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Do Students Have To File Taxes

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Do Students Have To File Taxes

Do students have to file taxes Index Symbols 401(k) Plan Elective Deferrals, Elective Deferrals (401(k) Plans) Safe harbor, Safe harbor 401(k) plan. Do students have to file taxes A Annual additions, Annual additions. Do students have to file taxes Annual benefits, Annual benefits. Do students have to file taxes Assistance (see Tax help) Automatic Enrollment, Automatic Enrollment B Business, definition, Business. Do students have to file taxes C Common-law employee, Common-law employee. Do students have to file taxes Compensation, Compensation. Do students have to file taxes Contribution Defined, Contribution. Do students have to file taxes Limits Qualified plans, Limits on Contributions and Benefits SEP-IRAs, Contribution Limits SIMPLE IRA plan, Contribution Limits D Deduction Defined, SIMPLE plans. Do students have to file taxes , Deduction. Do students have to file taxes Deduction worksheet for self-employed, Figuring your deduction. Do students have to file taxes Defined benefit plan Deduction limits, Defined benefit plans. Do students have to file taxes Limits on contributions, Defined benefit plan. Do students have to file taxes Defined contribution plan Automatic Enrollment, Automatic Enrollment Deduction limits, Defined contribution plans. Do students have to file taxes Eligible automatic contribution arrangement, Eligible automatic contribution arrangement. Do students have to file taxes Forfeitures, Forfeiture. Do students have to file taxes Limits on contributions, Defined contribution plan. Do students have to file taxes Money purchase pension plan, Money purchase pension plan. Do students have to file taxes Profit-sharing plan, Profit-sharing plan. Do students have to file taxes Qualified automatic contribution arrangement, Qualified automatic contribution arrangement. Do students have to file taxes Definitions you need to know, Definitions You Need To Know Disqualified person, Prohibited Transactions Distributions (withdrawals), Distributions (Withdrawals) E EACA, Eligible automatic contribution arrangement. Do students have to file taxes Earned income, Earned income. Do students have to file taxes Eligible automatic contribution arrangement, Eligible automatic contribution arrangement. Do students have to file taxes Employees Eligible, Eligible employee. Do students have to file taxes Excludable, Excludable employees. Do students have to file taxes Highly compensated, Highly compensated employee. Do students have to file taxes Leased, Leased employee. Do students have to file taxes Employer Defined, Employer. Do students have to file taxes Excess Deferrals, Treatment of Excess Deferrals Excise tax, Excise Tax on Reversion of Plan Assets Nondeductible (excess) contributions, Excise Tax for Nondeductible (Excess) Contributions Reduced benefit accrual, Notification of Significant Benefit Accrual Reduction SEP excess contributions, Excise tax. Do students have to file taxes Excludable employees, Excludable employees. Do students have to file taxes F Form 1040, Where To Deduct Contributions, Reporting the tax. Do students have to file taxes 1099-R, Reporting corrective distributions on Form 1099-R. Do students have to file taxes 5304–SIMPLE, How To Set Up a SIMPLE IRA Plan 5305–S, Setting up a SIMPLE IRA. Do students have to file taxes 5305–SA, Setting up a SIMPLE IRA. Do students have to file taxes 5305–SEP, Formal written agreement. Do students have to file taxes 5305–SIMPLE, How To Set Up a SIMPLE IRA Plan 5310, Form 5310. Do students have to file taxes 5329, Reporting the tax. Do students have to file taxes 5330, Reporting the tax. Do students have to file taxes , Tax on excess contributions of highly compensated employees. Do students have to file taxes , Excise Tax on Reversion of Plan Assets, Payment of the 15% tax. Do students have to file taxes 5500, Form 5500. Do students have to file taxes , Electronic filing of Forms 5500 and 5500-SF. Do students have to file taxes 5500-EZ, Form 5500-EZ. Do students have to file taxes Form W-2, Reporting on Form W-2. Do students have to file taxes Schedule K (Form 1065), Where To Deduct Contributions Free tax services, Free help with your return. Do students have to file taxes H Highly compensated employee, Highly compensated employee. Do students have to file taxes K Keogh plans (see Qualified plans) L Leased employee, Leased employee. Do students have to file taxes N Net earnings from self-employment, Net earnings from self-employment. Do students have to file taxes Notification requirements, Notification Requirement P Participant, definition, Participant. Do students have to file taxes Participation, Participation. Do students have to file taxes Partner, definition, Partner. Do students have to file taxes Publications (see Tax help) Q QACA, Qualified automatic contribution arrangement. Do students have to file taxes Qualified automatic contribution arrangement, Qualified automatic contribution arrangement. Do students have to file taxes Qualified Plan, definition, Qualified plan. Do students have to file taxes Qualified plans, Limits on Contributions and Benefits Assignment of benefits, Benefits must not be assigned or alienated. Do students have to file taxes Benefits starting date, Benefit payment must begin when required. Do students have to file taxes Contributions, Contributions, Employer Contributions, Limits on Contributions and Benefits, When Contributions Are Considered Made, Where To Deduct Contributions Deduction limits, Deduction Limits, Defined contribution plans. Do students have to file taxes , Defined benefit plans. Do students have to file taxes , Deduction Limit for Self-Employed Individuals, Carryover of Excess Contributions, Excise Tax for Nondeductible (Excess) Contributions Deduction Worksheet for Self-Employed, Table and Worksheets for the Self-Employed Deductions, Employer Deduction Deferrals, Treatment of contributions. Do students have to file taxes , Reporting on Form W-2. Do students have to file taxes Defined benefit plan, Defined Benefit Plan Defined contribution plan, Defined Contribution Plan Distributions, Distributions Minimum, Required Distributions Required beginning date, Required beginning date. Do students have to file taxes Rollover, Rollover. Do students have to file taxes Tax on excess benefits, Tax on Excess Benefits Tax on premature, Tax on Early Distributions Tax treatment, Tax Treatment of Distributions Elective Deferrals, Elective Deferrals (401(k) Plans) Limits, Limit on Elective Deferrals Employee nondeductible contributions, Employee Contributions Excess Deferrals, Treatment of Excess Deferrals Investing plan assets, Investing Plan Assets Kinds of plans, Kinds of Plans Leased employees, Leased employee. Do students have to file taxes Minimum requirements Coverage, Minimum coverage requirement must be met. Do students have to file taxes Funding, Minimum Funding Requirement Vesting, Minimum vesting standard must be met. Do students have to file taxes Prohibited transactions, Prohibited Transactions Qualification rules, Qualification Rules Rate Table for Self-Employed, Table and Worksheets for the Self-Employed Rate Worksheet for Self-Employed, Table and Worksheets for the Self-Employed Reporting requirements, Reporting Requirements Setting up, Setting Up a Qualified Plan Qualified Plans Survivor benefits, Survivor benefits. Do students have to file taxes Qualified Roth Contribution Program, Qualified Roth Contribution Program R Rate Table for Self-Employed, Rate table for self-employed. Do students have to file taxes Rate Worksheet for Self-Employed, Rate worksheet for self-employed. Do students have to file taxes Required distributions, Required Distributions Rollovers, Rollover. Do students have to file taxes S Safe harbor 401(k) plan, Safe harbor 401(k) plan. Do students have to file taxes Salary reduction arrangement, Deferral percentage. Do students have to file taxes , Limit on Elective Deferrals Salary Reduction Simplified Employee Pension(SARSEP), Salary Reduction Simplified Employee Pensions (SARSEPs) SARSEP ADP test, SARSEP ADP test. Do students have to file taxes Section 402(f) notice, Section 402(f) Notice. Do students have to file taxes Self-employed individual, Self-employed individual. Do students have to file taxes SEP plans Deduction Worksheet for Self-Employed, Table and Worksheets for the Self-Employed Rate Table for Self-Employed, Table and Worksheets for the Self-Employed Rate Worksheet for Self-Employed, Table and Worksheets for the Self-Employed Reporting and Disclosure, Reporting and Disclosure Requirements SEP-IRAs Contributions, Contributions for yourself. Do students have to file taxes Deductible contributions, Deducting Contributions, Excise tax. Do students have to file taxes Carryover of excess contributions, Carryover of Excess SEP Contributions Deduction limits, Deduction Limit for Contributions for Participants Limits for self-employed, Deduction Limit for Self-Employed Individuals When to deduct, When To Deduct Contributions Where to deduct, Where To Deduct Contributions Distributions (withdrawals), Distributions (Withdrawals) Eligible employee, Eligible employee. Do students have to file taxes Excludable employees, Excludable employees. Do students have to file taxes SIMPLE IRA plan Compensation, Compensation. Do students have to file taxes Contributions, Contribution Limits Deductions, Nonelective contributions. Do students have to file taxes Distributions(withdrawals), Distributions (Withdrawals) Employee election period, Election period. Do students have to file taxes Employer matching contributions, Employer matching contributions. Do students have to file taxes Excludable employees, Excludable employees. Do students have to file taxes Notification requirements, Notification Requirement When to deduct contributions, When To Deduct Contributions SIMPLE plans, Who Can Set Up a SIMPLE IRA Plan?, Reporting on Form W-2. Do students have to file taxes SIMPLE 401(k), SIMPLE 401(k) Plan SIMPLE IRA plan, SIMPLE IRA Plan Simplified employee pension (SEP), Salary Reduction Simplified Employee Pensions (SARSEPs) Salary reduction arrangement Compensation of self-employed individuals, Compensation of self-employed individuals. Do students have to file taxes Employee compensation, Employee compensation. Do students have to file taxes Who can have a SARSEP, Who can have a SARSEP? SEP-IRA contributions, How Much Can I Contribute? Setting up a SEP, Setting Up a SEP Sixty-day employee election period, Election period. Do students have to file taxes Sole proprietor, definition, Sole proprietor. Do students have to file taxes T Tax help, How To Get Tax Help U User fee, User fee. Do students have to file taxes W Worksheets Deduction Worksheet for Self-Employed, Table and Worksheets for the Self-Employed Rate Worksheet for Self-Employed, Table and Worksheets for the Self-Employed Prev  Up     Home   More Online Publications
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Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City  Street Address  Days/Hours of Service  Telephone* 
Bismarck 

4503 Coleman St.
Suite 101
Bismarck, ND  58503 

Monday-Friday - 8:30 a.m. - 4:30 p.m.
(Closed for lunch 11:00 a.m. - 12:00 noon)

 

**This office will be closed 4/17**

 

Services Provided

(701) 221-5834 
Fargo  657 Second Ave. N.
Fargo, ND 58102 

Monday-Friday - 8:30 a.m. - 4:30 p.m.

 

Services Provided

(701) 232-4710 
Grand Forks  102 N. Fourth St.
Grand Forks, ND 58203 

Monday-Friday - 8:30 a.m. - 4:30 p.m.
(Closed for lunch 11:00 a.m. - 12:00 noon)

 

**This office will be closed 3/31**

 

Services Provided

(701) 746-5283 
Minot  315 S. Main St.
Suite 316
Minot, ND 58701 

Monday-Friday - 8:30 a.m. - 4:30 p.m.
(Closed for lunch 11:00 a.m. - 12:00 noon)

 

Services Provided

(701) 839-7741 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

For information on where to file your tax return please see Where to File Addresses.

The Taxpayer Advocate Service: Call (701) 237-8342 in Fargo or 1-877-777-4778 elsewhere, or see Publication 1546, The Taxpayer Advocate Service of the IRS.

For further information, see Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
657 2nd Ave., North
Fargo, ND 58102

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The Do Students Have To File Taxes

Do students have to file taxes 1. Do students have to file taxes   Overview of Depreciation Table of Contents Introduction Useful Items - You may want to see: What Property Can Be Depreciated?Property You Own Property Used in Your Business or Income-Producing Activity Property Having a Determinable Useful Life Property Lasting More Than One Year What Property Cannot Be Depreciated?Land Excepted Property When Does Depreciation Begin and End?Placed in Service Idle Property Cost or Other Basis Fully Recovered Retired From Service What Method Can You Use To Depreciate Your Property?Property You Placed in Service Before 1987 Property Owned or Used in 1986 Intangible Property Corporate or Partnership Property Acquired in a Nontaxable Transfer Election To Exclude Property From MACRS What Is the Basis of Your Depreciable Property?Cost as Basis Other Basis Adjusted Basis How Do You Treat Repairs and Improvements? Do You Have To File Form 4562? How Do You Correct Depreciation Deductions?Filing an Amended Return Changing Your Accounting Method Introduction Depreciation is an annual income tax deduction that allows you to recover the cost or other basis of certain property over the time you use the property. Do students have to file taxes It is an allowance for the wear and tear, deterioration, or obsolescence of the property. Do students have to file taxes This chapter discusses the general rules for depreciating property and answers the following questions. Do students have to file taxes What property can be depreciated? What property cannot be depreciated? When does depreciation begin and end? What method can you use to depreciate your property? What is the basis of your depreciable property? How do you treat repairs and improvements? Do you have to file Form 4562? How do you correct depreciation deductions? Useful Items - You may want to see: Publication 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 538 Accounting Periods and Methods 551 Basis of Assets Form (and Instructions) Sch C (Form 1040) Profit or Loss From Business Sch C-EZ (Form 1040) Net Profit From Business 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization See chapter 6 for information about getting publications and forms. Do students have to file taxes What Property Can Be Depreciated? You can depreciate most types of tangible property (except land), such as buildings, machinery, vehicles, furniture, and equipment. Do students have to file taxes You also can depreciate certain intangible property, such as patents, copyrights, and computer software. Do students have to file taxes To be depreciable, the property must meet all the following requirements. Do students have to file taxes It must be property you own. Do students have to file taxes It must be used in your business or income-producing activity. Do students have to file taxes It must have a determinable useful life. Do students have to file taxes It must be expected to last more than one year. Do students have to file taxes The following discussions provide information about these requirements. Do students have to file taxes Property You Own To claim depreciation, you usually must be the owner of the property. Do students have to file taxes You are considered as owning property even if it is subject to a debt. Do students have to file taxes Example 1. Do students have to file taxes You made a down payment to purchase rental property and assumed the previous owner's mortgage. Do students have to file taxes You own the property and you can depreciate it. Do students have to file taxes Example 2. Do students have to file taxes You bought a new van that you will use only for your courier business. Do students have to file taxes You will be making payments on the van over the next 5 years. Do students have to file taxes You own the van and you can depreciate it. Do students have to file taxes Leased property. Do students have to file taxes   You can depreciate leased property only if you retain the incidents of ownership in the property (explained below). Do students have to file taxes This means you bear the burden of exhaustion of the capital investment in the property. Do students have to file taxes Therefore, if you lease property from someone to use in your trade or business or for the production of income, you generally cannot depreciate its cost because you do not retain the incidents of ownership. Do students have to file taxes You can, however, depreciate any capital improvements you make to the property. Do students have to file taxes See How Do You Treat Repairs and Improvements later in this chapter and Additions and Improvements under Which Recovery Period Applies in chapter 4. Do students have to file taxes   If you lease property to someone, you generally can depreciate its cost even if the lessee (the person leasing from you) has agreed to preserve, replace, renew, and maintain the property. Do students have to file taxes However, if the lease provides that the lessee is to maintain the property and return to you the same property or its equivalent in value at the expiration of the lease in as good condition and value as when leased, you cannot depreciate the cost of the property. Do students have to file taxes Incidents of ownership. Do students have to file taxes   Incidents of ownership in property include the following. Do students have to file taxes The legal title to the property. Do students have to file taxes The legal obligation to pay for the property. Do students have to file taxes The responsibility to pay maintenance and operating expenses. Do students have to file taxes The duty to pay any taxes on the property. Do students have to file taxes The risk of loss if the property is destroyed, condemned, or diminished in value through obsolescence or exhaustion. Do students have to file taxes Life tenant. Do students have to file taxes   Generally, if you hold business or investment property as a life tenant, you can depreciate it as if you were the absolute owner of the property. Do students have to file taxes However, see Certain term interests in property under Excepted Property, later. Do students have to file taxes Cooperative apartments. Do students have to file taxes   If you are a tenant-stockholder in a cooperative housing corporation and use your cooperative apartment in your business or for the production of income, you can depreciate your stock in the corporation, even though the corporation owns the apartment. Do students have to file taxes   Figure your depreciation deduction as follows. Do students have to file taxes Figure the depreciation for all the depreciable real property owned by the corporation in which you have a proprietary lease or right of tenancy. Do students have to file taxes If you bought your cooperative stock after its first offering, figure the depreciable basis of this property as follows. Do students have to file taxes Multiply your cost per share by the total number of outstanding shares, including any shares held by the corporation. Do students have to file taxes Add to the amount figured in (a) any mortgage debt on the property on the date you bought the stock. Do students have to file taxes Subtract from the amount figured in (b) any mortgage debt that is not for the depreciable real property, such as the part for the land. Do students have to file taxes Subtract from the amount figured in (1) any depreciation for space owned by the corporation that can be rented but cannot be lived in by tenant-stockholders. Do students have to file taxes Divide the number of your shares of stock by the total number of outstanding shares, including any shares held by the corporation. Do students have to file taxes Multiply the result of (2) by the percentage you figured in (3). Do students have to file taxes This is your depreciation on the stock. Do students have to file taxes   Your depreciation deduction for the year cannot be more than the part of your adjusted basis in the stock of the corporation that is allocable to your business or income-producing property. Do students have to file taxes You must also reduce your depreciation deduction if only a portion of the property is used in a business or for the production of income. Do students have to file taxes Example. Do students have to file taxes You figure your share of the cooperative housing corporation's depreciation to be $30,000. Do students have to file taxes Your adjusted basis in the stock of the corporation is $50,000. Do students have to file taxes You use one half of your apartment solely for business purposes. Do students have to file taxes Your depreciation deduction for the stock for the year cannot be more than $25,000 (½ of $50,000). Do students have to file taxes Change to business use. Do students have to file taxes   If you change your cooperative apartment to business use, figure your allowable depreciation as explained earlier. Do students have to file taxes The basis of all the depreciable real property owned by the cooperative housing corporation is the smaller of the following amounts. Do students have to file taxes The fair market value of the property on the date you change your apartment to business use. Do students have to file taxes This is considered to be the same as the corporation's adjusted basis minus straight line depreciation, unless this value is unrealistic. Do students have to file taxes The corporation's adjusted basis in the property on that date. Do students have to file taxes Do not subtract depreciation when figuring the corporation's adjusted basis. Do students have to file taxes   If you bought the stock after its first offering, the corporation's adjusted basis in the property is the amount figured in (1), above. Do students have to file taxes The fair market value of the property is considered to be the same as the corporation's adjusted basis figured in this way minus straight line depreciation, unless the value is unrealistic. Do students have to file taxes   For a discussion of fair market value and adjusted basis, see Publication 551. Do students have to file taxes Property Used in Your Business or Income-Producing Activity To claim depreciation on property, you must use it in your business or income-producing activity. Do students have to file taxes If you use property to produce income (investment use), the income must be taxable. Do students have to file taxes You cannot depreciate property that you use solely for personal activities. Do students have to file taxes Partial business or investment use. Do students have to file taxes   If you use property for business or investment purposes and for personal purposes, you can deduct depreciation based only on the business or investment use. Do students have to file taxes For example, you cannot deduct depreciation on a car used only for commuting, personal shopping trips, family vacations, driving children to and from school, or similar activities. Do students have to file taxes    You must keep records showing the business, investment, and personal use of your property. Do students have to file taxes For more information on the records you must keep for listed property, such as a car, see What Records Must Be Kept in chapter 5. Do students have to file taxes    Although you can combine business and investment use of property when figuring depreciation deductions, do not treat investment use as qualified business use when determining whether the business-use requirement for listed property is met. Do students have to file taxes For information about qualified business use of listed property, see What Is the Business-Use Requirement in chapter 5. Do students have to file taxes Office in the home. Do students have to file taxes   If you use part of your home as an office, you may be able to deduct depreciation on that part based on its business use. Do students have to file taxes For information about depreciating your home office, see Publication 587. Do students have to file taxes Inventory. Do students have to file taxes   You cannot depreciate inventory because it is not held for use in your business. Do students have to file taxes Inventory is any property you hold primarily for sale to customers in the ordinary course of your business. Do students have to file taxes   If you are a rent-to-own dealer, you may be able to treat certain property held in your business as depreciable property rather than as inventory. Do students have to file taxes See Rent-to-own dealer under Which Property Class Applies Under GDS in chapter 4. Do students have to file taxes   In some cases, it is not clear whether property is held for sale (inventory) or for use in your business. Do students have to file taxes If it is unclear, examine carefully all the facts in the operation of the particular business. Do students have to file taxes The following example shows how a careful examination of the facts in two similar situations results in different conclusions. Do students have to file taxes Example. Do students have to file taxes Maple Corporation is in the business of leasing cars. Do students have to file taxes At the end of their useful lives, when the cars are no longer profitable to lease, Maple sells them. Do students have to file taxes Maple does not have a showroom, used car lot, or individuals to sell the cars. Do students have to file taxes Instead, it sells them through wholesalers or by similar arrangements in which a dealer's profit is not intended or considered. Do students have to file taxes Maple can depreciate the leased cars because the cars are not held primarily for sale to customers in the ordinary course of business, but are leased. Do students have to file taxes If Maple buys cars at wholesale prices, leases them for a short time, and then sells them at retail prices or in sales in which a dealer's profit is intended, the cars are treated as inventory and are not depreciable property. Do students have to file taxes In this situation, the cars are held primarily for sale to customers in the ordinary course of business. Do students have to file taxes Containers. Do students have to file taxes   Generally, containers for the products you sell are part of inventory and you cannot depreciate them. Do students have to file taxes However, you can depreciate containers used to ship your products if they have a life longer than one year and meet the following requirements. Do students have to file taxes They qualify as property used in your business. Do students have to file taxes Title to the containers does not pass to the buyer. Do students have to file taxes   To determine if these requirements are met, consider the following questions. Do students have to file taxes Does your sales contract, sales invoice, or other type of order acknowledgment indicate whether you have retained title? Does your invoice treat the containers as separate items? Do any of your records state your basis in the containers? Property Having a Determinable Useful Life To be depreciable, your property must have a determinable useful life. Do students have to file taxes This means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Do students have to file taxes Property Lasting More Than One Year To be depreciable, property must have a useful life that extends substantially beyond the year you place it in service. Do students have to file taxes Example. Do students have to file taxes You maintain a library for use in your profession. Do students have to file taxes You can depreciate it. Do students have to file taxes However, if you buy technical books, journals, or information services for use in your business that have a useful life of one year or less, you cannot depreciate them. Do students have to file taxes Instead, you deduct their cost as a business expense. Do students have to file taxes What Property Cannot Be Depreciated? Certain property cannot be depreciated. Do students have to file taxes This includes land and certain excepted property. Do students have to file taxes Land You cannot depreciate the cost of land because land does not wear out, become obsolete, or get used up. Do students have to file taxes The cost of land generally includes the cost of clearing, grading, planting, and landscaping. Do students have to file taxes Although you cannot depreciate land, you can depreciate certain land preparation costs, such as landscaping costs, incurred in preparing land for business use. Do students have to file taxes These costs must be so closely associated with other depreciable property that you can determine a life for them along with the life of the associated property. Do students have to file taxes Example. Do students have to file taxes You constructed a new building for use in your business and paid for grading, clearing, seeding, and planting bushes and trees. Do students have to file taxes Some of the bushes and trees were planted right next to the building, while others were planted around the outer border of the lot. Do students have to file taxes If you replace the building, you would have to destroy the bushes and trees right next to it. Do students have to file taxes These bushes and trees are closely associated with the building, so they have a determinable useful life. Do students have to file taxes Therefore, you can depreciate them. Do students have to file taxes Add your other land preparation costs to the basis of your land because they have no determinable life and you cannot depreciate them. Do students have to file taxes Excepted Property Even if the requirements explained in the preceding discussions are met, you cannot depreciate the following property. Do students have to file taxes Property placed in service and disposed of in the same year. Do students have to file taxes Determining when property is placed in service is explained later. Do students have to file taxes Equipment used to build capital improvements. Do students have to file taxes You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. Do students have to file taxes See Uniform Capitalization Rules in Publication 551. Do students have to file taxes Section 197 intangibles. Do students have to file taxes You must amortize these costs. Do students have to file taxes Section 197 intangibles are discussed in detail in Chapter 8 of Publication 535. Do students have to file taxes Intangible property, such as certain computer software, that is not section 197 intangible property, can be depreciated if it meets certain requirements. Do students have to file taxes See Intangible Property , later. Do students have to file taxes Certain term interests. Do students have to file taxes Certain term interests in property. Do students have to file taxes   You cannot depreciate a term interest in property created or acquired after July 27, 1989, for any period during which the remainder interest is held, directly or indirectly, by a person related to you. Do students have to file taxes A term interest in property means a life interest in property, an interest in property for a term of years, or an income interest in a trust. Do students have to file taxes Related persons. Do students have to file taxes   For a description of related persons, see Related Persons, later. Do students have to file taxes 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. Do students have to file taxes Basis adjustments. Do students have to file taxes   If you would be allowed a depreciation deduction for a term interest in property except that the holder of the remainder interest is related to you, you generally must reduce your basis in the term interest by any depreciation or amortization not allowed. Do students have to file taxes   If you hold the remainder interest, you generally must increase your basis in that interest by the depreciation not allowed to the term interest holder. Do students have to file taxes However, do not increase your basis for depreciation not allowed for periods during which either of the following situations applies. Do students have to file taxes The term interest is held by an organization exempt from tax. Do students have to file taxes The term interest is held by a nonresident alien individual or foreign corporation, and the income from the term interest is not effectively connected with the conduct of a trade or business in the United States. Do students have to file taxes Exceptions. Do students have to file taxes   The above rules do not apply to the holder of a term interest in property acquired by gift, bequest, or inheritance. Do students have to file taxes They also do not apply to the holder of dividend rights that were separated from any stripped preferred stock if the rights were purchased after April 30, 1993, or to a person whose basis in the stock is determined by reference to the basis in the hands of the purchaser. Do students have to file taxes When Does Depreciation Begin and End? You begin to depreciate your property when you place it in service for use in your trade or business or for the production of income. Do students have to file taxes You stop depreciating property either when you have fully recovered your cost or other basis or when you retire it from service, whichever happens first. Do students have to file taxes Placed in Service You place property in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. Do students have to file taxes Even if you are not using the property, it is in service when it is ready and available for its specific use. Do students have to file taxes Example 1. Do students have to file taxes Donald Steep bought a machine for his business. Do students have to file taxes The machine was delivered last year. Do students have to file taxes However, it was not installed and operational until this year. Do students have to file taxes It is considered placed in service this year. Do students have to file taxes If the machine had been ready and available for use when it was delivered, it would be considered placed in service last year even if it was not actually used until this year. Do students have to file taxes Example 2. Do students have to file taxes On April 6, Sue Thorn bought a house to use as residential rental property. Do students have to file taxes She made several repairs and had it ready for rent on July 5. Do students have to file taxes At that time, she began to advertise it for rent in the local newspaper. Do students have to file taxes The house is considered placed in service in July when it was ready and available for rent. Do students have to file taxes She can begin to depreciate it in July. Do students have to file taxes Example 3. Do students have to file taxes James Elm is a building contractor who specializes in constructing office buildings. Do students have to file taxes He bought a truck last year that had to be modified to lift materials to second-story levels. Do students have to file taxes The installation of the lifting equipment was completed and James accepted delivery of the modified truck on January 10 of this year. Do students have to file taxes The truck was placed in service on January 10, the date it was ready and available to perform the function for which it was bought. Do students have to file taxes Conversion to business use. Do students have to file taxes   If you place property in service in a personal activity, you cannot claim depreciation. Do students have to file taxes However, if you change the property's use to use in a business or income-producing activity, then you can begin to depreciate it at the time of the change. Do students have to file taxes You place the property in service in the business or income-producing activity on the date of the change. Do students have to file taxes Example. Do students have to file taxes You bought a home and used it as your personal home several years before you converted it to rental property. Do students have to file taxes Although its specific use was personal and no depreciation was allowable, you placed the home in service when you began using it as your home. Do students have to file taxes You can begin to claim depreciation in the year you converted it to rental property because its use changed to an income-producing use at that time. Do students have to file taxes Idle Property Continue to claim a deduction for depreciation on property used in your business or for the production of income even if it is temporarily idle (not in use). Do students have to file taxes For example, if you stop using a machine because there is a temporary lack of a market for a product made with that machine, continue to deduct depreciation on the machine. Do students have to file taxes Cost or Other Basis Fully Recovered You stop depreciating property when you have fully recovered your cost or other basis. Do students have to file taxes You recover your basis when your section 179 and allowed or allowable depreciation deductions equal your cost or investment in the property. Do students have to file taxes See What Is the Basis of Your Depreciable Property , later. Do students have to file taxes Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. Do students have to file taxes You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. Do students have to file taxes You sell or exchange the property. Do students have to file taxes You convert the property to personal use. Do students have to file taxes You abandon the property. Do students have to file taxes You transfer the property to a supplies or scrap account. Do students have to file taxes The property is destroyed. Do students have to file taxes If you included the property in a general asset account, see How Do You Use General Asset Accounts in chapter 4 for the rules that apply when you dispose of that property. Do students have to file taxes What Method Can You Use To Depreciate Your Property? You must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate most property. Do students have to file taxes MACRS is discussed in chapter 4. Do students have to file taxes You cannot use MACRS to depreciate the following property. Do students have to file taxes Property you placed in service before 1987. Do students have to file taxes Certain property owned or used in 1986. Do students have to file taxes Intangible property. Do students have to file taxes Films, video tapes, and recordings. Do students have to file taxes Certain corporate or partnership property acquired in a nontaxable transfer. Do students have to file taxes Property you elected to exclude from MACRS. Do students have to file taxes The following discussions describe the property listed above and explain what depreciation method should be used. Do students have to file taxes Property You Placed in Service Before 1987 You cannot use MACRS for property you placed in service before 1987 (except property you placed in service after July 31, 1986, if MACRS was elected). Do students have to file taxes Property placed in service before 1987 must be depreciated under the methods discussed in Publication 534. Do students have to file taxes For a discussion of when property is placed in service, see When Does Depreciation Begin and End , earlier. Do students have to file taxes Use of real property changed. Do students have to file taxes   You generally must use MACRS to depreciate real property that you acquired for personal use before 1987 and changed to business or income-producing use after 1986. Do students have to file taxes Improvements made after 1986. Do students have to file taxes   You must treat an improvement made after 1986 to property you placed in service before 1987 as separate depreciable property. Do students have to file taxes Therefore, you can depreciate that improvement as separate property under MACRS if it is the type of property that otherwise qualifies for MACRS depreciation. Do students have to file taxes For more information about improvements, see How Do You Treat Repairs and Improvements , later and Additions and Improvements under Which Recovery Period Applies in chapter 4. Do students have to file taxes Property Owned or Used in 1986 You may not be able to use MACRS for property you acquired and placed in service after 1986 if any of the situations described below apply. Do students have to file taxes If you cannot use MACRS, the property must be depreciated under the methods discussed in Publication 534. Do students have to file taxes For the following discussions, do not treat property as owned before you placed it in service. Do students have to file taxes If you owned property in 1986 but did not place it in service until 1987, you do not treat it as owned in 1986. Do students have to file taxes Personal property. Do students have to file taxes   You cannot use MACRS for personal property (section 1245 property) in any of the following situations. Do students have to file taxes You or someone related to you owned or used the property in 1986. Do students have to file taxes You acquired the property from a person who owned it in 1986 and as part of the transaction the user of the property did not change. Do students have to file taxes You lease the property to a person (or someone related to this person) who owned or used the property in 1986. Do students have to file taxes You acquired the property in a transaction in which: The user of the property did not change, and The property was not MACRS property in the hands of the person from whom you acquired it because of (2) or (3) above. Do students have to file taxes Real property. Do students have to file taxes   You generally cannot use MACRS for real property (section 1250 property) in any of the following situations. Do students have to file taxes You or someone related to you owned the property in 1986. Do students have to file taxes You lease the property to a person who owned the property in 1986 (or someone related to that person). Do students have to file taxes You acquired the property in a like-kind exchange, involuntary conversion, or repossession of property you or someone related to you owned in 1986. Do students have to file taxes MACRS applies only to that part of your basis in the acquired property that represents cash paid or unlike property given up. Do students have to file taxes It does not apply to the carried-over part of the basis. Do students have to file taxes Exceptions. Do students have to file taxes   The rules above do not apply to the following. Do students have to file taxes Residential rental property or nonresidential real property. Do students have to file taxes Any property if, in the first tax year it is placed in service, the deduction under the Accelerated Cost Recovery System (ACRS) is more than the deduction under MACRS using the half-year convention. Do students have to file taxes For information on how to figure depreciation under ACRS, see Publication 534. Do students have to file taxes Property that was MACRS property in the hands of the person from whom you acquired it because of (2) above. Do students have to file taxes Related persons. Do students have to file taxes   For this purpose, the following are related persons. Do students have to file taxes An individual and a member of his or her family, including only a spouse, child, parent, brother, sister, half-brother, half-sister, ancestor, and lineal descendant. Do students have to file taxes A corporation and an individual who directly or indirectly owns more than 10% of the value of the outstanding stock of that corporation. Do students have to file taxes Two corporations that are members of the same controlled group. Do students have to file taxes A trust fiduciary and a corporation if more than 10% of the value of the outstanding stock is directly or indirectly owned by or for the trust or grantor of the trust. Do students have to file taxes The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. Do students have to file taxes The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. Do students have to file taxes A tax-exempt educational or charitable organization and any person (or, if that person is an individual, a member of that person's family) who directly or indirectly controls the organization. Do students have to file taxes Two S corporations, and an S corporation and a regular corporation, if the same persons own more than 10% of the value of the outstanding stock of each corporation. Do students have to file taxes A corporation and a partnership if the same persons own both of the following. Do students have to file taxes More than 10% of the value of the outstanding stock of the corporation. Do students have to file taxes More than 10% of the capital or profits interest in the partnership. Do students have to file taxes The executor and beneficiary of any estate. Do students have to file taxes A partnership and a person who directly or indirectly owns more than 10% of the capital or profits interest in the partnership. Do students have to file taxes Two partnerships, if the same persons directly or indirectly own more than 10% of the capital or profits interest in each. Do students have to file taxes The related person and a person who is engaged in trades or businesses under common control. Do students have to file taxes See section 52(a) and 52(b) of the Internal Revenue Code. Do students have to file taxes When to determine relationship. Do students have to file taxes   You must determine whether you are related to another person at the time you acquire the property. Do students have to file taxes   A partnership acquiring property from a terminating partnership must determine whether it is related to the terminating partnership immediately before the event causing the termination. Do students have to file taxes For this rule, a terminating partnership is one that sells or exchanges, within 12 months, 50% or more of its total interest in partnership capital or profits. Do students have to file taxes Constructive ownership of stock or partnership interest. Do students have to file taxes   To determine whether a person directly or indirectly owns any of the outstanding stock of a corporation or an interest in a partnership, apply the following rules. Do students have to file taxes Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Do students have to file taxes However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more of the value of the stock of the corporation. Do students have to file taxes An individual is considered to own the stock or partnership interest directly or indirectly owned by or for the individual's family. Do students have to file taxes An individual who owns, except by applying rule (2), any stock in a corporation is considered to own the stock directly or indirectly owned by or for the individual's partner. Do students have to file taxes For purposes of rules (1), (2), or (3), stock or a partnership interest considered to be owned by a person under rule (1) is treated as actually owned by that person. Do students have to file taxes However, stock or a partnership interest considered to be owned by an individual under rule (2) or (3) is not treated as owned by that individual for reapplying either rule (2) or (3) to make another person considered to be the owner of the same stock or partnership interest. Do students have to file taxes Intangible Property Generally, if you can depreciate intangible property, you usually use the straight line method of depreciation. Do students have to file taxes However, you can choose to depreciate certain intangible property under the income forecast method (discussed later). Do students have to file taxes You cannot depreciate intangible property that is a section 197 intangible or that otherwise does not meet all the requirements discussed earlier under What Property Can Be Depreciated. Do students have to file taxes Straight Line Method This method lets you deduct the same amount of depreciation each year over the useful life of the property. Do students have to file taxes To figure your deduction, first determine the adjusted basis, salvage value, and estimated useful life of your property. Do students have to file taxes Subtract the salvage value, if any, from the adjusted basis. Do students have to file taxes The balance is the total depreciation you can take over the useful life of the property. Do students have to file taxes Divide the balance by the number of years in the useful life. Do students have to file taxes This gives you your yearly depreciation deduction. Do students have to file taxes 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. Do students have to file taxes 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. Do students have to file taxes Example. Do students have to file taxes In April, Frank bought a patent for $5,100 that is not a section 197 intangible. Do students have to file taxes He depreciates the patent under the straight line method, using a 17-year useful life and no salvage value. Do students have to file taxes He divides the $5,100 basis by 17 years to get his $300 yearly depreciation deduction. Do students have to file taxes He only used the patent for 9 months during the first year, so he multiplies $300 by 9/12 to get his deduction of $225 for the first year. Do students have to file taxes Next year, Frank can deduct $300 for the full year. Do students have to file taxes Patents and copyrights. Do students have to file taxes   If you can depreciate the cost of a patent or copyright, use the straight line method over the useful life. Do students have to file taxes The useful life of a patent or copyright is the lesser of the life granted to it by the government or the remaining life when you acquire it. Do students have to file taxes However, if the patent or copyright becomes valueless before the end of its useful life, you can deduct in that year any of its remaining cost or other basis. Do students have to file taxes Computer software. Do students have to file taxes   Computer software is generally a section 197 intangible and cannot be depreciated if you acquired it in connection with the acquisition of assets constituting a business or a substantial part of a business. Do students have to file taxes   However, computer software is not a section 197 intangible and can be depreciated, even if acquired in connection with the acquisition of a business, if it meets all of the following tests. Do students have to file taxes It is readily available for purchase by the general public. Do students have to file taxes It is subject to a nonexclusive license. Do students have to file taxes It has not been substantially modified. Do students have to file taxes   If the software meets the tests above, it may also qualify for the section 179 deduction and the special depreciation allowance, discussed later. Do students have to file taxes If you can depreciate the cost of computer software, use the straight line method over a useful life of 36 months. Do students have to file taxes    Tax-exempt use property subject to a lease. Do students have to file taxes   The useful life of computer software leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership), cannot be less than 125% of the lease term. Do students have to file taxes Certain created intangibles. Do students have to file taxes   You can amortize certain intangibles created on or after December 31, 2003, over a 15-year period using the straight line method and no salvage value, even though they have a useful life that cannot be estimated with reasonable accuracy. Do students have to file taxes For example, amounts paid to acquire memberships or privileges of indefinite duration, such as a trade association membership, are eligible costs. Do students have to file taxes   The following are not eligible. Do students have to file taxes Any intangible asset acquired from another person. Do students have to file taxes Created financial interests. Do students have to file taxes Any intangible asset that has a useful life that can be estimated with reasonable accuracy. Do students have to file taxes Any intangible asset that has an amortization period or limited useful life that is specifically prescribed or prohibited by the Code, regulations, or other published IRS guidance. Do students have to file taxes Any amount paid to facilitate an acquisition of a trade or business, a change in the capital structure of a business entity, and certain other transactions. Do students have to file taxes   You must also increase the 15-year safe harbor amortization period to a 25-year period for certain intangibles related to benefits arising from the provision, production, or improvement of real property. Do students have to file taxes For this purpose, real property includes property that will remain attached to the real property for an indefinite period of time, such as roads, bridges, tunnels, pavements, and pollution control facilities. Do students have to file taxes Income Forecast Method You can choose to use the income forecast method instead of the straight line method to depreciate the following depreciable intangibles. Do students have to file taxes Motion picture films or video tapes. Do students have to file taxes Sound recordings. Do students have to file taxes Copyrights. Do students have to file taxes Books. Do students have to file taxes Patents. Do students have to file taxes Under the income forecast method, each year's depreciation deduction is equal to the cost of the property, multiplied by a fraction. Do students have to file taxes The numerator of the fraction is the current year's net income from the property, and the denominator is the total income anticipated from the property through the end of the 10th taxable year following the taxable year the property is placed in service. Do students have to file taxes For more information, see section 167(g) of the Internal Revenue Code. Do students have to file taxes Films, video tapes, and recordings. Do students have to file taxes   You cannot use MACRS for motion picture films, video tapes, and sound recordings. Do students have to file taxes For this purpose, sound recordings are discs, tapes, or other phonorecordings resulting from the fixation of a series of sounds. Do students have to file taxes You can depreciate this property using either the straight line method or the income forecast method. Do students have to file taxes Participations and residuals. Do students have to file taxes   You can include participations and residuals in the adjusted basis of the property for purposes of computing your depreciation deduction under the income forecast method. Do students have to file taxes The participations and residuals must relate to income to be derived from the property before the end of the 10th taxable year after the property is placed in service. Do students have to file taxes For this purpose, participations and residuals are defined as costs which by contract vary with the amount of income earned in connection with the property. Do students have to file taxes   Instead of including these amounts in the adjusted basis of the property, you can deduct the costs in the taxable year that they are paid. Do students have to file taxes Videocassettes. Do students have to file taxes   If you are in the business of renting videocassettes, you can depreciate only those videocassettes bought for rental. Do students have to file taxes If the videocassette has a useful life of one year or less, you can currently deduct the cost as a business expense. Do students have to file taxes Corporate or Partnership Property Acquired in a Nontaxable Transfer MACRS does not apply to property used before 1987 and transferred after 1986 to a corporation or partnership (except property the transferor placed in service after July 31, 1986, if MACRS was elected) to the extent its basis is carried over from the property's adjusted basis in the transferor's hands. Do students have to file taxes You must continue to use the same depreciation method as the transferor and figure depreciation as if the transfer had not occurred. Do students have to file taxes However, if MACRS would otherwise apply, you can use it to depreciate the part of the property's basis that exceeds the carried-over basis. Do students have to file taxes The nontaxable transfers covered by this rule include the following. Do students have to file taxes A distribution in complete liquidation of a subsidiary. Do students have to file taxes A transfer to a corporation controlled by the transferor. Do students have to file taxes An exchange of property solely for corporate stock or securities in a reorganization. Do students have to file taxes A contribution of property to a partnership in exchange for a partnership interest. Do students have to file taxes A partnership distribution of property to a partner. Do students have to file taxes Election To Exclude Property From MACRS If you can properly depreciate any property under a method not based on a term of years, such as the unit-of-production method, you can elect to exclude that property from MACRS. Do students have to file taxes You make the election by reporting your depreciation for the property on line 15 in Part II of Form 4562 and attaching a statement as described in the instructions for Form 4562. Do students have to file taxes You must make this election by the return due date (including extensions) for the tax year you place your property in service. Do students have to file taxes However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within six months of the due date of the return (excluding extensions). Do students have to file taxes Attach the election to the amended return and write “Filed pursuant to section 301. Do students have to file taxes 9100-2” on the election statement. Do students have to file taxes File the amended return at the same address you filed the original return. Do students have to file taxes Use of standard mileage rate. Do students have to file taxes   If you use the standard mileage rate to figure your tax deduction for your business automobile, you are treated as having made an election to exclude the automobile from MACRS. Do students have to file taxes See Publication 463 for a discussion of the standard mileage rate. Do students have to file taxes What Is the Basis of Your Depreciable Property? To figure your depreciation deduction, you must determine the basis of your property. Do students have to file taxes To determine basis, you need to know the cost or other basis of your property. Do students have to file taxes Cost as Basis The basis of property you buy is its cost plus amounts you paid for items such as sales tax (see Exception , below), freight charges, and installation and testing fees. Do students have to file taxes The cost includes the amount you pay in cash, debt obligations, other property, or services. Do students have to file taxes Exception. Do students have to file taxes   You can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040). Do students have to file taxes If you make that choice, you cannot include those sales taxes as part of your cost basis. Do students have to file taxes Assumed debt. Do students have to file taxes   If you buy property and assume (or buy subject to) an existing mortgage or other debt on the property, your basis includes the amount you pay for the property plus the amount of the assumed debt. Do students have to file taxes Example. Do students have to file taxes You make a $20,000 down payment on property and assume the seller's mortgage of $120,000. Do students have to file taxes Your total cost is $140,000, the cash you paid plus the mortgage you assumed. Do students have to file taxes Settlement costs. Do students have to file taxes   The basis of real property also includes certain fees and charges you pay in addition to the purchase price. Do students have to file taxes These generally are shown on your settlement statement and include the following. Do students have to file taxes Legal and recording fees. Do students have to file taxes Abstract fees. Do students have to file taxes Survey charges. Do students have to file taxes Owner's title insurance. Do students have to file taxes Amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Do students have to file taxes   For fees and charges you cannot include in the basis of property, see Real Property in Publication 551. Do students have to file taxes Property you construct or build. Do students have to file taxes   If you construct, build, or otherwise produce property for use in your business, you may have to use the uniform capitalization rules to determine the basis of your property. Do students have to file taxes For information about the uniform capitalization rules, see Publication 551 and the regulations under section 263A of the Internal Revenue Code. Do students have to file taxes Other Basis Other basis usually refers to basis that is determined by the way you received the property. Do students have to file taxes For example, your basis is other than cost if you acquired the property in exchange for other property, as payment for services you performed, as a gift, or as an inheritance. Do students have to file taxes If you acquired property in this or some other way, see Publication 551 to determine your basis. Do students have to file taxes Property changed from personal use. Do students have to file taxes   If you held property for personal use and later use it in your business or income-producing activity, your depreciable basis is the lesser of the following. Do students have to file taxes The fair market value (FMV) of the property on the date of the change in use. Do students have to file taxes Your original cost or other basis adjusted as follows. Do students have to file taxes Increased by the cost of any permanent improvements or additions and other costs that must be added to basis. Do students have to file taxes Decreased by any deductions you claimed for casualty and theft losses and other items that reduced your basis. Do students have to file taxes Example. Do students have to file taxes Several years ago, Nia paid $160,000 to have her home built on a lot that cost her $25,000. Do students have to file taxes Before changing the property to rental use last year, she paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house. Do students have to file taxes Land is not depreciable, so she includes only the cost of the house when figuring the basis for depreciation. Do students have to file taxes Nia's adjusted basis in the house when she changed its use was $178,000 ($160,000 + $20,000 − $2,000). Do students have to file taxes On the same date, her property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. Do students have to file taxes The basis for depreciation on the house is the FMV on the date of change ($165,000), because it is less than her adjusted basis ($178,000). Do students have to file taxes Property acquired in a nontaxable transaction. Do students have to file taxes   Generally, if you receive property in a nontaxable exchange, the basis of the property you receive is the same as the adjusted basis of the property you gave up. Do students have to file taxes Special rules apply in determining the basis and figuring the MACRS depreciation deduction and special depreciation allowance for property acquired in a like-kind exchange or involuntary conversion. Do students have to file taxes See Like-kind exchanges and involuntary conversions. Do students have to file taxes under How Much Can You Deduct? in chapter 3 and Figuring the Deduction for Property Acquired in a Nontaxable Exchange in chapter 4. Do students have to file taxes   There are also special rules for determining the basis of MACRS property involved in a like-kind exchange or involuntary conversion when the property is contained in a general asset account. Do students have to file taxes See How Do You Use General Asset Accounts in chapter 4. Do students have to file taxes Adjusted Basis To find your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service. Do students have to file taxes These events could include the following. Do students have to file taxes Installing utility lines. Do students have to file taxes Paying legal fees for perfecting the title. Do students have to file taxes Settling zoning issues. Do students have to file taxes Receiving rebates. Do students have to file taxes Incurring a casualty or theft loss. Do students have to file taxes For a discussion of adjustments to the basis of your property, see Adjusted Basis in Publication 551. Do students have to file taxes If you depreciate your property under MACRS, you also may have to reduce your basis by certain deductions and credits with respect to the property. Do students have to file taxes For more information, see What Is the Basis for Depreciation in chapter 4. Do students have to file taxes . Do students have to file taxes Basis adjustment for depreciation allowed or allowable. Do students have to file taxes   You must reduce the basis of property by the depreciation allowed or allowable, whichever is greater. Do students have to file taxes Depreciation allowed is depreciation you actually deducted (from which you received a tax benefit). Do students have to file taxes Depreciation allowable is depreciation you are entitled to deduct. Do students have to file taxes   If you do not claim depreciation you are entitled to deduct, you must still reduce the basis of the property by the full amount of depreciation allowable. Do students have to file taxes   If you deduct more depreciation than you should, you must reduce your basis by any amount deducted from which you received a tax benefit (the depreciation allowed). Do students have to file taxes How Do You Treat Repairs and Improvements? If you improve depreciable property, you must treat the improvement as separate depreciable property. Do students have to file taxes Improvement means an addition to or partial replacement of property that adds to its value, appreciably lengthens the time you can use it, or adapts it to a different use. Do students have to file taxes You generally deduct the cost of repairing business property in the same way as any other business expense. Do students have to file taxes However, if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it. Do students have to file taxes Example. Do students have to file taxes You repair a small section on one corner of the roof of a rental house. Do students have to file taxes You deduct the cost of the repair as a rental expense. Do students have to file taxes However, if you completely replace the roof, the new roof is an improvement because it increases the value and lengthens the life of the property. Do students have to file taxes You depreciate the cost of the new roof. Do students have to file taxes Improvements to rented property. Do students have to file taxes   You can depreciate permanent improvements you make to business property you rent from someone else. Do students have to file taxes Do You Have To File Form 4562? Use Form 4562 to figure your deduction for depreciation and amortization. Do students have to file taxes Attach Form 4562 to your tax return for the current tax year if you are claiming any of the following items. Do students have to file taxes A section 179 deduction for the current year or a section 179 carryover from a prior year. Do students have to file taxes See chapter 2 for information on the section 179 deduction. Do students have to file taxes Depreciation for property placed in service during the current year. Do students have to file taxes Depreciation on any vehicle or other listed property, regardless of when it was placed in service. Do students have to file taxes See chapter 5 for information on listed property. Do students have to file taxes A deduction for any vehicle if the deduction is reported on a form other than Schedule C (Form 1040) or Schedule C-EZ (Form 1040). Do students have to file taxes Amortization of costs if the current year is the first year of the amortization period. Do students have to file taxes Depreciation or amortization on any asset on a corporate income tax return (other than Form 1120S, U. Do students have to file taxes S. Do students have to file taxes Income Tax Return for an S Corporation) regardless of when it was placed in service. Do students have to file taxes You must submit a separate Form 4562 for each business or activity on your return for which a Form 4562 is required. Do students have to file taxes Table 1-1 presents an overview of the purpose of the various parts of Form 4562. Do students have to file taxes Employee. Do students have to file taxes   Do not use Form 4562 if you are an employee and you deduct job-related vehicle expenses using either actual expenses (including depreciation) or the standard mileage rate. Do students have to file taxes Instead, use either Form 2106 or Form 2106-EZ. Do students have to file taxes Use Form 2106-EZ if you are claiming the standard mileage rate and you are not reimbursed by your employer for any expenses. Do students have to file taxes How Do You Correct Depreciation Deductions? If you deducted an incorrect amount of depreciation in any year, you may be able to make a correction by filing an amended return for that year. Do students have to file taxes See Filing an Amended Return , next. Do students have to file taxes If you are not allowed to make the correction on an amended return, you may be able to change your accounting method to claim the correct amount of depreciation. Do students have to file taxes See Changing Your Accounting Method , later. Do students have to file taxes Filing an Amended Return You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. Do students have to file taxes You claimed the incorrect amount because of a mathematical error made in any year. Do students have to file taxes You claimed the incorrect amount because of a posting error made in any year. Do students have to file taxes You have not adopted a method of accounting for property placed in service by you in tax years ending after December 29, 2003. Do students have to file taxes You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. Do students have to file taxes Adoption of accounting method defined. Do students have to file taxes   Generally, you adopt a method of accounting for depreciation by using a permissible method of determining depreciation when you file your first tax return, or by using the same impermissible method of determining depreciation in two or more consecutively filed tax returns. Do students have to file taxes   For an exception to this 2-year rule, see Revenue Procedure 2011-14 on page 330 of the Internal Revenue Bulletin 2011-4, available at www. Do students have to file taxes irs. Do students have to file taxes gov/pub/irs-irbs/irb11-04. Do students have to file taxes pdf. Do students have to file taxes (Note. Do students have to file taxes Revenue Procedure 2011-14 is clarified and modified by Revenue Procedure 2012-20. Do students have to file taxes For more information, see Revenue Procedure 2012-20 on page 700 of the Internal Revenue Bulletin 2012-14, available at www. Do students have to file taxes irs. Do students have to file taxes gov/pub/irs-irbs/irb12-14. Do students have to file taxes pdf. Do students have to file taxes )   For a safe harbor method of accounting to treat rotable spare parts as depreciable assets and procedures to obtain automatic consent to change to the safe harbor method of accounting, see Revenue Procedure 2007-48 on page 110 of Internal Revenue Bulletin 2007-29, available at www. Do students have to file taxes irs. Do students have to file taxes gov/pub/irs-irbs/irb07-29. Do students have to file taxes pdf. Do students have to file taxes When to file. Do students have to file taxes   If an amended return is allowed, you must file it by the later of the following. Do students have to file taxes 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. Do students have to file taxes A return filed before an unextended due date is considered filed on that due date. Do students have to file taxes 2 years from the time you paid your tax for that year. Do students have to file taxes Changing Your Accounting Method Generally, you must get IRS approval to change your method of accounting. Do students have to file taxes You generally must file Form 3115, Application for Change in Accounting Method, to request a change in your method of accounting for depreciation. Do students have to file taxes The following are examples of a change in method of accounting for depreciation. Do students have to file taxes A change from an impermissible method of determining depreciation for depreciable property, if the impermissible method was used in two or more consecutively filed tax returns. Do students have to file taxes A change in the treatment of an asset from nondepreciable to depreciable or vice versa. Do students have to file taxes A change in the depreciation method, period of recovery, or convention of a depreciable asset. Do students have to file taxes A change from not claiming to claiming the special depreciation allowance if you did not make the election to not claim any special allowance. Do students have to file taxes A change from claiming a 50% special depreciation allowance to claiming a 30% special depreciation allowance for qualified property (including property that is included in a class of property for which you elected a 30% special allowance instead of a 50% special allowance). Do students have to file taxes Changes in depreciation that are not a change in method of accounting (and may only be made on an amended return) include the following. Do students have to file taxes An adjustment in the useful life of a depreciable asset for which depreciation is determined under section 167. Do students have to file taxes A change in use of an asset in the hands of the same taxpayer. Do students have to file taxes Making a late depreciation election or revoking a timely valid depreciation election (including the election not to deduct the special depreciation allowance). Do students have to file taxes If you elected not to claim any special allowance, a change from not claiming to claiming the special allowance is a revocation of the election and is not an accounting method change. Do students have to file taxes Generally, you must get IRS approval to make a late depreciation election or revoke a depreciation election. Do students have to file taxes You must submit a request for a letter ruling to make a late election or revoke an election. Do students have to file taxes Any change in the placed in service date of a depreciable asset. Do students have to file taxes See section 1. Do students have to file taxes 446-1(e)(2)(ii)(d) of the regulations for more information and examples. Do students have to file taxes IRS approval. Do students have to file taxes   In some instances, you may be able to get approval from the IRS to change your method of accounting for depreciation under the automatic change request procedures generally covered in Revenue Procedure 2011-14. Do students have to file taxes If you do not qualify to use the automatic procedures to get approval, you must use the advance consent request procedures generally covered in Revenue Procedure 97-27, 1997-1 C. Do students have to file taxes B. Do students have to file taxes 680. Do students have to file taxes Also see the Instructions for Form 3115 for more information on getting approval, including lists of scope limitations and automatic accounting method changes. Do students have to file taxes Additional guidance. Do students have to file taxes    For additional guidance and special procedures for changing your accounting method, automatic change procedures, amending your return, and filing Form 3115, see Revenue Procedure 2011-14 on page 330 of the Internal Revenue Bulletin 2011-4, available at www. Do students have to file taxes irs. Do students have to file taxes gov/pub/irs-irbs/irb11-04. Do students have to file taxes pdf. Do students have to file taxes (Note. Do students have to file taxes Revenue Procedure 2011-14 is clarified and modified by Revenue Procedure 2012-20. Do students have to file taxes For more information, see Revenue Procedure 2012-20 on page 700 of the Internal Revenue Bulletin 2012-14, available at www. Do students have to file taxes irs. Do students have to file taxes gov/pub/irs-irbs/irb12-14. Do students have to file taxes pdf. Do students have to file taxes )   For a safe harbor method of accounting to treat rotable spare parts as depreciable assets, see Revenue Procedure 2007-48 on page 110 of Internal Revenue Bulletin 2007-29, available at www. Do students have to file taxes irs. Do students have to file taxes gov/pub/irs-irbs/irb07-29. Do students have to file taxes pdf. Do students have to file taxes Table 1-1. Do students have to file taxes Purpose of Form 4562 This table describes the purpose of the various parts of Form 4562. Do students have to file taxes For more information, see Form 4562 and its instructions. Do students have to file taxes Part Purpose I • Electing the section 179 deduction • Figuring the maximum section 179 deduction for the current year • Figuring any section 179 deduction carryover to the next year II • Reporting the special depreciation allowance for property (other than listed property) placed in service during the tax year • Reporting depreciation deductions on property being depreciated under any method other than Modified Accelerated Cost Recovery System (MACRS) III • Reporting MACRS depreciation deductions for property placed in service before this year • Reporting MACRS depreciation deductions for property (other than listed property) placed in service during the current year IV • Summarizing other parts V • Reporting the special depreciation allowance for automobiles and other listed property • Reporting MACRS depreciation on automobiles and other listed property • Reporting the section 179 cost elected for automobiles and other listed property • Reporting information on the use of automobiles and other transportation vehicles VI • Reporting amortization deductions Section 481(a) adjustment. Do students have to file taxes   If you file Form 3115 and change from an impermissible method to a permissible method of accounting for depreciation, you can make a section 481(a) adjustment for any unclaimed or excess amount of allowable depreciation. Do students have to file taxes The adjustment is the difference between the total depreciation actually deducted for the property and the total amount allowable prior to the year of change. Do students have to file taxes If no depreciation was deducted, the adjustment is the total depreciation allowable prior to the year of change. Do students have to file taxes A negative section 481(a) adjustment results in a decrease in taxable income. Do students have to file taxes It is taken into account in the year of change and is reported on your business tax returns as “other expenses. Do students have to file taxes ” A positive section 481(a) adjustment results in an increase in taxable income. Do students have to file taxes It is generally taken into account over 4 tax years and is reported on your business tax returns as “other income. Do students have to file taxes ” However, you can elect to use a one-year adjustment period and report the adjustment in the year of change if the total adjustment is less than $25,000. Do students have to file taxes Make the election by completing the appropriate line on Form 3115. Do students have to file taxes   If you file a Form 3115 and change from one permissible method to another permissible method, the section 481(a) adjustment is zero. Do students have to file taxes Prev  Up  Next   Home   More Online Publications