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Basis ....................................................
6
Index .................................................... 12
Important Reminder
Limit on itemized deductions. Certain
itemized deductions (including real estate
taxes and home mortgage interest) are limited
if your adjusted gross income is more than
$126,600 ($63,300 if you are married filing
separately). For more information, see the
instructions for Schedule A (Form 1040).
Introduction
This publication provides tax information for
first-time homeowners. Your first home may
be a mobile home, a single-family house, a
townhouse, a condominium, or a cooperative
apartment.
The following topics are explained.
1) Your loan is secured by your main home. Points paid by the seller. The term
(Your main home is the one you live in “points” includes loan placement fees that the
Where To Deduct
most of the time.) seller pays to the lender to arrange financing Home Mortgage Interest
for the buyer. Enter on line 10 of your Schedule A (Form
2) Paying points is an established business
Treatment by seller. The seller cannot 1040) the home mortgage interest and points
practice in the area where the loan was
deduct these fees as interest. But they are a reported to you on Form 1098 (discussed
made.
selling expense that reduces the seller's next). If you did not receive a Form 1098,
3) The points paid were not more than the amount realized. See Publication 523 for enter your deductible interest on line 11, and
points generally charged in that area. more information. any deductible points on line 12. See Table
Treatment by buyer. The buyer also re- 1 for a summary of where to deduct home
4) You use the cash method of accounting.
duces the basis of the home by the amount mortgage interest and real estate taxes.
This means you report income in the
of the seller-paid points and treats the points If you paid home mortgage interest to the
year you receive it and deduct expenses
as if he or she had paid them. If all the tests person from whom you bought your home,
in the year you pay them. Most individ-
under the Exception are met, the buyer can show that person's name, address, and social
uals use this method.
deduct the points in the year paid. If any of security number (SSN) or employer identifi-
5) The points were not paid in place of those tests is not met, the buyer deducts the cation number (EIN) on the dotted lines next
amounts that ordinarily are stated sepa- points over the life of the loan. to line 11. The seller must give you this
Page 4
Figure A. Are My Points Fully Deductible This Year?
Start Here:
No
Is the loan secured by your main home? 䊳
Yes
䊲
No
Is the payment of points an established business practice in
䊳
your area?
Yes
䊲
Yes
Were the points paid more than the amount generally charged
䊳
in your area?
No
䊲
No
Do you use the cash method of accounting? 䊳
Yes
䊲
Yes
Were the points paid in place of amounts that ordinarily are
䊳
separately stated on the settlement sheet?
No
䊲
Yes
Did you take out the loan to improve your main home?
No
䊲
No
Did you take out the loan to buy or build your main home? 䊳
Yes
䊲
No
Were the points computed as a percentage of the principal
䊳
amount of the mortgage?
Yes
䊲
Were the funds you provided (other than those you borrowed No
from your lender or mortgage broker), plus any points the 䊳
seller paid, at least as much as the points charged?*
Yes
䊲
No
Is the amount paid clearly shown as points on the settlement
䊳
statement?
Yes
䊲 䊲
You cannot fully deduct the points this
䊳 You can fully deduct the points this year.
year. See the discussion on Points.
* The funds you provided do not have to have been applied to the points. They can include a down payment, an escrow deposit, earnest money, and other funds
you paid at or before closing for any purpose.
Page 5
number and you must give the seller your Table 1. Where To Deduct Interest and Taxes Paid on Your Home
SSN; Form W-9, Request for Taxpayer Iden-
See the text for information on what expenses are eligible.
tification Number and Certification, can be
used for this purpose. Failure to meet either
IF you are eligible to deduct . . . THEN report the amount
of these requirements may result in a $50
penalty for each failure. on Schedule A (Form 1040) . . .
The interest you paid at settlement should The mortgage interest credit is intended to This fraction, which you may change to a
be included on the statement. If it is not, add help lower-income individuals afford home percentage, will not change as long as you
the interest from the settlement sheet that ownership. The tax credit is allowed each can take the credit.
qualifies as home mortgage interest to the year for part of the home mortgage interest
total shown on Form 1098 or similar state- they pay. Example. Emily's mortgage loan is
ment. Put the total on line 10 of Schedule A To be eligible for the credit, you must get $50,000. The certified indebtedness amount
(Form 1040) and attach a statement to your a mortgage credit certificate (MCC) from on her MCC is $40,000. She paid $4,000 in-
return explaining the difference. Write “See your state or local government. Generally, an terest in this year. Emily figures the interest
attached” next to line 10. MCC is issued only in connection with a new to enter on line 1 of Form 8396 as follows:
A mortgage holder can be a financial in- mortgage for the purchase of your main $40,000
stitution, a governmental unit, or a cooper- home. = 80% (.80)
The MCC will show the certificate credit $50,000
ative housing corporation. If a statement
comes from a cooperative housing corpo- rate you will use to figure your credit. It will $4,000 ⫻ .80 = $3,200
ration, it will generally show your share of in- also show the certified indebtedness amount
terest. on which the interest is eligible for the credit. Emily enters $3,200 on line 1 of Form 8396.
You should receive your mortgage interest In each later year, she will figure her credit
statement for each year by January 31 of the You must contact the appropriate
TIP government agency about getting an using only 80% of the interest she pays for
following year. A copy of this form will also that year.
be sent to the IRS. MCC before you get a mortgage and
buy your home. Contact your state or local
housing finance agency for information about Limits
Example. You bought a new home on the availability of MCCs in your area. Two limits may apply to your credit:
May 3. You paid no points on the purchase.
During the year, you made mortgage pay- 1) A limit based on the credit rate, and
Claiming the credit. To claim the credit,
ments which included $1,872 deductible in-
complete Form 8396 and attach it to your 2) A limit based on your tax.
terest on your new home. The settlement
Form 1040. Include the credit in your total for
sheet for the purchase of the home included
line 47 of Form 1040, and check box b. Limit based on credit rate. If the certificate
interest of $232 for 29 days in May. The
mortgage statement you receive from the credit rate is higher than 20%, the credit
lender includes total interest of $2,104 Reducing your home mortgage interest cannot be more than $2,000.
($1,872 + $232). You can deduct the $2,104 deduction. If you itemize your deductions
if you itemize your deductions. on Schedule A (Form 1040), reduce your Limit based on tax. Your credit (after ap-
home mortgage interest deduction by the plying the limit based on the credit rate) can-
amount of the mortgage interest credit. not be more than your regular tax liability on
Refund of overpaid interest. If you receive line 40 of Form 1040 reduced by any credits
a refund of mortgage interest you overpaid in Selling your home. If you purchase a home claimed on lines 41 through 44 of Form 1040.
a prior year, you generally will receive a Form after 1990 using an MCC, and you sell that
1098 showing the refund in box 3. See Re- Legislation affecting this limit was
home within 9 years, you will have to recap-
fund of home mortgage interest, earlier, under ture (repay) a portion of the credit. For addi- ! pending at the time of printing. For
CAUTION guidance, visit the IRS's web site at
Home Mortgage Interest. tional information, see Publication 523.
www.irs.gov or see the Form 8396 in-
structions. Publication 553, Highlights of 1999
Tax Changes, will also contain information
More than one borrower. If you and at least Figuring the Credit about this and other tax law changes.
one other person (other than your spouse if Figure your credit on Form 8396.
you file a joint return) were liable for and paid
interest on a mortgage that was for your Dividing the Credit
home, and the other person received a Form Mortgage not more than certified indebt-
edness. If your mortgage is equal to (or If two or more persons (other than a married
1098 showing the interest that was paid dur- couple filing a joint return) hold an interest in
ing the year, attach a statement to your return smaller than) the certified indebtedness
amount shown on your MCC, enter on line 1 the home to which the MCC relates, the credit
explaining this. Show how much of the inter- must be divided based on the interest held
est each of you paid, and give the name and of Form 8396 all the interest you paid on your
mortgage during the year. by each person.
address of the person who received the form.
Deduct your share of the interest on line 11 Example. John and his brother, George,
of Schedule A (Form 1040), and write “See Mortgage more than certified indebt- were issued an MCC. They used it to get a
attached” next to the line. edness. If your mortgage is larger than the mortgage on their main home. John has a
certified indebtedness amount shown on your 60% ownership interest in the home, and
MCC, you can figure the credit on only part George has a 40% ownership interest in the
of the interest you paid. To find the amount home. John paid $5,400 mortgage interest
to enter on line 1, multiply the total interest this year and George paid $3,600.
Page 6
The MCC shows a credit rate of 25% and Table 2. Effect of Refinancing on Your Credit
a certified indebtedness amount of $65,000.
The loan amount (mortgage) on their home IF you get a new (reissued) MCC and the THEN the interest you claim on
is $60,000. Because the credit rate is more amount of your new mortgage is . . . Form 8396, line 1, is . . .
than 20%, the credit is limited to $2,000.
John figures the credit by multiplying the Smaller than or equal to the certificate All the interest paid during the year on your
mortgage interest he paid this year ($5,400) indebtedness amount on the new MCC new mortgage*
by the certificate credit rate (25%) for a total
of $1,350. His credit is limited to $1,200 Larger than the certificate indebtedness on Interest paid during the year on your new
($2,000 × 60%).
the new MCC mortgage multiplied by the following fraction.
George figures the credit by multiplying
the mortgage interest he paid in this year Certificate indebtedness on
($3,600) by the certificate credit rate (25%) for your new MCC
a total of $900. His credit is limited to $800 Original amount of your mortgage
($2,000 × 40%).
* The credit using the new MCC cannot be more than the credit using the old MCC. See New MCC
Carryforward cannot increase your credit.
If your allowable credit is reduced because
of the limit based on your tax, you can carry 3 of the form, and write “See attached” on the cause you must keep track of your basis and
forward the unused portion of the credit to the dotted line. adjusted basis during the period you own your
next 3 years or until used, whichever comes home. You must also keep records of the
first. New MCC cannot increase your credit. events that affect basis or adjusted basis. See
The credit that you claim with your new MCC Keeping Records, later.
Example. You receive a mortgage credit cannot be more than the credit that you could
certificate from State X. This year, your tax have claimed with your old MCC.
liability is $1,100, your tentative minimum tax In most cases, the agency that issues your Figuring Your Basis
is zero, and your mortgage interest credit is new MCC will make sure that it does not in- How you figure your basis depends on how
$1,700. You claim no other credits. Your un- crease your credit. However, if either your old you acquire your home. If you buy or build
used mortgage interest credit for this year is loan or your new loan has a variable (adjust- your home, your cost is your basis. If you
$600 ($1,700 − $1,100). You can carry for- able) interest rate, you will need to check this receive your home as a gift, your basis is
ward this amount to the next 3 years. yourself. In that case, you will need to know usually the adjusted basis that the person
the amount of the credit you could have who gave you the home had. If you inherit
Credit rate more than 20%. If you are sub- claimed using the old MCC. your home, the fair market value at that time
ject to the $2,000 limit because your certif- There are two methods for figuring the is generally your basis. Each of these topics
icate credit rate is more than 20%, you cannot credit you could have claimed. Under one is discussed later.
carry forward any amount more than $2,000 method, you figure the actual credit that
(or your share of the $2,000 if you must divide would have been allowed. This means you Fair market value. Fair market value is the
the credit). use the credit rate on the old MCC and the price that property would sell for on the open
interest you would have paid on the old loan. market. It is the price that would be agreed
Example. In the earlier example under on between a willing buyer and a willing
If your old loan was a variable rate mort-
Dividing the Credit, John and George used seller, with neither having to buy or sell, and
gage, you can use another method to deter-
the entire $2,000 credit. The excess $150 for both having reasonable knowledge of the
mine the credit that you could have claimed.
John ($1,350 − $1,200) and $100 for George relevant facts.
Under this method, you figure the credit using
($900 − $800) cannot be carried forward to
a payment schedule of a hypothetical self-
future years, despite the tax liabilities for John
amortizing mortgage with level payments Property transferred from a spouse. If your
and George.
projected to the final maturity date of the old home is transferred to you from your spouse,
mortgage. The interest rate of the hypothet- or from your former spouse as a result of a
ical mortgage is the annual percentage rate divorce, your basis is the same as the trans-
Refinancing (APR) of the new mortgage for purposes of feror's adjusted basis just before the transfer.
If you refinance your original mortgage loan the Federal Truth in Lending Act. The prin- Publication 504, Divorced or Separated Indi-
on which you had been given an MCC, you cipal of the hypothetical mortgage is the re- viduals, fully discusses transfers between
must get a new MCC to be able to claim the maining outstanding balance of the certified spouses.
credit on the new loan. And the amount of mortgage indebtedness shown on the old
credit you can claim on the new loan may MCC.
change. Table 2 summarizes how to figure Cost as Basis
your credit if you refinance your original You must choose one method and The cost of your home, whether you pur-
mortgage loan. ! use it consistently beginning with the
CAUTION first tax year for which you claim the
chased it or constructed it, is the amount you
paid for it, including any debt you assumed.
An issuer may reissue an MCC after you
refinance your mortgage, but only up to one credit based on the new MCC. The cost of your home includes most
year after the date of the refinancing. If you settlement or closing costs you paid when you
did not get a new MCC, you may want to As part of your tax records, you bought the home. If you built your home, your
contact the state or local housing finance TIP should keep your old MCC and the cost includes most closing costs paid when
agency that issued your original MCC for in- schedule of payments for your old you bought the land or settled on your mort-
formation about whether you can get a reis- mortgage. gage.
sued MCC.
Purchase. The basis of a home you bought
Year of refinancing. In the year of refi- is the amount you paid for it. This usually in-
nancing, add the applicable amount of inter- cludes your down payment and any debt you
est paid on the old mortgage and the appli- assumed. The basis of a cooperative apart-
cable amount of interest paid on the new Basis ment is the amount you paid for your shares
mortgage, and enter the total on line 1 of Basis is your starting point for figuring a gain in the corporation that owns or controls the
Form 8396. or loss if you later sell your home, or for fig- property. This amount includes any purchase
If your new MCC has a credit rate different uring depreciation if you later use part of your commissions or other costs of acquiring the
from the rate on the old MCC, you must at- home for business purposes or for rent. shares.
tach a statement to Form 8396. The state- While you own your home, you may add
ment must show the calculation for lines 1, certain items to your basis. You may subtract Construction. If you contracted to have your
2, and 3 for the part of the year when the old certain other items from your basis. These home built on land that you own, your basis
MCC was in effect. It must show a separate items are called adjustments to basis and are in the home is your basis in the land plus the
calculation for the part of the year when the explained later under Adjusted Basis. amount you paid to have the home built. This
new MCC was in effect. Combine the It is important that you understand these includes the cost of labor and materials, the
amounts of each line 3, enter the total on line terms when you first acquire your home be- amount you paid the contractor, any archi-
Page 7
tect's fees, building permit charges, utility Table 3. Adjusted Basis
meter and connection charges, and legal fees This table summarizes items that will generally increase or decrease your basis in
that are directly connected with building your your home.
home. If you built all or part of your home
yourself, your basis is the total amount it cost
you to build it. You cannot include the value Increases to Basis Decreases to Basis
of your own labor or any other labor you did
not pay for. Improvements: Insurance reimbursement for casualty
Putting an addition on your home losses
Real estate taxes. Real estate taxes are Replacing an entire roof
usually divided so that you and the seller each Paving your driveway Deductible casualty loss not covered by
pay taxes for the part of the property tax year Installing central air conditioning insurance
that each owned the home. See the earlier Rewiring your home
discussion of Real estate taxes paid at Payment received for easement or
settlement or closing, under Real Estate Assessments for local improvements right-of-way granted
Taxes, to figure the real estate taxes you paid (see Assessments for local benefits)
or are considered to have paid. Depreciation deduction if home is used
If you pay any part of the seller's share Amounts spent to restore damaged property for business or rental purposes
of the real estate taxes (the taxes up to the
date of sale), and the seller did not reimburse Value of energy conservation subsidy
you, add those taxes to your basis in the
home. You cannot deduct them as taxes paid.
If the seller paid any of your share of the the year you buy your home if you itemize c) Cost of a credit report, and
real estate taxes (the taxes beginning with the your deductions. You can add certain other
date of sale), you can still deduct those taxes. settlement or closing costs to the basis of d) Fee for an appraisal required by a
If you did not reimburse the seller, you must your home. lender.
reduce your basis by the amount of those Items added to basis. You can include
taxes. in your basis the settlement fees and closing Points paid by seller. If you bought your
costs that are for buying your home. A fee is home after April 3, 1994, you must reduce
Example 1. You bought your home on for buying the home if you would have had to your basis by any points paid for your mort-
September 1. The property tax year in your pay it even if you paid cash for the home. gage by the person who sold you your home.
area is the calendar year, and the tax is due The following are some of the settlement If you bought your home after 1990 but
on August 15. The real estate taxes on the fees and closing costs that you can include before April 4, 1994, you must reduce your
home you bought were $730 for the year and in the original basis of your home. basis by seller-paid points only if you de-
had been paid by the seller on August 15. ducted them. See Points, earlier, for the rules
You did not reimburse the seller for your • Abstract fees (abstract of title fees). on deducting points.
share of the real estate taxes from September
1 through December 31. You must reduce the • Charges for installing utility services.
basis of your home by the $244 [(122 ÷ 365) Gift
• Legal fees (including fees for the title
× $730] the seller paid for you. You can de-
search and preparation of the sales con- If someone gave you your home, your basis
duct your $244 share of real estate taxes on
tract and deed). is the same as the person's (the donor's) ad-
your return for the year you purchased your
home. • Recording fees. justed basis (defined later) when it was given
to you. However, your basis in the home for
• Surveys. determining a loss on its sale is the lesser of
Example 2. You bought your home on the fair market value of the home when it was
May 3, 1999. The property tax year in your • Transfer taxes.
given to you, or the donor's adjusted basis.
area is the calendar year. The taxes for the
• Title insurance. If you receive your home as a gift (after
previous year are assessed on January 2 and 1976), add to your basis (the donor's adjusted
are due on May 31 and November 30. Under • Any amount the seller owes that you basis) the part of any federal gift tax paid that
state law, the taxes become a lien on May agree to pay, such as back taxes or in- is due to the net increase in the value of the
31. You agreed to pay all taxes due after the terest, recording or mortgage fees, cost home. Figure this part by multiplying the fed-
date of sale. The taxes due in 1999 for 1998 for improvements or repairs, and sales eral gift tax paid on the gift of the home by a
were $520. The taxes due in 2000 for 1999 commissions. fraction. The numerator (top part) of the
will be $565. fraction is the net increase in the value of the
You cannot deduct any of the taxes paid If the seller actually paid for any item that home, and the denominator (bottom part) is
in 1999 because they relate to the 1998 you are liable for and that you can take a the value of the home. The net increase in the
property tax year. You did not own the home deduction for (such as your share of the real value of the home is the fair market value of
until 1999. Instead, you add the $520 to the estate taxes for the year of sale), you must the home minus the donor's adjusted basis.
cost (basis) of your home. reduce your basis by that amount unless you Publication 551, Basis of Assets, gives
Because you owned the home in 1999 for are charged for it in the settlement. more information including examples of figur-
243 days (May 3 to December 31), you can Items not added to basis and not ing your basis when you received property
take a tax deduction on your 2000 return of deductible. Here are some settlement and as a gift.
$376 [(243 ÷ 365) × $565] paid in 2000 for closing costs which you cannot deduct or add
1999. You add the remaining $189 ($565 − to your basis.
$376) of taxes paid in 2000 to the cost (basis)
of your home.
Inheritance
1) Fire insurance premiums.
Your basis in a home you inherited is gener-
2) Charges for using utilities or other ser- ally the fair market value of the home on the
Settlement or closing costs. If you bought vices related to occupancy of the home date of the decedent's death or on the alter-
your home, you probably paid settlement or before closing. nate valuation date if the estate qualified and
closing costs in addition to the contract price. used this date. If an estate tax return was
These costs are divided between you and the 3) Rent for occupying the home before filed, your basis is the value of the home listed
seller according to the sales contract, local closing. on the estate tax return.
custom, or understanding of the parties. If If an estate tax return was not filed, your
4) Charges connected with getting or refi-
you built your home, you probably paid these basis is the appraised value of the home at
nancing a mortgage loan, such as:
costs when you bought the land or settled on the decedent's date of death for state inher-
your mortgage. a) FHA mortgage insurance premiums itance or transmission taxes. Publication 551
The only settlement or closing costs you and VA funding fees, and Publication 559, Survivors, Executors,
can deduct are home mortgage interest and and Administrators, have more information
certain real estate taxes. You deduct them in b) Loan assumption fees, on the basis of inherited property.
Page 8
for improvements or other additions to the ness) to receive our electronic newslet-
Adjusted Basis basis. In addition, you should keep track of ters on hot tax issues and news.
While you own your home, various events any decreases to the basis such as those
may take place that can change the original • Small Business Corner (located under
listed in Table 3. Tax Info For Business) to get information
basis of your home. These events can in-
crease or decrease your original basis. The on starting and operating a small busi-
How to keep records. How you keep rec- ness.
result is called adjusted basis. See Table 3 ords is up to you, but they must be clear and
for a list of some of the items that can adjust accurate and must be available to the IRS. You can also reach us with your computer
your basis. using File Transfer Protocol at ftp.irs.gov.
How long to keep records. You must keep
Improvements. An improvement materially your records for as long as they are important
adds to the value of your home, considerably for the federal tax law.
prolongs its useful life, or adapts it to new Keep records that support an item of in- TaxFax Service. Using the phone
uses. You must add the cost of any improve- come or a deduction appearing on a return attached to your fax machine, you can
ments to the basis of your home. You cannot until the period of limitations for the return receive forms and instructions by
deduct these costs. runs out. ( A period of limitations is the limited calling 703–368–9694. Follow the directions
Improvements include putting a recreation period of time after which no legal action can from the prompts. When you order forms,
room in your unfinished basement, adding be brought.) For assessment of tax you owe, enter the catalog number for the form you
another bathroom or bedroom, putting up a this is generally 3 years from the date you need. The items you request will be faxed to
fence, putting in new plumbing or wiring, in- filed the return. For filing a claim for credit or you.
stalling a new roof, and paving your driveway. refund, this is generally 3 years from the date
Amount added to basis. The amount you filed the original return, or 2 years from
you add to your basis for improvements is the date you paid the tax, whichever is later.
your actual cost. This includes all costs for Returns filed before the due date are treated Phone. Many services are available
material and labor, except your own labor, as filed on the due date. by phone.
and all expenses related to the improvement. You may need to keep records relating to
For example, if you had your lot surveyed to the basis of property (discussed earlier)
put up a fence, the cost of the survey is a part longer than the period of limitations. Keep • Ordering forms, instructions, and publi-
of the cost of the fence. those records as long as they are important cations. Call 1–800–829–3676 to order
You must also add to your basis state and in figuring the basis of the original or re- current and prior year forms, instructions,
local assessments for improvements such as placement property. Generally, this means for and publications.
streets and sidewalks. These assessments as long as you own the property and, after
are discussed earlier under Real Estate
• Asking tax questions. Call the IRS with
you dispose of it, for the period of limitations your tax questions at 1–800–829–1040.
Taxes. that applies to you.
Repairs versus improvements. A repair • TTY/TDD equipment. If you have access
keeps your home in an ordinary, efficient op- to TTY/TDD equipment, call 1–800–829–
erating condition. It does not add to the value 4059 to ask tax questions or to order
of your home or prolong its life. Repairs in- forms and publications.
clude repainting your home inside or outside, How To Get More • TeleTax topics. Call 1–800–829–4477 to
fixing your gutters or floors, fixing leaks or
plastering, and replacing broken window
Information listen to pre-recorded messages covering
various tax topics.
panes. You cannot deduct repair costs and You can order free publications and forms,
generally cannot add them to the basis of ask tax questions, and get more information Evaluating the quality of our telephone
your home. from the IRS in several ways. By selecting the services. To ensure that IRS representatives
However, repairs that are done as part of method that is best for you, you will have give accurate, courteous, and professional
an extensive remodeling or restoration of your quick and easy access to tax help. answers, we evaluate the quality of our tele-
home are considered improvements. You phone services in several ways.
add them to the basis of your home. Free tax services. To find out what services
Records to keep. You can use Table 4 are available, get Publication 910, Guide to • A second IRS representative sometimes
as a guide to help you keep track of im- Free Tax Services. It contains a list of free tax monitors live telephone calls. That person
provements to your home. Also see Keeping publications and an index of tax topics. It also only evaluates the IRS assistor and does
Records, later. describes other free tax information services, not keep a record of any taxpayer's name
including tax education and assistance pro- or tax identification number.
Energy conservation subsidy. If a public grams and a list of TeleTax topics. • We sometimes record telephone calls to
utility gives you (directly or indirectly) a sub- Personal computer. With your per- evaluate IRS assistors objectively. We
sidy for the purchase or installation of an en- sonal computer and modem, you can hold these recordings no longer than one
ergy conservation measure for your home, access the IRS on the Internet at week and use them only to measure the
do not include the value of that subsidy in www.irs.gov. While visiting our web site, you quality of assistance.
your income. You must reduce the basis of can select: • We value our customers' opinions.
your home by that value. Throughout this year, we will be survey-
An energy conservation measure is an • Frequently Asked Tax Questions (located ing our customers for their opinions on
installation, or modification of an installation, under Taxpayer Help & Ed) to find an- our service.
that is primarily designed to reduce con- swers to questions you may have.
sumption of electricity or natural gas or to
improve the management of energy demand. • Forms & Pubs to download forms and
publications or search for forms and
publications by topic or keyword. Walk-in. You can walk in to many
post offices, libraries, and IRS offices
• Fill-in Forms (located under Forms & to pick up certain forms, instructions,
Pubs) to enter information while the form
Keeping Records is displayed and then print the completed
and publications. Also, some libraries and IRS
offices have:
Keeping full and accurate records is form.
vital to properly report your income • Tax Info For You to view Internal Reve- • An extensive collection of products avail-
RECORDS and expenses, to support your de- nue Bulletins published in the last few able to print from a CD-ROM or photo-
ductions, and to know the basis or adjusted years. copy from reproducible proofs.
basis of your home. These records include • The Internal Revenue Code, regulations,
your purchase contract and settlement papers
• Tax Regs in English to search regulations
and the Internal Revenue Code (under Internal Revenue Bulletins, and Cumula-
if you bought the property, or other objective tive Bulletins available for research pur-
United States Code (USC)).
evidence if you acquired it by gift, inheritance, poses.
or similar means. You should keep any re- • Digital Dispatch and IRS Local News Net
ceipts, canceled checks, and similar evidence (both located under Tax Info For Busi-
Page 9
Mail. You can send your order for • Eastern part of U.S. and foreign ad- • Popular tax forms which may be filled in
forms, instructions, and publications dresses: electronically, printed out for submission,
to the Distribution Center nearest to Eastern Area Distribution Center and saved for recordkeeping.
you and receive a response within 10 work- P.O. Box 85074 • Internal Revenue Bulletins.
days after your request is received. Find the Richmond, VA 23261–5074
address that applies to your part of the The CD-ROM can be purchased from
country. National Technical Information Service (NTIS)
by calling 1–877–233–6767 or on the Internet
at www.irs.gov/cdorders. The first release
• Western part of U.S.: CD-ROM. You can order IRS Publi-
is available in mid-December and the final
Western Area Distribution Center cation 1796, Federal Tax Products on
release is available in late January.
Rancho Cordova, CA 95743–0001 CD-ROM, and obtain:
IRS Publication 3207, Small Business
• Central part of U.S.: Resource Guide, is an interactive CD-ROM
• Current tax forms, instructions, and pub- that contains information important to small
Central Area Distribution Center lications.
P.O. Box 8903 businesses. It is available in mid-February.
Bloomington, IL 61702–8903 • Prior-year tax forms, instructions, and You can get one free copy by calling
publications. 1–800–829–3676.
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Table 4. Record of Home Improvements
Keep this for your records. Also keep receipts or other proof of improvements.
Caution: Remove from this record any improvements that are no longer part of your main home. For example, if you put
wall-to-wall carpeting in your home and later replace it with new wall-to-wall carpeting, remove the cost of the first carpeting.
Other Flooring
Wall-to-wall carpeting
Other
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Index
F W
Fire insurance premiums ............. 8 R What you can and cannot deduct 2
Form: K Real estate taxes: 䡵
1098 ....................................... 6 Keeping records .......................... 9 Deductible taxes ..................... 2
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