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Can I Still File 2012 Tax Return

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Can I Still File 2012 Tax Return

Can i still file 2012 tax return 5. Can i still file 2012 tax return   Taxes Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: When To Deduct Taxes Real Estate TaxesSeparate elections. Can i still file 2012 tax return Making the election. Can i still file 2012 tax return Form 3115. Can i still file 2012 tax return Income TaxesAccrual of contested income taxes. Can i still file 2012 tax return Employment Taxes Other TaxesAdditional Medicare Tax. Can i still file 2012 tax return What's New Additional Medicare Tax. Can i still file 2012 tax return  Beginning in 2013, you must withhold a 0. Can i still file 2012 tax return 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Can i still file 2012 tax return Also, self-employed individuals may be required to pay Additional Medicare Tax on self-employment income. Can i still file 2012 tax return See Employment Taxes , and Self-employment tax , later. Can i still file 2012 tax return Introduction You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses. Can i still file 2012 tax return You cannot deduct federal income taxes, estate and gift taxes, or state inheritance, legacy, and succession taxes. Can i still file 2012 tax return Topics - This chapter discusses: When to deduct taxes Real estate taxes Income taxes Employment taxes Other taxes Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 334 Tax Guide for Small Business 510 Excise Taxes 538 Accounting Periods and Methods 551 Basis of Assets Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch SE (Form 1040) Self-Employment Tax 3115 Application for Change in Accounting Method 8959 Additional Medicare Tax See chapter 12 for information about getting publications and forms. Can i still file 2012 tax return When To Deduct Taxes Generally, you can only deduct taxes in the year you pay them. Can i still file 2012 tax return This applies whether you use the cash method or an accrual method of accounting. Can i still file 2012 tax return Under an accrual method, you can deduct a tax before you pay it if you meet the exception for recurring items discussed under Economic Performance in Publication 538. Can i still file 2012 tax return You can also elect to ratably accrue real estate taxes as discussed later under Real Estate Taxes . Can i still file 2012 tax return Limit on accrual of taxes. Can i still file 2012 tax return   A taxing jurisdiction can require the use of a date for accruing taxes that is earlier than the date it originally required. Can i still file 2012 tax return However, if you use an accrual method, and can deduct the tax before you pay it, use the original accrual date for the year of change and all future years to determine when you can deduct the tax. Can i still file 2012 tax return Example. Can i still file 2012 tax return Your state imposes a tax on personal property used in a trade or business conducted in the state. Can i still file 2012 tax return This tax is assessed and becomes a lien as of July 1 (accrual date). Can i still file 2012 tax return In 2013, the state changed the assessment and lien dates from July 1, 2014, to December 31, 2013, for property tax year 2014. Can i still file 2012 tax return Use the original accrual date (July 1, 2014) to determine when you can deduct the tax. Can i still file 2012 tax return You must also use the July 1 accrual date for all future years to determine when you can deduct the tax. Can i still file 2012 tax return Uniform capitalization rules. Can i still file 2012 tax return   Uniform capitalization rules apply to certain taxpayers who produce real property or tangible personal property for use in a trade or business or for sale to customers. Can i still file 2012 tax return They also apply to certain taxpayers who acquire property for resale. Can i still file 2012 tax return Under these rules, you either include certain costs in inventory or capitalize certain expenses related to the property, such as taxes. Can i still file 2012 tax return For more information, see chapter 1. Can i still file 2012 tax return Carrying charges. Can i still file 2012 tax return   Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. Can i still file 2012 tax return You can elect to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. Can i still file 2012 tax return For more information, see chapter 7. Can i still file 2012 tax return Refunds of taxes. Can i still file 2012 tax return   If you receive a refund for any taxes you deducted in an earlier year, include the refund in income to the extent the deduction reduced your federal income tax in the earlier year. Can i still file 2012 tax return For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1. Can i still file 2012 tax return    You must include in income any interest you receive on tax refunds. Can i still file 2012 tax return Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. Can i still file 2012 tax return The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. Can i still file 2012 tax return Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. Can i still file 2012 tax return See Taxes for local benefits , later. Can i still file 2012 tax return If you use an accrual method, you generally cannot accrue real estate taxes until you pay them to the government authority. Can i still file 2012 tax return However, you can elect to ratably accrue the taxes during the year. Can i still file 2012 tax return See Electing to ratably accrue , later. Can i still file 2012 tax return Taxes for local benefits. Can i still file 2012 tax return   Generally, you cannot deduct taxes charged for local benefits and improvements that tend to increase the value of your property. Can i still file 2012 tax return These include assessments for streets, sidewalks, water mains, sewer lines, and public parking facilities. Can i still file 2012 tax return You should increase the basis of your property by the amount of the assessment. Can i still file 2012 tax return   You can deduct taxes for these local benefits only if the taxes are for maintenance, repairs, or interest charges related to those benefits. Can i still file 2012 tax return If part of the tax is for maintenance, repairs, or interest, you must be able to show how much of the tax is for these expenses to claim a deduction for that part of the tax. Can i still file 2012 tax return Example. Can i still file 2012 tax return To improve downtown commercial business, Waterfront City converted a downtown business area street into an enclosed pedestrian mall. Can i still file 2012 tax return The city assessed the full cost of construction, financed with 10-year bonds, against the affected properties. Can i still file 2012 tax return The city is paying the principal and interest with the annual payments made by the property owners. Can i still file 2012 tax return The assessments for construction costs are not deductible as taxes or as business expenses, but are depreciable capital expenses. Can i still file 2012 tax return The part of the payments used to pay the interest charges on the bonds is deductible as taxes. Can i still file 2012 tax return Charges for services. Can i still file 2012 tax return   Water bills, sewerage, and other service charges assessed against your business property are not real estate taxes, but are deductible as business expenses. Can i still file 2012 tax return Purchase or sale of real estate. Can i still file 2012 tax return   If real estate is sold, the real estate taxes must be allocated between the buyer and the seller. Can i still file 2012 tax return   The buyer and seller must allocate the real estate taxes according to the number of days in the real property tax year (the period to which the tax imposed relates) that each owned the property. Can i still file 2012 tax return Treat the seller as paying the taxes up to but not including the date of sale. Can i still file 2012 tax return Treat the buyer as paying the taxes beginning with the date of sale. Can i still file 2012 tax return You can usually find this information on the settlement statement you received at closing. Can i still file 2012 tax return   If you (the seller) use an accrual method and have not elected to ratably accrue real estate taxes, you are considered to have accrued your part of the tax on the date you sell the property. Can i still file 2012 tax return Example. Can i still file 2012 tax return Alberto Verde, a calendar year accrual method taxpayer, owns real estate in Olmo County. Can i still file 2012 tax return He has not elected to ratably accrue property taxes. Can i still file 2012 tax return November 30 of each year is the assessment and lien date for the current real property tax year, which is the calendar year. Can i still file 2012 tax return He sold the property on June 30, 2013. Can i still file 2012 tax return Under his accounting method he would not be able to claim a deduction for the taxes because the sale occurred before November 30. Can i still file 2012 tax return He is treated as having accrued his part of the tax, 181/366  (January 1–June 29), on June 30, and he can deduct it for 2013. Can i still file 2012 tax return Electing to ratably accrue. Can i still file 2012 tax return   If you use an accrual method, you can elect to accrue real estate tax related to a definite period ratably over that period. Can i still file 2012 tax return Example. Can i still file 2012 tax return Juan Sanchez is a calendar year taxpayer who uses an accrual method. Can i still file 2012 tax return His real estate taxes for the real property tax year, July 1, 2013, to June 30, 2014, are $1,200. Can i still file 2012 tax return July 1 is the assessment and lien date. Can i still file 2012 tax return If Juan elects to ratably accrue the taxes, $600 will accrue in 2013 ($1,200 × 6/12, July 1–December 31) and the balance will accrue in 2014. Can i still file 2012 tax return Separate elections. Can i still file 2012 tax return   You can elect to ratably accrue the taxes for each separate trade or business and for nonbusiness activities if you account for them separately. Can i still file 2012 tax return Once you elect to ratably accrue real estate taxes, you must use that method unless you get permission from the IRS to change. Can i still file 2012 tax return See Form 3115 , later. Can i still file 2012 tax return Making the election. Can i still file 2012 tax return   If you elect to ratably accrue the taxes for the first year in which you incur real estate taxes, attach a statement to your income tax return for that year. Can i still file 2012 tax return The statement should show all the following items. Can i still file 2012 tax return The trades or businesses to which the election applies and the accounting method or methods used. Can i still file 2012 tax return The period to which the taxes relate. Can i still file 2012 tax return The computation of the real estate tax deduction for that first year. Can i still file 2012 tax return   Generally, you must file your return by the due date (including extensions). Can i still file 2012 tax return However, if you timely filed your return for the year without electing to ratably accrue, you can still make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). Can i still file 2012 tax return Attach the statement to the amended return and write “Filed pursuant to section 301. Can i still file 2012 tax return 9100-2” on the statement. Can i still file 2012 tax return File the amended return at the same address where you filed the original return. Can i still file 2012 tax return Form 3115. Can i still file 2012 tax return    If you elect to ratably accrue real estate taxes for a year after the first year in which you incur real estate taxes, or if you want to revoke your election to ratably accrue real estate taxes, file Form 3115. Can i still file 2012 tax return For more information, including applicable time frames for filing, see the Instructions for Form 3115. Can i still file 2012 tax return Note. Can i still file 2012 tax return If you are filing an application for a change in accounting method filed after January 9, 2011, for a year of change ending after April 29, 2010, see Revenue Procedure 2011-14, 2011-4 I. Can i still file 2012 tax return R. Can i still file 2012 tax return B. Can i still file 2012 tax return 330, as modified and clarified by Revenue Procedure 2012-19, 2012-14 I. Can i still file 2012 tax return R. Can i still file 2012 tax return B. Can i still file 2012 tax return 689, and Revenue Procedure 2012-20, 2012-14 I. Can i still file 2012 tax return R. Can i still file 2012 tax return B. Can i still file 2012 tax return 700, or any successor. Can i still file 2012 tax return Revenue Procedure 2011-14 is available at  www. Can i still file 2012 tax return irs. Can i still file 2012 tax return gov/irb/2011-04IRB/ar08. Can i still file 2012 tax return html. Can i still file 2012 tax return Income Taxes This section discusses federal, state, local, and foreign income taxes. Can i still file 2012 tax return Federal income taxes. Can i still file 2012 tax return   You cannot deduct federal income taxes. Can i still file 2012 tax return State and local income taxes. Can i still file 2012 tax return   A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses. Can i still file 2012 tax return An individual can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). Can i still file 2012 tax return   However, an individual can deduct a state tax on gross income (as distinguished from net income) directly attributable to a trade or business as a business expense. Can i still file 2012 tax return Accrual of contested income taxes. Can i still file 2012 tax return   If you use an accrual method, and you contest a state or local income tax liability, you must accrue and deduct any contested amount in the tax year in which the liability is finally determined. Can i still file 2012 tax return   If additional state or local income taxes for a prior year are assessed in a later year, you can deduct the taxes in the year in which they were originally imposed (the prior year) if the tax liability is not contested. Can i still file 2012 tax return You cannot deduct them in the year in which the liability is finally determined. Can i still file 2012 tax return    The filing of an income tax return is not considered a contest and, in the absence of an overt act of protest, you can deduct the tax in the prior year. Can i still file 2012 tax return Also, you can deduct any additional taxes in the prior year if you do not show some affirmative evidence of denial of the liability. Can i still file 2012 tax return   However, if you consistently deduct additional assessments in the year they are paid or finally determined (including those for which there was no contest), you must continue to do so. Can i still file 2012 tax return You cannot take a deduction in the earlier year unless you receive permission to change your method of accounting. Can i still file 2012 tax return For more information on accounting methods, see When Can I Deduct an Expense in chapter 1. Can i still file 2012 tax return Foreign income taxes. Can i still file 2012 tax return   Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. Can i still file 2012 tax return S. Can i still file 2012 tax return possession. Can i still file 2012 tax return However, an individual cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. Can i still file 2012 tax return S. Can i still file 2012 tax return tax under the foreign earned income exclusion or the foreign housing exclusion. Can i still file 2012 tax return For information on these exclusions, see Publication 54, Tax Guide for U. Can i still file 2012 tax return S. Can i still file 2012 tax return Citizens and Resident Aliens Abroad. Can i still file 2012 tax return For information on the foreign tax credit, see Publication 514, Foreign Tax Credit for Individuals. Can i still file 2012 tax return Employment Taxes If you have employees, you must withhold various taxes from your employees' pay. Can i still file 2012 tax return Most employers must withhold their employees' share of social security, Medicare taxes, and Additional Medicare Tax (if applicable) along with state and federal income taxes. Can i still file 2012 tax return You may also need to pay certain employment taxes from your own funds. Can i still file 2012 tax return These include your share of social security and Medicare taxes as an employer, along with unemployment taxes. Can i still file 2012 tax return Note. Can i still file 2012 tax return Additional Medicare Tax is only imposed on the employee. Can i still file 2012 tax return There is no employer share of Additional Medicare Tax. Can i still file 2012 tax return Your deduction for wages paid is not reduced by the social security and Medicare taxes, Additional Medicare Tax, and income taxes you withhold from your employees. Can i still file 2012 tax return You can deduct the employment taxes you must pay from your own funds as taxes. Can i still file 2012 tax return Example. Can i still file 2012 tax return You pay your employee $18,000 a year. Can i still file 2012 tax return However, after you withhold various taxes, your employee receives $14,500. Can i still file 2012 tax return You also pay an additional $1,500 in employment taxes. Can i still file 2012 tax return You should deduct the full $18,000 as wages. Can i still file 2012 tax return You can deduct the $1,500 you pay from your own funds as taxes. Can i still file 2012 tax return For more information on employment taxes, see Publication 15 (Circular E). Can i still file 2012 tax return Unemployment fund taxes. Can i still file 2012 tax return   As an employer, you may have to make payments to a state unemployment compensation fund or to a state disability benefit fund. Can i still file 2012 tax return Deduct these payments as taxes. Can i still file 2012 tax return Other Taxes The following are other taxes you can deduct if you incur them in the ordinary course of your trade or business. Can i still file 2012 tax return Excise taxes. Can i still file 2012 tax return   Generally, you can deduct as a business expense all excise taxes that are ordinary and necessary expenses of carrying on your trade or business. Can i still file 2012 tax return However, see Fuel taxes , later. Can i still file 2012 tax return   For more information on excise taxes, see Publication 510. Can i still file 2012 tax return Franchise taxes. Can i still file 2012 tax return   You can deduct corporate franchise taxes as a business expense. Can i still file 2012 tax return Fuel taxes. Can i still file 2012 tax return   Generally, taxes on gasoline, diesel fuel, and other motor fuels that you use in your business are included as part of the cost of the fuel. Can i still file 2012 tax return Do not deduct these taxes as a separate item. Can i still file 2012 tax return   You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. Can i still file 2012 tax return For more information, see Publication 510. Can i still file 2012 tax return Occupational taxes. Can i still file 2012 tax return   You can deduct as a business expense an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Can i still file 2012 tax return Personal property tax. Can i still file 2012 tax return   You can deduct any tax imposed by a state or local government on personal property used in your trade or business. Can i still file 2012 tax return Sales tax. Can i still file 2012 tax return   Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. Can i still file 2012 tax return If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. Can i still file 2012 tax return If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. Can i still file 2012 tax return If the property is depreciable, add the sales tax to the basis for depreciation. Can i still file 2012 tax return For more information on basis, see Publication 551. Can i still file 2012 tax return    Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. Can i still file 2012 tax return Also, do not include these taxes in gross receipts or sales. Can i still file 2012 tax return Self-employment tax. Can i still file 2012 tax return   You can deduct part of your self-employment tax as a business expense in figuring your adjusted gross income. Can i still file 2012 tax return This deduction only affects your income tax. Can i still file 2012 tax return It does not affect your net earnings from self-employment or your self-employment tax. Can i still file 2012 tax return   To deduct the tax, enter on Form 1040, line 27, the amount shown on the Deduction for one-half of self-employment tax line of Schedule SE (Form 1040). Can i still file 2012 tax return   For more information on self-employment tax, see Publication 334. Can i still file 2012 tax return Additional Medicare Tax. Can i still file 2012 tax return   Beginning in 2013, you may be required to pay Additional Medicare Tax on self-employment income. Can i still file 2012 tax return See Form 8959 and the Instructions for Form 8959 for more information on the Additional Medicare Tax. Can i still file 2012 tax return Prev  Up  Next   Home   More Online Publications
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Can i still file 2012 tax return Other Methods of Depreciation Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: How To Figure the DeductionBasis Useful Life Salvage Value Methods To UseStraight Line Method Declining Balance Method Income Forecast Method How To Change Methods DispositionsSale or exchange. Can i still file 2012 tax return Property not disposed of or abandoned. Can i still file 2012 tax return Special rule for normal retirements from item accounts. Can i still file 2012 tax return Abandoned property. Can i still file 2012 tax return Single item accounts. Can i still file 2012 tax return Multiple property account. Can i still file 2012 tax return Topics - This chapter discusses: How to figure the deduction Methods to use How to change methods Dispositions Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 551 Basis of Assets 583 Starting a Business and Keeping Records 946 How To Depreciate Property Form (and Instructions) 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization Schedule C (Form 1040) Profit or Loss From Business If your property is being depreciated under ACRS, you must continue to use rules for depreciation that applied when you placed the property in service. Can i still file 2012 tax return If your property qualified for MACRS, you must depreciate it under MACRS. Can i still file 2012 tax return See Publication 946. Can i still file 2012 tax return However, you cannot use MACRS for certain property because of special rules that exclude it from MACRS. Can i still file 2012 tax return Also, you can elect to exclude certain property from being depreciated under MACRS. Can i still file 2012 tax return Property that you cannot depreciate using MACRS includes: Intangible property, Property you can elect to exclude from MACRS that you properly depreciate under a method that is not based on a term of years, Certain public utility property, Any motion picture film or video tape, Any sound recording, and Certain real and personal property placed in service before 1987. Can i still file 2012 tax return Intangible property. Can i still file 2012 tax return   You cannot depreciate intangible property under ACRS or MACRS. Can i still file 2012 tax return You depreciate intangible property using any other reasonable method, usually, the straight line method. Can i still file 2012 tax return Note. Can i still file 2012 tax return The cost of certain intangible property that you acquire after August 10, 1993, must be amortized over a 15-year period. Can i still file 2012 tax return For more information, see chapter 12 of Publication 535. Can i still file 2012 tax return Public utility property. Can i still file 2012 tax return   The law excludes from MACRS any public utility property for which the taxpayer does not use a normalization method of accounting. Can i still file 2012 tax return This type of property is subject to depreciation under a special rule. Can i still file 2012 tax return Videocassettes. Can i still file 2012 tax return   If you are in the videocassette rental business, you can depreciate those videocassettes purchased for rental. Can i still file 2012 tax return You can depreciate the cost less salvage value of those videocassettes that have a useful life over one year using either: The straight line method, or The income forecast method. Can i still file 2012 tax return The straight line method, salvage value, and useful life are discussed later under Methods To Use. Can i still file 2012 tax return You can deduct in the year of purchase as a business expense the cost of any cassette that has a useful life of one year or less. Can i still file 2012 tax return How To Figure the Deduction Two other reasonable methods can be used to figure your deduction for property not covered under ACRS or MACRS. Can i still file 2012 tax return These methods are straight line and declining balance. Can i still file 2012 tax return To figure depreciation using these methods, you must generally determine three things about the property you intend to depreciate. Can i still file 2012 tax return They are: The basis, The useful life, and The estimated salvage value at the end of its useful life. Can i still file 2012 tax return The amount of the deduction in any year also depends on which method of depreciation you choose. Can i still file 2012 tax return Basis To deduct the proper amount of depreciation each year, first determine your basis in the property you intend to depreciate. Can i still file 2012 tax return The basis used for figuring depreciation is the same as the basis that would be used for figuring the gain on a sale. Can i still file 2012 tax return Your original basis is usually the purchase price. Can i still file 2012 tax return However, if you acquire property in some other way, such as inheriting it, getting it as a gift, or building it yourself, you have to figure your original basis in a different way. Can i still file 2012 tax return Adjusted basis. Can i still file 2012 tax return   Events will often change the basis of property. Can i still file 2012 tax return When this occurs, the changed basis is called the adjusted basis. Can i still file 2012 tax return Some events, such as improvements you make, increase basis. Can i still file 2012 tax return Events such as deducting casualty losses and depreciation decrease basis. Can i still file 2012 tax return If basis is adjusted, the depreciation deduction may also have to be changed, depending on the reason for the adjustment and the method of depreciation you are using. Can i still file 2012 tax return   Publication 551 explains how to figure basis for property acquired in different ways. Can i still file 2012 tax return It also discusses what items increase and decrease basis, how to figure adjusted basis, and how to allocate cost if you buy several pieces of property at one time. Can i still file 2012 tax return Useful Life The useful life of a piece of property is an estimate of how long you can expect to use it in your trade or business, or to produce income. Can i still file 2012 tax return It is the length of time over which you will make yearly depreciation deductions of your basis in the property. Can i still file 2012 tax return It is how long it will continue to be useful to you, not how long the property will last. Can i still file 2012 tax return Many things affect the useful life of property, such as: Frequency of use, Age when acquired, Your repair policy, and Environmental conditions. Can i still file 2012 tax return The useful life can also be affected by technological improvements, progress in the arts, reasonably foreseeable economic changes, shifting of business centers, prohibitory laws, and other causes. Can i still file 2012 tax return Consider all these factors before you arrive at a useful life for your property. Can i still file 2012 tax return The useful life of the same type of property varies from user to user. Can i still file 2012 tax return When you determine the useful life of your property, keep in mind your own experience with similar property. Can i still file 2012 tax return You can use the general experience of the industry you are in until you are able to determine a useful life of your property from your own experience. Can i still file 2012 tax return Change in useful life. Can i still file 2012 tax return   You base your estimate of useful life on certain facts. Can i still file 2012 tax return If these facts change significantly, you can adjust your estimate of the remaining useful life. Can i still file 2012 tax return However, you redetermine the estimated useful life only when the change is substantial and there is a clear reason for making the change. Can i still file 2012 tax return Salvage Value It is important for you to accurately determine the correct salvage value of the property you want to depreciate. Can i still file 2012 tax return You generally cannot depreciate property below a reasonable salvage value. Can i still file 2012 tax return Determining salvage value. Can i still file 2012 tax return   Salvage value is the estimated value of property at the end of its useful life. Can i still file 2012 tax return It is what you expect to get for the property if you sell it after you can no longer use it productively. Can i still file 2012 tax return You must estimate the salvage value of a piece of property when you first acquire it. Can i still file 2012 tax return   Salvage value is affected both by how you use the property and how long you use it. Can i still file 2012 tax return If it is your policy to dispose of property that is still in good operating condition, the salvage value can be relatively large. Can i still file 2012 tax return However, if your policy is to use property until it is no longer usable, its salvage value can be its junk value. Can i still file 2012 tax return Changing salvage value. Can i still file 2012 tax return   Once you determine the salvage value for property, you should not change it merely because prices have changed. Can i still file 2012 tax return However, if you redetermine the useful life of property, as discussed earlier under Change in useful life, you can also redetermine the salvage value. Can i still file 2012 tax return When you redetermine the salvage value, take into account the facts that exist at the time. Can i still file 2012 tax return Net salvage. Can i still file 2012 tax return   Net salvage is the salvage value of property minus what it costs to remove it when you dispose of it. Can i still file 2012 tax return You can choose either salvage value or net salvage when you figure depreciation. Can i still file 2012 tax return You must consistently use the one you choose and the treatment of the costs of removal must be consistent with the practice adopted. Can i still file 2012 tax return However, if the cost to remove the property is more than the estimated salvage value, then net salvage is zero. Can i still file 2012 tax return Your salvage value can never be less than zero. Can i still file 2012 tax return Ten percent rule. Can i still file 2012 tax return   If you acquire personal property that has a useful life of 3 years or more, you can use an amount for salvage value that is less than your actual estimate. Can i still file 2012 tax return You can subtract from your estimate of salvage value an amount equal to 10% of your basis in the property. Can i still file 2012 tax return If salvage value is less than 10% of basis, you can ignore salvage value when you figure depreciation. Can i still file 2012 tax return Methods To Use Two methods of depreciation are the straight line and declining balance methods. Can i still file 2012 tax return If ACRS or MACRS does not apply, you can use one of these methods. Can i still file 2012 tax return The straight line and declining balance methods discussed in this section are not figured in the same way as straight line or declining balance methods under MACRS. Can i still file 2012 tax return Straight Line Method Before 1981, you could use any reasonable method for every kind of depreciable property. Can i still file 2012 tax return One of these methods was the straight line method. Can i still file 2012 tax return This method was also used for intangible property. Can i still file 2012 tax return It lets you deduct the same amount of depreciation each year. Can i still file 2012 tax return To figure your deduction, determine the adjusted basis of your property, its salvage value, and its estimated useful life. Can i still file 2012 tax return Subtract the salvage value, if any, from the adjusted basis. Can i still file 2012 tax return The balance is the total amount of depreciation you can take over the useful life of the property. Can i still file 2012 tax return Divide the balance by the number of years remaining in the useful life. Can i still file 2012 tax return This gives you the amount of your yearly depreciation deduction. Can i still file 2012 tax return Unless there is a big change in adjusted basis, or useful life, this amount will stay the same throughout the time you depreciate the property. Can i still file 2012 tax return If, in the first year, you use the property for less than a full year, you must prorate your depreciation deduction for the number of months in use. Can i still file 2012 tax return Example. Can i still file 2012 tax return In April 1994, Frank bought a franchise for $5,600. Can i still file 2012 tax return It expires in 10 years. Can i still file 2012 tax return This property is intangible property that cannot be depreciated under MACRS. Can i still file 2012 tax return Frank depreciates the franchise under the straight line method, using a 10-year useful life and no salvage value. Can i still file 2012 tax return He takes the $5,600 basis and divides that amount by 10 years ($5,600 ÷ 10 = $560, a full year's use). Can i still file 2012 tax return He must prorate the $560 for his 9 months of use in 1994. Can i still file 2012 tax return This gives him a deduction of $420 ($560 ÷ 9/12). Can i still file 2012 tax return In 1995, Frank can deduct $560 for the full year. Can i still file 2012 tax return Declining Balance Method The declining balance method allows you to recover a larger amount of the cost of the property in the early years of your use of the property. Can i still file 2012 tax return The rate cannot be more than twice the straight line rate. Can i still file 2012 tax return Rate of depreciation. Can i still file 2012 tax return   Under this method, you must determine your declining balance rate of depreciation. Can i still file 2012 tax return The initial step is to: Divide the number 1 by the useful life of your property to get a straight line rate. Can i still file 2012 tax return (For example, if property has a useful life of 5 years, its normal straight line rate of depreciation is ⅕, or 20%. Can i still file 2012 tax return ) Multiply this straight line rate by a number that is more than 1 but not more than 2 to determine the declining balance rate. Can i still file 2012 tax return Unless there is a change in the useful life during the time you depreciate the property, the rate of depreciation generally will not change. Can i still file 2012 tax return Depreciation deductions. Can i still file 2012 tax return   After you determine the rate of depreciation, multiply the adjusted basis of the property by it. Can i still file 2012 tax return This gives you the amount of your deduction. Can i still file 2012 tax return For example, if your adjusted basis at the beginning of the first year is $10,000, and your declining balance rate is 20%, your depreciation deduction for the first year is $2,000 ($10,000 ÷ 20%). Can i still file 2012 tax return To figure your depreciation deduction in the second year, you must first adjust the basis for the amount of depreciation you deducted in the first year. Can i still file 2012 tax return Subtract the previous year's depreciation from your basis ($10,000 - $2,000 = $8,000). Can i still file 2012 tax return Multiply this amount by the rate of depreciation ($8,000 ÷ 20% = $1,600). Can i still file 2012 tax return Your depreciation deduction for the second year is $1,600. Can i still file 2012 tax return   As you can see from this example, your adjusted basis in the property gets smaller each year. Can i still file 2012 tax return Also, under this method, deductions are larger in the earlier years and smaller in the later years. Can i still file 2012 tax return You can make a change to the straight line method without consent. Can i still file 2012 tax return Salvage value. Can i still file 2012 tax return   Do not subtract salvage value when you figure your yearly depreciation deductions under the declining balance method. Can i still file 2012 tax return However, you cannot depreciate the property below its reasonable salvage value. Can i still file 2012 tax return Determine salvage value using the rules discussed earlier, including the special 10% rule. Can i still file 2012 tax return Example. Can i still file 2012 tax return If your adjusted basis has been decreased to $1,000 and the rate of depreciation is 20%, your depreciation deduction should be $200. Can i still file 2012 tax return But if your estimate of salvage value was $900, you can only deduct $100. Can i still file 2012 tax return This is because $100 is the amount that would lower your adjusted basis to equal salvage value. Can i still file 2012 tax return Income Forecast Method The income forecast method requires income projections for each videocassette or group of videocassettes. Can i still file 2012 tax return You can group the videocassettes by title for making this projection. Can i still file 2012 tax return You determine the depreciation by applying a fraction to the cost less salvage value of the cassette. Can i still file 2012 tax return The numerator is the income from the videocassette for the tax year and the denominator is the total projected income for the cassette. Can i still file 2012 tax return For more information on the income forecast method, see Revenue Ruling 60-358 in Cumulative Bulletin 1960, Volume 2, on page 68. Can i still file 2012 tax return How To Change Methods In some cases, you may change your method of depreciation for property depreciated under a reasonable method. Can i still file 2012 tax return If you change your method of depreciation, it is generally a change in your method of accounting. Can i still file 2012 tax return You must get IRS consent before making the change. Can i still file 2012 tax return However, you do not need permission for certain changes in your method of depreciation. Can i still file 2012 tax return The rules discussed in this section do not apply to property depreciated under ACRS or MACRS. Can i still file 2012 tax return For information on ACRS elections,see Revocation of election, in chapter 1 under Alternate ACRS Method. Can i still file 2012 tax return Change to the straight line method. Can i still file 2012 tax return   You can change from the declining balance method to the straight line method at any time during the useful life of your property without IRS consent. Can i still file 2012 tax return However, if you have a written agreement with the IRS that prohibits a change, you must first get IRS permission. Can i still file 2012 tax return When the change is made, figure depreciation based on your adjusted basis in the property at that time. Can i still file 2012 tax return Your adjusted basis takes into account all previous depreciation deductions. Can i still file 2012 tax return Use the estimated remaining useful life of your property at the time of change and its estimated salvage value. Can i still file 2012 tax return   You can change from the declining balance method to straight line only on the original tax return for the year you first use the straight line method. Can i still file 2012 tax return You cannot make the change on an amended return filed after the due date of the original return (including extensions). Can i still file 2012 tax return   When you make the change, attach a statement to your tax return showing: When you acquired the property, Its original cost or other original basis, The total amount claimed for depreciation and other allowances since you acquired it, Its salvage value and remaining useful life, and A description of the property and its use. Can i still file 2012 tax return   After you change to straight line, you cannot change back to the declining balance method or to any other method for a period of 10 years without written permission from the IRS. Can i still file 2012 tax return Changes that require permission. Can i still file 2012 tax return   For most other changes in method of depreciation, you must get permission from the IRS. Can i still file 2012 tax return To request a change in method of depreciation, file Form 3115. Can i still file 2012 tax return File the application within the first 180 days of the tax year the change is to become effective. Can i still file 2012 tax return In most cases, there is a user fee that must accompany Form 3115. Can i still file 2012 tax return See the instructions for Form 3115 to determine if a fee is required. Can i still file 2012 tax return Changes granted automatically. Can i still file 2012 tax return   The IRS automatically approves certain changes of a method of depreciation. Can i still file 2012 tax return But, you must file Form 3115 for these automatic changes. Can i still file 2012 tax return   However, IRS can deny permission if Form 3115 is not filed on time. Can i still file 2012 tax return For more information on automatic changes, see Revenue Procedure 74-11, 1974-1 C. Can i still file 2012 tax return B. Can i still file 2012 tax return 420. Can i still file 2012 tax return Changes for which approval is not automatic. Can i still file 2012 tax return   The automatic change procedures do not apply to: Property or an account where you made a change in depreciation within the last 10 tax years (unless the change was made under the Class Life System), Class Life Asset Depreciation Range System, and Public utility property. Can i still file 2012 tax return   You must request and receive permission for these changes. Can i still file 2012 tax return To make the request, file Form 3115 during the first 180 days of the tax year for which you want the change to be effective. Can i still file 2012 tax return Change from an improper method. Can i still file 2012 tax return   If the IRS disallows the method you are using, you do not need permission to change to a proper method. Can i still file 2012 tax return You can adopt the straight line method, or any other method that would have been permitted if you had used it from the beginning. Can i still file 2012 tax return If you file your tax return using an improper method, but later file an amended return, you can use a proper method on the amended return without getting IRS permission. Can i still file 2012 tax return However, you must file the amended return before the filing date for the next tax year. Can i still file 2012 tax return Dispositions Retirement is the permanent withdrawal of depreciable property from use in your trade or business or for the production of income. Can i still file 2012 tax return You can do this by selling, exchanging, or abandoning the item of property. Can i still file 2012 tax return You can also withdraw it from use without disposing of it. Can i still file 2012 tax return For example, you could place it in a supplies or scrap account. Can i still file 2012 tax return Retirements can be either normal or abnormal depending on all facts and circumstances. Can i still file 2012 tax return The rules discussed next do not apply to MACRS and ACRS property. Can i still file 2012 tax return Normal retirement. Can i still file 2012 tax return   A normal retirement is a permanent withdrawal of depreciable property from use if the following apply: The retirement is made within the useful life you estimated originally, and The property has reached a condition at which you customarily retire or would retire similar property from use. Can i still file 2012 tax return A retirement is generally considered normal unless you can show that you retired the property because of a reason you did not consider when you originally estimated the useful life of the property. Can i still file 2012 tax return Abnormal retirement. Can i still file 2012 tax return   A retirement can be abnormal if you withdraw the property early or under other circumstances. Can i still file 2012 tax return For example, if the property is damaged by a fire or suddenly becomes obsolete and is now useless. Can i still file 2012 tax return Gain or loss on retirement. Can i still file 2012 tax return   There are special rules for figuring the gain or loss on retirement of property. Can i still file 2012 tax return The gain or loss will depend on several factors. Can i still file 2012 tax return These include the type of withdrawal, if the withdrawal was from a single property or multiple property account, and if the retirement was normal or abnormal. Can i still file 2012 tax return A single property account contains only one item of property. Can i still file 2012 tax return A multiple property account is one in which several items have been combined with a single rate of depreciation assigned to the entire account. Can i still file 2012 tax return Sale or exchange. Can i still file 2012 tax return   If property is retired by sale or exchange, you figure gain or loss by the usual rules that apply to sales or other dispositions of property. Can i still file 2012 tax return See Publication 544. Can i still file 2012 tax return Property not disposed of or abandoned. Can i still file 2012 tax return   If property is retired permanently, but not disposed of or physically abandoned, you do not recognize gain. Can i still file 2012 tax return You are allowed a loss in such a case, but only if the retirement is: An abnormal retirement, A normal retirement from a single property account in which you determined the life of each item of property separately, or A normal retirement from a multiple property account in which the depreciation rate is based on the maximum expected life of the longest lived item of property and the loss occurs before the expiration of the full useful life. Can i still file 2012 tax return However, you are not allowed a loss if the depreciation rate is based on the average useful life of the items of property in the account. Can i still file 2012 tax return   To figure your loss, subtract the estimated salvage or fair market value of the property at the date of retirement, whichever is more, from its adjusted basis. Can i still file 2012 tax return Special rule for normal retirements from item accounts. Can i still file 2012 tax return   You can generally deduct losses upon retirement of a few depreciable items of property with similar useful lives, if: You account for each one in a separate account, and You use the average useful life to figure depreciation. Can i still file 2012 tax return However, you cannot deduct losses if you use the average useful life to figure depreciation and they have a wide range of useful lives. Can i still file 2012 tax return   If you have a large number of depreciable property items and use average useful lives to figure depreciation, you cannot deduct the losses upon normal retirements from these accounts. Can i still file 2012 tax return Abandoned property. Can i still file 2012 tax return   If you physically abandon property, you can deduct as a loss the adjusted basis of the property at the time of its abandonment. Can i still file 2012 tax return However, your intent must be to discard the property so that you will not use it again or retrieve it for sale, exchange, or other disposition. Can i still file 2012 tax return Basis of property retired. Can i still file 2012 tax return   The basis for figuring gain or loss on the retirement of property is its adjusted basis at the time of retirement, as determined in the following discussions. Can i still file 2012 tax return Single item accounts. Can i still file 2012 tax return   If an item of property is accounted for in a single item account, the adjusted basis is the basis you would use to figure gain or loss for a sale or exchange of the property. Can i still file 2012 tax return This is generally the cost or other basis of the item of property less depreciation. Can i still file 2012 tax return See Publication 551. Can i still file 2012 tax return Multiple property account. Can i still file 2012 tax return   For a normal retirement from a multiple property account, if you figured depreciation using the average expected useful life, the adjusted basis is the salvage value estimated for the item of property when it was originally acquired. Can i still file 2012 tax return If you figured depreciation using the maximum expected useful life of the longest lived item of property in the account, you must use the depreciation method used for the multiple property account and a rate based on the maximum expected useful life of the item of property retired. Can i still file 2012 tax return   You make the adjustment for depreciation for an abnormal retirement from a multiple property account at the rate that would be proper if the item of property was depreciated in a single property account. Can i still file 2012 tax return The method of depreciation used for the multiple property account is used. Can i still file 2012 tax return You base the rate on either the average expected useful life or the maximum expected useful life of the retired item of property, depending on the method used to determine the depreciation rate for the multiple property account. 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