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Irs Gov State Tax Forms

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Irs Gov State Tax Forms

Irs gov state tax forms 12. Irs gov state tax forms   Other Income Table of Contents Introduction Useful Items - You may want to see: Bartering Canceled DebtsInterest included in canceled debt. Irs gov state tax forms Exceptions Host or Hostess Life Insurance ProceedsSurviving spouse. Irs gov state tax forms Endowment Contract Proceeds Accelerated Death Benefits Public Safety Officer Killed in the Line of Duty Partnership Income S Corporation Income RecoveriesItemized Deduction Recoveries Rents from Personal Property RepaymentsMethod 1. Irs gov state tax forms Method 2. Irs gov state tax forms RoyaltiesDepletion. Irs gov state tax forms Coal and iron ore. Irs gov state tax forms Sale of property interest. Irs gov state tax forms Part of future production sold. Irs gov state tax forms Unemployment BenefitsTypes of unemployment compensation. Irs gov state tax forms Governmental program. Irs gov state tax forms Repayment of unemployment compensation. Irs gov state tax forms Tax withholding. Irs gov state tax forms Repayment of benefits. Irs gov state tax forms Welfare and Other Public Assistance Benefits Other IncomeEmotional distress. Irs gov state tax forms Deduction for costs involved in unlawful discrimination suits. Irs gov state tax forms Energy conservation measure. Irs gov state tax forms Dwelling unit. Irs gov state tax forms Current income required to be distributed. Irs gov state tax forms Current income not required to be distributed. Irs gov state tax forms How to report. Irs gov state tax forms Losses. Irs gov state tax forms Grantor trust. Irs gov state tax forms Nonemployee compensation. Irs gov state tax forms Corporate director. Irs gov state tax forms Personal representatives. Irs gov state tax forms Manager of trade or business for bankruptcy estate. Irs gov state tax forms Notary public. Irs gov state tax forms Election precinct official. Irs gov state tax forms Difficulty-of-care payments. Irs gov state tax forms Maintaining space in home. Irs gov state tax forms Reporting taxable payments. Irs gov state tax forms Lotteries and raffles. Irs gov state tax forms Form W-2G. Irs gov state tax forms Reporting winnings and recordkeeping. Irs gov state tax forms Inherited pension or IRA. Irs gov state tax forms Employee awards or bonuses. Irs gov state tax forms Pulitzer, Nobel, and similar prizes. Irs gov state tax forms Payment for services. Irs gov state tax forms VA payments. Irs gov state tax forms Prizes. Irs gov state tax forms Strike and lockout benefits. Irs gov state tax forms Introduction You must include on your return all items of income you receive in the form of money, property, and services unless the tax law states that you do not include them. Irs gov state tax forms Some items, however, are only partly excluded from income. Irs gov state tax forms This chapter discusses many kinds of income and explains whether they are taxable or nontaxable. Irs gov state tax forms Income that is taxable must be reported on your tax return and is subject to tax. Irs gov state tax forms Income that is nontaxable may have to be shown on your tax return but is not taxable. Irs gov state tax forms This chapter begins with discussions of the following income items. Irs gov state tax forms Bartering. Irs gov state tax forms Canceled debts. Irs gov state tax forms Sales parties at which you are the host or hostess. Irs gov state tax forms Life insurance proceeds. Irs gov state tax forms Partnership income. Irs gov state tax forms S Corporation income. Irs gov state tax forms Recoveries (including state income tax refunds). Irs gov state tax forms Rents from personal property. Irs gov state tax forms Repayments. Irs gov state tax forms Royalties. Irs gov state tax forms Unemployment benefits. Irs gov state tax forms Welfare and other public assistance benefits. Irs gov state tax forms These discussions are followed by brief discussions of other income items. Irs gov state tax forms Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 544 Sales and Other Dispositions of Assets 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Bartering Bartering is an exchange of property or services. Irs gov state tax forms You must include in your income, at the time received, the fair market value of property or services you receive in bartering. Irs gov state tax forms If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise. Irs gov state tax forms Generally, you report this income on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Irs gov state tax forms However, if the barter involves an exchange of something other than services, such as in Example 3 below, you may have to use another form or schedule instead. Irs gov state tax forms Example 1. Irs gov state tax forms You are a self-employed attorney who performs legal services for a client, a small corporation. Irs gov state tax forms The corporation gives you shares of its stock as payment for your services. Irs gov state tax forms You must include the fair market value of the shares in your income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) in the year you receive them. Irs gov state tax forms Example 2. Irs gov state tax forms You are self-employed and a member of a barter club. Irs gov state tax forms The club uses “credit units” as a means of exchange. Irs gov state tax forms It adds credit units to your account for goods or services you provide to members, which you can use to purchase goods or services offered by other members of the barter club. Irs gov state tax forms The club subtracts credit units from your account when you receive goods or services from other members. Irs gov state tax forms You must include in your income the value of the credit units that are added to your account, even though you may not actually receive goods or services from other members until a later tax year. Irs gov state tax forms Example 3. Irs gov state tax forms You own a small apartment building. Irs gov state tax forms In return for 6 months rent-free use of an apartment, an artist gives you a work of art she created. Irs gov state tax forms You must report as rental income on Schedule E (Form 1040), Supplemental Income and Loss, the fair market value of the artwork, and the artist must report as income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) the fair rental value of the apartment. Irs gov state tax forms Form 1099-B from barter exchange. Irs gov state tax forms   If you exchanged property or services through a barter exchange, Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a similar statement from the barter exchange should be sent to you by February 18, 2014. Irs gov state tax forms It should show the value of cash, property, services, credits, or scrip you received from exchanges during 2013. Irs gov state tax forms The IRS also will receive a copy of Form 1099-B. Irs gov state tax forms Canceled Debts In most cases, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income. Irs gov state tax forms You have no income from the canceled debt if it is intended as a gift to you. Irs gov state tax forms A debt includes any indebtedness for which you are liable or which attaches to property you hold. Irs gov state tax forms If the debt is a nonbusiness debt, report the canceled amount on Form 1040, line 21. Irs gov state tax forms If it is a business debt, report the amount on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) (or on Schedule F (Form 1040), Profit or Loss From Farming, if the debt is farm debt and you are a farmer). Irs gov state tax forms Form 1099-C. Irs gov state tax forms   If a Federal Government agency, financial institution, or credit union cancels or forgives a debt you owe of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. Irs gov state tax forms The amount of the canceled debt is shown in box 2. Irs gov state tax forms Interest included in canceled debt. Irs gov state tax forms   If any interest is forgiven and included in the amount of canceled debt in box 2, the amount of interest also will be shown in box 3. Irs gov state tax forms Whether or not you must include the interest portion of the canceled debt in your income depends on whether the interest would be deductible when you paid it. Irs gov state tax forms See Deductible debt under Exceptions, later. Irs gov state tax forms   If the interest would not be deductible (such as interest on a personal loan), include in your income the amount from Form 1099-C, box 2. Irs gov state tax forms If the interest would be deductible (such as on a business loan), include in your income the net amount of the canceled debt (the amount shown in box 2 less the interest amount shown in box 3). Irs gov state tax forms Discounted mortgage loan. Irs gov state tax forms   If your financial institution offers a discount for the early payment of your mortgage loan, the amount of the discount is canceled debt. Irs gov state tax forms You must include the canceled amount in your income. Irs gov state tax forms Mortgage relief upon sale or other disposition. Irs gov state tax forms   If you are personally liable for a mortgage (recourse debt), and you are relieved of the mortgage when you dispose of the property, you may realize gain or loss up to the fair market value of the property. Irs gov state tax forms To the extent the mortgage discharge exceeds the fair market value of the property, it is income from discharge of indebtedness unless it qualifies for exclusion under Excluded debt , later. Irs gov state tax forms Report any income from discharge of indebtedness on nonbusiness debt that does not qualify for exclusion as other income on Form 1040, line 21. Irs gov state tax forms    You may be able to exclude part of the mortgage relief on your principal residence. Irs gov state tax forms See Excluded debt, later. Irs gov state tax forms   If you are not personally liable for a mortgage (nonrecourse debt), and you are relieved of the mortgage when you dispose of the property (such as through foreclosure), that relief is included in the amount you realize. Irs gov state tax forms You may have a taxable gain if the amount you realize exceeds your adjusted basis in the property. Irs gov state tax forms Report any gain on nonbusiness property as a capital gain. Irs gov state tax forms   See Publication 4681 for more information. Irs gov state tax forms Stockholder debt. Irs gov state tax forms   If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution that is generally dividend income to you. Irs gov state tax forms For more information, see Publication 542, Corporations. Irs gov state tax forms   If you are a stockholder in a corporation and you cancel a debt owed to you by the corporation, you generally do not realize income. Irs gov state tax forms This is because the canceled debt is considered as a contribution to the capital of the corporation equal to the amount of debt principal that you canceled. Irs gov state tax forms Repayment of canceled debt. Irs gov state tax forms   If you included a canceled amount in your income and later pay the debt, you may be able to file a claim for refund for the year the amount was included in income. Irs gov state tax forms You can file a claim on Form 1040X if the statute of limitations for filing a claim is still open. Irs gov state tax forms The statute of limitations generally does not end until 3 years after the due date of your original return. Irs gov state tax forms Exceptions There are several exceptions to the inclusion of canceled debt in income. Irs gov state tax forms These are explained next. Irs gov state tax forms Student loans. Irs gov state tax forms   Certain student loans contain a provision that all or part of the debt incurred to attend the qualified educational institution will be canceled if you work for a certain period of time in certain professions for any of a broad class of employers. Irs gov state tax forms   You do not have income if your student loan is canceled after you agreed to this provision and then performed the services required. Irs gov state tax forms To qualify, the loan must have been made by: The Federal Government, a state or local government, or an instrumentality, agency, or subdivision thereof, A tax-exempt public benefit corporation that has assumed control of a state, county, or municipal hospital, and whose employees are considered public employees under state law, or An educational institution: Under an agreement with an entity described in (1) or (2) that provided the funds to the institution to make the loan, or As part of a program of the institution designed to encourage its students to serve in occupations with unmet needs or in areas with unmet needs and under which the services provided by the students (or former students) are for or under the direction of a governmental unit or a tax-exempt organization described in section 501(c)(3). Irs gov state tax forms   A loan to refinance a qualified student loan also will qualify if it was made by an educational institution or a qualified tax-exempt organization under its program designed as described in (3)(b) above. Irs gov state tax forms Education loan repayment assistance. Irs gov state tax forms   Education loan repayments made to you by the National Health Service Corps Loan Repayment Program (NHSC Loan Repayment Program), a state education loan repayment program eligible for funds under the Public Health Service Act, or any other state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health services in underserved or health professional shortage areas are not taxable. Irs gov state tax forms    The provision relating to the “other state loan repayment or loan forgiveness program” was added to this exclusion for amounts received in tax years beginning after December 31, 2008. Irs gov state tax forms If you included these amounts in income in 2010, 2011, or 2012, you should file an amended tax return to exclude this income. Irs gov state tax forms See Form 1040X and its instructions for details on filing. Irs gov state tax forms Deductible debt. Irs gov state tax forms   You do not have income from the cancellation of a debt if your payment of the debt would be deductible. Irs gov state tax forms This exception applies only if you use the cash method of accounting. Irs gov state tax forms For more information, see chapter 5 of Publication 334, Tax Guide for Small Business. Irs gov state tax forms Price reduced after purchase. Irs gov state tax forms   In most cases, if the seller reduces the amount of debt you owe for property you purchased, you do not have income from the reduction. Irs gov state tax forms The reduction of the debt is treated as a purchase price adjustment and reduces your basis in the property. Irs gov state tax forms Excluded debt. Irs gov state tax forms   Do not include a canceled debt in your gross income in the following situations. Irs gov state tax forms The debt is canceled in a bankruptcy case under title 11 of the U. Irs gov state tax forms S. Irs gov state tax forms Code. Irs gov state tax forms See Publication 908, Bankruptcy Tax Guide. Irs gov state tax forms The debt is canceled when you are insolvent. Irs gov state tax forms However, you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent. Irs gov state tax forms See Publication 908. Irs gov state tax forms The debt is qualified farm debt and is canceled by a qualified person. Irs gov state tax forms See chapter 3 of Publication 225, Farmer's Tax Guide. Irs gov state tax forms The debt is qualified real property business debt. Irs gov state tax forms See chapter 5 of Publication 334. Irs gov state tax forms The cancellation is intended as a gift. Irs gov state tax forms The debt is qualified principal residence indebtedness. Irs gov state tax forms See Publication 525 for additional information. Irs gov state tax forms Host or Hostess If you host a party or event at which sales are made, any gift or gratuity you receive for giving the event is a payment for helping a direct seller make sales. Irs gov state tax forms You must report this item as income at its fair market value. Irs gov state tax forms Your out-of-pocket party expenses are subject to the 50% limit for meal and entertainment expenses. Irs gov state tax forms These expenses are deductible as miscellaneous itemized deductions subject to the 2%-of-AGI limit on Schedule A (Form 1040), but only up to the amount of income you receive for giving the party. Irs gov state tax forms For more information about the 50% limit for meal and entertainment expenses, see chapter 26. Irs gov state tax forms Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. Irs gov state tax forms This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. Irs gov state tax forms However, interest income received as a result of life insurance proceeds may be taxable. Irs gov state tax forms Proceeds not received in installments. Irs gov state tax forms   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. Irs gov state tax forms If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. Irs gov state tax forms Proceeds received in installments. Irs gov state tax forms   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. Irs gov state tax forms   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. Irs gov state tax forms Include anything over this excluded part in your income as interest. Irs gov state tax forms Surviving spouse. Irs gov state tax forms   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude up to $1,000 a year of the interest included in the installments. Irs gov state tax forms If you remarry, you can continue to take the exclusion. Irs gov state tax forms Surrender of policy for cash. Irs gov state tax forms   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Irs gov state tax forms In most cases, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. Irs gov state tax forms    You should receive a Form 1099-R showing the total proceeds and the taxable part. Irs gov state tax forms Report these amounts on lines 16a and 16b of Form 1040 or lines 12a and 12b of Form 1040A. Irs gov state tax forms More information. Irs gov state tax forms   For more information, see Life Insurance Proceeds in Publication 525. Irs gov state tax forms Endowment Contract Proceeds An endowment contract is a policy under which you are paid a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. Irs gov state tax forms Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. Irs gov state tax forms To determine your cost, subtract any amount that you previously received under the contract and excluded from your income from the total premiums (or other consideration) paid for the contract. Irs gov state tax forms Include the part of the lump sum payment that is more than your cost in your income. Irs gov state tax forms Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are excluded from income if the insured is terminally or chronically ill. Irs gov state tax forms Viatical settlement. Irs gov state tax forms   This is the sale or assignment of any part of the death benefit under a life insurance contract to a viatical settlement provider. Irs gov state tax forms A viatical settlement provider is a person who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill and who meets the requirements of section 101(g)(2)(B) of the Internal Revenue Code. Irs gov state tax forms Exclusion for terminal illness. Irs gov state tax forms    Accelerated death benefits are fully excludable if the insured is a terminally ill individual. Irs gov state tax forms This is a person who has been certified by a physician as having an illness or physical condition that can reasonably be expected to result in death within 24 months from the date of the certification. Irs gov state tax forms Exclusion for chronic illness. Irs gov state tax forms    If the insured is a chronically ill individual who is not terminally ill, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. Irs gov state tax forms Accelerated death benefits paid on a per diem or other periodic basis are excludable up to a limit. Irs gov state tax forms This limit applies to the total of the accelerated death benefits and any periodic payments received from long-term care insurance contracts. Irs gov state tax forms For information on the limit and the definitions of chronically ill individual, qualified long-term care services, and long-term care insurance contracts, see Long-Term Care Insurance Contracts under Sickness and Injury Benefits in Publication 525. Irs gov state tax forms Exception. Irs gov state tax forms   The exclusion does not apply to any amount paid to a person (other than the insured) who has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the person, or Has a financial interest in the person's business. Irs gov state tax forms Form 8853. Irs gov state tax forms   To claim an exclusion for accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. Irs gov state tax forms You do not have to file Form 8853 to exclude accelerated death benefits paid on the basis of actual expenses incurred. Irs gov state tax forms Public Safety Officer Killed in the Line of Duty If you are a survivor of a public safety officer who was killed in the line of duty, you may be able to exclude from income certain amounts you receive. Irs gov state tax forms For this purpose, the term public safety officer includes law enforcement officers, firefighters, chaplains, and rescue squad and ambulance crew members. Irs gov state tax forms For more information, see Publication 559, Survivors, Executors, and Administrators. Irs gov state tax forms Partnership Income A partnership generally is not a taxable entity. Irs gov state tax forms The income, gains, losses, deductions, and credits of a partnership are passed through to the partners based on each partner's distributive share of these items. Irs gov state tax forms Schedule K-1 (Form 1065). Irs gov state tax forms    Although a partnership generally pays no tax, it must file an information return on Form 1065, U. Irs gov state tax forms S. Irs gov state tax forms Return of Partnership Income, and send Schedule K-1 (Form 1065) to each partner. Irs gov state tax forms In addition, the partnership will send each partner a copy of the Partner's Instructions for Schedule K-1 (Form 1065) to help each partner report his or her share of the partnership's income, deductions, credits, and tax preference items. Irs gov state tax forms Keep Schedule K-1 (Form 1065) for your records. Irs gov state tax forms Do not attach it to your Form 1040, unless you are specifically required to do so. Irs gov state tax forms For more information on partnerships, see Publication 541, Partnerships. Irs gov state tax forms Qualified joint venture. Irs gov state tax forms   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Irs gov state tax forms To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Irs gov state tax forms For further information on how to make the election and which schedule(s) to file, see the instructions for your individual tax return. Irs gov state tax forms S Corporation Income In most cases, an S corporation does not pay tax on its income. Irs gov state tax forms Instead, the income, losses, deductions, and credits of the corporation are passed through to the shareholders based on each shareholder's pro rata share. Irs gov state tax forms Schedule K-1 (Form 1120S). Irs gov state tax forms   An S corporation must file a return on Form 1120S, U. Irs gov state tax forms S. Irs gov state tax forms Income Tax Return for an S Corporation, and send Schedule K-1 (Form 1120S) to each shareholder. Irs gov state tax forms In addition, the S corporation will send each shareholder a copy of the Shareholder's Instructions for Schedule K-1 (Form 1120S) to help each shareholder report his or her share of the S corporation's income, losses, credits, and deductions. Irs gov state tax forms Keep Schedule K-1 (Form 1120S) for your records. Irs gov state tax forms Do not attach it to your Form 1040, unless you are specifically required to do so. Irs gov state tax forms For more information on S corporations and their shareholders, see the Instructions for Form 1120S. Irs gov state tax forms Recoveries A recovery is a return of an amount you deducted or took a credit for in an earlier year. Irs gov state tax forms The most common recoveries are refunds, reimbursements, and rebates of deductions itemized on Schedule A (Form 1040). Irs gov state tax forms You also may have recoveries of non-itemized deductions (such as payments on previously deducted bad debts) and recoveries of items for which you previously claimed a tax credit. Irs gov state tax forms Tax benefit rule. Irs gov state tax forms   You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. Irs gov state tax forms For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year. Irs gov state tax forms For more information, see Publication 525. Irs gov state tax forms Federal income tax refund. Irs gov state tax forms   Refunds of federal income taxes are not included in your income because they are never allowed as a deduction from income. Irs gov state tax forms State tax refund. Irs gov state tax forms   If you received a state or local income tax refund (or credit or offset) in 2013, you generally must include it in income if you deducted the tax in an earlier year. Irs gov state tax forms The payer should send Form 1099-G, Certain Government Payments, to you by January 31, 2014. Irs gov state tax forms The IRS also will receive a copy of the Form 1099-G. Irs gov state tax forms If you file Form 1040, use the State and Local Income Tax Refund Worksheet in the 2013 Form 1040 instructions for line 10 to figure the amount (if any) to include in your income. Irs gov state tax forms See Publication 525 for when you must use another worksheet. Irs gov state tax forms   If you could choose to deduct for a tax year either: State and local income taxes, or State and local general sales taxes, then the maximum refund that you may have to include in income is limited to the excess of the tax you chose to deduct for that year over the tax you did not choose to deduct for that year. Irs gov state tax forms For examples, see Publication 525. Irs gov state tax forms Mortgage interest refund. Irs gov state tax forms    If you received a refund or credit in 2013 of mortgage interest paid in an earlier year, the amount should be shown in box 3 of your Form 1098, Mortgage Interest Statement. Irs gov state tax forms Do not subtract the refund amount from the interest you paid in 2013. Irs gov state tax forms You may have to include it in your income under the rules explained in the following discussions. Irs gov state tax forms Interest on recovery. Irs gov state tax forms   Interest on any of the amounts you recover must be reported as interest income in the year received. Irs gov state tax forms For example, report any interest you received on state or local income tax refunds on Form 1040, line 8a. Irs gov state tax forms Recovery and expense in same year. Irs gov state tax forms   If the refund or other recovery and the expense occur in the same year, the recovery reduces the deduction or credit and is not reported as income. Irs gov state tax forms Recovery for 2 or more years. Irs gov state tax forms   If you receive a refund or other recovery that is for amounts you paid in 2 or more separate years, you must allocate, on a pro rata basis, the recovered amount between the years in which you paid it. Irs gov state tax forms This allocation is necessary to determine the amount of recovery from any earlier years and to determine the amount, if any, of your allowable deduction for this item for the current year. Irs gov state tax forms For information on how to compute the allocation, see Recoveries in Publication 525. Irs gov state tax forms Itemized Deduction Recoveries If you recover any amount that you deducted in an earlier year on Schedule A (Form 1040), you generally must include the full amount of the recovery in your income in the year you receive it. Irs gov state tax forms Where to report. Irs gov state tax forms   Enter your state or local income tax refund on Form 1040, line 10, and the total of all other recoveries as other income on Form 1040, line 21. Irs gov state tax forms You cannot use Form 1040A or Form 1040EZ. Irs gov state tax forms Standard deduction limit. Irs gov state tax forms   You generally are allowed to claim the standard deduction if you do not itemize your deductions. Irs gov state tax forms Only your itemized deductions that are more than your standard deduction are subject to the recovery rule (unless you are required to itemize your deductions). Irs gov state tax forms If your total deductions on the earlier year return were not more than your income for that year, include in your income this year the lesser of: Your recoveries, or The amount by which your itemized deductions exceeded the standard deduction. Irs gov state tax forms Example. Irs gov state tax forms For 2012, you filed a joint return. Irs gov state tax forms Your taxable income was $60,000 and you were not entitled to any tax credits. Irs gov state tax forms Your standard deduction was $11,900, and you had itemized deductions of $14,000. Irs gov state tax forms In 2013, you received the following recoveries for amounts deducted on your 2012 return: Medical expenses $200 State and local income tax refund 400 Refund of mortgage interest 325 Total recoveries $925 None of the recoveries were more than the deductions taken for 2012. Irs gov state tax forms The difference between the state and local income tax you deducted and your local general sales tax was more than $400. Irs gov state tax forms Your total recoveries are less than the amount by which your itemized deductions exceeded the standard deduction ($14,000 − 11,900 = $2,100), so you must include your total recoveries in your income for 2013. Irs gov state tax forms Report the state and local income tax refund of $400 on Form 1040, line 10, and the balance of your recoveries, $525, on Form 1040, line 21. Irs gov state tax forms Standard deduction for earlier years. Irs gov state tax forms   To determine if amounts recovered in 2013 must be included in your income, you must know the standard deduction for your filing status for the year the deduction was claimed. Irs gov state tax forms Look in the instructions for your tax return from prior years to locate the standard deduction for the filing status for that prior year. Irs gov state tax forms Example. Irs gov state tax forms You filed a joint return on Form 1040 for 2012 with taxable income of $45,000. Irs gov state tax forms Your itemized deductions were $12,350. Irs gov state tax forms The standard deduction that you could have claimed was $11,900. Irs gov state tax forms In 2013, you recovered $2,100 of your 2012 itemized deductions. Irs gov state tax forms None of the recoveries were more than the actual deductions for 2012. Irs gov state tax forms Include $450 of the recoveries in your 2013 income. Irs gov state tax forms This is the smaller of your recoveries ($2,100) or the amount by which your itemized deductions were more than the standard deduction ($12,350 − $11,900 = $450). Irs gov state tax forms Recovery limited to deduction. Irs gov state tax forms   You do not include in your income any amount of your recovery that is more than the amount you deducted in the earlier year. Irs gov state tax forms The amount you include in your income is limited to the smaller of: The amount deducted on Schedule A (Form 1040), or The amount recovered. Irs gov state tax forms Example. Irs gov state tax forms During 2012 you paid $1,700 for medical expenses. Irs gov state tax forms From this amount you subtracted $1,500, which was 7. Irs gov state tax forms 5% of your adjusted gross income. Irs gov state tax forms Your actual medical expense deduction was $200. Irs gov state tax forms In 2013, you received a $500 reimbursement from your medical insurance for your 2012 expenses. Irs gov state tax forms The only amount of the $500 reimbursement that must be included in your income for 2013 is $200—the amount actually deducted. Irs gov state tax forms Other recoveries. Irs gov state tax forms   See Recoveries in Publication 525 if: You have recoveries of items other than itemized deductions, or You received a recovery for an item for which you claimed a tax credit (other than investment credit or foreign tax credit) in a prior year. Irs gov state tax forms Rents from Personal Property If you rent out personal property, such as equipment or vehicles, how you report your income and expenses is in most cases determined by: Whether or not the rental activity is a business, and Whether or not the rental activity is conducted for profit. Irs gov state tax forms In most cases, if your primary purpose is income or profit and you are involved in the rental activity with continuity and regularity, your rental activity is a business. Irs gov state tax forms See Publication 535, Business Expenses, for details on deducting expenses for both business and not-for-profit activities. Irs gov state tax forms Reporting business income and expenses. Irs gov state tax forms    If you are in the business of renting personal property, report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Irs gov state tax forms The form instructions have information on how to complete them. Irs gov state tax forms Reporting nonbusiness income. Irs gov state tax forms   If you are not in the business of renting personal property, report your rental income on Form 1040, line 21. Irs gov state tax forms List the type and amount of the income on the dotted line next to line 21. Irs gov state tax forms Reporting nonbusiness expenses. Irs gov state tax forms   If you rent personal property for profit, include your rental expenses in the total amount you enter on Form 1040, line 36. Irs gov state tax forms Also enter the amount and “PPR” on the dotted line next to line 36. Irs gov state tax forms   If you do not rent personal property for profit, your deductions are limited and you cannot report a loss to offset other income. Irs gov state tax forms See Activity not for profit , under Other Income, later. Irs gov state tax forms Repayments If you had to repay an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income for the year in which you repaid it. Irs gov state tax forms Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. Irs gov state tax forms Generally, you can claim a deduction or credit only if the repayment qualifies as an expense or loss incurred in your trade or business or in a for-profit transaction. Irs gov state tax forms Type of deduction. Irs gov state tax forms   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. Irs gov state tax forms You generally deduct the repayment on the same form or schedule on which you previously reported it as income. Irs gov state tax forms For example, if you reported it as self-employment income, deduct it as a business expense on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). Irs gov state tax forms If you reported it as a capital gain, deduct it as a capital loss as explained in the Instructions for Schedule D (Form 1040). Irs gov state tax forms If you reported it as wages, unemployment compensation, or other nonbusiness income, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040). Irs gov state tax forms Repaid social security benefits. Irs gov state tax forms   If you repaid social security benefits or equivalent railroad retirement benefits, see Repayment of benefits in chapter 11. Irs gov state tax forms Repayment of $3,000 or less. Irs gov state tax forms   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Irs gov state tax forms If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 23. Irs gov state tax forms Repayment over $3,000. Irs gov state tax forms   If the amount you repaid was more than $3,000, you can deduct the repayment (as explained under Type of deduction , earlier). Irs gov state tax forms However, you can choose instead to take a tax credit for the year of repayment if you included the income under a claim of right. Irs gov state tax forms This means that at the time you included the income, it appeared that you had an unrestricted right to it. Irs gov state tax forms If you qualify for this choice, figure your tax under both methods and compare the results. Irs gov state tax forms Use the method (deduction or credit) that results in less tax. Irs gov state tax forms When determining whether the amount you repaid was more or less than $3,000, consider the total amount being repaid on the return. Irs gov state tax forms Each instance of repayment is not considered separately. Irs gov state tax forms Method 1. Irs gov state tax forms   Figure your tax for 2013 claiming a deduction for the repaid amount. Irs gov state tax forms If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 28. Irs gov state tax forms Method 2. Irs gov state tax forms   Figure your tax for 2013 claiming a credit for the repaid amount. Irs gov state tax forms Follow these steps. Irs gov state tax forms Figure your tax for 2013 without deducting the repaid amount. Irs gov state tax forms Refigure your tax from the earlier year without including in income the amount you repaid in 2013. Irs gov state tax forms Subtract the tax in (2) from the tax shown on your return for the earlier year. Irs gov state tax forms This is the credit. Irs gov state tax forms Subtract the answer in (3) from the tax for 2013 figured without the deduction (Step 1). Irs gov state tax forms   If method 1 results in less tax, deduct the amount repaid. Irs gov state tax forms If method 2 results in less tax, claim the credit figured in (3) above on Form 1040, line 71, by adding the amount of the credit to any other credits on this line, and entering “I. Irs gov state tax forms R. Irs gov state tax forms C. Irs gov state tax forms 1341” in the column to the right of line 71. Irs gov state tax forms   An example of this computation can be found in Publication 525. Irs gov state tax forms Repaid wages subject to social security and Medicare taxes. Irs gov state tax forms   If you had to repay an amount that you included in your wages or compensation in an earlier year on which social security, Medicare, or tier 1 RRTA taxes were paid, ask your employer to refund the excess amount to you. Irs gov state tax forms If the employer refuses to refund the taxes, ask for a statement indicating the amount of the overcollection to support your claim. Irs gov state tax forms File a claim for refund using Form 843, Claim for Refund and Request for Abatement. Irs gov state tax forms Repaid wages subject to Additional Medicare Tax. Irs gov state tax forms   Employers cannot make an adjustment or file a claim for refund for Additional Medicare Tax withholding when there is a repayment of wages received by an employee in a prior year because the employee determines liability for Additional Medicare Tax on the employee's income tax return for the prior year. Irs gov state tax forms If you had to repay an amount that you included in your wages or compensation in an earlier year, and on which Additional Medicare Tax was paid, you may be able to recover the Additional Medicare Tax paid on the amount. Irs gov state tax forms To recover Additional Medicare Tax on the repaid wages or compensation, you must file Form 1040X, Amended U. Irs gov state tax forms S. Irs gov state tax forms Individual Income Tax Return, for the prior year in which the wages or compensation were originally received. Irs gov state tax forms See the Instructions for Form 1040X. Irs gov state tax forms Royalties Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income. Irs gov state tax forms In most cases you report royalties in Part I of Schedule E (Form 1040). Irs gov state tax forms However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc. Irs gov state tax forms , report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). Irs gov state tax forms Copyrights and patents. Irs gov state tax forms   Royalties from copyrights on literary, musical, or artistic works, and similar property, or from patents on inventions, are amounts paid to you for the right to use your work over a specified period of time. Irs gov state tax forms Royalties generally are based on the number of units sold, such as the number of books, tickets to a performance, or machines sold. Irs gov state tax forms Oil, gas, and minerals. Irs gov state tax forms   Royalty income from oil, gas, and mineral properties is the amount you receive when natural resources are extracted from your property. Irs gov state tax forms The royalties are based on units, such as barrels, tons, etc. Irs gov state tax forms , and are paid to you by a person or company who leases the property from you. Irs gov state tax forms Depletion. Irs gov state tax forms   If you are the owner of an economic interest in mineral deposits or oil and gas wells, you can recover your investment through the depletion allowance. Irs gov state tax forms For information on this subject, see chapter 9 of Publication 535. Irs gov state tax forms Coal and iron ore. Irs gov state tax forms   Under certain circumstances, you can treat amounts you receive from the disposal of coal and iron ore as payments from the sale of a capital asset, rather than as royalty income. Irs gov state tax forms For information about gain or loss from the sale of coal and iron ore, see Publication 544. Irs gov state tax forms Sale of property interest. Irs gov state tax forms   If you sell your complete interest in oil, gas, or mineral rights, the amount you receive is considered payment for the sale of property used in a trade or business under section 1231, not royalty income. Irs gov state tax forms Under certain circumstances, the sale is subject to capital gain or loss treatment as explained in the Instructions for Schedule D (Form 1040). Irs gov state tax forms For more information on selling section 1231 property, see chapter 3 of Publication 544. Irs gov state tax forms   If you retain a royalty, an overriding royalty, or a net profit interest in a mineral property for the life of the property, you have made a lease or a sublease, and any cash you receive for the assignment of other interests in the property is ordinary income subject to a depletion allowance. Irs gov state tax forms Part of future production sold. Irs gov state tax forms   If you own mineral property but sell part of the future production, in most cases you treat the money you receive from the buyer at the time of the sale as a loan from the buyer. Irs gov state tax forms Do not include it in your income or take depletion based on it. Irs gov state tax forms   When production begins, you include all the proceeds in your income, deduct all the production expenses, and deduct depletion from that amount to arrive at your taxable income from the property. Irs gov state tax forms Unemployment Benefits The tax treatment of unemployment benefits you receive depends on the type of program paying the benefits. Irs gov state tax forms Unemployment compensation. Irs gov state tax forms   You must include in income all unemployment compensation you receive. Irs gov state tax forms You should receive a Form 1099-G showing in box 1 the total unemployment compensation paid to you. Irs gov state tax forms In most cases, you enter unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Irs gov state tax forms Types of unemployment compensation. Irs gov state tax forms   Unemployment compensation generally includes any amount received under an unemployment compensation law of the United States or of a state. Irs gov state tax forms It includes the following benefits. Irs gov state tax forms Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund. Irs gov state tax forms State unemployment insurance benefits. Irs gov state tax forms Railroad unemployment compensation benefits. Irs gov state tax forms Disability payments from a government program paid as a substitute for unemployment compensation. Irs gov state tax forms (Amounts received as workers' compensation for injuries or illness are not unemployment compensation. Irs gov state tax forms See chapter 5 for more information. Irs gov state tax forms ) Trade readjustment allowances under the Trade Act of 1974. Irs gov state tax forms Unemployment assistance under the Disaster Relief and Emergency Assistance Act. Irs gov state tax forms Unemployment assistance under the Airline Deregulation Act of 1974 Program. Irs gov state tax forms Governmental program. Irs gov state tax forms   If you contribute to a governmental unemployment compensation program and your contributions are not deductible, amounts you receive under the program are not included as unemployment compensation until you recover your contributions. Irs gov state tax forms If you deducted all of your contributions to the program, the entire amount you receive under the program is included in your income. Irs gov state tax forms Repayment of unemployment compensation. Irs gov state tax forms   If you repaid in 2013 unemployment compensation you received in 2013, subtract the amount you repaid from the total amount you received and enter the difference on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Irs gov state tax forms On the dotted line next to your entry enter “Repaid” and the amount you repaid. Irs gov state tax forms If you repaid unemployment compensation in 2013 that you included in income in an earlier year, you can deduct the amount repaid on Schedule A (Form 1040), line 23, if you itemize deductions. Irs gov state tax forms If the amount is more than $3,000, see Repayments , earlier. Irs gov state tax forms Tax withholding. Irs gov state tax forms   You can choose to have federal income tax withheld from your unemployment compensation. Irs gov state tax forms To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. Irs gov state tax forms Tax will be withheld at 10% of your payment. Irs gov state tax forms    If you do not choose to have tax withheld from your unemployment compensation, you may be liable for estimated tax. Irs gov state tax forms If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. Irs gov state tax forms For more information on estimated tax, see chapter 4. Irs gov state tax forms Supplemental unemployment benefits. Irs gov state tax forms   Benefits received from an employer-financed fund (to which the employees did not contribute) are not unemployment compensation. Irs gov state tax forms They are taxable as wages and are subject to withholding for income tax. Irs gov state tax forms They may be subject to social security and Medicare taxes. Irs gov state tax forms For more information, see Supplemental Unemployment Benefits in section 5 of Publication 15-A, Employer's Supplemental Tax Guide. Irs gov state tax forms Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Irs gov state tax forms Repayment of benefits. Irs gov state tax forms   You may have to repay some of your supplemental unemployment benefits to qualify for trade readjustment allowances under the Trade Act of 1974. Irs gov state tax forms If you repay supplemental unemployment benefits in the same year you receive them, reduce the total benefits by the amount you repay. Irs gov state tax forms If you repay the benefits in a later year, you must include the full amount of the benefits received in your income for the year you received them. Irs gov state tax forms   Deduct the repayment in the later year as an adjustment to gross income on Form 1040. Irs gov state tax forms (You cannot use Form 1040A or Form 1040EZ. Irs gov state tax forms ) Include the repayment on Form 1040, line 36, and enter “Sub-Pay TRA” and the amount on the dotted line next to line 36. Irs gov state tax forms If the amount you repay in a later year is more than $3,000, you may be able to take a credit against your tax for the later year instead of deducting the amount repaid. Irs gov state tax forms For more information on this, see Repayments , earlier. Irs gov state tax forms Private unemployment fund. Irs gov state tax forms   Unemployment benefit payments from a private (nonunion) fund to which you voluntarily contribute are taxable only if the amounts you receive are more than your total payments into the fund. Irs gov state tax forms Report the taxable amount on Form 1040, line 21. Irs gov state tax forms Payments by a union. Irs gov state tax forms   Benefits paid to you as an unemployed member of a union from regular union dues are included in your income on Form 1040, line 21. Irs gov state tax forms However, if you contribute to a special union fund and your payments to the fund are not deductible, the unemployment benefits you receive from the fund are includible in your income only to the extent they are more than your contributions. Irs gov state tax forms Guaranteed annual wage. Irs gov state tax forms   Payments you receive from your employer during periods of unemployment, under a union agreement that guarantees you full pay during the year, are taxable as wages. Irs gov state tax forms Include them on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Irs gov state tax forms State employees. Irs gov state tax forms   Payments similar to a state's unemployment compensation may be made by the state to its employees who are not covered by the state's unemployment compensation law. Irs gov state tax forms Although the payments are fully taxable, do not report them as unemployment compensation. Irs gov state tax forms Report these payments on Form 1040, line 21. Irs gov state tax forms Welfare and Other Public Assistance Benefits Do not include in your income governmental benefit payments from a public welfare fund based upon need, such as payments to blind individuals under a state public assistance law. Irs gov state tax forms Payments from a state fund for the victims of crime should not be included in the victims' incomes if they are in the nature of welfare payments. Irs gov state tax forms Do not deduct medical expenses that are reimbursed by such a fund. Irs gov state tax forms You must include in your income any welfare payments that are compensation for services or that are obtained fraudulently. Irs gov state tax forms Reemployment Trade Adjustment Assistance (RTAA) payments. Irs gov state tax forms   RTAA payments received from a state must be included in your income. Irs gov state tax forms The state must send you Form 1099-G to advise you of the amount you should include in income. Irs gov state tax forms The amount should be reported on Form 1040, line 21. Irs gov state tax forms Persons with disabilities. Irs gov state tax forms   If you have a disability, you must include in income compensation you receive for services you perform unless the compensation is otherwise excluded. Irs gov state tax forms However, you do not include in income the value of goods, services, and cash that you receive, not in return for your services, but for your training and rehabilitation because you have a disability. Irs gov state tax forms Excludable amounts include payments for transportation and attendant care, such as interpreter services for the deaf, reader services for the blind, and services to help individuals with an intellectual disability do their work. Irs gov state tax forms Disaster relief grants. Irs gov state tax forms    Do not include post-disaster grants received under the Robert T. Irs gov state tax forms Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, child care, or funeral expenses. Irs gov state tax forms Do not deduct casualty losses or medical expenses that are specifically reimbursed by these disaster relief grants. Irs gov state tax forms If you have deducted a casualty loss for the loss of your personal residence and you later receive a disaster relief grant for the loss of the same residence, you may have to include part or all of the grant in your taxable income. Irs gov state tax forms See Recoveries , earlier. Irs gov state tax forms Unemployment assistance payments under the Act are taxable unemployment compensation. Irs gov state tax forms See Unemployment compensation under Unemployment Benefits, earlier. Irs gov state tax forms Disaster relief payments. Irs gov state tax forms   You can exclude from income any amount you receive that is a qualified disaster relief payment. Irs gov state tax forms A qualified disaster relief payment is an amount paid to you: To reimburse or pay reasonable and necessary personal, family, living, or funeral expenses that result from a qualified disaster; To reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of your home or repair or replacement of its contents to the extent it is due to a qualified disaster; By a person engaged in the furnishing or sale of transportation as a common carrier because of the death or personal physical injuries incurred as a result of a qualified disaster; or By a federal, state, or local government, or agency, or instrumentality in connection with a qualified disaster in order to promote the general welfare. Irs gov state tax forms You can exclude this amount only to the extent any expense it pays for is not paid for by insurance or otherwise. Irs gov state tax forms The exclusion does not apply if you were a participant or conspirator in a terrorist action or a representative of one. Irs gov state tax forms   A qualified disaster is: A disaster which results from a terrorist or military action; A federally declared disaster; or A disaster which results from an accident involving a common carrier, or from any other event, which is determined to be catastrophic by the Secretary of the Treasury or his or her delegate. Irs gov state tax forms   For amounts paid under item (4), a disaster is qualified if it is determined by an applicable federal, state, or local authority to warrant assistance from the federal, state, or local government, agency, or instrumentality. Irs gov state tax forms Disaster mitigation payments. Irs gov state tax forms   You also can exclude from income any amount you receive that is a qualified disaster mitigation payment. Irs gov state tax forms Qualified disaster mitigation payments are also most commonly paid to you in the period immediately following damage to property as a result of a natural disaster. Irs gov state tax forms However, disaster mitigation payments are used to mitigate (reduce the severity of) potential damage from future natural disasters. Irs gov state tax forms They are paid to you through state and local governments based on the provisions of the Robert T. Irs gov state tax forms Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act. Irs gov state tax forms   You cannot increase the basis or adjusted basis of your property for improvements made with nontaxable disaster mitigation payments. Irs gov state tax forms Home Affordable Modification Program (HAMP). Irs gov state tax forms   If you benefit from Pay-for-Performance Success Payments under HAMP, the payments are not taxable. Irs gov state tax forms Mortgage assistance payments under section 235 of the National Housing Act. Irs gov state tax forms   Payments made under section 235 of the National Housing Act for mortgage assistance are not included in the homeowner's income. Irs gov state tax forms Interest paid for the homeowner under the mortgage assistance program cannot be deducted. Irs gov state tax forms Medicare. Irs gov state tax forms   Medicare benefits received under title XVIII of the Social Security Act are not includible in the gross income of the individuals for whom they are paid. Irs gov state tax forms This includes basic (part A (Hospital Insurance Benefits for the Aged)) and supplementary (part B (Supplementary Medical Insurance Benefits for the Aged)). Irs gov state tax forms Old-age, survivors, and disability insurance benefits (OASDI). Irs gov state tax forms   Generally, OASDI payments under section 202 of title II of the Social Security Act are not includible in the gross income of the individuals to whom they are paid. Irs gov state tax forms This applies to old-age insurance benefits, and insurance benefits for wives, husbands, children, widows, widowers, mothers and fathers, and parents, as well as the lump-sum death payment. Irs gov state tax forms Nutrition Program for the Elderly. Irs gov state tax forms    Food benefits you receive under the Nutrition Program for the Elderly are not taxable. Irs gov state tax forms If you prepare and serve free meals for the program, include in your income as wages the cash pay you receive, even if you are also eligible for food benefits. Irs gov state tax forms Payments to reduce cost of winter energy. Irs gov state tax forms   Payments made by a state to qualified people to reduce their cost of winter energy use are not taxable. Irs gov state tax forms Other Income The following brief discussions are arranged in alphabetical order. Irs gov state tax forms Other income items briefly discussed below are referenced to publications which provide more topical information. Irs gov state tax forms Activity not for profit. Irs gov state tax forms   You must include on your return income from an activity from which you do not expect to make a profit. Irs gov state tax forms An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. Irs gov state tax forms Enter this income on Form 1040, line 21. Irs gov state tax forms Deductions for expenses related to the activity are limited. Irs gov state tax forms They cannot total more than the income you report and can be taken only if you itemize deductions on Schedule A (Form 1040). Irs gov state tax forms See Not-for-Profit Activities in chapter 1 of Publication 535 for information on whether an activity is considered carried on for a profit. Irs gov state tax forms Alaska Permanent Fund dividend. Irs gov state tax forms   If you received a payment from Alaska's mineral income fund (Alaska Permanent Fund dividend), report it as income on line 21 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. Irs gov state tax forms The state of Alaska sends each recipient a document that shows the amount of the payment with the check. Irs gov state tax forms The amount also is reported to IRS. Irs gov state tax forms Alimony. Irs gov state tax forms   Include in your income on Form 1040, line 11, any alimony payments you receive. Irs gov state tax forms Amounts you receive for child support are not income to you. Irs gov state tax forms Alimony and child support payments are discussed in chapter 18. Irs gov state tax forms Bribes. Irs gov state tax forms   If you receive a bribe, include it in your income. Irs gov state tax forms Campaign contributions. Irs gov state tax forms   These contributions are not income to a candidate unless they are diverted to his or her personal use. Irs gov state tax forms To be exempt from tax, the contributions must be spent for campaign purposes or kept in a fund for use in future campaigns. Irs gov state tax forms However, interest earned on bank deposits, dividends received on contributed securities, and net gains realized on sales of contributed securities are taxable and must be reported on Form 1120-POL, U. Irs gov state tax forms S. Irs gov state tax forms Income Tax Return for Certain Political Organizations. Irs gov state tax forms Excess campaign funds transferred to an office account must be included in the officeholder's income on Form 1040, line 21, in the year transferred. Irs gov state tax forms Car pools. Irs gov state tax forms   Do not include in your income amounts you receive from the passengers for driving a car in a car pool to and from work. Irs gov state tax forms These amounts are considered reimbursement for your expenses. Irs gov state tax forms However, this rule does not apply if you have developed car pool arrangements into a profit-making business of transporting workers for hire. Irs gov state tax forms Cash rebates. Irs gov state tax forms   A cash rebate you receive from a dealer or manufacturer of an item you buy is not income, but you must reduce your basis by the amount of the rebate. Irs gov state tax forms Example. Irs gov state tax forms You buy a new car for $24,000 cash and receive a $2,000 rebate check from the manufacturer. Irs gov state tax forms The $2,000 is not income to you. Irs gov state tax forms Your basis in the car is $22,000. Irs gov state tax forms This is the basis on which you figure gain or loss if you sell the car and depreciation if you use it for business. Irs gov state tax forms Casualty insurance and other reimbursements. Irs gov state tax forms   You generally should not report these reimbursements on your return unless you are figuring gain or loss from the casualty or theft. Irs gov state tax forms See chapter 25 for more information. Irs gov state tax forms Child support payments. Irs gov state tax forms   You should not report these payments on your return. Irs gov state tax forms See chapter 18 for more information. Irs gov state tax forms Court awards and damages. Irs gov state tax forms   To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. Irs gov state tax forms The character of the income as ordinary income or capital gain depends on the nature of the underlying claim. Irs gov state tax forms Include the following as ordinary income. Irs gov state tax forms Interest on any award. Irs gov state tax forms Compensation for lost wages or lost profits in most cases. Irs gov state tax forms Punitive damages, in most cases. Irs gov state tax forms It does not matter if they relate to a physical injury or physical sickness. Irs gov state tax forms Amounts received in settlement of pension rights (if you did not contribute to the plan). Irs gov state tax forms Damages for: Patent or copyright infringement, Breach of contract, or Interference with business operations. Irs gov state tax forms Back pay and damages for emotional distress received to satisfy a claim under title VII of the Civil Rights Act of 1964. Irs gov state tax forms Attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income. Irs gov state tax forms   Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments). Irs gov state tax forms Emotional distress. Irs gov state tax forms   Emotional distress itself is not a physical injury or physical sickness, but damages you receive for emotional distress due to a physical injury or sickness are treated as received for the physical injury or sickness. Irs gov state tax forms Do not include them in your income. Irs gov state tax forms   If the emotional distress is due to a personal injury that is not due to a physical injury or sickness (for example, employment discrimination or injury to reputation), you must include the damages in your income, except for any damages you receive for medical care due to that emotional distress. Irs gov state tax forms Emotional distress includes physical symptoms that result from emotional distress, such as headaches, insomnia, and stomach disorders. Irs gov state tax forms Deduction for costs involved in unlawful discrimination suits. Irs gov state tax forms   You may be able to deduct attorney fees and court costs paid to recover a judgment or settlement for a claim of unlawful discrimination under various provisions of federal, state, and local law listed in Internal Revenue Code section 62(e), a claim against the United States government, or a claim under section 1862(b)(3)(A) of the Social Security Act. Irs gov state tax forms For more information, see Publication 525. Irs gov state tax forms Credit card insurance. Irs gov state tax forms   In most cases, if you receive benefits under a credit card disability or unemployment insurance plan, the benefits are taxable to you. Irs gov state tax forms These plans make the minimum monthly payment on your credit card account if you cannot make the payment due to injury, illness, disability, or unemployment. Irs gov state tax forms Report on Form 1040, line 21, the amount of benefits you received during the year that is more than the amount of the premiums you paid during the year. Irs gov state tax forms Down payment assistance. Irs gov state tax forms   If you purchase a home and receive assistance from a nonprofit corporation to make the down payment, that assistance is not included in your income. Irs gov state tax forms If the corporation qualifies as a tax-exempt charitable organization, the assistance is treated as a gift and is included in your basis of the house. Irs gov state tax forms If the corporation does not qualify, the assistance is treated as a rebate or reduction of the purchase price and is not included in your basis. Irs gov state tax forms Employment agency fees. Irs gov state tax forms   If you get a job through an employment agency, and the fee is paid by your employer, the fee is not includible in your income if you are not liable for it. Irs gov state tax forms However, if you pay it and your employer reimburses you for it, it is includible in your income. Irs gov state tax forms Energy conservation subsidies. Irs gov state tax forms   You can exclude from gross income any subsidy provided, either directly or indirectly, by public utilities for the purchase or installation of an energy conservation measure for a dwelling unit. Irs gov state tax forms Energy conservation measure. Irs gov state tax forms   This includes installations or modifications that are primarily designed to reduce consumption of electricity or natural gas, or improve the management of energy demand. Irs gov state tax forms Dwelling unit. Irs gov state tax forms   This includes a house, apartment, condominium, mobile home, boat, or similar property. Irs gov state tax forms If a building or structure contains both dwelling and other units, any subsidy must be properly allocated. Irs gov state tax forms Estate and trust income. Irs gov state tax forms    An estate or trust, unlike a partnership, may have to pay federal income tax. Irs gov state tax forms If you are a beneficiary of an estate or trust, you may be taxed on your share of its income distributed or required to be distributed to you. Irs gov state tax forms However, there is never a double tax. Irs gov state tax forms Estates and trusts file their returns on Form 1041, U. Irs gov state tax forms S. Irs gov state tax forms Income Tax Return for Estates and Trusts, and your share of the income is reported to you on Schedule K-1 (Form 1041). Irs gov state tax forms Current income required to be distributed. Irs gov state tax forms   If you are the beneficiary of an estate or trust that must distribute all of its current income, you must report your share of the distributable net income, whether or not you actually received it. Irs gov state tax forms Current income not required to be distributed. Irs gov state tax forms    If you are the beneficiary of an estate or trust and the fiduciary has the choice of whether to distribute all or part of the current income, you must report: All income that is required to be distributed to you, whether or not it is actually distributed, plus All other amounts actually paid or credited to you, up to the amount of your share of distributable net income. Irs gov state tax forms How to report. Irs gov state tax forms   Treat each item of income the same way that the estate or trust would treat it. Irs gov state tax forms For example, if a trust's dividend income is distributed to you, you report the distribution as dividend income on your return. Irs gov state tax forms The same rule applies to distributions of tax-exempt interest and capital gains. Irs gov state tax forms   The fiduciary of the estate or trust must tell you the type of items making up your share of the estate or trust income and any credits you are allowed on your individual income tax return. Irs gov state tax forms Losses. Irs gov state tax forms   Losses of estates and trusts generally are not deductible by the beneficiaries. Irs gov state tax forms Grantor trust. Irs gov state tax forms   Income earned by a grantor trust is taxable to the grantor, not the beneficiary, if the grantor keeps certain control over the trust. Irs gov state tax forms (The grantor is the one who transferred property to the trust. Irs gov state tax forms ) This rule applies if the property (or income from the property) put into the trust will or may revert (be returned) to the grantor or the grantor's spouse. Irs gov state tax forms   Generally, a trust is a grantor trust if the grantor has a reversionary interest valued (at the date of transfer) at more than 5% of the value of the transferred property. Irs gov state tax forms Expenses paid by another. Irs gov state tax forms   If your personal expenses are paid for by another person, such as a corporation, the payment may be taxable to you depending upon your relationship with that person and the nature of the payment. Irs gov state tax forms But if the payment makes up for a loss caused by that person, and only restores you to the position you were in before the loss, the payment is not includible in your income. Irs gov state tax forms Fees for services. Irs gov state tax forms   Include all fees for your services in your income. Irs gov state tax forms Examples of these fees are amounts you receive for services you perform as: A corporate director, An executor, administrator, or personal representative of an estate, A manager of a trade or business you operated before declaring Chapter 11 bankruptcy, A notary public, or An election precinct official. Irs gov state tax forms Nonemployee compensation. Irs gov state tax forms   If you are not an employee and the fees for your services from the same payer total $600 or more for the year, you may receive a Form 1099-MISC. Irs gov state tax forms You may need to report your fees as self-employment income. Irs gov state tax forms See Self-Employed Persons , in chapter 1, for a discussion of when you are considered self-employed. Irs gov state tax forms Corporate director. Irs gov state tax forms   Corporate director fees are self-employment income. Irs gov state tax forms Report these payments on Schedule C or Schedule C-EZ (Form 1040). Irs gov state tax forms Personal representatives. Irs gov state tax forms   All personal representatives must include in their gross income fees paid to them from an estate. Irs gov state tax forms If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on Form 1040, line 21. Irs gov state tax forms If you are in the trade or business of being an executor, report these fees as self-employment income on Schedule C or Schedule C-EZ (Form 1040). Irs gov state tax forms The fee is not includible in income if it is waived. Irs gov state tax forms Manager of trade or business for bankruptcy estate. Irs gov state tax forms   Include in your income all payments received from your bankruptcy estate for managing or operating a trade or business that you operated before you filed for bankruptcy. Irs gov state tax forms Report this income on Form 1040, line 21. Irs gov state tax forms Notary public. Irs gov state tax forms    Report payments for these services on Schedule C or Schedule C-EZ (Form 1040). Irs gov state tax forms These payments are not subject to self-employment tax. Irs gov state tax forms See the separate instructions for Schedule SE (Form 1040) for details. Irs gov state tax forms Election precinct official. Irs gov state tax forms    You should receive a Form W-2 showing payments for services performed as an election official or election worker. Irs gov state tax forms Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. Irs gov state tax forms Foster care providers. Irs gov state tax forms   Payments you receive from a state, political subdivision, or a qualified foster care placement agency for providing care to qualified foster individuals in your home generally are not included in your income. Irs gov state tax forms However, you must include in your income payments received for the care of more than 5 individuals age 19 or older and certain difficulty-of-care payments. Irs gov state tax forms   A qualified foster individual is a person who: Is living in a foster family home, and Was placed there by: An agency of a state or one of its political subdivisions, or A qualified foster care placement agency. Irs gov state tax forms Difficulty-of-care payments. Irs gov state tax forms   These are additional payments that are designated by the payer as compensation for providing the additional care that is required for physically, mentally, or emotionally handicapped qualified foster individuals. Irs gov state tax forms A state must determine that the additional compensation is needed, and the care for which the payments are made must be provided in your home. Irs gov state tax forms   You must include in your income difficulty-of-care payments received for more than: 10 qualified foster individuals under age 19, or 5 qualified foster individuals age 19 or older. Irs gov state tax forms Maintaining space in home. Irs gov state tax forms   If you are paid to maintain space in your home for emergency foster care, you must include the payment in your income. Irs gov state tax forms Reporting taxable payments. Irs gov state tax forms    If you receive payments that you must include in your income, you are in business as a foster care provider and you are self-employed. Irs gov state tax forms Report the payments on Schedule C or Schedule C-EZ (Form 1040). Irs gov state tax forms See Publication 587, Business Use of Your Home, to help you determine the amount you can deduct for the use of your home. Irs gov state tax forms Found property. Irs gov state tax forms   If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession. Irs gov state tax forms Free tour. Irs gov state tax forms   If you received a free tour from a travel agency for organizing a group of tourists, you must include its value in your income. Irs gov state tax forms Report the fair market value of the tour on Form 1040, line 21, if you are not in the trade or business of organizing tours. Irs gov state tax forms You cannot deduct your expenses in serving as the voluntary leader of the group at the group's request. Irs gov state tax forms If you organize tours as a trade or business, report the tour's value on Schedule C or Schedule C-EZ (Form 1040). Irs gov state tax forms Gambling winnings. Irs gov state tax forms   You must include your gambling winnings in income on Form 1040, line 21. Irs gov state tax forms If you itemize your deductions on Schedule A (Form 1040), you can deduct gambling losses you had during the year, but only up to the amount of your winnings. Irs gov state tax forms Lotteries and raffles. Irs gov state tax forms   Winnings from lotteries and raffles are gambling winnings. Irs gov state tax forms In addition to cash winnings, you must include in your income the fair market value of bonds, cars, houses, and other noncash prizes. Irs gov state tax forms    If you win a state lottery prize payable in installments, see Publication 525 for more information. Irs gov state tax forms Form W-2G. Irs gov state tax forms   You may have received a Form W-2G, Certain Gambling Winnings, showing the amount of your gambling winnings and any tax taken out of them. Irs gov state tax forms Include the amount from box 1 on Form 1040, line 21. Irs gov state tax forms Include the amount shown in box 4 on Form 1040, line 62, as federal income tax withheld. Irs gov state tax forms Reporting winnings and recordkeeping. Irs gov state tax forms   For more information on reporting gam
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LP 68 Frequently Asked Questions (FAQs)

What is the notice telling me?

We have released the Notice of Levy sent to you previously regarding the taxpayer named in the letter.

What do I have to do?

You are no longer required to turn over any money, property, or rights to property belonging to this taxpayer.

How much time do I have?

The levy release is effective immediately upon receipt by you. No other action is required on your part.

Who should I contact?

There is no need to contact us regarding the release. You may inform the taxpayer that you received the release of levy.

Page Last Reviewed or Updated: 30-Jan-2014

The Irs Gov State Tax Forms

Irs gov state tax forms Publication 523 - Main Content Table of Contents Main HomeVacant land. Irs gov state tax forms Factors used to determine main home. Irs gov state tax forms Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining BasisCost As Basis Basis Other Than Cost Adjusted Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Nonqualified Use Business Use or Rental of HomeUnrecaptured section 1250 gain. Irs gov state tax forms Property Used Partly for Business or Rental Reporting the SaleSeller-financed mortgage. Irs gov state tax forms Individual taxpayer identification number (ITIN). Irs gov state tax forms More information. Irs gov state tax forms Comprehensive Examples Special SituationsException for sales to related persons. Irs gov state tax forms Deducting Taxes in the Year of SaleForm 1099-S. Irs gov state tax forms More information. Irs gov state tax forms Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of First-Time Homebuyer CreditExample. Irs gov state tax forms Worksheets How To Get Tax HelpLow Income Taxpayer Clinics Main Home This section explains the term “main home. Irs gov state tax forms ” Usually, the home you live in most of the time is your main home and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Irs gov state tax forms To exclude gain under the rules in this publication, you in most cases must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. Irs gov state tax forms Land. Irs gov state tax forms   If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land. Irs gov state tax forms Example. Irs gov state tax forms You buy a piece of land and move your main home to it. Irs gov state tax forms Then, you sell the land on which your main home was located. Irs gov state tax forms This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. Irs gov state tax forms Vacant land. Irs gov state tax forms   The sale of vacant land is not a sale of your main home unless: The vacant land is adjacent to land containing your home, You owned and used the vacant land as part of your main home, The separate sale of your home satisfies the requirements for exclusion and occurs within 2 years before or 2 years after the date of the sale of the vacant land, and The other requirements for excluding gain from the sale of a main home have been satisfied with respect to the vacant land. Irs gov state tax forms If these requirements are met, the sale of the home and the sale of the vacant land are treated as one sale and only one maximum exclusion can be applied to any gain. Irs gov state tax forms See Excluding the Gain , later. Irs gov state tax forms The destruction of your home is treated as a sale of your home. Irs gov state tax forms As a result, you may be able to meet these requirements if you sell vacant land used as a part of your main home within 2 years from the date of the destruction of your main home. Irs gov state tax forms For information, see Publication 547. Irs gov state tax forms More than one home. Irs gov state tax forms   If you have more than one home, you can exclude gain only from the sale of your main home. Irs gov state tax forms You must include in income the gain from the sale of any other home. Irs gov state tax forms If you have two homes and live in each of them, your main home is ordinarily the one you live in most of the time during the year. Irs gov state tax forms Example 1. Irs gov state tax forms You own two homes, one in New York and one in Florida. Irs gov state tax forms From 2009 through 2013, you live in the New York home for 7 months and in the Florida residence for 5 months of each year. Irs gov state tax forms In the absence of facts and circumstances indicating otherwise, the New York home is your main home. Irs gov state tax forms You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. Irs gov state tax forms Example 2. Irs gov state tax forms You own a house, but you live in another house that you rent. Irs gov state tax forms The rented house is your main home. Irs gov state tax forms Example 3. Irs gov state tax forms You own two homes, one in Virginia and one in New Hampshire. Irs gov state tax forms In 2009 and 2010, you lived in the Virginia home. Irs gov state tax forms In 2011 and 2012, you lived in the New Hampshire home. Irs gov state tax forms In 2013, you lived again in the Virginia home. Irs gov state tax forms Your main home in 2009, 2010, and 2013 is the Virginia home. Irs gov state tax forms Your main home in 2011 and 2012 is the New Hampshire home. Irs gov state tax forms You would be eligible to exclude gain from the sale of either home (but not both) in 2013. Irs gov state tax forms Factors used to determine main home. Irs gov state tax forms   In addition to the amount of time you live in each home, other factors are relevant in determining which home is your main home. Irs gov state tax forms Those factors include the following. Irs gov state tax forms Your place of employment. Irs gov state tax forms The location of your family members' main home. Irs gov state tax forms Your mailing address for bills and correspondence. Irs gov state tax forms The address listed on your: Federal and state tax returns, Driver's license, Car registration, and Voter registration card. Irs gov state tax forms The location of the banks you use. Irs gov state tax forms The location of recreational clubs and religious organizations of which you are a member. Irs gov state tax forms Property used partly as your main home. Irs gov state tax forms   If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. Irs gov state tax forms For details, see Business Use or Rental of Home , later. Irs gov state tax forms Figuring Gain or Loss To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. Irs gov state tax forms Subtract the adjusted basis from the amount realized to get your gain or loss. Irs gov state tax forms     Selling price     − Selling expenses       Amount realized     − Adjusted basis       Gain or loss   Gain. Irs gov state tax forms   Gain is the excess of the amount realized over the adjusted basis of the property. Irs gov state tax forms Loss. Irs gov state tax forms   Loss is the excess of the adjusted basis over the amount realized for the property. Irs gov state tax forms Selling Price The selling price is the total amount you receive for your home. Irs gov state tax forms It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale. Irs gov state tax forms Personal property. Irs gov state tax forms   The selling price of your home does not include amounts you received for personal property sold with your home. Irs gov state tax forms Personal property is property that is not a permanent part of the home. Irs gov state tax forms Examples are furniture, draperies, rugs, a washer and dryer, and lawn equipment. Irs gov state tax forms Separately stated amounts you received for these items should not be shown on Form 1099-S (discussed later). Irs gov state tax forms Any gains from sales of personal property must be included in your income, but not as part of the sale of your home. Irs gov state tax forms Payment by employer. Irs gov state tax forms   You may have to sell your home because of a job transfer. Irs gov state tax forms If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. Irs gov state tax forms Your employer will include it as wages in box 1 of your Form W-2 and you will include it in your income on Form 1040, line 7, or on Form 1040NR, line 8. Irs gov state tax forms Option to buy. Irs gov state tax forms   If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. Irs gov state tax forms If the option is not exercised, you must report the amount as ordinary income in the year the option expires. Irs gov state tax forms Report this amount on Form 1040, line 21, or on Form 1040NR, line 21. Irs gov state tax forms Form 1099-S. Irs gov state tax forms   If you received Form 1099-S, box 2 (gross proceeds) should show the total amount you received for your home. Irs gov state tax forms   However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. Irs gov state tax forms Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. Irs gov state tax forms Amount Realized The amount realized is the selling price minus selling expenses. Irs gov state tax forms Selling expenses. Irs gov state tax forms   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. Irs gov state tax forms ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. Irs gov state tax forms This adjusted basis must be determined before you can figure gain or loss on the sale of your home. Irs gov state tax forms For information on how to figure your home's adjusted basis, see Determining Basis , later. Irs gov state tax forms Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. Irs gov state tax forms Gain on sale. Irs gov state tax forms   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, generally is taxable. Irs gov state tax forms Loss on sale. Irs gov state tax forms   If the amount realized is less than the adjusted basis, the difference is a loss. Irs gov state tax forms Generally, a loss on the sale of your main home cannot be deducted. Irs gov state tax forms Jointly owned home. Irs gov state tax forms   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. Irs gov state tax forms Separate returns. Irs gov state tax forms   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. Irs gov state tax forms Your ownership interest is generally determined by state law. Irs gov state tax forms Joint owners not married. Irs gov state tax forms   If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. Irs gov state tax forms Each of you applies the rules discussed in this publication on an individual basis. Irs gov state tax forms Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. Irs gov state tax forms Foreclosure or repossession. Irs gov state tax forms   If your home was foreclosed on or repossessed, you have a disposition. Irs gov state tax forms See Publication 4681 to determine if you have ordinary income, gain, or loss. Irs gov state tax forms More information. Irs gov state tax forms   If part of a home is used for business or rental purposes, see Foreclosures and Repossessions in chapter 1 of Publication 544 for more information. Irs gov state tax forms Publication 544 has examples of how to figure gain or loss on a foreclosure or repossession. Irs gov state tax forms Abandonment. Irs gov state tax forms   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. Irs gov state tax forms Trading (exchanging) homes. Irs gov state tax forms   If you trade your home for another home, treat the trade as a sale and a purchase. Irs gov state tax forms Example. Irs gov state tax forms You owned and lived in a home with an adjusted basis of $41,000. Irs gov state tax forms A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. Irs gov state tax forms This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 − $41,000). Irs gov state tax forms If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed). Irs gov state tax forms Transfer to spouse. Irs gov state tax forms   If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss (unless the Exception, discussed next, applies). Irs gov state tax forms This is true even if you receive cash or other consideration for the home. Irs gov state tax forms As a result, the rules explained in this publication do not apply. Irs gov state tax forms   If you owned your home jointly with your spouse and transfer your interest in the home to your spouse, or to your former spouse incident to your divorce, the same rule applies. Irs gov state tax forms You have no gain or loss. Irs gov state tax forms Exception. Irs gov state tax forms   These transfer rules do not apply if your spouse or former spouse is a nonresident alien. Irs gov state tax forms In that case, you generally will have a gain or loss. Irs gov state tax forms More information. Irs gov state tax forms    See Property Settlements in Publication 504, Divorced or Separated Individuals, for more information. Irs gov state tax forms Involuntary conversion. Irs gov state tax forms   You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. Irs gov state tax forms This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations (see Home destroyed or condemned ). Irs gov state tax forms Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. Irs gov state tax forms Your basis in your home is determined by how you got the home. Irs gov state tax forms Generally, your basis is its cost if you bought it or built it. Irs gov state tax forms If you got it in some other way (inheritance, gift, etc. Irs gov state tax forms ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. Irs gov state tax forms While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. Irs gov state tax forms The result of these adjustments is your home's adjusted basis, which is used to figure gain or loss on the sale of your home. Irs gov state tax forms To figure your adjusted basis, you can use Worksheet 1, near the end of this publication. Irs gov state tax forms Filled-in examples of that worksheet are included in the Comprehensive Examples , later. Irs gov state tax forms Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. Irs gov state tax forms Purchase. Irs gov state tax forms   If you bought your home, your basis is its cost to you. Irs gov state tax forms This includes the purchase price and certain settlement or closing costs. Irs gov state tax forms In most cases, your purchase price includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home. Irs gov state tax forms If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed later. Irs gov state tax forms Seller-paid points. Irs gov state tax forms   If the person who sold you your home paid points on your loan, you may have to reduce your home's basis by the amount of the points, as shown in the following chart. Irs gov state tax forms    IF you bought your home. Irs gov state tax forms . Irs gov state tax forms . Irs gov state tax forms THEN reduce your home's basis by the seller-paid points. Irs gov state tax forms . Irs gov state tax forms . Irs gov state tax forms after 1990 but before April 4, 1994 only if you deducted them as home mortgage interest in the year paid. Irs gov state tax forms after April 3, 1994 even if you did not deduct them. Irs gov state tax forms Settlement fees or closing costs. Irs gov state tax forms   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. Irs gov state tax forms You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. Irs gov state tax forms A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing). Irs gov state tax forms   Settlement fees do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Irs gov state tax forms   Some of the settlement fees or closing costs that you can include in your basis are: Abstract fees (abstract of title fees), Charges for installing utility services, Legal fees (including fees for the title search and preparing the sales contract and deed), Recording fees, Survey fees, Transfer or stamp taxes, Owner's title insurance, and Any amounts the seller owes that you agree to pay, such as: Certain real estate taxes (discussed later), Back interest, Recording or mortgage fees, Charges for improvements or repairs, and Sales commissions. Irs gov state tax forms   Some settlement fees and closing costs you cannot include in your basis are: Fire insurance premiums, Rent for occupancy of the house before closing, Charges for utilities or other services related to occupancy of the house before closing, Any fee or cost that you deducted as a moving expense (allowed for certain fees and costs before 1994), Charges connected with getting a mortgage loan, such as: Mortgage insurance premiums (including funding fees connected with loans guaranteed by the Department of Veterans Affairs), Loan assumption fees, Cost of a credit report, Fee for an appraisal required by a lender, and Fees for refinancing a mortgage. Irs gov state tax forms Real estate taxes. Irs gov state tax forms   Real estate taxes for the year you bought your home may affect your basis, as shown in the following chart. Irs gov state tax forms    IF. Irs gov state tax forms . Irs gov state tax forms . Irs gov state tax forms AND. Irs gov state tax forms . Irs gov state tax forms . Irs gov state tax forms THEN the taxes. Irs gov state tax forms . Irs gov state tax forms . Irs gov state tax forms you pay taxes that the seller owed on the home up to the date of sale the seller does not reimburse you are added to the basis of your home. Irs gov state tax forms the seller reimburses you do not affect the basis of your home. Irs gov state tax forms the seller pays taxes for you (taxes owed beginning on the date of sale) you do not reimburse the seller are subtracted from the basis of your home. Irs gov state tax forms you reimburse the seller do not affect the basis of your home. Irs gov state tax forms Construction. Irs gov state tax forms   If you contracted to have your house built on land you own, your basis is: The cost of the land, plus The amount it cost you to complete the house, including: The cost of labor and materials, Any amounts paid to a contractor, Any architect's fees, Building permit charges, Utility meter and connection charges, and Legal fees directly connected with building the house. Irs gov state tax forms   Your cost includes your down payment and any debt such as a first or second mortgage or notes you gave the seller or builder. Irs gov state tax forms It also includes certain settlement or closing costs. Irs gov state tax forms You may have to reduce your basis by points the seller paid for you. Irs gov state tax forms For more information, see Seller-paid points and Settlement fees or closing costs , earlier. Irs gov state tax forms Built by you. Irs gov state tax forms   If you built all or part of your house yourself, its basis is the total amount it cost you to complete it. Irs gov state tax forms Do not include in the cost of the house: The value of your own labor, or The value of any other labor you did not pay for. Irs gov state tax forms Temporary housing. Irs gov state tax forms   If a builder gave you temporary housing while your home was being finished, you must reduce your basis by the part of the contract price that was for the temporary housing. Irs gov state tax forms To figure the amount of the reduction, multiply the contract price by a fraction. Irs gov state tax forms The numerator is the value of the temporary housing, and the denominator is the sum of the value of the temporary housing plus the value of the new home. Irs gov state tax forms Cooperative apartment. Irs gov state tax forms   If you are a tenant-stockholder in a cooperative housing corporation, your basis in the cooperative apartment used as your home is usually the cost of your stock in the corporation. Irs gov state tax forms This may include your share of a mortgage on the apartment building. Irs gov state tax forms Condominium. Irs gov state tax forms   To determine your basis in a condominium apartment used as your home, use the same rules as for any other home. Irs gov state tax forms Basis Other Than Cost You must use a basis other than cost, such as adjusted basis or fair market value, if you received your home as a gift, inheritance, a trade, or from your spouse. Irs gov state tax forms These situations are discussed in the following pages. Irs gov state tax forms Also, the instructions for Worksheet 1 (near the end of the publication) address each of these issues. Irs gov state tax forms Other special rules may apply in certain situations. Irs gov state tax forms If you converted the property, or some part of it, to business or rental use, see Property Changed to Business or Rental Use, in Publication 551. Irs gov state tax forms Home received as gift. Irs gov state tax forms   Use the following chart to find the basis of a home you received as a gift. Irs gov state tax forms IF the donor's adjusted basis at the time of the gift was. Irs gov state tax forms . Irs gov state tax forms . Irs gov state tax forms THEN your basis is. Irs gov state tax forms . Irs gov state tax forms . Irs gov state tax forms more than the fair market value of the home at that time the same as the donor's adjusted basis at the time of the gift. Irs gov state tax forms   Exception: If using the donor's adjusted basis results in a loss when you sell the home, you must use the fair market value of the home at the time of the gift as your basis. Irs gov state tax forms If using the fair market value results in a gain, you have neither gain nor loss. Irs gov state tax forms equal to or less than the fair market value at that time, and you received the gift before 1977 the smaller of the: • donor's adjusted basis, plus  any federal gift tax paid on  the gift, or • the home's fair market value  at the time of the gift. Irs gov state tax forms equal to or less than the fair market value at that time, and you received the gift after 1976 the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home (explained next). Irs gov state tax forms Fair market value. Irs gov state tax forms   The fair market value of property at the time of the gift is the value of the property as appraised for purposes of the federal gift tax. Irs gov state tax forms If the gift was not subject to the federal gift tax, the fair market value is the value as appraised for the purposes of a state gift tax. Irs gov state tax forms Part of federal gift tax due to net increase in value. Irs gov state tax forms   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. Irs gov state tax forms The numerator of the fraction is the net increase in the value of the home, and the denominator is the value of the home for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Irs gov state tax forms The net increase in the value of the home is its fair market value minus the donor's adjusted basis immediately before the gift. Irs gov state tax forms Home acquired from a decedent who died before or after 2010. Irs gov state tax forms   If you inherited your home from a decedent who died before or after 2010, your basis is the fair market value of the property on the date of the decedent's death (or the later alternate valuation date chosen by the personal representative of the estate). Irs gov state tax forms If an estate tax return was filed or required to be filed, the value of the property listed on the estate tax return is your basis. Irs gov state tax forms If a federal estate tax return did not have to be filed, your basis in the home is the same as its appraised value at the date of death, for purposes of state inheritance or transmission taxes. Irs gov state tax forms Surviving spouse. Irs gov state tax forms   If you are a surviving spouse and you owned your home jointly, your basis in the home will change. Irs gov state tax forms The new basis for the interest your spouse owned will be its fair market value on the date of death (or alternate valuation date). Irs gov state tax forms The basis in your interest will remain the same. Irs gov state tax forms Your new basis in the home is the total of these two amounts. Irs gov state tax forms   If you and your spouse owned the home either as tenants by the entirety or as joint tenants with right of survivorship, you will each be considered to have owned one-half of the home. Irs gov state tax forms Example. Irs gov state tax forms Your jointly owned home (owned as joint tenants with right of survivorship) had an adjusted basis of $50,000 on the date of your spouse's death, and the fair market value on that date was $100,000. Irs gov state tax forms Your new basis in the home is $75,000 ($25,000 for one-half of the adjusted basis plus $50,000 for one-half of the fair market value). Irs gov state tax forms Community property. Irs gov state tax forms   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), each spouse is usually considered to own half of the community property. Irs gov state tax forms When either spouse dies, the total fair market value of the community property becomes the basis of the entire property, including the part belonging to the surviving spouse. Irs gov state tax forms For this to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. Irs gov state tax forms   For more information about community property, see Publication 555, Community Property. Irs gov state tax forms    If you are selling a home in which you acquired an interest from a decedent who died in 2010, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your basis. Irs gov state tax forms Home received as trade. Irs gov state tax forms   If you acquired your home as a trade for other property, in most cases, the basis of your home is the fair market value (at the time of the trade) of the property you gave up. Irs gov state tax forms If you traded one home for another, you have made a sale and purchase. Irs gov state tax forms In that case, you may have a gain. Irs gov state tax forms See Trading (exchanging) homes under Dispositions Other Than Sales, earlier, for an example of figuring the gain. Irs gov state tax forms Home received from spouse. Irs gov state tax forms   If you received your home from your spouse or from your former spouse incident to your divorce, your basis in the home depends on the date of the transfer. Irs gov state tax forms Transfers after July 18, 1984. Irs gov state tax forms   If you received the home after July 18, 1984, there was no gain or loss on the transfer. Irs gov state tax forms In most cases, your basis in this home is the same as your spouse's (or former spouse's) adjusted basis just before you received it. Irs gov state tax forms This rule applies even if you received the home in exchange for cash, the release of marital rights, the assumption of liabilities, or other considerations. Irs gov state tax forms   If you owned a home jointly with your spouse and your spouse transferred his or her interest in the home to you, in most cases, your basis in the half interest received from your spouse is the same as your spouse's adjusted basis just before the transfer. Irs gov state tax forms This also applies if your former spouse transferred his or her interest in the home to you incident to your divorce. Irs gov state tax forms Your basis in the half interest you already owned does not change. Irs gov state tax forms Your new basis in the home is the total of these two amounts. Irs gov state tax forms Transfers before July 19, 1984. Irs gov state tax forms   If you received your home before July 19, 1984, in exchange for your release of marital rights, in most cases, your basis in the home is generally its fair market value at the time you received it. Irs gov state tax forms More information. Irs gov state tax forms   For more information on property received from a spouse or former spouse, see Property Settlements in Publication 504. Irs gov state tax forms Involuntary conversion. Irs gov state tax forms   If your home is destroyed or condemned, you may receive insurance proceeds or a condemnation award. Irs gov state tax forms If you acquired a replacement home with these proceeds, the basis is its cost decreased by any gain not recognized on the conversion under the rules explained in: Publication 547, in the case of a home that was destroyed, or Chapter 1 of Publication 544, in the case of a home that was condemned. Irs gov state tax forms Example. Irs gov state tax forms A fire destroyed your home that you owned and used for only 6 months. Irs gov state tax forms The home had an adjusted basis of $80,000 and the insurance company paid you $130,000 for the loss. Irs gov state tax forms Your gain is $50,000 ($130,000 − $80,000). Irs gov state tax forms You bought a replacement home for $100,000. Irs gov state tax forms The part of your gain that is taxable is $30,000 ($130,000 − $100,000), the unspent part of the payment from the insurance company. Irs gov state tax forms The rest of the gain ($20,000) is not taxable, so that amount reduces your basis in the new home. Irs gov state tax forms The basis of the new home is figured as follows. Irs gov state tax forms Cost of replacement home $100,000 Minus: Gain not recognized 20,000 Basis of the replacement home $80,000 More information. Irs gov state tax forms   For more information about basis, see Publication 551. Irs gov state tax forms Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. Irs gov state tax forms To figure your adjusted basis, you can use Worksheet 1, found toward the end of this publication. Irs gov state tax forms Filled-in examples of that worksheet are included in Comprehensive Examples , later. Irs gov state tax forms Recordkeeping. Irs gov state tax forms You should keep records to prove your home's adjusted basis. Irs gov state tax forms Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. Irs gov state tax forms But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. Irs gov state tax forms Keep records proving the basis of both homes as long as they are needed for tax purposes. Irs gov state tax forms The records you should keep include: Proof of the home's purchase price and purchase expenses; Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis; Any worksheets or other computations you used to figure the adjusted basis of the home you sold, the gain or loss on the sale, the exclusion, and the taxable gain; Any Form 982 you filed to exclude any discharge of qualified principal residence indebtedness; Any Form 2119, Sale of Your Home, you filed to postpone gain from the sale of a previous home before May 7, 1997; and Any worksheets you used to prepare Form 2119, such as the Adjusted Basis of Home Sold Worksheet or the Capital Improvements Worksheet from the Form 2119 instructions, or other source of computations. Irs gov state tax forms Increases to Basis These include the following. Irs gov state tax forms Additions and other improvements that have a useful life of more than 1 year. Irs gov state tax forms Special assessments for local improvements. Irs gov state tax forms Amounts you spent after a casualty to restore damaged property. Irs gov state tax forms Improvements. Irs gov state tax forms   These add to the value of your home, prolong its useful life, or adapt it to new uses. Irs gov state tax forms You add the cost of additions and other improvements to the basis of your property. Irs gov state tax forms   The following chart lists some other examples of improvements. Irs gov state tax forms Examples of Improvements That Increase Basis Additions Bedroom Bathroom Deck Garage Porch Patio Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Lawn & Grounds Landscaping Driveway Walkway Fence  Retaining wall Sprinkler system Swimming pool  Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system  Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances  Kitchen modernization  Flooring Wall-to-wall carpeting  Insulation Attic Walls Floors Pipes and duct work Improvements no longer part of home. Irs gov state tax forms   Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. Irs gov state tax forms Example. Irs gov state tax forms You put wall-to-wall carpeting in your home 15 years ago. Irs gov state tax forms Later, you replaced that carpeting with new wall-to-wall carpeting. Irs gov state tax forms The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. Irs gov state tax forms Repairs. Irs gov state tax forms   These maintain your home in good condition but do not add to its value or prolong its life. Irs gov state tax forms You do not add their cost to the basis of your property. Irs gov state tax forms Examples. Irs gov state tax forms Repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes are examples of repairs. Irs gov state tax forms Exception. Irs gov state tax forms   The entire job is considered an improvement if items that would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home. Irs gov state tax forms For example, if you have a casualty and your home is damaged, increase your basis by the amount you spend on repairs that restore the property to its pre-casualty condition. Irs gov state tax forms Decreases to Basis These include the following. Irs gov state tax forms Discharge of qualified principal residence indebtedness that was excluded from income (but not below zero). Irs gov state tax forms For details, see Publication 4681. Irs gov state tax forms Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. Irs gov state tax forms For details, see Publication 4681. Irs gov state tax forms Gain you postponed from the sale of a previous home before May 7, 1997. Irs gov state tax forms Deductible casualty losses. Irs gov state tax forms Insurance payments you received or expect to receive for casualty losses. Irs gov state tax forms Payments you received for granting an easement or right-of-way. Irs gov state tax forms Depreciation allowed or allowable if you used your home for business or rental purposes. Irs gov state tax forms Energy-related credits allowed for expenditures made on the residence. Irs gov state tax forms (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. Irs gov state tax forms ) Adoption credit you claimed for improvements added to the basis of your home. Irs gov state tax forms Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. Irs gov state tax forms Energy conservation subsidy excluded from your gross income because you received it (directly or indirectly) from a public utility after 1992 to buy or install any energy conservation measure. Irs gov state tax forms An energy conservation measure is an installation or modification primarily designed either to reduce consumption of electricity or natural gas or to improve the management of energy demand for a home. Irs gov state tax forms District of Columbia first-time homebuyer credit allowed on the purchase of a principal residence in the District of Columbia. Irs gov state tax forms General sales taxes claimed as an itemized deduction on Schedule A (Form 1040) that were imposed on the purchase of personal property, such as a houseboat used as your home or a mobile home. Irs gov state tax forms Discharges of qualified principal residence indebtedness. Irs gov state tax forms   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. Irs gov state tax forms This exclusion applies to discharges made after 2006 and before 2014. Irs gov state tax forms If you choose to exclude this income, you must reduce (but not below zero) the basis of your principal residence by the amount excluded from gross income. Irs gov state tax forms   File Form 982 with your tax return. Irs gov state tax forms See the form's instructions for detailed information. Irs gov state tax forms    A decrease in basis due to a discharge of qualified principal residence indebtedness that is excluded from income occurs only if you retain ownership of the principal residence after a discharge. Irs gov state tax forms In most cases, this would occur in a refinancing or a restructuring of the mortgage. Irs gov state tax forms Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. Irs gov state tax forms This means that, if you qualify, you will not have to pay tax on the gain up to the limit described under Maximum Exclusion , next. Irs gov state tax forms To qualify, you must meet the ownership and use tests described later. Irs gov state tax forms You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. Irs gov state tax forms This choice can be made (or revoked) at any time before the expiration of a 3-year period beginning on the due date of your return (not including extensions) for the year of the sale. Irs gov state tax forms You can use Worksheet 2 (near the end of this publication) to figure the amount of your exclusion and your taxable gain, if any. Irs gov state tax forms If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. Irs gov state tax forms See Publication 505, Tax Withholding and Estimated Tax. Irs gov state tax forms Maximum Exclusion You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. Irs gov state tax forms You meet the ownership test. Irs gov state tax forms You meet the use test. Irs gov state tax forms During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. Irs gov state tax forms For details on gain allocated to periods of nonqualified use, see Nonqualified Use , later. Irs gov state tax forms If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed. Irs gov state tax forms You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . Irs gov state tax forms Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. Irs gov state tax forms This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). Irs gov state tax forms Exception. Irs gov state tax forms   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. Irs gov state tax forms However, the maximum amount you may be able to exclude will be reduced. Irs gov state tax forms See Reduced Maximum Exclusion , later. Irs gov state tax forms Example 1—home owned and occupied for at least 2 years. Irs gov state tax forms Mya bought and moved into her main home in September 2011. Irs gov state tax forms She sold the home at a gain in October 2013. Irs gov state tax forms During the 5-year period ending on the date of sale in October 2013, she owned and lived in the home for more than 2 years. Irs gov state tax forms She meets the ownership and use tests. Irs gov state tax forms Example 2—ownership test met but use test not met. Irs gov state tax forms Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. Irs gov state tax forms He later sold the home for a gain in June 2013. Irs gov state tax forms He owned the home during the entire 5-year period ending on the date of sale. Irs gov state tax forms He meets the ownership test but not the use test. Irs gov state tax forms He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). Irs gov state tax forms Period of Ownership and Use The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time. Irs gov state tax forms You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale. Irs gov state tax forms Example. Irs gov state tax forms Naomi bought and moved into a house in July 2009. Irs gov state tax forms She lived there for 13 months and then moved in with a friend. Irs gov state tax forms She later moved back into her house and lived there for 12 months until she sold it in August 2013. Irs gov state tax forms Naomi meets the ownership and use tests because, during the 5-year period ending on the date of sale, she owned the house for more than 2 years and lived in it for a total of 25 (13 + 12) months. Irs gov state tax forms Temporary absence. Irs gov state tax forms   Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. Irs gov state tax forms The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. Irs gov state tax forms Example 1. Irs gov state tax forms David Johnson, who is single, bought and moved into his home on February 1, 2011. Irs gov state tax forms Each year during 2011 and 2012, David left his home for a 2-month summer vacation. Irs gov state tax forms David sold the house on March 1, 2013. Irs gov state tax forms Although the total time David lived in his home is less than 2 years (21 months), he meets the use requirement and may exclude gain. Irs gov state tax forms The 2-month vacations are short temporary absences and are counted as periods of use in determining whether David used the home for the required 2 years. Irs gov state tax forms Example 2. Irs gov state tax forms Professor Paul Beard, who is single, bought and moved into a house in December 2010, went abroad for a 1-year sabbatical leave in January 2012, returned to the house in January 2013, and sold it at a gain in February 2013. Irs gov state tax forms Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. Irs gov state tax forms He cannot exclude any part of his gain because he did not use the residence for the required 2 years. Irs gov state tax forms Ownership and use tests met at different times. Irs gov state tax forms   You can meet the ownership and use tests during different 2-year periods. Irs gov state tax forms However, you must meet both tests during the 5-year period ending on the date of the sale. Irs gov state tax forms Example. Irs gov state tax forms Beginning in 2002, Helen Jones lived in a rented apartment. Irs gov state tax forms The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. Irs gov state tax forms In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. Irs gov state tax forms On July 12, 2013, while still living in her daughter's home, she sold her condominium. Irs gov state tax forms Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 13, 2008, to July 12, 2013, the date she sold the condominium. Irs gov state tax forms She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). Irs gov state tax forms She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). Irs gov state tax forms The time Helen lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use. Irs gov state tax forms Cooperative apartment. Irs gov state tax forms   If you sold stock as a tenant-shareholder in a cooperative housing corporation, the ownership and use tests are met if, during the 5-year period ending on the date of sale, you: Owned the stock for at least 2 years, and Lived in the house or apartment that the stock entitled you to occupy as your main home for at least 2 years. Irs gov state tax forms Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. Irs gov state tax forms Exception for individuals with a disability. Irs gov state tax forms   There is an exception to the use test if: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home. Irs gov state tax forms Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. Irs gov state tax forms   If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. Irs gov state tax forms Previous home destroyed or condemned. Irs gov state tax forms   For the ownership and use tests, you add the time you owned and lived in a previous home that was destroyed or condemned to the time you owned and lived in the replacement home on whose sale you wish to exclude gain. Irs gov state tax forms This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home (see Involuntary Conversions in Publication 551). Irs gov state tax forms Otherwise, you must have owned and lived in the same home for 2 of the 5 years before the sale to qualify for the exclusion. Irs gov state tax forms Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Irs gov state tax forms   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty (defined later) as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. Irs gov state tax forms You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve outside the United States either as an employee of the Peace Corps on qualified official extended duty (defined later) or as an enrolled volunteer or volunteer leader of the Peace Corps. Irs gov state tax forms This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. Irs gov state tax forms   If this helps you qualify to exclude gain, you can choose to have the 5-year test period suspended by filing a return for the year of sale that does not include the gain. Irs gov state tax forms Example. Irs gov state tax forms John bought and moved into a home in 2005. Irs gov state tax forms He lived in it as his main home for 2½ years. Irs gov state tax forms For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. Irs gov state tax forms He then sold the home at a gain in 2013. Irs gov state tax forms To meet the use test, John chooses to suspend the 5-year test period for the 6 years he was on qualified official extended duty. Irs gov state tax forms This means he can disregard those 6 years. Irs gov state tax forms Therefore, John's 5-year test period consists of the 5 years before he went on qualified official extended duty. Irs gov state tax forms He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. Irs gov state tax forms Period of suspension. Irs gov state tax forms   The period of suspension cannot last more than 10 years. Irs gov state tax forms Together, the 10-year suspension period and the 5-year test period can be as long as, but no more than, 15 years. Irs gov state tax forms You cannot suspend the 5-year period for more than one property at a time. Irs gov state tax forms You can revoke your choice to suspend the 5-year period at any time. Irs gov state tax forms Example. Irs gov state tax forms Mary bought a home on April 1, 1997. Irs gov state tax forms She used it as her main home until August 31, 2000. Irs gov state tax forms On September 1, 2000, she went on qualified official extended duty with the Navy. Irs gov state tax forms She did not live in the house again before selling it on July 31, 2013. Irs gov state tax forms Mary chooses to use the entire 10-year suspension period. Irs gov state tax forms Therefore, the suspension period would extend back from July 31, 2013, to August 1, 2003, and the 5-year test period would extend back to August 1, 1998. Irs gov state tax forms During that period, Mary owned the house all 5 years and lived in it as her main home from August 1, 1998, until August 31, 2000, a period of more than 24 months. Irs gov state tax forms She meets the ownership and use tests because she owned and lived in the home for at least 2 years during this test period. Irs gov state tax forms Uniformed services. Irs gov state tax forms   The uniformed services are: The Armed Forces (the Army, Navy, Air Force, Marine Corps, and Coast Guard), The commissioned corps of the National Oceanic and Atmospheric Administration, and The commissioned corps of the Public Health Service. Irs gov state tax forms Foreign Service member. Irs gov state tax forms   For purposes of the choice to suspend the 5-year test period for ownership and use, you are a member of the Foreign Service if you are any of the following. Irs gov state tax forms A Chief of mission. Irs gov state tax forms An Ambassador at large. Irs gov state tax forms A member of the Senior Foreign Service. Irs gov state tax forms A Foreign Service officer. Irs gov state tax forms Part of the Foreign Service personnel. Irs gov state tax forms Employee of the intelligence community. Irs gov state tax forms   For purposes of the choice to suspend the 5-year test period for ownership and use, you are an employee of the intelligence community if you are an employee of any of the following. Irs gov state tax forms The Office of the Director of National Intelligence. Irs gov state tax forms The Central Intelligence Agency. Irs gov state tax forms The National Security Agency. Irs gov state tax forms The Defense Intelligence Agency. Irs gov state tax forms The National Geospatial-Intelligence Agency. Irs gov state tax forms The National Reconnaissance Office and any other office within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs. Irs gov state tax forms Any of the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, the Department of Treasury, the Department of Energy, and the Coast Guard. Irs gov state tax forms The Bureau of Intelligence and Research of the Department of State. Irs gov state tax forms Any of the elements of the Department of Homeland Security concerned with the analyses of foreign intelligence information. Irs gov state tax forms Qualified official extended duty. Irs gov state tax forms   You are on qualified official extended duty if you are on extended duty while: Serving at a duty station at least 50 miles from your main home, or Living in Government quarters under Government orders. Irs gov state tax forms   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. Irs gov state tax forms Married Persons If you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use tests, you can exclude up to $250,000 of the gain. Irs gov state tax forms (But see Special rules for joint returns, next. Irs gov state tax forms ) Special rules for joint returns. Irs gov state tax forms   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. Irs gov state tax forms You are married and file a joint return for the year. Irs gov state tax forms Either you or your spouse meets the ownership test. Irs gov state tax forms Both you and your spouse meet the use test. Irs gov state tax forms During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. Irs gov state tax forms If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. Irs gov state tax forms For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. Irs gov state tax forms Example 1—one spouse sells a home. Irs gov state tax forms Emily sells her home in June 2013 for a gain of $300,000. Irs gov state tax forms She marries Jamie later in the year. Irs gov state tax forms She meets the ownership and use tests, but Jamie does not. Irs gov state tax forms Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. Irs gov state tax forms The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. Irs gov state tax forms Example 2—each spouse sells a home. Irs gov state tax forms The facts are the same as in Example 1 except that Jamie also sells a home in 2013 for a gain of $200,000 before he marries Emily. Irs gov state tax forms He meets the ownership and use tests on his home, but Emily does not. Irs gov state tax forms Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. Irs gov state tax forms However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. Irs gov state tax forms Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. Irs gov state tax forms The $500,000 maximum exclusion for certain joint returns does not apply because Emily and Jamie do not both meet the use test for the same home. Irs gov state tax forms Sale of main home by surviving spouse. Irs gov state tax forms   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. Irs gov state tax forms   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. Irs gov state tax forms The sale or exchange took place after 2008. Irs gov state tax forms The sale or exchange took place no more than 2 years after the date of death of your spouse. Irs gov state tax forms You have not remarried. Irs gov state tax forms You and your spouse met the use test at the time of your spouse's death. Irs gov state tax forms You or your spouse met the ownership test at the time of your spouse's death. Irs gov state tax forms Neither you nor your spouse excluded gain from the sale of another home during the last 2 years before the date of death. Irs gov state tax forms The ownership and use tests were described earlier. Irs gov state tax forms Example. Irs gov state tax forms Harry owned and used a house as his main home since 2009. Irs gov state tax forms Harry and Wilma married on July 1, 2013, and from that date they used Harry's house as their main home. Irs gov state tax forms Harry died on August 15, 2013, and Wilma inherited the property. Irs gov state tax forms Wilma sold the property on September 1, 2013, at which time she had not remarried. Irs gov state tax forms Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Harry owned and used the property before death. Irs gov state tax forms Home transferred from spouse. Irs gov state tax forms   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. Irs gov state tax forms Use of home after divorce. Irs gov state tax forms   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. Irs gov state tax forms Reduced Maximum Exclusion If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. Irs gov state tax forms This applies to those who: Fail to meet the ownership and use tests, or Have used the exclusion within 2 years of selling their current home. Irs gov state tax forms In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. Irs gov state tax forms A change in place of employment. Irs gov state tax forms Health. Irs gov state tax forms Unforeseen circumstances. Irs gov state tax forms Qualified individual. Irs gov state tax forms   For purposes of the reduced maximum exclusion, a qualified individual is any of the following. Irs gov state tax forms You. Irs gov state tax forms Your spouse. Irs gov state tax forms A co-owner of the home. Irs gov state tax forms A person whose main home is the same as yours. Irs gov state tax forms Primary reason for sale. Irs gov state tax forms   One of the three reasons above will be considered to be the primary reason you sold your home if either (1) or (2) is true. Irs gov state tax forms You qualify under a “safe harbor. Irs gov state tax forms ” This is a specific set of facts and circumstances that, if applicable, qualifies you to claim a reduced maximum exclusion. Irs gov state tax forms Safe harbors corresponding to the reasons listed above are described later. Irs gov state tax forms A safe harbor does not apply, but you can establish, based on facts and circumstances, that the primary reason for the sale is a change in place of employment, health, or unforeseen circumstances. Irs gov state tax forms  Factors that may be relevant in determining your primary reason for sale include whether: Your sale and the circumstances causing it were close in time, The circumstances causing your sale occurred during the time you owned and used the property as your main home, The circumstances causing your sale were not reasonably foreseeable when you began using the property as your main home, Your financial ability to maintain the property became materially impaired, The suitability of the property as your main home materially changed, and During the time you owned the property, you used it as your home. Irs gov state tax forms Change in Place of Employment You may qualify for a reduced exclusion if the primary reason for the sale of your main home is a change in the location of employment of a qualified individual. Irs gov state tax forms Employment. Irs gov state tax forms   For this purpose, employment includes the start of work with a new employer or continuation of work with the same employer. Irs gov state tax forms It also includes the start or continuation of self-employment. Irs gov state tax forms Distance safe harbor. Irs gov state tax forms   A change in place of employment is considered to be the reason you sold your home if: The change occurred during the period you owned and used the property as your main home, and The new place of employment is at least 50 miles farther from the home you sold than was the former place of employment (or, if there was no former place of employment, the distance between your new place of employment and the home sold is at least 50 miles). Irs gov state tax forms Example. Irs gov state tax forms Justin was unemployed and living in a townhouse in Florida he had owned and used as his main home since 2012. Irs gov state tax forms He got a job in North Carolina and sold his townhouse in 2013. Irs gov state tax forms Because the distance between Justin's new place of employment and the home he sold is at least 50 miles, the sale satisfies the conditions of the distance safe harbor. Irs gov state tax forms Justin's sale of his home is considered to be because of a change in place of employment, and he is entitled to claim a reduced maximum exclusion of gain from the sale. Irs gov state tax forms Health The sale of your main home is because of health if your primary reason for the sale is: To obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual, or To obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury. Irs gov state tax forms The sale of your home is not because of health if the sale merely benefits a qualified individual's general health or well-being. Irs gov state tax forms For purposes of this reason, a qualified individual includes, in addition to the individuals listed earlier under Qualified individual , any of the following family members of these individuals. Irs gov state tax forms Parent, grandparent, stepmother, stepfather. Irs gov state tax forms Child, grandchild, stepchild, adopted child, eligible foster child. Irs gov state tax forms Brother, sister, stepbrother, stepsister, half-brother, half-sister. Irs gov state tax forms Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law. Irs gov state tax forms Uncle, aunt, nephew, niece, or cousin. Irs gov state tax forms Example. Irs gov state tax forms In 2012, Chase and Lauren, spouses, bought a house that they used as their main home. Irs gov state tax forms Lauren's father has a chronic disease and is unable to care for himself. Irs gov state tax forms In 2013, Chase and Lauren sold their home in order to move into Lauren's father's house to provide care for him. Irs gov state tax forms Because the primary reason for the sale of their home was to provide care for Lauren's father, Chase and Lauren are entitled to a reduced maximum exclusion. Irs gov state tax forms Doctor's recommendation safe harbor. Irs gov state tax forms   Health is considered to be the reason you sold your home if, for one or more of the reasons listed at the beginning of this discussion, a doctor recommends a change of residence. Irs gov state tax forms Unforeseen Circumstances The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying that home. Irs gov state tax forms You are not considered to have an unforeseen circumstance if the primary reason you sold your home was that you preferred to get a different home or because your finances improved. Irs gov state tax forms Specific event safe harbors. Irs gov state tax forms   Unforeseen circumstances are considered to be the reason for selling your home if any of the following events occurred while you owned and used the property as your main home. Irs gov state tax forms An involuntary conversion of your home, such as when your home is destroyed or condemned. Irs gov state tax forms Natural or man-made disasters or acts of war or terrorism resulting in a casualty to your home, whether or not your loss is deductible. Irs gov state tax forms In the case of qualified individuals (listed earlier under Qualified individual ): Death, Unemployment (if the individual is eligible for unemployment compensation), A change in employment or self-employment status that results in the individual's inability to pay reasonable basic living expenses (listed under Reasonable basic living expenses , later) for his or her household, Divorce or legal separation under a decree of divorce or separate maintenance, or Multiple births resulting from the same pregnancy. Irs gov state tax forms An event the IRS determined to be an unforeseen circumstance in published guidance of general applicability. Irs gov state tax forms For example, the IRS determined the September 11, 2001, terrorist attacks to be an unforeseen circumstance. Irs gov state tax forms Reasonable basic living expenses. Irs gov state tax forms   Reasonable basic living expenses for your household include the following. Irs gov state tax forms Amounts spent for food. Irs gov state tax forms Amounts spent for clothing. Irs gov state tax forms Housing and related expenses. Irs gov state tax forms Medical expenses. Irs gov state tax forms Transportation expenses. Irs gov state tax forms Tax payments. Irs gov state tax forms Court-ordered payments. Irs gov state tax forms Expenses reasonably necessary to produce income. Irs gov state tax forms   Any of these amounts spent to maintain an affluent or luxurious standard of living are not reasonable basic living expenses. Irs gov state tax forms Nonqualified Use Gain from the sale or exchange of the main home is not excludable from income if it is allocable to periods of nonqualified use. Irs gov state tax forms Nonqualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions (see next). Irs gov state tax forms Exceptions. Irs gov state tax forms   A period of nonqualified use does not include: Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home; Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty: As a member of the uniformed services; As a member of the Foreign Service of the United States; or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. Irs gov state tax forms Calculation. Irs gov state tax forms   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain (net of any depreciation allowed or allowable on the property for periods after May 6, 1997) by the following fraction:   Total nonqualified use during the period of ownership after 2008     Total period of ownership     This calculation can be found in Worksheet 2, line 10, later in this publication. Irs gov state tax forms   For examples of this calculation, see Business Use or Rental of Home , next. Irs gov state tax forms Business Use or Rental of Home You may be able to exclude gain from the sale of a home you have used for business or to produce rental income if you meet the ownership and use tests. Irs gov state tax forms Example 1. Irs gov state tax forms On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. Irs gov state tax forms She moved in on that date and lived in it until May 31, 2009, when she moved out of the house and put it up for rent. Irs gov state tax forms The house was rented from June 1, 2009, to March 31, 2011. Irs gov state tax forms Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. Irs gov state tax forms Amy moved back into the house on April 1, 2011, and lived there until she sold it on January 31, 2013, for a gain of $200,000. Irs gov state tax forms During the 5-year period ending on the date of the sale (January 31, 2008–January 31, 2013), Amy owned and lived in the house for more than 2 years as shown in the following table. Irs gov state tax forms Five-Year Period Used as Home Used as Rental 1/31/08 – 5/31/09 16 months   6/01/09 – 3/31/11   22 months 4/01/11 – 1/31/13 22 months     38 months 22 months       During the period Amy owned the house (2,080 days), her period of nonqualified use was 668 days. Irs gov state tax forms Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain, as shown on Worksheet 2. Irs gov state tax forms Example 2. Irs gov state tax forms William owned and used a house as his main home from 2007 through 2010. Irs gov state tax forms On January 1, 2011, he moved to another state. Irs gov state tax forms He rented his house from that date until April 30, 2013, when he sold it. Irs gov state tax forms During the 5-year period ending on the date of sale (May 1, 2008-April 30, 2013), William owned and lived in the house for more than 2 years. Irs gov state tax forms Because it was rental property at the time of the sale, he must report the sale on Form 4797. Irs gov state tax forms Because the period of nonqualified use does not include any part of the 5-year period after the last date William lived in the house, he has no period of nonqualified use. Irs gov state tax forms Because he met the ownership and use tests, he can exclude gain up to $250,000. Irs gov state tax forms However, he cannot exclude the part of the gain equal to the depreciation he claimed or could have claimed for renting the house, as explained next. Irs gov state tax forms Depreciation after May 6, 1997. Irs gov state tax forms   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. Irs gov state tax forms If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed. Irs gov state tax forms Unrecaptured section 1250 gain. Irs gov state tax forms   This is the part of any long-term capital gain from the sale of your home that is due to depreciation and cannot be excluded. Irs gov state tax forms To figure the amount of unrecaptured section 1250 gain to be reported on Schedule D (Form 1040), you must also take into account certain gains or losses from the sale of property other than your home. Irs gov state tax forms Use the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions for this purpose. Irs gov state tax forms Worksheet 2. Irs gov state tax forms Taxable Gain on Sale of Home—Completed Example 1 for Amy Part 1. Irs gov state tax forms Gain or (Loss) on Sale       1. Irs gov state tax forms   Selling price of home 1. Irs gov state tax forms     2. Irs gov state tax forms   Selling expenses (including commissions, advertising and legal fees, and seller-paid loan charges) 2. Irs gov state tax forms     3. Irs gov state tax forms   Subtract line 2 from line 1. Irs gov state tax forms This is the amount realized 3. Irs gov state tax forms     4. Irs gov state tax forms   Adjusted basis of home sold (from Worksheet 1, line 13) 4. Irs gov state tax forms     5. Irs gov state tax forms   Gain or (loss) on the sale. Irs gov state tax forms Subtract line 4 from line 3. Irs gov state tax forms If this is a loss, stop here 5. Irs gov state tax forms 200,000   Part 2. Irs gov state tax forms Exclusion and Taxable Gain       6. Irs gov state tax forms   Enter any depreciation allowed or allowable on the property for periods after May 6, 1997. Irs gov state tax forms If none, enter -0- 6. Irs gov state tax forms 10,000   7. Irs gov state tax forms   Subtract line 6 from line 5. Irs gov state tax forms If the result is less than zero, enter -0- 7. Irs gov state tax forms 190,000   8. Irs gov state tax forms   Aggregate number of days of nonqualified use after 2008. Irs gov state tax forms If none, enter -0-. Irs gov state tax forms  If line 8 is equal to zero, skip to line 12 and enter the amount from line 7 on line 12 8. Irs gov state tax forms 668   9. Irs gov state tax forms   Number of days taxpayer owned the property 9. Irs gov state tax forms 2,080   10. Irs gov state tax forms   Divide the amount on line 8 by the amount on line 9. Irs gov state tax forms Enter the result as a decimal (rounded to at least 3 places). Irs gov state tax forms But do not enter an amount greater than 1. Irs gov state tax forms 00 10. Irs gov state tax forms 0. Irs gov state tax forms 321   11. Irs gov state tax forms   Gain allocated to nonqualified use. Irs gov state tax forms (Line 7 multiplied by line 10) 11. Irs gov state tax forms 60,990   12. Irs gov state tax forms   Gain eligible for exclusion. Irs gov state tax forms Subtract line 11 from line 7 12. Irs gov state tax forms 129,010   13. Irs gov state tax forms   If you qualify to exclude gain on the sale, enter your maximum exclusion (see Maximum Exclusion ). Irs gov state tax forms  If you qualify for a reduced maximum exclusion, enter the amount from Worksheet 3, line 7. Irs gov state tax forms If you do  not qualify to exclude gain, enter -0- 13. Irs gov state tax forms 250,000   14. Irs gov state tax forms   Exclusion. Irs gov state tax forms Enter the smaller of line 12 or line 13 14. Irs gov state tax forms 129,010   15. Irs gov state tax forms   Taxable gain. Irs gov state tax forms Subtract line 14 from line 5. Irs gov state tax forms Report your taxable gain as described under Reporting the Sale . Irs gov state tax forms If the amount on line 6 is more than zero, complete line 16 15. Irs gov state tax forms 70,990   16. Irs gov state tax forms   Enter the smaller of line 6 or line 15. Irs gov state tax forms Enter this amount on line 12 of the Unrecaptured Section 1250 Gain  Worksheet in the instructions for Schedule D (Form 1040) 16. Irs gov state tax forms 10,000 Property Used Partly for Business or Rental If you use property partly as a home and partly for business or to produce rental income, the treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. Irs gov state tax forms Part of Home Used for Business or Rental If the part of your property used for business or to produce rental income is within your home, such as a room used as a home office for a business, you do not need to allocate gain on the sale of the property between the business part of the property and the part used as a home. Irs gov state tax forms In addition, you do not need to report the sale of the business or rental part on Form 4797. Irs gov state tax forms This is true whether or not you were entitled to claim any depreciation. Irs gov state tax forms However, you cannot exclude the part of any gain equal to any depreciation allowed or allowable after May 6, 1997. Irs gov state tax forms See Depreciation after May 6, 1997, earlier. Irs gov state tax forms Example 1. Irs gov state tax forms Ray sold his main home in 2013 at a $30,000 gain. Irs gov state tax forms He has no gains or losses from the sale of property other than the gain from the sale of his home. Irs gov state tax forms He meets the ownership and use tests to exclude the gain from his income. Irs gov state tax forms However, he used part of the home as a business office in 2012 and claimed $500 depreciation. Irs gov state tax forms Because the business office was part of his home (not separate from it), he does not have to allocate the gain on the sale between the business part of the property and the part used as a home. Irs gov state tax forms In addition, he does not have to report any part of the gain on Form 4797. Irs gov state tax forms Because Ray was entitled to take a depreciation deduction, he must recognize $500 of the gain as unrecaptured section 1250 gain. Irs gov state tax forms He reports his gain, exclusion, and the taxable gain of $500 on Form 8949 and Schedule D (Form 1040). Irs gov state tax forms Example 2. Irs gov state tax forms The facts are the same as in Example 1 except that Ray was not entitled to claim depreciation for the business use of his home. Irs gov state tax forms Since Ray did not claim any depreciation, he can exclude the entire $30,000 gain. Irs gov state tax forms Separate Part of Property Used for Business or Rental You may have used part of your property as your home and a separate part of it for business or to produce rental income. Irs gov state tax forms Examples are: A working farm on which your house was located, A duplex in w