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2010 tax software free download 12. 2010 tax software free download   Business Deduction for Work-Related Education Table of Contents What's New Introduction Qualifying Work-Related EducationEducation Required by Employer or by Law Education To Maintain or Improve Skills Education To Meet Minimum Requirements Education That Qualifies You for a New Trade or Business What Expenses Can Be DeductedUnclaimed reimbursement. 2010 tax software free download Transportation Expenses Travel Expenses No Double Benefit Allowed How To Treat ReimbursementsAccountable Plans Nonaccountable Plans Deducting Business ExpensesSelf-Employed Persons Employees Performing Artists and Fee-Basis Officials Impairment-Related Work Expenses Recordkeeping Illustrated Example What's New Standard mileage rate. 2010 tax software free download  Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2013 through December 31, 2013, is 56. 2010 tax software free download 5 cents per mile. 2010 tax software free download For more information, see Transportation Expenses under What Expenses Can Be Deducted, later. 2010 tax software free download Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. 2010 tax software free download To claim such a deduction, you must: Itemize your deductions on Schedule A (Form 1040 or 1040NR) if you are an employee, File Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming if you are self-employed, and Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education , later. 2010 tax software free download What is the tax benefit of taking a business deduction for work-related education. 2010 tax software free download   If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. 2010 tax software free download Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses (except for impairment-related work expenses of disabled individuals) is greater than 2% of your adjusted gross income. 2010 tax software free download An itemized deduction reduces the amount of your income subject to tax. 2010 tax software free download   If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. 2010 tax software free download This reduces the amount of your income subject to both income tax and self-employment tax. 2010 tax software free download   Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits. 2010 tax software free download You may qualify for these other benefits even if you do not meet the requirements listed above. 2010 tax software free download   Also, your work-related education expenses may qualify you to claim more than one tax benefit. 2010 tax software free download Generally, you may claim any number of benefits as long as you use different expenses to figure each one. 2010 tax software free download Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. 2010 tax software free download This is education that meets at least one of the following two tests. 2010 tax software free download The education is required by your employer or the law to keep your present salary, status, or job. 2010 tax software free download The required education must serve a bona fide business purpose of your employer. 2010 tax software free download The education maintains or improves skills needed in your present work. 2010 tax software free download However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. 2010 tax software free download You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. 2010 tax software free download Use Figure 12-1, Does Your Work-Related Education Qualify as a quick check to see if your education qualifies. 2010 tax software free download Education Required by Employer or by Law Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. 2010 tax software free download This additional education is qualifying work-related education if all three of the following requirements are met. 2010 tax software free download It is required for you to keep your present salary, status, or job, The requirement serves a bona fide business purpose of your employer, and The education is not part of a program that will qualify you for a new trade or business. 2010 tax software free download When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work. 2010 tax software free download See Education To Maintain or Improve Skills , later. 2010 tax software free download Example. 2010 tax software free download You are a teacher who has satisfied the minimum requirements for teaching. 2010 tax software free download Your employer requires you to take an additional college course each year to keep your teaching job. 2010 tax software free download If the courses will not qualify you for a new trade or business, they are qualifying work-related education even if you eventually receive a master's degree and an increase in salary because of this extra education. 2010 tax software free download This image is too large to be displayed in the current screen. 2010 tax software free download Please click the link to view the image. 2010 tax software free download Figure 12-1 Education To Maintain or Improve Skills If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. 2010 tax software free download This could include refresher courses, courses on current developments, and academic or vocational courses. 2010 tax software free download Example. 2010 tax software free download You repair televisions, radios, and stereo systems for XYZ Store. 2010 tax software free download To keep up with the latest changes, you take special courses in radio and stereo service. 2010 tax software free download These courses maintain and improve skills required in your work. 2010 tax software free download Maintaining skills vs. 2010 tax software free download qualifying for new job. 2010 tax software free download   Education to maintain or improve skills needed in your present work is not qualifying education if it will also qualify you for a new trade or business. 2010 tax software free download Education during temporary absence. 2010 tax software free download   If you stop working for a year or less in order to get education to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. 2010 tax software free download Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. 2010 tax software free download Example. 2010 tax software free download You quit your biology research job to become a full-time biology graduate student for 1 year. 2010 tax software free download If you return to work in biology research after completing the courses, the education is related to your present work even if you do not go back to work with the same employer. 2010 tax software free download Education during indefinite absence. 2010 tax software free download   If you stop work for more than a year, your absence from your job is considered indefinite. 2010 tax software free download Education during an indefinite absence, even if it maintains or improves skills needed in the work from which you are absent, is considered to qualify you for a new trade or business. 2010 tax software free download Therefore, it is not qualifying work-related education. 2010 tax software free download Education To Meet Minimum Requirements Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. 2010 tax software free download The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. 2010 tax software free download Once you have met the minimum educational requirements that were in effect when you were hired, you do not have to meet any new minimum educational requirements. 2010 tax software free download This means that if the minimum requirements change after you were hired, any education you need to meet the new requirements can be qualifying education. 2010 tax software free download You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. 2010 tax software free download Example 1. 2010 tax software free download You are a full-time engineering student. 2010 tax software free download Although you have not received your degree or certification, you work part time as an engineer for a firm that will employ you as a full-time engineer after you finish college. 2010 tax software free download Although your college engineering courses improve your skills in your present job, they are also needed to meet the minimum job requirements for a full-time engineer. 2010 tax software free download The education is not qualifying work-related education. 2010 tax software free download Example 2. 2010 tax software free download You are an accountant and you have met the minimum educational requirements of your employer. 2010 tax software free download Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. 2010 tax software free download These additional courses can be qualifying work-related education because you have already satisfied the minimum requirements that were in effect when you were hired. 2010 tax software free download Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. 2010 tax software free download The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. 2010 tax software free download If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. 2010 tax software free download The determination of whether you are a faculty member of an educational institution must be made on the basis of the particular practices of the institution. 2010 tax software free download You generally will be considered a faculty member when one or more of the following occurs. 2010 tax software free download You have tenure. 2010 tax software free download Your years of service count toward obtaining tenure. 2010 tax software free download You have a vote in faculty decisions. 2010 tax software free download Your school makes contributions for you to a retirement plan other than social security or a similar program. 2010 tax software free download Example 1. 2010 tax software free download The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. 2010 tax software free download In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. 2010 tax software free download If the employing school certifies to the state Department of Education that qualified teachers cannot be found, the school can hire persons with only 3 years of college. 2010 tax software free download However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. 2010 tax software free download Under these facts, the bachelor's degree, whether or not it includes the 10 professional education courses, is considered the minimum educational requirement for qualification as a teacher in your state. 2010 tax software free download If you have all the required education except the fifth year, you have met the minimum educational requirements. 2010 tax software free download The fifth year of training is qualifying work-related education unless it is part of a program of study that will qualify you for a new trade or business. 2010 tax software free download Example 2. 2010 tax software free download Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. 2010 tax software free download The additional four education courses can be qualifying work-related education. 2010 tax software free download Although you do not have all the required courses, you have already met the minimum educational requirements. 2010 tax software free download Example 3. 2010 tax software free download Assume the same facts as in Example 1 except that you are hired with only 3 years of college. 2010 tax software free download The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. 2010 tax software free download They are needed to meet the minimum educational requirements for employment as a teacher. 2010 tax software free download Example 4. 2010 tax software free download You have a bachelor's degree and you work as a temporary instructor at a university. 2010 tax software free download At the same time, you take graduate courses toward an advanced degree. 2010 tax software free download The rules of the university state that you can become a faculty member only if you get a graduate degree. 2010 tax software free download Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. 2010 tax software free download You have not met the minimum educational requirements to qualify you as a faculty member. 2010 tax software free download The graduate courses are not qualifying work-related education. 2010 tax software free download Certification in a new state. 2010 tax software free download   Once you have met the minimum educational requirements for teachers for your state, you are considered to have met the minimum educational requirements in all states. 2010 tax software free download This is true even if you must get additional education to be certified in another state. 2010 tax software free download Any additional education you need is qualifying work-related education. 2010 tax software free download You have already met the minimum requirements for teaching. 2010 tax software free download Teaching in another state is not a new trade or business. 2010 tax software free download Example. 2010 tax software free download You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. 2010 tax software free download You move to State B and are promptly hired as a teacher. 2010 tax software free download You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. 2010 tax software free download These additional courses are qualifying work-related education because the teaching position in State B involves the same general kind of work for which you were qualified in State A. 2010 tax software free download Education That Qualifies You for a New Trade or Business Education that is part of a program of study that will qualify you for a new trade or business is not qualifying work-related education. 2010 tax software free download This is true even if you do not plan to enter that trade or business. 2010 tax software free download If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. 2010 tax software free download Example 1. 2010 tax software free download You are an accountant. 2010 tax software free download Your employer requires you to get a law degree at your own expense. 2010 tax software free download You register at a law school for the regular curriculum that leads to a law degree. 2010 tax software free download Even if you do not intend to become a lawyer, the education is not qualifying because the law degree will qualify you for a new trade or business. 2010 tax software free download Example 2. 2010 tax software free download You are a general practitioner of medicine. 2010 tax software free download You take a 2-week course to review developments in several specialized fields of medicine. 2010 tax software free download The course does not qualify you for a new profession. 2010 tax software free download It is qualifying work- related education because it maintains or improves skills required in your present profession. 2010 tax software free download Example 3. 2010 tax software free download While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. 2010 tax software free download The program will lead to qualifying you to practice psychoanalysis. 2010 tax software free download The psychoanalytic training does not qualify you for a new profession. 2010 tax software free download It is qualifying work-related education because it maintains or improves skills required in your present profession. 2010 tax software free download Bar or CPA Review Course Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying work-related education. 2010 tax software free download They are part of a program of study that can qualify you for a new profession. 2010 tax software free download Teaching and Related Duties All teaching and related duties are considered the same general kind of work. 2010 tax software free download A change in duties in any of the following ways is not considered a change to a new business. 2010 tax software free download Elementary school teacher to secondary school teacher. 2010 tax software free download Teacher of one subject, such as biology, to teacher of another subject, such as art. 2010 tax software free download Classroom teacher to guidance counselor. 2010 tax software free download Classroom teacher to school administrator. 2010 tax software free download What Expenses Can Be Deducted If your education meets the requirements described earlier under Qualifying Work-Related Education you can generally deduct your education expenses as business expenses. 2010 tax software free download If you are not self-employed, you can deduct business expenses only if you itemize your deductions. 2010 tax software free download You cannot deduct expenses related to tax-exempt and excluded income. 2010 tax software free download Deductible expenses. 2010 tax software free download   The following education expenses can be deducted. 2010 tax software free download Tuition, books, supplies, lab fees, and similar items. 2010 tax software free download Certain transportation and travel costs. 2010 tax software free download Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. 2010 tax software free download Nondeductible expenses. 2010 tax software free download   You cannot deduct personal or capital expenses. 2010 tax software free download For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. 2010 tax software free download This amount is a personal expense. 2010 tax software free download Unclaimed reimbursement. 2010 tax software free download   If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses that apply to that unclaimed reimbursement. 2010 tax software free download Example. 2010 tax software free download Your employer agrees to pay your education expenses if you file a voucher showing your expenses. 2010 tax software free download You do not file a voucher and you do not get reimbursed. 2010 tax software free download Because you did not file a voucher, you cannot deduct the expenses on your tax return. 2010 tax software free download Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. 2010 tax software free download If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. 2010 tax software free download Temporary basis. 2010 tax software free download   You go to school on a temporary basis if either of the following situations applies to you. 2010 tax software free download Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. 2010 tax software free download Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. 2010 tax software free download Your attendance is temporary up to the date you determine it will last more than 1 year. 2010 tax software free download If you are in either situation (1) or (2) above, your attendance is not temporary if facts and circumstances indicate otherwise. 2010 tax software free download Attendance not on a temporary basis. 2010 tax software free download   You do not go to school on a temporary basis if either of the following situations apply to you. 2010 tax software free download Your attendance at school is realistically expected to last more than 1 year. 2010 tax software free download It does not matter how long you actually attend. 2010 tax software free download Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. 2010 tax software free download Your attendance is not temporary after the date you determine it will last more than 1 year. 2010 tax software free download Deductible Transportation Expenses If you are regularly employed and go directly from home to school on a temporary basis, you can deduct the round-trip costs of transportation between your home and school. 2010 tax software free download This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. 2010 tax software free download Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. 2010 tax software free download Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. 2010 tax software free download Example 1. 2010 tax software free download You regularly work in a nearby town, and go directly from work to home. 2010 tax software free download You also attend school every work night for 3 months to take a course that improves your job skills. 2010 tax software free download Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. 2010 tax software free download This is true regardless of the distance traveled. 2010 tax software free download Example 2. 2010 tax software free download Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. 2010 tax software free download You can deduct your transportation expenses from your regular work site to school and then home. 2010 tax software free download Example 3. 2010 tax software free download Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. 2010 tax software free download Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. 2010 tax software free download Example 4. 2010 tax software free download Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. 2010 tax software free download Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. 2010 tax software free download If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. 2010 tax software free download If you go from work to home to school and return home, your transportation expenses cannot be more than if you had gone directly from work to school. 2010 tax software free download Using your car. 2010 tax software free download    If you use your car (whether you own or lease it) for transportation to school, you can deduct your actual expenses or use the standard mileage rate to figure the amount you can deduct. 2010 tax software free download The standard mileage rate for miles driven from January 1, 2013 through December 31, 2013, is 56. 2010 tax software free download 5 cents per mile. 2010 tax software free download Whichever method you use, you can also deduct parking fees and tolls. 2010 tax software free download See Publication 463, chapter 4, for information on deducting your actual expenses of using a car. 2010 tax software free download Travel Expenses You can deduct expenses for travel, meals (see 50% limit on meals , later), and lodging if you travel overnight mainly to obtain qualifying work-related education. 2010 tax software free download Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. 2010 tax software free download For more information, see chapter 1 of Publication 463. 2010 tax software free download You cannot deduct expenses for personal activities such as sightseeing, visiting, or entertaining. 2010 tax software free download Mainly personal travel. 2010 tax software free download   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. 2010 tax software free download You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. 2010 tax software free download   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. 2010 tax software free download An important factor is the comparison of time spent on personal activities with time spent on educational activities. 2010 tax software free download If you spend more time on personal activities, the trip is considered mainly educational only if you can show a substantial nonpersonal reason for traveling to a particular location. 2010 tax software free download Example 1. 2010 tax software free download John works in Newark, New Jersey. 2010 tax software free download He traveled to Chicago to take a deductible 1-week course at the request of his employer. 2010 tax software free download His main reason for going to Chicago was to take the course. 2010 tax software free download While there, he took a sightseeing trip, entertained some friends, and took a side trip to Pleasantville for a day. 2010 tax software free download Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. 2010 tax software free download He cannot deduct his transportation expenses of going to Pleasantville. 2010 tax software free download He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. 2010 tax software free download Example 2. 2010 tax software free download Sue works in Boston. 2010 tax software free download She went to a university in Michigan to take a course for work. 2010 tax software free download The course is qualifying work-related education. 2010 tax software free download She took one course, which is one-fourth of a full course load of study. 2010 tax software free download She spent the rest of the time on personal activities. 2010 tax software free download Her reasons for taking the course in Michigan were all personal. 2010 tax software free download Sue's trip is mainly personal because three-fourths of her time is considered personal time. 2010 tax software free download She cannot deduct the cost of her round-trip train ticket to Michigan. 2010 tax software free download She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. 2010 tax software free download Example 3. 2010 tax software free download Dave works in Nashville and recently traveled to California to take a 2-week seminar. 2010 tax software free download The seminar is qualifying work-related education. 2010 tax software free download While there, he spent an extra 8 weeks on personal activities. 2010 tax software free download The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. 2010 tax software free download Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. 2010 tax software free download He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. 2010 tax software free download Cruises and conventions. 2010 tax software free download   Certain cruises and conventions offer seminars or courses as part of their itinerary. 2010 tax software free download Even if the seminars or courses are work related, your deduction for travel may be limited. 2010 tax software free download This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. 2010 tax software free download   For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and Conventions in chapter 1 of Publication 463. 2010 tax software free download 50% limit on meals. 2010 tax software free download   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. 2010 tax software free download If you were reimbursed for the meals, see How To Treat Reimbursements , later. 2010 tax software free download   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. 2010 tax software free download Travel as Education You cannot deduct the cost of travel as a form of education even if it is directly related to your duties in your work or business. 2010 tax software free download Example. 2010 tax software free download You are a French language teacher. 2010 tax software free download While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. 2010 tax software free download You chose your itinerary and most of your activities to improve your French language skills. 2010 tax software free download You cannot deduct your travel expenses as education expenses. 2010 tax software free download This is true even if you spent most of your time learning French by visiting French schools and families, attending movies or plays, and engaging in similar activities. 2010 tax software free download No Double Benefit Allowed You cannot do either of the following. 2010 tax software free download Deduct work-related education expenses as business expenses if you benefit from these expenses under any other provision of the law, for example, as a tuition and fees deduction. 2010 tax software free download Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. 2010 tax software free download See Adjustments to Qualifying Work-Related Education Expenses, next. 2010 tax software free download Adjustments to Qualifying Work-Related Education Expenses If you pay qualifying work-related education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. 2010 tax software free download You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. 2010 tax software free download Tax-free educational assistance. 2010 tax software free download   This includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions). 2010 tax software free download Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 2010 tax software free download Amounts that do not reduce qualifying work-related education expenses. 2010 tax software free download   Do not reduce the qualifying work-related education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. 2010 tax software free download Also, do not reduce the qualifying work-related education expenses by any scholarship or fellowship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualifying work-related education expenses. 2010 tax software free download How To Treat Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. 2010 tax software free download There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. 2010 tax software free download You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. 2010 tax software free download Note. 2010 tax software free download The following rules about reimbursement arrangements also apply to expense allowances received from your employer. 2010 tax software free download Accountable Plans To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules. 2010 tax software free download Your expenses must have a business connection. 2010 tax software free download This means your expenses must be deductible under the rules for qualifying work-related education explained earlier. 2010 tax software free download You must adequately account to your employer for your expenses within a reasonable period of time. 2010 tax software free download You must return any reimbursement or allowance in excess of the expenses accounted for within a reasonable period of time. 2010 tax software free download If you are reimbursed under an accountable plan, your employer should not include any reimbursement in your income in box 1 of your Form W-2. 2010 tax software free download If your employer included reimbursements in box 1 of your Form W-2 and you meet all three rules for accountable plans, ask your employer for a corrected Form W-2. 2010 tax software free download Accountable plan rules not met. 2010 tax software free download   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules for accountable plans. 2010 tax software free download Those expenses that fail to meet the three rules are treated as having been reimbursed under a Nonaccountable Plan (discussed later). 2010 tax software free download Expenses equal reimbursement. 2010 tax software free download   Under an accountable plan, if your expenses equal your reimbursement, you do not complete Form 2106 or 2106-EZ. 2010 tax software free download Because your expenses and reimbursements are equal, you do not have a deduction. 2010 tax software free download Excess expenses. 2010 tax software free download   If your expenses are more than your reimbursement, you can deduct your excess expenses. 2010 tax software free download This is discussed later, under Deducting Business Expenses . 2010 tax software free download Allocating your reimbursements for meals. 2010 tax software free download   Because your excess meal expenses are subject to the 50% limit, you must figure them separately from your other expenses. 2010 tax software free download If your employer paid you a single amount to cover both meals and other expenses, you must allocate the reimbursement so that you can figure your excess meal expenses separately. 2010 tax software free download Make the allocation as follows. 2010 tax software free download Divide your meal expenses by your total expenses. 2010 tax software free download Multiply your total reimbursement by the result from (1). 2010 tax software free download This is the allocated reimbursement for your meal expenses. 2010 tax software free download Subtract the amount figured in (2) from your total reimbursement. 2010 tax software free download The difference is the allocated reimbursement for your other expenses of qualifying work-related education. 2010 tax software free download Example. 2010 tax software free download Your employer paid you an expense allowance of $2,000 under an accountable plan. 2010 tax software free download The allowance was to cover all of your expenses of traveling away from home to take a 2-week training course for work. 2010 tax software free download There was no indication of how much of the reimbursement was for each type of expense. 2010 tax software free download Your actual expenses equal $2,500 ($425 for meals + $700 lodging + $150 transportation expenses + $1,225 for books and tuition). 2010 tax software free download Using the steps listed above, allocate the reimbursement between the $425 meal expenses and the $2,075 other expenses. 2010 tax software free download   1. 2010 tax software free download $425 meal expenses  $2,500 total expenses = . 2010 tax software free download 17   2. 2010 tax software free download $2,000 (reimbursement)×. 2010 tax software free download 17     =$340 (allocated reimbursement for meal expenses)   3. 2010 tax software free download $2,000 (reimbursement)−$340 (meals)     = $1,660 (allocated reimbursement for other qualifying work-related education expenses) Your excess meal expenses are $85 ($425 − $340) and your excess other expenses are $415 ($2,075 − $1,660). 2010 tax software free download After you apply the 50% limit to your meals, you have a deduction for work-related education expenses of $458 (($85 × 50%) + $415). 2010 tax software free download Nonaccountable Plans Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other pay and report the total in box 1 of your Form W-2. 2010 tax software free download You can deduct your expenses regardless of whether they are more than, less than, or equal to your reimbursement. 2010 tax software free download This is discussed later under Deducting Business Expenses . 2010 tax software free download An illustrated example of a nonaccountable plan, using Form 2106-EZ, is shown at the end of this chapter. 2010 tax software free download Reimbursements for nondeductible expenses. 2010 tax software free download   Reimbursements you received for nondeductible expenses are treated as paid under a nonaccountable plan. 2010 tax software free download You must include them in your income. 2010 tax software free download For example, you must include in your income reimbursements your employer gave you for expenses of education that: You need to meet the minimum educational requirements for your job, or Is part of a program of study that can qualify you for a new trade or business. 2010 tax software free download   For more information on accountable and nonaccountable plans, see chapter 6 of Publication 463. 2010 tax software free download Deducting Business Expenses Self-employed persons and employees report their business expenses differently. 2010 tax software free download The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. 2010 tax software free download Self-Employed Persons If you are self-employed, you must report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses (generally Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040)). 2010 tax software free download If your education expenses include expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those items. 2010 tax software free download See the instructions for the form you file for information on how to complete it. 2010 tax software free download Employees If you are an employee, you can deduct the cost of qualifying work-related education only if you: Did not receive (and were not entitled to receive) any reimbursement from your employer, Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or Received reimbursement under an accountable plan, but the amount received was less than your expenses for which you claimed reimbursement. 2010 tax software free download If either (1) or (2) applies, you can deduct the total qualifying cost. 2010 tax software free download If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. 2010 tax software free download In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your deduction for any other employee business expenses on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. 2010 tax software free download (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. 2010 tax software free download ) This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. 2010 tax software free download Form 2106 or 2106-EZ. 2010 tax software free download   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or 2106-EZ. 2010 tax software free download Form not required. 2010 tax software free download   Do not complete either Form 2106 or 2106-EZ if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are not claiming travel, transportation, meal, or entertainment expenses. 2010 tax software free download   If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. 2010 tax software free download (Special rules for expenses of certain Performing Artists and Fee-Basis Officials and for Impairment-Related Work Expenses are explained later. 2010 tax software free download ) Using Form 2106-EZ. 2010 tax software free download   This form is shorter and easier to use than Form 2106. 2010 tax software free download Generally, you can use this form if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are using the standard mileage rate if you are claiming vehicle expenses. 2010 tax software free download   If you do not meet both of these requirements, use Form 2106. 2010 tax software free download Performing Artists and Fee-Basis Officials If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee basis, you can deduct the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction. 2010 tax software free download Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24, or Form 1040NR, line 35. 2010 tax software free download You do not have to itemize your deductions on Schedule A (Form 1040 or 1040NR), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. 2010 tax software free download You must complete Form 2106 or 2106-EZ to figure your deduction even if you meet the requirements described earlier under Form not required . 2010 tax software free download For more information on qualified performing artists, see chapter 6 of Publication 463. 2010 tax software free download Impairment-Related Work Expenses If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related education, you can deduct these expenses on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14. 2010 tax software free download They are not subject to the 2%-of-adjusted-gross-income limit. 2010 tax software free download To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . 2010 tax software free download For more information on impairment-related work expenses, see chapter 6 of Publication 463. 2010 tax software free download Recordkeeping You must keep records as proof of any deduction claimed on your tax return. 2010 tax software free download Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. 2010 tax software free download If you are an employee who is reimbursed for expenses and you give your records and documentation to your employer, you do not have to keep duplicate copies of this information. 2010 tax software free download However, you should keep your records for a 3-year period if: You claim deductions for expenses that are more than your reimbursement, Your employer does not use adequate accounting procedures to verify expense accounts, You are related to your employer, or Your expenses are reimbursed under a nonaccountable plan. 2010 tax software free download Examples of records to keep. 2010 tax software free download   If any of the above cases apply to you, you must be able to prove that your expenses are deductible. 2010 tax software free download You should keep adequate records or have sufficient evidence that will support your expenses. 2010 tax software free download Estimates or approximations do not qualify as proof of an expense. 2010 tax software free download Some examples of what can be used to help prove your expenses are: Documents, such as transcripts, course descriptions, catalogs, etc. 2010 tax software free download , showing periods of enrollment in educational institutions, principal subjects studied, and descriptions of educational activity. 2010 tax software free download Canceled checks and receipts to verify amounts you spent for: Tuition and books, Meals and lodging while away from home overnight for educational purposes, Travel and transportation, and Other education expenses. 2010 tax software free download Statements from your employer explaining whether the education was necessary for you to keep your job, salary, or status; how the education helped maintain or improve skills needed in your job; how much reimbursement you received; and, if you are a teacher, the type of certificate and subjects taught. 2010 tax software free download Complete information about any scholarship or fellowship grants, including amounts you received during the year. 2010 tax software free download Illustrated Example Victor Jones teaches math at a private high school in North Carolina. 2010 tax software free download He was selected to attend a 3-week math seminar at a university in California. 2010 tax software free download The seminar will improve his skills in his current job and is qualifying work-related education. 2010 tax software free download He was reimbursed for his expenses under his employer's nonaccountable plan, so his reimbursement of $2,100 is included in the wages shown in box 1 of his Form W-2. 2010 tax software free download Victor will file Form 1040. 2010 tax software free download His actual expenses for the seminar are as follows:   Lodging   $1,050     Meals   526     Airfare   550     Taxi fares   50     Tuition and books   400     Total Expenses   $2,576   Victor files Form 2106-EZ with his tax return. 2010 tax software free download He shows his expenses for the seminar in Part I of the form. 2010 tax software free download He enters $1,650 ($1,050 + $550 + $50) on line 3 to account for his lodging, airfare, and taxi fares. 2010 tax software free download He enters $400 on line 4 for his tuition and books. 2010 tax software free download On the line provided for total meals and entertainment expenses, Victor enters $526 for meal expenses. 2010 tax software free download He multiplies that amount by 50% and enters the result, $263, on line 5. 2010 tax software free download On line 6, Victor totals the amounts from lines 3 through 5. 2010 tax software free download He carries the total, $2,313, to Schedule A (Form 1040), line 21. 2010 tax software free download Since he does not claim any vehicle expenses, Victor leaves Part II blank. 2010 tax software free download His filled-in form is shown on the next page. 2010 tax software free download This image is too large to be displayed in the current screen. 2010 tax software free download Please click the link to view the image. 2010 tax software free download Form 2106-EZ for V. 2010 tax software free download Jones Prev  Up  Next   Home   More Online Publications
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EO Select Check

Exempt Organizations Select Check is an on-line search tool that allows users to search for and select an exempt organization and check certain information about its federal tax status and filings.  It consolidates three former search sites into one, providing expanded search capability and a more efficient way to search for organizations that:

  • Are eligible to receive tax-deductible charitable contributions (Publication 78 data). Users may rely on this list in determining deductibility of their contributions (just as they did when Publication 78 was a separate electronic publication rather than part of Select Check).
    Updated data posting date: 3-10-2014
  • Have had their tax-exempt status automatically revoked under the law because they have not filed Form 990 series returns or notices annually as required for three consecutive years (Auto-Revocation List)
    Updated data posting date: 3-10-2014
  • Have filed a Form 990-N (e-Postcard) annual electronic notice. (Most small exempt organizations whose annual gross receipts are normally $50,000 or less are required to electronically submit Form 990-N, unless they choose instead to file a completed Form 990 or Form 990-EZ.)
    Updated data posting date: 3-31-2014

A tip for organizations and donors about the timing of data updates.

In addition to searching for a particular organization, users may download a complete list of each of the three types of organizations through Exempt Organizations Select Check.

 

 

Search Tips for Exempt Organizations Select Check

Note:  The Statistics of Income Division maintains a list of organizations recognized as exempt by the IRS, SOI Tax Stats - Exempt Organizations Business Master File Extract (EO BMF).

FOR RELATED INFORMATION SEE:

  
 
Page Last Reviewed or Updated: 31-Mar-2014

The 2010 Tax Software Free Download

2010 tax software free download 3. 2010 tax software free download   Rent Expense Table of Contents Introduction Topics - This chapter discusses: RentConditional sales contract. 2010 tax software free download Leveraged leases. 2010 tax software free download Leveraged leases of limited-use property. 2010 tax software free download Taxes on Leased Property Cost of Getting a Lease Improvements by Lessee Capitalizing Rent Expenses Introduction This chapter discusses the tax treatment of rent or lease payments you make for property you use in your business but do not own. 2010 tax software free download It also discusses how to treat other kinds of payments you make that are related to your use of this property. 2010 tax software free download These include payments you make for taxes on the property. 2010 tax software free download Topics - This chapter discusses: The definition of rent Taxes on leased property The cost of getting a lease Improvements by the lessee Capitalizing rent expenses Rent Rent is any amount you pay for the use of property you do not own. 2010 tax software free download In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. 2010 tax software free download If you have or will receive equity in or title to the property, the rent is not deductible. 2010 tax software free download Unreasonable rent. 2010 tax software free download   You cannot take a rental deduction for unreasonable rent. 2010 tax software free download Ordinarily, the issue of reasonableness arises only if you and the lessor are related. 2010 tax software free download Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. 2010 tax software free download Rent is not unreasonable just because it is figured as a percentage of gross sales. 2010 tax software free download For examples of related persons, see Related persons in chapter 2, Publication 544. 2010 tax software free download Rent on your home. 2010 tax software free download   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. 2010 tax software free download You must meet the requirements for business use of your home. 2010 tax software free download For more information, see Business use of your home in chapter 1. 2010 tax software free download Rent paid in advance. 2010 tax software free download   Generally, rent paid in your trade or business is deductible in the year paid or accrued. 2010 tax software free download If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. 2010 tax software free download You can deduct the rest of your payment only over the period to which it applies. 2010 tax software free download Example 1. 2010 tax software free download You are a calendar year taxpayer and you leased a building for 5 years beginning July 1. 2010 tax software free download Your rent is $12,000 per year. 2010 tax software free download You paid the first year's rent ($12,000) on June 30. 2010 tax software free download You can deduct only $6,000 (6/12 × $12,000) for the rent that applies to the first year. 2010 tax software free download Example 2. 2010 tax software free download You are a calendar year taxpayer. 2010 tax software free download Last January you leased property for 3 years for $6,000 a year. 2010 tax software free download You paid the full $18,000 (3 × $6,000) during the first year of the lease. 2010 tax software free download Each year you can deduct only $6,000, the part of the lease that applies to that year. 2010 tax software free download Canceling a lease. 2010 tax software free download   You generally can deduct as rent an amount you pay to cancel a business lease. 2010 tax software free download Lease or purchase. 2010 tax software free download   There may be instances in which you must determine whether your payments are for rent or for the purchase of the property. 2010 tax software free download You must first determine whether your agreement is a lease or a conditional sales contract. 2010 tax software free download Payments made under a conditional sales contract are not deductible as rent expense. 2010 tax software free download Conditional sales contract. 2010 tax software free download   Whether an agreement is a conditional sales contract depends on the intent of the parties. 2010 tax software free download Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. 2010 tax software free download No single test, or special combination of tests, always applies. 2010 tax software free download However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. 2010 tax software free download The agreement applies part of each payment toward an equity interest you will receive. 2010 tax software free download You get title to the property after you make a stated amount of required payments. 2010 tax software free download The amount you must pay to use the property for a short time is a large part of the amount you would pay to get title to the property. 2010 tax software free download You pay much more than the current fair rental value of the property. 2010 tax software free download You have an option to buy the property at a nominal price compared to the value of the property when you may exercise the option. 2010 tax software free download Determine this value when you make the agreement. 2010 tax software free download You have an option to buy the property at a nominal price compared to the total amount you have to pay under the agreement. 2010 tax software free download The agreement designates part of the payments as interest, or that part is easy to recognize as interest. 2010 tax software free download Leveraged leases. 2010 tax software free download   Leveraged lease transactions may not be considered leases. 2010 tax software free download Leveraged leases generally involve three parties: a lessor, a lessee, and a lender to the lessor. 2010 tax software free download Usually the lease term covers a large part of the useful life of the leased property, and the lessee's payments to the lessor are enough to cover the lessor's payments to the lender. 2010 tax software free download   If you plan to take part in what appears to be a leveraged lease, you may want to get an advance ruling. 2010 tax software free download Revenue Procedure 2001-28 on page 1156 of Internal Revenue Bulletin 2001-19 contains the guidelines the IRS will use to determine if a leveraged lease is a lease for federal income tax purposes. 2010 tax software free download Revenue Procedure 2001-29 on page 1160 of the same Internal Revenue Bulletin provides the information required to be furnished in a request for an advance ruling on a leveraged lease transaction. 2010 tax software free download Internal Revenue Bulletin 2001-19 is available at www. 2010 tax software free download irs. 2010 tax software free download gov/pub/irs-irbs/irb01-19. 2010 tax software free download pdf. 2010 tax software free download   In general, Revenue Procedure 2001-28 provides that, for advance ruling purposes only, the IRS will consider the lessor in a leveraged lease transaction to be the owner of the property and the transaction to be a valid lease if all the factors in the revenue procedure are met, including the following. 2010 tax software free download The lessor must maintain a minimum unconditional “at risk” equity investment in the property (at least 20% of the cost of the property) during the entire lease term. 2010 tax software free download The lessee may not have a contractual right to buy the property from the lessor at less than fair market value when the right is exercised. 2010 tax software free download The lessee may not invest in the property, except as provided by Revenue Procedure 2001-28. 2010 tax software free download The lessee may not lend any money to the lessor to buy the property or guarantee the loan used by the lessor to buy the property. 2010 tax software free download The lessor must show that it expects to receive a profit apart from the tax deductions, allowances, credits, and other tax attributes. 2010 tax software free download   The IRS may charge you a user fee for issuing a tax ruling. 2010 tax software free download For more information, see Revenue Procedure 2014-1 available at  www. 2010 tax software free download irs. 2010 tax software free download gov/irb/2014-1_IRB/ar05. 2010 tax software free download html. 2010 tax software free download Leveraged leases of limited-use property. 2010 tax software free download   The IRS will not issue advance rulings on leveraged leases of so-called limited-use property. 2010 tax software free download Limited-use property is property not expected to be either useful to or usable by a lessor at the end of the lease term except for continued leasing or transfer to a lessee. 2010 tax software free download See Revenue Procedure 2001-28 for examples of limited-use property and property that is not limited-use property. 2010 tax software free download Leases over $250,000. 2010 tax software free download   Special rules are provided for certain leases of tangible property. 2010 tax software free download The rules apply if the lease calls for total payments of more than $250,000 and any of the following apply. 2010 tax software free download Rents increase during the lease. 2010 tax software free download Rents decrease during the lease. 2010 tax software free download Rents are deferred (rent is payable after the end of the calendar year following the calendar year in which the use occurs and the rent is allocated). 2010 tax software free download Rents are prepaid (rent is payable before the end of the calendar year preceding the calendar year in which the use occurs and the rent is allocated). 2010 tax software free download These rules do not apply if your lease specifies equal amounts of rent for each month in the lease term and all rent payments are due in the calendar year to which the rent relates (or in the preceding or following calendar year). 2010 tax software free download   Generally, if the special rules apply, you must use an accrual method of accounting (and time value of money principles) for your rental expenses, regardless of your overall method of accounting. 2010 tax software free download In addition, in certain cases in which the IRS has determined that a lease was designed to achieve tax avoidance, you must take rent and stated or imputed interest into account under a constant rental accrual method in which the rent is treated as accruing ratably over the entire lease term. 2010 tax software free download For details, see section 467 of the Internal Revenue Code. 2010 tax software free download Taxes on Leased Property If you lease business property, you can deduct as additional rent any taxes you have to pay to or for the lessor. 2010 tax software free download When you can deduct these taxes as additional rent depends on your accounting method. 2010 tax software free download Cash method. 2010 tax software free download   If you use the cash method of accounting, you can deduct the taxes as additional rent only for the tax year in which you pay them. 2010 tax software free download Accrual method. 2010 tax software free download   If you use an accrual method of accounting, you can deduct taxes as additional rent for the tax year in which you can determine all the following. 2010 tax software free download That you have a liability for taxes on the leased property. 2010 tax software free download How much the liability is. 2010 tax software free download That economic performance occurred. 2010 tax software free download   The liability and amount of taxes are determined by state or local law and the lease agreement. 2010 tax software free download Economic performance occurs as you use the property. 2010 tax software free download Example 1. 2010 tax software free download Oak Corporation is a calendar year taxpayer that uses an accrual method of accounting. 2010 tax software free download Oak leases land for use in its business. 2010 tax software free download Under state law, owners of real property become liable (incur a lien on the property) for real estate taxes for the year on January 1 of that year. 2010 tax software free download However, they do not have to pay these taxes until July 1 of the next year (18 months later) when tax bills are issued. 2010 tax software free download Under the terms of the lease, Oak becomes liable for the real estate taxes in the later year when the tax bills are issued. 2010 tax software free download If the lease ends before the tax bill for a year is issued, Oak is not liable for the taxes for that year. 2010 tax software free download Oak cannot deduct the real estate taxes as rent until the tax bill is issued. 2010 tax software free download This is when Oak's liability under the lease becomes fixed. 2010 tax software free download Example 2. 2010 tax software free download The facts are the same as in Example 1 except that, according to the terms of the lease, Oak becomes liable for the real estate taxes when the owner of the property becomes liable for them. 2010 tax software free download As a result, Oak will deduct the real estate taxes as rent on its tax return for the earlier year. 2010 tax software free download This is the year in which Oak's liability under the lease becomes fixed. 2010 tax software free download Cost of Getting a Lease You may either enter into a new lease with the lessor of the property or get an existing lease from another lessee. 2010 tax software free download Very often when you get an existing lease from another lessee, you must pay the previous lessee money to get the lease, besides having to pay the rent on the lease. 2010 tax software free download If you get an existing lease on property or equipment for your business, you generally must amortize any amount you pay to get that lease over the remaining term of the lease. 2010 tax software free download For example, if you pay $10,000 to get a lease and there are 10 years remaining on the lease with no option to renew, you can deduct $1,000 each year. 2010 tax software free download The cost of getting an existing lease of tangible property is not subject to the amortization rules for section 197 intangibles discussed in chapter 8. 2010 tax software free download Option to renew. 2010 tax software free download   The term of the lease for amortization includes all renewal options plus any other period for which you and the lessor reasonably expect the lease to be renewed. 2010 tax software free download However, this applies only if less than 75% of the cost of getting the lease is for the term remaining on the purchase date (not including any period for which you may choose to renew, extend, or continue the lease). 2010 tax software free download Allocate the lease cost to the original term and any option term based on the facts and circumstances. 2010 tax software free download In some cases, it may be appropriate to make the allocation using a present value computation. 2010 tax software free download For more information, see Regulations section 1. 2010 tax software free download 178-1(b)(5). 2010 tax software free download Example 1. 2010 tax software free download You paid $10,000 to get a lease with 20 years remaining on it and two options to renew for 5 years each. 2010 tax software free download Of this cost, you paid $7,000 for the original lease and $3,000 for the renewal options. 2010 tax software free download Because $7,000 is less than 75% of the total $10,000 cost of the lease (or $7,500), you must amortize the $10,000 over 30 years. 2010 tax software free download That is the remaining life of your present lease plus the periods for renewal. 2010 tax software free download Example 2. 2010 tax software free download The facts are the same as in Example 1, except that you paid $8,000 for the original lease and $2,000 for the renewal options. 2010 tax software free download You can amortize the entire $10,000 over the 20-year remaining life of the original lease. 2010 tax software free download The $8,000 cost of getting the original lease was not less than 75% of the total cost of the lease (or $7,500). 2010 tax software free download Cost of a modification agreement. 2010 tax software free download   You may have to pay an additional “rent” amount over part of the lease period to change certain provisions in your lease. 2010 tax software free download You must capitalize these payments and amortize them over the remaining period of the lease. 2010 tax software free download You cannot deduct the payments as additional rent, even if they are described as rent in the agreement. 2010 tax software free download Example. 2010 tax software free download You are a calendar year taxpayer and sign a 20-year lease to rent part of a building starting on January 1. 2010 tax software free download However, before you occupy it, you decide that you really need less space. 2010 tax software free download The lessor agrees to reduce your rent from $7,000 to $6,000 per year and to release the excess space from the original lease. 2010 tax software free download In exchange, you agree to pay an additional rent amount of $3,000, payable in 60 monthly installments of $50 each. 2010 tax software free download   You must capitalize the $3,000 and amortize it over the 20-year term of the lease. 2010 tax software free download Your amortization deduction each year will be $150 ($3,000 ÷ 20). 2010 tax software free download You cannot deduct the $600 (12 × $50) that you will pay during each of the first 5 years as rent. 2010 tax software free download Commissions, bonuses, and fees. 2010 tax software free download   Commissions, bonuses, fees, and other amounts you pay to get a lease on property you use in your business are capital costs. 2010 tax software free download You must amortize these costs over the term of the lease. 2010 tax software free download Loss on merchandise and fixtures. 2010 tax software free download   If you sell at a loss merchandise and fixtures that you bought solely to get a lease, the loss is a cost of getting the lease. 2010 tax software free download You must capitalize the loss and amortize it over the remaining term of the lease. 2010 tax software free download Improvements by Lessee If you add buildings or make other permanent improvements to leased property, depreciate the cost of the improvements using the modified accelerated cost recovery system (MACRS). 2010 tax software free download Depreciate the property over its appropriate recovery period. 2010 tax software free download You cannot amortize the cost over the remaining term of the lease. 2010 tax software free download If you do not keep the improvements when you end the lease, figure your gain or loss based on your adjusted basis in the improvements at that time. 2010 tax software free download For more information, see the discussion of MACRS in Publication 946, How To Depreciate Property. 2010 tax software free download Assignment of a lease. 2010 tax software free download   If a long-term lessee who makes permanent improvements to land later assigns all lease rights to you for money and you pay the rent required by the lease, the amount you pay for the assignment is a capital investment. 2010 tax software free download If the rental value of the leased land increased since the lease began, part of your capital investment is for that increase in the rental value. 2010 tax software free download The rest is for your investment in the permanent improvements. 2010 tax software free download   The part that is for the increased rental value of the land is a cost of getting a lease, and you amortize it over the remaining term of the lease. 2010 tax software free download You can depreciate the part that is for your investment in the improvements over the recovery period of the property as discussed earlier, without regard to the lease term. 2010 tax software free download Capitalizing Rent Expenses Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. 2010 tax software free download Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. 2010 tax software free download You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. 2010 tax software free download Indirect costs include amounts incurred for renting or leasing equipment, facilities, or land. 2010 tax software free download Uniform capitalization rules. 2010 tax software free download   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. 2010 tax software free download Produce real property or tangible personal property. 2010 tax software free download For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. 2010 tax software free download Acquire property for resale. 2010 tax software free download However, these rules do not apply to the following property. 2010 tax software free download Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. 2010 tax software free download Property you produce if you meet either of the following conditions. 2010 tax software free download Your indirect costs of producing the property are $200,000 or less. 2010 tax software free download You use the cash method of accounting and do not account for inventories. 2010 tax software free download Example 1. 2010 tax software free download You rent construction equipment to build a storage facility. 2010 tax software free download If you are subject to the uniform capitalization rules, you must capitalize as part of the cost of the building the rent you paid for the equipment. 2010 tax software free download You recover your cost by claiming a deduction for depreciation on the building. 2010 tax software free download Example 2. 2010 tax software free download You rent space in a facility to conduct your business of manufacturing tools. 2010 tax software free download If you are subject to the uniform capitalization rules, you must include the rent you paid to occupy the facility in the cost of the tools you produce. 2010 tax software free download More information. 2010 tax software free download   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. 2010 tax software free download Prev  Up  Next   Home   More Online Publications