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Hr Block 2012 Tax Software

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Hr Block 2012 Tax Software

Hr block 2012 tax software Publication 584 - Additional Material Table of Contents This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Entrance Hall This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Living Room This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Dining Room This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Kitchen This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Den This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Bedrooms This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Bathrooms This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Recreation Room This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Laundry and Basement This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Garage This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Sporting Equipment This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Men's Clothing This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Women's Clothing This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Children's Clothing This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Jewelry This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Electrical Appliances This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Linens This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Miscellaneous This image is too large to be displayed in the current screen. Hr block 2012 tax software Please click the link to view the image. Hr block 2012 tax software Motor Vehicles Schedule 20. Hr block 2012 tax software Home (Excluding Contents) Note. Hr block 2012 tax software If you used the entire property as your home, fill out only column (a). Hr block 2012 tax software If you used part of the property as your home and part of it for business or to produce rental income, you must allocate the entries on lines 2-9 between the personal part (column (a)) and the business/rental part (column (b)). Hr block 2012 tax software 1. Hr block 2012 tax software Description of property (Show location and date acquired. Hr block 2012 tax software )     (a)  Personal Part (b)  Business/Rental Part 2. Hr block 2012 tax software Cost or other (adjusted) basis of property (from Worksheet A)     3. Hr block 2012 tax software Insurance or other reimbursement Note. Hr block 2012 tax software If line 2 is more than line 3, skip line 4. Hr block 2012 tax software If line 3 is more than line 2, you exclude gain, and the gain is more than you can exclude, see the instructions for line 3 in the Instructions for Form 4684 for the amount to enter. Hr block 2012 tax software     4. Hr block 2012 tax software Gain from casualty. Hr block 2012 tax software If line 3 is more than line 2, enter the difference here and skip lines 5 through 9. Hr block 2012 tax software But see Next below line 9. Hr block 2012 tax software     5. Hr block 2012 tax software Fair market value before casualty     6. Hr block 2012 tax software Fair market value after casualty     7. Hr block 2012 tax software Decrease in fair market value. Hr block 2012 tax software Subtract line 6 from line 5. Hr block 2012 tax software     8. Hr block 2012 tax software Enter the smaller of line 2 or line 7 Note for business/rental part. Hr block 2012 tax software If the property was totally destroyed by casualty, enter on line 8, column (b) the amount from line 2, column (b). Hr block 2012 tax software     9. Hr block 2012 tax software Subtract line 3 from line 8. Hr block 2012 tax software If zero or less, enter -0-. Hr block 2012 tax software     Next: Transfer the entries from line 1 and lines 2-9, column (a), above to the corresponding lines on Form 4684, Section A. Hr block 2012 tax software Transfer the entries from line 1 and lines 2-9, column (b), to the corresponding lines on Form 4684, Section B. Hr block 2012 tax software Worksheet A. Hr block 2012 tax software Cost or Other (Adjusted) Basis Caution. Hr block 2012 tax software See the Worksheet A Instructions before you use this worksheet. Hr block 2012 tax software         (a) Personal Part (b) Business/Rental Part 1. Hr block 2012 tax software   Enter the purchase price of the home damaged or destroyed. Hr block 2012 tax software (If you filed Form 2119 when you originally acquired that home to postpone gain on the sale of a previous home before May 7, 1997, enter the adjusted basis of the new home from that Form 2119. Hr block 2012 tax software ) 1. Hr block 2012 tax software     2. Hr block 2012 tax software   Seller paid points for home bought after 1990. Hr block 2012 tax software Do not include any seller-paid points you already subtracted to arrive at the amount entered on line 1 2. Hr block 2012 tax software     3. Hr block 2012 tax software   Subtract line 2 from line 1 3. Hr block 2012 tax software     4. Hr block 2012 tax software   Settlement fees or closing costs. Hr block 2012 tax software (See Settlement costs in Publication 551. Hr block 2012 tax software ) If line 1 includes the adjusted basis of the new home from Form 2119, skip lines 4a-4g and 5; go to line 6. Hr block 2012 tax software         a. Hr block 2012 tax software Abstract and recording fees 4a. Hr block 2012 tax software       b. Hr block 2012 tax software Legal fees (including fees for title search and preparing documents) 4b. Hr block 2012 tax software       c. Hr block 2012 tax software Survey fees 4c. Hr block 2012 tax software       d. Hr block 2012 tax software Title insurance 4d. Hr block 2012 tax software       e. Hr block 2012 tax software Transfer or stamp taxes 4e. Hr block 2012 tax software       f. Hr block 2012 tax software Amounts that the seller owed that you agreed to pay (back taxes or interest, recording or mortgage fees, and sales commissions) 4f. Hr block 2012 tax software       g. Hr block 2012 tax software Other 4g. Hr block 2012 tax software     5. Hr block 2012 tax software   Add lines 4a through 4g 5. Hr block 2012 tax software     6. Hr block 2012 tax software   Cost of additions and improvements. Hr block 2012 tax software (See Increases to Basis in Publication 551. Hr block 2012 tax software ) Do not include any additions and improvements included on line 1 6. Hr block 2012 tax software     7. Hr block 2012 tax software   Special tax assessments paid for local improvements, such as streets and sidewalks 7. Hr block 2012 tax software     8. Hr block 2012 tax software   Other increases to basis 8. Hr block 2012 tax software     9. Hr block 2012 tax software   Add lines 3, 5, 6, 7, and 8 9. Hr block 2012 tax software     10. Hr block 2012 tax software   Depreciation allowed or allowable, related to the business use or rental of the home 10. Hr block 2012 tax software 0   11. Hr block 2012 tax software   Other decreases to basis (See Decreases to Basis in Publication 551. Hr block 2012 tax software ) 11. Hr block 2012 tax software     12. Hr block 2012 tax software   Add lines 10 and 11 12. Hr block 2012 tax software     13. Hr block 2012 tax software   Cost or other (adjusted) basis of home damaged or destroyed. Hr block 2012 tax software Subtract line 12 from line 9. Hr block 2012 tax software Enter here and on Schedule 20, line 2 13. Hr block 2012 tax software     Worksheet A Instructions. Hr block 2012 tax software If you use Worksheet A to figure the cost or other (adjusted) basis of your home, follow these instructions. Hr block 2012 tax software DO NOT use this worksheet to determine your basis if you acquired an interest in your home from a decedent who died in 2010 and whose executor filed Form 8939. Hr block 2012 tax software IF. Hr block 2012 tax software . Hr block 2012 tax software . Hr block 2012 tax software   THEN. Hr block 2012 tax software . Hr block 2012 tax software . Hr block 2012 tax software you inherited your home from a decedent who died either before or after 2010 or from a decedent who died in 2010 and whose executor did not file Form 8939. Hr block 2012 tax software 1 skip lines 1–4 of the worksheet. Hr block 2012 tax software 2 find your basis using the rules under Inherited Property in Publication 551. Hr block 2012 tax software Enter this amount on line 5 of the worksheet. Hr block 2012 tax software 3 fill out lines 6–13 of the worksheet. Hr block 2012 tax software you received your home as a gift 1 read Property Received as a Gift in Publication 551 and enter on lines 1 and 3 of the worksheet either the donor's adjusted basis or the home's fair market value at the time of the gift, whichever is appropriate. Hr block 2012 tax software 2 if you can add any federal gift tax to your basis, enter that amount on line 5 of the worksheet. Hr block 2012 tax software 3 fill out the rest of the worksheet. Hr block 2012 tax software you received your home as a trade for other property 1 enter on line 1 of the worksheet the fair market value of the other property at the time of the trade. Hr block 2012 tax software (But if you received your home as a trade for your previous home before May 7, 1997, and had a gain on the trade that you postponed using Form 2119, enter on line 1 of the worksheet the adjusted basis of the new home from that Form 2119. Hr block 2012 tax software ) 2 fill out the rest of the worksheet. Hr block 2012 tax software you built your home 1 add the purchase price of the land and the cost of building the home. Hr block 2012 tax software Enter that total on line 1 of the worksheet. Hr block 2012 tax software (However, if you filed a Form 2119 to postpone gain on the sale of a previous home before May 7, 1997, enter on line 1 of the worksheet the adjusted basis of the new home from that Form 2119. Hr block 2012 tax software ) 2 fill out the rest of the worksheet. Hr block 2012 tax software you received your home from your spouse after July 18, 1984 1 skip lines 1–4 of the worksheet. Hr block 2012 tax software 2 enter on line 5 of the worksheet your spouse's cost or other (adjusted) basis in the home just before you received it. Hr block 2012 tax software 3 fill out lines 6–13 of the worksheet, making adjustments to basis only for events after the transfer. Hr block 2012 tax software you owned a home jointly with your spouse, who transferred his or her interest in the home to you after July 18, 1984     fill out one worksheet, making adjustments to basis for events both before and after the transfer. Hr block 2012 tax software   you received your home from your spouse before July 19, 1984 1 skip lines 1–4 of the worksheet. Hr block 2012 tax software 2 enter on line 5 of the worksheet the home's fair market value at the time you received it. Hr block 2012 tax software 3 fill out lines 6–13 of the worksheet, making adjustments to basis only for events after the transfer. Hr block 2012 tax software you owned a home jointly with your spouse, and your spouse transferred his or her interest in the home to you before July 19, 1984 1 fill out a worksheet, lines 1–13, making adjustments to basis only for events before the transfer. Hr block 2012 tax software 2 multiply the amount on line 13 of that worksheet by 50% (0. Hr block 2012 tax software 50) to get the adjusted basis of your half-interest at the time of the transfer. Hr block 2012 tax software 3 multiply the fair market value of the home at the time of the transfer by 50% (0. Hr block 2012 tax software 50). Hr block 2012 tax software Generally, this is the basis of the half-interest that your spouse owned. Hr block 2012 tax software 4 add the amounts from steps 2 and 3 and enter the total on line 5 of a second worksheet. Hr block 2012 tax software 5 complete lines 6–13 of the second worksheet, making adjustments to basis only for events after the transfer. Hr block 2012 tax software you owned your home jointly with a nonspouse 1 fill out lines 1–13 of the worksheet. Hr block 2012 tax software 2 multiply the amount on line 13 by your percentage of ownership to get the adjusted basis of your part-interest. Hr block 2012 tax software Worksheet A Instructions. Hr block 2012 tax software (Continued) IF. Hr block 2012 tax software . Hr block 2012 tax software . Hr block 2012 tax software   THEN. Hr block 2012 tax software . Hr block 2012 tax software . Hr block 2012 tax software you owned your home jointly with your spouse who died before 2010 and before the casualty 1 fill out a worksheet, lines 1–13, including adjustments to basis only for events before your spouse's death. Hr block 2012 tax software 2 multiply the amount on line 13 of that worksheet by 50% (0. Hr block 2012 tax software 50) to get the adjusted basis of your half-interest on the date of death. Hr block 2012 tax software 3 figure the basis for the half-interest owned by your spouse. Hr block 2012 tax software This is one-half of the fair market value on the date of death (or later alternate valuation used for estate or inheritance tax). Hr block 2012 tax software (The basis in your half will remain one-half of the adjusted basis determined in step 2. Hr block 2012 tax software ) 4 add the amounts from steps 2 and 3 and enter the total on line 5 of a second worksheet. Hr block 2012 tax software 5 complete lines 6–13 of the second worksheet, making adjustments to basis only for events after your spouse's death. Hr block 2012 tax software you owned your home jointly with your spouse who died before 2010 and before the casualty, and your permanent legal home is in a community property state 1 skip lines 1–4 of the worksheet. Hr block 2012 tax software 2 enter the amount of your basis on line 5 of the worksheet. Hr block 2012 tax software Generally, this is the fair market value of the home at the time of death. Hr block 2012 tax software (But see Community Property in Publication 551 for special rules. Hr block 2012 tax software ) 3 fill out lines 6–13 of the worksheet, making adjustments to basis only for events after your spouse's death. Hr block 2012 tax software you owned your home jointly with a nonspouse who died before 2010 and before the casualty 1 fill out lines 1–13 of the worksheet, including adjustments to basis only for events before the co-owner's death. Hr block 2012 tax software 2 multiply the amount on line 13 by your percentage of ownership to get the adjusted basis of your part-interest on the date of death. Hr block 2012 tax software 3 multiply the fair market value on the date of death (or later alternate valuation used for estate or inheritance tax) by the co-owner's percentage of ownership. Hr block 2012 tax software This is the basis for the co-owner's part-interest. Hr block 2012 tax software 4 add the amounts from steps 2 and 3 and enter the total on line 5 of a second worksheet. Hr block 2012 tax software 5 complete lines 6–13 of the second worksheet, including adjustments to basis only for events after the co-owner's death. Hr block 2012 tax software your home was ever damaged as a result of a prior casualty 1 on line 8 of the worksheet, enter any amounts you spent to restore the home to its condition before the prior casualty. Hr block 2012 tax software 2 on line 11 enter: any insurance reimbursements you received (or expect to receive) for the prior loss,  and any deductible casualty losses from prior years not covered by insurance. Hr block 2012 tax software the person who sold you your home paid points on your loan and you bought your home after 1990 but before April 4, 1994. Hr block 2012 tax software   on line 2 enter the seller-paid points only if you deducted them as home mortgage interest in the year paid (unless you used the seller-paid points to reduce the amount on line 1). Hr block 2012 tax software the person who sold you your home paid points on your loan and you bought your home after April 3, 1994   on line 2 enter the seller-paid points even if you did not deduct them (unless you used the seller-paid points to reduce the amount on line 1). Hr block 2012 tax software you used part of the property as your home and part of it for business or to produce rental income   you must allocate the entries on Worksheet A between the personal part (column (a)) and the business/rental part (column (b)). Hr block 2012 tax software none of these items apply   fill out the entire worksheet. 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The Hr Block 2012 Tax Software

Hr block 2012 tax software 1. Hr block 2012 tax software   Rental Income and Expenses (If No Personal Use of Dwelling) Table of Contents Rental IncomeWhen To Report Types of Income Rental ExpensesWhen To Deduct Types of Expenses This chapter discusses the various types of rental income and expenses for a residential rental activity with no personal use of the dwelling. Hr block 2012 tax software Generally, each year you will report all income and deduct all out-of-pocket expenses in full. Hr block 2012 tax software The deduction to recover the cost of your rental property—depreciation—is taken over a prescribed number of years, and is discussed in chapter 2, Depreciation of Rental Property. Hr block 2012 tax software If your rental income is from property you also use personally or rent to someone at less than a fair rental price, first read the information in chapter 5 , Personal Use of Dwelling Unit (Including Vacation Home). Hr block 2012 tax software Rental Income In most cases, you must include in your gross income all amounts you receive as rent. Hr block 2012 tax software Rental income is any payment you receive for the use or occupation of property. Hr block 2012 tax software In addition to amounts you receive as normal rental payments, there are other amounts that may be rental income. Hr block 2012 tax software When To Report When you report rental income on your tax return generally depends on whether you are a cash basis taxpayer or use an accrual method. Hr block 2012 tax software Most individual taxpayers use the cash method. Hr block 2012 tax software Cash method. Hr block 2012 tax software   You are a cash basis taxpayer if you report income on your return in the year you actually or constructively receive it, regardless of when it was earned. Hr block 2012 tax software You constructively receive income when it is made available to you, for example, by being credited to your bank account. Hr block 2012 tax software Accrual method. Hr block 2012 tax software    If you are an accrual basis taxpayer, you generally report income when you earn it, rather than when you receive it. Hr block 2012 tax software You generally deduct your expenses when you incur them, rather than when you pay them. Hr block 2012 tax software More information. Hr block 2012 tax software   See Publication 538, Accounting Periods and Methods, for more information about when you constructively receive income and accrual methods of accounting. Hr block 2012 tax software Types of Income The following are common types of rental income. Hr block 2012 tax software Advance rent. Hr block 2012 tax software   Advance rent is any amount you receive before the period that it covers. Hr block 2012 tax software Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. Hr block 2012 tax software Example. Hr block 2012 tax software On March 18, 2013, you signed a 10-year lease to rent your property. Hr block 2012 tax software During 2013, you received $9,600 for the first year's rent and $9,600 as rent for the last year of the lease. Hr block 2012 tax software You must include $19,200 in your rental income in the first year. Hr block 2012 tax software Canceling a lease. Hr block 2012 tax software   If your tenant pays you to cancel a lease, the amount you receive is rent. Hr block 2012 tax software Include the payment in your income in the year you receive it regardless of your method of accounting. Hr block 2012 tax software Expenses paid by tenant. Hr block 2012 tax software   If your tenant pays any of your expenses, those payments are rental income. Hr block 2012 tax software Because you must include this amount in income, you can also deduct the expenses if they are deductible rental expenses. Hr block 2012 tax software For more information, see Rental Expenses , later. Hr block 2012 tax software Example 1. Hr block 2012 tax software Your tenant pays the water and sewage bill for your rental property and deducts the amount from the normal rent payment. Hr block 2012 tax software Under the terms of the lease, your tenant does not have to pay this bill. Hr block 2012 tax software Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income. Hr block 2012 tax software You can deduct the utility payment made by your tenant as a rental expense. Hr block 2012 tax software Example 2. Hr block 2012 tax software While you are out of town, the furnace in your rental property stops working. Hr block 2012 tax software Your tenant pays for the necessary repairs and deducts the repair bill from the rent payment. Hr block 2012 tax software Include the repair bill paid by the tenant and any amount received as a rent payment in your rental income. Hr block 2012 tax software You can deduct the repair payment made by your tenant as a rental expense. Hr block 2012 tax software Property or services. Hr block 2012 tax software   If you receive property or services as rent, instead of money, include the fair market value of the property or services in your rental income. Hr block 2012 tax software   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. Hr block 2012 tax software Example. Hr block 2012 tax software Your tenant is a house painter. Hr block 2012 tax software He offers to paint your rental property instead of paying 2 months rent. Hr block 2012 tax software You accept his offer. Hr block 2012 tax software Include in your rental income the amount the tenant would have paid for 2 months rent. Hr block 2012 tax software You can deduct that same amount as a rental expense for painting your property. Hr block 2012 tax software Security deposits. Hr block 2012 tax software   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. Hr block 2012 tax software But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. Hr block 2012 tax software    If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Hr block 2012 tax software Include it in your income when you receive it. Hr block 2012 tax software Other Sources of Rental Income Lease with option to buy. Hr block 2012 tax software   If the rental agreement gives your tenant the right to buy your rental property, the payments you receive under the agreement are generally rental income. Hr block 2012 tax software If your tenant exercises the right to buy the property, the payments you receive for the period after the date of sale are considered part of the selling price. Hr block 2012 tax software Part interest. Hr block 2012 tax software   If you own a part interest in rental property, you must report your part of the rental income from the property. Hr block 2012 tax software Rental of property also used as your home. Hr block 2012 tax software   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. Hr block 2012 tax software However, you can deduct on Schedule A (Form 1040), Itemized Deductions, the interest, taxes, and casualty and theft losses that are allowed for nonrental property. Hr block 2012 tax software See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Hr block 2012 tax software Rental Expenses In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. Hr block 2012 tax software Personal use of rental property. Hr block 2012 tax software   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. Hr block 2012 tax software Also, your rental expense deductions may be limited. Hr block 2012 tax software See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Hr block 2012 tax software Part interest. Hr block 2012 tax software   If you own a part interest in rental property, you can deduct expenses you paid according to your percentage of ownership. Hr block 2012 tax software Example. Hr block 2012 tax software Roger owns a one-half undivided interest in a rental house. Hr block 2012 tax software Last year he paid $968 for necessary repairs on the property. Hr block 2012 tax software Roger can deduct $484 (50% × $968) as a rental expense. Hr block 2012 tax software He is entitled to reimbursement for the remaining half from the co-owner. Hr block 2012 tax software When To Deduct You generally deduct your rental expenses in the year you pay them. Hr block 2012 tax software If you use the accrual method, see Publication 538 for more information. Hr block 2012 tax software Types of Expenses Listed below are the most common rental expenses. Hr block 2012 tax software Advertising. Hr block 2012 tax software Auto and travel expenses. Hr block 2012 tax software Cleaning and maintenance. Hr block 2012 tax software Commissions. Hr block 2012 tax software Depreciation. Hr block 2012 tax software Insurance. Hr block 2012 tax software Interest (other). Hr block 2012 tax software Legal and other professional fees. Hr block 2012 tax software Local transportation expenses. Hr block 2012 tax software Management fees. Hr block 2012 tax software Mortgage interest paid to banks, etc. Hr block 2012 tax software Points. Hr block 2012 tax software Rental payments. Hr block 2012 tax software Repairs. Hr block 2012 tax software Taxes. Hr block 2012 tax software Utilities. Hr block 2012 tax software Some of these expenses, as well as other less common ones, are discussed below. Hr block 2012 tax software Depreciation. Hr block 2012 tax software   Depreciation is a capital expense. Hr block 2012 tax software It is the mechanism for recovering your cost in an income producing property and must be taken over the expected life of the property. Hr block 2012 tax software   You can begin to depreciate rental property when it is ready and available for rent. Hr block 2012 tax software See Placed in Service under When Does Depreciation Begin and End in chapter 2. Hr block 2012 tax software Insurance premiums paid in advance. Hr block 2012 tax software   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. Hr block 2012 tax software You cannot deduct the total premium in the year you pay it. Hr block 2012 tax software See chapter 6 of Publication 535 for information on deductible premiums. Hr block 2012 tax software Interest expense. Hr block 2012 tax software   You can deduct mortgage interest you pay on your rental property. Hr block 2012 tax software When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Hr block 2012 tax software Chapter 4 of Publication 535 explains mortgage interest in detail. Hr block 2012 tax software Expenses paid to obtain a mortgage. Hr block 2012 tax software   Certain expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. Hr block 2012 tax software These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property. Hr block 2012 tax software Form 1098, Mortgage Interest Statement. Hr block 2012 tax software   If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098 or similar statement showing the interest you paid for the year. Hr block 2012 tax software If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on, the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. Hr block 2012 tax software Attach a statement to your return showing the name and address of the other person. Hr block 2012 tax software On the dotted line next to line 13, enter “See attached. Hr block 2012 tax software ” Legal and other professional fees. Hr block 2012 tax software   You can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. Hr block 2012 tax software For example, on your 2013 Schedule E you can deduct fees paid in 2013 to prepare Part I of your 2012 Schedule E. Hr block 2012 tax software You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. Hr block 2012 tax software Local benefit taxes. Hr block 2012 tax software   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. Hr block 2012 tax software These charges are nondepreciable capital expenditures and must be added to the basis of your property. Hr block 2012 tax software However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. Hr block 2012 tax software Local transportation expenses. Hr block 2012 tax software   You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. Hr block 2012 tax software However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. Hr block 2012 tax software See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Hr block 2012 tax software   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. Hr block 2012 tax software For 2013, the standard mileage rate for business use is 56. Hr block 2012 tax software 5 cents per mile. Hr block 2012 tax software For more information, see chapter 4 of Publication 463. Hr block 2012 tax software    To deduct car expenses under either method, you must keep records that follow the rules in chapter 5 of Publication 463. Hr block 2012 tax software In addition, you must complete Form 4562, Part V, and attach it to your tax return. Hr block 2012 tax software Pre-rental expenses. Hr block 2012 tax software   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. Hr block 2012 tax software Rental of equipment. Hr block 2012 tax software   You can deduct the rent you pay for equipment that you use for rental purposes. Hr block 2012 tax software However, in some cases, lease contracts are actually purchase contracts. Hr block 2012 tax software If so, you cannot deduct these payments. Hr block 2012 tax software You can recover the cost of purchased equipment through depreciation. Hr block 2012 tax software Rental of property. Hr block 2012 tax software   You can deduct the rent you pay for property that you use for rental purposes. Hr block 2012 tax software If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. Hr block 2012 tax software Travel expenses. Hr block 2012 tax software   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. Hr block 2012 tax software You must properly allocate your expenses between rental and nonrental activities. Hr block 2012 tax software You cannot deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. Hr block 2012 tax software The cost of improvements is recovered by taking depreciation. Hr block 2012 tax software For information on travel expenses, see chapter 1 of Publication 463. Hr block 2012 tax software    To deduct travel expenses, you must keep records that follow the rules in chapter 5 of Publication 463. Hr block 2012 tax software Uncollected rent. Hr block 2012 tax software   If you are a cash basis taxpayer, do not deduct uncollected rent. Hr block 2012 tax software Because you have not included it in your income, it is not deductible. Hr block 2012 tax software   If you use an accrual method, report income when you earn it. Hr block 2012 tax software If you are unable to collect the rent, you may be able to deduct it as a business bad debt. Hr block 2012 tax software See chapter 10 of Publication 535 for more information about business bad debts. Hr block 2012 tax software Vacant rental property. Hr block 2012 tax software   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. Hr block 2012 tax software However, you cannot deduct any loss of rental income for the period the property is vacant. Hr block 2012 tax software Vacant while listed for sale. Hr block 2012 tax software   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. Hr block 2012 tax software If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. Hr block 2012 tax software Points The term “points” is often used to describe some of the charges paid, or treated as paid, by a borrower to take out a loan or a mortgage. Hr block 2012 tax software These charges are also called loan origination fees, maximum loan charges, or premium charges. Hr block 2012 tax software Any of these charges (points) that are solely for the use of money are interest. Hr block 2012 tax software Because points are prepaid interest, you generally cannot deduct the full amount in the year paid, but must deduct the interest over the term of the loan. Hr block 2012 tax software The method used to figure the amount of points you can deduct each year follows the original issue discount (OID) rules. Hr block 2012 tax software In this case, points are equivalent to OID, which is the difference between: The amount borrowed (redemption price at maturity, or principal) and The proceeds (issue price). Hr block 2012 tax software The first step is to determine whether your total OID (which you may have on bonds or other investments in addition to the mortgage loan), including the OID resulting from the points, is insignificant or de minimis. Hr block 2012 tax software If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct. Hr block 2012 tax software De minimis OID. Hr block 2012 tax software   The OID is de minimis if it is less than one-fourth of 1% (. Hr block 2012 tax software 0025) of the stated redemption price at maturity (principal amount of the loan) multiplied by the number of full years from the date of original issue to maturity (term of the loan). Hr block 2012 tax software   If the OID is de minimis, you can choose one of the following ways to figure the amount of points you can deduct each year. Hr block 2012 tax software On a constant-yield basis over the term of the loan. Hr block 2012 tax software On a straight line basis over the term of the loan. Hr block 2012 tax software In proportion to stated interest payments. Hr block 2012 tax software In its entirety at maturity of the loan. Hr block 2012 tax software You make this choice by deducting the OID (points) in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued. Hr block 2012 tax software Example. Hr block 2012 tax software Carol Madison took out a $100,000 mortgage loan on January 1, 2013, to buy a house she will use as a rental during 2013. Hr block 2012 tax software The loan is to be repaid over 30 years. Hr block 2012 tax software During 2013, Carol paid $10,000 of mortgage interest (stated interest) to the lender. Hr block 2012 tax software When the loan was made, she paid $1,500 in points to the lender. Hr block 2012 tax software The points reduced the principal amount of the loan from $100,000 to $98,500, resulting in $1,500 of OID. Hr block 2012 tax software Carol determines that the points (OID) she paid are de minimis based on the following computation. Hr block 2012 tax software Redemption price at maturity (principal amount of the loan) $100,000 Multiplied by: The term of the  loan in complete years ×30 Multiplied by ×. Hr block 2012 tax software 0025 De minimis amount $7,500 The points (OID) she paid ($1,500) are less than the de minimis amount ($7,500). Hr block 2012 tax software Therefore, Carol has de minimis OID and she can choose one of the four ways discussed earlier to figure the amount she can deduct each year. Hr block 2012 tax software Under the straight line method, she can deduct $50 each year for 30 years. Hr block 2012 tax software Constant-yield method. Hr block 2012 tax software   If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. Hr block 2012 tax software   You figure your deduction for the first year in the following manner. Hr block 2012 tax software Determine the issue price of the loan. Hr block 2012 tax software If you paid points on the loan, the issue price generally is the difference between the principal and the points. Hr block 2012 tax software Multiply the result in (1) by the yield to maturity (defined later). Hr block 2012 tax software Subtract any qualified stated interest payments (defined later) from the result in (2). Hr block 2012 tax software This is the OID you can deduct in the first year. Hr block 2012 tax software Yield to maturity (YTM). Hr block 2012 tax software   This rate is generally shown in the literature you receive from your lender. Hr block 2012 tax software If you do not have this information, consult your lender or tax advisor. Hr block 2012 tax software In general, the YTM is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan. Hr block 2012 tax software Qualified stated interest (QSI). Hr block 2012 tax software   In general, this is the stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a fixed rate. Hr block 2012 tax software Example—Year 1. Hr block 2012 tax software The facts are the same as in the previous example. Hr block 2012 tax software The yield to maturity on Carol's loan is 10. Hr block 2012 tax software 2467%, compounded annually. Hr block 2012 tax software She figured the amount of points (OID) she could deduct in 2013 as follows. Hr block 2012 tax software Principal amount of the loan $100,000 Minus: Points (OID) –1,500 Issue price of the loan $98,500 Multiplied by: YTM × . Hr block 2012 tax software 102467 Total 10,093 Minus: QSI –10,000 Points (OID) deductible in 2013 $93 To figure your deduction in any subsequent year, you start with the adjusted issue price. Hr block 2012 tax software To get the adjusted issue price, add to the issue price figured in Year 1 any OID previously deducted. Hr block 2012 tax software Then follow steps (2) and (3), earlier. Hr block 2012 tax software Example—Year 2. Hr block 2012 tax software Carol figured the deduction for 2014 as follows. Hr block 2012 tax software Issue price $98,500 Plus: Points (OID) deducted  in 2013 +93 Adjusted issue price $98,593 Multiplied by: YTM × . Hr block 2012 tax software 102467 Total 10,103 Minus: QSI –10,000 Points (OID) deductible in 2014 $103 Loan or mortgage ends. Hr block 2012 tax software    If your loan or mortgage ends, you may be able to deduct any remaining points (OID) in the tax year in which the loan or mortgage ends. Hr block 2012 tax software A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event. Hr block 2012 tax software However, if the refinancing is with the same lender, the remaining points (OID) generally are not deductible in the year in which the refinancing occurs, but may be deductible over the term of the new mortgage or loan. Hr block 2012 tax software Points when loan refinance is more than the previous outstanding balance. Hr block 2012 tax software   When you refinance a rental property for more than the previous outstanding balance, the portion of the points allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Hr block 2012 tax software For example, if an individual refinanced a loan with a balance of $100,000, the amount of the new loan was $120,000, and the taxpayer used $20,000 to purchase a car, points allocable to the $20,000 would be treated as nondeductible personal interest. Hr block 2012 tax software Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. Hr block 2012 tax software Improvements. Hr block 2012 tax software   You must capitalize any expense you pay to improve your rental property. Hr block 2012 tax software An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. Hr block 2012 tax software Betterments. Hr block 2012 tax software   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. Hr block 2012 tax software Restoration. Hr block 2012 tax software   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. Hr block 2012 tax software Adaptation. Hr block 2012 tax software   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. Hr block 2012 tax software Separate the costs of repairs and improvements, and keep accurate records. Hr block 2012 tax software You will need to know the cost of improvements when you sell or depreciate your property. Hr block 2012 tax software The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. Hr block 2012 tax software Table 1-1. Hr block 2012 tax software Examples of Improvements Additions Bedroom Bathroom Deck Garage Porch Patio  Lawn & Grounds Landscaping Driveway Walkway Fence Retaining wall Sprinkler system Swimming pool Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system   Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances Kitchen modernization Flooring Wall-to-wall carpeting  Insulation Attic Walls, floor Pipes, duct work Prev  Up  Next   Home   More Online Publications