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2012 Federal And State Tax Forms

2012 federal and state tax forms 1. 2012 federal and state tax forms   Bona Fide Residence Table of Contents Presence TestDays of Presence in the United States or Relevant Possession Significant Connection Tax HomeExceptions Closer ConnectionException for Year of Move Special Rules in the Year of a MoveYear of Moving to a Possession Year of Moving From a Possession Reporting a Change in Bona Fide ResidenceWho Must File Penalty for Not Filing Form 8898 In order to qualify for certain tax benefits (see chapter 3), you must be a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI for the entire tax year. 2012 federal and state tax forms Generally, you are a bona fide resident of one of these possessions (the relevant possession) if, during the tax year, you: Meet the presence test, Do not have a tax home outside the relevant possession, and Do not have a closer connection to the United States or to a foreign country than to the relevant possession. 2012 federal and state tax forms Special rule for members of the U. 2012 federal and state tax forms S. 2012 federal and state tax forms Armed Forces. 2012 federal and state tax forms   If you are a member of the U. 2012 federal and state tax forms S. 2012 federal and state tax forms Armed Forces who qualified as a bona fide resident of the relevant possession in an earlier tax year, your absence from that possession during the current tax year in compliance with military orders will not affect your status as a bona fide resident. 2012 federal and state tax forms Likewise, being in a possession solely in compliance with military orders will not qualify you for bona fide residency. 2012 federal and state tax forms Also see the special income source rule for members of the U. 2012 federal and state tax forms S. 2012 federal and state tax forms Armed Forces in chapter 2, under Compensation for Labor or Personal Services . 2012 federal and state tax forms Special rule for civilian spouse of active duty member of the U. 2012 federal and state tax forms S. 2012 federal and state tax forms Armed Forces. 2012 federal and state tax forms   If you are the civilian spouse of an active duty servicemember, under Military Spouses Residency Relief Act (MSRRA) you can choose to keep your prior residence or domicile for tax purposes (tax residence) when accompanying the servicemember spouse, who is relocating under military orders, to a new military duty station in one of the 50 states, the District of Columbia, or a U. 2012 federal and state tax forms S. 2012 federal and state tax forms possession. 2012 federal and state tax forms Before relocating, you and your spouse must have the same tax residence. 2012 federal and state tax forms If you are a civilian spouse and choose to keep your prior tax residence after such relocation, the source of income for services performed (for example, wages, salaries, tips, or self-employment) by you is considered to be (the jurisdiction of) the prior tax residence. 2012 federal and state tax forms As a result, the amount of income tax withholding (from Form(s) W-2, Wage and Tax Statement) that you are able to claim on your federal return, as well as the need to file a state or U. 2012 federal and state tax forms S. 2012 federal and state tax forms possession return, may be affected. 2012 federal and state tax forms For more information, consult with state, local, or U. 2012 federal and state tax forms S. 2012 federal and state tax forms possession tax authorities regarding your tax obligations under MSRRA. 2012 federal and state tax forms Presence Test If you are a U. 2012 federal and state tax forms S. 2012 federal and state tax forms citizen or resident alien, you will satisfy the presence test for the entire tax year if you meet one of the following conditions. 2012 federal and state tax forms You were present in the relevant possession for at least 183 days during the tax year. 2012 federal and state tax forms You were present in the relevant possession for at least 549 days during the 3-year period that includes the current tax year and the 2 immediately preceding tax years. 2012 federal and state tax forms During each year of the 3-year period, you must be present in the relevant possession for at least 60 days. 2012 federal and state tax forms You were present in the United States for no more than 90 days during the tax year. 2012 federal and state tax forms You had earned income in the United States of no more than a total of $3,000 and were present for more days in the relevant possession than in the United States during the tax year. 2012 federal and state tax forms Earned income is pay for personal services performed, such as wages, salaries, or professional fees. 2012 federal and state tax forms You had no significant connection to the United States during the tax year. 2012 federal and state tax forms Special rule for nonresident aliens. 2012 federal and state tax forms   Conditions (1) through (5) above do not apply to nonresident aliens of the United States. 2012 federal and state tax forms Instead, nonresident aliens must meet the substantial presence test discussed in chapter 1 of Publication 519. 2012 federal and state tax forms In that discussion, substitute the name of the possession for “United States” and “U. 2012 federal and state tax forms S. 2012 federal and state tax forms ” wherever they appear. 2012 federal and state tax forms Disregard the discussion in that chapter about a Closer Connection to a Foreign Country. 2012 federal and state tax forms Days of Presence in the United States or Relevant Possession Generally, you are treated as being present in the United States or in the relevant possession on any day that you are physically present in that location at any time during the day. 2012 federal and state tax forms Days of presence in a possession. 2012 federal and state tax forms   You are considered to be present in the relevant possession on any of the following days. 2012 federal and state tax forms Any day you are physically present in that possession at any time during the day. 2012 federal and state tax forms Any day you are outside of the relevant possession in order to receive, or to accompany any of the following family members to receive, qualifying medical treatment (see Qualifying Medical Treatment , later). 2012 federal and state tax forms Your parent. 2012 federal and state tax forms Your spouse. 2012 federal and state tax forms Your child, who is your son, daughter, stepson, or stepdaughter. 2012 federal and state tax forms This includes an adopted child or child lawfully placed with you for legal adoption. 2012 federal and state tax forms This also includes a foster child who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. 2012 federal and state tax forms Any day you are outside the relevant possession because you leave or are unable to return to the relevant possession during any: 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a federal declaration of a major disaster is issued in the Federal Register, or Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located. 2012 federal and state tax forms   If, during a single day, you are physically present: In the United States and in the relevant possession, that day is considered a day of presence in the relevant possession; or In two possessions, that day is considered a day of presence in the possession where your tax home is located (see Tax Home , later). 2012 federal and state tax forms Days of presence in the United States. 2012 federal and state tax forms   You are considered to be present in the United States on any day that you are physically present in the United States at any time during the day. 2012 federal and state tax forms However, do not count the following days as days of presence in the United States. 2012 federal and state tax forms Any day you are temporarily present in the United States in order to receive, or to accompany a parent, spouse, or child who is receiving, qualifying medical treatment. 2012 federal and state tax forms “Child” is defined under item 2c earlier. 2012 federal and state tax forms “Qualifying medical treatment” is defined later. 2012 federal and state tax forms Any day you are temporarily present in the United States because you leave or are unable to return to the relevant possession during any: 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a federal declaration of a major disaster is issued in the Federal Register, or Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located. 2012 federal and state tax forms Any day you are in the United States for less than 24 hours when you are traveling between two places outside the United States. 2012 federal and state tax forms Any day you are temporarily present in the United States as a professional athlete to compete in a charitable sports event (defined later). 2012 federal and state tax forms Any day you are temporarily in the United States as a student (defined later). 2012 federal and state tax forms Any day you are in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions). 2012 federal and state tax forms Qualifying Medical Treatment Such treatment is generally provided by (or under the supervision of) a physician for an illness, injury, impairment, or physical or mental condition. 2012 federal and state tax forms The treatment generally involves: Any period of inpatient care that requires an overnight stay in a hospital or hospice, and any period immediately before or after that inpatient care to the extent it is medically necessary, or Any temporary period of inpatient care in a residential medical care facility for medically necessary rehabilitation services. 2012 federal and state tax forms With respect to each qualifying medical treatment, you must prepare (or obtain) and maintain documentation supporting your claim that such treatment meets the criteria to be considered days of presence in the relevant possession. 2012 federal and state tax forms You must be able to produce this documentation within 30 days if requested by the IRS or tax administrator for the relevant possession. 2012 federal and state tax forms You must keep the following documentation. 2012 federal and state tax forms Records that provide: The patient's name and relationship to you (if the medical treatment is provided to a person you accompany); The name and address of the hospital, hospice, or residential medical care facility where the medical treatment was provided; The name, address, and telephone number of the physician who provided the medical treatment; The date(s) on which the medical treatment was provided; and Receipt(s) of payment for the medical treatment. 2012 federal and state tax forms Signed certification by the providing or supervising physician that the medical treatment met the requirements for being qualified medical treatment, and setting forth: The patient's name, A reasonably detailed description of the medical treatment provided by (or under the supervision of) the physician, The dates on which the medical treatment was provided, and The medical facts that support the physician's certification and determination that the treatment was medically necessary. 2012 federal and state tax forms Charitable Sports Event A charitable sports event is one that meets all of the following conditions. 2012 federal and state tax forms The main purpose is to benefit a qualified charitable organization. 2012 federal and state tax forms The entire net proceeds go to charity. 2012 federal and state tax forms Volunteers perform substantially all the work. 2012 federal and state tax forms In figuring the days of presence in the United States, you can exclude only the days on which you actually competed in the charitable sports event. 2012 federal and state tax forms You cannot exclude the days on which you were in the United States to practice for the event, to perform promotional or other activities related to the event, or to travel between events. 2012 federal and state tax forms Student To qualify as a student, you must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or A student taking a full-time, on-farm training course given by a school described in (1) above or by a state, county, or local government agency. 2012 federal and state tax forms The 5 calendar months do not have to be consecutive. 2012 federal and state tax forms Full-time student. 2012 federal and state tax forms   A full-time student is a person who is enrolled for the number of hours or courses the school considers to be full-time attendance. 2012 federal and state tax forms However, school attendance exclusively at night is not considered full-time attendance. 2012 federal and state tax forms School. 2012 federal and state tax forms   The term “school” includes elementary schools, middle schools, junior and senior high schools, colleges, universities, and technical, trade, and mechanical schools. 2012 federal and state tax forms It does not include on-the-job training courses, correspondence schools, and schools offering courses only through the Internet. 2012 federal and state tax forms Significant Connection One way in which you can meet the presence test is to have no significant connection to the United States during the tax year. 2012 federal and state tax forms This section looks at the factors that determine if a significant connection exists. 2012 federal and state tax forms You are treated as having a significant connection to the United States if you: Have a permanent home in the United States, Are currently registered to vote in any political subdivision of the United States, or Have a spouse or child (see item 2c under Days of presence in a possession , earlier) who is under age 18 whose main home is in the United States, other than: A child who is in the United States because he or she is the child of divorced or legally separated parents and is living with a custodial parent under a custodial decree or multiple support agreement, or A child who is in the United States as a student. 2012 federal and state tax forms For the purpose of determining if you have a significant connection to the United States, the term “spouse” does not include a spouse from whom you are legally separated under a decree of divorce or separate maintenance. 2012 federal and state tax forms Permanent home. 2012 federal and state tax forms   A permanent home generally includes an accommodation such as a house, an apartment, or a furnished room that is either owned or rented by you or your spouse. 2012 federal and state tax forms The dwelling unit must be available at all times, continuously, not only for short stays. 2012 federal and state tax forms Exception for rental property. 2012 federal and state tax forms   If you or your spouse own the dwelling unit and at any time during the tax year it is rented to someone else at fair rental value, it will be considered your permanent home only if you or your spouse use that property for personal purposes for more than the greater of: 14 days, or 10% of the number of days during that tax year that the property is rented to others at a fair rental value. 2012 federal and state tax forms   You are treated as using rental property for personal purposes on any day the property is not being rented to someone else at fair rental value for the entire day. 2012 federal and state tax forms   A day of personal use of a dwelling unit is also any day that the unit is used by any of the following persons. 2012 federal and state tax forms You or any other person who has an interest in it, unless you rent it to another owner as his or her main home under a shared equity financing agreement. 2012 federal and state tax forms A member of your family or a member of the family of any other person who has an interest in it, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. 2012 federal and state tax forms Family includes only brothers and sisters, half-brothers and half-sisters, spouses, ancestors (parents, grandparents, etc. 2012 federal and state tax forms ), and lineal descendants (children, grandchildren, etc. 2012 federal and state tax forms ). 2012 federal and state tax forms Anyone under an arrangement that lets you use some other dwelling unit. 2012 federal and state tax forms Anyone at less than a fair rental price. 2012 federal and state tax forms   However, any day you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. 2012 federal and state tax forms Whether your property is used mainly for this purpose is determined in light of all the facts and circumstances, such as: The amount of time you devote to repair and maintenance work, How often during the tax year you perform repair and maintenance work on this property, and The presence and activities of companions. 2012 federal and state tax forms   See Publication 527, Residential Rental Property, for more information about personal use of a dwelling unit. 2012 federal and state tax forms Example—significant connection. 2012 federal and state tax forms Ann Green, a U. 2012 federal and state tax forms S. 2012 federal and state tax forms citizen, is a sales representative for a company based in Guam. 2012 federal and state tax forms Ann lives with her spouse and young children in their house in Guam, where she is also registered to vote. 2012 federal and state tax forms Her business travel requires her to spend 120 days in the United States and another 120 days in foreign countries. 2012 federal and state tax forms When traveling on business, Ann generally stays at hotels but sometimes stays with her brother, who lives in the United States. 2012 federal and state tax forms Ann's stays are always of short duration and she asks her brother's permission to stay with him. 2012 federal and state tax forms Her brother's house is not her permanent home, nor does she have any other accommodations in the United States that would be considered her permanent home. 2012 federal and state tax forms Ann satisfies the presence test because she has no significant connection to the United States. 2012 federal and state tax forms Example—presence test. 2012 federal and state tax forms Eric and Wanda Brown live for part of the year in a condominium, which they own, in the CNMI. 2012 federal and state tax forms They also own a house in Maine where they live for 120 days every year to be near their grown children and grandchildren. 2012 federal and state tax forms The Browns are retired and their only income is from pension payments, dividends, interest, and social security benefits. 2012 federal and state tax forms In 2013, they spent only 175 days in the CNMI because of a 70-day vacation to Europe and Asia. 2012 federal and state tax forms Thus, in 2013, the Browns were not present in the CNMI for at least 183 days, were present in the United States for more than 90 days, and had a significant connection to the United States because of their permanent home. 2012 federal and state tax forms However, the Browns still satisfied the presence test with respect to the CNMI because they had no earned income in the United States and were physically present for more days in the CNMI than in the United States. 2012 federal and state tax forms Tax Home You will have met the tax home test if you did not have a tax home outside the relevant possession during any part of the tax year. 2012 federal and state tax forms Your tax home is your regular or main place of business, employment, or post of duty regardless of where you maintain your family home. 2012 federal and state tax forms If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. 2012 federal and state tax forms If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. 2012 federal and state tax forms Exceptions There are some special rules regarding tax home that provide exceptions to the general rule stated above. 2012 federal and state tax forms Students and Government Officials Disregard the following days when determining whether you have a tax home outside the relevant possession. 2012 federal and state tax forms Days you were temporarily in the United States as a student (see Student under Days of Presence in the United States or Relevant Possession, earlier). 2012 federal and state tax forms Days you were in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions). 2012 federal and state tax forms Seafarers You will not be considered to have a tax home outside the relevant possession solely because you are employed on a ship or other seafaring vessel that is predominantly used in local and international waters. 2012 federal and state tax forms For this purpose, a vessel is considered to be predominantly used in local and international waters if, during the tax year, the total amount of time it is used in international waters and in the waters within 3 miles of the relevant possession exceeds the total amount of time it is used in the territorial waters of the United States, another possession, or any foreign country. 2012 federal and state tax forms Example. 2012 federal and state tax forms In 2013, Sean Silverman, a U. 2012 federal and state tax forms S. 2012 federal and state tax forms citizen, was employed by a fishery and spent 250 days at sea on a fishing vessel. 2012 federal and state tax forms When not at sea, Sean lived with his spouse at a house they own in American Samoa. 2012 federal and state tax forms The fishing vessel on which Sean works departs and arrives at various ports in American Samoa, other possessions, and foreign countries, but was in international or American Samoa's local waters for 225 days. 2012 federal and state tax forms For purposes of determining bona fide residency of American Samoa, Sean will not be considered to have a tax home outside that possession solely because of his employment on board the fishing vessel. 2012 federal and state tax forms Year of Move If you are moving to or from a possession during the year, you may still be able to meet the tax home test for that year. 2012 federal and state tax forms See Special Rules in the Year of a Move , later in this chapter. 2012 federal and state tax forms Closer Connection You will have met the closer connection test if, during any part of the tax year, you do not have a closer connection to the United States or a foreign country than to the relevant U. 2012 federal and state tax forms S. 2012 federal and state tax forms possession. 2012 federal and state tax forms You will be considered to have a closer connection to a possession than to the United States or to a foreign country if you have maintained more significant contacts with the possession(s) than with the United States or foreign country. 2012 federal and state tax forms In determining if you have maintained more significant contacts with the relevant possession, the facts and circumstances to be considered include, but are not limited to, the following. 2012 federal and state tax forms The location of your permanent home. 2012 federal and state tax forms The location of your family. 2012 federal and state tax forms The location of personal belongings, such as automobiles, furniture, clothing, and jewelry owned by you and your family. 2012 federal and state tax forms The location of social, political, cultural, professional, or religious organizations with which you have a current relationship. 2012 federal and state tax forms The location where you conduct your routine personal banking activities. 2012 federal and state tax forms The location where you conduct business activities (other than those that go into determining your tax home). 2012 federal and state tax forms The location of the jurisdiction in which you hold a driver's license. 2012 federal and state tax forms The location of the jurisdiction in which you vote. 2012 federal and state tax forms The location of charitable organizations to which you contribute. 2012 federal and state tax forms The country of residence you designate on forms and documents. 2012 federal and state tax forms The types of official forms and documents you file, such as Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals), or Form W-9, Request for Taxpayer Identification Number and Certification. 2012 federal and state tax forms Your connections to the relevant possession will be compared to the total of your connections with the United States and foreign countries. 2012 federal and state tax forms Your answers to the questions on Form 8898, Part III, will help establish the jurisdiction to which you have a closer connection. 2012 federal and state tax forms Example—closer connection to the United States. 2012 federal and state tax forms Marcos Reyes, a U. 2012 federal and state tax forms S. 2012 federal and state tax forms citizen, moved to Puerto Rico in 2013 to start an investment consulting and venture capital business. 2012 federal and state tax forms His spouse and two teenage children remained in California to allow the children to complete high school. 2012 federal and state tax forms He traveled back to the United States regularly to see his spouse and children, to engage in business activities, and to take vacations. 2012 federal and state tax forms Marcos had an apartment available for his full-time use in Puerto Rico, but remained a joint owner of the residence in California where his spouse and children lived. 2012 federal and state tax forms Marcos and his family had automobiles and personal belongings such as furniture, clothing, and jewelry located at both residences. 2012 federal and state tax forms Although Marcos was a member of the Puerto Rico Chamber of Commerce, he also belonged to and had current relationships with social, political, cultural, and religious organizations in California. 2012 federal and state tax forms Marcos received mail in California, including bank and brokerage statements and credit card bills. 2012 federal and state tax forms He conducted his personal banking activities in California. 2012 federal and state tax forms He held a California driver's license and was also registered to vote there. 2012 federal and state tax forms Based on all of the particular facts and circumstances pertaining to Marcos, he was not a bona fide resident of Puerto Rico in 2013 because he had a closer connection to the United States than to Puerto Rico. 2012 federal and state tax forms Closer connection to another possession. 2012 federal and state tax forms   Generally, possessions are not treated as foreign countries. 2012 federal and state tax forms Therefore, a closer connection to a possession other than the relevant possession will not be treated as a closer connection to a foreign country. 2012 federal and state tax forms Example—tax home and closer connection to possession. 2012 federal and state tax forms Pearl Blackmon, a U. 2012 federal and state tax forms S. 2012 federal and state tax forms citizen, is a permanent employee of a hotel in Guam, but works only during the tourist season. 2012 federal and state tax forms For the remainder of each year, Pearl lives with her spouse and children in the CNMI, where she has no outside employment. 2012 federal and state tax forms Most of Pearl's personal belongings, including her automobile, are located in the CNMI. 2012 federal and state tax forms She is registered to vote in, and has a driver's license issued by, the CNMI. 2012 federal and state tax forms She does her personal banking in the CNMI and routinely lists her CNMI address as her permanent address on forms and documents. 2012 federal and state tax forms Pearl satisfies the presence test with respect to both Guam and the CNMI. 2012 federal and state tax forms She satisfies the tax home test with respect to Guam, because her regular place of business is in Guam. 2012 federal and state tax forms Pearl satisfies the closer connection test with respect to both Guam and the CNMI, because she does not have a closer connection to the United States or to any foreign country. 2012 federal and state tax forms Pearl is considered a bona fide resident of Guam, the location of her tax home. 2012 federal and state tax forms Exception for Year of Move If you are moving to or from a possession during the year, you may still be able to meet the closer connection test for that year. 2012 federal and state tax forms See Special Rules in the Year of a Move , next. 2012 federal and state tax forms Special Rules in the Year of a Move If you are moving to or from a possession during the year, you may still be able to meet the tax home and closer connection tests for that year. 2012 federal and state tax forms Year of Moving to a Possession You will satisfy the tax home and closer connection tests in the tax year of changing your residence to the relevant possession if you meet all of the following. 2012 federal and state tax forms You have not been a bona fide resident of the relevant possession in any of the 3 tax years immediately preceding your move. 2012 federal and state tax forms In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the last 183 days of the tax year. 2012 federal and state tax forms You are a bona fide resident of the relevant possession for each of the 3 tax years immediately following your move. 2012 federal and state tax forms Example. 2012 federal and state tax forms Dwight Wood, a U. 2012 federal and state tax forms S. 2012 federal and state tax forms citizen, files returns on a calendar year basis. 2012 federal and state tax forms He lived in the United States from January 2007 through May 2013. 2012 federal and state tax forms In June 2013 he moved to the USVI, purchased a house, and accepted a permanent job with a local employer. 2012 federal and state tax forms From July 1 through December 31, 2013 (more than 183 days), Dwight's principal place of business was in the USVI and, during that time, he did not have a closer connection to the United States or a foreign country than to the USVI. 2012 federal and state tax forms If he is a bona fide resident of the USVI during all of 2014 through 2016, he will satisfy the tax home and closer connection tests for 2013. 2012 federal and state tax forms If Dwight also satisfies the presence test in 2013, he will be considered a bona fide resident of the USVI for the entire 2013 tax year. 2012 federal and state tax forms Year of Moving From a Possession In the year you cease to be a bona fide resident of American Samoa, the CNMI, Guam, or the USVI, you will satisfy the tax home and closer connection tests with respect to the relevant possession if you meet all of the following. 2012 federal and state tax forms You have been a bona fide resident of the relevant possession for each of the 3 tax years immediately preceding your change of residence. 2012 federal and state tax forms In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the first 183 days of the tax year. 2012 federal and state tax forms You are not a bona fide resident of the relevant possession for any of the 3 tax years immediately following your move. 2012 federal and state tax forms Example. 2012 federal and state tax forms Jean Aspen, a U. 2012 federal and state tax forms S. 2012 federal and state tax forms citizen, files returns on a calendar year basis. 2012 federal and state tax forms From January 2010 through December 2012, Jean was a bona fide resident of American Samoa. 2012 federal and state tax forms Jean continued to live there until September 6, 2013, when she accepted new employment and moved to Hawaii. 2012 federal and state tax forms Jean's principal place of business from January 1 through September 5, 2013 (more than 183 days), was in American Samoa, and during that period Jean did not have a closer connection to the United States or a foreign country than to American Samoa. 2012 federal and state tax forms If Jean continues to live and work in Hawaii for the rest of 2013 and throughout years 2014 through 2016, she will satisfy the tax home and closer connection tests for 2013 with respect to American Samoa. 2012 federal and state tax forms If Jean also satisfies the presence test in 2013, she will be considered a bona fide resident for the entire 2013 tax year. 2012 federal and state tax forms Puerto Rico You will be considered a bona fide resident of Puerto Rico for the part of the tax year preceding the date on which you move if you: Are a U. 2012 federal and state tax forms S. 2012 federal and state tax forms citizen, Are a bona fide resident of Puerto Rico for at least 2 tax years immediately preceding the tax year of the move, Cease to be a bona fide resident of Puerto Rico during the tax year, Cease to have a tax home in Puerto Rico during the tax year, and Have a closer connection to Puerto Rico than to the United States or a foreign country throughout the part of the tax year preceding the date on which you cease to have a tax home in Puerto Rico. 2012 federal and state tax forms Example. 2012 federal and state tax forms Randy White, a U. 2012 federal and state tax forms S. 2012 federal and state tax forms citizen, files returns on a calendar year basis. 2012 federal and state tax forms For all of 2011 and 2012, Randy was a bona fide resident of Puerto Rico. 2012 federal and state tax forms From January through April 2013, Randy continued to reside and maintain his principal place of business in and closer connection to Puerto Rico. 2012 federal and state tax forms On May 5, 2013, Randy moved and changed his tax home to Nevada. 2012 federal and state tax forms Later that year he established a closer connection to the United States than to Puerto Rico. 2012 federal and state tax forms Randy did not satisfy the presence test for 2013 with respect to Puerto Rico, nor the tax home or closer connection tests. 2012 federal and state tax forms However, because Randy was a bona fide resident of Puerto Rico for at least 2 tax years before he moved to Nevada in 2013, he was a bona fide resident of Puerto Rico from January 1 through May 4, 2013. 2012 federal and state tax forms Reporting a Change in Bona Fide Residence If you became or ceased to be a bona fide resident of a U. 2012 federal and state tax forms S. 2012 federal and state tax forms possession, you may need to file Form 8898. 2012 federal and state tax forms This applies to the U. 2012 federal and state tax forms S. 2012 federal and state tax forms possessions of American Samoa, the CNMI, Guam, Puerto Rico, and the USVI. 2012 federal and state tax forms Who Must File You must file Form 8898 for the tax year in which you meet both of the following conditions. 2012 federal and state tax forms Your worldwide gross income (defined below) in that tax year is more than $75,000. 2012 federal and state tax forms You meet one of the following. 2012 federal and state tax forms You take a position for U. 2012 federal and state tax forms S. 2012 federal and state tax forms tax purposes that you became a bona fide resident of a U. 2012 federal and state tax forms S. 2012 federal and state tax forms possession after a tax year for which you filed a U. 2012 federal and state tax forms S. 2012 federal and state tax forms income tax return as a citizen or resident alien of the United States but not as a bona fide resident of the possession. 2012 federal and state tax forms You are a citizen or resident alien of the United States who takes the position for U. 2012 federal and state tax forms S. 2012 federal and state tax forms tax purposes that you ceased to be a bona fide resident of a U. 2012 federal and state tax forms S. 2012 federal and state tax forms possession after a tax year for which you filed an income tax return (with the IRS, the possession tax authority, or both) as a bona fide resident of the possession. 2012 federal and state tax forms You take the position for U. 2012 federal and state tax forms S. 2012 federal and state tax forms tax purposes that you became a bona fide resident of Puerto Rico or American Samoa after a tax year for which you were required to file an income tax return as a bona fide resident of the CNMI, Guam, or the USVI. 2012 federal and state tax forms Worldwide gross income. 2012 federal and state tax forms   Worldwide gross income means all income you received in the form of money, goods, property, and services, including any income from sources outside the United States (even if you can exclude part or all of it) and before any deductions, credits, or rebates. 2012 federal and state tax forms Example. 2012 federal and state tax forms You are a U. 2012 federal and state tax forms S. 2012 federal and state tax forms citizen who moved to the CNMI in December 2012, but did not become a bona fide resident of that possession until the 2013 tax year. 2012 federal and state tax forms You must file Form 8898 for the 2013 tax year if your worldwide gross income for that year was more than $75,000. 2012 federal and state tax forms Penalty for Not Filing Form 8898 If you are required to file Form 8898 for any tax year and you fail to file it, you may owe a penalty of $1,000. 2012 federal and state tax forms You may also owe this penalty if you do not include all the information required by the form or the form includes incorrect information. 2012 federal and state tax forms In either case, you will not owe this penalty if you can show that such failure is due to reasonable cause and not willful neglect. 2012 federal and state tax forms This is in addition to any criminal penalty that may be imposed. 2012 federal and state tax forms Prev  Up  Next   Home   More Online Publications
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Get the Facts About Renting

A lease is an agreement that outlines the obligations of the owner and the tenants of a house or apartment. It is a legally binding document that courts will generally uphold in legal proceedings, so it is important for you to know the exact terms of the lease agreement before you sign it. Before agreeing to lease a home to you, a landlord may review your credit report, so you may want to get a copy before you start your apartment search. Some things to look for in a lease:

  • Clauses that allow the landlord to change the terms of the lease after it is signed
  • Requirements/responsibilities of the tenants to do routine repairs such as lawn maintenance, cleaning or notification of repairs
  • Restrictions that would prevent you from living normally or comfortably in the home
  • Term of the lease and any important dates such as when the rent is due, or garbage pick up days
  • Extra fees for parking spaces or storage, garbage collection, and pets
  • Information regarding utility providers, how to arrange for service and whether you or the landlord is responsible for those bills.

Read the lease carefully and discuss anything you don't understand or issues you might have. All landlord responsibilities should be clearly stated. Always get a copy of the signed lease to keep in your records. Any clause or terms in the agreement affects ALL parties who sign.

Tenants who lease or rent property are protected against discrimination by The Fair Housing Act. If you think your rights have been violated, you may write a letter or telephone the HUD office nearest you. You have one year after the alleged violation to file a complaint with HUD, but you should file as soon as possible.

Each state has its own tenant rights, laws and protections. Contact HUD for a state-by-state directory. You can also find public housing that is available from the Department of Housing and Urban Development. The agency offers several housing assistance programs for tenants and landlords as well as information of displaced residents.

Ten Tips for Renters

  • The best way to win over a prospective landlord is to be prepared by bringing a completed rental application; written references from previous landlords, employers, friends and colleagues; and a current copy of your credit report with you.
  • Carefully review all the important conditions of the lease before you sign.
  • To avoid disputes or misunderstandings with your landlord, get everything in writing.
  • Know your rights to live in a habitable rental unit-and don't give them up.
  • Keep communication open with your landlord.
  • Ask about your privacy rights before you sign the lease.
  • Purchase renter's insurance to cover your valuables.
  • Make sure the security deposit refund procedures are spelled out in your lease or rental agreement.
  • Learn whether your building and neighborhood are safe, and what you can expect your landlord to do about it if they aren't.
  • Know when to fight an eviction notice and when to move. Unless you have the law and provable facts on your side, fighting an eviction notice is usually shortsighted.

The 2012 Federal And State Tax Forms

2012 federal and state tax forms 5. 2012 federal and state tax forms   Additional Rules for Listed Property Table of Contents Introduction Useful Items - You may want to see: What Is Listed Property?Passenger Automobiles Other Property Used for Transportation Computers and Related Peripheral Equipment Can Employees Claim a Deduction? What Is the Business-Use Requirement?How To Allocate Use Qualified Business Use Recapture of Excess Depreciation Lessee's Inclusion Amount Do the Passenger Automobile Limits Apply?Maximum Depreciation Deduction Deductions After the Recovery Period Deductions For Passenger Automobiles Acquired in a Trade-in What Records Must Be Kept?Adequate Records How Is Listed Property Information Reported? Introduction This chapter discusses the deduction limits and other special rules that apply to certain listed property. 2012 federal and state tax forms Listed property includes cars and other property used for transportation, property used for entertainment, and certain computers. 2012 federal and state tax forms Deductions for listed property (other than certain leased property) are subject to the following special rules and limits. 2012 federal and state tax forms Deduction for employees. 2012 federal and state tax forms If your use of the property is not for your employer's convenience or is not required as a condition of your employment, you cannot deduct depreciation or rent expenses for your use of the property as an employee. 2012 federal and state tax forms Business-use requirement. 2012 federal and state tax forms If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. 2012 federal and state tax forms In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. 2012 federal and state tax forms You may also have to recapture (include in income) any excess depreciation claimed in previous years. 2012 federal and state tax forms A similar inclusion amount applies to certain leased property. 2012 federal and state tax forms Passenger automobile limits and rules. 2012 federal and state tax forms Annual limits apply to depreciation deductions (including section 179 deductions and any special depreciation allowance) for certain passenger automobiles. 2012 federal and state tax forms You can continue to deduct depreciation for the unrecovered basis resulting from these limits after the end of the recovery period. 2012 federal and state tax forms This chapter defines listed property and explains the special rules and depreciation deduction limits that apply, including the special inclusion amount rule for leased property. 2012 federal and state tax forms It also discusses the recordkeeping rules for listed property and explains how to report information about the property on your tax return. 2012 federal and state tax forms Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. 2012 federal and state tax forms What Is Listed Property? Listed property is any of the following. 2012 federal and state tax forms Passenger automobiles (as defined later). 2012 federal and state tax forms Any other property used for transportation, unless it is an excepted vehicle. 2012 federal and state tax forms Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video-recording equipment). 2012 federal and state tax forms Computers and related peripheral equipment, unless used only at a regular business establishment and owned or leased by the person operating the establishment. 2012 federal and state tax forms A regular business establishment includes a portion of a dwelling unit that is used both regularly and exclusively for business as discussed in Publication 587. 2012 federal and state tax forms Improvements to listed property. 2012 federal and state tax forms   An improvement made to listed property that must be capitalized is treated as a new item of depreciable property. 2012 federal and state tax forms The recovery period and method of depreciation that apply to the listed property as a whole also apply to the improvement. 2012 federal and state tax forms For example, if you must depreciate the listed property using the straight line method, you also must depreciate the improvement using the straight line method. 2012 federal and state tax forms Passenger Automobiles A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (6,000 pounds or less of gross vehicle weight for trucks and vans). 2012 federal and state tax forms It includes any part, component, or other item physically attached to the automobile at the time of purchase or usually included in the purchase price of an automobile. 2012 federal and state tax forms The following vehicles are not considered passenger automobiles for these purposes. 2012 federal and state tax forms An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business. 2012 federal and state tax forms A vehicle used directly in the trade or business of transporting persons or property for pay or hire. 2012 federal and state tax forms A truck or van that is a qualified nonpersonal use vehicle. 2012 federal and state tax forms Qualified nonpersonal use vehicles. 2012 federal and state tax forms   Qualified nonpersonal use vehicles are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. 2012 federal and state tax forms They include the trucks and vans listed as excepted vehicles under Other Property Used for Transportation , next. 2012 federal and state tax forms They also include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. 2012 federal and state tax forms For a detailed discussion of passenger automobiles, including leased passenger automobiles, see  Publication 463. 2012 federal and state tax forms Other Property Used for Transportation Although vehicles used to transport persons or property for pay or hire and vehicles rated at more than the 6,000-pound threshold are not passenger automobiles, they are still “other property used for transportation” and are subject to the special rules for listed property. 2012 federal and state tax forms Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles used to transport persons or goods. 2012 federal and state tax forms Excepted vehicles. 2012 federal and state tax forms   Other property used for transportation does not include the following qualified nonpersonal use vehicles (defined earlier under Passenger Automobiles ). 2012 federal and state tax forms Clearly marked police and fire vehicles. 2012 federal and state tax forms Unmarked vehicles used by law enforcement officers if the use is officially authorized. 2012 federal and state tax forms Ambulances used as such and hearses used as such. 2012 federal and state tax forms Any vehicle with a loaded gross vehicle weight of over 14,000 pounds that is designed to carry cargo. 2012 federal and state tax forms Bucket trucks (cherry pickers), cement mixers, dump trucks (including garbage trucks), flatbed trucks, and refrigerated trucks. 2012 federal and state tax forms Combines, cranes and derricks, and forklifts. 2012 federal and state tax forms Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat. 2012 federal and state tax forms Qualified moving vans. 2012 federal and state tax forms Qualified specialized utility repair trucks. 2012 federal and state tax forms School buses used in transporting students and employees of schools. 2012 federal and state tax forms Other buses with a capacity of at least 20 passengers that are used as passenger buses. 2012 federal and state tax forms Tractors and other special purpose farm vehicles. 2012 federal and state tax forms Clearly marked police and fire vehicle. 2012 federal and state tax forms   A clearly marked police or fire vehicle is a vehicle that meets all the following requirements. 2012 federal and state tax forms It is owned or leased by a governmental unit or an agency or instrumentality of a governmental unit. 2012 federal and state tax forms It is required to be used for commuting by a police officer or fire fighter who, when not on a regular shift, is on call at all times. 2012 federal and state tax forms It is prohibited from being used for personal use (other than commuting) outside the limit of the police officer's arrest powers or the fire fighter's obligation to respond to an emergency. 2012 federal and state tax forms It is clearly marked with painted insignia or words that make it readily apparent that it is a police or fire vehicle. 2012 federal and state tax forms A marking on a license plate is not a clear marking for these purposes. 2012 federal and state tax forms Qualified moving van. 2012 federal and state tax forms   A qualified moving van is any truck or van used by a professional moving company for moving household or business goods if the following requirements are met. 2012 federal and state tax forms No personal use of the van is allowed other than for travel to and from a move site or for minor personal use, such as a stop for lunch on the way from one move site to another. 2012 federal and state tax forms Personal use for travel to and from a move site happens no more than five times a month on average. 2012 federal and state tax forms Personal use is limited to situations in which it is more convenient to the employer, because of the location of the employee's residence in relation to the location of the move site, for the van not to be returned to the employer's business location. 2012 federal and state tax forms Qualified specialized utility repair truck. 2012 federal and state tax forms   A truck is a qualified specialized utility repair truck if it is not a van or pickup truck and all the following apply. 2012 federal and state tax forms The truck was specifically designed for and is used to carry heavy tools, testing equipment, or parts. 2012 federal and state tax forms Shelves, racks, or other permanent interior construction has been installed to carry and store the tools, equipment, or parts and would make it unlikely that the truck would be used, other than minimally, for personal purposes. 2012 federal and state tax forms The employer requires the employee to drive the truck home in order to be able to respond in emergency situations for purposes of restoring or maintaining electricity, gas, telephone, water, sewer, or steam utility services. 2012 federal and state tax forms Computers and Related Peripheral Equipment A computer is a programmable, electronically activated device capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention. 2012 federal and state tax forms It consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. 2012 federal and state tax forms Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. 2012 federal and state tax forms The following are neither computers nor related peripheral equipment. 2012 federal and state tax forms Any equipment that is an integral part of other property that is not a computer. 2012 federal and state tax forms Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment. 2012 federal and state tax forms Equipment of a kind used primarily for the user's amusement or entertainment, such as video games. 2012 federal and state tax forms Can Employees Claim a Deduction? If you are an employee, you can claim a depreciation deduction for the use of your listed property (whether owned or rented) in performing services as an employee only if your use is a business use. 2012 federal and state tax forms The use of your property in performing services as an employee is a business use only if both the following requirements are met. 2012 federal and state tax forms The use is for your employer's convenience. 2012 federal and state tax forms The use is required as a condition of your employment. 2012 federal and state tax forms If these requirements are not met, you cannot deduct depreciation (including the section 179 deduction) or rent expenses for your use of the property as an employee. 2012 federal and state tax forms Employer's convenience. 2012 federal and state tax forms   Whether the use of listed property is for your employer's convenience must be determined from all the facts. 2012 federal and state tax forms The use is for your employer's convenience if it is for a substantial business reason of the employer. 2012 federal and state tax forms The use of listed property during your regular working hours to carry on your employer's business generally is for the employer's convenience. 2012 federal and state tax forms Condition of employment. 2012 federal and state tax forms   Whether the use of listed property is a condition of your employment depends on all the facts and circumstances. 2012 federal and state tax forms The use of property must be required for you to perform your duties properly. 2012 federal and state tax forms Your employer does not have to require explicitly that you use the property. 2012 federal and state tax forms However, a mere statement by the employer that the use of the property is a condition of your employment is not sufficient. 2012 federal and state tax forms Example 1. 2012 federal and state tax forms Virginia Sycamore is employed as a courier with We Deliver, which provides local courier services. 2012 federal and state tax forms She owns and uses a motorcycle to deliver packages to downtown offices. 2012 federal and state tax forms We Deliver explicitly requires all delivery persons to own a car or motorcycle for use in their employment. 2012 federal and state tax forms Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. 2012 federal and state tax forms Example 2. 2012 federal and state tax forms Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. 2012 federal and state tax forms He must travel to these sites on a regular basis. 2012 federal and state tax forms Uplift does not furnish an automobile or explicitly require him to use his own automobile. 2012 federal and state tax forms However, it pays him for any costs he incurs in traveling to the various sites. 2012 federal and state tax forms The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. 2012 federal and state tax forms Example 3. 2012 federal and state tax forms Assume the same facts as in Example 2 except that Uplift furnishes a car to Bill, who chooses to use his own car and receive payment for using it. 2012 federal and state tax forms The use of his own car is neither for the convenience of Uplift nor required as a condition of employment. 2012 federal and state tax forms Example 4. 2012 federal and state tax forms Marilyn Lee is a pilot for Y Company, a small charter airline. 2012 federal and state tax forms Y requires pilots to obtain 80 hours of flight time annually in addition to flight time spent with the airline. 2012 federal and state tax forms Pilots usually can obtain these hours by flying with the Air Force Reserve or by flying part-time with another airline. 2012 federal and state tax forms Marilyn owns her own airplane. 2012 federal and state tax forms The use of her airplane to obtain the required flight hours is neither for the convenience of the employer nor required as a condition of employment. 2012 federal and state tax forms Example 5. 2012 federal and state tax forms David Rule is employed as an engineer with Zip, an engineering contracting firm. 2012 federal and state tax forms He occasionally takes work home at night rather than work late in the office. 2012 federal and state tax forms He owns and uses a home computer which is virtually identical to the office model. 2012 federal and state tax forms His use of the computer is neither for the convenience of his employer nor required as a condition of employment. 2012 federal and state tax forms What Is the Business-Use Requirement? You can claim the section 179 deduction and a special depreciation allowance for listed property and depreciate listed property using GDS and a declining balance method if the property meets the business-use requirement. 2012 federal and state tax forms To meet this requirement, listed property must be used predominantly (more than 50% of its total use) for qualified business use. 2012 federal and state tax forms If this requirement is not met, the following rules apply. 2012 federal and state tax forms Property not used predominantly for qualified business use during the year it is placed in service does not qualify for the section 179 deduction. 2012 federal and state tax forms Property not used predominantly for qualified business use during the year it is placed in service does not qualify for a special depreciation allowance. 2012 federal and state tax forms Any depreciation deduction under MACRS for property not used predominantly for qualified business use during any year must be figured using the straight line method over the ADS recovery period. 2012 federal and state tax forms This rule applies each year of the recovery period. 2012 federal and state tax forms Excess depreciation on property previously used predominantly for qualified business use must be recaptured (included in income) in the first year in which it is no longer used predominantly for qualified business use. 2012 federal and state tax forms A lessee must add an inclusion amount to income in the first year in which the leased property is not used predominantly for qualified business use. 2012 federal and state tax forms Being required to use the straight line method for an item of listed property not used predominantly for qualified business use is not the same as electing the straight line method. 2012 federal and state tax forms It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. 2012 federal and state tax forms Exception for leased property. 2012 federal and state tax forms   The business-use requirement generally does not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. 2012 federal and state tax forms   You are considered regularly engaged in the business of leasing listed property only if you enter into contracts for the leasing of listed property with some frequency over a continuous period of time. 2012 federal and state tax forms This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of your business in its entirety. 2012 federal and state tax forms Occasional or incidental leasing activity is insufficient. 2012 federal and state tax forms For example, if you lease only one passenger automobile during a tax year, you are not regularly engaged in the business of leasing automobiles. 2012 federal and state tax forms An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. 2012 federal and state tax forms How To Allocate Use To determine whether the business-use requirement is met, you must allocate the use of any item of listed property used for more than one purpose during the year among its various uses. 2012 federal and state tax forms For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. 2012 federal and state tax forms You determine the percentage of qualified business use by dividing the number of miles you drove the vehicle for business purposes during the year by the total number of miles you drove the vehicle for all purposes (including business miles) during the year. 2012 federal and state tax forms For other listed property, allocate the property's use on the basis of the most appropriate unit of time the property is actually used (rather than merely being available for use). 2012 federal and state tax forms For example, you can determine the percentage of business use of a computer by dividing the number of hours you used the computer for business purposes during the year by the total number of hours you used the computer for all purposes (including business use) during the year. 2012 federal and state tax forms Entertainment use. 2012 federal and state tax forms   Treat the use of listed property for entertainment, recreation, or amusement purposes as a business use only to the extent you can deduct expenses (other than interest and property tax expenses) due to its use as an ordinary and necessary business expense. 2012 federal and state tax forms Commuting use. 2012 federal and state tax forms   The use of an automobile for commuting is not business use, regardless of whether work is performed during the trip. 2012 federal and state tax forms For example, a business telephone call made on a car telephone while commuting to work does not change the character of the trip from commuting to business. 2012 federal and state tax forms This is also true for a business meeting held in a car while commuting to work. 2012 federal and state tax forms Similarly, a business call made on an otherwise personal trip does not change the character of a trip from personal to business. 2012 federal and state tax forms The fact that an automobile is used to display material that advertises the owner's or user's trade or business does not convert an otherwise personal use into business use. 2012 federal and state tax forms Use of your automobile by another person. 2012 federal and state tax forms   If someone else uses your automobile, do not treat that use as business use unless one of the following conditions applies. 2012 federal and state tax forms That use is directly connected with your business. 2012 federal and state tax forms You properly report the value of the use as income to the other person and withhold tax on the income where required. 2012 federal and state tax forms You are paid a fair market rent. 2012 federal and state tax forms Treat any payment to you for the use of the automobile as a rent payment for purposes of item (3). 2012 federal and state tax forms Employee deductions. 2012 federal and state tax forms   If you are an employee, do not treat your use of listed property as business use unless it is for your employer's convenience and is required as a condition of your employment. 2012 federal and state tax forms See Can Employees Claim a Deduction , earlier. 2012 federal and state tax forms Qualified Business Use Qualified business use of listed property is any use of the property in your trade or business. 2012 federal and state tax forms However, it does not include the following uses. 2012 federal and state tax forms The leasing of property to any 5% owner or related person (to the extent the property is used by a 5% owner or person related to the owner or lessee of the property). 2012 federal and state tax forms The use of property as pay for the services of a 5% owner or related person. 2012 federal and state tax forms The use of property as pay for services of any person (other than a 5% owner or related person), unless the value of the use is included in that person's gross income and income tax is withheld on that amount where required. 2012 federal and state tax forms Property does not stop being used predominantly for qualified business use because of a transfer at death. 2012 federal and state tax forms Exception for leasing or compensatory use of aircraft. 2012 federal and state tax forms   Treat the leasing of any aircraft by a 5% owner or related person, or the compensatory use of any aircraft, as a qualified business use if at least 25% of the total use of the aircraft during the year is for a qualified business use. 2012 federal and state tax forms 5% owner. 2012 federal and state tax forms   For a business entity that is not a corporation, a 5% owner is any person who owns more than 5% of the capital or profits interest in the business. 2012 federal and state tax forms   For a corporation, a 5% owner is any person who owns, or is considered to own, either of the following. 2012 federal and state tax forms More than 5% of the outstanding stock of the corporation. 2012 federal and state tax forms Stock possessing more than 5% of the total combined voting power of all stock in the corporation. 2012 federal and state tax forms Related persons. 2012 federal and state tax forms   For a description of related persons, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 . 2012 federal and state tax forms For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. 2012 federal and state tax forms Examples. 2012 federal and state tax forms   The following examples illustrate whether the use of business property is qualified business use. 2012 federal and state tax forms Example 1. 2012 federal and state tax forms John Maple is the sole proprietor of a plumbing contracting business. 2012 federal and state tax forms John employs his brother, Richard, in the business. 2012 federal and state tax forms As part of Richard's pay, he is allowed to use one of the company automobiles for personal use. 2012 federal and state tax forms The company includes the value of the personal use of the automobile in Richard's gross income and properly withholds tax on it. 2012 federal and state tax forms The use of the automobile is pay for the performance of services by a related person, so it is not a qualified business use. 2012 federal and state tax forms Example 2. 2012 federal and state tax forms John, in Example 1, allows unrelated employees to use company automobiles for personal purposes. 2012 federal and state tax forms He does not include the value of the personal use of the company automobiles as part of their compensation and he does not withhold tax on the value of the use of the automobiles. 2012 federal and state tax forms This use of company automobiles by employees is not a qualified business use. 2012 federal and state tax forms Example 3. 2012 federal and state tax forms James Company Inc. 2012 federal and state tax forms owns several automobiles that its employees use for business purposes. 2012 federal and state tax forms The employees also are allowed to take the automobiles home at night. 2012 federal and state tax forms The fair market value of each employee's use of an automobile for any personal purpose, such as commuting to and from work, is reported as income to the employee and James Company withholds tax on it. 2012 federal and state tax forms This use of company automobiles by employees, even for personal purposes, is a qualified business use for the company. 2012 federal and state tax forms Investment Use The use of property to produce income in a nonbusiness activity (investment use) is not a qualified business use. 2012 federal and state tax forms However, you can treat the investment use as business use to figure the depreciation deduction for the property in a given year. 2012 federal and state tax forms Example 1. 2012 federal and state tax forms Sarah Bradley uses a home computer 50% of the time to manage her investments. 2012 federal and state tax forms She also uses the computer 40% of the time in her part-time consumer research business. 2012 federal and state tax forms Sarah's home computer is listed property because it is not used at a regular business establishment. 2012 federal and state tax forms She does not use the computer predominantly for qualified business use. 2012 federal and state tax forms Therefore, she cannot elect a section 179 deduction or claim a special depreciation allowance for the computer. 2012 federal and state tax forms She must depreciate it using the straight line method over the ADS recovery period. 2012 federal and state tax forms Her combined business/investment use for determining her depreciation deduction is 90%. 2012 federal and state tax forms Example 2. 2012 federal and state tax forms If Sarah uses her computer 30% of the time to manage her investments and 60% of the time in her consumer research business, it is used predominantly for qualified business use. 2012 federal and state tax forms She can elect a section 179 deduction and, if she does not deduct all the computer's cost, she can claim a special depreciation allowance and depreciate the computer using the 200% declining balance method over the GDS recovery period. 2012 federal and state tax forms Her combined business/investment use for determining her depreciation deduction is 90%. 2012 federal and state tax forms Recapture of Excess Depreciation If you used listed property more than 50% in a qualified business use in the year you placed it in service, you must recapture (include in income) excess depreciation in the first year you use it 50% or less. 2012 federal and state tax forms You also increase the adjusted basis of your property by the same amount. 2012 federal and state tax forms Excess depreciation is: The depreciation allowable for the property (including any section 179 deduction and special depreciation allowance claimed) for years before the first year you do not use the property predominantly for qualified business use, minus The depreciation that would have been allowable for those years if you had not used the property predominantly for qualified business use in the year you placed it in service. 2012 federal and state tax forms To determine the amount in (2) above, you must refigure the depreciation using the straight line method and the ADS recovery period. 2012 federal and state tax forms Example. 2012 federal and state tax forms In June 2009, Ellen Rye purchased and placed in service a pickup truck that cost $18,000. 2012 federal and state tax forms She used it only for qualified business use for 2009 through 2012. 2012 federal and state tax forms Ellen claimed a section 179 deduction of $10,000 based on the purchase of the truck. 2012 federal and state tax forms She began depreciating it using the 200% DB method over a 5-year GDS recovery period. 2012 federal and state tax forms The pickup truck's gross vehicle weight was over 6,000 pounds, so it was not subject to the passenger automobile limits discussed later under Do the Passenger Automobile Limits Apply. 2012 federal and state tax forms During 2013, she used the truck 50% for business and 50% for personal purposes. 2012 federal and state tax forms She includes $4,018 excess depreciation in her gross income for 2013. 2012 federal and state tax forms The excess depreciation is determined as follows. 2012 federal and state tax forms Total section 179 deduction ($10,000) and depreciation claimed ($6,618) for 2009 through 2012. 2012 federal and state tax forms (Depreciation is from Table A-1. 2012 federal and state tax forms ) $16,618 Minus: Depreciation allowable (Table A-8):     2009 – 10% of $18,000 $1,800   2010 – 20% of $18,000 3,600   2011 – 20% of $18,000 3,600   2012 – 20% of $18,000 3,600 12,600 Excess depreciation $4,018 If Ellen's use of the truck does not change to 50% for business and 50% for personal purposes until 2015, there will be no excess depreciation. 2012 federal and state tax forms The total depreciation allowable using Table A-8 through 2015 will be $18,000, which equals the total of the section 179 deduction and depreciation she will have claimed. 2012 federal and state tax forms Where to figure and report recapture. 2012 federal and state tax forms   Use Form 4797, Part IV, to figure the recapture amount. 2012 federal and state tax forms Report the recapture amount as other income on the same form or schedule on which you took the depreciation deduction. 2012 federal and state tax forms For example, report the recapture amount as other income on Schedule C (Form 1040) if you took the depreciation deduction on Schedule C. 2012 federal and state tax forms If you took the depreciation deduction on Form 2106, report the recapture amount as other income on Form 1040, line 21. 2012 federal and state tax forms Lessee's Inclusion Amount If you use leased listed property other than a passenger automobile for business/investment use, you must include an amount in your income in the first year your qualified business-use percentage is 50% or less. 2012 federal and state tax forms Your qualified business-use percentage is the part of the property's total use that is qualified business use (defined earlier). 2012 federal and state tax forms For the inclusion amount rules for a leased passenger automobile, see Leasing a Car in chapter 4 of Publication 463. 2012 federal and state tax forms The inclusion amount is the sum of Amount A and Amount B, described next. 2012 federal and state tax forms However, see the special rules for the inclusion amount, later, if your lease begins in the last 9 months of your tax year or is for less than one year. 2012 federal and state tax forms Amount A. 2012 federal and state tax forms   Amount A is: The fair market value of the property, multiplied by The business/investment use for the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A-19 in Appendix A . 2012 federal and state tax forms   The fair market value of the property is the value on the first day of the lease term. 2012 federal and state tax forms If the capitalized cost of an item of listed property is specified in the lease agreement, you must treat that amount as the fair market value. 2012 federal and state tax forms Amount B. 2012 federal and state tax forms   Amount B is: The fair market value of the property, multiplied by The average of the business/investment use for all tax years the property was leased that precede the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A–20 in Appendix A . 2012 federal and state tax forms Maximum inclusion amount. 2012 federal and state tax forms   The inclusion amount cannot be more than the sum of the deductible amounts of rent for the tax year in which the lessee must include the amount in gross income. 2012 federal and state tax forms Inclusion amount worksheet. 2012 federal and state tax forms   The following worksheet is provided to help you figure the inclusion amount for leased listed property. 2012 federal and state tax forms Inclusion Amount Worksheet for Leased Listed Property 1. 2012 federal and state tax forms Fair market value   2. 2012 federal and state tax forms Business/investment use for first year business use is 50% or less   3. 2012 federal and state tax forms Multiply line 1 by line 2. 2012 federal and state tax forms   4. 2012 federal and state tax forms Rate (%) from Table A-19   5. 2012 federal and state tax forms Multiply line 3 by line 4. 2012 federal and state tax forms This is Amount A. 2012 federal and state tax forms   6. 2012 federal and state tax forms Fair market value   7. 2012 federal and state tax forms Average business/investment use for years property leased before the first year business use is 50% or less . 2012 federal and state tax forms . 2012 federal and state tax forms . 2012 federal and state tax forms . 2012 federal and state tax forms . 2012 federal and state tax forms . 2012 federal and state tax forms . 2012 federal and state tax forms . 2012 federal and state tax forms . 2012 federal and state tax forms . 2012 federal and state tax forms . 2012 federal and state tax forms . 2012 federal and state tax forms . 2012 federal and state tax forms   8. 2012 federal and state tax forms Multiply line 6 by line 7   9. 2012 federal and state tax forms Rate (%) from Table A-20   10. 2012 federal and state tax forms Multiply line 8 by line 9. 2012 federal and state tax forms This is Amount B. 2012 federal and state tax forms   11. 2012 federal and state tax forms Add line 5 and line 10. 2012 federal and state tax forms This is your inclusion amount. 2012 federal and state tax forms Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. 2012 federal and state tax forms )         Example. 2012 federal and state tax forms On February 1, 2011, Larry House, a calendar year taxpayer, leased and placed in service a computer with a fair market value of $3,000. 2012 federal and state tax forms The lease is for a period of 5 years. 2012 federal and state tax forms Larry does not use the computer at a regular business establishment, so it is listed property. 2012 federal and state tax forms His business use of the property (all of which is qualified business use) is 80% in 2011, 60% in 2012, and 40% in 2013. 2012 federal and state tax forms He must add an inclusion amount to gross income for 2013, the first tax year his qualified business-use percentage is 50% or less. 2012 federal and state tax forms The computer has a 5-year recovery period under both GDS and ADS. 2012 federal and state tax forms 2013 is the third tax year of the lease, so the applicable percentage from Table A-19 is −19. 2012 federal and state tax forms 8%. 2012 federal and state tax forms The applicable percentage from Table A-20 is 22. 2012 federal and state tax forms 0%. 2012 federal and state tax forms Larry's deductible rent for the computer for 2013 is $800. 2012 federal and state tax forms Larry uses the Inclusion amount worksheet. 2012 federal and state tax forms to figure the amount he must include in income for 2013. 2012 federal and state tax forms His inclusion amount is $224, which is the sum of −$238 (Amount A) and $462 (Amount B). 2012 federal and state tax forms Inclusion Amount Worksheet for Leased Listed Property 1. 2012 federal and state tax forms Fair market value $3,000   2. 2012 federal and state tax forms Business/investment use for first year business use is 50% or less 40 % 3. 2012 federal and state tax forms Multiply line 1 by line 2. 2012 federal and state tax forms 1,200   4. 2012 federal and state tax forms Rate (%) from Table A-19 −19. 2012 federal and state tax forms 8 % 5. 2012 federal and state tax forms Multiply line 3 by line 4. 2012 federal and state tax forms This is Amount A. 2012 federal and state tax forms −238   6. 2012 federal and state tax forms Fair market value 3,000   7. 2012 federal and state tax forms Average business/investment use for years property leased before the first year business use is 50% or less 70 % 8. 2012 federal and state tax forms Multiply line 6 by line 7 2,100   9. 2012 federal and state tax forms Rate (%) from Table A-20 22. 2012 federal and state tax forms 0 % 10. 2012 federal and state tax forms Multiply line 8 by line 9. 2012 federal and state tax forms This is Amount B. 2012 federal and state tax forms 462   11. 2012 federal and state tax forms Add line 5 and line 10. 2012 federal and state tax forms This is your inclusion amount. 2012 federal and state tax forms Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. 2012 federal and state tax forms ) $224           Lease beginning in the last 9 months of your tax year. 2012 federal and state tax forms    The inclusion amount is subject to a special rule if all the following apply. 2012 federal and state tax forms The lease term begins within 9 months before the close of your tax year. 2012 federal and state tax forms You do not use the property predominantly (more than 50%) for qualified business use during that part of the tax year. 2012 federal and state tax forms The lease term continues into your next tax year. 2012 federal and state tax forms Under this special rule, add the inclusion amount to income in the next tax year. 2012 federal and state tax forms Figure the inclusion amount by taking into account the average of the business/investment use for both tax years (line 2 of the Inclusion Amount Worksheet for Leased Listed Property) and the applicable percentage for the tax year the lease term begins. 2012 federal and state tax forms Skip lines 6 through 9 of the worksheet and enter zero on line 10. 2012 federal and state tax forms Example 1. 2012 federal and state tax forms On August 1, 2012, Julie Rule, a calendar year taxpayer, leased and placed in service an item of listed property. 2012 federal and state tax forms The property is 5-year property with a fair market value of $10,000. 2012 federal and state tax forms Her property has a recovery period of 5 years under ADS. 2012 federal and state tax forms The lease is for 5 years. 2012 federal and state tax forms Her business use of the property was 50% in 2012 and 90% in 2013. 2012 federal and state tax forms She paid rent of $3,600 for 2012, of which $3,240 is deductible. 2012 federal and state tax forms She must include $147 in income in 2013. 2012 federal and state tax forms The $147 is the sum of Amount A and Amount B. 2012 federal and state tax forms Amount A is $147 ($10,000 × 70% × 2. 2012 federal and state tax forms 1%), the product of the fair market value, the average business use for 2012 and 2013, and the applicable percentage for year one from Table A-19 . 2012 federal and state tax forms Amount B is zero. 2012 federal and state tax forms Lease for less than one year. 2012 federal and state tax forms   A special rule for the inclusion amount applies if the lease term is less than one year and you do not use the property predominantly (more than 50%) for qualified business use. 2012 federal and state tax forms The amount included in income is the inclusion amount (figured as described in the preceding discussions) multiplied by a fraction. 2012 federal and state tax forms The numerator of the fraction is the number of days in the lease term and the denominator is 365 (or 366 for leap years). 2012 federal and state tax forms   The lease term for listed property other than residential rental or nonresidential real property includes options to renew. 2012 federal and state tax forms If you have two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property, treat them as one lease. 2012 federal and state tax forms Example 2. 2012 federal and state tax forms On October 1, 2012, John Joyce, a calendar year taxpayer, leased and placed in service an item of listed property that is 3-year property. 2012 federal and state tax forms This property had a fair market value of $15,000 and a recovery period of 5 years under ADS. 2012 federal and state tax forms The lease term was 6 months (ending on March 31, 2013), during which he used the property 45% in business. 2012 federal and state tax forms He must include $71 in income in 2013. 2012 federal and state tax forms The $71 is the sum of Amount A and Amount B. 2012 federal and state tax forms Amount A is $71 ($15,000 × 45% × 2. 2012 federal and state tax forms 1% × 183/365), the product of the fair market value, the average business use for both years, and the applicable percentage for year one from Table A-19 , prorated for the length of the lease. 2012 federal and state tax forms Amount B is zero. 2012 federal and state tax forms Where to report inclusion amount. 2012 federal and state tax forms   Report the inclusion amount figured as described in the preceding discussions as other income on the same form or schedule on which you took the deduction for your rental costs. 2012 federal and state tax forms For example, report the inclusion amount as other income on Schedule C (Form 1040) if you took the deduction on Schedule C. 2012 federal and state tax forms If you took the deduction for rental costs on Form 2106, report the inclusion amount as other income on Form 1040, line 21. 2012 federal and state tax forms Do the Passenger Automobile Limits Apply? The depreciation deduction, including the section 179 deduction and special depreciation allowance, you can claim for a passenger automobile (defined earlier) each year is limited. 2012 federal and state tax forms This section describes the maximum depreciation deduction amounts for 2013 and explains how to deduct, after the recovery period, the unrecovered basis of your property that results from applying the passenger automobile limit. 2012 federal and state tax forms Exception for leased cars. 2012 federal and state tax forms   The passenger automobile limits generally do not apply to passenger automobiles leased or held for leasing by anyone regularly engaged in the business of leasing passenger automobiles. 2012 federal and state tax forms For information on when you are considered regularly engaged in the business of leasing listed property, including passenger automobiles, see Exception for leased property , earlier, under What Is the Business-Use Requirement . 2012 federal and state tax forms Maximum Depreciation Deduction The passenger automobile limits are the maximum depreciation amounts you can deduct for a passenger automobile. 2012 federal and state tax forms They are based on the date you placed the automobile in service. 2012 federal and state tax forms Passenger Automobiles The maximum deduction amounts for most passenger automobiles are shown in the following table. 2012 federal and state tax forms Maximum Depreciation Deduction for Passenger Automobiles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,1601 $5,100 $3,050 $1,875 2012 11,1601 5,100 3,050 1,875 2011 11,0602 4,900 2,950 1,775 2010 11,0602  4,900 2,950 1,775 2009 10,9603 4,800 2,850 1,775 2008 10,9603  4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6104 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7105 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6606 4,900 2,950 1,775 1If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. 2012 federal and state tax forms 2If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,060. 2012 federal and state tax forms 3If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $2,960. 2012 federal and state tax forms 4If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $2,960. 2012 federal and state tax forms 5If you acquired the vehicle before 5/06/03, the maximum deduction is $7,660. 2012 federal and state tax forms If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. 2012 federal and state tax forms 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. 2012 federal and state tax forms If your business/investment use of the automobile is less than 100%, you must reduce the maximum deduction amount by multiplying the maximum amount by the percentage of business/investment use determined on an annual basis during the tax year. 2012 federal and state tax forms If you have a short tax year, you must reduce the maximum deduction amount by multiplying the maximum amount by a fraction. 2012 federal and state tax forms The numerator of the fraction is the number of months and partial months in the short tax year and the denominator is 12. 2012 federal and state tax forms Example. 2012 federal and state tax forms On April 15, 2013, Virginia Hart bought and placed in service a new car for $14,500. 2012 federal and state tax forms She used the car only in her business. 2012 federal and state tax forms She files her tax return based on the calendar year. 2012 federal and state tax forms She does not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. 2012 federal and state tax forms Under MACRS, a car is 5-year property. 2012 federal and state tax forms Since she placed her car in service on April 15 and used it only for business, she uses the percentages in Table A-1 to figure her MACRS depreciation on the car. 2012 federal and state tax forms Virginia multiplies the $14,500 unadjusted basis of her car by 0. 2012 federal and state tax forms 20 to get her MACRS depreciation of $2,900 for 2013. 2012 federal and state tax forms This $2,900 is below the maximum depreciation deduction of $3,160 for passenger automobiles placed in service in 2013. 2012 federal and state tax forms She can deduct the full $2,900. 2012 federal and state tax forms Electric Vehicles The maximum depreciation deductions for passenger automobiles that are produced to run primarily on electricity are higher than those for other automobiles. 2012 federal and state tax forms The maximum deduction amounts for electric vehicles placed in service after August 5, 1997, and before January 1, 2007, are shown in the following table. 2012 federal and state tax forms Owners of electric vehicles placed in service after December 31, 2006, should use the table of maximum deduction amounts later for electric vehicles classified as passenger automobiles or use the table of maximum deduction amounts for trucks and vans later, for electric vehicles classified as trucks and vans. 2012 federal and state tax forms Maximum Depreciation Deduction For Electric Vehicles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2006 $8,980 $14,400 $8,650 $5,225 2005 8,880 14,200 8,450 5,125 2004 31,8301 14,300 8,550 5,125 5/06/2003– 12/31/2003 32,0302 14,600 8,750 5,225 1/01/2003– 5/05/2003 22,8803 14,600 8,750 5,225 1If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $8,880. 2012 federal and state tax forms 2If you acquired the vehicle before 5/06/03, the maximum deduction is $22,880. 2012 federal and state tax forms If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. 2012 federal and state tax forms 3 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. 2012 federal and state tax forms Trucks and Vans The maximum depreciation deductions for trucks and vans placed in service after 2002 are higher than those for other passenger automobiles. 2012 federal and state tax forms The maximum deduction amounts for trucks and vans are shown in the following table. 2012 federal and state tax forms Maximum Depreciation Deduction For Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 11,3601 5,300 3,150 1,875 2011 11,2602 5,200 3,150 1,875 2010 11,1603 5,100 3,050 1,875 2009 11,0604 4,900 2,950 1,775 2008 11,1605 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2006 3,260 5,200 3,150 1,875 2005 3,260 5,200 3,150 1,875 2004 10,9106 5,300 3,150 1,875 5/06/2003– 12/31/2003 11,0107 5,400 3,250 1,975 1/01/2003– 5/05/2003 7,9608 5,400 3,250 1,975 1 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,360. 2012 federal and state tax forms 2 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,260. 2012 federal and state tax forms 3 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. 2012 federal and state tax forms 4 If you elect not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,060. 2012 federal and state tax forms 5If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,160. 2012 federal and state tax forms 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, or the maximum deduction is $3,260. 2012 federal and state tax forms 7 If you acquired the vehicle before 5/06/03, the maximum deduction is $7,960. 2012 federal and state tax forms If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. 2012 federal and state tax forms 8 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. 2012 federal and state tax forms Depreciation Worksheet for Passenger Automobiles You can use the following worksheet to figure your depreciation deduction using the percentage tables. 2012 federal and state tax forms Then use the information from this worksheet to prepare Form 4562. 2012 federal and state tax forms Depreciation Worksheet for Passenger Automobiles   Part I   1. 2012 federal and state tax forms MACRS system (GDS or ADS)     2. 2012 federal and state tax forms Property class     3. 2012 federal and state tax forms Date placed in service     4. 2012 federal and state tax forms Recovery period     5. 2012 federal and state tax forms Method and convention     6. 2012 federal and state tax forms Depreciation rate (from tables)     7. 2012 federal and state tax forms Maximum depreciation deduction for this year from the appropriate table       8. 2012 federal and state tax forms Business/investment-use percentage       9. 2012 federal and state tax forms Multiply line 7 by line 8. 2012 federal and state tax forms This is your adjusted maximum depreciation deduction       10. 2012 federal and state tax forms Section 179 deduction claimed this year (not more than line 9). 2012 federal and state tax forms Enter -0- if this is not the year you placed the car in service. 2012 federal and state tax forms         Note. 2012 federal and state tax forms  1) If line 10 is equal to line 9, stop here. 2012 federal and state tax forms Your combined section 179 and depreciation deduction (including your special depreciation allowance) is limited to the amount on line 9. 2012 federal and state tax forms  2) If line 10 is less than line 9, complete Part II. 2012 federal and state tax forms   Part II   11. 2012 federal and state tax forms Subtract line 10 from line 9. 2012 federal and state tax forms This is the limit on the amount you can deduct for depreciation (including any special depreciation allowance )       12. 2012 federal and state tax forms Cost or other basis (reduced by any alternative motor vehicle credit 1or credit for electric vehicles 2)       13. 2012 federal and state tax forms Multiply line 12 by line 8. 2012 federal and state tax forms This is your business/investment cost       14. 2012 federal and state tax forms Section 179 deduction claimed in the year you placed the car in service       15. 2012 federal and state tax forms Subtract line 14 from line 13. 2012 federal and state tax forms This is your tentative basis for depreciation       16. 2012 federal and state tax forms Multiply line 15 by . 2012 federal and state tax forms 50 if the 50% special depreciation allowance applies. 2012 federal and state tax forms This is your special depreciation allowance. 2012 federal and state tax forms Enter -0- if this is not the year you placed the car in service, the car is not qualified property, or you elected not to claim a special depreciation allowance       Note 1) If line 16 is equal to line 11, stop here. 2012 federal and state tax forms Your depreciation deduction (including your special depreciation allowance) is limited to the amount on line 11. 2012 federal and state tax forms  2) If line 16 is less than line 11, complete Part III. 2012 federal and state tax forms   Part III   17. 2012 federal and state tax forms Subtract line 16 from 11. 2012 federal and state tax forms This is the limit on the amount you can deduct for MACRS depreciation       18. 2012 federal and state tax forms Subtract line 16 from line 15. 2012 federal and state tax forms This is your basis for depreciation. 2012 federal and state tax forms       19. 2012 federal and state tax forms Multiply line 18 by line 6. 2012 federal and state tax forms This is your tentative MACRS depreciation deduction. 2012 federal and state tax forms       20. 2012 federal and state tax forms Enter the lesser of line 17 or line 19. 2012 federal and state tax forms This is your MACRS depreciation deduction. 2012 federal and state tax forms     1 When figuring the amount to enter on line 12, do not reduce your cost or other basis by any section 179 deduction you claimed for your car. 2012 federal and state tax forms 2 Reduce the basis by the lesser of $4,000 or 10% of the cost of the vehicle even if the credit is less than that amount. 2012 federal and state tax forms             Deductions After the Recovery Period If the depreciation deductions for your automobile are reduced under the passenger automobile limits, you will have unrecovered basis in your automobile at the end of the recovery period. 2012 federal and state tax forms If you continue to use the automobile for business, you can deduct that unrecovered basis after the recovery period ends. 2012 federal and state tax forms You can claim a depreciation deduction in each succeeding tax year until you recover your full basis in the car. 2012 federal and state tax forms The maximum amount you can deduct each year is determined by the date you placed the car in service and your business/investment-use percentage. 2012 federal and state tax forms See Maximum Depreciation Deduction , earlier. 2012 federal and state tax forms Unrecovered basis is the cost or other basis of the passenger automobile reduced by any clean-fuel vehicle deduction, electric vehicle credit, depreciation, and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use and the passenger automobile limits had not applied. 2012 federal and state tax forms You cannot claim a depreciation deduction for listed property other than passenger automobiles after the recovery period ends. 2012 federal and state tax forms There is no unrecovered basis at the end of the recovery period because you are considered to have used this property 100% for business and investment purposes during all of the recovery period. 2012 federal and state tax forms Example. 2012 federal and state tax forms In May 2007, you bought and placed in service a car costing $31,500. 2012 federal and state tax forms The car was 5-year property under GDS (MACRS). 2012 federal and state tax forms You did not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. 2012 federal and state tax forms You used the car exclusively for business during the recovery period (2007 through 2012). 2012 federal and state tax forms You figured your depreciation as shown below. 2012 federal and state tax forms Year Percentage Amount Limit   Allowed 2007 20. 2012 federal and state tax forms 0% $6,300 $2,960   $2,960 2008 32. 2012 federal and state tax forms 0 10,080 4,800   4,800 2009 19. 2012 federal and state tax forms 2 6,048 2,850   2,850 2010 11. 2012 federal and state tax forms 52 3,629 1,675   1,675 2011 11. 2012 federal and state tax forms 52 3,629 1,675   1,675 2012 5. 2012 federal and state tax forms 76 1,814 1,675   1,675 Total   $15,635 At the end of 2012, you had an unrecovered basis of $15,865 ($31,500 − $15,635). 2012 federal and state tax forms If in 2013 and later years you continue to use the car 100% for business, you can deduct each year the lesser of $1,675 or your remaining unrecovered basis. 2012 federal and state tax forms If your business use of the car had been less than 100% during any year, your depreciation deduction would have been less than the maximum amount allowable for that year. 2012 federal and state tax forms However, in figuring your unrecovered basis in the car, you would still reduce your basis by the maximum amount allowable as if the business use had been 100%. 2012 federal and state tax forms For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $9,519 ($15,865 × 60%), but you still would have to reduce your basis by $15,865 to determine your unrecovered basis. 2012 federal and state tax forms Deductions For Passenger Automobiles Acquired in a Trade-in If you acquire a passenger automobile in a trade-in, depreciate the carryover basis separately as if the trade-in did not occur. 2012 federal and state tax forms Depreciate the part of the new automobile's basis that exceeds its carryover basis (excess basis) as if it were newly placed in service property. 2012 federal and state tax forms This excess basis is the additional cash paid for the new automobile in the trade-in. 2012 federal and state tax forms The depreciation figured for the two components of the basis (carryover basis and excess basis) is subject to a single passenger automobile limit. 2012 federal and state tax forms Special rules apply in determining the passenger automobile limits. 2012 federal and state tax forms These rules and examples are discussed in section 1. 2012 federal and state tax forms 168(i)-6(d)(3) of the regulations. 2012 federal and state tax forms Instead of figuring depreciation for the carryover basis and the excess basis separately, you can elect to treat the old automobile as disposed of and both of the basis components for the new automobile as if placed in service at the time of the trade-in. 2012 federal and state tax forms For more information, including how to make this election, see Election out under Property Acquired in a Like-kind Exchange or Involuntary Conversion in chapter 4 and sections 1. 2012 federal and state tax forms 168(i)-6(i) and 1. 2012 federal and state tax forms 168(i)-6(j) of the regulations. 2012 federal and state tax forms What Records Must Be Kept? You cannot take any depreciation or section 179 deduction for the use of listed property unless you can prove your business/investment use with adequate records or with sufficient evidence to support your own statements. 2012 federal and state tax forms For listed property, you must keep records for as long as any recapture can still occur. 2012 federal and state tax forms Recapture can occur in any tax year of the recovery period. 2012 federal and state tax forms Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. 2012 federal and state tax forms You do not have to record information in an account book, diary, or similar record if the information is already shown on the receipt. 2012 federal and state tax forms However, your records should back up your receipts in an orderly manner. 2012 federal and state tax forms Elements of expenditure or use. 2012 federal and state tax forms   Your records or other documentary evidence must support all the following. 2012 federal and state tax forms The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses. 2012 federal and state tax forms The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year. 2012 federal and state tax forms The date of the expenditure or use. 2012 federal and state tax forms The business or investment purpose for the expenditure or use. 2012 federal and state tax forms   Written documents of your expenditure or use are generally better evidence than oral statements alone. 2012 federal and state tax forms You do not have to keep a daily log. 2012 federal and state tax forms However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time of the expenditure or use and backed up by other documents is preferable to a statement you prepare later. 2012 federal and state tax forms Timeliness. 2012 federal and state tax forms   You must record the elements of an expenditure or use at the time you have full knowledge of the elements. 2012 federal and state tax forms An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use generally is considered a timely record if, in the regular course of business: The statement is given by an employee to the employer, or The statement is given by an independent contractor to the client or customer. 2012 federal and state tax forms   For example, a log maintained on a weekly basis, that accounts for use during the week, will be considered a record made at or near the time of use. 2012 federal and state tax forms Business purpose supported. 2012 federal and state tax forms   Generally, an adequate record of business purpose must be in the form of a written statement. 2012 federal and state tax forms However, the amount of detail necessary to establish a business purpose depends on the facts and circumstances of each case. 2012 federal and state tax forms A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. 2012 federal and state tax forms For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. 2012 federal and state tax forms Business use supported. 2012 federal and state tax forms   An adequate record contains enough information on each element of every business or investment use. 2012 federal and state tax forms The amount of detail required to support the use depends on the facts and circumstances. 2012 federal and state tax forms For example, a taxpayer who uses a truck for both business and personal purposes and whose only business use of the truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. 2012 federal and state tax forms   Although you generally must prepare an adequate written record, you can prepare a record of the business use of listed property in a computer memory device that uses a logging program. 2012 federal and state tax forms Separate or combined expenditures or uses. 2012 federal and state tax forms   Each use by you normally is considered a separate use. 2012 federal and state tax forms However, you can combine repeated uses as a single item. 2012 federal and state tax forms   Record each expenditure as a separate item. 2012 federal and state tax forms Do not combine it with other expenditures. 2012 federal and state tax forms If you choose, however, you can combine amounts you spent for the use of listed property during a tax year, such as for gasoline or automobile repairs. 2012 federal and state tax forms If you combine these expenses, you do not need to support the business purpose of each expense. 2012 federal and state tax forms Instead, you can divide the expenses based on the total business use of the listed property. 2012 federal and state tax forms   You can account for uses that can be considered part of a single use, such as a round trip or uninterrupted business use, by a single record. 2012 federal and state tax forms For example, you can account for the use of a truck to make deliveries at several locations that begin and end at the business premises and can include a stop at the business in between deliveries by a single record of miles driven. 2012 federal and state tax forms You can account for the use of a passenger automobile by a salesperson for a business trip away from home over a period of time by a single record of miles traveled. 2012 federal and state tax forms Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. 2012 federal and state tax forms Confidential information. 2012 federal and state tax forms   If any of the information on the elements of an expenditure or use is confidential, you do not need to include it in the account book or similar record if you record it at or near the time of the expenditure or use. 2012 federal and state tax forms You must keep it elsewhere and make it available as support to the IRS director for your area on request. 2012 federal and state tax forms Substantial compliance. 2012 federal and state tax forms   If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the satisfaction of the IRS director for your area, you can establish this element by any evidence the IRS director for your area deems adequate. 2012 federal and state tax forms   If you fail to establish to the satisfaction of the IRS director for your area that you have substantially complied with the adequate records requirement for an element of an expenditure or use, you must establish the element as follows. 2012 federal and state tax forms By your own oral or written statement containing detailed information as to the element. 2012 federal and state tax forms By other evidence sufficient to establish the element. 2012 federal and state tax forms   If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct evidence, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. 2012 federal and state tax forms If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. 2012 federal and state tax forms Sampling. 2012 federal and state tax forms   You can maintain an adequate record for part of a tax year and use that record to support your business and investment use of listed property for the entire tax year if it can be shown by other evidence that the periods for which you maintain an adequate record are representative of the use throughout the year. 2012 federal and state tax forms Example 1. 2012 federal and state tax forms Denise Williams, a sole proprietor and calendar year taxpayer, operates an interior decorating business out of her home. 2012 federal and state tax forms She uses her automobile for local business visits to the homes or offices of clients, for meetings with suppliers and subcontractors, and to pick up and deliver items to clients. 2012 federal and state tax forms There is no other business use of the automobile, but she and family members also use it for personal purposes. 2012 federal and state tax forms She maintains adequate records for the first 3 months of the year showing that 75% of the automobile use was for business. 2012 federal and state tax forms Subcontractor invoices and paid bills show that her business continued at approximately the same rate for the rest of the year. 2012 federal and state tax forms If there is no change in circumstances, such as the purchase of a second car for exclusive use in her business, the determination that her combined business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. 2012 federal and state tax forms Example 2. 2012 federal and state tax forms Assume the same facts as in Example 1, except that Denise maintains adequate records during the first week of every month showing that 75% of her use of the automobile is for business. 2012 federal and state tax forms Her business invoices show that her business continued at the same rate during the later weeks of each month so that her weekly records are representative of the automobile's business use throughout the month. 2012 federal and state tax forms The determination that her business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. 2012 federal and state tax forms Example 3. 2012 federal and state tax forms Bill Baker, a sole proprietor and calendar year taxpayer, is a salesman in a large metropolitan area for a company that manufactures household products. 2012 federal and state tax forms For the first 3 weeks of each month, he occasionally uses his own automobile for business travel within the metropolitan area. 2012 federal and state tax forms During these weeks, his business use of the automobile does not follow a consistent pattern. 2012 federal and state tax forms During the fourth week of each month, he delivers all business orders taken during the previous month. 2012 federal and state tax forms The business use of his automobile, as supported by adequate records, is 70% of its total use during that fourth week. 2012 federal and state tax forms The determination based on the record maintained during the fourth week of the month that his business/investment use of the automobile for the tax year is 70% does not rest on sufficient supporting evidence because his use during that week is not representative of use during other periods. 2012 federal and state tax forms Loss of records. 2012 federal and state tax forms   When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. 2012 federal and state tax forms How Is Listed Property Information Reported? You must provide the information about your listed property requested in Part V of Form 4562, Section A, if you claim either of the following deductions. 2012 federal and state tax forms Any deduction for a vehicle. 2012 federal and state tax forms A depreciation deduction for any other listed property. 2012 federal and state tax forms If you claim any deduction for a vehicle, you also must provide the information requested in Section B. 2012 federal and state tax forms If you provide the vehicle for your employee's use, the employee must give you this information. 2012 federal and state tax forms If you provide any vehicle for use by an employee, you must first answer the questions in Section C to see if you meet an exception to completing Section B for that vehicle. 2012 federal and state tax forms Vehicles used by your employees. 2012 federal and state tax forms   You do not have to complete Section B, Part V, for vehicles used by your employees who are not more-than-5% owners or related persons if you meet at least one of the following requirements. 2012 federal and state tax forms You maintain a written policy statement that prohibits one of the following uses of the vehicles. 2012 federal and state tax forms All personal use including commuting. 2012 federal and state tax forms Personal use, other than commuting, by employees who are not officers, directors, or 1%-or-more owners. 2012 federal and state tax forms You treat all use of the vehicles by your employees as personal use. 2012 federal and state tax forms You provide more than five vehicles for use by your employees, and you keep in your records the information on their use given to you by the employees. 2012 federal and state tax forms For demonstrator automobiles provided to full-time salespersons, you maintain a written policy statement that limits the total mileage outside the salesperson's normal working hours and prohibits use of the automobile by anyone else, for vacation trips, or to store personal possessions. 2012 federal and state tax forms Exceptions. 2012 federal and state tax forms   If you file Form 2106, 2106-EZ, or Schedule C-EZ (Form 1040), and you are not required to file Form 4562, report information about listed property on that form and not on Form 4562. 2012 federal and state tax forms Also, if you file Schedule C (Form 1040) and are claiming the standard mileage rate or actual vehicle expenses (except depreciation) and you are not required to file Form 4562 for any other reason, report vehicle information in Part IV of Schedule C and not on Form 4562. 2012 federal and state tax forms Prev  Up  Next   Home   More Online Publications