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E File 1040x Free

E file 1040x free Depreciation Table of Contents Introduction Special Depreciation AllowanceQualified Property Election Not To Claim the Allowance Rules for Returns Filed Before June 1, 2002 Passenger Automobiles New York Liberty Zone BenefitsSpecial Liberty Zone Depreciation Allowance Increased Section 179 Deduction Liberty Zone Leasehold Improvement Property If you depreciate business property that you acquired and placed in service after September 10, 2001, new law contains provisions that may affect your depreciation deduction for that property. E file 1040x free Publication 946, How To Depreciate Property, contains information on depreciation. E file 1040x free However, Publication 946 does not contain the new provisions because it was printed before the law was enacted. E file 1040x free The new provisions are in the Supplement to Publication 946, which is reprinted below. E file 1040x free Supplement to Publication 946 How To Depreciate Property   Introduction After Publication 946 was printed, the Job Creation and Worker Assistance Act of 2002 was signed into law by the President. E file 1040x free The new law made several changes in the tax rules explained in the publication. E file 1040x free Some of the changes apply to property placed in service during 2001. E file 1040x free This supplemental publication describes those changes and explains what you should do if you are affected by them. E file 1040x free The situations and examples in Publication 946 do not reflect any of the changes made by the Job Creation and Worker Assistance Act of 2002. E file 1040x free The new law contains the following provisions. E file 1040x free 30% depreciation deductions (special depreciation allowance and special New York Liberty Zone (Liberty Zone) depreciation allowance) for the year qualified property is placed in service after September 10, 2001. E file 1040x free An increased dollar limit on the section 179 deduction for qualified Liberty Zone property purchased after September 10, 2001. E file 1040x free A shorter recovery period for qualified Liberty Zone leasehold improvement property placed in service after September 10, 2001. E file 1040x free An increase in the maximum depreciation deduction for 2001 for a qualified passenger automobile placed in service after September 10, 2001. E file 1040x free If you believe you qualify for an increased deduction under any of these new rules, you must file the revised 2001 Form 4562 (dated March 2002) for 2001 calendar or fiscal years and 2000 fiscal years ending after September 10, 2001. E file 1040x free If you have already filed a tax return, this supplemental publication explains how to claim these benefits and how to elect not to claim the special depreciation allowance or special Liberty Zone depreciation allowance. E file 1040x free See Table 2 at the end of the supplement for an overview of the rules that apply if you filed your return before June 1, 2002. E file 1040x free Special Depreciation Allowance You can take a special depreciation allowance for qualified property you place in service after September 10, 2001. E file 1040x free The allowance is an additional deduction of 30% of the property's depreciable basis. E file 1040x free To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. E file 1040x free See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. E file 1040x free The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. E file 1040x free There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. E file 1040x free In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. E file 1040x free Example 1. E file 1040x free On November 1, 2001, you bought and placed in service in your business qualified property that cost $100,000. E file 1040x free You did not elect to claim a section 179 deduction. E file 1040x free You can deduct 30% of the cost ($30,000) as a special depreciation allowance for 2001. E file 1040x free You use the remaining $70,000 of cost to figure your regular depreciation deduction for 2001 and later years. E file 1040x free Example 2. E file 1040x free The facts are the same as in Example 1, except that you choose to deduct $24,000 of the property's cost as a section 179 deduction. E file 1040x free You use the remaining $76,000 of cost to figure your special depreciation allowance of $22,800 ($76,000 × 30%). E file 1040x free You use the remaining $53,200 of cost to figure your regular depreciation deduction for 2001 and later years. E file 1040x free Qualified Property To qualify for the special depreciation allowance, your property must meet the following requirements. E file 1040x free It is new property of one of the following types. E file 1040x free Property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. E file 1040x free See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. E file 1040x free Water utility property. E file 1040x free See 25-year property on page 22 in Publication 946. E file 1040x free Computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. E file 1040x free (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. E file 1040x free ) Qualified leasehold improvement property (defined later). E file 1040x free It meets the following tests (explained later under Tests To Be Met). E file 1040x free Acquisition date test. E file 1040x free Placed in service date test. E file 1040x free Original use test. E file 1040x free It is not excepted property (explained later under Excepted Property). E file 1040x free Qualified leasehold improvement property. E file 1040x free    Generally, this is any improvement to an interior part of a building that is nonresidential real property, provided all of the following requirements are met. E file 1040x free The improvement is made under or pursuant to a lease by the lessee (or any sublessee) or the lessor of that part of the building. E file 1040x free That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part. E file 1040x free The improvement is placed in service more than 3 years after the date the building was first placed in service. E file 1040x free   However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following. E file 1040x free The enlargement of the building. E file 1040x free Any elevator or escalator. E file 1040x free Any structural component benefiting a common area. E file 1040x free The internal structural framework of the building. E file 1040x free   Generally, a binding commitment to enter into a lease is treated as a lease and the parties to the commitment are treated as the lessor and lessee. E file 1040x free However, a binding commitment between related persons is not treated as a lease. E file 1040x free Related persons. E file 1040x free   For this purpose, the following are related persons. E file 1040x free Members of an affiliated group. E file 1040x free The persons listed in items (1) through (9) under Related persons on page 8 of Publication 946 (except that “80% or more” should be substituted for “more than 10%” each place it appears). E file 1040x free An executor and a beneficiary of the same estate. E file 1040x free Tests To Be Met To qualify for the special depreciation allowance, the property must meet all of the following tests. E file 1040x free Acquisition date test. E file 1040x free    Generally, you must have acquired the property either: After September 10, 2001, and before September 11, 2004, but only if no written binding contract for the acquisition was in effect before September 11, 2001, or Pursuant to a written binding contract entered into after September 10, 2001, and before September 11, 2004. E file 1040x free   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001, and before September 11, 2004. E file 1040x free Placed in service date test. E file 1040x free   Generally, the property must be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. E file 1040x free   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. E file 1040x free Original use test. E file 1040x free   The original use of the property must have begun with you after September 10, 2001. E file 1040x free “Original use” means the first use to which the property is put, whether or not by you. E file 1040x free Additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test. E file 1040x free Excepted Property The following property does not qualify for the special depreciation allowance. E file 1040x free Property used by any person before September 11, 2001. E file 1040x free Property required to be depreciated using ADS. E file 1040x free This includes listed property used 50% or less in a qualified business use. E file 1040x free Qualified New York Liberty Zone leasehold improvement property (defined next). E file 1040x free Qualified New York Liberty Zone leasehold improvement property. E file 1040x free   This is any qualified leasehold improvement property (as defined earlier) if all of the following requirements are met. E file 1040x free The improvement is to a building located in the New York Liberty Zone (defined later under New York Liberty Zone Benefits). E file 1040x free The improvement is placed in service after September 10, 2001, and before January 1, 2007. E file 1040x free No written binding contract for the improvement was in effect before September 11, 2001. E file 1040x free Election Not To Claim the Allowance You can elect not to claim the special depreciation allowance for qualified property. E file 1040x free If you make this election for any property, it applies to all property in the same property class placed in service during the year. E file 1040x free To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. E file 1040x free When to make election. E file 1040x free   Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. E file 1040x free   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 6 months of the due date of the original return (not including extensions). E file 1040x free Attach the election statement to the amended return. E file 1040x free At the top of the election statement, write “Filed pursuant to section 301. E file 1040x free 9100–2. E file 1040x free ” Revoking an election. E file 1040x free   Once you elect not to deduct the special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. E file 1040x free A request to revoke the election is subject to a user fee. E file 1040x free Rules for Returns Filed Before June 1, 2002 The following rules apply if you placed qualified property in service after September 10, 2001, and filed your return before June 1, 2002. E file 1040x free The rules apply to returns for the following years. E file 1040x free 2000 fiscal years that end after September 10, 2001. E file 1040x free 2001 calendar and fiscal years. E file 1040x free Claiming the allowance. E file 1040x free   If you did not claim the allowance on your return and did not make the election not to claim the allowance, you can do either of the following to claim the allowance. E file 1040x free File an amended return by the due date (not including extensions) of your return for the year following the year the property was placed in service. E file 1040x free Write “Filed Pursuant to Rev. E file 1040x free Proc. E file 1040x free 2002–33” at the top of the amended return. E file 1040x free File Form 3115, Application for Change in Accounting Method, with your return for the year following the year the property was placed in service. E file 1040x free Your return must be filed by the due date (including extensions). E file 1040x free Write “Automatic Change Filed Under Rev. E file 1040x free Proc. E file 1040x free 2002–33” on the appropriate line of Form 3115. E file 1040x free You must also file a copy (with signature) of the completed Form 3115 with the IRS National Office no later than when you file the original with your return. E file 1040x free For more information about filing Form 3115, including the address to send it to, see Revenue Procedure 2002–9, Revenue Procedure 2002–19, and Revenue Procedure 2002–33. E file 1040x free Example 1. E file 1040x free You are an individual and you use the calendar year. E file 1040x free You placed qualified property in service for your business in December 2001. E file 1040x free You filed your 2001 income tax return before April 15, 2002. E file 1040x free You did not claim the special depreciation allowance for the property and did not make the election not to claim the allowance. E file 1040x free You can claim the special allowance by filing an amended 2001 return by April 15, 2003, with “Filed Pursuant to Rev. E file 1040x free Proc. E file 1040x free 2002–33” at the top of the amended return. E file 1040x free You must file an amended return by April 15, 2003, even if you get an extension of time to file your 2002 tax return. E file 1040x free Example 2. E file 1040x free The facts concerning your 2001 return are the same as in Example 1. E file 1040x free In addition, you got an automatic 4-month extension of time (to August 15, 2003) to file your 2002 return. E file 1040x free You can claim the special allowance by filing a Form 3115 (with “Filed Pursuant to Rev. E file 1040x free Proc. E file 1040x free 2002–33” on the appropriate line) with your 2002 return by August 15, 2003. E file 1040x free You must also file a copy of this Form 3115 with the IRS National Office no later than when you file your 2002 return. E file 1040x free Electing not to claim the allowance. E file 1040x free   Generally, you have elected not to claim the special depreciation allowance for a class of property if you: Filed your return timely (including extensions) for the year you placed qualified property in service and indicated on a statement with the return that you are not claiming the allowance, or Filed your return timely and filed an amended return within 6 months of the due date of the original return (not including extensions) and indicated on a statement with the amended return that you are not claiming the allowance. E file 1040x free The statement must indicate that you are not deducting the special depreciation allowance and the class of property to which the election applies. E file 1040x free The statement can be either attached to or written on the return. E file 1040x free You can, for example, write “not deducting 30%” on Form 4562. E file 1040x free Deemed election. E file 1040x free   If you have not followed either of the procedures described above to elect not to claim the allowance, you may still be treated as making the election. E file 1040x free You will be treated as making the election if you meet both of the following conditions. E file 1040x free You filed your return for the year you placed the property in service and claimed depreciation, but not the special allowance, for any class of property. E file 1040x free You do not file an amended return or a Form 3115 within the time prescribed for claiming the special allowance. E file 1040x free See Claiming the allowance, earlier. E file 1040x free Passenger Automobiles The limit on your depreciation deduction (including any section 179 deduction) for any passenger automobile that is qualified property (defined earlier) placed in service after September 10, 2001, and for which you claim the special depreciation allowance is increased. E file 1040x free Generally, the limit is increased from $3,060 to $7,660. E file 1040x free However, if the automobile is a qualified electric car, the limit is increased from $9,280 to $23,080 ($22,980 if placed in service in 2002). E file 1040x free Table 1 shows the maximum deduction amounts for 2001. E file 1040x free Table 1. E file 1040x free Maximum Deduction for 2001 Qualified Vehicle Placed in Service Before Sept. E file 1040x free 11 Placed in Service After Sept. E file 1040x free 10 Passenger automobile $3,060 $7,660 Electric car 9,280 23,080 1 1$22,980 if you place an electric car in service in 2002. E file 1040x free Election not to claim the allowance. E file 1040x free   The increased maximum depreciation deduction does not apply if you elected not to claim the special depreciation allowance as explained earlier under Election Not To Claim the Allowance and Rules for Returns Filed Before June 1, 2002. E file 1040x free New York Liberty Zone Benefits Several benefits are available for property you place in service in the New York Liberty Zone (Liberty Zone). E file 1040x free They include a special depreciation allowance for the year you place the property in service, an increased section 179 deduction, and the classification of certain leasehold improvement property as 5-year property. E file 1040x free Area defined. E file 1040x free   The New York Liberty Zone is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway) in the Borough of Manhattan in the City of New York, New York. E file 1040x free Special Liberty Zone Depreciation Allowance You can take a special depreciation allowance for qualified Liberty Zone property you place in service after September 10, 2001. E file 1040x free The allowance is an additional deduction of 30% of the property's depreciable basis. E file 1040x free To figure the depreciable basis, you must first multiply the property's cost or other basis by the percentage of business/investment use and then reduce that amount by any section 179 deduction and certain other deductions and credits for the property. E file 1040x free See What Is the Basis for Depreciation? on page 23 in Publication 946 for more information on figuring depreciable basis. E file 1040x free The allowance is deductible for both regular tax and alternative minimum tax (AMT) purposes. E file 1040x free There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. E file 1040x free In the year you claim the allowance (generally the year you place the property in service), you must reduce the depreciable basis of the property by the allowance before figuring your regular depreciation deduction. E file 1040x free You cannot claim the special Liberty Zone depreciation allowance for property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. E file 1040x free Qualified property is eligible for only one special depreciation allowance. E file 1040x free Example 1. E file 1040x free On November 1, 2001, you bought and placed in service in your business, which is in the Liberty Zone, qualified Liberty Zone property that cost $200,000. E file 1040x free You did not elect to claim a section 179 deduction. E file 1040x free You can deduct 30% of the cost ($60,000) as a special Liberty Zone depreciation allowance for 2001. E file 1040x free You use the remaining $140,000 of cost to figure your regular depreciation deduction for 2001 and later years. E file 1040x free Example 2. E file 1040x free The facts are the same as in Example 1, except that you choose to deduct $59,000 of the property's cost as a section 179 deduction. E file 1040x free (See Increased Section 179 Deduction, later, for information concerning how this section 179 deduction amount is figured). E file 1040x free You use the remaining $141,000 of cost to figure your special Liberty Zone depreciation allowance of $42,300 ($141,000 × 30%). E file 1040x free You use the remaining $98,700 of cost to figure your regular depreciation deduction for 2001 and later years. E file 1040x free Qualified Liberty Zone Property For a 2001 calendar or fiscal year and a 2000 fiscal year that ends after September 10, 2001, property qualifies for the special Liberty Zone depreciation allowance if it meets the following requirements. E file 1040x free It is one of the following types of property. E file 1040x free Used property depreciated under MACRS with a recovery period of 20 years or less. E file 1040x free See Can You Use MACRS To Depreciate Your Property and Which Recovery Period Applies? on pages 7 and 23, respectively, in Publication 946. E file 1040x free Used water utility property. E file 1040x free See 25-year property on page 22 in Publication 946. E file 1040x free Used computer software that is not a section 197 intangible as described in Computer software on page 5 in Publication 946. E file 1040x free (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. E file 1040x free ) Certain nonresidential real property and residential rental property (defined later). E file 1040x free It meets the following tests (explained later under Tests to be met). E file 1040x free Acquisition date test. E file 1040x free Placed in service date test. E file 1040x free Substantial use test. E file 1040x free Original use test. E file 1040x free It is not excepted property (explained later under Excepted property). E file 1040x free Nonresidential real property and residential rental property. E file 1040x free   This property is qualifying property only to the extent it rehabilitates real property damaged, or replaces real property destroyed or condemned, as a result of the terrorist attack of September 11, 2001. E file 1040x free Property is treated as replacing destroyed or condemned property if, as part of an integrated plan, such property replaces real property included in a continuous area that includes real property destroyed or condemned. E file 1040x free   For these purposes, real property is considered destroyed (or condemned) only if an entire building or structure was destroyed (or condemned) as a result of the terrorist attack. E file 1040x free Otherwise, the property is considered damaged real property. E file 1040x free For example, if certain structural components of a building (such as walls, floors, or plumbing fixtures) are damaged or destroyed as a result of the terrorist attack, but the building is not destroyed (or condemned), then only costs related to replacing the damaged or destroyed structural components qualify for the special Liberty Zone depreciation allowance. E file 1040x free Tests to be met. E file 1040x free   To qualify for the special Liberty Zone depreciation allowance, your property must meet all of the following tests. E file 1040x free Acquisition date test. E file 1040x free   You must have acquired the property by purchase after September 10, 2001, and there must not have been a binding written contract for the acquisition in effect before September 11, 2001. E file 1040x free   For information on the acquisition of property by purchase, see Property Acquired by Purchase on page 15 of Publication 946. E file 1040x free   Property you manufacture, construct, or produce for your own use meets this test if you began the manufacture, construction, or production of the property after September 10, 2001. E file 1040x free Placed in service date test. E file 1040x free   Generally, the property must be placed in service for use in your trade or business or for the production of income before January 1, 2007 (January 1, 2010, in the case of qualifying nonresidential real property and residential rental property). E file 1040x free   If you sold property you placed in service after September 10, 2001, and you leased it back within 3 months after the property was originally placed in service, the property is treated as placed in service no earlier than the date it is used under the leaseback. E file 1040x free Substantial use test. E file 1040x free   Substantially all use of the property must be in the Liberty Zone and in the active conduct of your trade or business in the Liberty Zone. E file 1040x free Original use test. E file 1040x free   The original use of the property in the Liberty Zone must have begun with you after September 10, 2001. E file 1040x free   Used property can be qualified Liberty Zone property if it has not previously been used within the Liberty Zone. E file 1040x free Also, additional capital expenditures you incurred after September 10, 2001, to recondition or rebuild your property meet the original use test if the original use of the property in the Liberty Zone began with you. E file 1040x free Excepted property. E file 1040x free   The following property does not qualify for the special Liberty Zone depreciation allowance. E file 1040x free Property eligible for the special depreciation allowance explained earlier in Qualified Property under Special Depreciation Allowance. E file 1040x free Property required to be depreciated using ADS. E file 1040x free This includes listed property used 50% or less in a qualified business use. E file 1040x free Qualified New York Liberty Zone leasehold improvement property (defined earlier in Excepted Property under Special Depreciation Allowance). E file 1040x free Example. E file 1040x free In December 2001, you bought and placed in service in your business in the Liberty Zone the following property. E file 1040x free New office furniture with a MACRS recovery period of 7 years. E file 1040x free A used computer with a MACRS recovery period of 5 years. E file 1040x free The computer had not previously been used within the Liberty Zone. E file 1040x free Because the office furniture is new property, it qualifies for the special depreciation allowance, but not the special Liberty Zone depreciation allowance. E file 1040x free Because the computer is used property that had not previously been used in the Liberty Zone, it qualifies for the special Liberty Zone depreciation allowance, but not the special depreciation allowance. E file 1040x free Election Not To Claim the Liberty Zone Allowance You can elect not to claim the special Liberty Zone depreciation allowance for qualified property. E file 1040x free If you make this election for any property, it applies to all property in the same property class placed in service during the year. E file 1040x free To make this election, attach a statement to your return indicating you elect not to claim the allowance and the class of property for which you are making the election. E file 1040x free When to make the election. E file 1040x free   Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. E file 1040x free   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 6 months of the due date of the original return (not including extensions). E file 1040x free Attach the election statement to the amended return. E file 1040x free At the top of the election statement, write “Filed pursuant to section 301. E file 1040x free 9100–2. E file 1040x free ” Revoking an election. E file 1040x free   Once you elect not to deduct the special Liberty Zone depreciation allowance for a class of property, you cannot revoke the election without IRS consent. E file 1040x free A request to revoke the election is subject to a user fee. E file 1040x free Returns filed before June 1, 2002. E file 1040x free   The rules that apply to the special depreciation allowance discussed earlier in Rules for Returns Filed Before June 1, 2002 under Special Depreciation Allowance also apply to the special Liberty Zone depreciation allowance. E file 1040x free Increased Section 179 Deduction Under section 179 of the Internal Revenue Code, you can choose to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. E file 1040x free For tax years beginning in 2000, that limit was $20,000. E file 1040x free For tax years beginning in 2001 and 2002, that limit is generally $24,000. E file 1040x free If the cost of qualifying section 179 property placed in service in a year is over $200,000, you must reduce the dollar limit (but not below zero) by the amount of the cost over $200,000. E file 1040x free Increased Dollar Limit The dollar limit on the section 179 deduction is increased for certain property placed in service in the Liberty Zone. E file 1040x free The increase is the smaller of the following amounts. E file 1040x free $35,000. E file 1040x free The cost of section 179 property that is qualified Liberty Zone property placed in service during the year. E file 1040x free If you use the revised 2001 Form 4562 (dated March 2002) for a tax year beginning in 2000, you must reduce the section 179 dollar limit to $20,000 before adding the additional amount for qualified property. E file 1040x free Qualified property. E file 1040x free   To qualify for the increased section 179 deduction, your property must be section 179 property that is either: Qualified Liberty Zone property, or Property that would be qualified Liberty Zone property except that it is eligible for the special depreciation allowance. E file 1040x free Qualified Liberty Zone property is explained earlier in Qualified Liberty Zone Property under Special Liberty Zone Depreciation Allowance. E file 1040x free Property eligible for the special depreciation allowance is explained earlier in Qualified Property under Special Depreciation Allowance. E file 1040x free For information on the requirements that must be met for property to qualify for the section 179 deduction, see What Property Qualifies? on page 14 of Publication 946. E file 1040x free Example 1. E file 1040x free In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $25,000. E file 1040x free Because this cost is less than $35,000, the dollar limit on the section 179 deduction is increased by $25,000 to $49,000 ($24,000 + $25,000). E file 1040x free Example 2. E file 1040x free In 2002, you place in service in your business, which is in the Liberty Zone, qualified property (defined earlier) costing $75,000. E file 1040x free Because $35,000 is less than the cost of the property you place in service, the dollar limit on the section 179 deduction you can claim is increased by $35,000 to $59,000 ($24,000 + $35,000). E file 1040x free Reduced Dollar Limit Generally, you must reduce the dollar limit for a year by the cost of qualifying section 179 property placed in service in the year that is more than $200,000. E file 1040x free However, if the cost of your Liberty Zone property exceeds $200,000, you take into account only 50% (instead of 100%) of the cost of qualified property placed in service in a year. E file 1040x free Example. E file 1040x free In 2002, you place in service in your business, which is in the Liberty Zone, qualified property costing $460,000. E file 1040x free Your increased dollar limit is $59,000 ($35,000 + $24,000). E file 1040x free Because 50% of the cost of the property you place in service ($230,000) is $30,000 more than $200,000, you must reduce your $59,000 dollar limit to $29,000 ($59,000 - $30,000). E file 1040x free Recapture Rules Rules similar to those explained on page 20 of Publication 946 under When Must You Recapture the Deduction? apply with respect to any qualified property you stop using in the Liberty Zone. E file 1040x free Returns Filed Before June 1, 2002 If you filed a return before June 1, 2002, and did not deduct the increased section 179 amount for qualified property placed in service after September 10, 2001, you can deduct the increased amount by filing an amended return by the due date (not including extensions) of the return for the year after the year the property was placed in service. E file 1040x free This rule applies to returns for the following years. E file 1040x free 2000 fiscal years that end after September 10, 2001. E file 1040x free 2001 calendar and fiscal years. E file 1040x free On the amended return, write “Filed Pursuant to Rev. E file 1040x free Proc. E file 1040x free 2002–33. E file 1040x free ” Liberty Zone Leasehold Improvement Property Qualified Liberty Zone leasehold improvement property (described earlier in Qualified Property under Special Depreciation Allowance) is 5-year property. E file 1040x free This means that it is depreciated over a recovery period of 5 years. E file 1040x free For information about recovery periods, see Which Recovery Period Applies? on page 23 of Publication 946. E file 1040x free The straight-line method must be used with respect to qualified Liberty Zone leasehold improvement property. E file 1040x free Under ADS, the recovery period for qualified Liberty Zone leasehold improvement property is 9 years. E file 1040x free Returns Filed Before June 1, 2002 If you filed either of the following returns before June 1, 2002, and did not depreciate qualified Liberty Zone leasehold improvement property placed in service during the tax year as 5-year property using the straight line method, you should file an amended return before you file your return for the year after the year the property was placed in service. E file 1040x free Your 2000 fiscal year return (for a 2000 fiscal year that ends after September 10, 2001). E file 1040x free Your 2001 calendar or fiscal year return. E file 1040x free On the amended return, write “Filed Pursuant to Rev. E file 1040x free Proc. E file 1040x free 2002–33. E file 1040x free ” Table 2. E file 1040x free Rules for Returns Filed Before June 1, 2002 Note:This chart highlights the rules for returns affected by the Job Creation and Worker Assistance Act of 2002 that were filed before June 1, 2002, without accounting for any of the new benefits under the law. E file 1040x free See the text for definitions and examples. E file 1040x free Do not rely on this chart alone. E file 1040x free IF you want to. E file 1040x free . E file 1040x free . E file 1040x free THEN you. E file 1040x free . E file 1040x free . E file 1040x free BY. E file 1040x free . E file 1040x free . E file 1040x free claim the special depreciation allowance or special Liberty Zone depreciation allowance • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service, or • must file Form 3115, Application for Change in Accounting Method, with your return for the year after the year the property was placed in service • the due date (including extensions) of your return for the year after the year the property was placed in service, and • must file a copy of your completed Form 3115 with the IRS National Office • the date you file the original Form 3115 with your return for the year after the year the property was placed in service. E file 1040x free elect not to claim the special depreciation allowance or the special Liberty Zone depreciation allowance 1 • must have filed your return timely for the year the property was placed in service, and   • must file an amended return stating you are not claiming the allowance • the date that is 6 months after the due date of the original return (not including extensions). E file 1040x free deduct the increased section 179 amount • must file an amended return • the due date (not including extensions) of your return for the year after the year the property was placed in service. E file 1040x free use a 5-year recovery period for depreciating qualified Liberty Zone leasehold improvement property • should file an amended return • the date you file your return for the year after the year the property was placed in service. E file 1040x free 1See also Deemed election under Rules for Returns Filed Before June 1, 2002, earlier. 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The E File 1040x Free

E file 1040x free 3. E file 1040x free   Claiming the Special Depreciation Allowance Table of Contents Introduction What Is Qualified Property?Qualified Reuse and Recycling Property Qualified Cellulosic Biofuel Plant Property Qualified Disaster Assistance Property Certain Qualified Property Acquired After December 31, 2007 Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance How Much Can You Deduct? How Can You Elect Not To Claim an Allowance? When Must You Recapture an Allowance? Introduction You can take a special depreciation allowance to recover part of the cost of qualified property (defined next), placed in service during the tax year. E file 1040x free The allowance applies only for the first year you place the property in service. E file 1040x free For qualified property placed in service in 2013, you can take an additional 50% special allowance. E file 1040x free The allowance is an additional deduction you can take after any section 179 deduction and before you figure regular depreciation under MACRS for the year you place the property in service. E file 1040x free This chapter explains what is qualified property. E file 1040x free It also includes rules regarding how to figure an allowance, how to elect not to claim an allowance, and when you must recapture an allowance. E file 1040x free Corporations can elect to accelerate certain minimum tax credits in lieu of claiming the special depreciation allowance for eligible qualified property. E file 1040x free See Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance , later. E file 1040x free See chapter 6 for information about getting publications and forms. E file 1040x free What Is Qualified Property? Your property is qualified property if it is one of the following. E file 1040x free Qualified reuse and recycling property. E file 1040x free Qualified cellulosic biofuel plant property. E file 1040x free Qualified disaster assistance property. E file 1040x free Certain qualified property acquired after December 31, 2007. E file 1040x free The following discussions provide information about the types of qualified property listed above for which you can take the special depreciation allowance. E file 1040x free Qualified Reuse and Recycling Property You can take a 50% special depreciation allowance for qualified reuse and recycling property. E file 1040x free Qualified reuse and recycling property is any machinery or equipment (not including buildings or real estate), along with any appurtenance, that is used exclusively to collect, distribute, or recycle qualified reuse and recyclable materials (as defined in section 168(m)(3)(B) of the Internal Revenue Code). E file 1040x free Qualified reuse and recycling property also includes software necessary to operate such equipment. E file 1040x free The property must meet the following requirements. E file 1040x free The property must be depreciated under MACRS. E file 1040x free The property must have a useful life of at least 5 years. E file 1040x free The original use of the property must begin with you after August 31, 2008. E file 1040x free You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2 ) after August 31, 2008, with no binding written contract for the acquisition in effect before September 1, 2008. E file 1040x free The property must be placed in service for use in your trade or business after August 31, 2008. E file 1040x free Excepted Property Qualified reuse and recycling property does not include any of the following. E file 1040x free Any rolling stock or other equipment used to transport reuse or recyclable materials. E file 1040x free Property required to be depreciated using the Alternative Depreciation System (ADS). E file 1040x free For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . E file 1040x free Other bonus depreciation property to which section 168(k) of the Internal Revenue Code applies. E file 1040x free Property for which you elected not to claim any special depreciation allowance (discussed later). E file 1040x free Property placed in service and disposed of in the same tax year. E file 1040x free Property converted from business use to personal use in the same tax year acquired. E file 1040x free Property converted from personal use to business use in the same or later tax year may be qualified reuse and recycling property. E file 1040x free Qualified Cellulosic Biofuel Plant Property You can take a 50% special depreciation allowance for qualified cellulosic biofuel plant property. E file 1040x free Cellulosic biofuel is any liquid fuel which is produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis. E file 1040x free Examples include bagasse (from sugar cane), corn stalks, and switchgrass. E file 1040x free The property must meet the following requirements. E file 1040x free The property is used in the United States solely to produce cellulosic biofuel. E file 1040x free The original use of the property must begin with you after December 20, 2006. E file 1040x free You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2 ) after December 20, 2006, with no binding written contract for acquisition in effect before December 21, 2006. E file 1040x free The property must be placed in service for use in your trade or business or for the production of income after October 3, 2008, and before January 3, 2013. E file 1040x free Note. E file 1040x free For property placed in service after January 2, 2013, and before January 1, 2014, you can take a 50% special depreciation allowance for qualified second generation biofuel plant property that is used solely in the United States to produce second generation biofuel (as defined in section 40(b)(6)(E)). E file 1040x free The other requirements for qualified second generation biofuel plant property to be eligible for the special depreciation allowance are identical to the requirements discussed for Qualified Cellulosic Biofuel Plant Property above. E file 1040x free Special Rules Sale-leaseback. E file 1040x free   If you sold qualified cellulosic biofuel plant property you placed in service after October 3, 2008, and leased it back within 3 months after you originally placed it in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback. E file 1040x free   The property will not qualify for the special allowance if the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the property before December 21, 2006. E file 1040x free Syndicated leasing transactions. E file 1040x free   If qualified cellulosic biofuel plant property is originally placed in service by a lessor after October 3, 2008, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale. E file 1040x free   Multiple units of property subject to the same lease will be treated as originally placed in service no earlier than the date of sale if the property is sold within 3 months after the final unit is placed in service and the period between the times the first and last units are placed in service does not exceed 12 months. E file 1040x free Excepted Property Qualified cellulosic biofuel plant property does not include any of the following. E file 1040x free Property placed in service and disposed of in the same tax year. E file 1040x free Property converted from business use to personal use in the same tax year it is acquired. E file 1040x free Property converted from personal use to business use in the same or later tax year may be qualified cellulosic biomass ethanol plant property. E file 1040x free Property required to be depreciated using the Alternative Depreciation System (ADS). E file 1040x free For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . E file 1040x free Property any portion of which is financed with the proceeds of any obligation the interest on which is exempt from tax under section 103 of the Internal Revenue Code. E file 1040x free Property for which you elected not to claim any special depreciation allowance (discussed later). E file 1040x free Property for which a deduction was taken under section 179C for certain qualified refinery property. E file 1040x free Other bonus depreciation property to which section 168(k) of the Internal Revenue Code applies. E file 1040x free Qualified Disaster Assistance Property You can take a 50% special depreciation allowance for qualified disaster assistance property placed in service in federally declared disaster areas in which the disaster occurred in 2009. E file 1040x free A list of the federally declared disaster areas is available at the FEMA website at www. E file 1040x free fema. E file 1040x free gov. E file 1040x free Your property is qualified disaster assistance property if it meets the following requirements. E file 1040x free The property is nonresidential real property or residential real property placed in service before January 1, 2014, in a federally declared disaster area in which the disaster occurred in 2009. E file 1040x free You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2 ) on or after the applicable disaster date, with no binding written contract for the acquisition in effect before the applicable disaster date. E file 1040x free The property must rehabilitate property damaged, or replace property destroyed or condemned, as a result of the applicable federally declared disaster. E file 1040x free The property must be similar in nature to, and located in the same county as, the rehabilitated or replaced property. E file 1040x free The original use of the property within the applicable disaster area must have begun with you on or after the applicable disaster date. E file 1040x free The property is placed in service by you on or before the date which is the last day of the fourth calendar year. E file 1040x free Substantially all (80% or more) of the use of the property must be in the active conduct of your trade or business in a federally declared disaster area, occurring in 2009. E file 1040x free It is not excepted property (explained later in Excepted Property ). E file 1040x free Special Rules Sale-leaseback. E file 1040x free   If you sold qualified disaster assistance property you placed in service after the applicable disaster date and leased it back within 3 months after you originally placed it in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback. E file 1040x free   The property will not qualify for the special allowance if the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the property before the applicable disaster date. E file 1040x free Syndicated leasing transactions. E file 1040x free   If qualified disaster assistance property is originally placed in service by a lessor after the applicable disaster date, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale. E file 1040x free   Multiple units of property subject to the same lease will be treated as originally placed in service no earlier than the date of sale if the property is sold within 3 months after the final unit is placed in service and the period between the times the first and last units are placed in service does not exceed 12 months. E file 1040x free Excepted Property Qualified disaster assistance property does not include any of the following. E file 1040x free Property required to be depreciated using the Alternative Depreciation System (ADS). E file 1040x free For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . E file 1040x free Property any portion of which is financed with the proceeds of a tax-exempt obligation under section 103 of the Internal Revenue Code. E file 1040x free Any qualified revitalization building (defined later) placed in service before January 1, 2010, for which you have elected to claim a commercial revitalization deduction for qualified revitalization expenditures. E file 1040x free Any property used in connection with any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store, the principal business of which is the sale of alcoholic beverages for consumption off premises. E file 1040x free Any property for which the special allowance under section 168(k) or section 1400N(d) of the Internal Revenue Code applies. E file 1040x free Property for which you elected not to claim any special depreciation allowance (discussed later). E file 1040x free Property placed in service and disposed of in the same tax year. E file 1040x free Property converted from business use to personal use in the same tax year acquired. E file 1040x free Property converted from personal use to business use in the same or later tax year may be qualified disaster assistance property. E file 1040x free Any gambling or animal racing property (defined later). E file 1040x free Qualified revitalization building. E file 1040x free   This is a commercial building and its structural components that you placed in service in a renewal community before January 1, 2010. E file 1040x free If the building is new, the original use of the building must begin with you. E file 1040x free If the building is not new, you must substantially rehabilitate the building and then place it in service. E file 1040x free For more information, including definitions of substantially rehabilitated building and qualified revitalization expenditure, see section 1400I(b) of the Internal Revenue Code. E file 1040x free Gambling or animal racing property. E file 1040x free   Gambling or animal racing property includes the following personal and real property. E file 1040x free Any equipment, furniture, software, or other property used directly in connection with gambling, the racing of animals, or the on-site viewing of such racing. E file 1040x free Any real property determined by square footage (other than any portion that is less than 100 square feet) that is dedicated to gambling, the racing of animals, or the on-site viewing of such racing. E file 1040x free Certain Qualified Property Acquired After December 31, 2007 You can take a 50% special depreciation deduction allowance for certain qualified property acquired after December 31, 2007. E file 1040x free Your property is qualified property if it meets the following requirements. E file 1040x free It is one of the following types of property. E file 1040x free Tangible property depreciated under MACRS with a recovery period of 20 years or less. E file 1040x free Water utility property. E file 1040x free Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. E file 1040x free (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. E file 1040x free ) Qualified leasehold improvement property (defined under Qualified leasehold improvement property later). E file 1040x free You must have acquired the property after December 31, 2007, with no binding written contract for the acquisition in effect before January 1, 2008. E file 1040x free The property must be placed in service for use in your trade or business or for the production of income before January 1, 2014 (before January 1, 2015, for certain property with a long production period and certain aircraft (defined next)). E file 1040x free The original use of the property must begin with you after December 31, 2007. E file 1040x free It is not excepted property (explained later in Excepted property). E file 1040x free Qualified leasehold improvement property. E file 1040x free    Generally, this is any improvement to an interior part of a building that is nonresidential real property, if all the following requirements are met. E file 1040x free The improvement is made under or according to a lease by the lessee (or any sublessee) or the lessor of that part of the building. E file 1040x free That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part. E file 1040x free The improvement is placed in service more than 3 years after the date the building was first placed in service by any person. E file 1040x free The improvement is section 1250 property. E file 1040x free See chapter 3 in Publication 544, Sales and Other Dispositions of Assets, for the definition of section 1250 property. E file 1040x free   However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following. E file 1040x free The enlargement of the building. E file 1040x free Any elevator or escalator. E file 1040x free Any structural component benefiting a common area. E file 1040x free The internal structural framework of the building. E file 1040x free   Generally, a binding commitment to enter into a lease is treated as a lease and the parties to the commitment are treated as the lessor and lessee. E file 1040x free However, a lease between related persons is not treated as a lease. E file 1040x free Related persons. E file 1040x free   For this purpose, the following are related persons. E file 1040x free Members of an affiliated group. E file 1040x free 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. E file 1040x free A corporation and an individual who directly or indirectly owns 80% or more of the value of the outstanding stock of that corporation. E file 1040x free Two corporations that are members of the same controlled group. E file 1040x free A trust fiduciary and a corporation if 80% or more of the value of the outstanding stock is directly or indirectly owned by or for the trust or grantor of the trust. E file 1040x free The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. E file 1040x free 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. E file 1040x free 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. E file 1040x free Two S corporations, and an S corporation and a regular corporation, if the same persons own 80% or more of the value of the outstanding stock of each corporation. E file 1040x free A corporation and a partnership if the same persons own both of the following. E file 1040x free 80% or more of the value of the outstanding stock of the corporation. E file 1040x free 80% or more of the capital or profits interest in the partnership. E file 1040x free The executor and beneficiary of any estate. E file 1040x free Long Production Period Property To be qualified property, long production period property must meet the following requirements. E file 1040x free It must meet the requirements in (2)-(5), above. E file 1040x free The property has a recovery period of at least 10 years or is transportation property. E file 1040x free Transportation property is tangible personal property used in the trade or business of transporting persons or property. E file 1040x free The property is subject to section 263A of the Internal Revenue Code. E file 1040x free The property has an estimated production period exceeding 1 year and an estimated production cost exceeding $1,000,000. E file 1040x free Noncommercial Aircraft To be qualified property, noncommercial aircraft must meet the following requirements. E file 1040x free It must meet the requirements in (2)-(5), above. E file 1040x free The aircraft must not be tangible personal property used in the trade or business of transporting persons or property (except for agricultural or firefighting purposes). E file 1040x free The aircraft must be purchased (as discussed under Property Acquired by Purchase in chapter 2 ) by a purchaser who at the time of the contract for purchase, makes a nonrefundable deposit of the lesser of 10% of the cost or $100,000. E file 1040x free The aircraft must have an estimated production period exceeding four months and a cost exceeding $200,000. E file 1040x free Special Rules Sale-leaseback. E file 1040x free   If you sold qualified property you placed in service after December 31, 2007, and leased it back within 3 months after you originally placed in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback. E file 1040x free   The property will not qualify for the special depreciation allowance if the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the property before January 1, 2008. E file 1040x free Syndicated leasing transactions. E file 1040x free   If qualified property is originally placed in service by a lessor after December 31, 2007, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale. E file 1040x free   Multiple units of property subject to the same lease will be treated as originally placed in service no earlier than the date of the last sale if the property is sold within 3 months after the final unit is placed in service and the period between the time the first and last units are placed in service does not exceed 12 months. E file 1040x free Excepted Property Qualified property does not include any of the following. E file 1040x free Property placed in service and disposed of in the same tax year. E file 1040x free Property converted from business use to personal use in the same tax year acquired. E file 1040x free Property converted from personal use to business use in the same or later tax year may be qualified property. E file 1040x free Property required to be depreciated under the Alternative Depreciation System (ADS). E file 1040x free This includes listed property used 50% or less in a qualified business use. E file 1040x free For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . E file 1040x free Qualified restaurant property (as defined in section 168(e)(7) of the Internal Revenue Code). E file 1040x free Qualified retail improvement property (as defined in section 168(e)(8) of the Internal Revenue Code). E file 1040x free Property for which you elected not to claim any special depreciation allowance (discussed later). E file 1040x free Property for which you elected to accelerate certain credits in lieu of the special depreciation allowance (discussed next). E file 1040x free Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance An election made by a corporation to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, or its first tax year ending after December 31, 2010, continues to apply to round 2 extension property (as defined in section 168(k)(4)(I)(iv)), unless the corporation made an election not to apply the section 168(k)(4) election to round 2 extension property for its first tax year ending after December 31, 2010. E file 1040x free For 2013, round 2 extension property generally is long production period and noncommercial aircraft if acquired after March 31, 2008, and placed in service after December 31, 2012, but before January 1, 2014. E file 1040x free An election made by a corporation to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, or its first tax year ending after December 31, 2010, continues to apply to round 3 extension property (as defined in section 168(k)(4)(J)(iv)), unless the corporation makes an election not to apply the section 168(k)(4) election to round 3 extension property. E file 1040x free If a corporation did not make a section 168(k)(4) election for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, or its first tax year ending after December 31, 2010, the corporation may elect for its first tax year ending after December 31, 2012, to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance for only round 3 extension property. E file 1040x free If you make an election to accelerate these credits in lieu of claiming the special depreciation allowance for eligible property, you must not take the 50% special depreciation allowance for the property and must depreciate the basis in the property under MACRS using the straight line method. E file 1040x free See Which Depreciation Method Applies in chapter 4 . E file 1040x free Once made, the election cannot be revoked without IRS consent. E file 1040x free Additional guidance. E file 1040x free   For additional guidance on the election to accelerate the research or minimum tax credit in lieu of claiming the special depreciation allowance, see Rev. E file 1040x free Proc. E file 1040x free 2008-65 on page 1082 of Internal Revenue Bulletin 2008-44, available at www. E file 1040x free irs. E file 1040x free gov/pub/irs-irbs/irb08-44. E file 1040x free pdf, Rev. E file 1040x free Proc. E file 1040x free 2009-16 on page 449 of Internal Revenue Bulletin 2009-06, available at www. E file 1040x free irs. E file 1040x free gov/pub/irs-irbs/irb09-06. E file 1040x free pdf, and Rev. E file 1040x free Proc. E file 1040x free 2009-33 on page 150 of Internal Revenue Bulletin 2009-29, available at www. E file 1040x free irs. E file 1040x free gov/pub/irs-irbs/irb09-29. E file 1040x free pdf. E file 1040x free Also, see Form 3800, General Business Credit; Form 8827, Credit for Prior Year Minimum Tax — Corporations; and related instructions. E file 1040x free   Additional guidance regarding the election to accelerate the minimum tax credit in lieu of claiming the special depreciation allowance for round 2 extension property and round 3 extension property may also be available in later Internal Revenue Bulletins available at www. E file 1040x free irs. E file 1040x free gov/irb. E file 1040x free How Much Can You Deduct? Figure the special depreciation allowance by multiplying the depreciable basis of qualified reuse and recycling property, qualified cellulosic biofuel plant property, qualified disaster assistance property, and certain qualified property acquired after December 31, 2007, by 50%. E file 1040x free For qualified property other than listed property, enter the special allowance on line 14 in Part II of Form 4562. E file 1040x free For qualified property that is listed property, enter the special allowance on line 25 in Part V of Form 4562. E file 1040x free If you place qualified property in service in a short tax year, you can take the full amount of a special depreciation allowance. E file 1040x free Depreciable basis. E file 1040x free   This is the property's cost or other basis multiplied by the percentage of business/investment use, reduced by the total amount of any credits and deductions allocable to the property. E file 1040x free   The following are examples of some credits and deductions that reduce depreciable basis. E file 1040x free Any section 179 deduction. E file 1040x free Any deduction for removal of barriers to the disabled and the elderly. E file 1040x free Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. E file 1040x free Basis adjustment to investment credit property under section 50(c) of the Internal Revenue Code. E file 1040x free   For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. E file 1040x free   For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property in chapter 1 . E file 1040x free For a discussion of business/investment use, see Partial business or investment use under Property Used in Your Business or Income-Producing Activity in chapter 1 . E file 1040x free Depreciating the remaining cost. E file 1040x free   After you figure your special depreciation allowance for your qualified property, you can use the remaining cost to figure your regular MACRS depreciation deduction (discussed in chapter 4 . E file 1040x free Therefore, you must reduce the depreciable basis of the property by the special depreciation allowance before figuring your regular MACRS depreciation deduction. E file 1040x free Example. E file 1040x free On November 1, 2013, Tom Brown bought and placed in service in his business qualified property that cost $450,000. E file 1040x free He did not elect to claim a section 179 deduction. E file 1040x free He deducts 50% of the cost ($225,000) as a special depreciation allowance for 2013. E file 1040x free He uses the remaining $225,000 of cost to figure his regular MACRS depreciation deduction for 2013 and later years. E file 1040x free Like-kind exchanges and involuntary conversions. E file 1040x free   If you acquire qualified property in a like-kind exchange or involuntary conversion, the carryover basis of the acquired property is eligible for a special depreciation allowance. E file 1040x free After you figure your special allowance, you can use the remaining carryover basis to figure your regular MACRS depreciation deduction. E file 1040x free In the year you claim the allowance (the year you place in service the property received in the exchange or dispose of involuntarily converted property), you must reduce the carryover basis of the property by the allowance before figuring your regular MACRS depreciation deduction. E file 1040x free See Figuring the Deduction for Property Acquired in a Nontaxable Exchange , in chapter 4 under How Is the Depreciation Deduction Figured . E file 1040x free The excess basis (the part of the acquired property's basis that exceeds its carryover basis) is also eligible for a special depreciation allowance. E file 1040x free How Can You Elect Not To Claim an Allowance? You can elect, for any class of property, not to deduct any special allowances for all property in such class placed in service during the tax year. E file 1040x free To make an election, attach a statement to your return indicating what election you are making and the class of property for which you are making the election. E file 1040x free When to make election. E file 1040x free   Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. E file 1040x free   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 6 months of the due date of the original return (not including extensions). E file 1040x free Attach the election statement to the amended return. E file 1040x free On the amended return, write “Filed pursuant to section 301. E file 1040x free 9100-2. E file 1040x free ” Revoking an election. E file 1040x free   Once you elect not to deduct a special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. E file 1040x free A request to revoke the election is a request for a letter ruling. E file 1040x free If you elect not to have any special allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation. E file 1040x free When Must You Recapture an Allowance? When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. E file 1040x free See When Do You Recapture MACRS Depreciation in chapter 4 or more information. E file 1040x free Recapture of allowance deducted for qualified GO Zone property. E file 1040x free   If, in any year after the year you claim the special depreciation allowance for qualified GO Zone property (including specified GO Zone extension property), the property ceases to be used in the GO Zone, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. E file 1040x free For additional guidance, see Notice 2008-25 on page 484 of Internal Revenue Bulletin 2008-9. E file 1040x free Qualified cellulosic biomass ethanol plant property and qualified cellulosic biofuel plant property. E file 1040x free   If, in any year after the year you claim the special depreciation allowance for any qualified cellulosic biomass ethanol plant property or qualified biofuel plant property, the property ceases to be qualified cellulosic biomass ethanol plant property or qualified biofuel plant property, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. E file 1040x free Recapture of allowance for qualified Recovery Assistance property. E file 1040x free   If, in any year after the year you claim the special depreciation allowance for qualified Recovery Assistance property, the property ceases to be used in the Kansas disaster area, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. E file 1040x free For additional guidance, see Notice 2008-67 on page 307 of Internal Revenue Bulletin 2008-32. E file 1040x free Recapture of allowance for qualified disaster assistance property. E file 1040x free   If, in any year after the year you claim the special depreciation allowance for qualified disaster assistance property, the property ceases to be used in the applicable disaster area, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. E file 1040x free   For additional guidance, see Notice 2008-67 on page 307 of Internal Revenue Bulletin 2008-32. E file 1040x free Prev  Up  Next   Home   More Online Publications