Line 10

If you make payments to a financial institution, or to a person whose business is making loans, you should get Form 1098 or a similar statement from the lender. This form will show the amount of interest to enter on line 10. Also include on this line any other interest payments made on debts secured by a qualified home for which you did not receive a Form 1098. Do not include points on this line.

Claiming your deductible points.   Figure your deductible points as follows.

1. Figure your deductible points for the current year using the rules explained under Points in Part I.
2. Multiply the amount in item (1) by the decimal amount on line 11. Enter the result on Schedule A (Form 1040), line 10 or 12, whichever applies. This amount is fully deductible.
3. Subtract the result in item (2) from the amount in item (1). This amount is not deductible as home mortgage interest. However, if you used any of the loan proceeds for business or investment activities, see the instructions for line 13, next.

Line 13

You cannot deduct the amount of interest on line 13 as home mortgage interest. If you did not use any of the proceeds of any mortgage included on line 9 of the worksheet for business, investment, or other deductible activities, then all the interest on line 13 is personal interest. Personal interest is not deductible.

If you did use all or part of any mortgage proceeds for business, investment, or other deductible activities, the part of the interest on line 13 that is allocable to those activities may be deducted as business, investment, or other deductible expense, subject to any limits that apply. Table 2 shows where to deduct that interest. See Allocation of Interest in chapter 5 of Publication 535 for an explanation of how to determine the use of loan proceeds.

The following two rules describe how to allocate the interest on line 13 to a business or investment activity.

1. If you used all of the proceeds of the mortgages on line 9 for one activity, then all the interest on line 13 is allocated to that activity. In this case, deduct the interest on the form or schedule to which it applies.
2. If you used the proceeds of the mortgages on line 9 for more than one activity, then you can allocate the interest on line 13 among the activities in any manner you select (up to the total amount of interest otherwise allocable to each activity, explained next).

You figure the total amount of interest otherwise allocable to each activity by multiplying the amount on line 10 by the following fraction.

formula: business or investment activity

Example.   Don had two mortgages (A and B) on his main home during the entire year. Mortgage A had an average balance of $90,000, and mortgage B had an average balance of $110,000.

Don determines that the proceeds of mortgage A are allocable to personal expenses for the entire year. The proceeds of mortgage B are allocable to his business for the entire year. Don paid $14,000 of interest on mortgage A and $16,000 of interest on mortgage B. He figures the amount of home mortgage interest he can deduct by using Table 1. Since both mortgages are home equity debt, Don determines that $15,000 of the interest can be deducted as home mortgage interest.

The interest Don can allocate to his business is the smaller of:

1. The amount on line 13 of the Table 1 worksheet ($15,000), or
2. The total amount of interest allocable to the business ($16,500), figured by multiplying the amount on line 10 (the $30,000 total interest paid) by the following fraction.

formula: Dan's example

Because $15,000 is the smaller of items (1) and (2), that is the amount of interest Don can allocate to his business. He deducts this amount on his Schedule C (Form 1040).

Table 2. Where To Deduct Your Interest Expense

IF you had the following type of interest expense ...	THEN you can deduct it on ...	AND you can find additional information in ...
student loan interest	Form 1040, line 25, or Form 1040A, line 18	Publication 970, Tax Benefits for Education.
deductible home mortgage interest and points reported on Form 1098	Schedule A (Form 1040), line 10	this publication (936).
deductible home mortgage interest not reported on Form 1098	Schedule A (Form 1040), line 11	this publication (936).
points not reported on Form 1098	Schedule A (Form 1040), line 12	this publication (936).
investment interest (other than incurred to produce rents or royalties)	Schedule A (Form 1040), line 13	Publication 550, Investment Income and Expenses.
business interest (non-farm)	Schedule C or C-EZ (Form 1040)	Publication 535, Business Expenses.
farm business interest	Schedule F (Form 1040)	Publications 225, Farmer's Tax Guide, and 535.
interest incurred to produce rents or royalties	Schedule E (Form 1040)	Publication 527, Residential Rental Property, and 535.
personal interest	not deductible.

How To Get Tax Help

You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.

Contacting your Taxpayer Advocate.   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate.

The Taxpayer Advocate represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review.

To contact your Taxpayer Advocate:

• Call the Taxpayer Advocate at
  1-877-777-4778.
• Call, write, or fax the Taxpayer Advocate office in your area.
• Call 1-800-829-4059 if you are a
  TTY/TDD user.

For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS.

Free tax services.   To find out what services are available, get Publication 910, Guide to Free Tax Services. It contains a list of free tax publications and an index of tax topics. It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics.

Personal computer. With your personal computer and modem, you can access the IRS on the Internet at www.irs.gov. While visiting our web site, you can:

• See answers to frequently asked tax questions or request help by e-mail.
• Download forms and publications or search for forms and publications by topic or keyword.
• Order IRS products on-line.
• View forms that may be filled in electronically, print the completed form, and then save the form for recordkeeping.
• View Internal Revenue Bulletins published in the last few years.
• Search regulations and the Internal Revenue Code.
• Receive our electronic newsletters on hot tax issues and news.
• Learn about the benefits of filing electronically (IRS e-file).
• Get information on starting and operating a small business.

You can also reach us with your computer using File Transfer Protocol at ftp.irs.gov.

TaxFax Service. Using the phone attached to your fax machine, you can receive forms and instructions by calling 703-368-9694. Follow the directions from the prompts. When you order forms, enter the catalog number for the form you need. The items you request will be faxed to you.

For help with transmission problems, call the FedWorld Help Desk at 703-487-4608.

Phone. Many services are available by phone.
 

• Ordering forms, instructions, and publications. Call 1-800-829-3676 to order current and prior year forms, instructions, and publications.
• Asking tax questions. Call the IRS with your tax questions at 1-800-829-1040.
• Solving problems. Take advantage of Everyday Tax Solutions service by calling your local IRS office to set up an in-person appointment at your convenience. Check your local directory assistance or www.irs.gov for the numbers.
• TTY/TDD equipment. If you have access to TTY/TDD equipment, call 1-800-829- 4059 to ask tax questions or to order forms and publications.
• TeleTax topics. Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics.

Evaluating the quality of our telephone services. To ensure that IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. One method is for a second IRS representative to sometimes listen in on or record telephone calls. Another is to ask some callers to complete a short survey at the end of the call.

Walk-in. Many products and services are available on a walk-in basis.
 

• Products. You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Some IRS offices, libraries, grocery stores, copy centers, city and county governments, credit unions, and office supply stores have an extensive collection of products available to print from a CD-ROM or photocopy from reproducible proofs. Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes.
• Services. You can walk in to your local IRS office to ask tax questions or get help with a tax problem. Now you can set up an appointment by calling your local IRS office number and, at the prompt, leaving a message requesting Everyday Tax Solutions help. A representative will call you back within 2 business days to schedule an in-person appointment at your convenience.

Mail. You can send your order for forms, instructions, and publications to the Distribution Center nearest to you and receive a response within 10 workdays after your request is received. Find the address that applies to your part of the country.

• Western part of U.S.:
  Western Area Distribution Center
  Rancho Cordova, CA 95743-0001
• Central part of U.S.:
  Central Area Distribution Center
  P.O. Box 8903
  Bloomington, IL 61702-8903
• Eastern part of U.S. and foreign addresses:
  Eastern Area Distribution Center
  P.O. Box 85074
  Richmond, VA 23261-5074

CD-ROM for tax products. You can order IRS Publication 1796, Federal Tax Products on CD-ROM, and obtain:

• Current tax forms, instructions, and publications.
• Prior-year tax forms and instructions.
• Popular tax forms that may be filled in electronically, printed out for submission, and saved for recordkeeping.
• Internal Revenue Bulletins.

The CD-ROM can be purchased from National Technical Information Service (NTIS) by calling 1-877-233-6767 or on the Internet at http://www.irs.gov/cdorders. The first release is available in early January and the final release is available in late February.

CD-ROM for small businesses. IRS Publication 3207, Small Business Resource Guide, is a must for every small business owner or any taxpayer about to start a business. This handy, interactive CD contains all the business tax forms, instructions and publications needed to successfully manage a business. In addition, the CD provides an abundance of other helpful information, such as how to prepare a business plan, finding financing for your business, and much more. The design of the CD makes finding information easy and quick and incorporates file formats and browsers that can be run on virtually any desktop or laptop computer.

It is available in March. You can get a free copy by calling 1-800-829-3676 or by visiting the website at www.irs.gov/smallbiz.

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