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Irs Ez Form 2011

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Irs Ez Form 2011

Irs ez form 2011 Publication 936 - Main Content Table of Contents Part I. Irs ez form 2011 Home Mortgage InterestSecured Debt Qualified Home Special Situations Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement How To Report Special Rule for Tenant-Stockholders in Cooperative Housing Corporations Part II. Irs ez form 2011 Limits on Home Mortgage Interest DeductionHome Acquisition Debt Home Equity Debt Grandfathered Debt Table 1 Instructions How To Get Tax HelpLow Income Taxpayer Clinics Part I. Irs ez form 2011 Home Mortgage Interest This part explains what you can deduct as home mortgage interest. Irs ez form 2011 It includes discussions on points, mortgage insurance premiums, and how to report deductible interest on your tax return. Irs ez form 2011 Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). Irs ez form 2011 The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. Irs ez form 2011 You can deduct home mortgage interest if all the following conditions are met. Irs ez form 2011 You file Form 1040 and itemize deductions on Schedule A (Form 1040). Irs ez form 2011 The mortgage is a secured debt on a qualified home in which you have an ownership interest. Irs ez form 2011 Secured Debt and Qualified Home are explained later. Irs ez form 2011  Both you and the lender must intend that the loan be repaid. Irs ez form 2011 Fully deductible interest. Irs ez form 2011   In most cases, you can deduct all of your home mortgage interest. Irs ez form 2011 How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. Irs ez form 2011   If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. Irs ez form 2011 (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category. Irs ez form 2011 ) If one or more of your mortgages does not fit into any of these categories, use Part II of this publication to figure the amount of interest you can deduct. Irs ez form 2011   The three categories are as follows. Irs ez form 2011 Mortgages you took out on or before October 13, 1987 (called grandfathered debt). Irs ez form 2011 Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2013 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately). Irs ez form 2011 Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2013 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2). Irs ez form 2011 The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. Irs ez form 2011   See Part II for more detailed definitions of grandfathered, home acquisition, and home equity debt. Irs ez form 2011    You can use Figure A to check whether your home mortgage interest is fully deductible. Irs ez form 2011 This image is too large to be displayed in the current screen. Irs ez form 2011 Please click the link to view the image. Irs ez form 2011 Figure A. Irs ez form 2011 Is My Home Mortgage Interest Fully Deductible? Secured Debt You can deduct your home mortgage interest only if your mortgage is a secured debt. Irs ez form 2011 A secured debt is one in which you sign an instrument (such as a mortgage, deed of trust, or land contract) that: Makes your ownership in a qualified home security for payment of the debt, Provides, in case of default, that your home could satisfy the debt, and Is recorded or is otherwise perfected under any state or local law that applies. Irs ez form 2011 In other words, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. Irs ez form 2011 If you cannot pay the debt, your home can then serve as payment to the lender to satisfy (pay) the debt. Irs ez form 2011 In this publication, mortgage will refer to secured debt. Irs ez form 2011 Debt not secured by home. Irs ez form 2011   A debt is not secured by your home if it is secured solely because of a lien on your general assets or if it is a security interest that attaches to the property without your consent (such as a mechanic's lien or judgment lien). Irs ez form 2011   A debt is not secured by your home if it once was, but is no longer secured by your home. Irs ez form 2011 Wraparound mortgage. Irs ez form 2011   This is not a secured debt unless it is recorded or otherwise perfected under state law. Irs ez form 2011 Example. Irs ez form 2011 Beth owns a home subject to a mortgage of $40,000. Irs ez form 2011 She sells the home for $100,000 to John, who takes it subject to the $40,000 mortgage. Irs ez form 2011 Beth continues to make the payments on the $40,000 note. Irs ez form 2011 John pays $10,000 down and gives Beth a $90,000 note secured by a wraparound mortgage on the home. Irs ez form 2011 Beth does not record or otherwise perfect the $90,000 mortgage under the state law that applies. Irs ez form 2011 Therefore, the mortgage is not a secured debt and John cannot deduct any of the interest he pays on it as home mortgage interest. Irs ez form 2011 Choice to treat the debt as not secured by your home. Irs ez form 2011   You can choose to treat any debt secured by your qualified home as not secured by the home. Irs ez form 2011 This treatment begins with the tax year for which you make the choice and continues for all later tax years. Irs ez form 2011 You can revoke your choice only with the consent of the Internal Revenue Service (IRS). Irs ez form 2011   You may want to treat a debt as not secured by your home if the interest on that debt is fully deductible (for example, as a business expense) whether or not it qualifies as home mortgage interest. Irs ez form 2011 This may allow you, if the limits in Part II apply, more of a deduction for interest on other debts that are deductible only as home mortgage interest. Irs ez form 2011 Cooperative apartment owner. Irs ez form 2011   If you own stock in a cooperative housing corporation, see the Special Rule for Tenant-Stockholders in Cooperative Housing Corporations , near the end of this Part I. Irs ez form 2011 Qualified Home For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. Irs ez form 2011 This means your main home or your second home. Irs ez form 2011 A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. Irs ez form 2011 The interest you pay on a mortgage on a home other than your main or second home may be deductible if the proceeds of the loan were used for business, investment, or other deductible purposes. Irs ez form 2011 Otherwise, it is considered personal interest and is not deductible. Irs ez form 2011 Main home. Irs ez form 2011   You can have only one main home at any one time. Irs ez form 2011 This is the home where you ordinarily live most of the time. Irs ez form 2011 Second home. Irs ez form 2011   A second home is a home that you choose to treat as your second home. Irs ez form 2011 Second home not rented out. Irs ez form 2011   If you have a second home that you do not hold out for rent or resale to others at any time during the year, you can treat it as a qualified home. Irs ez form 2011 You do not have to use the home during the year. Irs ez form 2011 Second home rented out. Irs ez form 2011   If you have a second home and rent it out part of the year, you also must use it as a home during the year for it to be a qualified home. Irs ez form 2011 You must use this home more than 14 days or more than 10% of the number of days during the year that the home is rented at a fair rental, whichever is longer. Irs ez form 2011 If you do not use the home long enough, it is considered rental property and not a second home. Irs ez form 2011 For information on residential rental property, see Publication 527. Irs ez form 2011 More than one second home. Irs ez form 2011   If you have more than one second home, you can treat only one as the qualified second home during any year. Irs ez form 2011 However, you can change the home you treat as a second home during the year in the following situations. Irs ez form 2011 If you get a new home during the year, you can choose to treat the new home as your second home as of the day you buy it. Irs ez form 2011 If your main home no longer qualifies as your main home, you can choose to treat it as your second home as of the day you stop using it as your main home. Irs ez form 2011 If your second home is sold during the year or becomes your main home, you can choose a new second home as of the day you sell the old one or begin using it as your main home. Irs ez form 2011 Divided use of your home. Irs ez form 2011   The only part of your home that is considered a qualified home is the part you use for residential living. Irs ez form 2011 If you use part of your home for other than residential living, such as a home office, you must allocate the use of your home. Irs ez form 2011 You must then divide both the cost and fair market value of your home between the part that is a qualified home and the part that is not. Irs ez form 2011 Dividing the cost may affect the amount of your home acquisition debt, which is limited to the cost of your home plus the cost of any improvements. Irs ez form 2011 (See Home Acquisition Debt in Part II. Irs ez form 2011 ) Dividing the fair market value may affect your home equity debt limit, also explained in Part II . Irs ez form 2011 Renting out part of home. Irs ez form 2011   If you rent out part of a qualified home to another person (tenant), you can treat the rented part as being used by you for residential living only if all of the following conditions apply. Irs ez form 2011 The rented part of your home is used by the tenant primarily for residential living. Irs ez form 2011 The rented part of your home is not a self-contained residential unit having separate sleeping, cooking, and toilet facilities. Irs ez form 2011 You do not rent (directly or by sublease) the same or different parts of your home to more than two tenants at any time during the tax year. Irs ez form 2011 If two persons (and dependents of either) share the same sleeping quarters, they are treated as one tenant. Irs ez form 2011 Office in home. Irs ez form 2011   If you have an office in your home that you use in your business, see Publication 587, Business Use of Your Home. Irs ez form 2011 It explains how to figure your deduction for the business use of your home, which includes the business part of your home mortgage interest. Irs ez form 2011 Home under construction. Irs ez form 2011   You can treat a home under construction as a qualified home for a period of up to 24 months, but only if it becomes your qualified home at the time it is ready for occupancy. Irs ez form 2011   The 24-month period can start any time on or after the day construction begins. Irs ez form 2011 Home destroyed. Irs ez form 2011   You may be able to continue treating your home as a qualified home even after it is destroyed in a fire, storm, tornado, earthquake, or other casualty. Irs ez form 2011 This means you can continue to deduct the interest you pay on your home mortgage, subject to the limits described in this publication. Irs ez form 2011   You can continue treating a destroyed home as a qualified home if, within a reasonable period of time after the home is destroyed, you: Rebuild the destroyed home and move into it, or Sell the land on which the home was located. Irs ez form 2011   This rule applies to your main home and to a second home that you treat as a qualified home. Irs ez form 2011 Time-sharing arrangements. Irs ez form 2011   You can treat a home you own under a time-sharing plan as a qualified home if it meets all the requirements. Irs ez form 2011 A time-sharing plan is an arrangement between two or more people that limits each person's interest in the home or right to use it to a certain part of the year. Irs ez form 2011 Rental of time-share. Irs ez form 2011   If you rent out your time-share, it qualifies as a second home only if you also use it as a home during the year. Irs ez form 2011 See Second home rented out , earlier, for the use requirement. Irs ez form 2011 To know whether you meet that requirement, count your days of use and rental of the home only during the time you have a right to use it or to receive any benefits from the rental of it. Irs ez form 2011 Married taxpayers. Irs ez form 2011   If you are married and file a joint return, your qualified home(s) can be owned either jointly or by only one spouse. Irs ez form 2011 Separate returns. Irs ez form 2011   If you are married filing separately and you and your spouse own more than one home, you can each take into account only one home as a qualified home. Irs ez form 2011 However, if you both consent in writing, then one spouse can take both the main home and a second home into account. Irs ez form 2011 Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. Irs ez form 2011 It also describes certain special situations that may affect your deduction. Irs ez form 2011 Late payment charge on mortgage payment. Irs ez form 2011   You can deduct as home mortgage interest a late payment charge if it was not for a specific service performed in connection with your mortgage loan. Irs ez form 2011 Mortgage prepayment penalty. Irs ez form 2011   If you pay off your home mortgage early, you may have to pay a penalty. Irs ez form 2011 You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. Irs ez form 2011 Sale of home. Irs ez form 2011   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of the sale. Irs ez form 2011 Example. Irs ez form 2011 John and Peggy Harris sold their home on May 7. Irs ez form 2011 Through April 30, they made home mortgage interest payments of $1,220. Irs ez form 2011 The settlement sheet for the sale of the home showed $50 interest for the 6-day period in May up to, but not including, the date of sale. Irs ez form 2011 Their mortgage interest deduction is $1,270 ($1,220 + $50). Irs ez form 2011 Prepaid interest. Irs ez form 2011   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. Irs ez form 2011 You can deduct in each year only the interest that qualifies as home mortgage interest for that year. Irs ez form 2011 However, there is an exception that applies to points, discussed later. Irs ez form 2011 Mortgage interest credit. Irs ez form 2011    You may be able to claim a mortgage interest credit if you were issued a mortgage credit certificate (MCC) by a state or local government. Irs ez form 2011 Figure the credit on Form 8396, Mortgage Interest Credit. Irs ez form 2011 If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. Irs ez form 2011   See Form 8396 and Publication 530 for more information on the mortgage interest credit. Irs ez form 2011 Ministers' and military housing allowance. Irs ez form 2011   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you can still deduct your home mortgage interest. Irs ez form 2011 Hardest Hit Fund and Emergency Homeowners' Loan Programs. Irs ez form 2011   You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. Irs ez form 2011 You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. Irs ez form 2011 You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. Irs ez form 2011 If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098–MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received from payer(s) / borrower(s)), box 4 (mortgage insurance premiums), and box 5 (other information including real property taxes paid). Irs ez form 2011 However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. Irs ez form 2011 Mortgage assistance payments under section 235 of the National Housing Act. Irs ez form 2011   If you qualify for mortgage assistance payments for lower-income families under section 235 of the National Housing Act, part or all of the interest on your mortgage may be paid for you. Irs ez form 2011 You cannot deduct the interest that is paid for you. Irs ez form 2011 No other effect on taxes. Irs ez form 2011   Do not include these mortgage assistance payments in your income. Irs ez form 2011 Also, do not use these payments to reduce other deductions, such as real estate taxes. Irs ez form 2011 Divorced or separated individuals. Irs ez form 2011   If a divorce or separation agreement requires you or your spouse or former spouse to pay home mortgage interest on a home owned by both of you, the payment of interest may be alimony. Irs ez form 2011 See the discussion of Payments for jointly-owned home under Alimony in Publication 504, Divorced or Separated Individuals. Irs ez form 2011 Redeemable ground rents. Irs ez form 2011   In some states (such as Maryland), you can buy your home subject to a ground rent. Irs ez form 2011 A ground rent is an obligation you assume to pay a fixed amount per year on the property. Irs ez form 2011 Under this arrangement, you are leasing (rather than buying) the land on which your home is located. Irs ez form 2011   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. Irs ez form 2011   A ground rent is a redeemable ground rent if all of the following are true. Irs ez form 2011 Your lease, including renewal periods, is for more than 15 years. Irs ez form 2011 You can freely assign the lease. Irs ez form 2011 You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specific amount. Irs ez form 2011 The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled. Irs ez form 2011   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. Irs ez form 2011 Nonredeemable ground rents. Irs ez form 2011   Payments on a nonredeemable ground rent are not mortgage interest. Irs ez form 2011 You can deduct them as rent if they are a business expense or if they are for rental property. Irs ez form 2011 Reverse mortgages. Irs ez form 2011   A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. Irs ez form 2011 With a reverse mortgage, you retain title to your home. Irs ez form 2011 Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. Irs ez form 2011 Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Irs ez form 2011 Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until you actually pay it, which is usually when you pay off the loan in full. Irs ez form 2011 Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Part II. Irs ez form 2011 Rental payments. Irs ez form 2011   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. Irs ez form 2011 This is true even if the settlement papers call them interest. Irs ez form 2011 You cannot deduct these payments as home mortgage interest. Irs ez form 2011 Mortgage proceeds invested in tax-exempt securities. Irs ez form 2011   You cannot deduct the home mortgage interest on grandfathered debt or home equity debt if you used the proceeds of the mortgage to buy securities or certificates that produce tax-free income. Irs ez form 2011 “Grandfathered debt” and “home equity debt” are defined in Part II of this publication. Irs ez form 2011 Refunds of interest. Irs ez form 2011   If you receive a refund of interest in the same tax year you paid it, you must reduce your interest expense by the amount refunded to you. Irs ez form 2011 If you receive a refund of interest you deducted in an earlier year, you generally must include the refund in income in the year you receive it. Irs ez form 2011 However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. Irs ez form 2011 This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. Irs ez form 2011 If you need to include the refund in income, report it on Form 1040, line 21. Irs ez form 2011   If you received a refund of interest you overpaid in an earlier year, you generally will receive a Form 1098, Mortgage Interest Statement, showing the refund in box 3. Irs ez form 2011 For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. Irs ez form 2011   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in Publication 525, Taxable and Nontaxable Income. Irs ez form 2011 Cooperative apartment owner. Irs ez form 2011   If you own a cooperative apartment, you must reduce your home mortgage interest deduction by your share of any cash portion of a patronage dividend that the cooperative receives. Irs ez form 2011 The patronage dividend is a partial refund to the cooperative housing corporation of mortgage interest it paid in a prior year. Irs ez form 2011   If you receive a Form 1098 from the cooperative housing corporation, the form should show only the amount you can deduct. Irs ez form 2011 Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Irs ez form 2011 Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Irs ez form 2011 This image is too large to be displayed in the current screen. Irs ez form 2011 Please click the link to view the image. Irs ez form 2011 Figure B. Irs ez form 2011 Are My Points Fully Deductible This Year? A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Irs ez form 2011 See Points paid by the seller , later. Irs ez form 2011 General Rule You generally cannot deduct the full amount of points in the year paid. Irs ez form 2011 Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. Irs ez form 2011 See Deduction Allowed Ratably , next. Irs ez form 2011 For exceptions to the general rule, see Deduction Allowed in Year Paid , later. Irs ez form 2011 Deduction Allowed Ratably If you do not meet the tests listed under Deduction Allowed in Year Paid , later, the loan is not a home improvement loan, or you choose not to deduct your points in full in the year paid, you can deduct the points ratably (equally) over the life of the loan if you meet all the following tests. Irs ez form 2011 You use the cash method of accounting. Irs ez form 2011 This means you report income in the year you receive it and deduct expenses in the year you pay them. Irs ez form 2011 Most individuals use this method. Irs ez form 2011 Your loan is secured by a home. Irs ez form 2011 (The home does not need to be your main home. Irs ez form 2011 ) Your loan period is not more than 30 years. Irs ez form 2011 If your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period. Irs ez form 2011 Either your loan amount is $250,000 or less, or the number of points is not more than: 4, if your loan period is 15 years or less, or 6, if your loan period is more than 15 years. Irs ez form 2011 Example. Irs ez form 2011 You use the cash method of accounting. Irs ez form 2011 In 2013, you took out a $100,000 loan payable over 20 years. Irs ez form 2011 The terms of the loan are the same as for other 20-year loans offered in your area. Irs ez form 2011 You paid $4,800 in points. Irs ez form 2011 You made 3 monthly payments on the loan in 2013. Irs ez form 2011 You can deduct $60 [($4,800 ÷ 240 months) x 3 payments] in 2013. Irs ez form 2011 In 2014, if you make all twelve payments, you will be able to deduct $240 ($20 x 12). Irs ez form 2011 Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. Irs ez form 2011 (You can use Figure B as a quick guide to see whether your points are fully deductible in the year paid. Irs ez form 2011 ) Your loan is secured by your main home. Irs ez form 2011 (Your main home is the one you ordinarily live in most of the time. Irs ez form 2011 ) Paying points is an established business practice in the area where the loan was made. Irs ez form 2011 The points paid were not more than the points generally charged in that area. Irs ez form 2011 You use the cash method of accounting. Irs ez form 2011 This means you report income in the year you receive it and deduct expenses in the year you pay them. Irs ez form 2011 Most individuals use this method. Irs ez form 2011 The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. Irs ez form 2011 The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Irs ez form 2011 The funds you provided are not required to have been applied to the points. Irs ez form 2011 They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Irs ez form 2011 You cannot have borrowed these funds from your lender or mortgage broker. Irs ez form 2011 You use your loan to buy or build your main home. Irs ez form 2011 The points were computed as a percentage of the principal amount of the mortgage. Irs ez form 2011 The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. Irs ez form 2011 The points may be shown as paid from either your funds or the seller's. Irs ez form 2011 Note. Irs ez form 2011 If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan. Irs ez form 2011 Home improvement loan. Irs ez form 2011   You can also fully deduct in the year paid points paid on a loan to improve your main home, if tests (1) through (6) are met. Irs ez form 2011 Second home. Irs ez form 2011 You cannot fully deduct in the year paid points you pay on loans secured by your second home. Irs ez form 2011 You can deduct these points only over the life of the loan. Irs ez form 2011 Refinancing. Irs ez form 2011   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. Irs ez form 2011 This is true even if the new mortgage is secured by your main home. Irs ez form 2011   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Irs ez form 2011 You can deduct the rest of the points over the life of the loan. Irs ez form 2011 Example 1. Irs ez form 2011 In 1998, Bill Fields got a mortgage to buy a home. Irs ez form 2011 In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. Irs ez form 2011 The mortgage is secured by his home. Irs ez form 2011 To get the new loan, he had to pay three points ($3,000). Irs ez form 2011 Two points ($2,000) were for prepaid interest, and one point ($1,000) was charged for services, in place of amounts that ordinarily are stated separately on the settlement statement. Irs ez form 2011 Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. Irs ez form 2011 The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. Irs ez form 2011 Bill's first payment on the new loan was due July 1. Irs ez form 2011 He made six payments on the loan in 2013 and is a cash basis taxpayer. Irs ez form 2011 Bill used the funds from the new mortgage to repay his existing mortgage. Irs ez form 2011 Although the new mortgage loan was for Bill's continued ownership of his main home, it was not for the purchase or improvement of that home. Irs ez form 2011 He cannot deduct all of the points in 2013. Irs ez form 2011 He can deduct two points ($2,000) ratably over the life of the loan. Irs ez form 2011 He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. Irs ez form 2011 The other point ($1,000) was a fee for services and is not deductible. Irs ez form 2011 Example 2. Irs ez form 2011 The facts are the same as in Example 1, except that Bill used $25,000 of the loan proceeds to improve his home and $75,000 to repay his existing mortgage. Irs ez form 2011 Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. Irs ez form 2011 His deduction is $500 ($2,000 × 25%). Irs ez form 2011 Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. Irs ez form 2011 This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. Irs ez form 2011 The total amount Bill deducts in 2013 is $550 ($500 + $50). Irs ez form 2011 Special Situations This section describes certain special situations that may affect your deduction of points. Irs ez form 2011 Original issue discount. Irs ez form 2011   If you do not qualify to either deduct the points in the year paid or deduct them ratably over the life of the loan, or if you choose not to use either of these methods, the points reduce the issue price of the loan. Irs ez form 2011 This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. Irs ez form 2011 Amounts charged for services. Irs ez form 2011    Amounts charged by the lender for specific services connected to the loan are not interest. Irs ez form 2011 Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Irs ez form 2011  You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Irs ez form 2011 Points paid by the seller. Irs ez form 2011   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Irs ez form 2011 Treatment by seller. Irs ez form 2011   The seller cannot deduct these fees as interest. Irs ez form 2011 But they are a selling expense that reduces the amount realized by the seller. Irs ez form 2011 See Publication 523 for information on selling your home. Irs ez form 2011 Treatment by buyer. Irs ez form 2011   The buyer reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them. Irs ez form 2011 If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. Irs ez form 2011 If any of those tests are not met, the buyer deducts the points over the life of the loan. Irs ez form 2011   If you need information about the basis of your home, see Publication 523 or Publication 530. Irs ez form 2011 Funds provided are less than points. Irs ez form 2011   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the funds you provided were less than the points charged to you (test (6)), you can deduct the points in the year paid, up to the amount of funds you provided. Irs ez form 2011 In addition, you can deduct any points paid by the seller. Irs ez form 2011 Example 1. Irs ez form 2011 When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Irs ez form 2011 You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. Irs ez form 2011 Of the $1,000 charged for points, you can deduct $750 in the year paid. Irs ez form 2011 You spread the remaining $250 over the life of the mortgage. Irs ez form 2011 Example 2. Irs ez form 2011 The facts are the same as in Example 1, except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. Irs ez form 2011 In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Irs ez form 2011 You spread the remaining $250 over the life of the mortgage. Irs ez form 2011 You must reduce the basis of your home by the $1,000 paid by the seller. Irs ez form 2011 Excess points. Irs ez form 2011   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the points paid were more than generally paid in your area (test (3)), you deduct in the year paid only the points that are generally charged. Irs ez form 2011 You must spread any additional points over the life of the mortgage. Irs ez form 2011 Mortgage ending early. Irs ez form 2011   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. Irs ez form 2011 However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. Irs ez form 2011 Instead, deduct the remaining balance over the term of the new loan. Irs ez form 2011   A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Irs ez form 2011 Example. Irs ez form 2011 Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. Irs ez form 2011 He deducts $200 points per year. Irs ez form 2011 Through 2012, Dan has deducted $2,200 of the points. Irs ez form 2011 Dan prepaid his mortgage in full in 2013. Irs ez form 2011 He can deduct the remaining $800 of points in 2013. Irs ez form 2011 Limits on deduction. Irs ez form 2011   You cannot fully deduct points paid on a mortgage that exceeds the limits discussed in Part II . Irs ez form 2011 See the Table 1 Instructions for line 10. Irs ez form 2011 Form 1098. Irs ez form 2011    The mortgage interest statement you receive should show not only the total interest paid during the year, but also your deductible points paid during the year. Irs ez form 2011 See Form 1098, Mortgage Interest Statement , later. Irs ez form 2011 Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. Irs ez form 2011 The insurance must be in connection with home acquisition debt, and the insurance contract must have been issued after 2006. Irs ez form 2011 Qualified mortgage insurance. Irs ez form 2011   Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). Irs ez form 2011   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. Irs ez form 2011 If provided by the Rural Housing Service, it is commonly known as a guarantee fee. Irs ez form 2011 The funding fee and guarantee fee can either be included in the amount of the loan or paid in full at the time of closing. Irs ez form 2011 These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Irs ez form 2011 Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. Irs ez form 2011 Special rules for prepaid mortgage insurance. Irs ez form 2011   Generally, if you paid premiums for qualified mortgage insurance that are properly allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. Irs ez form 2011 You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. Irs ez form 2011 No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. Irs ez form 2011 This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. Irs ez form 2011 Example. Irs ez form 2011 Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. Irs ez form 2011 Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Irs ez form 2011 Since the $9,240 in private mortgage insurance is allocable to periods after 2012, Ryan must allocate the $9,240 over the shorter of the life of the mortgage or 84 months. Irs ez form 2011 Ryan's adjusted gross income (AGI) for 2012 is $76,000. Irs ez form 2011 Ryan can deduct $880 ($9,240 ÷ 84 x 8 months) for qualified mortgage insurance premiums in 2012. Irs ez form 2011 For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 x 12 months) if his AGI is $100,000 or less. Irs ez form 2011 In this example, the mortgage insurance premiums are allocated over 84 months, which is shorter than the life of the mortgage of 15 years (180 months). Irs ez form 2011 Limit on deduction. Irs ez form 2011   If your adjusted gross income on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. Irs ez form 2011 See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. Irs ez form 2011 If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Irs ez form 2011 Form 1098. Irs ez form 2011   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your mortgage insurance premiums paid during the year, which may qualify to be treated as deductible mortgage interest. Irs ez form 2011 See Form 1098, Mortgage Interest Statement, next. Irs ez form 2011 Form 1098, Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage, you generally will receive a Form 1098 or a similar statement from the mortgage holder. Irs ez form 2011 You will receive the statement if you pay interest to a person (including a financial institution or cooperative housing corporation) in the course of that person's trade or business. Irs ez form 2011 A governmental unit is a person for purposes of furnishing the statement. Irs ez form 2011 The statement for each year should be sent to you by January 31 of the following year. Irs ez form 2011 A copy of this form will also be sent to the IRS. Irs ez form 2011 The statement will show the total interest you paid during the year, any mortgage insurance premiums you paid, and if you purchased a main home during the year, it also will show the deductible points paid during the year, including seller-paid points. Irs ez form 2011 However, it should not show any interest that was paid for you by a government agency. Irs ez form 2011 As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Irs ez form 2011 However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. Irs ez form 2011 See the earlier discussion of Points to determine whether you can deduct points not shown on Form 1098. Irs ez form 2011 Prepaid interest on Form 1098. Irs ez form 2011   If you prepaid interest in 2013 that accrued in full by January 15, 2014, this prepaid interest may be included in box 1 of Form 1098. Irs ez form 2011 However, you cannot deduct the prepaid amount for January 2014 in 2013. Irs ez form 2011 (See Prepaid interest , earlier. Irs ez form 2011 ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. Irs ez form 2011 You will include the interest for January 2014 with other interest you pay for 2014. Irs ez form 2011 Refunded interest. Irs ez form 2011   If you received a refund of mortgage interest you overpaid in an earlier year, you generally will receive a Form 1098 showing the refund in box 3. Irs ez form 2011 See Refunds of interest , earlier. Irs ez form 2011 Mortgage insurance premiums. Irs ez form 2011   The amount of mortgage insurance premiums you paid during 2013 may be shown in Box 4 of Form 1098. Irs ez form 2011 See Mortgage Insurance Premiums , earlier. Irs ez form 2011 How To Report Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. Irs ez form 2011 If you paid more deductible interest to the financial institution than the amount shown on Form 1098, show the larger deductible amount on line 10. Irs ez form 2011 Attach a statement explaining the difference and print “See attached” next to line 10. Irs ez form 2011 Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. Irs ez form 2011 If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and taxpayer identification number (TIN) on the dotted lines next to line 11. Irs ez form 2011 The seller must give you this number and you must give the seller your TIN. Irs ez form 2011 A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Irs ez form 2011 Failure to meet any of these requirements may result in a $50 penalty for each failure. Irs ez form 2011 The TIN can be either a social security number, an individual taxpayer identification number (issued by the Internal Revenue Service), or an employer identification number. Irs ez form 2011 If you can take a deduction for points that were not reported to you on Form 1098, deduct those points on Schedule A (Form 1040), line 12. Irs ez form 2011 Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. Irs ez form 2011 More than one borrower. Irs ez form 2011   If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Irs ez form 2011 Show how much of the interest each of you paid, and give the name and address of the person who received the form. Irs ez form 2011 Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Irs ez form 2011 Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. Irs ez form 2011   Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Irs ez form 2011 Let each of the other borrowers know what his or her share is. Irs ez form 2011 Mortgage proceeds used for business or investment. Irs ez form 2011   If your home mortgage interest deduction is limited under the rules explained in Part II , but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 2 near the end of this publication. Irs ez form 2011 It shows where to deduct the part of your excess interest that is for those activities. Irs ez form 2011 The Table 1 Instructions for line 13 in Part II explain how to divide the excess interest among the activities for which the mortgage proceeds were used. Irs ez form 2011 Special Rule for Tenant-Stockholders in Cooperative Housing Corporations A qualified home includes stock in a cooperative housing corporation owned by a tenant-stockholder. Irs ez form 2011 This applies only if the tenant-stockholder is entitled to live in the house or apartment because of owning stock in the cooperative. Irs ez form 2011 Cooperative housing corporation. Irs ez form 2011   This is a corporation that meets all of the following conditions. Irs ez form 2011 Has only one class of stock outstanding, Has no stockholders other than those who own the stock that can live in a house, apartment, or house trailer owned or leased by the corporation, Has no stockholders who can receive any distribution out of capital other than on a liquidation of the corporation, and Meets at least one of the following requirements. Irs ez form 2011 Receives at least 80% of its gross income for the year in which the mortgage interest is paid or incurred from tenant-stockholders. Irs ez form 2011 For this purpose, gross income is all income received during the entire year, including amounts received before the corporation changed to cooperative ownership. Irs ez form 2011 At all times during the year, at least 80% of the total square footage of the corporation's property is used or available for use by the tenant-stockholders for residential or residential-related use. Irs ez form 2011 At least 90% of the corporation's expenditures paid or incurred during the year are for the acquisition, construction, management, maintenance, or care of corporate property for the benefit of the tenant-stockholders. Irs ez form 2011 Stock used to secure debt. Irs ez form 2011   In some cases, you cannot use your cooperative housing stock to secure a debt because of either: Restrictions under local or state law, or Restrictions in the cooperative agreement (other than restrictions in which the main purpose is to permit the tenant- stockholder to treat unsecured debt as secured debt). Irs ez form 2011 However, you can treat a debt as secured by the stock to the extent that the proceeds are used to buy the stock under the allocation of interest rules. Irs ez form 2011 See chapter 4 of Publication 535 for details on these rules. Irs ez form 2011 Figuring deductible home mortgage interest. Irs ez form 2011   Generally, if you are a tenant-stockholder, you can deduct payments you make for your share of the interest paid or incurred by the cooperative. Irs ez form 2011 The interest must be on a debt to buy, build, change, improve, or maintain the cooperative's housing, or on a debt to buy the land. Irs ez form 2011   Figure your share of this interest by multiplying the total by the following fraction. Irs ez form 2011      Your shares of stock in the cooperative   The total shares of stock in the cooperative Limits on deduction. Irs ez form 2011   To figure how the limits discussed in Part II apply to you, treat your share of the cooperative's debt as debt incurred by you. Irs ez form 2011 The cooperative should determine your share of its grandfathered debt, its home acquisition debt, and its home equity debt. Irs ez form 2011 (Your share of each of these types of debt is equal to the average balance of each debt multiplied by the fraction just given. Irs ez form 2011 ) After your share of the average balance of each type of debt is determined, you include it with the average balance of that type of debt secured by your stock. Irs ez form 2011 Form 1098. Irs ez form 2011    The cooperative should give you a Form 1098 showing your share of the interest. Irs ez form 2011 Use the rules in this publication to determine your deductible mortgage interest. Irs ez form 2011 Part II. Irs ez form 2011 Limits on Home Mortgage Interest Deduction This part of the publication discusses the limits on deductible home mortgage interest. Irs ez form 2011 These limits apply to your home mortgage interest expense if you have a home mortgage that does not fit into any of the three categories listed at the beginning of Part I under Fully deductible interest . Irs ez form 2011 Your home mortgage interest deduction is limited to the interest on the part of your home mortgage debt that is not more than your qualified loan limit. Irs ez form 2011 This is the part of your home mortgage debt that is grandfathered debt or that is not more than the limits for home acquisition debt and home equity debt. Irs ez form 2011 Table 1 can help you figure your qualified loan limit and your deductible home mortgage interest. Irs ez form 2011 Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home (your main or second home). Irs ez form 2011 It also must be secured by that home. Irs ez form 2011 If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. Irs ez form 2011 The additional debt may qualify as home equity debt (discussed later). Irs ez form 2011 Home acquisition debt limit. Irs ez form 2011   The total amount you can treat as home acquisition debt at any time on your main home and second home cannot be more than $1 million ($500,000 if married filing separately). Irs ez form 2011 This limit is reduced (but not below zero) by the amount of your grandfathered debt (discussed later). Irs ez form 2011 Debt over this limit may qualify as home equity debt (also discussed later). Irs ez form 2011 Refinanced home acquisition debt. Irs ez form 2011   Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt. Irs ez form 2011 However, the new debt will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing. Irs ez form 2011 Any additional debt not used to buy, build, or substantially improve a qualified home is not home acquisition debt, but may qualify as home equity debt (discussed later). Irs ez form 2011 Mortgage that qualifies later. Irs ez form 2011   A mortgage that does not qualify as home acquisition debt because it does not meet all the requirements may qualify at a later time. Irs ez form 2011 For example, a debt that you use to buy your home may not qualify as home acquisition debt because it is not secured by the home. Irs ez form 2011 However, if the debt is later secured by the home, it may qualify as home acquisition debt after that time. Irs ez form 2011 Similarly, a debt that you use to buy property may not qualify because the property is not a qualified home. Irs ez form 2011 However, if the property later becomes a qualified home, the debt may qualify after that time. Irs ez form 2011 Mortgage treated as used to buy, build, or improve home. Irs ez form 2011   A mortgage secured by a qualified home may be treated as home acquisition debt, even if you do not actually use the proceeds to buy, build, or substantially improve the home. Irs ez form 2011 This applies in the following situations. Irs ez form 2011 You buy your home within 90 days before or after the date you take out the mortgage. Irs ez form 2011 The home acquisition debt is limited to the home's cost, plus the cost of any substantial improvements within the limit described below in (2) or (3). Irs ez form 2011 (See Example 1 later. Irs ez form 2011 ) You build or improve your home and take out the mortgage before the work is completed. Irs ez form 2011 The home acquisition debt is limited to the amount of the expenses incurred within 24 months before the date of the mortgage. Irs ez form 2011 You build or improve your home and take out the mortgage within 90 days after the work is completed. Irs ez form 2011 The home acquisition debt is limited to the amount of the expenses incurred within the period beginning 24 months before the work is completed and ending on the date of the mortgage. Irs ez form 2011 (See Example 2 later. Irs ez form 2011 ) Example 1. Irs ez form 2011 You bought your main home on June 3 for $175,000. Irs ez form 2011 You paid for the home with cash you got from the sale of your old home. Irs ez form 2011 On July 15, you took out a mortgage of $150,000 secured by your main home. Irs ez form 2011 You used the $150,000 to invest in stocks. Irs ez form 2011 You can treat the mortgage as taken out to buy your home because you bought the home within 90 days before you took out the mortgage. Irs ez form 2011 The entire mortgage qualifies as home acquisition debt because it was not more than the home's cost. Irs ez form 2011 Example 2. Irs ez form 2011 On January 31, John began building a home on the lot that he owned. Irs ez form 2011 He used $45,000 of his personal funds to build the home. Irs ez form 2011 The home was completed on October 31. Irs ez form 2011 On November 21, John took out a $36,000 mortgage that was secured by the home. Irs ez form 2011 The mortgage can be treated as used to build the home because it was taken out within 90 days after the home was completed. Irs ez form 2011 The entire mortgage qualifies as home acquisition debt because it was not more than the expenses incurred within the period beginning 24 months before the home was completed. Irs ez form 2011 This is illustrated by Figure C. Irs ez form 2011   Please click here for the text description of the image. Irs ez form 2011 Figure C. Irs ez form 2011 John's example Date of the mortgage. Irs ez form 2011   The date you take out your mortgage is the day the loan proceeds are disbursed. Irs ez form 2011 This is generally the closing date. Irs ez form 2011 You can treat the day you apply in writing for your mortgage as the date you take it out. Irs ez form 2011 However, this applies only if you receive the loan proceeds within a reasonable time (such as within 30 days) after your application is approved. Irs ez form 2011 If a timely application you make is rejected, a reasonable additional time will be allowed to make a new application. Irs ez form 2011 Cost of home or improvements. Irs ez form 2011   To determine your cost, include amounts paid to acquire any interest in a qualified home or to substantially improve the home. Irs ez form 2011   The cost of building or substantially improving a qualified home includes the costs to acquire real property and building materials, fees for architects and design plans, and required building permits. Irs ez form 2011 Substantial improvement. Irs ez form 2011   An improvement is substantial if it: Adds to the value of your home, Prolongs your home's useful life, or Adapts your home to new uses. Irs ez form 2011    Repairs that maintain your home in good condition, such as repainting your home, are not substantial improvements. Irs ez form 2011 However, if you paint your home as part of a renovation that substantially improves your qualified home, you can include the painting costs in the cost of the improvements. Irs ez form 2011 Acquiring an interest in a home because of a divorce. Irs ez form 2011   If you incur debt to acquire the interest of a spouse or former spouse in a home, because of a divorce or legal separation, you can treat that debt as home acquisition debt. Irs ez form 2011 Part of home not a qualified home. Irs ez form 2011    To figure your home acquisition debt, you must divide the cost of your home and improvements between the part of your home that is a qualified home and any part that is not a qualified home. Irs ez form 2011 See Divided use of your home under Qualified Home in Part I. Irs ez form 2011 Home Equity Debt If you took out a loan for reasons other than to buy, build, or substantially improve your home, it may qualify as home equity debt. Irs ez form 2011 In addition, debt you incurred to buy, build, or substantially improve your home, to the extent it is more than the home acquisition debt limit (discussed earlier), may qualify as home equity debt. Irs ez form 2011 Home equity debt is a mortgage you took out after October 13, 1987, that: Does not qualify as home acquisition debt or as grandfathered debt, and Is secured by your qualified home. Irs ez form 2011 Example. Irs ez form 2011 You bought your home for cash 10 years ago. Irs ez form 2011 You did not have a mortgage on your home until last year, when you took out a $50,000 loan, secured by your home, to pay for your daughter's college tuition and your father's medical bills. Irs ez form 2011 This loan is home equity debt. Irs ez form 2011 Home equity debt limit. Irs ez form 2011   There is a limit on the amount of debt that can be treated as home equity debt. Irs ez form 2011 The total home equity debt on your main home and second home is limited to the smaller of: $100,000 ($50,000 if married filing separately), or The total of each home's fair market value (FMV) reduced (but not below zero) by the amount of its home acquisition debt and grandfathered debt. Irs ez form 2011 Determine the FMV and the outstanding home acquisition and grandfathered debt for each home on the date that the last debt was secured by the home. Irs ez form 2011 Example. Irs ez form 2011 You own one home that you bought in 2000. Irs ez form 2011 Its FMV now is $110,000, and the current balance on your original mortgage (home acquisition debt) is $95,000. Irs ez form 2011 Bank M offers you a home mortgage loan of 125% of the FMV of the home less any outstanding mortgages or other liens. Irs ez form 2011 To consolidate some of your other debts, you take out a $42,500 home mortgage loan [(125% × $110,000) − $95,000] with Bank M. Irs ez form 2011 Your home equity debt is limited to $15,000. Irs ez form 2011 This is the smaller of: $100,000, the maximum limit, or $15,000, the amount that the FMV of $110,000 exceeds the amount of home acquisition debt of $95,000. Irs ez form 2011 Debt higher than limit. Irs ez form 2011   Interest on amounts over the home equity debt limit (such as the interest on $27,500 [$42,500 − $15,000] in the preceding example) generally is treated as personal interest and is not deductible. Irs ez form 2011 But if the proceeds of the loan were used for investment, business, or other deductible purposes, the interest may be deductible. Irs ez form 2011 If it is, see the Table 1 Instructions for line 13 for an explanation of how to allocate the excess interest. Irs ez form 2011 Part of home not a qualified home. Irs ez form 2011   To figure the limit on your home equity debt, you must divide the FMV of your home between the part that is a qualified home and any part that is not a qualified home. Irs ez form 2011 See Divided use of your home under Qualified Home in Part I. Irs ez form 2011 Fair market value (FMV). Irs ez form 2011    This is the price at which the home would change hands between you and a buyer, neither having to sell or buy, and both having reasonable knowledge of all relevant facts. Irs ez form 2011 Sales of similar homes in your area, on about the same date your last debt was secured by the home, may be helpful in figuring the FMV. Irs ez form 2011 Grandfathered Debt If you took out a mortgage on your home before October 14, 1987, or you refinanced such a mortgage, it may qualify as grandfathered debt. Irs ez form 2011 To qualify, it must have been secured by your qualified home on October 13, 1987, and at all times after that date. Irs ez form 2011 How you used the proceeds does not matter. Irs ez form 2011 Grandfathered debt is not limited. Irs ez form 2011 All of the interest you paid on grandfathered debt is fully deductible home mortgage interest. Irs ez form 2011 However, the amount of your grandfathered debt reduces the $1 million limit for home acquisition debt and the limit based on your home's fair market value for home equity debt. Irs ez form 2011 Refinanced grandfathered debt. Irs ez form 2011   If you refinanced grandfathered debt after October 13, 1987, for an amount that was not more than the mortgage principal left on the debt, then you still treat it as grandfathered debt. Irs ez form 2011 To the extent the new debt is more than that mortgage principal, it is treated as home acquisition or home equity debt, and the mortgage is a mixed-use mortgage (discussed later under Average Mortgage Balance in the Table 1 instructions). Irs ez form 2011 The debt must be secured by the qualified home. Irs ez form 2011   You treat grandfathered debt that was refinanced after October 13, 1987, as grandfathered debt only for the term left on the debt that was refinanced. Irs ez form 2011 After that, you treat it as home acquisition debt or home equity debt, depending on how you used the proceeds. Irs ez form 2011 Exception. Irs ez form 2011   If the debt before refinancing was like a balloon note (the principal on the debt was not amortized over the term of the debt), then you treat the refinanced debt as grandfathered debt for the term of the first refinancing. Irs ez form 2011 This term cannot be more than 30 years. Irs ez form 2011 Example. Irs ez form 2011 Chester took out a $200,000 first mortgage on his home in 1986. Irs ez form 2011 The mortgage was a five-year balloon note and the entire balance on the note was due in 1991. Irs ez form 2011 Chester refinanced the debt in 1991 with a new 20-year mortgage. Irs ez form 2011 The refinanced debt is treated as grandfathered debt for its entire term (20 years). Irs ez form 2011 Line-of-credit mortgage. Irs ez form 2011    If you had a line-of-credit mortgage on October 13, 1987, and borrowed additional amounts against it after that date, then the additional amounts are either home acquisition debt or home equity debt depending on how you used the proceeds. Irs ez form 2011 The balance on the mortgage before you borrowed the additional amounts is grandfathered debt. Irs ez form 2011 The newly borrowed amounts are not grandfathered debt because the funds were borrowed after October 13, 1987. Irs ez form 2011 See Average Mortgage Balance in the Table 1 Instructions that follow. Irs ez form 2011 Table 1 Instructions Unless you are subject to the overall limit on itemized deductions, you can deduct all of the interest you paid during the year on mortgages secured by your main home or second home in either of the following two situations. Irs ez form 2011 All the mortgages are grandfathered debt. Irs ez form 2011 The total of the mortgage balances for the entire year is within the limits discussed earlier under Home Acquisition Debt and Home Equity Debt . Irs ez form 2011 In either of those cases, you do not need Table 1. Irs ez form 2011 Otherwise, you can use Table 1 to determine your qualified loan limit and deductible home mortgage interest. Irs ez form 2011 Fill out only one Table 1 for both your main and second home regardless of how many mortgages you have. Irs ez form 2011 Table 1. Irs ez form 2011 Worksheet To Figure Your Qualified Loan Limit and Deductible Home Mortgage Interest For the Current Year See the Table 1 Instructions. Irs ez form 2011 Part I Qualified Loan Limit 1. Irs ez form 2011 Enter the average balance of all your grandfathered debt. Irs ez form 2011 See line 1 instructions 1. Irs ez form 2011   2. Irs ez form 2011 Enter the average balance of all your home acquisition debt. Irs ez form 2011 See line 2 instructions 2. Irs ez form 2011   3. Irs ez form 2011 Enter $1,000,000 ($500,000 if married filing separately) 3. Irs ez form 2011   4. Irs ez form 2011 Enter the larger of the amount on line 1 or the amount on line 3 4. Irs ez form 2011   5. Irs ez form 2011 Add the amounts on lines 1 and 2. Irs ez form 2011 Enter the total here 5. Irs ez form 2011   6. Irs ez form 2011 Enter the smaller of the amount on line 4 or the amount on line 5 6. Irs ez form 2011   7. Irs ez form 2011 If you have home equity debt, enter the smaller of $100,000 ($50,000 if married filing separately) or your limited amount. Irs ez form 2011 See the line 7 instructions for the limit which may apply to you. Irs ez form 2011 7. Irs ez form 2011   8. Irs ez form 2011 Add the amounts on lines 6 and 7. Irs ez form 2011 Enter the total. Irs ez form 2011 This is your qualified loan limit. Irs ez form 2011 8. Irs ez form 2011   Part II Deductible Home Mortgage Interest 9. Irs ez form 2011 Enter the total of the average balances of all mortgages on all qualified homes. Irs ez form 2011  See line 9 instructions 9. Irs ez form 2011     If line 8 is less than line 9, go on to line 10. Irs ez form 2011 If line 8 is equal to or more than line 9, stop here. Irs ez form 2011 All of your interest on all the mortgages included on line 9 is deductible as home mortgage interest on Schedule A (Form 1040). Irs ez form 2011     10. Irs ez form 2011 Enter the total amount of interest that you paid. Irs ez form 2011 See line 10 instructions 10. Irs ez form 2011   11. Irs ez form 2011 Divide the amount on line 8 by the amount on line 9. Irs ez form 2011 Enter the result as a decimal amount (rounded to three places) 11. Irs ez form 2011 × . Irs ez form 2011 12. Irs ez form 2011 Multiply the amount on line 10 by the decimal amount on line 11. Irs ez form 2011 Enter the result. Irs ez form 2011 This is your deductible home mortgage interest. Irs ez form 2011 Enter this amount on Schedule A (Form 1040) 12. Irs ez form 2011   13. Irs ez form 2011 Subtract the amount on line 12 from the amount on line 10. Irs ez form 2011 Enter the result. Irs ez form 2011 This is not home mortgage interest. Irs ez form 2011 See line 13 instructions 13. Irs ez form 2011   Home equity debt only. Irs ez form 2011   If all of your mortgages are home equity debt, do not fill in lines 1 through 5. Irs ez form 2011 Enter zero on line 6 and complete the rest of Table 1. Irs ez form 2011 Average Mortgage Balance You have to figure the average balance of each mortgage to determine your qualified loan limit. Irs ez form 2011 You need these amounts to complete lines 1, 2, and 9 of Table 1. Irs ez form 2011 You can use the highest mortgage balances during the year, but you may benefit most by using the average balances. Irs ez form 2011 The following are methods you can use to figure your average mortgage balances. Irs ez form 2011 However, if a mortgage has more than one category of debt, see Mixed-use mortgages , later, in this section. Irs ez form 2011 Average of first and last balance method. Irs ez form 2011   You can use this method if all the following apply. Irs ez form 2011 You did not borrow any new amounts on the mortgage during the year. Irs ez form 2011 (This does not include borrowing the original mortgage amount. Irs ez form 2011 ) You did not prepay more than one month's principal during the year. Irs ez form 2011 (This includes prepayment by refinancing your home or by applying proceeds from its sale. Irs ez form 2011 ) You had to make level payments at fixed equal intervals on at least a semi-annual basis. Irs ez form 2011 You treat your payments as level even if they were adjusted from time to time because of changes in the interest rate. Irs ez form 2011    To figure your average balance, complete the following worksheet. Irs ez form 2011    1. Irs ez form 2011 Enter the balance as of the first day of the year that the mortgage was secured by your qualified home during the year (generally January 1)   2. Irs ez form 2011 Enter the balance as of the last day of the year that the mortgage was secured by your qualified home during the year (generally December 31)   3. Irs ez form 2011 Add amounts on lines 1 and 2   4. Irs ez form 2011 Divide the amount on line 3 by 2. Irs ez form 2011 Enter the result   Interest paid divided by interest rate method. Irs ez form 2011   You can use this method if at all times in 2013 the mortgage was secured by your qualified home and the interest was paid at least monthly. Irs ez form 2011    Complete the following worksheet to figure your average balance. Irs ez form 2011    1. Irs ez form 2011 Enter the interest paid in 2013. Irs ez form 2011 Do not include points, mortgage insurance premiums, or any interest paid in 2013 that is for a year after 2013. Irs ez form 2011 However, do include interest that is for 2013 but was paid in an earlier year   2. Irs ez form 2011 Enter the annual interest rate on the mortgage. Irs ez form 2011 If the interest rate varied in 2013, use the lowest rate for the year   3. Irs ez form 2011 Divide the amount on line 1 by the amount on line 2. Irs ez form 2011 Enter the result   Example. Irs ez form 2011 Mr. Irs ez form 2011 Blue had a line of credit secured by his main home all year. Irs ez form 2011 He paid interest of $2,500 on this loan. Irs ez form 2011 The interest rate on the loan was 9% (. Irs ez form 2011 09) all year. Irs ez form 2011 His average balance using this method is $27,778, figured as follows. Irs ez form 2011 1. Irs ez form 2011 Enter the interest paid in 2013. Irs ez form 2011 Do not include points, mortgage insurance premiums, or any interest paid in 2013 that is for a year after 2013. Irs ez form 2011 However, do include interest that is for 2013 but was paid in an earlier year $2,500 2. Irs ez form 2011 Enter the annual interest rate on the mortgage. Irs ez form 2011 If the interest rate varied in 2013, use the lowest rate for the year . Irs ez form 2011 09 3. Irs ez form 2011 Divide the amount on line 1 by the amount on line 2. Irs ez form 2011 Enter the result $27,778 Statements provided by your lender. Irs ez form 2011   If you receive monthly statements showing the closing balance or the average balance for the month, you can use either to figure your average balance for the year. Irs ez form 2011 You can treat the balance as zero for any month the mortgage was not secured by your qualified home. Irs ez form 2011   For each mortgage, figure your average balance by adding your monthly closing or average balances and dividing that total by the number of months the home secured by that mortgage was a qualified home during the year. Irs ez form 2011   If your lender can give you your average balance for the year, you can use that amount. Irs ez form 2011 Example. Irs ez form 2011 Ms. Irs ez form 2011 Brown had a home equity loan secured by her main home all year. Irs ez form 2011 She received monthly statements showing her average balance for each month. Irs ez form 2011 She can figure her average balance for the year by adding her monthly average balances and dividing the total by 12. Irs ez form 2011 Mixed-use mortgages. Irs ez form 2011   A mixed-use mortgage is a loan that consists of more than one of the three categories of debt (grandfathered debt, home acquisition debt, and home equity debt). Irs ez form 2011 For example, a mortgage you took out during the year is a mixed-use mortgage if you used its proceeds partly to refinance a mortgage that you took out in an earlier year to buy your home (home acquisition debt) and partly to buy a car (home equity debt). Irs ez form 2011   Complete lines 1 and 2 of Table 1 by including the separate average balances of any grandfathered debt and home acquisition debt in your mixed-use mortgage. Irs ez form 2011 Do not use the methods described earlier in this section to figure the average balance of either category. Irs ez form 2011 Instead, for each category, use the following method. Irs ez form 2011 Figure the balance of that category of debt for each month. Irs ez form 2011 This is the amount of the loan proceeds allocated to that category, reduced by your principal payments on the mortgage previously applied to that category. Irs ez form 2011 Principal payments on a mixed-use mortgage are applied in full to each category of debt, until its balance is zero, in the following order: First, any home equity debt, Next, any grandfathered debt, and Finally, any home acquisition debt. Irs ez form 2011 Add together the monthly balances figured in (1). Irs ez form 2011 Divide the result in (2) by 12. Irs ez form 2011   Complete line 9 of Table 1 by including the average balance of the entire mixed-use mortgage, figured under one of the methods described earlier in this section. Irs ez form 2011 Example 1. Irs ez form 2011 In 1986, Sharon took out a $1,400,000 mortgage to buy her main home (grandfathered debt). Irs ez form 2011 On March 2, 2013, when the home had a fair market value of $1,700,000 and she owed $1,100,000 on the mortgage, Sharon took out a second mortgage for $200,000. Irs ez form 2011 She used $180,000 of the proceeds to make substantial improvements to her home (home acquisition debt) and the remaining $20,000 to buy a car (home equity debt). Irs ez form 2011 Under the loan agreement, Sharon must make principal payments of $1,000 at the end of each month. Irs ez form 2011 During 2013, her principal payments on the second mortgage totaled $10,000. Irs ez form 2011 To complete Table 1, line 2, Sharon must figure a separate average balance for the part of her second mortgage that is home acquisition debt. Irs ez form 2011 The January and February balances were zero. Irs ez form 2011 The March through December balances were all $180,000, because none of her principal payments are applied to the home acquisition debt. Irs ez form 2011 (They are all applied to the home equity debt, reducing it to $10,000 [$20,000 − $10,000]. Irs ez form 2011 ) The monthly balances of the home acquisition debt total $1,800,000 ($180,000 × 10). Irs ez form 2011 Therefore, the average balance of the home acquisition debt for 2013 was $150,000 ($1,800,000 ÷ 12). Irs ez form 2011 Example 2. Irs ez form 2011 The facts are the same as in Example 1. Irs ez form 2011 In 2014, Sharon's January through October principal payments on her second mortgage are applied to the home equity debt, reducing it to zero. Irs ez form 2011 The balance of the home acquisition debt remains $180,000 for each of those months. Irs ez form 2011 Because her November and December principal payments are applied to the home acquisition debt, the November balance is $179,000 ($180,000 − $1,000) and the December balance is $178,000 ($180,000 − $2,000). Irs ez form 2011 The monthly balances total $2,157,000 [($180,000 × 10) + $179,000 + $178,000]. Irs ez form 2011 Therefore, the average balance of the home acquisition debt for 2014 is $179,750 ($2,157,000 ÷ 12). Irs ez form 2011 L
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The Irs Ez Form 2011

Irs ez form 2011 3. Irs ez form 2011   Credit for Withholding and Estimated Tax for 2013 Table of Contents Introduction Topics - This chapter discusses: WithholdingForm W-2 Form W-2G The 1099 Series Form Not Correct Form Received After Filing Separate Returns Fiscal Years (FY) Estimated TaxSeparate Returns Divorced Taxpayers Excess Social Security or Railroad Retirement Tax WithholdingJoint returns. Irs ez form 2011 Worksheet for Nonrailroad Employees Worksheets for Railroad Employees Introduction When you file your 2013 income tax return, take credit for all the income tax and excess social security or railroad retirement tax withheld from your salary, wages, pensions, etc. Irs ez form 2011 Also take credit for the estimated tax you paid for 2013. Irs ez form 2011 These credits are subtracted from your total tax. Irs ez form 2011 Because these credits are refundable, you should file a return and claim these credits, even if you do not owe tax. Irs ez form 2011 If the total of your withholding and your estimated tax payments for any payment period is less than the amount you needed to pay by the due date for that period, you may be charged a penalty, even if the total of these credits is more than your tax for the year. Irs ez form 2011 Topics - This chapter discusses: How to take credit for withholding, How to take credit for estimated taxes you paid, and How to take credit for excess social security, Medicare, or railroad retirement tax withholding. Irs ez form 2011 Withholding If you had income tax withheld during 2013, you generally should be sent a statement by January 31, 2014, showing your income and the tax withheld. Irs ez form 2011 Depending on the source of your income, you will receive: Form W-2, Wage and Tax Statement, Form W-2G, Certain Gambling Winnings, or A form in the 1099 series. Irs ez form 2011 Form W-2 Your employer is required to provide or send Form W-2 to you no later than January 31, 2014. Irs ez form 2011 You should receive a separate Form W-2 from each employer you worked for. Irs ez form 2011 If you stopped working before the end of 2013, your employer could have given you your Form W-2 at any time after you stopped working. Irs ez form 2011 However, your employer must provide or send it to you by January 31, 2014. Irs ez form 2011 If you ask for the form, your employer must send it to you within 30 days after receiving your written request or within 30 days after your final wage payment, whichever is later. Irs ez form 2011 If you have not received your Form W-2 by January 31, contact your employer or payer to request a copy. Irs ez form 2011 If you still do not get the form by February 15, the IRS can help you by requesting the form from your employer. Irs ez form 2011 The phone number for the IRS is listed in chapter 5. Irs ez form 2011 You will be asked for the following information. Irs ez form 2011 Your name, address, city and state, zip code, and social security number. Irs ez form 2011 Your employer's name, address, city, state, zip code, and the employer's identification number (if known). Irs ez form 2011 An estimate of the wages you earned, the federal income tax withheld, and the period you worked for that employer. Irs ez form 2011 The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible. Irs ez form 2011 Form W-2 shows your total pay and other compensation and the income tax, social security tax, and Medicare tax that was withheld during the year. Irs ez form 2011 Total the federal income tax withheld (shown in box 2 of all Forms W-2 received) and enter that amount on the appropriate line of your tax return. Irs ez form 2011 In addition, Form W-2 is used to report any taxable sick pay you received and any income tax withheld from your sick pay. Irs ez form 2011 Your sick pay may be combined with other wages in one Form W-2 or you may receive a separate Form W-2 for sick pay. Irs ez form 2011 If you file a paper tax return, attach Copy B of Form W-2 to your return. Irs ez form 2011 Form W-2G If you had gambling winnings in 2013, the payer may have withheld income tax. Irs ez form 2011 If tax was withheld, the payer will give you a Form W-2G showing the amount you won and the amount of tax withheld. Irs ez form 2011 Report the amounts you won on line 21 of Form 1040. Irs ez form 2011 Take credit for the tax withheld on line 62 of Form 1040. Irs ez form 2011 If you had gambling winnings, you must use Form 1040; you cannot use Form 1040A or Form 1040EZ. Irs ez form 2011 Gambling losses can be deducted on Schedule A (Form 1040) as a miscellaneous itemized deduction. Irs ez form 2011 However, you cannot deduct more than the gambling winnings you report on Form 1040. Irs ez form 2011 File Form W-2G with your income tax return only if it shows any federal income tax withheld in box 2. Irs ez form 2011 The 1099 Series Most forms in the 1099 series are not filed with your return. Irs ez form 2011 In general, these forms should be furnished to you by January 31, 2014. Irs ez form 2011 Unless instructed to file any of these forms with your return, keep them for your records. Irs ez form 2011 There are several different forms in this series, including: Form 1099-B, Proceeds From Broker and Barter Exchange Transactions; Form 1099-C, Cancellation of Debt; Form 1099-DIV, Dividends and Distributions; Form 1099-G, Certain Government Payments; Form 1099-INT, Interest Income; Form 1099-K, Payment Card and Third-Party Network Transactions; Form 1099-MISC, Miscellaneous Income; Form 1099-OID, Original Issue Discount; Form 1099-PATR, Taxable Distributions Received From Cooperatives; Form 1099-Q, Payments From Qualified Education Programs (Under Sections 529 and 530); Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Irs ez form 2011 ; Form SSA-1099, Social Security Benefit Statement; and Form RRB-1099, Payments by the Railroad Retirement Board. Irs ez form 2011 If you received the types of income reported on some forms in the 1099 series, you may not be able to use Form 1040A or Form 1040EZ. Irs ez form 2011 See the instructions to these forms for details. Irs ez form 2011 Reporting your withholding. Irs ez form 2011   Report on your tax return all federal income tax withholding shown on your Form 1099, Form SSA-1099, and/or Form RRB-1099. Irs ez form 2011 Include the amount withheld in the total on line 62 of Form 1040, line 36 of Form 1040A, or line 7 of Form 1040EZ. Irs ez form 2011 Form 1099-R. Irs ez form 2011   Attach Form 1099-R to your paper return if federal income tax withholding is shown in box 4. Irs ez form 2011 Do not attach any other Form 1099. Irs ez form 2011 Form Not Correct If you receive a form with incorrect information, you should ask the payer for a corrected form. Irs ez form 2011 Call the telephone number or write to the address given for the payer on the form. Irs ez form 2011 The corrected Form W-2G or Form 1099 you receive will have an “X” in the “CORRECTED” box at the top of the form. Irs ez form 2011 A special form, Form W-2c, Corrected Wage and Tax Statement, is used to correct a Form W-2. Irs ez form 2011 In certain situations, you will receive two forms in place of the original incorrect form. Irs ez form 2011 This will happen when your taxpayer identification number is wrong or missing, your name and address are wrong, or you received the wrong type of form (for example, a Form 1099-DIV instead of a Form 1099-INT). Irs ez form 2011 One new form you receive will be the same incorrect form or have the same incorrect information, but all money amounts will be zero. Irs ez form 2011 This form will have an “X” in the “CORRECTED” box at the top of the form. Irs ez form 2011 The second new form should have all the correct information, prepared as though it is the original (the “CORRECTED” box will not be checked). Irs ez form 2011 Form Received After Filing If you file your return and you later receive a form for income that you did not include on your return, report the income and take credit for any income tax withheld by filing Form 1040X, Amended U. Irs ez form 2011 S. Irs ez form 2011 Individual Income Tax Return. Irs ez form 2011 Separate Returns If you are married but file a separate return, you can take credit only for the tax withheld from your own income. Irs ez form 2011 Do not include any amount withheld from your spouse's income. Irs ez form 2011 However, different rules may apply if you live in a community property state. Irs ez form 2011 Community property states. Irs ez form 2011   The following are community property states. Irs ez form 2011 Arizona. Irs ez form 2011 California. Irs ez form 2011 Idaho. Irs ez form 2011 Louisiana. Irs ez form 2011 Nevada. Irs ez form 2011 New Mexico. Irs ez form 2011 Texas. Irs ez form 2011 Washington. Irs ez form 2011 Wisconsin. Irs ez form 2011 Generally, if you live in a community property state and file a separate return, you and your spouse each must report half of all community income in addition to your own separate income. Irs ez form 2011 If you are required to report half of all community income, you are entitled to take credit for half of all taxes withheld on the community income. Irs ez form 2011 If you were divorced during the year, each of you generally must report half the community income and can take credit for half the withholding on that community income for the period before the divorce. Irs ez form 2011   For more information on these rules, and some exceptions, see Publication 555, Community Property. Irs ez form 2011 Fiscal Years (FY) If you file your tax return on the basis of a fiscal year (a 12-month period ending on the last day of any month except December), you must follow special rules, described below, to determine your credit for federal income tax withholding. Irs ez form 2011 Fiscal year withholding. Irs ez form 2011    You can claim credit on your tax return only for the tax withheld during the calendar year (CY) ending within your fiscal year. Irs ez form 2011 You cannot claim credit for any of the tax withheld during the calendar year beginning in your fiscal year. Irs ez form 2011 You will be able to claim credit for that withholding on your return for your next fiscal year. Irs ez form 2011   The Form W-2 or 1099 you receive for the calendar year that ends during your fiscal year will show the tax withheld and the income you received during that calendar year. Irs ez form 2011   Although you take credit for all the withheld tax shown on the form, report only the part of the income shown on the form that you received during your fiscal year. Irs ez form 2011 Add to that the income you received during the rest of your fiscal year. Irs ez form 2011 Example. Irs ez form 2011 Miles Hanson files his return for a fiscal year ending June 30, 2013. Irs ez form 2011 In January 2013, he received a Form W-2 that showed that his wages for 2012 were $31,200 and that his income tax withheld was $3,380. Irs ez form 2011 His records show that he had received $15,000 of the wages by June 30, 2012, and $16,200 from July 1 through December 31, 2012. Irs ez form 2011 See Table 3-1 . Irs ez form 2011 On his return for the fiscal year ending June 30, 2013, Miles will report the $16,200 he was paid in July through December of 2012, plus the $18,850 he was paid during the rest of the fiscal year, January 1, 2013, through June 30, 2013. Irs ez form 2011 However, he takes credit for all $3,380 that was withheld during 2012. Irs ez form 2011 On his return for the fiscal year ending June 30, 2012, he reported the $15,000 he was paid in January through June 2012, but took no credit for the tax withheld during that time. Irs ez form 2011 On his return for the fiscal year ending June 30, 2014, he will take the credit for any tax withheld during 2013 but not for any tax withheld during 2014. Irs ez form 2011 Table 3-1. Irs ez form 2011 Example for Fiscal Year Ending June 30, 2013—Miles Hanson Date Form W-2 Miles' records Tax return for FY ending 6/30/20121 Tax return for FY ending 6/30/2013 Wages With- holding Wages With- holding Wages With- holding Wages With- holding CY 20122 $31,200 $3,380             1/1/2012 –  6/30/2012     $15,000 $1,600 $15,000       7/1/2012 –  12/31/2012     $16,200 $1,780     $16,200 $3,380 CY 2013 $37,700 $4,316 3             1/1/2013 –  6/30/2013     $18,850 $2,158     $18,850   7/1/2013 –  12/31/2013     $18,850 4 $2,158         1Miles' tax return for FY ending 6/30/2012 also included his wages for 7/1–12/31/2011 and the withholding shown on his 2011 Form W-2. Irs ez form 2011  2Calendar year (January 1 – December 31). Irs ez form 2011   3Withholding shown on 2013 Form W-2 ($4,316) will be included in Miles' tax return for FY ending 6/30/2014, the fiscal year in which calendar year 2013 ends. Irs ez form 2011   4Wages for 7/1–12/31/2013 ($18,850) will be included in Miles' tax return for FY ending 6/30/2014, the fiscal year in which the wages were received. Irs ez form 2011 Backup withholding. Irs ez form 2011   If income tax has been withheld under the backup withholding rule, take credit for it on your tax return for the fiscal year in which you received the income. Irs ez form 2011 Example. Irs ez form 2011 Emily Smith's records show that she received income in November 2013 and February 2014 from which there was backup withholding ($100 and $50, respectively). Irs ez form 2011 Emily takes credit for the entire $150 of backup withholding on her tax return for the fiscal year ending September 30, 2014. Irs ez form 2011 Estimated Tax Take credit for all your estimated tax payments for 2013 on line 63 of Form 1040 or line 37 of Form 1040A. Irs ez form 2011 Include any overpayment from 2012 that you had credited to your 2013 estimated tax. Irs ez form 2011 You must use Form 1040 or Form 1040A if you paid estimated tax. Irs ez form 2011 You cannot file Form 1040EZ. Irs ez form 2011 If you were a beneficiary of an estate or trust, you should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Irs ez form 2011 , from the fiduciary. Irs ez form 2011 If you have estimated taxes credited to you from the estate or trust (from Schedule K-1 (Form 1041)), you must report the estimated taxes on Schedule E (Form 1040). Irs ez form 2011 On the dotted line next to the entry space for line 37 of Schedule E (Form 1040), enter “ES payment claimed” and the amount. Irs ez form 2011 However, do not include this amount in the total on line 37. Irs ez form 2011 Instead, enter the amount on Form 1040, line 63. Irs ez form 2011 This estimated tax payment for 2013 is treated as being made by you on January 15, 2014. Irs ez form 2011 Name changed. Irs ez form 2011   If you changed your name, and you made estimated tax payments using your former name, attach a statement to the front of your paper tax return indicating: When you made the payments, The amount of each payment, Your name when you made the payments, and The social security number under which you made the payments. Irs ez form 2011  The statement should cover payments you made jointly with your spouse as well as any you made separately. Irs ez form 2011   Be sure to report the change to your local Social Security Administration office before filing your 2014 tax return. Irs ez form 2011 This prevents delays in processing your return and issuing refunds. Irs ez form 2011 It also safeguards your future social security benefits. Irs ez form 2011 For more information, call the Social Security Administration at 1-800-772-1213. Irs ez form 2011 Separate Returns If you and your spouse made separate estimated tax payments for 2013 and you file separate returns, you can take credit only for your own payments. Irs ez form 2011 If you made joint estimated tax payments, you must decide how to divide the payments between your returns. Irs ez form 2011 One of you can claim all of the estimated tax paid and the other none, or you can divide it in any other way you agree on. Irs ez form 2011 If you cannot agree, you must divide the payments in proportion to each spouse's individual tax as shown on your separate returns for 2013. Irs ez form 2011 Example. Irs ez form 2011 James and Evelyn Brown made joint estimated tax payments for 2013 totaling $3,000. Irs ez form 2011 They file separate 2013 Forms 1040. Irs ez form 2011 James' tax is $4,000 and Evelyn's is $1,000. Irs ez form 2011 If they do not agree on how to divide the $3,000, they must divide it proportionately between their returns. Irs ez form 2011 Because James' tax ($4,000) is 80% of the total tax ($5,000), his share of the estimated tax is $2,400 (80% of $3,000). Irs ez form 2011 The balance, $600 (20% of $3,000), is Evelyn's share. Irs ez form 2011 Divorced Taxpayers If you made joint estimated tax payments for 2013 and you were divorced during the year, either you or your former spouse can claim all of the joint payments, or you each can claim part of them. Irs ez form 2011 If you cannot agree on how to divide the payments, you must divide them in proportion to each spouse's individual tax as shown on your separate returns for 2013. Irs ez form 2011 See Example earlier under Separate Returns. Irs ez form 2011 If you claim any of the joint payments on your tax return, enter your former spouse's social security number (SSN) in the space provided at the top of page 1 of Form 1040 or Form 1040A. Irs ez form 2011 If you divorced and remarried in 2013, enter your present spouse's SSN in that space. Irs ez form 2011 Enter your former spouse's SSN, followed by “DIV,” under Payments to the left of Form 1040, line 63, or in the blank space to the left of Form 1040A, line 37. Irs ez form 2011 Excess Social Security or Railroad Retirement Tax Withholding Most employers must withhold social security tax from your wages. Irs ez form 2011 In some cases, however, the federal government and state and local governments do not have to withhold social security tax from their employees' wages. Irs ez form 2011 If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax. Irs ez form 2011 Two or more employers. Irs ez form 2011   If you worked for two or more employers in 2013, too much social security tax or tier 1 RRTA tax may have been withheld from your pay. Irs ez form 2011 You may be able to claim the excess as a credit against your income tax when you file your return. Irs ez form 2011 Table 3-2 shows the maximum amount that should have been withheld for any of these taxes for 2013. Irs ez form 2011 Figure the excess withholding on the appropriate worksheet. Irs ez form 2011    Table 3-2. Irs ez form 2011 Maximum Social Security and RRTA Withholding for 2013 Type of tax Maximum wages subject to tax Tax rate Maximum tax to be withheld Social security $113,700 6. Irs ez form 2011 2% $7,049. Irs ez form 2011 40 Tier 1 RRTA $113,700 6. Irs ez form 2011 2% $7,049. Irs ez form 2011 40 Tier 2 RRTA $84,300 4. Irs ez form 2011 4% $3,709. Irs ez form 2011 20 Joint returns. Irs ez form 2011   If you are filing a joint return, you and your spouse must figure any excess social security or tier 1 RRTA separately. Irs ez form 2011 Note. Irs ez form 2011 All wages are subject to Medicare tax withholding. Irs ez form 2011 Employer's error. Irs ez form 2011   If you had only one employer and he or she withheld too much social security, Medicare, or tier 1 RRTA tax, ask the employer to refund the excess amount to you. Irs ez form 2011 If the employer refuses to refund the overcollection, ask for a statement indicating the amount of the overcollection to support your claim. Irs ez form 2011 File a claim for refund using Form 843, Claim for Refund and Request for Abatement. Irs ez form 2011 Worksheet for Nonrailroad Employees If you did not work for a railroad during 2013, figure the excess social security withholding on Worksheet 3-1. Irs ez form 2011 Note. Irs ez form 2011 If you worked for both a railroad employer and a nonrailroad employer, use Worksheet 3-2, to figure excess social security and tier 1 RRTA tax. Irs ez form 2011 Where to claim credit for excess social security withholding. Irs ez form 2011   If you file Form 1040, enter the excess on line 69. Irs ez form 2011   If you file Form 1040A, include the excess in the total on line 41. Irs ez form 2011 Write “Excess SST” and show the amount of the credit in the space to the left of the line. Irs ez form 2011   You cannot claim excess social security tax withholding on Form 1040EZ. Irs ez form 2011 Worksheets for Railroad Employees If you worked for a railroad during 2013, figure your excess withholding on Worksheet 3-2 and 3-3, as appropriate. Irs ez form 2011 Where to claim credit for excess tier 1 RRTA withholding. Irs ez form 2011   If you file Form 1040, enter the excess on line 69. Irs ez form 2011   If you file Form 1040A, include the excess in the total on line 41. Irs ez form 2011 Write “Excess SST” and show the amount of the credit in the space to the left of the line. Irs ez form 2011   You cannot claim excess tier 1 RRTA withholding on Form 1040EZ. Irs ez form 2011 How to claim refund of excess tier 2 RRTA. Irs ez form 2011   To claim a refund of tier 2 tax, use Form 843. Irs ez form 2011 Be sure to attach a copy of all of your Forms W-2. Irs ez form 2011   See Worksheet 3-3 and the Instructions for Form 843, for more details. Irs ez form 2011 Worksheet 3-1. Irs ez form 2011 Excess Social Security—Nonrailroad Employees 1. Irs ez form 2011 Add all social security tax withheld (but not more than  $7,049. Irs ez form 2011 40 for each employer). Irs ez form 2011 This tax should be shown  in box 4 of your Forms W-2. Irs ez form 2011 Enter the total here 1. Irs ez form 2011   2. Irs ez form 2011 Enter any uncollected social security tax on tips or group-term life insurance on Form 1040, line 60, identified by “UT” 2. Irs ez form 2011   3. Irs ez form 2011 Add lines 1 and 2. Irs ez form 2011 If $7,049. Irs ez form 2011 40 or less, stop here. Irs ez form 2011 You cannot claim the credit 3. Irs ez form 2011   4. Irs ez form 2011 Social security limit 4. Irs ez form 2011 $7,049. Irs ez form 2011 40 5. Irs ez form 2011 Excess. Irs ez form 2011 Subtract line 4 from line 3 5. Irs ez form 2011   Worksheet 3-2. Irs ez form 2011 Excess Social Security and Tier 1 RRTA—Railroad Employees 1. Irs ez form 2011 Add all social security and tier 1 RRTA tax withheld (but not more than $7,049. Irs ez form 2011 40 for each employer). Irs ez form 2011 Social security tax should be shown in box 4 and tier 1 RRTA should be shown  in box 14 of your Forms W-2. Irs ez form 2011 Enter the total here 1. Irs ez form 2011   2. Irs ez form 2011 Enter any uncollected social security and tier 1 RRTA tax on tips or group-term life insurance on Form 1040, line 60, identified by “UT” 2. Irs ez form 2011   3. Irs ez form 2011 Add lines 1 and 2. Irs ez form 2011 If $7,049. Irs ez form 2011 40 or less, stop here. Irs ez form 2011 You cannot claim the credit 3. Irs ez form 2011   4. Irs ez form 2011 Social security and tier 1 RRTA tax limit 4. Irs ez form 2011 $7,049. Irs ez form 2011 40 5. Irs ez form 2011 Excess. Irs ez form 2011 Subtract line 4 from line 3 5. Irs ez form 2011   Worksheet 3-3. Irs ez form 2011 Excess Tier 2 RRTA—Railroad Employees 1. Irs ez form 2011 Add all tier 2 RRTA tax withheld (but not more than $3,709. Irs ez form 2011 20 for each employer). Irs ez form 2011 Box 14 of your Forms W-2 should show tier 2 RRTA tax. Irs ez form 2011 Enter the total here 1. Irs ez form 2011   2. Irs ez form 2011 Enter any uncollected tier 2 RRTA tax on tips or group-term life insurance on Form 1040, line 60, identified by “UT” 2. Irs ez form 2011   3. Irs ez form 2011 Add lines 1 and 2. Irs ez form 2011 If $3,709. Irs ez form 2011 20 or less, stop here. Irs ez form 2011 You cannot claim the credit. Irs ez form 2011 3. Irs ez form 2011   4. Irs ez form 2011 Tier 2 RRTA tax limit 4. Irs ez form 2011 $3,709. Irs ez form 2011 20 5. Irs ez form 2011 Excess. Irs ez form 2011 Subtract line 4 from line 3. Irs ez form 2011 5. Irs ez form 2011   Prev  Up  Next   Home   More Online Publications