make investments as a broker or dealer. How to file tax extention So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. How to file tax extention Principal Place of Business You can have more than one business location, including your home, for a single trade or business. How to file tax extention To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. How to file tax extention To determine whether your home is your principal place of business, you must consider: The relative importance of the activities performed at each place where you conduct business, and The amount of time spent at each place where you conduct business. How to file tax extention Your home office will qualify as your principal place of business if you meet the following requirements. How to file tax extention You use it exclusively and regularly for administrative or management activities of your trade or business. How to file tax extention You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. How to file tax extention If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. How to file tax extention However, see the later discussions under Place To Meet Patients, Clients, or Customers and Separate Structure for other ways to qualify to deduct home office expenses. How to file tax extention Administrative or management activities. How to file tax extention   There are many activities that are administrative or managerial in nature. How to file tax extention The following are a few examples. How to file tax extention Billing customers, clients, or patients. How to file tax extention Keeping books and records. How to file tax extention Ordering supplies. How to file tax extention Setting up appointments. How to file tax extention Forwarding orders or writing reports. How to file tax extention Administrative or management activities performed at other locations. How to file tax extention   The following activities performed by you or others will not disqualify your home office from being your principal place of business. How to file tax extention You have others conduct your administrative or management activities at locations other than your home. How to file tax extention (For example, another company does your billing from its place of business. How to file tax extention ) You conduct administrative or management activities at places that are not fixed locations of your business, such as in a car or a hotel room. How to file tax extention You occasionally conduct minimal administrative or management activities at a fixed location outside your home. How to file tax extention You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. How to file tax extention (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home. How to file tax extention ) You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. How to file tax extention Please click here for the text description of the image. How to file tax extention Can you deduct business use of the home expenses? Example 1. How to file tax extention John is a self-employed plumber. How to file tax extention Most of John's time is spent at customers' homes and offices installing and repairing plumbing. How to file tax extention He has a small office in his home that he uses exclusively and regularly for the administrative or management activities of his business, such as phoning customers, ordering supplies, and keeping his books. How to file tax extention John writes up estimates and records of work completed at his customers' premises. How to file tax extention He does not conduct any substantial administrative or management activities at any fixed location other than his home office. How to file tax extention John does not do his own billing. How to file tax extention He uses a local bookkeeping service to bill his customers. How to file tax extention John's home office qualifies as his principal place of business for deducting expenses for its use. How to file tax extention He uses the home office for the administrative or managerial activities of his plumbing business and he has no other fixed location where he conducts these administrative or managerial activities. How to file tax extention His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. How to file tax extention He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. How to file tax extention Example 2. How to file tax extention Pamela is a self-employed sales representative for several different product lines. How to file tax extention She has an office in her home that she uses exclusively and regularly to set up appointments and write up orders and other reports for the companies whose products she sells. How to file tax extention She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. How to file tax extention Pamela's business is selling products to customers at various locations throughout her territory. How to file tax extention To make these sales, she regularly visits customers to explain the available products and take orders. How to file tax extention Pamela's home office qualifies as her principal place of business for deducting expenses for its use. How to file tax extention She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. How to file tax extention The fact that she conducts some administrative or management activities in her hotel room (not a fixed location) does not disqualify her home office from being her principal place of business. How to file tax extention She meets all the qualifications, including principal place of business, so she can deduct expenses (subject to certain limitations, explained later) for the business use of her home. How to file tax extention Example 3. How to file tax extention Paul is a self-employed anesthesiologist. How to file tax extention He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. How to file tax extention One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. How to file tax extention Paul very rarely uses the office the hospital provides. How to file tax extention He uses a room in his home that he has converted to an office. How to file tax extention He uses this room exclusively and regularly to conduct all the following activities. How to file tax extention Contacting patients, surgeons, and hospitals regarding scheduling. How to file tax extention Preparing for treatments and presentations. How to file tax extention Maintaining billing records and patient logs. How to file tax extention Satisfying continuing medical education requirements. How to file tax extention Reading medical journals and books. How to file tax extention Paul's home office qualifies as his principal place of business for deducting expenses for its use. How to file tax extention He conducts administrative or management activities for his business as an anesthesiologist there and he has no other fixed location where he conducts substantial administrative or management activities for this business. How to file tax extention His choice to use his home office instead of the one provided by the hospital does not disqualify his home office from being his principal place of business. How to file tax extention His performance of substantial nonadministrative or nonmanagement activities at fixed locations outside his home also does not disqualify his home office from being his principal place of business. How to file tax extention He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. How to file tax extention Example 4. How to file tax extention Kathleen is employed as a teacher. How to file tax extention She is required to teach and meet with students at the school and to grade papers and tests. How to file tax extention The school provides her with a small office where she can work on her lesson plans, grade papers and tests, and meet with parents and students. How to file tax extention The school does not require her to work at home. How to file tax extention Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. How to file tax extention She uses this home office exclusively and regularly for the administrative duties of her teaching job. How to file tax extention Kathleen must meet the convenience-of-the-employer test, even if her home qualifies as her principal place of business for deducting expenses for its use. How to file tax extention Her employer provides her with an office and does not require her to work at home, so she does not meet the convenience-of-the-employer test and cannot claim a deduction for the business use of her home. How to file tax extention More Than One Trade or Business The same home office can be the principal place of business for two or more separate business activities. How to file tax extention Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. How to file tax extention You must use the home office exclusively and regularly for one or more of the following purposes. How to file tax extention As the principal place of business for one or more of your trades or businesses. How to file tax extention As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses. How to file tax extention If your home office is a separate structure, in connection with one or more of your trades or businesses. How to file tax extention You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i. How to file tax extention e. How to file tax extention , personal) activities. How to file tax extention If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. How to file tax extention See Rental to employer , later, if you rent part of your home to your employer. How to file tax extention Example. How to file tax extention Tracy White is employed as a teacher. How to file tax extention Her principal place of work is the school, which provides her office space to do her school work. How to file tax extention She also has a mail order jewelry business. How to file tax extention All her work in the jewelry business is done in her home office and the office is used exclusively for that business. How to file tax extention If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. How to file tax extention If Tracy also uses the office for work related to her teaching, she must meet the exclusive use test for both businesses to qualify for the deduction. How to file tax extention As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. How to file tax extention She does not meet this test for her work as a teacher, so she cannot claim a deduction for the business use of her home for either activity. How to file tax extention Place To Meet Patients, Clients, or Customers If you meet or deal with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business if you meet both the following tests. How to file tax extention You physically meet with patients, clients, or customers on your premises. How to file tax extention Their use of your home is substantial and integral to the conduct of your business. How to file tax extention Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. How to file tax extention Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. How to file tax extention The part of your home you use exclusively and regularly to meet patients, clients, or customers does not have to be your principal place of business. How to file tax extention Example. How to file tax extention June Quill, a self-employed attorney, works 3 days a week in her city office. How to file tax extention She works 2 days a week in her home office used only for business. How to file tax extention She regularly meets clients there. How to file tax extention Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. How to file tax extention Separate Structure You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business. How to file tax extention The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. How to file tax extention Example. How to file tax extention John Berry operates a floral shop in town. How to file tax extention He grows the plants for his shop in a greenhouse behind his home. How to file tax extention He uses the greenhouse exclusively and regularly in his business, so he can deduct the expenses for its use, subject to certain limitations, explained later. How to file tax extention Figuring the Deduction After you determine that you meet the tests under Qualifying for a Deduction , you can begin to figure how much you can deduct. How to file tax extention When figuring the amount you can deduct for the business use of your home, you will use either your actual expenses or a simplified method. How to file tax extention Electing to use the simplified method. How to file tax extention   The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. How to file tax extention You choose whether or not to figure your deduction using the simplified method each taxable year. How to file tax extention See Using the Simplified Method , later. How to file tax extention Rental to employer. How to file tax extention   If you rent part of your home to your employer and you use the rented part in performing services for your employer as an employee, your deduction for the business use of your home is limited. How to file tax extention You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. How to file tax extention However, you cannot deduct otherwise allowable trade or business expenses, business casualty losses, or depreciation related to the use of your home (or use the simplified method as an alternative to deducting these actual expenses) in performing services for your employer. How to file tax extention Using Actual Expenses If you do not or cannot elect to use the simplified method for a home, you will figure your deduction for that home using your actual expenses. How to file tax extention You will also need to figure the percentage of your home used for business and the limit on the deduction. How to file tax extention If you are an employee or a partner, or you use your home in your farming business and you file Schedule F (Form 1040), you can use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to help you figure your deduction. How to file tax extention If you use your home in a trade or business and you file Schedule C (Form 1040), you will use Form 8829 to figure your deduction. How to file tax extention Part-year use. How to file tax extention   You cannot deduct expenses for the business use of your home incurred during any part of the year you did not use your home for business purposes. How to file tax extention For example, if you begin using part of your home for business on July 1, and you meet all the tests from that date until the end of the year, consider only your expenses for the last half of the year in figuring your allowable deduction. How to file tax extention Expenses related to tax-exempt income. How to file tax extention   Generally, you cannot deduct expenses that are related to tax-exempt allowances. How to file tax extention However, if you receive a tax-exempt parsonage allowance or a tax-exempt military allowance, your expenses for mortgage interest and real estate taxes are deductible under the normal rules. How to file tax extention No deduction is allowed for other expenses related to the tax-exempt allowance. How to file tax extention   If your housing is provided free of charge and the value of the housing is tax exempt, you cannot deduct the rental value of any portion of the housing. How to file tax extention Actual Expenses You must divide the expenses of operating your home between personal and business use. How to file tax extention The part of a home operating expense you can use to figure your deduction depends on both of the following. How to file tax extention Whether the expense is direct, indirect, or unrelated. How to file tax extention The percentage of your home used for business. How to file tax extention Table 1, next, describes the types of expenses you may have and the extent to which they are deductible. How to file tax extention Table 1. How to file tax extention Types of Expenses  Expense  Description  Deductibility Direct Expenses only for  the business part  of your home. How to file tax extention Deductible in full. How to file tax extention *   Examples:  Painting or repairs  only in the area  used for business. How to file tax extention Exception: May be only partially  deductible in a daycare facility. How to file tax extention See Daycare Facility , later. How to file tax extention Indirect Expenses for  keeping up and running your  entire home. How to file tax extention Deductible based on the percentage of your home used for business. How to file tax extention *   Examples:  Insurance, utilities, and  general repairs. How to file tax extention   Unrelated Expenses only for  the parts of your  home not used  for business. How to file tax extention Not deductible. How to file tax extention   Examples:  Lawn care or painting  a room not used  for business. How to file tax extention   *Subject to the deduction limit, discussed later. How to file tax extention Form 8829 and the Worksheet To Figure the Deduction for Business Use of Your Home have separate columns for direct and indirect expenses. How to file tax extention Certain expenses are deductible whether or not you use your home for business. How to file tax extention If you qualify to deduct business use of the home expenses, use the business percentage of these expenses to figure your total business use of the home deduction. How to file tax extention These expenses include the following. How to file tax extention Real estate taxes. How to file tax extention Qualified mortgage insurance premiums. How to file tax extention Deductible mortgage interest. How to file tax extention Casualty losses. How to file tax extention Other expenses are deductible only if you use your home for business. How to file tax extention You can use the business percentage of these expenses to figure your total business use of the home deduction. How to file tax extention These expenses generally include (but are not limited to) the following. How to file tax extention Depreciation (covered under Depreciating Your Home , later). How to file tax extention Insurance. How to file tax extention Rent paid for the use of property you do not own but use in your trade or business. How to file tax extention Repairs. How to file tax extention Security system. How to file tax extention Utilities and services. How to file tax extention Real estate taxes. How to file tax extention   To figure the business part of your real estate taxes, multiply the real estate taxes paid by the percentage of your home used for business. How to file tax extention   For more information on the deduction for real estate taxes, see Publication 530, Tax Information for Homeowners. How to file tax extention Deductible mortgage interest. How to file tax extention   To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. How to file tax extention You can include interest on a second mortgage in this computation. How to file tax extention If your total mortgage debt is more than $1,000,000 or your home equity debt is more than $100,000, your deduction may be limited. How to file tax extention For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction. How to file tax extention Qualified mortgage insurance premiums. How to file tax extention   To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. How to file tax extention You can include premiums for insurance on a second mortgage in this computation. How to file tax extention If your adjusted gross income is more than $100,000 ($50,000 if your filing status is married filing separately), your deduction may be limited. How to file tax extention For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040). How to file tax extention Casualty losses. How to file tax extention    If you have a casualty loss on your home that you use for business, treat the casualty loss as a direct expense, an indirect expense, or an unrelated expense, depending on the property affected. How to file tax extention A direct expense is the loss on the portion of the property you use only in your business. How to file tax extention Use the entire loss to figure the business use of the home deduction. How to file tax extention An indirect expense is the loss on property you use for both business and personal purposes. How to file tax extention Use only the business portion to figure the deduction. How to file tax extention An unrelated expense is the loss on property you do not use in your business. How to file tax extention Do not use any of the loss to figure the deduction. How to file tax extention Example. How to file tax extention You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. How to file tax extention A storm damages your roof. How to file tax extention This is an indirect expense as the roof is part of the whole house and is considered to be used both for business and personal purposes. How to file tax extention You would complete Form 4684, Casualties and Thefts, to report your loss. How to file tax extention You complete both section A (Personal Use Property) and section B (Business and Income-Producing Property) as your home is used both for business and personal purposes. How to file tax extention Since you use 90% of your home for personal purposes, use 90% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 2, 3, 5, and 6 of Form 4684. How to file tax extention Since you use 10% of your home for business purposes, use 10% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 20, 21, 23, and 24 of Form 4684. How to file tax extention Forms and worksheets to use. How to file tax extention   If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. How to file tax extention If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. How to file tax extention You will also need to get Form 4684. How to file tax extention More information. How to file tax extention   For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts. How to file tax extention Insurance. How to file tax extention   You can deduct the cost of insurance that covers the business part of your home. How to file tax extention However, if your insurance premium gives you coverage for a period that extends past the end of your tax year, you can deduct only the business percentage of the part of the premium that gives you coverage for your tax year. How to file tax extention You can deduct the business percentage of the part that applies to the following year in that year. How to file tax extention Rent. How to file tax extention   If you rent the home you occupy and meet the requirements for business use of the home, you can deduct part of the rent you pay. How to file tax extention To figure your deduction, multiply your rent payments by the percentage of your home used for business. How to file tax extention   If you own your home, you cannot deduct the fair rental value of your home. How to file tax extention However, see Depreciating Your Home , later. How to file tax extention Repairs. How to file tax extention   The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. How to file tax extention For example, a furnace repair benefits the entire home. How to file tax extention If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. How to file tax extention   Repairs keep your home in good working order over its useful life. How to file tax extention Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. How to file tax extention However, repairs are sometimes treated as a permanent improvement and are not deductible. How to file tax extention See Permanent improvements , later, under Depreciating Your Home. How to file tax extention Security system. How to file tax extention   If you install a security system that protects all the doors and windows in your home, you can deduct the business part of the expenses you incur to maintain and monitor the system. How to file tax extention You also can take a depreciation deduction for the part of the cost of the security system relating to the business use of your home. How to file tax extention Utilities and services. How to file tax extention   Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. How to file tax extention However, if you use part of your home for business, you can deduct the business part of these expenses. How to file tax extention Generally, the business percentage for utilities is the same as the percentage of your home used for business. How to file tax extention Telephone. How to file tax extention   The basic local telephone service charge, including taxes, for the first telephone line into your home (i. How to file tax extention e. How to file tax extention , landline) is a nondeductible personal expense. How to file tax extention However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. How to file tax extention Do not include these expenses as a cost of using your home for business. How to file tax extention Deduct these charges separately on the appropriate form or schedule. How to file tax extention For example, if you file Schedule C (Form 1040), deduct these expenses on line 25, Utilities (instead of line 30, Expenses for business use of your home). How to file tax extention Depreciating Your Home If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. How to file tax extention Depreciation is an allowance for the wear and tear on the part of your home used for business. How to file tax extention You cannot depreciate the cost or value of the land. How to file tax extention You recover its cost when you sell or otherwise dispose of the property. How to file tax extention Before you figure your depreciation deduction, you need to know the following information. How to file tax extention The month and year you started using your home for business. How to file tax extention The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. How to file tax extention The cost of any improvements before and after you began using the property for business. How to file tax extention The percentage of your home used for business. How to file tax extention See Business Percentage , later. How to file tax extention Adjusted basis defined. How to file tax extention   The adjusted basis of your home is generally its cost, plus the cost of any permanent improvements you made to it, minus any casualty losses or depreciation deducted in earlier tax years. How to file tax extention For a discussion of adjusted basis, see Publication 551. How to file tax extention Permanent improvements. How to file tax extention   A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. How to file tax extention Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. How to file tax extention    You must carefully distinguish between repairs and improvements. How to file tax extention See Repairs , earlier, under Actual Expenses. How to file tax extention You also must keep accurate records of these expenses. How to file tax extention These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. How to file tax extention However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. How to file tax extention Example. How to file tax extention You buy an older home and fix up two rooms as a beauty salon. How to file tax extention You patch the plaster on the ceilings and walls, paint, repair the floor, install an outside door, and install new wiring, plumbing, and other equipment. How to file tax extention Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. How to file tax extention However, because the work gives your property a new use, the entire remodeling job is a permanent improvement and its cost is added to the basis of the property. How to file tax extention You cannot deduct any portion of it as a repair expense. How to file tax extention Adjusting for depreciation deducted in earlier years. How to file tax extention   Decrease the basis of your property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you properly selected. How to file tax extention If you deducted less depreciation than you could have under the method you selected, decrease the basis by the amount you could have deducted under that method. How to file tax extention If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. How to file tax extention   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted, plus the part of the excess depreciation you deducted that actually decreased your tax liability for any year. How to file tax extention   If you deducted the incorrect amount of depreciation, see Publication 946. How to file tax extention Fair market value defined. How to file tax extention   The fair market value of your home is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. How to file tax extention Sales of similar property, on or about the date you begin using your home for business, may be helpful in determining the property's fair market value. How to file tax extention Figuring the depreciation deduction for the current year. How to file tax extention   If you began using your home for business before 2013, continue to use the same depreciation method you used in past tax years. How to file tax extention   If you began using your home for business for the first time in 2013, depreciate the business part as nonresidential real property under the modified accelerated cost recovery system (MACRS). How to file tax extention Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. How to file tax extention For more information on MACRS and other methods of depreciation, see Publication 946. How to file tax extention   To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). How to file tax extention The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. How to file tax extention The adjusted basis of your home (excluding land) on the date you began using your home for business. How to file tax extention The fair market value of your home (excluding land) on the date you began using your home for business. How to file tax extention Depreciation table. How to file tax extention   If 2013 was the first year you used your home for business, you can figure your 2013 depreciation for the business part of your home by using the appropriate percentage from the following table. How to file tax extention Table 2. How to file tax extention MACRS Percentage Table for 39-Year Nonresidential Real Property Month First Used for Business Percentage To Use 1 2. How to file tax extention 461% 2 2. How to file tax extention 247% 3 2. How to file tax extention 033% 4 1. How to file tax extention 819% 5 1. How to file tax extention 605% 6 1. How to file tax extention 391% 7 1. How to file tax extention 177% 8 0. How to file tax extention 963% 9 0. How to file tax extention 749% 10 0. How to file tax extention 535% 11 0. How to file tax extention 321% 12 0. How to file tax extention 107%   Multiply the depreciable basis of the business part of your home by the percentage from the table for the first month you use your home for business. How to file tax extention See Publication 946 for the percentages for the remaining tax years of the recovery period. How to file tax extention Example. How to file tax extention In May, George Miller began to use one room in his home exclusively and regularly to meet clients. How to file tax extention This room is 8% of the square footage of his home. How to file tax extention He bought the home in 2003 for $125,000. How to file tax extention He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. How to file tax extention In May, the house had a fair market value of $165,000. How to file tax extention He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. How to file tax extention The result is $9,200, his depreciable basis for the business part of the house. How to file tax extention George files his return based on the calendar year. How to file tax extention May is the 5th month of his tax year. How to file tax extention He multiplies his depreciable basis of $9,200 by 1. How to file tax extention 605% (. How to file tax extention 01605), the percentage from the table for the 5th month. How to file tax extention His depreciation deduction is $147. How to file tax extention 66. How to file tax extention Depreciating permanent improvements. How to file tax extention   Add the costs of permanent improvements made before you began using your home for business to the basis of your property. How to file tax extention Depreciate these costs as part of the cost of your home as explained earlier. How to file tax extention The costs of improvements made after you begin using your home for business (that affect the business part of your home, such as a new roof) are depreciated separately. How to file tax extention Multiply the cost of the improvement by the business-use percentage and depreciate the result over the recovery period that would apply to your home if you began using it for business at the same time as the improvement. How to file tax extention For improvements made this year, the recovery period is 39 years. How to file tax extention For the percentage to use for the first year, see Table 2, earlier. How to file tax extention For more information on recovery periods, see Publication 946. How to file tax extention Business Percentage To find the business percentage, compare the size of the part of your home that you use for business to your whole house. How to file tax extention Use the resulting percentage to figure the business part of the expenses for operating your entire home. How to file tax extention You can use any reasonable method to determine the business percentage. How to file tax extention The following are two commonly used methods for figuring the percentage. How to file tax extention Divide the area (length multiplied by the width) used for business by the total area of your home. How to file tax extention If the rooms in your home are all about the same size, you can divide the number of rooms used for business by the total number of rooms in your home. How to file tax extention Example 1. How to file tax extention Your office is 240 square feet (12 feet × 20 feet). How to file tax extention Your home is 1,200 square feet. How to file tax extention Your office is 20% (240 ÷ 1,200) of the total area of your home. How to file tax extention Your business percentage is 20%. How to file tax extention Example 2. How to file tax extention You use one room in your home for business. How to file tax extention Your home has 10 rooms, all about equal size. How to file tax extention Your office is 10% (1 ÷ 10) of the total area of your home. How to file tax extention Your business percentage is 10%. How to file tax extention Use lines 1-7 of Form 8829, or lines 1-3 on the Worksheet To Figure the Deduction for Business Use of Your Home (near the end of this publication) to figure your business percentage. How to file tax extention Deduction Limit If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. How to file tax extention If your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. How to file tax extention Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation of your home (with depreciation of your home taken last), that are allocable to the business, is limited to the gross income from the business use of your home minus the sum of the following. How to file tax extention The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). How to file tax extention These expenses are discussed in detail under Actual Expenses , earlier. How to file tax extention The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. How to file tax extention If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. How to file tax extention Carryover of unallowed expenses. How to file tax extention   If your deductions are greater than the current year's limit, you can carry over the excess to the next year in which you use actual expenses. How to file tax extention They are subject to the deduction limit for that year, whether or not you live in the same home during that year. How to file tax extention Figuring the deduction limit and carryover. How to file tax extention   If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. How to file tax extention If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. How to file tax extention Example. How to file tax extention You meet the requirements for deducting expenses for the business use of your home. How to file tax extention You use 20% of your home for business. How to file tax extention In 2013, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order. How to file tax extention    Gross income from business $6,000 Minus:   Deductible mortgage interest and real estate taxes (20%) 3,000 Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment) 2,000 Deduction limit $1,000 Minus other expenses allocable to business use of home:   Maintenance, insurance, and utilities (20%) 800 Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit) 200 Other expenses up to the deduction limit $1,000 Depreciation carryover to 2014 ($1,600 − $200) (subject to deduction limit in 2014) $1,400   You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). How to file tax extention You also can deduct all of your business expenses not related to the use of your home ($2,000). How to file tax extention Additionally, you can deduct all of the business part of your expenses for maintenance, insurance, and utilities, because the total ($800) is less than the $1,000 deduction limit. How to file tax extention Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. How to file tax extention You can carry over the $1,400 balance and add it to your depreciation for 2014, subject to your deduction limit in 2014. How to file tax extention More than one place of business. How to file tax extention   If part of the gross income from your trade or business is from the business use of part of your home and part is from a place other than your home, you must determine the part of your gross income from the business use of your home before you figure the deduction limit. How to file tax extention In making this determination, consider the time you spend at each location, the business investment in each location, and any other relevant facts and circumstances. How to file tax extention If your home office qualifies as your principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. How to file tax extention For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. How to file tax extention Using the Simplified Method The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. How to file tax extention In most cases, you will figure your deduction by multiplying $5, the prescribed rate, by the area of your home used for a qualified business use. How to file tax extention The area you use to figure your deduction is limited to 300 square feet. How to file tax extention See Simplified Amount , later, for information about figuring the amount of the deduction. How to file tax extention For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I. How to file tax extention R. How to file tax extention B. How to file tax extention 478, available at www. How to file tax extention irs. How to file tax extention gov/irb/2013-06_IRB/ar09. How to file tax extention html. How to file tax extention Actual expenses and depreciation of your home. How to file tax extention   If you elect to use the simplified method, you cannot deduct any actual expenses for the business except for business expenses that are not related to the use of the home. How to file tax extention You also cannot deduct any depreciation (including any additional first-year depreciation) or section 179 expense for the portion of the home that is used for a qualified business use. How to file tax extention The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. How to file tax extention If you figure your deduction for business use of the home using actual expenses in a subsequent year, you will have to use the appropriate optional depreciation table for MACRS to figure your depreciation. How to file tax extention More information. How to file tax extention   For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I. How to file tax extention R. How to file tax extention B. How to file tax extention 478, available at www. How to file tax extention irs. How to file tax extention gov/irb/2013-06_IRB/ar09. How to file tax extention html. How to file tax extention See Publication 946 for the optional depreciation tables Although you cannot deduct any depreciation or section 179 expense for the portion of your home used for a qualified business use, you may still claim depreciation or the section 179 expense deduction on other assets used in the business (for example, furniture and equipment). How to file tax extention Expenses deductible without regard to business use. How to file tax extention   When using the simplified method, treat as personal expenses those business expenses related to the use of the home that are deductible without regard to whether there is a qualified business use of the home. How to file tax extention These expenses include mortgage interest, real estate taxes, and casualty losses, subject to any limitations. How to file tax extention See Where To Deduct , later. How to file tax extention If you also rent part of your home, you must still allocate these expenses between rental use and personal use (for this purpose, personal use includes business use reported using the simplified method). How to file tax extention No deduction of carryover of actual expenses. How to file tax extention   If you used actual expenses to figure your deduction for business use of the home in a prior year and your deduction was limited, you cannot deduct the disallowed amount carried over from the prior year during a year you figure your deduction using the simplified method. How to file tax extention Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. How to file tax extention Electing the Simplified Method You choose whether or not to figure your deduction using the simplified method each taxable year. How to file tax extention Make the election for a home by using the simplified method to figure the deduction for the qualified business use of that home on a timely filed, original federal income tax return. How to file tax extention An election for a taxable year, once made, is irrevocable. How to file tax extention A change from using the simplified method in one year to actual expenses in a succeeding taxable year, or vice-versa, is not a change in method of accounting and does not require the consent of the Commissioner. How to file tax extention Shared use. How to file tax extention   If you share your home with someone else who also uses the home in a business that qualifies for this deduction, each of you make your own election. How to file tax extention More than one qualified business use. How to file tax extention   If you conduct more than one business that qualifies for this deduction in your home, your election to use the simplified method applies to all your qualified business uses of that home. How to file tax extention More than one home. How to file tax extention   If you used more than one home during the year (for example, you moved during the year), you can elect to use the simplified method for only one of the homes. How to file tax extention You must figure the deduction for any other home using actual expenses. How to file tax extention Simplified Amount Your deduction for the qualified business use of a home is the sum of each amount you figure for a separate qualified business use of your home. How to file tax extention To figure your deduction for the business use of a home using the simplified method, you will need to know the following information for each qualified business use of the home. How to file tax extention The allowable area of your home used in conducting the business. How to file tax extention If you did not conduct the business for the entire year in the home or the area changed during the year, you will need to know the allowable area you used and the number of days you conducted the business for each month. How to file tax extention The gross income from the business use of your home. How to file tax extention The amount of the business expenses that are not related to the use of your home. How to file tax extention If the qualified business use is for a daycare facility that uses space in your home on a regular (but not exclusive) basis, you will also need to know the percentage of time that part of your home is used for daycare. How to file tax extention To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these 3 steps. How to file tax extention Multiply the allowable area by $5 (or less than $5 if the qualified business use is for a daycare that uses space in your home on a regular, but not exclusive, basis). How to file tax extention See Allowable area and Space used regularly for daycare , later. How to file tax extention Subtract the expenses from the business that are not related to the use of the home from the gross income related to the business use of the home. How to file tax extention If these expenses are greater than the gross income from the business use of the home, then you cannot take a deduction for this business use of the home. How to file tax extention See Gross income limitation , later. How to file tax extention Take the smaller of the amounts from (1) and (2). How to file tax extention This is the amount you can deduct for this qualified business use of your home using the simplified method. How to file tax extention If you are an employee or a partner, or you use your home in your farming business and file Schedule F (Form 1040), you can use the Simplified Method Worksheet, near the end of this publication, to help you figure your deduction. How to file tax extention If you use your home in a trade or business and you file Schedule C (Form 1040), you will use the Simplified Method Worksheet in your Instructions for Schedule C to figure your deduction. How to file tax extention Allowable area. How to file tax extention   In most cases, the allowable area is the smaller of the actual area (in square feet) of your home used in conducting the business and 300 square feet. How to file tax extention Your allowable area may be smaller if you conducted the business as a qualified joint venture with your spouse, the area used by the business was shared with another qualified business use, you used the home for the business for only part of the year, or the area used by the business changed during the year. How to file tax extention You can use the Area Adjustment Worksheet (for simplified method), near the end of this publication, to help you figure your allowable area for a qualified business use. How to file tax extention Area used by a qualified joint venture. How to file tax extention   If the qualified business use of the home is also a qualified joint venture, you and your spouse will figure the deduction for the business use separately. How to file tax extention Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. How to file tax extention Then, each spouse will figure the allowable area separately. How to file tax extention For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. How to file tax extention Shared use. How to file tax extention   If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person. How to file tax extention You must allocate the shared space between you and the other person in a reasonable manner. How to file tax extention Example. How to file tax extention Kristin and Lindsey are roommates. How to file tax extention Kristin uses 300 square feet of their home for a qualified business use. How to file tax extention Lindsey uses 200 square feet of their home for a separate qualified business use. How to file tax extention The qualified business uses share 100 square feet. How to file tax extention In addition to the portion that they do not share, Kristin and Lindsey can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. How to file tax extention If divided evenly, Kristin could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. How to file tax extention More than one qualified business use. How to file tax extention   If you conduct more than one business qualifying for the deduction, you are limited to a maximum of 300 square feet for all of the businesses. How to file tax extention Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. How to file tax extention However, do not allocate more square feet to a qualified business use than you actually use for that business. How to file tax extention Rental use. How to file tax extention   The simplified method does not apply to rental use. How to file tax extention A rental use that qualifies for the deduction must be figured using actual expenses. How to file tax extention If the rental use and a qualified business use share the same area, you will have to allocate the actual area used between the two uses. How to file tax extention You cannot use the same area to figure a deduction for the qualified business use as you are using to figure the deduction for the rental use. How to file tax extention Part-year use or area changes. How to file tax extention   If your qualified business use was for a portion of the taxable year (for example, a seasonal business or a business that begins during the taxable year) or you changed the square footage of your qualified business use, your deduction is limited to the average monthly allowable square footage. How to file tax extention You calculate the average monthly allowable square footage by adding the amount of allowable square feet you used in each month and dividing the sum by 12. How to file tax extention When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. How to file tax extention Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. How to file tax extention Example 1. How to file tax extention Andy files his federal income tax return on a calendar year basis. How to file tax extention On July 20, he began using 420 square feet of his home for a qualified business use. How to file tax extention He continued to use the 420 square feet until the end of the year. How to file tax extention His average monthly allowable square footage is 125 square feet, which is figured using 300 square feet for each month August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 0 + 0 + 0 + 300 + 300 + 300 + 300 + 300)/12). How to file tax extention Example 2. How to file tax extention Amy files her federal income tax return on a calendar year basis. How to file tax extention On April 20, she began using 100 square feet of her home for a qualified business use. How to file tax extention On August 5, she expanded the area of her qualified use to 330 square feet. How to file tax extention Amy continued to use the 330 square feet until the end of the year. How to file tax extention Her average monthly allowable square footage is 150 square feet, which is figured using 100 square feet for May through July and 300 square feet for August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 100 + 100 +100 + 300 + 300 + 300 + 300 + 300)/12). How to file tax extention Gross income limitation. How to file tax extention   Your deduction for business use of the home is limited to an amount equal to the gross income derived from the qualified business use of the home reduced by the business deductions that are unrelated to the use of your home. How to file tax extention If the business deductions that are unrelated to the use of your home are greater than the gross income derived from the qualified business use of your home, then you cannot take a deduction for this qualified business use of your home. How to file tax extention Business expenses not related to use of the home. How to file tax extention   These expenses relate to the business activity in the home, but not to the use of the home itself. How to file tax extention You can still deduct business expenses that are unrelated to the use of the home. How to file tax extention See Where To Deduct , later. How to file tax extention Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. How to file tax extention Space used regularly for daycare. How to file tax extention   If you do not use the area of your home exclusively for daycare, you must reduce the prescribed rate (maximum $5 per square foot) before figuring your deduction. How to file tax extention The reduced rate will equal the prescribed rate times a fraction. How to file tax extention The numerator of the fraction is the number of hours that the space was used during the year for daycare and the denominator is the total number of hours during the year that the space was available for all uses. How to file tax extention You can use the Daycare Facility Worksheet (for simplified method), near the end of this publication, to help you figure the reduced rate. How to file tax extention    If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to reduce the prescribed rate or complete the Daycare Facility Worksheet. How to file tax extention Daycare Facility If you use space in your home on a regular basis for providing daycare, you may be able to claim a deduction for that part of your home even if you use the same space for nonbusiness purposes. How to file tax extention To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. How to file tax extention You must be in the trade or business of providing daycare for children, persons age 65 or older, or persons who are physically or mentally unable to care for themselves. How to file tax extention You must have applied for, been granted, or be exempt from having, a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law. How to file tax extention You do not meet this requirement if your application was rejected or your license or other authorization was revoked. How to file tax extention Figuring the deduction. How to file tax extention   If you elect to use the simplified method for your home, figure your deduction as described earlier in Using the Simplified Method under Figuring the Deduction. How to file tax extention    If you are figuring your deduction using actual expenses and you regularly use part of your home for daycare, figure what part is used for daycare, as explained in Business Percentage , earlier, under Figuring the Deduction. How to file tax extention If you also use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. How to file tax extention   If the use of part of your home as a daycare facility is regular, but not exclusive, you must figure the percentage of time that part of your home is used for daycare. How to file tax extention A room that is available for use throughout each business day and that you regularly use in your business is considered to be used for daycare throughout each business day. How to file tax extention You do not have to keep records to show the specific hours the area was used for business. How to file tax extention You can use the area occasionally for personal reasons. How to file tax extention However, a room you use only occasionally for business does not qualify for the deduction. How to file tax extention To find the percentage of time you actually use your home for business, compare the total time used for business to the total time that part of your home can be used for all purposes. How to file tax extention You can compare the hours of business use in a week with the number of hours in a week (168). How to file tax extention Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2013). How to file tax extention If you started or stopped using your home for daycare in 2013, you must prorate the number of hours based on the number of days the home was available for daycare. How to file tax extention Example 1. How to file tax extention Mary Lake used her basement to operate a daycare business for children. How to file tax extention She figures the business percentage of the basement as follows. How to file tax extention Square footage of the basement Square footage of her home = 1,600 3,200 = 50%           She used the basement for daycare an average of 12 hours a day, 5 days a week, for 50 weeks a year. How to file tax extention During the other 12 hours a day, the family could use the basement. How to file tax extention She figures the percentage of time the basement was used for daycare as follows. How to file tax extention Number of hours used for daycare (12 x 5 x 50) Total number of hours in the year (24 x 365) = 3,000 8,760 = 34. How to file tax extention 25%           Mary can deduct 34. How to file tax extention 25% of any direct expenses for the basement. How to file tax extention However, because her indirect expenses are for the entire house, she can deduct only 17. How to file tax extention 13% of the indirect expenses. How to file tax extention She figures the percentage for her indirect expenses as follows. How to file tax extention Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 34. How to file tax extention 25% Percentage for indirect expenses 17. How to file tax extention 13% Mary completes Form 8829, Part I, figuring the percentage of her home used for business, including the percentage of time the basement was used. How to file tax extention In Part II, Mary figures her deductible expenses. How to file tax extention She uses the following information to complete Part II. How to file tax extention Gross income from her daycare business $50,000 Expenses not related to the business use of the home $25,000 Tentative profit $25,000 Rent $8,400 Utilities $850 Painting the basement $500 Mary enters her tentative profit, $25,000, on line 8. How to file tax extention (This figure is the same as the amount on line 29 of her Schedule C (Form 1040). How to file tax extention ) The expenses she paid for rent and utilities relate to her entire home. How to file tax extention Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). How to file tax extention She shows the total of these expenses on line 22, column (b). How to file tax extention For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. How to file tax extention Mary paid $500 to have the basement painted. How to file tax extention The painting is a direct expense. How to file tax extention However, because she did not use the basement exclusively for daycare, she must multiply $500 by the percentage of time the basement was used for daycare (34. How to file tax extention 25% – line 6). How to file tax extention She enters $171 (34. How to file tax extention 25% × $500) on line 19, column (a). How to file tax extention She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. How to file tax extention This is less than her deduction limit (line 15), so she can deduct the entire amount. How to file tax extention She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. How to file tax extention She then carries the $1,756 to line 30 of her Schedule C (Form 1040). How to file tax extention Example 2. How to file tax extention Assume the same facts as in Example 1 except that Mary also has another room that was available each business day for children to take naps in. How to file tax extention Although she did not keep a record of the number of hours the room was actually used for naps, it was used for part of each business day. How to file tax extention Since the room was available for business use during regular operating hours each business day and was used regularly in the business, it is considered used for daycare throughout each business day. How to file tax extention The basement and room are 60% of the total area of her home. How to file tax extention In figuring her expenses, 34. How to file tax extention 25% of any direct expenses for the basement and room are deductible. How to file tax extention In addition, 20. How to file tax extention 55% (34. How to file tax extention 25% × 60%) of her indirect expenses are deductible. How to file tax extention Example 3. How to file tax extention Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2013. How to file tax extention She used the basement for daycare an average of 12 hours a day, 5 days a week, but for only 25 weeks of the year. How to file tax extention During the other 12 hours a day, the family could still use the basement. How to file tax extention She figures the percentage of time the basement was used for business as follows. How to file tax extention Number of hours used for daycare (12 x 5 x 25) Total number of hours during period used (24 x 175) = 1,500 4,200 = 35. How to file tax extention 71%           Mary can deduct 35. How to file tax extention 71% of any direct expenses for the basement. How to file tax extention However, because her indirect expenses are for the entire house, she can deduct only 17. How to file tax extention 86% of the indirect expenses. How to file tax extention She figures the percentage for her indirect expenses as follows. How to file tax extention Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 35. How to file tax extention 71% Percentage for indirect expenses 17. How to file tax extention 86% Meals. How to file tax extention   If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. How to file tax extention Claim it as a separate deduction on your Schedule C (Form 1040). How to file tax extention You can never deduct the cost of food consumed by you or your family. How to file tax extention You can deduct as a business expense 100% of the actual cost of food consumed by your daycare recipients (see Standard meal and snack rates , later, for an optional method for eligible children) and generally only 50% of the cost of food consumed by your employees. How to file tax extention However, you can deduct 100% of the cost of food consumed by your employees if its value can be excluded from their wages as a de minimis fringe benefit. How to file tax extention For more information on meals that meet these requirements, see Meals in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits. How to file tax extention   If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family's food costs. How to file tax extention   Reimbursements you receive from a sponsor under the Child and Adult Care Food Program of the Department of Agriculture are taxable only to the extent they exceed your expenses for food for eligible children. How to file tax extention If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). How to file tax extention If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). How to file tax extention Do not include payments or expenses for your own children if they are eligible for the program. How to file tax extention Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. How to file tax extention Standard meal and snack rates. How to file tax extention   If you qualify as a family daycare provider, you can use the standard meal and snack rates, instead of actual costs, to compute the deductible cost of meals and snacks provided to eligible children. How to file tax extention For these purposes: A family daycare provider is a person engaged in the business of providing family daycare. How to file tax extention Family daycare is childcare provided to eligible children in the home of the family daycare provider. How to file tax extention The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. How to file tax extention Eligible children are minor children receiving family daycare in the home of the family daycare provider. How to file tax extention Eligible children do not include children who are full-time or part-time residents in the home where the childcare is provided or children whose parents or guardians are residents of the same home. How to file tax extention Eligible children do not include children who receive daycare services for personal reasons of the provider. How to file tax extention For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child. How to file tax extention   You can compute the deductible cost of each meal and snack you actually purchased and served to an eligible child during the time period you provided family daycare using the standard meal and snack rates shown in Table 3, later. How to file tax extention You can use the standard meal and snack rates for a maximum of one breakfast, one lunch, one dinner, and three snacks per eligible child per day. How to file tax extention If you receive reimbursement for a particular meal or snack, you can deduct only the portion of the applicable standard meal or snack rate that is more than the amount of the reimbursement. How to file tax extention   You can use either the standard meal and snack rates or actual costs to calculate the deductible cost of food provided to eligible children in the family daycare for any particular tax year. How to file tax extention If you choose to use the standard meal and snack rates for a particular tax year, you must use the rates for all your deductible food costs for eligible children during that tax year. How to file tax extention However, if you use the standard meal and snack rates in any tax year, you can use actual costs to compute the deductible cost of food in any other tax year. How to file tax extention   If you use the standard meal and snack rates, you must maintain records to substantiate the computation of the total amount deducted for the cost of food provided to eligible children. How to file tax extention The records kept should include the name of each child, dates and hours of attendance in the daycare, and the type and quantity of meals and snacks served. How to file tax extention This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. How to file tax extention   The standard meal and snack rates include beverages, but do not include non-food supplies used for food preparation, service, or storage, such as containers, paper products, or utensils. How to file tax extention These expenses can be claimed as a separate deduction on your Schedule C (Form 1040). How to file tax extention     Table 3. How to file tax extention Standard Meal and Snack Rates1 Location of Family Daycare Provider Breakfast Lunch Dinner Snack States other than Alaska an
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The How To File Tax Extention

How to file tax extention 5. How to file tax extention   Personal Use of Dwelling Unit (Including Vacation Home) Table of Contents Dividing Expenses Dwelling Unit Used as a HomeMain home. How to file tax extention Shared equity financing agreement. How to file tax extention Donation of use of the property. How to file tax extention Examples. How to file tax extention Days used for repairs and maintenance. How to file tax extention Days used as a main home before or after renting. How to file tax extention Reporting Income and DeductionsNot used as a home. How to file tax extention Used as a home but rented less than 15 days. How to file tax extention Used as a home and rented 15 days or more. How to file tax extention 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. How to file tax extention 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. How to file tax extention Only your rental expenses may deducted on Schedule E (Form 1040). How to file tax extention Some of your personal expenses may be deductible if you itemize your deductions on Schedule A (Form 1040). How to file tax extention You must also determine if the dwelling unit is considered a home. How to file tax extention The amount of rental expenses that you can deduct may be limited if the dwelling unit is considered a home. How to file tax extention Whether a dwelling unit is considered a home depends on how many days during the year are considered to be days of personal use. How to file tax extention 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. How to file tax extention Dwelling unit. How to file tax extention   A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. How to file tax extention It also includes all structures or other property belonging to the dwelling unit. How to file tax extention A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. How to file tax extention   A dwelling unit does not include property (or part of the property) used solely as a hotel, motel, inn, or similar establishment. How to file tax extention 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. How to file tax extention Example. How to file tax extention You rent a room in your home that is always available for short-term occupancy by paying customers. How to file tax extention You do not use the room yourself and you allow only paying customers to use the room. How to file tax extention This room is used solely as a hotel, motel, inn, or similar establishment and is not a dwelling unit. How to file tax extention 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. How to file tax extention When dividing your expenses, follow these rules. How to file tax extention 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. How to file tax extention (This rule does not apply when determining whether you used the unit as a home. How to file tax extention ) Any day that the unit is available for rent but not actually rented is not a day of rental use. How to file tax extention Fair rental price. How to file tax extention   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. How to file tax extention 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. How to file tax extention   Ask yourself the following questions when comparing another property with yours. How to file tax extention Is it used for the same purpose? Is it approximately the same size? Is it in approximately the same condition? Does it have similar furnishings? Is it in a similar location? If any of the answers are no, the properties probably are not similar. How to file tax extention Example. How to file tax extention Your beach cottage was available for rent from June 1 through August 31 (92 days). How to file tax extention 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 during that time. How to file tax extention 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. How to file tax extention Your family also used the cottage during the last 2 weeks of May (14 days). How to file tax extention The cottage was not used at all before May 17 or after August 31. How to file tax extention You figure the part of the cottage expenses to treat as rental expenses as follows. How to file tax extention The cottage was used for rental a total of 85 days (92 − 7). How to file tax extention The days it was available for rent but not rented (7 days) are not days of rental use. How to file tax extention The July weekend (2 days) you used it is rental use because you received a fair rental price for the weekend. How to file tax extention You used the cottage for personal purposes for 14 days (the last 2 weeks in May). How to file tax extention The total use of the cottage was 99 days (14 days personal use + 85 days rental use). How to file tax extention Your rental expenses are 85/99 (86%) of the cottage expenses. How to file tax extention Note. How to file tax extention 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. How to file tax extention Therefore, you had 16 days of personal use and 83 days of rental use for this purpose. How to file tax extention 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. How to file tax extention If you have a net loss, you may not be able to deduct all of the rental expenses. How to file tax extention See Dwelling Unit Used as a Home, next. How to file tax extention 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. How to file tax extention 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. How to file tax extention See What is a day of personal use , later. How to file tax extention If a dwelling unit is used for personal purposes on a day it is rented at a fair rental price (discussed earlier), do not count that day as a day of rental use in applying (2) above. How to file tax extention Instead, count it as a day of personal use in applying both (1) and (2) above. How to file tax extention 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. How to file tax extention You or any other person who owns an interest in it, unless you rent it to another owner as his or her main home under a shared equity financing agreement (defined later). How to file tax extention However, see Days used as a main home before or after renting , later. How to file tax extention A member of your family or a member of the family of any other person who owns an interest in it, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. How to file tax extention Family includes only your spouse, brothers and sisters, half-brothers and half-sisters, ancestors (parents, grandparents, etc. How to file tax extention ), and lineal descendants (children, grandchildren, etc. How to file tax extention ). How to file tax extention Anyone under an arrangement that lets you use some other dwelling unit. How to file tax extention Anyone at less than a fair rental price. How to file tax extention Main home. How to file tax extention   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. How to file tax extention Shared equity financing agreement. How to file tax extention   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. How to file tax extention Donation of use of the property. How to file tax extention   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. How to file tax extention Examples. How to file tax extention   The following examples show how to determine if you have days of personal use. How to file tax extention Example 1. How to file tax extention You and your neighbor are co-owners of a condominium at the beach. How to file tax extention Last year, you rented the unit to vacationers whenever possible. How to file tax extention The unit was not used as a main home by anyone. How to file tax extention Your neighbor used the unit for 2 weeks last year; you did not use it at all. How to file tax extention 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. How to file tax extention Example 2. How to file tax extention You and your neighbors are co-owners of a house under a shared equity financing agreement. How to file tax extention Your neighbors live in the house and pay you a fair rental price. How to file tax extention 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. How to file tax extention This is because your neighbors rent the house as their main home under a shared equity financing agreement. How to file tax extention Example 3. How to file tax extention You own a rental property that you rent to your son. How to file tax extention Your son does not own any interest in this property. How to file tax extention He uses it as his main home and pays you a fair rental price. How to file tax extention 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. How to file tax extention Example 4. How to file tax extention You rent your beach house to Rosa. How to file tax extention Rosa rents her cabin in the mountains to you. How to file tax extention You each pay a fair rental price. How to file tax extention You are using your beach house for personal purposes on the days that Rosa uses it because your house is used by Rosa under an arrangement that allows you to use her cabin. How to file tax extention Example 5. How to file tax extention You rent an apartment to your mother at less than a fair rental price. How to file tax extention You are using the apartment for personal purposes on the days that your mother rents it because you rent it for less than a fair rental price. How to file tax extention Days used for repairs and maintenance. How to file tax extention   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. How to file tax extention 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. How to file tax extention Example. How to file tax extention Corey owns a cabin in the mountains that he rents for most of the year. How to file tax extention He spends a week at the cabin with family members. How to file tax extention Corey works on maintenance of the cabin 3 or 4 hours each day during the week and spends the rest of the time fishing, hiking, and relaxing. How to file tax extention Corey's family members, however, work substantially full time on the cabin each day during the week. How to file tax extention The main purpose of being at the cabin that week is to do maintenance work. How to file tax extention Therefore, the use of the cabin during the week by Corey and his family will not be considered personal use by Corey. How to file tax extention Days used as a main home before or after renting. How to file tax extention   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. How to file tax extention Do not count them as days of personal use if: You rented or tried to rent the property for 12 or more consecutive months. How to file tax extention 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. How to file tax extention However, this special rule does not apply when dividing expenses between rental and personal use. How to file tax extention See Property Changed to Rental Use in chapter 4. How to file tax extention Example 1. How to file tax extention On February 29, 2012, you moved out of the house you had lived in for 6 years because you accepted a job in another town. How to file tax extention You rented your house at a fair rental price from March 15, 2012, to May 14, 2013 (14 months). How to file tax extention On June 1, 2013, you moved back into your old house. How to file tax extention The days you used the house as your main home from January 1 to February 29, 2012, and from June 1 to December 31, 2013, are not counted as days of personal use. How to file tax extention Therefore, you would use the rules in chapter 1 when figuring your rental income and expenses. How to file tax extention Example 2. How to file tax extention On January 31, you moved out of the condominium where you had lived for 3 years. How to file tax extention You offered it for rent at a fair rental price beginning on February 1. How to file tax extention You were unable to rent it until April. How to file tax extention On September 15, you sold the condominium. How to file tax extention The days you used the condominium as your main home from January 1 to January 31 are not counted as days of personal use when determining whether you used it as a home. How to file tax extention Examples. How to file tax extention   The following examples show how to determine whether you used your rental property as a home. How to file tax extention Example 1. How to file tax extention You converted the basement of your home into an apartment with a bedroom, a bathroom, and a small kitchen. How to file tax extention You rented the basement apartment at a fair rental price to college students during the regular school year. How to file tax extention You rented to them on a 9-month lease (273 days). How to file tax extention You figured 10% of the total days rented to others at a fair rental price is 27 days. How to file tax extention During June (30 days), your brothers stayed with you and lived in the basement apartment rent free. How to file tax extention Your basement apartment was used as a home because you used it for personal purposes for 30 days. How to file tax extention Rent-free use by your brothers is considered personal use. How to file tax extention Your personal use (30 days) is more than the greater of 14 days or 10% of the total days it was rented (27 days). How to file tax extention Example 2. How to file tax extention 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). How to file tax extention Your sister-in-law stayed in the room, rent free, for the last 3 weeks (21 days) in July. How to file tax extention You figured 10% of the total days rented to others at a fair rental price is 3 days. How to file tax extention The room was used as a home because you used it for personal purposes for 21 days. How to file tax extention That is more than the greater of 14 days or 10% of the 27 days it was rented (3 days). How to file tax extention Example 3. How to file tax extention You own a condominium apartment in a resort area. How to file tax extention You rented it at a fair rental price for a total of 170 days during the year. How to file tax extention For 12 of these 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. How to file tax extention Your family actually used the apartment for 10 of those days. How to file tax extention Therefore, the apartment is treated as having been rented for 160 (170 – 10) days. How to file tax extention You figured 10% of the total days rented to others at a fair rental price is 16 days. How to file tax extention Your family also used the apartment for 7 other days during the year. How to file tax extention You used the apartment as a home because you used it for personal purposes for 17 days. How to file tax extention That is more than the greater of 14 days or 10% of the 160 days it was rented (16 days). How to file tax extention Minimal rental use. How to file tax extention   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. How to file tax extention See Used as a home but rented less than 15 days, later, for more information. How to file tax extention Limit on deductions. How to file tax extention   Renting a dwelling unit that is considered a home is not a passive activity. How to file tax extention 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. How to file tax extention 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. How to file tax extention Any expenses carried forward to the next year will be subject to any limits that apply for that year. How to file tax extention 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. How to file tax extention   To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 5–1. How to file tax extention Reporting Income and Deductions Property not used for personal purposes. How to file tax extention   If you do not use a dwelling unit for personal purposes, see chapter 3 for how to report your rental income and expenses. How to file tax extention Property used for personal purposes. How to file tax extention   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. How to file tax extention Not used as a home. How to file tax extention   If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. How to file tax extention 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 this chapter under Dividing Expenses . How to file tax extention The expenses for personal use are not deductible as rental expenses. How to file tax extention   Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses in chapter 3. How to file tax extention Used as a home but rented less than 15 days. How to file tax extention   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). How to file tax extention You are not required to report the rental income and rental expenses from this activity. How to file tax extention The expenses, including qualified mortgage interest, property taxes, and any qualified casualty loss will be reported as normally allowed on Schedule A (Form 1040). How to file tax extention See the Instructions for Schedule A (Form 1040) for more information on deducting these expenses. How to file tax extention Used as a home and rented 15 days or more. How to file tax extention   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. How to file tax extention 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 this chapter under Dividing Expenses . How to file tax extention The expenses for personal use are not deductible as rental expenses. How to file tax extention   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. How to file tax extention You do not need to use Worksheet 5-1. How to file tax extention   However, if you had a net loss from renting the dwelling unit for the year, your deduction for certain rental expenses is limited. How to file tax extention To figure your deductible rental expenses and any carryover to next year, use Worksheet 5–1. How to file tax extention Worksheet 5-1. How to file tax extention 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. How to file tax extention Did you use the dwelling unit as a home this year? (See Dwelling Unit Used as a Home . How to file tax extention ) 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. How to file tax extention Rental Use Percentage A. How to file tax extention Total days available for rent at fair rental price A. How to file tax extention       B. How to file tax extention Total days available for rent (line A) but not rented B. How to file tax extention       C. How to file tax extention Total days of rental use. How to file tax extention Subtract line B from line A C. How to file tax extention       D. How to file tax extention Total days of personal use (including days rented at less than fair rental price) D. How to file tax extention       E. How to file tax extention Total days of rental and personal use. How to file tax extention Add lines C and D E. How to file tax extention       F. How to file tax extention Percentage of expenses allowed for rental. How to file tax extention Divide line C by line E     F. How to file tax extention . How to file tax extention PART II. How to file tax extention Allowable Rental Expenses 1. How to file tax extention Enter rents received 1. How to file tax extention   2a. How to file tax extention Enter the rental portion of deductible home mortgage interest and qualified mortgage insurance premiums (see instructions) 2a. How to file tax extention       b. How to file tax extention Enter the rental portion of real estate taxes b. How to file tax extention       c. How to file tax extention Enter the rental portion of deductible casualty and theft losses (see instructions) c. How to file tax extention       d. How to file tax extention Enter direct rental expenses (see instructions) d. How to file tax extention       e. How to file tax extention Fully deductible rental expenses. How to file tax extention Add lines 2a–2d. How to file tax extention Enter here and  on the appropriate lines on Schedule E (see instructions) 2e. How to file tax extention   3. How to file tax extention Subtract line 2e from line 1. How to file tax extention If zero or less, enter -0- 3. How to file tax extention   4a. How to file tax extention Enter the rental portion of expenses directly related to operating or maintaining  the dwelling unit (such as repairs, insurance, and utilities) 4a. How to file tax extention       b. How to file tax extention Enter the rental portion of excess mortgage interest and qualified mortgage insurance premiums (see instructions) b. How to file tax extention       c. How to file tax extention Carryover of operating expenses from 2012 worksheet c. How to file tax extention       d. How to file tax extention Add lines 4a–4c d. How to file tax extention       e. How to file tax extention Allowable expenses. How to file tax extention Enter the smaller of line 3 or line 4d (see instructions) 4e. How to file tax extention   5. How to file tax extention Subtract line 4e from line 3. How to file tax extention If zero or less, enter -0- 5. How to file tax extention   6a. How to file tax extention Enter the rental portion of excess casualty and theft losses (see instructions) 6a. How to file tax extention       b. How to file tax extention Enter the rental portion of depreciation of the dwelling unit b. How to file tax extention       c. How to file tax extention Carryover of excess casualty losses and depreciation from 2012 worksheet c. How to file tax extention       d. How to file tax extention Add lines 6a–6c d. How to file tax extention       e. How to file tax extention Allowable excess casualty and theft losses and depreciation. How to file tax extention Enter the smaller of  line 5 or line 6d (see instructions) 6e. How to file tax extention   PART III. How to file tax extention Carryover of Unallowed Expenses to Next Year 7a. How to file tax extention Operating expenses to be carried over to next year. How to file tax extention Subtract line 4e from line 4d 7a. How to file tax extention   b. How to file tax extention Excess casualty and theft losses and depreciation to be carried over to next year. How to file tax extention  Subtract line 6e from line 6d b. How to file tax extention   Worksheet 5-1 Instructions. How to file tax extention Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Caution. How to file tax extention 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. How to file tax extention Line 2a. How to file tax extention Figure the mortgage interest on the dwelling unit that you could deduct on Schedule A as if you had not rented the unit. How to file tax extention Do not include interest on a loan that did not benefit the dwelling unit. How to file tax extention 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. How to file tax extention Include interest on a loan used to buy, build, or improve the dwelling unit, or to refinance such a loan. How to file tax extention Include the rental portion of this interest in the total you enter on line 2a of the worksheet. How to file tax extention   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. How to file tax extention See the Schedule A instructions. How to file tax extention However, figure your adjusted gross income (Form 1040, line 38) without your rental income and expenses from the dwelling unit. How to file tax extention See Line 4b to deduct the part of the qualified mortgage insurance premiums not allowed because of the adjusted gross income limit. How to file tax extention Include the rental portion of the amount from Schedule A, line 13, in the total you enter on line 2a of the worksheet. How to file tax extention   Note. How to file tax extention Do not file this Schedule A or use it to figure the amount to deduct on line 13 of that schedule. How to file tax extention Instead, figure the personal portion on a separate Schedule A. How to file tax extention 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. How to file tax extention           Line 2c. How to file tax extention 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. How to file tax extention To do this, complete Section A of Form 4684, Casualties and Thefts, treating the losses as personal losses. How to file tax extention If any of the loss is due to a federally declared disaster, see the Instructions for Form 4684. How to file tax extention On Form 4684, line 17, enter 10% of your adjusted gross income figured without your rental income and expenses from the dwelling unit. How to file tax extention Enter the rental portion of the result from Form 4684, line 18, on line 2c of this worksheet. How to file tax extention   Note. How to file tax extention Do not file this Form 4684 or use it to figure your personal losses on Schedule A. How to file tax extention Instead, figure the personal portion on a separate Form 4684. How to file tax extention           Line 2d. How to file tax extention Enter the total of your rental expenses that are directly related only to the rental activity. How to file tax extention These include interest on loans used for rental activities other than to buy, build, or improve the dwelling unit. How to file tax extention Also include rental agency fees, advertising, office supplies, and depreciation on office equipment used in your rental activity. How to file tax extention           Line 2e. How to file tax extention 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. How to file tax extention Enter the amounts on lines 2a, 2b, 2c, and 2d on the appropriate lines of Schedule E. How to file tax extention           Line 4b. How to file tax extention On line 2a, you entered the rental portion of the mortgage interest or qualified mortgage insurance premiums you could deduct on Schedule A if you had not rented the dwelling unit. How to file tax extention 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. How to file tax extention Do not include interest on a loan that did not benefit the dwelling unit  (as explained in the line 2a instructions). How to file tax extention           Line 4e. How to file tax extention 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. How to file tax extention *           Line 6a. How to file tax extention To find the rental portion of excess casualty and theft losses, use the Form 4684 you prepared for line 2c of this worksheet. How to file tax extention   A. How to file tax extention Enter the amount from Form 4684, line 10       B. How to file tax extention Enter the rental portion of line A       C. How to file tax extention Enter the amount from line 2c of this worksheet       D. How to file tax extention Subtract line C from line B. How to file tax extention Enter the result here and on line 6a of this worksheet               Line 6e. How to file tax extention 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. How to file tax extention * *Allocating the limited deduction. How to file tax extention 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. How to file tax extention Enter the amount you allocate to each expense on the appropriate line of Schedule E, Part I. How to file tax extention Prev  Up  Next   Home   More Online Publications