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Filing 2012 Taxes Late

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Filing 2012 Taxes Late

Filing 2012 taxes late 13. Filing 2012 taxes late   Employment Taxes Table of Contents What's New for 2013 What's New for 2014 Reminders Important Dates for 2014 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Farm Employment Family Employees Crew Leaders Social Security and Medicare TaxesReligious exemption. Filing 2012 taxes late Wage limit. Filing 2012 taxes late Federal Income Tax WithholdingNew Form W-4 for 2014. Filing 2012 taxes late Required Notice to Employees About Earned Income Credit (EIC) Reporting and Paying Social Security, Medicare, and Withheld Federal Income TaxesElectronic deposit requirement. Filing 2012 taxes late Federal Unemployment (FUTA) TaxReporting and Paying FUTA Tax What's New for 2013 Social security and Medicare tax for 2013. Filing 2012 taxes late  The employee tax rate for social security is 6. Filing 2012 taxes late 2%. Filing 2012 taxes late Previously, the employee tax rate for social security was 4. Filing 2012 taxes late 2%. Filing 2012 taxes late The employer tax rate for social security remains unchanged at 6. Filing 2012 taxes late 2%. Filing 2012 taxes late The social security wage base limit is $113,700. Filing 2012 taxes late The Medicare tax rate is 1. Filing 2012 taxes late 45% each for the employee and employer, unchanged from 2012. Filing 2012 taxes late There is no wage base limit for Medicare tax. Filing 2012 taxes late Additional Medicare Tax. Filing 2012 taxes late  In addition to withholding Medicare tax at 1. Filing 2012 taxes late 45%, you must withhold a 0. Filing 2012 taxes late 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Filing 2012 taxes late You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Filing 2012 taxes late Additional Medicare Tax is only imposed on the employee. Filing 2012 taxes late There is no employer share of Additional Medicare Tax. Filing 2012 taxes late All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold. Filing 2012 taxes late For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E), Employer's Tax Guide. Filing 2012 taxes late For more information on Additional Medicare Tax, visit IRS. Filing 2012 taxes late gov and enter “Additional Medicare Tax” in the search box. Filing 2012 taxes late Leave-based donation programs to aid victims of Hurricane Sandy. Filing 2012 taxes late  Under these programs, employees may donate their vacation, sick, or personal leave in exchange for employer cash payments made before January 1, 2014, to qualified tax-exempt organizations providing relief for the victims of Hurricane Sandy. Filing 2012 taxes late The donated leave will not be included in the income or wages of the employee. Filing 2012 taxes late The employer may deduct the cash payments as business expenses or charitable contributions. Filing 2012 taxes late For more information, see Notice 2012-69, 2012-51 I. Filing 2012 taxes late R. Filing 2012 taxes late B. Filing 2012 taxes late 712, available at www. Filing 2012 taxes late irs. Filing 2012 taxes late gov/irb/2012-51_IRB/ar09. Filing 2012 taxes late html. Filing 2012 taxes late Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans extended. Filing 2012 taxes late  The work opportunity tax credit is now available for eligible unemployed veterans who begin work before January 1, 2014. Filing 2012 taxes late Previously, the credit was available for unemployed veterans who began work on or after November 22, 2011, and before January 1, 2013. Filing 2012 taxes late Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Filing 2012 taxes late For more information, visit IRS. Filing 2012 taxes late gov and enter “work opportunity credit” in the search box. Filing 2012 taxes late What's New for 2014 Social security and Medicare tax for 2014. Filing 2012 taxes late  The employee and employer tax rates for social security and the maximum amount of wages subject to social security tax for 2014 will be discussed in Publication 51 (Circular A), Agricultural Employer's Tax Guide (For use in 2014). Filing 2012 taxes late The Medicare tax rate for 2014 will also be discussed in Publication 51 (Circular A) (For use in 2014). Filing 2012 taxes late There is no limit on the amount of wages subject to Medicare tax. Filing 2012 taxes late Reminders Additional employment tax information for farmers. Filing 2012 taxes late  See Publication 51 (Circular A) for more detailed guidance on employment taxes. Filing 2012 taxes late For the latest information about employment tax developments impacting farmers, go to www. Filing 2012 taxes late irs. Filing 2012 taxes late gov/pub51. Filing 2012 taxes late Correcting a previously filed Form 943. Filing 2012 taxes late  If you discover an error on a previously filed Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, make the correction using Form 943-X, Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund. Filing 2012 taxes late Form 943-X is filed separately from Form 943. Filing 2012 taxes late For more information on correcting Form 943, see the Instructions for Form 943-X. Filing 2012 taxes late Federal tax deposits must be made by electronic funds transfer. Filing 2012 taxes late  You must use electronic funds transfer to make all federal tax deposits. Filing 2012 taxes late Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). Filing 2012 taxes late If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Filing 2012 taxes late Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Filing 2012 taxes late EFTPS is a free service provided by the Department of Treasury. Filing 2012 taxes late Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Filing 2012 taxes late For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). Filing 2012 taxes late To get more information about EFTPS or to enroll in EFTPS, visit www. Filing 2012 taxes late eftps. Filing 2012 taxes late gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Filing 2012 taxes late Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. Filing 2012 taxes late Important Dates for 2014 You should take the action indicated by the dates listed. Filing 2012 taxes late See By February 15 and On February 16 for Form W-4, Employee's Withholding Allowance Certificate, information. Filing 2012 taxes late Due dates for deposits of withheld federal income taxes, social security taxes, and Medicare taxes are not listed here. Filing 2012 taxes late For these dates, see Publication 509, Tax Calendars (For use in 2014). Filing 2012 taxes late Note. Filing 2012 taxes late  If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. Filing 2012 taxes late A statewide legal holiday delays a filing or furnishing due date only if the IRS office where you are required to file a return or furnish a form is located in that state. Filing 2012 taxes late For any due date, you will meet the “file” or “furnish” date requirement if the envelope containing the tax return or form is properly addressed, contains sufficient postage, and is postmarked by the U. Filing 2012 taxes late S. Filing 2012 taxes late Postal Service by the due date, or sent by an IRS-designated delivery service by the due date. Filing 2012 taxes late See Private delivery services in Publication 51 (Circular A). Filing 2012 taxes late Federal tax deposits can only be made by electronic funds transfer and are governed by legal holidays in the District of Columbia. Filing 2012 taxes late Statewide holidays no longer apply. Filing 2012 taxes late For a list of legal holidays that delay the due date of a federal tax deposit, see section 7 of Publication 51 (Circular A). Filing 2012 taxes late Fiscal year taxpayers. Filing 2012 taxes late  The due dates listed below apply whether you use a calendar or a fiscal year. Filing 2012 taxes late By January 31. Filing 2012 taxes late   File Form 943 with the IRS. Filing 2012 taxes late If you deposited all Form 943 taxes when due, you have 10 additional days to file. Filing 2012 taxes late Furnish each employee with a completed Form W-2, Wage and Tax Statement. Filing 2012 taxes late Furnish each recipient to whom you paid $600 or more in nonemployee compensation with a completed Form 1099 (for example, Form 1099-MISC). Filing 2012 taxes late File Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, with the IRS. Filing 2012 taxes late If you deposited all the FUTA tax when due, you have 10 additional days to file. Filing 2012 taxes late File Form 945, Annual Return of Withheld Federal Income Tax, with the IRS to report any nonpayroll income tax withheld during 2013. Filing 2012 taxes late If you deposited all Form 945 taxes when due, you have 10 additional days to file. Filing 2012 taxes late By February 15. Filing 2012 taxes late  Ask for a new Form W-4 or Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, from each employee who claimed exemption from federal income tax withholding last year. Filing 2012 taxes late On February 16. Filing 2012 taxes late  Any Form W-4 claiming exemption from withholding for the previous year has now expired. Filing 2012 taxes late Begin withholding for any employee who previously claimed exemption from withholding but has not given you a new Form W-4 for the current year. Filing 2012 taxes late If the employee does not give you a new Form W-4, withhold taxes based on the last valid Form W-4 you have for the employee that does not claim exemption from withholding or, if one does not exist, as if he or she is single with zero withholding allowances. Filing 2012 taxes late If the employee furnishes a new Form W-4 claiming exemption from withholding after February 15, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. Filing 2012 taxes late By February 28. Filing 2012 taxes late   File paper Forms 1099 and 1096. Filing 2012 taxes late File Copy A of all paper Forms 1099 with Form 1096, Annual Summary and Transmittal of U. Filing 2012 taxes late S. Filing 2012 taxes late Information Returns, with the IRS. Filing 2012 taxes late For electronically filed returns, see By March 31 below. Filing 2012 taxes late File paper Forms W-2 and W-3. Filing 2012 taxes late File Copy A of all paper Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration (SSA). Filing 2012 taxes late For electronically filed returns, see By March 31 below. Filing 2012 taxes late By March 31. Filing 2012 taxes late   File electronic Forms W-2 and 1099. Filing 2012 taxes late File electronic Forms W-2 with the SSA and Forms 1099 with the IRS. Filing 2012 taxes late For more information on reporting Form W-2 information to the SSA electronically, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. Filing 2012 taxes late socialsecurity. Filing 2012 taxes late gov/employer. Filing 2012 taxes late For information on filing information returns electronically with the IRS, see Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically. Filing 2012 taxes late By April 30, July 31, October 31, and January 31. Filing 2012 taxes late   Deposit FUTA taxes. Filing 2012 taxes late Deposit FUTA tax due if it is more than $500. Filing 2012 taxes late Before December 1. Filing 2012 taxes late  Remind employees to submit a new Form W-4 if their withholding allowances have changed or will change for the next year. Filing 2012 taxes late Introduction You are generally required to withhold federal income tax from the wages of your employees. Filing 2012 taxes late You may also be subject to social security and Medicare taxes under the Federal Insurance Contributions Act (FICA) and federal unemployment tax under the Federal Unemployment Tax Act (FUTA). Filing 2012 taxes late You must also withhold Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Filing 2012 taxes late This chapter includes information about these taxes. Filing 2012 taxes late You must also pay self-employment tax on your net earnings from farming. Filing 2012 taxes late See chapter 12 for information on self-employment tax. Filing 2012 taxes late Topics - This chapter discusses: Farm employment, Family employees, Crew leaders, Social security and Medicare taxes, Additional Medicare Tax withholding, Federal income tax withholding, Reporting and paying social security, Medicare, and withheld federal income taxes, and FUTA tax. Filing 2012 taxes late Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits 51 (Circular A), Agricultural Employer's Tax Guide 926 Household Employer's Tax Guide Form (and Instructions) W-2 Wage and Tax Statement W-4 Employee's Withholding Allowance Certificate W-9 Request for Taxpayer Identification Number and Certification 940 Employer's Annual Federal Unemployment (FUTA) Tax Return 943 Employer's Annual Federal Tax Return for Agricultural Employees 943-X Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund See chapter 16 for information about getting publications and forms. Filing 2012 taxes late Farm Employment In general, you are an employer of farmworkers if your employees do any of the following types of work. Filing 2012 taxes late Raising or harvesting agricultural or horticultural products on a farm, including raising and feeding of livestock. Filing 2012 taxes late Operating, managing, conserving, improving, or maintaining your farm and its tools and equipment. Filing 2012 taxes late Services performed in salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor). Filing 2012 taxes late Handling, processing, or packaging any agricultural or horticultural commodity if you produced more than half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity). Filing 2012 taxes late Work related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. Filing 2012 taxes late For more information, see Publication 51 (Circular A). Filing 2012 taxes late Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. Filing 2012 taxes late This is so even when you give the employee freedom of action. Filing 2012 taxes late What matters is that you have the right to control the details of how the services are performed. Filing 2012 taxes late You are responsible for withholding and paying employment taxes for your employees. Filing 2012 taxes late You are also required to file employment tax returns. Filing 2012 taxes late These requirements do not apply to amounts that you pay to independent contractors. Filing 2012 taxes late See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. Filing 2012 taxes late If you employ a family of workers, each worker subject to your control (not just the head of the family) is an employee. Filing 2012 taxes late Special rules apply to crew leaders. Filing 2012 taxes late See Crew Leaders , later. Filing 2012 taxes late Employer identification number (EIN). Filing 2012 taxes late   If you have employees, you must have an EIN. Filing 2012 taxes late If you do not have an EIN, you may apply for one online. Filing 2012 taxes late Go to IRS. Filing 2012 taxes late gov and click on the Apply for an EIN Online link under Tools. Filing 2012 taxes late You may also apply for an EIN by calling 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). Filing 2012 taxes late The hours of operation for both numbers are Monday–Friday form 7:00 a. Filing 2012 taxes late m. Filing 2012 taxes late –7:00 p. Filing 2012 taxes late m. Filing 2012 taxes late local time (Alaska and Hawaii follow Pacific time). Filing 2012 taxes late You can also fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. Filing 2012 taxes late Employee's social security number (SSN). Filing 2012 taxes late   An employee who does not have an SSN should submit Form SS-5, Application for a Social Security Card, to the Social Security Administration (SSA). Filing 2012 taxes late Form SS-5 is available from any SSA office or by calling 1-800-772-1213 (operates 24 hours per day). Filing 2012 taxes late It is also available from the SSA's website at www. Filing 2012 taxes late socialsecurity. Filing 2012 taxes late gov. Filing 2012 taxes late   The employee must furnish evidence of age, identity, and U. Filing 2012 taxes late S. Filing 2012 taxes late citizenship or lawful immigration status permitting employment with the Form SS-5. Filing 2012 taxes late An employee who is age 18 or older must appear in person with this evidence at an SSA office. Filing 2012 taxes late Form I-9. Filing 2012 taxes late    You must verify that each new employee is legally eligible to work in the United States. Filing 2012 taxes late This includes completing the Form I-9, Employment Eligibility Verification. Filing 2012 taxes late Form I-9 is available from the U. Filing 2012 taxes late S. Filing 2012 taxes late Citizenship and Immigration Services (USCIS) offices or by calling the Bureau of Citizenship and Immigration Services Forms Request Line at 1-800-870-3676. Filing 2012 taxes late Form I-9 is also available from the USCIS website at www. Filing 2012 taxes late uscis. Filing 2012 taxes late gov. Filing 2012 taxes late You can also contact the USCIS at 1-800-375-5283 for more information. Filing 2012 taxes late New hire reporting. Filing 2012 taxes late   You are required to report any new employee to a designated state new hire registry. Filing 2012 taxes late Many states accept a copy of Form W-4 with employer information added. Filing 2012 taxes late Visit the Office of Child Support Enforcement website at www. Filing 2012 taxes late acf. Filing 2012 taxes late hhs. Filing 2012 taxes late gov/programs/cse/newhire for more information. Filing 2012 taxes late Family Employees Generally, the wages you pay to family members who are your employees are subject to employment taxes. Filing 2012 taxes late However, certain exemptions may apply to wages paid to your child, spouse, or parent. Filing 2012 taxes late Exemptions for your child. Filing 2012 taxes late   Payments for the services of your child under age 18 who works for you in your trade or business (including a farm) are not subject to social security and Medicare taxes. Filing 2012 taxes late However, see Nonexempt services of a child or spouse , later. Filing 2012 taxes late Payments for the services of your child under age 21 employed by you in other than a trade or business, such as payments for household services in your home, are also not subject to social security or Medicare taxes. Filing 2012 taxes late Payments for the services of your child under age 21 employed by you, whether or not in your trade or business, are not subject to FUTA tax. Filing 2012 taxes late Although not subject to social security, Medicare, or FUTA tax, the child's wages still may be subject to federal income tax withholding. Filing 2012 taxes late Exemptions for your spouse. Filing 2012 taxes late   Payments for the services of your spouse who works for you in your trade or business are subject to federal income tax withholding and social security and Medicare taxes, but not FUTA tax. Filing 2012 taxes late   Payments for the services of your spouse employed by you in other than a trade or business, such as payments for household services in your home, are not subject to social security, Medicare, or FUTA taxes. Filing 2012 taxes late Nonexempt services of a child or spouse. Filing 2012 taxes late   Payments for the services of your child or spouse are subject to federal income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for any of the following entities. Filing 2012 taxes late A corporation, even if it is controlled by you. Filing 2012 taxes late A partnership, even if you are a partner. Filing 2012 taxes late This does not apply to wages paid to your child if each partner is a parent of the child. Filing 2012 taxes late An estate or trust, even if it is the estate of a deceased parent. Filing 2012 taxes late In these situations, the child or spouse is considered to work for the corporation, partnership, or estate, not you. Filing 2012 taxes late Exemptions for your parent. Filing 2012 taxes late   Payments for the services of your parent employed by you in your trade or business are subject to federal income tax withholding and social security and Medicare taxes. Filing 2012 taxes late Social security and Medicare taxes do not apply to wages paid to your parent for services not in your trade or business, but they do apply to payments for household services in your home if both the following conditions are satisfied. Filing 2012 taxes late You have a child living in your home who is under age 18 or has a physical or mental condition that requires care by an adult for at least 4 continuous weeks in a calendar quarter. Filing 2012 taxes late You are a widow or widower; or divorced and not remarried; or have a spouse in the home who, because of a physical or mental condition, cannot care for your child for at least 4 continuous weeks in the quarter. Filing 2012 taxes late   Wages you pay to your parent are not subject to FUTA tax, regardless of the type of services provided. Filing 2012 taxes late Qualified joint venture. Filing 2012 taxes late   If spouses elect to be treated as a qualified joint venture instead of a partnership, either spouse may report and pay the employment taxes due on the wages paid to employees using the EIN of that spouse's sole proprietorship. Filing 2012 taxes late For more information about qualified joint ventures, see chapter 12. Filing 2012 taxes late Crew Leaders If farmworkers are provided by a crew leader, the crew leader may be the employer of the workers. Filing 2012 taxes late Social security and Medicare taxes. Filing 2012 taxes late   For social security and Medicare tax purposes, the crew leader is the employer of the workers if both of the following requirements are met. Filing 2012 taxes late The crew leader pays (either on his or her own behalf or on behalf of the farmer) the workers for their farm labor. Filing 2012 taxes late The crew leader has not entered into a written agreement with the farmer under which the crew leader is designated as an employee of the farmer. Filing 2012 taxes late Federal income tax withholding. Filing 2012 taxes late   If the crew leader is the employer for social security and Medicare tax purposes, the crew leader is the employer for federal income tax withholding purposes. Filing 2012 taxes late Federal unemployment (FUTA) tax. Filing 2012 taxes late   For FUTA tax purposes, the crew leader is the employer of the workers if, in addition to the earlier requirements, either of the following requirements are met. Filing 2012 taxes late The crew leader is registered under the Migrant and Seasonal Agricultural Worker Protection Act. Filing 2012 taxes late Substantially all crew members operate or maintain mechanized equipment provided by the crew leader as part of the service to the farmer. Filing 2012 taxes late   The farmer is the employer of workers furnished by a crew leader in all other situations. Filing 2012 taxes late In addition, the farmer is the employer of workers furnished by a registered crew leader if the workers are the employees of the farmer under the common-law test. Filing 2012 taxes late For example, some farmers employ individuals to recruit farmworkers exclusively for them. Filing 2012 taxes late Although these individuals may be required to register under the Migrant and Seasonal Agricultural Worker Protection Act, the workers are employed directly by the farmer. Filing 2012 taxes late The farmer is the employer in these cases. Filing 2012 taxes late For information about common-law employees, see section 1 of Publication 15-A. Filing 2012 taxes late For information about crew leaders, see the Department of Labor website at www. Filing 2012 taxes late dol. Filing 2012 taxes late gov/whd/regs/compliance/whdfs49. Filing 2012 taxes late htm. Filing 2012 taxes late Social Security and Medicare Taxes All cash wages you pay to an employee during the year for farmwork are subject to social security and Medicare taxes if you meet either of the following tests. Filing 2012 taxes late You pay the employee $150 or more in cash wages (count all wages paid on a time, piecework, or other basis) during the year for farmwork (the $150 test). Filing 2012 taxes late The $150 test applies separately to each farmworker that you employ. Filing 2012 taxes late If you employ a family of workers, each member is treated separately. Filing 2012 taxes late Do not count wages paid by other employers. Filing 2012 taxes late You pay cash and noncash wages of $2,500 or more during the year to all your employees for farmwork (the $2,500 test). Filing 2012 taxes late If the $2,500 test for the group is not met, the $150 test for an employee still applies. Filing 2012 taxes late Exceptions. Filing 2012 taxes late   Annual cash wages of less than $150 you pay to a seasonal farmworker are not subject to social security and Medicare taxes, even if you pay $2,500 or more to all your farmworkers. Filing 2012 taxes late However, these wages count toward the $2,500 test for determining whether other farmworkers' wages are subject to social security and Medicare taxes. Filing 2012 taxes late   A seasonal farmworker is a worker who: Works as a hand-harvest laborer, Is paid piece rates in an operation usually paid on this basis in the region of employment, Commutes daily from his or her permanent home to the farm, and Worked in agriculture less than 13 weeks in the preceding calendar year. Filing 2012 taxes late   See Family Employees , earlier, for certain exemptions from social security and Medicare taxes that apply to your child, spouse, and parent. Filing 2012 taxes late Religious exemption. Filing 2012 taxes late   An exemption from social security and Medicare taxes is available to members of a recognized religious group or division opposed to public insurance. Filing 2012 taxes late This exemption is available only if both the employee and the employer are members of the group or division. Filing 2012 taxes late   For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Filing 2012 taxes late Cash wages. Filing 2012 taxes late   Only cash wages paid to farmworkers are subject to social security and Medicare taxes. Filing 2012 taxes late Cash wages include checks, money orders, and any kind of money or cash. Filing 2012 taxes late   Only cash wages subject to social security and Medicare taxes are credited to your employees for social security benefit purposes. Filing 2012 taxes late Payments not subject to these taxes, such as commodity wages, do not contribute to your employees' social security coverage. Filing 2012 taxes late For information about social security benefits, contact the SSA at 1-800-772-1213 or online at www. Filing 2012 taxes late socialsecurity. Filing 2012 taxes late gov. Filing 2012 taxes late Noncash wages. Filing 2012 taxes late    Noncash wages include food, lodging, clothing, transportation passes, and other goods and services. Filing 2012 taxes late Noncash wages paid to farmworkers, including commodity wages, are not subject to social security and Medicare taxes. Filing 2012 taxes late However, they are subject to these taxes if the substance of the transaction is a cash payment. Filing 2012 taxes late For information on lodging provided as a condition of employment, see Publication 15-B. Filing 2012 taxes late   Report the value of noncash wages in box 1 of Form W-2 together with cash wages. Filing 2012 taxes late Do not show noncash wages in box 3 or in box 5, (unless the substance of the transaction is a cash payment). Filing 2012 taxes late Tax rates and social security wage limit. Filing 2012 taxes late   For 2013, the employer and the employee will pay the following taxes. Filing 2012 taxes late The employer and employee each pay 6. Filing 2012 taxes late 2% of cash wages for social security tax (old-age, survivors, and disability insurance). Filing 2012 taxes late The employer and employee each pay 1. Filing 2012 taxes late 45% of cash wages for Medicare tax (hospital insurance). Filing 2012 taxes late The employee pays 0. Filing 2012 taxes late 9% of cash wages in excess of $200,000 for Additional Medicare Tax. Filing 2012 taxes late Wage limit. Filing 2012 taxes late   The limit on wages subject to the social security tax for 2013 is $113,700. Filing 2012 taxes late There is no limit on wages subject to the Medicare tax. Filing 2012 taxes late All covered wages are subject to the Medicare tax. Filing 2012 taxes late Additionally, all wages in excess of $200,000 are subject to Additional Medicare Tax withholding. Filing 2012 taxes late Paying employee's share. Filing 2012 taxes late   If you would rather pay the employee's share of social security and Medicare taxes without deducting it from his or her wages, you may do so. Filing 2012 taxes late It is additional income to the employee. Filing 2012 taxes late You must include it in box 1 of the employee's Form W-2, but do not count it as social security and Medicare wages (boxes 3 and 5 on Form W-2) or as wages for federal unemployment (FUTA) tax purposes. Filing 2012 taxes late Example. Filing 2012 taxes late Jane operates a small family fruit farm. Filing 2012 taxes late She employs day laborers in the picking season to enable her to timely get her crop to market. Filing 2012 taxes late She does not deduct the employees' share of social security and Medicare taxes from their pay; instead, she pays it on their behalf. Filing 2012 taxes late When her accountant, Susan, prepares the employees' Forms W-2, she adds each employee's share of social security and Medicare taxes paid by Jane to the employee's wage income (box 1 of Form W-2), but does not include it in box 3 (social security wages) or box 5 (Medicare wages and tips). Filing 2012 taxes late For 2013, Jane paid Mary $1,000 during the year. Filing 2012 taxes late Susan enters $1,076. Filing 2012 taxes late 50 in box 1 of Mary's Form W-2 ($1,000 wages plus $76. Filing 2012 taxes late 50 social security and Medicare taxes paid for Mary). Filing 2012 taxes late She enters $1,000 in boxes 3 and 5 of Mary's Form W-2. Filing 2012 taxes late Additional Medicare Tax. Filing 2012 taxes late   In addition to withholding Medicare tax at 1. Filing 2012 taxes late 45%, you must withhold a 0. Filing 2012 taxes late 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Filing 2012 taxes late You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Filing 2012 taxes late Additional Medicare Tax is only imposed on the employee. Filing 2012 taxes late There is no employer share of Additional Medicare Tax. Filing 2012 taxes late All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold. Filing 2012 taxes late   For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E). Filing 2012 taxes late For more information on Additional Medicare Tax, visit IRS. Filing 2012 taxes late gov and enter “Additional Medicare Tax” in the search box. Filing 2012 taxes late Federal Income Tax Withholding If the cash wages you pay to farmworkers are subject to social security and Medicare taxes, they are also subject to federal income tax withholding. Filing 2012 taxes late Although noncash wages are subject to federal income tax, withhold income tax only if you and the employee agree to do so. Filing 2012 taxes late The amount to withhold is figured on gross wages without taking out social security and Medicare taxes, union dues, insurance, etc. Filing 2012 taxes late Form W-4. Filing 2012 taxes late   Generally, the amount of federal income tax you withhold is based on the employee's marital status and withholding allowances claimed on the employee's Form W-4. Filing 2012 taxes late In general, an employee can claim withholding allowances on Form W-4 equal to the number of exemptions the employee will be entitled to claim on his or her tax return. Filing 2012 taxes late An employee may also be able to claim a special withholding allowance and allowances for estimated deductions and credits. Filing 2012 taxes late   Do not withhold federal income tax from the wages of an employee who, by filing Form W-4, certifies that he or she had no federal income tax liability last year and anticipates no liability for the current year. Filing 2012 taxes late   You should give each new employee a Form W-4 as soon as you hire the employee. Filing 2012 taxes late For Spanish-speaking employees, you may use Formulario W-4(SP) which is the Spanish translation of Form W-4. Filing 2012 taxes late Have the employee complete and return the form to you before the first payday. Filing 2012 taxes late If the employee does not return the completed form, you must withhold federal income tax as if the employee is single and claims no withholding allowances. Filing 2012 taxes late New Form W-4 for 2014. Filing 2012 taxes late   You should make the 2014 Form W-4 available to your employees and encourage them to check their income tax withholding for 2014. Filing 2012 taxes late Those employees who owed a large amount of tax or received a large refund for 2013 may want to submit a new Form W-4. Filing 2012 taxes late You cannot accept substitute Forms W-4 developed by employees. Filing 2012 taxes late How to figure withholding. Filing 2012 taxes late   You can use one of several methods to determine the amount to withhold. Filing 2012 taxes late The methods are described in Publication 51 (Circular A), which contains tables showing the correct amount of federal income tax you should withhold. Filing 2012 taxes late Publication 51 (Circular A) also contains additional information about federal income tax withholding. Filing 2012 taxes late Nonemployee compensation. Filing 2012 taxes late   Generally, you do not have to withhold federal income tax on payments for services to individuals who are not your employees. Filing 2012 taxes late However, you may be required to report these payments on Form 1099-MISC, Miscellaneous Income, and to withhold under the backup withholding rules. Filing 2012 taxes late For more information, see the Instructions for Form 1099-MISC. Filing 2012 taxes late Required Notice to Employees About Earned Income Credit (EIC) You must provide notification about EIC to each employee who worked for you at any time during the year and from whom you did not withhold any federal income tax. Filing 2012 taxes late However, you do not have to notify employees who claim exemption from federal income tax withholding on Form W-4. Filing 2012 taxes late You meet the notification requirement by giving each employee any of the following. Filing 2012 taxes late Form W-2, which contains EIC notification on the back of Copy B. Filing 2012 taxes late A substitute Form W-2 with the exact EIC wording shown on the back of copy B of Form W-2. Filing 2012 taxes late Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC). Filing 2012 taxes late Your own written statement with the exact wording of Notice 797. Filing 2012 taxes late For more information, see Publication 51 (Circular A). Filing 2012 taxes late Reporting and Paying Social Security, Medicare, and Withheld Federal Income Taxes You must withhold federal income, social security, and Medicare taxes required to be withheld from the salaries and wages of your employees. Filing 2012 taxes late You are liable for the payment of these taxes to the federal government whether or not you collect them from your employees. Filing 2012 taxes late If, for example, you withhold less than the correct tax from an employee's wages, you are still liable for the full amount. Filing 2012 taxes late You must also pay the employer's share of social security and Medicare taxes. Filing 2012 taxes late There is no employer share of Additional Medicare Tax. Filing 2012 taxes late Form 943. Filing 2012 taxes late   Report withheld federal income tax, social security tax, and Medicare tax on Form 943. Filing 2012 taxes late Your 2013 Form 943 is due by January 31, 2014 (or February 10, 2014, if you made deposits on time in full payment of the taxes due for the year). Filing 2012 taxes late Deposits. Filing 2012 taxes late   Generally, you must deposit both the employer and employee shares of social security and Medicare taxes and federal income tax withheld during the year. Filing 2012 taxes late However, you may make payments with Form 943 instead of depositing them if you accumulate less than a $2,500 tax liability (“Total taxes after adjustments” line on Form 943) during the year and you pay in full with a timely filed return. Filing 2012 taxes late   For more information on deposit rules, see Publication 51 (Circular A). Filing 2012 taxes late Electronic deposit requirement. Filing 2012 taxes late   You must use electronic funds transfer to make all federal tax deposits. Filing 2012 taxes late Generally, electronic funds transfers are made using EFTPS. Filing 2012 taxes late If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Filing 2012 taxes late Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Filing 2012 taxes late EFTPS is a free service provided by the Department of Treasury. Filing 2012 taxes late Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Filing 2012 taxes late   For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). Filing 2012 taxes late To get more information about EFTPS or to enroll in EFTPS, visit www. Filing 2012 taxes late eftps. Filing 2012 taxes late gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Filing 2012 taxes late Additional information about EFTPS is also available in Publication 966. Filing 2012 taxes late Form W-2. Filing 2012 taxes late   By January 31, you must furnish each employee a Form W-2 showing total wages for the previous year and total federal income tax, social security tax, and Medicare tax withheld. Filing 2012 taxes late However, if an employee stops working for you and requests the form earlier, you must give it to the employee within 30 days of the later of the following dates. Filing 2012 taxes late The date the employee requests the form. Filing 2012 taxes late The date you make your final payment of wages to the employee. Filing 2012 taxes late Compensation paid to H-2A visa holders. Filing 2012 taxes late   Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2. Filing 2012 taxes late Compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes, and therefore should not be reported as wages subject to social security tax (line 2), Medicare tax (line 4), or Additional Medicare Tax (line 6) on Form 943, and should not be reported as social security wages (box 3) or Medicare wages (box 5) on Form W-2. Filing 2012 taxes late   An employer is not required to withhold federal income tax from compensation it pays to an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. Filing 2012 taxes late In this case, the worker must give the employer a completed Form W-4. Filing 2012 taxes late Federal income tax withheld should be reported on Form 943, line 8, and in box 2 of Form W-2. Filing 2012 taxes late   These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. Filing 2012 taxes late For the rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945. Filing 2012 taxes late Trust fund recovery penalty. Filing 2012 taxes late   If you are responsible for withholding, accounting for, depositing, or paying federal withholding taxes and willfully fail to do so, you can be held liable for a penalty equal to the withheld tax not paid. Filing 2012 taxes late A responsible person can be an officer of a corporation, a partner, a sole proprietor, or an employee of any form of business. Filing 2012 taxes late A trustee or agent with authority over the funds of the business can also be held responsible for the penalty. Filing 2012 taxes late   Willfully means voluntarily, consciously, and intentionally. Filing 2012 taxes late Paying other expenses of the business instead of the taxes due is acting willfully. Filing 2012 taxes late Consequences of treating an employee as an independent contractor. Filing 2012 taxes late   If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker. Filing 2012 taxes late See Publication 15-A for more information. Filing 2012 taxes late Federal Unemployment (FUTA) Tax You must pay FUTA tax if you meet either of the following tests. Filing 2012 taxes late You paid cash wages of $20,000 or more to farmworkers in any calendar quarter during the current or preceding calendar year. Filing 2012 taxes late You employed 10 or more farmworkers for some part of at least 1 day during any 20 or more different calendar weeks during the current or preceding calendar year. Filing 2012 taxes late These rules do not apply to exempt services of your spouse, your parents, or your children under age 21. Filing 2012 taxes late See Family Employees , earlier. Filing 2012 taxes late Alien farmworkers. Filing 2012 taxes late   Wages paid to aliens admitted on a temporary basis to the United States to perform farmwork (also known as “H-2A visa workers”) are exempt from FUTA tax. Filing 2012 taxes late However, include your employment of these workers and the wages you paid them to determine whether you meet either of the above tests. Filing 2012 taxes late Commodity wages. Filing 2012 taxes late   Payments in kind for farm labor are not cash wages. Filing 2012 taxes late Do not count them to figure whether you are subject to FUTA tax or to figure how much tax you owe. Filing 2012 taxes late Tax rate and credit. Filing 2012 taxes late   The gross FUTA tax rate is 6. Filing 2012 taxes late 0% of the first $7,000 cash wages you pay to each employee during the year. Filing 2012 taxes late However, you are given a credit of up to 5. Filing 2012 taxes late 4% of the first $7,000 cash wages you pay to each employee for the state unemployment tax you pay. Filing 2012 taxes late If your state tax rate (experience rate) is less than 5. Filing 2012 taxes late 4%, you may still be allowed the full 5. Filing 2012 taxes late 4% credit. Filing 2012 taxes late   If you do not pay the state tax, you cannot take the credit. Filing 2012 taxes late If you are exempt from state unemployment tax for any reason, the full 6. Filing 2012 taxes late 0% rate applies. Filing 2012 taxes late See the Instructions for Form 940 for additional information. Filing 2012 taxes late More information. Filing 2012 taxes late   For more information on FUTA tax, see Publication 51 (Circular A). Filing 2012 taxes late Reporting and Paying FUTA Tax The FUTA tax is imposed on you as the employer. Filing 2012 taxes late It must not be collected or deducted from the wages of your employees. Filing 2012 taxes late Form 940. Filing 2012 taxes late   Report FUTA tax on Form 940. Filing 2012 taxes late The 2013 Form 940 is due January 31, 2014 (or February 10, 2014, if you timely deposited the full amount of your 2013 FUTA tax). Filing 2012 taxes late Deposits. Filing 2012 taxes late   If at the end of any calendar quarter you owe, but have not yet deposited, more than $500 in FUTA tax for the year, you must make a deposit by the end of the following month. Filing 2012 taxes late If the undeposited tax is $500 or less at the end of a quarter, you do not have to deposit it. Filing 2012 taxes late You can add it to the tax for the next quarter. Filing 2012 taxes late If the total undeposited tax is more than $500 at the end of the next quarter, a deposit will be required. Filing 2012 taxes late If the total undeposited tax at the end of the 4th quarter is $500 or less, you can either make a deposit or pay it with your return by the January 31, 2014, due date. Filing 2012 taxes late Electronic deposit requirement. Filing 2012 taxes late   You must use electronic funds transfer to make all federal tax deposits. Filing 2012 taxes late Generally, electronic funds transfers are made using EFTPS. Filing 2012 taxes late If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Filing 2012 taxes late Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Filing 2012 taxes late EFTPS is a free service provided by the Department of Treasury. Filing 2012 taxes late Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Filing 2012 taxes late   For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). Filing 2012 taxes late To get more information about EFTPS or to enroll in EFTPS, visit www. Filing 2012 taxes late eftps. Filing 2012 taxes late gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Filing 2012 taxes late Additional information about EFTPS is also available in Publication 966. Filing 2012 taxes late Prev  Up  Next   Home   More Online Publications
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The Filing 2012 Taxes Late

Filing 2012 taxes late 4. Filing 2012 taxes late   Transportation Table of Contents Parking fees. Filing 2012 taxes late Advertising display on car. Filing 2012 taxes late Car pools. Filing 2012 taxes late Hauling tools or instruments. Filing 2012 taxes late Union members' trips from a union hall. Filing 2012 taxes late Car ExpensesStandard Mileage Rate Actual Car Expenses Leasing a Car Disposition of a Car This chapter discusses expenses you can deduct for business transportation when you are not traveling away from home as defined in chapter 1. Filing 2012 taxes late These expenses include the cost of transportation by air, rail, bus, taxi, etc. Filing 2012 taxes late , and the cost of driving and maintaining your car. Filing 2012 taxes late Transportation expenses include the ordinary and necessary costs of all of the following. Filing 2012 taxes late Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Filing 2012 taxes late Tax home is defined in chapter 1. Filing 2012 taxes late Visiting clients or customers. Filing 2012 taxes late Going to a business meeting away from your regular workplace. Filing 2012 taxes late Getting from your home to a temporary workplace when you have one or more regular places of work. Filing 2012 taxes late These temporary workplaces can be either within the area of your tax home or outside that area. Filing 2012 taxes late Transportation expenses do not include expenses you have while traveling away from home overnight. Filing 2012 taxes late Those expenses are travel expenses discussed in chapter 1 . Filing 2012 taxes late However, if you use your car while traveling away from home overnight, use the rules in this chapter to figure your car expense deduction. Filing 2012 taxes late See Car Expenses , later. Filing 2012 taxes late Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses. Filing 2012 taxes late However, there may be exceptions to this general rule. Filing 2012 taxes late You can deduct daily transportation expenses incurred going between your residence and a temporary work station outside the metropolitan area where you live. Filing 2012 taxes late Also, daily transportation expenses can be deducted if: (1) you have one or more regular work locations away from your residence or (2) your residence is your principal place of business and you incur expenses going between the residence and another work location in the same trade or business, regardless of whether the work is temporary or permanent and regardless of the distance. Filing 2012 taxes late Illustration of transportation expenses. Filing 2012 taxes late    Figure B , earlier, illustrates the rules that apply for deducting transportation expenses when you have a regular or main job away from your home. Filing 2012 taxes late You may want to refer to it when deciding whether you can deduct your transportation expenses. Filing 2012 taxes late Temporary work location. Filing 2012 taxes late   If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance. Filing 2012 taxes late   If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise. Filing 2012 taxes late   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. Filing 2012 taxes late   If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. Filing 2012 taxes late It will not be treated as temporary after the date you determine it will last more than 1 year. Filing 2012 taxes late   If the temporary work location is beyond the general area of your regular place of work and you stay overnight, you are traveling away from home. Filing 2012 taxes late You may have deductible travel expenses as discussed in chapter 1 . Filing 2012 taxes late No regular place of work. Filing 2012 taxes late   If you have no regular place of work but ordinarily work in the metropolitan area where you live, you can deduct daily transportation costs between home and a temporary work site outside that metropolitan area. Filing 2012 taxes late   Generally, a metropolitan area includes the area within the city limits and the suburbs that are considered part of that metropolitan area. Filing 2012 taxes late   You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. Filing 2012 taxes late These are nondeductible commuting expenses. Filing 2012 taxes late Two places of work. Filing 2012 taxes late   If you work at two places in one day, whether or not for the same employer, you can deduct the expense of getting from one workplace to the other. Filing 2012 taxes late However, if for some personal reason you do not go directly from one location to the other, you cannot deduct more than the amount it would have cost you to go directly from the first location to the second. Filing 2012 taxes late   Transportation expenses you have in going between home and a part-time job on a day off from your main job are commuting expenses. Filing 2012 taxes late You cannot deduct them. Filing 2012 taxes late Armed Forces reservists. Filing 2012 taxes late   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. Filing 2012 taxes late You can deduct the expense of getting from one workplace to the other as just discussed under Two places of work . Filing 2012 taxes late   You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. Filing 2012 taxes late In this case, your transportation generally is a nondeductible commuting expense. Filing 2012 taxes late However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. Filing 2012 taxes late   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. Filing 2012 taxes late   If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. Filing 2012 taxes late These expenses are discussed in chapter 1 . Filing 2012 taxes late   If you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you may be able to deduct some of your reserve-related travel costs as an adjustment to gross income rather than as an itemized deduction. Filing 2012 taxes late For more information, see Armed Forces Reservists Traveling More Than 100 Miles From Home under Special Rules, in chapter 6. Filing 2012 taxes late Commuting expenses. Filing 2012 taxes late   You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. Filing 2012 taxes late These costs are personal commuting expenses. Filing 2012 taxes late You cannot deduct commuting expenses no matter how far your home is from your regular place of work. Filing 2012 taxes late You cannot deduct commuting expenses even if you work during the commuting trip. Filing 2012 taxes late Example. Filing 2012 taxes late You sometimes use your cell phone to make business calls while commuting to and from work. Filing 2012 taxes late Sometimes business associates ride with you to and from work, and you have a business discussion in the car. Filing 2012 taxes late These activities do not change the trip from personal to business. Filing 2012 taxes late You cannot deduct your commuting expenses. Filing 2012 taxes late Parking fees. Filing 2012 taxes late    Fees you pay to park your car at your place of business are nondeductible commuting expenses. Filing 2012 taxes late You can, however, deduct business-related parking fees when visiting a customer or client. Filing 2012 taxes late Advertising display on car. Filing 2012 taxes late   Putting display material that advertises your business on your car does not change the use of your car from personal use to business use. Filing 2012 taxes late If you use this car for commuting or other personal uses, you still cannot deduct your expenses for those uses. Filing 2012 taxes late Car pools. Filing 2012 taxes late   You cannot deduct the cost of using your car in a nonprofit car pool. Filing 2012 taxes late Do not include payments you receive from the passengers in your income. Filing 2012 taxes late These payments are considered reimbursements of your expenses. Filing 2012 taxes late However, if you operate a car pool for a profit, you must include payments from passengers in your income. Filing 2012 taxes late You can then deduct your car expenses (using the rules in this publication). Filing 2012 taxes late Hauling tools or instruments. Filing 2012 taxes late   Hauling tools or instruments in your car while commuting to and from work does not make your car expenses deductible. Filing 2012 taxes late However, you can deduct any additional costs you have for hauling tools or instruments (such as for renting a trailer you tow with your car). Filing 2012 taxes late Union members' trips from a union hall. Filing 2012 taxes late   If you get your work assignments at a union hall and then go to your place of work, the costs of getting from the union hall to your place of work are nondeductible commuting expenses. Filing 2012 taxes late Although you need the union to get your work assignments, you are employed where you work, not where the union hall is located. Filing 2012 taxes late Office in the home. Filing 2012 taxes late   If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. Filing 2012 taxes late (See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Filing 2012 taxes late ) Examples of deductible transportation. Filing 2012 taxes late   The following examples show when you can deduct transportation expenses based on the location of your work and your home. Filing 2012 taxes late Example 1. Filing 2012 taxes late You regularly work in an office in the city where you live. Filing 2012 taxes late Your employer sends you to a 1-week training session at a different office in the same city. Filing 2012 taxes late You travel directly from your home to the training location and return each day. Filing 2012 taxes late You can deduct the cost of your daily round-trip transportation between your home and the training location. Filing 2012 taxes late Example 2. Filing 2012 taxes late Your principal place of business is in your home. Filing 2012 taxes late You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business. Filing 2012 taxes late Example 3. Filing 2012 taxes late You have no regular office, and you do not have an office in your home. Filing 2012 taxes late In this case, the location of your first business contact inside the metropolitan area is considered your office. Filing 2012 taxes late Transportation expenses between your home and this first contact are nondeductible commuting expenses. Filing 2012 taxes late Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. Filing 2012 taxes late While you cannot deduct the costs of these trips, you can deduct the costs of going from one client or customer to another. Filing 2012 taxes late Car Expenses If you use your car for business purposes, you ordinarily can deduct car expenses. Filing 2012 taxes late You generally can use one of the two following methods to figure your deductible expenses. Filing 2012 taxes late Standard mileage rate. Filing 2012 taxes late Actual car expenses. Filing 2012 taxes late If you use actual expenses to figure your deduction for a car you lease, there are rules that affect the amount of your lease payments you can deduct. Filing 2012 taxes late See Leasing a Car , later. Filing 2012 taxes late In this publication, “car” includes a van, pickup, or panel truck. Filing 2012 taxes late For the definition of “car” for depreciation purposes, see Car defined under Actual Car Expenses, later. Filing 2012 taxes late Rural mail carriers. Filing 2012 taxes late   If you are a rural mail carrier, you may be able to treat the qualified reimbursement you received as your allowable expense. Filing 2012 taxes late Because the qualified reimbursement is treated as paid under an accountable plan, your employer should not include the reimbursement in your income. Filing 2012 taxes late   If your vehicle expenses are more than the amount of your reimbursement, you can deduct the unreimbursed expenses as an itemized deduction on Schedule A (Form 1040). Filing 2012 taxes late You must complete Form 2106 and attach it to your Form 1040, U. Filing 2012 taxes late S. Filing 2012 taxes late Individual Income Tax Return. Filing 2012 taxes late   A “qualified reimbursement” is the reimbursement you receive that meets both of the following conditions. Filing 2012 taxes late It is given as an equipment maintenance allowance (EMA) to employees of the U. Filing 2012 taxes late S. Filing 2012 taxes late Postal Service. Filing 2012 taxes late It is at the rate contained in the 1991 collective bargaining agreement. Filing 2012 taxes late Any later agreement cannot increase the qualified reimbursement amount by more than the rate of inflation. Filing 2012 taxes late See your employer for information on your reimbursement. Filing 2012 taxes late    If you are a rural mail carrier and received a qualified reimbursement, you cannot use the standard mileage rate. Filing 2012 taxes late Standard Mileage Rate You may be able to use the standard mileage rate to figure the deductible costs of operating your car for business purposes. Filing 2012 taxes late For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Filing 2012 taxes late If you use the standard mileage rate for a year, you cannot deduct your actual car expenses for that year. Filing 2012 taxes late You cannot deduct depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance, or vehicle registration fees. Filing 2012 taxes late See Choosing the standard mileage rate and Standard mileage rate not allowed, later. Filing 2012 taxes late You generally can use the standard mileage rate whether or not you are reimbursed and whether or not any reimbursement is more or less than the amount figured using the standard mileage rate. Filing 2012 taxes late See chapter 6 for more information on reimbursements . Filing 2012 taxes late Choosing the standard mileage rate. Filing 2012 taxes late   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Filing 2012 taxes late Then, in later years, you can choose to use either the standard mileage rate or actual expenses. Filing 2012 taxes late   If you want to use the standard mileage rate for a car you lease, you must use it for the entire lease period. Filing 2012 taxes late For leases that began on or before December 31, 1997, the standard mileage rate must be used for the entire portion of the lease period (including renewals) that is after 1997. Filing 2012 taxes late   You must make the choice to use the standard mileage rate by the due date (including extensions) of your return. Filing 2012 taxes late You cannot revoke the choice. Filing 2012 taxes late However, in later years, you can switch from the standard mileage rate to the actual expenses method. Filing 2012 taxes late If you change to the actual expenses method in a later year, but before your car is fully depreciated, you have to estimate the remaining useful life of the car and use straight line depreciation. Filing 2012 taxes late Example. Filing 2012 taxes late Larry is an employee who occasionally uses his own car for business purposes. Filing 2012 taxes late He purchased the car in 2011, but he did not claim any unreimbursed employee expenses on his 2011 tax return. Filing 2012 taxes late Because Larry did not use the standard mileage rate the first year the car was available for business use, he cannot use the standard mileage rate in 2013 to claim unreimbursed employee business expenses. Filing 2012 taxes late   For more information about depreciation included in the standard mileage rate, see Exception under Methods of depreciation, later. Filing 2012 taxes late Standard mileage rate not allowed. Filing 2012 taxes late   You cannot use the standard mileage rate if you: Use five or more cars at the same time (such as in fleet operations), Claimed a depreciation deduction for the car using any method other than straight line, for example, MACRS (as discussed later under Depreciation Deduction), Claimed a section 179 deduction (discussed later) on the car, Claimed the special depreciation allowance on the car, Claimed actual car expenses after 1997 for a car you leased, or Are a rural mail carrier who received a qualified reimbursement. Filing 2012 taxes late (See Rural mail carriers , earlier. Filing 2012 taxes late ) Note. Filing 2012 taxes late You can elect to use the standard mileage rate if you used a car for hire (such as a taxi) unless the standard mileage rate is otherwise not allowed, as discussed above. Filing 2012 taxes late Five or more cars. Filing 2012 taxes late   If you own or lease five or more cars that are used for business at the same time, you cannot use the standard mileage rate for the business use of any car. Filing 2012 taxes late However, you may be able to deduct your actual expenses for operating each of the cars in your business. Filing 2012 taxes late See Actual Car Expenses , later, for information on how to figure your deduction. Filing 2012 taxes late   You are not using five or more cars for business at the same time if you alternate using (use at different times) the cars for business. Filing 2012 taxes late   The following examples illustrate the rules for when you can and cannot use the standard mileage rate for five or more cars. Filing 2012 taxes late Example 1. Filing 2012 taxes late Marcia, a salesperson, owns three cars and two vans that she alternates using for calling on her customers. Filing 2012 taxes late She can use the standard mileage rate for the business mileage of the three cars and the two vans because she does not use them at the same time. Filing 2012 taxes late Example 2. Filing 2012 taxes late Tony and his employees use his four pickup trucks in his landscaping business. Filing 2012 taxes late During the year, he traded in two of his old trucks for two newer ones. Filing 2012 taxes late Tony can use the standard mileage rate for the business mileage of all six of the trucks he owned during the year. Filing 2012 taxes late Example 3. Filing 2012 taxes late Chris owns a repair shop and an insurance business. Filing 2012 taxes late He and his employees use his two pickup trucks and van for the repair shop. Filing 2012 taxes late Chris alternates using his two cars for the insurance business. Filing 2012 taxes late No one else uses the cars for business purposes. Filing 2012 taxes late Chris can use the standard mileage rate for the business use of the pickup trucks, van, and the cars because he never has more than four vehicles used for business at the same time. Filing 2012 taxes late Example 4. Filing 2012 taxes late Maureen owns a car and four vans that are used in her housecleaning business. Filing 2012 taxes late Her employees use the vans, and she uses the car to travel to various customers. Filing 2012 taxes late Maureen cannot use the standard mileage rate for the car or the vans. Filing 2012 taxes late This is because all five vehicles are used in Maureen's business at the same time. Filing 2012 taxes late She must use actual expenses for all vehicles. Filing 2012 taxes late Interest. Filing 2012 taxes late   If you are an employee, you cannot deduct any interest paid on a car loan. Filing 2012 taxes late This applies even if you use the car 100% for business as an employee. Filing 2012 taxes late   However, if you are self-employed and use your car in your business, you can deduct that part of the interest expense that represents your business use of the car. Filing 2012 taxes late For example, if you use your car 60% for business, you can deduct 60% of the interest on Schedule C (Form 1040). Filing 2012 taxes late You cannot deduct the part of the interest expense that represents your personal use of the car. Filing 2012 taxes late    If you use a home equity loan to purchase your car, you may be able to deduct the interest. Filing 2012 taxes late See Publication 936, Home Mortgage Interest Deduction, for more information. Filing 2012 taxes late Personal property taxes. Filing 2012 taxes late   If you itemize your deductions on Schedule A (Form 1040), you can deduct on line 7 state and local personal property taxes on motor vehicles. Filing 2012 taxes late You can take this deduction even if you use the standard mileage rate or if you do not use the car for business. Filing 2012 taxes late   If you are self-employed and use your car in your business, you can deduct the business part of state and local personal property taxes on motor vehicles on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). Filing 2012 taxes late If you itemize your deductions, you can include the remainder of your state and local personal property taxes on the car on Schedule A (Form 1040). Filing 2012 taxes late Parking fees and tolls. Filing 2012 taxes late   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. Filing 2012 taxes late (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. Filing 2012 taxes late ) Sale, trade-in, or other disposition. Filing 2012 taxes late   If you sell, trade in, or otherwise dispose of your car, you may have a gain or loss on the transaction or an adjustment to the basis of your new car. Filing 2012 taxes late See Disposition of a Car , later. Filing 2012 taxes late Actual Car Expenses If you do not use the standard mileage rate, you may be able to deduct your actual car expenses. Filing 2012 taxes late If you qualify to use both methods, you may want to figure your deduction both ways to see which gives you a larger deduction. Filing 2012 taxes late Actual car expenses include: Depreciation Licenses Lease  payments Registration  fees Gas Insurance Repairs Oil Garage rent Tires Tolls Parking fees   If you have fully depreciated a car that you still use in your business, you can continue to claim your other actual car expenses. Filing 2012 taxes late Continue to keep records, as explained later in chapter 5 . Filing 2012 taxes late Business and personal use. Filing 2012 taxes late   If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. Filing 2012 taxes late You can divide your expense based on the miles driven for each purpose. Filing 2012 taxes late Example. Filing 2012 taxes late You are a sales representative for a clothing firm and drive your car 20,000 miles during the year: 12,000 miles for business and 8,000 miles for personal use. Filing 2012 taxes late You can claim only 60% (12,000 ÷ 20,000) of the cost of operating your car as a business expense. Filing 2012 taxes late Employer-provided vehicle. Filing 2012 taxes late   If you use a vehicle provided by your employer for business purposes, you can deduct your actual unreimbursed car expenses. Filing 2012 taxes late You cannot use the standard mileage rate. Filing 2012 taxes late See Vehicle Provided by Your Employer in chapter 6. Filing 2012 taxes late Interest on car loans. Filing 2012 taxes late   If you are an employee, you cannot deduct any interest paid on a car loan. Filing 2012 taxes late This interest is treated as personal interest and is not deductible. Filing 2012 taxes late If you are self-employed and use your car in that business, see Interest , earlier, under Standard Mileage Rate. Filing 2012 taxes late Taxes paid on your car. Filing 2012 taxes late   If you are an employee, you can deduct personal property taxes paid on your car if you itemize deductions. Filing 2012 taxes late Enter the amount paid on line 7 of Schedule A (Form 1040). Filing 2012 taxes late Sales taxes. Filing 2012 taxes late   Generally, sales taxes on your car are part of your car's basis and are recovered through depreciation, discussed later. Filing 2012 taxes late Fines and collateral. Filing 2012 taxes late   You cannot deduct fines you pay or collateral you forfeit for traffic violations. Filing 2012 taxes late Casualty and theft losses. Filing 2012 taxes late   If your car is damaged, destroyed, or stolen, you may be able to deduct part of the loss not covered by insurance. Filing 2012 taxes late See Publication 547, Casualties, Disasters, and Thefts, for information on deducting a loss on your car. Filing 2012 taxes late Depreciation and section 179 deductions. Filing 2012 taxes late   Generally, the cost of a car, plus sales tax and improvements, is a capital expense. Filing 2012 taxes late Because the benefits last longer than 1 year, you generally cannot deduct a capital expense. Filing 2012 taxes late However, you can recover this cost through the section 179 deduction (the deduction allowed by section 179 of the Internal Revenue Code), special depreciation allowance, and depreciation deductions. Filing 2012 taxes late Depreciation allows you to recover the cost over more than 1 year by deducting part of it each year. Filing 2012 taxes late The section 179 deduction , special depreciation allowance , and depreciation deductions are discussed later. Filing 2012 taxes late   Generally, there are limits on these deductions. Filing 2012 taxes late Special rules apply if you use your car 50% or less in your work or business. Filing 2012 taxes late   You can claim a section 179 deduction and use a depreciation method other than straight line only if you do not use the standard mileage rate to figure your business-related car expenses in the year you first place a car in service. Filing 2012 taxes late   If, in the year you first place a car in service, you claim either a section 179 deduction or use a depreciation method other than straight line for its estimated useful life, you cannot use the standard mileage rate on that car in any future year. Filing 2012 taxes late Car defined. Filing 2012 taxes late   For depreciation purposes, a car is any four-wheeled vehicle (including a truck or van) made primarily for use on public streets, roads, and highways. Filing 2012 taxes late Its unloaded gross vehicle weight must not be more than 6,000 pounds. Filing 2012 taxes late A car includes any part, component, or other item physically attached to it or usually included in the purchase price. Filing 2012 taxes late   A car does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a business, A vehicle used directly in the business of transporting persons or property for pay or hire, or A truck or van that is a qualified nonpersonal use vehicle. Filing 2012 taxes late Qualified nonpersonal use vehicles. Filing 2012 taxes late   These are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Filing 2012 taxes late They include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Filing 2012 taxes late Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat, are qualified nonpersonal use vehicles. Filing 2012 taxes late More information. Filing 2012 taxes late   See Depreciation Deduction , later, for more information on how to depreciate your vehicle. Filing 2012 taxes late Section 179 Deduction The section 179 deduction allows you to treat a portion or all of the cost of a car as a current expense. Filing 2012 taxes late If you choose to deduct all or part of the cost as a current expense, you must reduce your depreciable basis in the car by the amount of the section 179 deduction. Filing 2012 taxes late There is a limit on the total section 179 deduction, special depreciation allowance, and depreciation deduction for cars, trucks, and vans that may reduce or eliminate any benefit from claiming the section 179 deduction. Filing 2012 taxes late See Depreciation Limits, later. Filing 2012 taxes late You can claim the section 179 deduction only in the year you place the car in service. Filing 2012 taxes late For this purpose, a car is placed in service when it is ready and available for a specifically assigned use, whether in a trade or business, a tax-exempt activity, a personal activity, or for the production of income. Filing 2012 taxes late Even if you are not using the property, it is in service when it is ready and available for its specifically assigned use. Filing 2012 taxes late A car first used for personal purposes cannot qualify for the deduction in a later year when its use changes to business. Filing 2012 taxes late Example. Filing 2012 taxes late In 2012, you bought a new car and used it for personal purposes. Filing 2012 taxes late In 2013, you began to use it for business. Filing 2012 taxes late Changing its use to business use does not qualify the cost of your car for a section 179 deduction in 2013. Filing 2012 taxes late However, you can claim a depreciation deduction for the business use of the car starting in 2013. Filing 2012 taxes late See Depreciation Deduction , later. Filing 2012 taxes late More than 50% business use requirement. Filing 2012 taxes late   You must use the property more than 50% for business to claim any section 179 deduction. Filing 2012 taxes late If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. Filing 2012 taxes late The result is the cost of the property that can qualify for the section 179 deduction. Filing 2012 taxes late Example. Filing 2012 taxes late Peter purchased a car in April 2013 for $24,500 and used it 60% for business. Filing 2012 taxes late Based on his business usage, the total cost of Peter's car that qualifies for the section 179 deduction is $14,700 ($24,500 cost × 60% business use). Filing 2012 taxes late But see Limit on total section 179, special depreciation allowance, and depreciation deduction , discussed later. Filing 2012 taxes late Limits. Filing 2012 taxes late   There are limits on: The amount of the section 179 deduction, The section 179 deduction for sport utility and certain other vehicles, and The total amount of the section 179 deduction, special depreciation allowance, and depreciation deduction (discussed later ) you can claim for a qualified property. Filing 2012 taxes late Limit on the amount of the section 179 deduction. Filing 2012 taxes late   For 2013, the total amount you can choose to deduct under section 179 generally cannot be more than $500,000. Filing 2012 taxes late   If the cost of your section 179 property placed in service in 2013 is over $2,000,000, you must reduce the $500,000 dollar limit (but not below zero) by the amount of cost over $2,000,000. Filing 2012 taxes late If the cost of your section 179 property placed in service during 2013 is $2,500,000 or more, you cannot take a section 179 deduction. Filing 2012 taxes late   The total amount you can deduct under section 179 each year after you apply the limits listed above cannot be more than the taxable income from the active conduct of any trade or business during the year. Filing 2012 taxes late   If you are married and file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service. Filing 2012 taxes late   If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit. Filing 2012 taxes late You must allocate the dollar limit (after any reduction) between you. Filing 2012 taxes late   For more information on the above section 179 deduction limits, see Publication 946. Filing 2012 taxes late Limit for sport utility and certain other vehicles. Filing 2012 taxes late   For sport utility and certain other vehicles placed in service in 2013, the portion of the vehicle's cost taken into account in figuring your section 179 deduction is limited to $25,000. Filing 2012 taxes late This rule applies to any four-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways, that is not subject to any of the passenger automobile limits explained under Depreciation Limits , later, and that is rated at no more than 14,000 pounds gross vehicle weight. Filing 2012 taxes late However, the $25,000 limit does not apply to any vehicle: Designed to have a seating capacity of more than nine persons behind the driver's seat, Equipped with a cargo area of at least 6 feet in interior length that is an open area or is designed for use as an open area but is enclosed by a cap and is not readily accessible directly from the passenger compartment, or That has an integral enclosure, fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield. Filing 2012 taxes late    Limit on total section 179, special depreciation allowance, and depreciation deduction. Filing 2012 taxes late   Generally, the total amount of section 179, special depreciation allowance, and depreciation deduction you can claim for a car that is qualified property and that you placed in service in 2013 is $11,160. Filing 2012 taxes late The limit is reduced if your business use of the car is less than 100%. Filing 2012 taxes late See Depreciation Limits , later, for more information. Filing 2012 taxes late Example. Filing 2012 taxes late In the earlier example under More than 50% business use requirement, Peter had a car with a cost (for purposes of the section 179 deduction) of $14,700. Filing 2012 taxes late However, based on Peter's business usage of his car, the total of his section 179, special depreciation allowance, and depreciation deductions is limited to $6,696 ($11,160 limit x 60% business use). Filing 2012 taxes late Cost of car. Filing 2012 taxes late   For purposes of the section 179 deduction, the cost of the car does not include any amount figured by reference to any other property held by you at any time. Filing 2012 taxes late For example, if you buy (for cash and a trade-in) a new car to use in your business, your cost for purposes of the section 179 deduction does not include your adjusted basis in the car you trade in for the new car. Filing 2012 taxes late Your cost includes only the cash you paid. Filing 2012 taxes late Basis of car for depreciation. Filing 2012 taxes late   The amount of the section 179 deduction reduces your basis in your car. Filing 2012 taxes late If you choose the section 179 deduction, you must subtract the amount of the deduction from the cost of your car. Filing 2012 taxes late The resulting amount is the basis in your car you use to figure your depreciation deduction. Filing 2012 taxes late When to choose. Filing 2012 taxes late   If you want to take the section 179 deduction, you must make the choice in the tax year you place the car in service for business or work. Filing 2012 taxes late How to choose. Filing 2012 taxes late    Employees use Form 2106 to make this choice and report the section 179 deduction. Filing 2012 taxes late All others use Form 4562. Filing 2012 taxes late   File the appropriate form with either of the following. Filing 2012 taxes late Your original tax return filed for the year the property was placed in service (whether or not you file it timely). Filing 2012 taxes late An amended return filed within the time prescribed by law. Filing 2012 taxes late An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. Filing 2012 taxes late The amended return must also include any resulting adjustments to taxable income. Filing 2012 taxes late    You must keep records that show the specific identification of each piece of qualifying section 179 property. Filing 2012 taxes late These records must show how you acquired the property, the person you acquired it from, and when you placed it in service. Filing 2012 taxes late Revoking an election. Filing 2012 taxes late   An election (or any specification made in the election) to take a section 179 deduction for 2013 can only be revoked with the Commissioner's approval. Filing 2012 taxes late Recapture of section 179 deduction. Filing 2012 taxes late   To be eligible to claim the section 179 deduction, you must use your car more than 50% for business or work in the year you acquired it. Filing 2012 taxes late If your business use of the car is 50% or less in a later tax year during the recovery period, you have to recapture (include in income) in that later year any excess depreciation. Filing 2012 taxes late Any section 179 deduction claimed on the car is included in calculating the excess depreciation. Filing 2012 taxes late For information on this calculation, see Excess depreciation , later in this chapter under Car Used 50% or Less for Business. Filing 2012 taxes late Dispositions. Filing 2012 taxes late   If you dispose of a car on which you had claimed the section 179 deduction, the amount of that deduction is treated as a depreciation deduction for recapture purposes. Filing 2012 taxes late You treat any gain on the disposition of the property as ordinary income up to the amount of the section 179 deduction and any allowable depreciation (unless you establish the amount actually allowed). Filing 2012 taxes late For information on the disposition of a car, see Disposition of a Car , later. Filing 2012 taxes late Special Depreciation Allowance You may be able to claim the special depreciation allowance for your car, truck, or van, if it is qualified property and was placed in service in 2013. Filing 2012 taxes late The allowance is an additional depreciation deduction of 50% of the car's depreciable basis (after any section 179 deduction, but before figuring your regular depreciation deduction under MACRS). Filing 2012 taxes late The special depreciation allowance applies only for the first year the car is placed in service. Filing 2012 taxes late To qualify for the allowance more than 50% of the use of the car must be in a qualified business use (as defined under Depreciation Deduction, later). Filing 2012 taxes late Combined depreciation. Filing 2012 taxes late   Your combined section 179 deduction, special depreciation allowance, and regular MACRS depreciation deduction is limited to the maximum allowable depreciation deduction for cars of $11,160 ($3,160 if you elect not to claim the special depreciation allowance). Filing 2012 taxes late For trucks and vans, the first-year limit remains at $11,360 ($3,360 if you elect not to claim the special depreciation allowance). Filing 2012 taxes late See Depreciation Limits , later in this chapter. Filing 2012 taxes late Qualified car. Filing 2012 taxes late   To be a qualified car (including trucks and vans), the car must meet all of the following tests. Filing 2012 taxes late You purchased the car new on or after January 1, 2008, but only if no binding written contract to acquire the car existed before January 1, 2008, You placed the car in service in your trade or business before January 1, 2014, You used the car more than 50% in a qualified business use. Filing 2012 taxes late Election not to claim the special depreciation allowance. Filing 2012 taxes late   You can elect not to claim the special depreciation allowance for your car, truck, or van, that is qualified property. Filing 2012 taxes late If you make this election, it applies to all 5-year property placed in service during the year. Filing 2012 taxes late   To make the election, attach a statement to your timely filed return (including extensions) indicating the class of property (5-year for cars) for which you are making the election and that you are electing not to claim the special depreciation allowance for qualified property acquired on or after January 1, 2008. Filing 2012 taxes late    Unless you elect not to claim the special depreciation allowance, you must reduce the car's adjusted basis by the amount of the allowance, even if the allowance was not claimed. Filing 2012 taxes late Depreciation Deduction If you use actual car expenses to figure your deduction for a car you own and use in your business, you can claim a depreciation deduction. Filing 2012 taxes late This means you can deduct a certain amount each year as a recovery of your cost or other basis in your car. Filing 2012 taxes late You generally need to know the following things about the car you intend to depreciate. Filing 2012 taxes late Your basis in the car. Filing 2012 taxes late The date you place the car in service. Filing 2012 taxes late The method of depreciation and recovery period you will use. Filing 2012 taxes late Basis. Filing 2012 taxes late   Your basis in a car for figuring depreciation is generally its cost. Filing 2012 taxes late This includes any amount you borrow or pay in cash, other property, or services. Filing 2012 taxes late   Generally, you figure depreciation on your car, truck, or van using your unadjusted basis (see Unadjusted basis , later). Filing 2012 taxes late However, in some situations you will use your adjusted basis (your basis reduced by depreciation allowed or allowable in earlier years). Filing 2012 taxes late For one of these situations see Exception under Methods of depreciation, later. Filing 2012 taxes late   If you change the use of a car from personal to business, your basis for depreciation is the lesser of the fair market value or your adjusted basis in the car on the date of conversion. Filing 2012 taxes late Additional rules concerning basis are discussed later in this chapter under Unadjusted basis . Filing 2012 taxes late Placed in service. Filing 2012 taxes late   You generally place a car in service when it is available for use in your work or business, in an income-producing activity, or in a personal activity. Filing 2012 taxes late Depreciation begins when the car is placed in service for use in your work or business or for the production of income. Filing 2012 taxes late   For purposes of computing depreciation, if you first start using the car only for personal use and later convert it to business use, you place the car in service on the date of conversion. Filing 2012 taxes late Car placed in service and disposed of in the same year. Filing 2012 taxes late   If you place a car in service and dispose of it in the same tax year, you cannot claim any depreciation deduction for that car. Filing 2012 taxes late Methods of depreciation. Filing 2012 taxes late   Generally, you figure depreciation on cars using the Modified Accelerated Cost Recovery System (MACRS). Filing 2012 taxes late MACRS is discussed later in this chapter. Filing 2012 taxes late Exception. Filing 2012 taxes late   If you used the standard mileage rate in the first year of business use and change to the actual expenses method in a later year, you cannot depreciate your car under the MACRS rules. Filing 2012 taxes late You must use straight line depreciation over the estimated remaining useful life of the car. Filing 2012 taxes late   To figure depreciation under the straight line method, you must reduce your basis in the car (but not below zero) by a set rate per mile for all miles for which you used the standard mileage rate. Filing 2012 taxes late The rate per mile varies depending on the year(s) you used the standard mileage rate. Filing 2012 taxes late For the rate(s) to use, see Depreciation adjustment when you used the standard mileage rate under Disposition of a Car, later. Filing 2012 taxes late   This reduction of basis is in addition to those basis adjustments described later under Unadjusted basis . Filing 2012 taxes late You must use your adjusted basis in your car to figure your depreciation deduction. Filing 2012 taxes late For additional information on the straight line method of depreciation, see Publication 946. Filing 2012 taxes late More-than-50%-use test. Filing 2012 taxes late   Generally, you must use your car more than 50% for qualified business use (defined next) during the year to use MACRS. Filing 2012 taxes late You must meet this more-than-50%-use test each year of the recovery period (6 years under MACRS) for your car. Filing 2012 taxes late   If your business use is 50% or less, you must use the straight line method to depreciate your car. Filing 2012 taxes late This is explained later under Car Used 50% or Less for Business . Filing 2012 taxes late Qualified business use. Filing 2012 taxes late   A qualified business use is any use in your trade or business. Filing 2012 taxes late It does not include use for the production of income (investment use). Filing 2012 taxes late However, you do combine your business and investment use to compute your depreciation deduction for the tax year. Filing 2012 taxes late Use of your car by another person. Filing 2012 taxes late   Do not treat any use of your car by another person as use in your trade or business unless that use meets one of the following conditions. Filing 2012 taxes late It is directly connected with your business. Filing 2012 taxes late It is properly reported by you as income to the other person (and, if you have to, you withhold tax on the income). Filing 2012 taxes late It results in a payment of fair market rent. Filing 2012 taxes late This includes any payment to you for the use of your car. Filing 2012 taxes late Business use changes. Filing 2012 taxes late   If you used your car more than 50% in qualified business use in the year you placed it in service, but 50% or less in a later year (including the year of disposition), you have to change to the straight line method of depreciation. Filing 2012 taxes late See Qualified business use 50% or less in a later year under Car Used 50% or Less for Business, later. Filing 2012 taxes late    Property does not cease to be used more than 50% in qualified business use by reason of a transfer at death. Filing 2012 taxes late Use for more than one purpose. Filing 2012 taxes late   If you use your car for more than one purpose during the tax year, you must allocate the use to the various purposes. Filing 2012 taxes late You do this on the basis of mileage. Filing 2012 taxes late Figure the percentage of qualified business use by dividing the number of miles you drive your car for business purposes during the year by the total number of miles you drive the car during the year for any purpose. Filing 2012 taxes late Change from personal to business use. Filing 2012 taxes late   If you change the use of a car from 100% personal use to business use during the tax year, you may not have mileage records for the time before the change to business use. Filing 2012 taxes late In this case, you figure the percentage of business use for the year as follows. Filing 2012 taxes late Determine the percentage of business use for the period following the change. Filing 2012 taxes late Do this by dividing business miles by total miles driven during that period. Filing 2012 taxes late Multiply the percentage in (1) by a fraction. Filing 2012 taxes late The numerator (top number) is the number of months the car is used for business and the denominator (bottom number) is 12. Filing 2012 taxes late Example. Filing 2012 taxes late You use a car only for personal purposes during the first 6 months of the year. Filing 2012 taxes late During the last 6 months of the year, you drive the car a total of 15,000 miles of which 12,000 miles are for business. Filing 2012 taxes late This gives you a business use percentage of 80% (12,000 ÷ 15,000) for that period. Filing 2012 taxes late Your business use for the year is 40% (80% × 6/12). Filing 2012 taxes late Limits. Filing 2012 taxes late   The amount you can claim for section 179, special depreciation allowance, and depreciation deductions may be limited. Filing 2012 taxes late The maximum amount you can claim depends on the year in which you placed your car in service. Filing 2012 taxes late You have to reduce the maximum amount if you did not use the car exclusively for business. Filing 2012 taxes late See Depreciation Limits , later. Filing 2012 taxes late Unadjusted basis. Filing 2012 taxes late   You use your unadjusted basis (often referred to as your basis or your basis for depreciation) to figure your depreciation using the MACRS depreciation chart, explained later under Modified Accelerated Cost Recovery System (MACRS) . Filing 2012 taxes late Your unadjusted basis for figuring depreciation is your original basis increased or decreased by certain amounts. Filing 2012 taxes late   To figure your unadjusted basis, begin with your car's original basis, which generally is its cost. Filing 2012 taxes late Cost includes sales taxes (see Sales taxes , earlier), destination charges, and dealer preparation. Filing 2012 taxes late Increase your basis by any substantial improvements you make to your car, such as adding air conditioning or a new engine. Filing 2012 taxes late Decrease your basis by any section 179 deduction, special depreciation allowance, gas guzzler tax, clean-fuel vehicle deduction (for vehicles placed in service before Jan. Filing 2012 taxes late 1, 2006), and alternative motor vehicle credit. Filing 2012 taxes late   See Form 8910 for information on the alternative motor vehicle credit. Filing 2012 taxes late If your business use later falls to 50% or less, you may have to recapture (include in your income) any excess depreciation. Filing 2012 taxes late See Car Used 50% or Less for Business, later, for more information. Filing 2012 taxes late If you acquired the car by gift or inheritance, see Publication 551, Basis of Assets, for information on your basis in the car. Filing 2012 taxes late Improvements. Filing 2012 taxes late   A major improvement to a car is treated as a new item of 5-year recovery property. Filing 2012 taxes late It is treated as placed in service in the year the improvement is made. Filing 2012 taxes late It does not matter how old the car is when the improvement is added. Filing 2012 taxes late Follow the same steps for depreciating the improvement as you would for depreciating the original cost of the car. Filing 2012 taxes late However, you must treat the improvement and the car as a whole when applying the limits on the depreciation deductions. Filing 2012 taxes late Your car's depreciation deduction for the year (plus any section 179 deduction, special depreciation allowance, and depreciation on any improvements) cannot be more than the depreciation limit that applies for that year. Filing 2012 taxes late See Depreciation Limits , later. Filing 2012 taxes late Car trade-in. Filing 2012 taxes late   If you traded one car (the “old car”) for another car (the “new car”) in 2013, there are two ways you can treat the transaction. Filing 2012 taxes late You can elect to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. Filing 2012 taxes late If you make this election, you treat the old car as disposed of at the time of the trade-in. Filing 2012 taxes late The depreciable basis of the new car is the adjusted basis of the old car (figured as if 100% of the car's use had been for business purposes) plus any additional amount you paid for the new car. Filing 2012 taxes late You then figure your depreciation deduction for the new car beginning with the date you placed it in service. Filing 2012 taxes late You make this election by completing Form 2106, Part II, Section D. Filing 2012 taxes late This method is explained later, beginning at Effect of trade-in on basis . Filing 2012 taxes late If you do not make the election described in (1), you must figure depreciation separately for the remaining basis of the old car and for any additional amount you paid for the new car. Filing 2012 taxes late You must apply two depreciation limits (see Depreciation Limits , later). Filing 2012 taxes late The limit that applies to the remaining basis of the old car generally is the amount that would have been allowed had you not traded in the old car. Filing 2012 taxes late The limit that applies to the additional amount you paid for the new car generally is the limit that applies for the tax year, reduced by the depreciation allowance for the remaining basis of the old car. Filing 2012 taxes late You must use Form 4562 to compute your depreciation deduction. Filing 2012 taxes late You cannot use Form 2106, Part II, Section D. Filing 2012 taxes late This method is explained in Publication 946. Filing 2012 taxes late   If you elect to use the method described in (1), you must do so on a timely filed tax return (including extensions). Filing 2012 taxes late Otherwise, you must use the method described in (2). Filing 2012 taxes late Effect of trade-in on basis. Filing 2012 taxes late   The discussion that follows applies to trade-ins of cars in 2013, where the election was made to treat the transaction as a tax-free disposition of the old car and the purchase of the new car. Filing 2012 taxes late For information on how to figure depreciation for cars involved in a like-kind exchange (trade-in) in 2013, for which the election was not made, see Publication 946 and Regulations section 1. Filing 2012 taxes late 168(i)-6(d)(3). Filing 2012 taxes late Traded car used only for business. Filing 2012 taxes late   If you trade in a car you used only in your business for another car that will be used only in your business, your original basis in the new car is your adjusted basis in the old car, plus any additional amount you pay for the new car. Filing 2012 taxes late Example. Filing 2012 taxes late Paul trades in a car that has an adjusted basis of $5,000 for a new car. Filing 2012 taxes late In addition, he pays cash of $20,000 for the new car. Filing 2012 taxes late His original basis of the new car is $25,000 (his $5,000 adjusted basis in the old car plus the $20,000 cash paid). Filing 2012 taxes late Paul's unadjusted basis is $25,000 unless he claims the section 179 deduction, special depreciation allowance, or has other increases or decreases to his original basis, discussed under Unadjusted basis , earlier. Filing 2012 taxes late Traded car used partly in business. Filing 2012 taxes late   If you trade in a car you used partly in your business for a new car you will use in your business, you must make a “trade-in” adjustment for the personal use of the old car. Filing 2012 taxes late This adjustment has the effect of reducing your basis in your old car, but not below zero, for purposes of figuring your depreciation deduction for the new car. Filing 2012 taxes late (This adjustment is not used, however, when you determine the gain or loss on the later disposition of the new car. Filing 2012 taxes late See Publication 544, Sales and Other Dispositions of Assets, for information on how to report the disposition of your car. Filing 2012 taxes late )   To figure the unadjusted basis of your new car for depreciation, first add to your adjusted basis in the old car any additional amount you pay for the new car. Filing 2012 taxes late Then subtract from that total the excess, if any, of: The total of the amounts that would have been allowable as depreciation during the tax years before the trade if 100% of the use of the car had been business and investment use, over The total of the amounts actually allowed as depreciation during those years. Filing 2012 taxes late For information about figuring depreciation, see Modified Accelerated Cost Recovery System (MACRS) , which follows Example 2, later. Filing 2012 taxes late Modified Accelerated Cost Recovery System (MACRS). Filing 2012 taxes late   The Modified Accelerated Cost Recovery System (MACRS) is the name given to the tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income. Filing 2012 taxes late   The maximum amount you can deduct is limited, depending on the year you placed your car in service. Filing 2012 taxes late See Depreciation Limits , later. Filing 2012 taxes late Recovery period. Filing 2012 taxes late   Under MACRS, cars are classified as 5-year property. Filing 2012 taxes late You actually depreciate the cost of a car, truck, or van over a period of 6 calendar years. Filing 2012 taxes late This is because your car is generally treated as placed in service in the middle of the year, and you claim depreciation for one-half of both the first year and the sixth year. Filing 2012 taxes late Depreciation deduction for certain Indian reservation property. Filing 2012 taxes late   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations after 1993 and before 2014. Filing 2012 taxes late The recovery that applies for a business-use car is 3 years instead of 5 years. Filing 2012 taxes late However, the depreciation limits, discussed later, will still apply. Filing 2012 taxes late   For more information on the qualifications for this shorter recovery period and the percentages to use in figuring the depreciation deduction, see chapter 4 of Publication 946. Filing 2012 taxes late Depreciation methods. Filing 2012 taxes late   You can use one of the following methods to depreciate your car. Filing 2012 taxes late The 200% declining balance method (200% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. Filing 2012 taxes late The 150% declining balance method (150% DB) over a 5-year recovery period that switches to the straight line method when that method provides an equal or greater deduction. Filing 2012 taxes late The straight line method (SL) over a 5-year recovery period. Filing 2012 taxes late    If you use Table 4-1 (discussed later under MACRS depreciation chart) to determine your depreciation rate for 2013, you do not need to determine in what year using the straight line method provides an equal or greater deduction. Filing 2012 taxes late This is because the chart has the switch to the straight line method built into its rates. Filing 2012 taxes late   Before choosing a method, you may wish to consider the following facts. Filing 2012 taxes late Using the straight line method provides equal yearly deductions throughout the recovery period. Filing 2012 taxes late Using the declining balance methods provides greater deductions during the earlier recovery years with the deductions generally getting smaller each year. Filing 2012 taxes late MACRS depreciation chart. Filing 2012 taxes late   A 2013 MACRS Depreciation Chart and instructions are included in this chapter as Table 4-1 . Filing 2012 taxes late Using this table will make it easy for you to figure the 2013 depreciation deduction for your car. Filing 2012 taxes late A similar chart appears in the Instructions for Form 2106. Filing 2012 taxes late    You may have to use the tables in Publication 946 instead of using this MACRS Depreciation Chart. Filing 2012 taxes late   You must use the Depreciation Tables in Publication 946 rather than the 2013 MACRS Depreciation Chart in this publication if any one of the following four conditions applies to you. Filing 2012 taxes late You file your return on a fiscal year basis. Filing 2012 taxes late You file your return for a short tax year (less than 12 months). Filing 2012 taxes late During the year, all of the following conditions apply. Filing 2012 taxes late You placed some property in service from January through September. Filing 2012 taxes late You placed some property in service from October through December. Filing 2012 taxes late Your basis in the property you placed in service from October through December (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) was more than 40% of your total bases in all property you placed in service during the year. Filing 2012 taxes late   You placed qualified property in service on an Indian reservation. Filing 2012 taxes late Depreciation in future years. Filing 2012 taxes late   If you use the percentages from the chart, you generally must continue to use them for the entire recovery period of your car. Filing 2012 taxes late However, you cannot continue to use the chart if your basis in your car is adjusted because of a casualty. Filing 2012 taxes late In that case, for the year of the adjustment and the remaining recovery period, figure the depreciation without the chart using your adjusted basis in the car at the end of the year of the adjustment and over the remaining recovery period. Filing 2012 taxes late See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. Filing 2012 taxes late    In future years, do not use the chart in this edition of the publication. Filing 2012 taxes late Instead, use the chart in the publication or the form instructions for those future years. Filing 2012 taxes late Disposition of car during recovery period. Filing 2012 taxes late   If you dispose of the car before the end of the recovery period, you are generally allowed a half year of depreciation in the year of disposition unless you purchased the car during the last quarter of a year. Filing 2012 taxes late See Depreciation deduction for the year of disposition under Disposition of a Car, later, for information on how to figure the depreciation allowed in the year of disposition. Filing 2012 taxes late How to use the 2013 chart. Filing 2012 taxes late   To figure your depreciation deduction for 2013, find the percentage in the column of Table 4-1 based on the date that you first placed the car in service and the depreciation method that you are using. Filing 2012 taxes late Multiply the unadjusted basis of your car (defined earlier) by that percentage to determine the amount of your depreciation deduction. Filing 2012 taxes late If you prefer to figure your depreciation deduction without the help of the chart, see Publication 946. Filing 2012 taxes late    Your deduction cannot be more than the maximum depreciation limit for cars. Filing 2012 taxes late See Depreciation Limits, later. Filing 2012 taxes late Example. Filing 2012 taxes late Phil bought a used truck in February 2012 to use exclusively in his landscape business. Filing 2012 taxes late He paid $9,200 for the truck with no trade-in. Filing 2012 taxes late Phil did not claim any section 179 deduction, the truck did not qualify for the special depreciation allowance, and he chose to use the 200% DB method to get the largest depreciation deduction in the early years. Filing 2012 taxes late Phil used the MACRS depreciation chart in 2012 to find his percentage. Filing 2012 taxes late The unadjusted basis of his truck equals its cost because Phil used it exclusively for business. Filing 2012 taxes late He multiplied the unadjusted basis of his truck, $9,200, by the percentage that applied, 20%, to figure his 2012 depreciation deduction of $1,840. Filing 2012 taxes late In 2013, Phil used the truck for personal purposes when he repaired his father's cabin. Filing 2012 taxes late His records show that the business use of his truck was 90% in 2013. Filing 2012 taxes late Phil used Table 4-1 to find his percentage. Filing 2012 taxes late Reading down the first column for the date placed in service and across to the 200% DB column, he locates his percentage, 32%. Filing 2012 taxes late He multiplies the unadjusted basis of his truck, $8,280 ($9,200 cost × 90% business use), by 32% to figure his 2013 depreciation deduction of $2,650. Filing 2012 taxes late Depreciation Limits There are limits on the amount you can deduct for depreciation of your car, truck, or van. Filing 2012 taxes late The section 179 deduction and special depreciation allowance are treated as depreciation for purposes of the limits. Filing 2012 taxes late The maximum amount you can deduct each year depends on the year you place the car in service. Filing 2012 taxes late These limits are shown in the following tables. Filing 2012 taxes late   Maximum Depreciation Deduction for Cars Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2012–2013 $11,1601 $5,100 $3,050 $1,875 2010–2011 11,0602 4,900 2,950 1,775 2008–2009 10,9603 4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6103 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7104 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6605 4,900 2,950 1,775 2001–2002 7,6605 4,900 2,950 1,775 2000 3,060 4,900 2,950 1,775 1$3,160 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Filing 2012 taxes late 2$3,060 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Filing 2012 taxes late 3$2,960 if the car is not qualified property or if you elect not to claim the special depreciation allowance. Filing 2012 taxes late 4$7,660 if you acquired the car before 5/6/2003. Filing 2012 taxes late $3,060 if the car is not qualified property or if you elect not to claim any special depreciation allowance. Filing 2012 taxes late 5$3,060 if you acquired the car before 9/11/2001, the car is not qualified property, or you elect not to claim the special depreciation allowance. Filing 2012 taxes late Trucks and vans. Filing 2012 taxes late   For 2013, the maximum depreciation deductions for trucks and vans are generally higher than those for cars. Filing 2012 taxes late A truck or van is a passenger automobile that is classified by the manufacturer as a truck or van and rated at 6,000 pounds gross vehicle weight or less. Filing 2012 taxes late For trucks and vans placed in service before 2003, use the Maximum Depreciation Deduction for Cars table. Filing 2012 taxes late Maximum Depreciation Deduction for Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 $11,3601 $5,300 $3,150 $1,875 2011 11,2601 5,200 3,150 1,875 2010 11,1601 5,100 3,050 1,875 2009 11,0601 4,900 2,950 1,775 2008 11,1601 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2005–2006 3,260 5,200 3,150 1,875 2004 10,9101 5,300 3,150 1,875 2003 11,0101,2 5,400 3,250 1,975 1If the special depreciation allowance does not apply or you make the election not to claim the special depreciation allowance, the first-year limit is $3,360 for 2012 and 2013, $3,260 for 2011, $3,160 for 2010, $3,060 for 2009, $3,160 for 2008, $3,260 for 2004, and $3,360 for 2003. Filing 2012 taxes late 2If the truck or van was acquired before 5/06/2003, the truck or van is qualified property, and you claim the special depreciation allowance for the truck or van, the maximum deduction is $7,960. Filing 2012 taxes late Car used less than full year. Filing 2012 taxes late   The depreciation limits are not reduced if you use a car for less than a full year. Filing 2012 taxes late This means that you do not reduce the limit when you either place a car in service or dispose of a car during the year. Filing 2012 taxes late However, the depreciation limits are reduced if you do not use the car exclusively for business and investment purposes. Filing 2012 taxes late See Reduction for personal use , next. Filing 2012 taxes late Reduction for personal use. Filing 2012 taxes late   The depreciation limits are reduced based on your percentage of personal use. Filing 2012 taxes late If you use a car less than 100% in your business or work, you must determine the depreciation deduction limit by multiplying the limit amount by the percentage of business and investment use during the tax year. Filing 2012 taxes late Section 179 deduction. Filing 2012 taxes late   The section 179 deduction is treated as a depreciation deduction. Filing 2012 taxes late If you place a car that is not a truck or van in service in 2013, use it only for business, and choose the section 179 deduction, the special depreciation allowance, and the depreciation deduction for that car for 2013 is limited to $11,160. Filing 2012 taxes late Example. Filing 2012 taxes late On September 4, 2013, Jack bought a used car for $10,000 and placed it in service. Filing 2012 taxes late He used it 80% for his business, and he chooses to take a section 179 deduction for the car. Filing 2012 taxes late The car is not qualified property for purposes of the special depreciation allowance. Filing 2012 taxes late Before applying the limit, Jack figures his maximum section 179 deduction to be $8,000. Filing 2012 taxes late This is the cost of his qualifying property (up to the maximum $500,000 amount) multiplied by his business use ($10,000 × 80%). Filing 2012 taxes late Jack then figures that his section 179 deduction for 2013 is limited to $2,528 (80% of $3,160). Filing 2012 taxes late He then figures his unadjusted basis of $5,472 (($10,000 × 80%) − $2,528) for determining his depreciation deduction. Filing 2012 taxes late Jack has reached his maximum depreciation deduction for 2013. Filing 2012 taxes late For 2014, Jack will use his unadjusted basis of $5,472 to figure his depreciation deduction. Filing 2012 taxes late Deductions in years after the recovery period. Filing 2012 taxes late   If the depreciation deductions for your car are reduced under the passenger automobile limits (discussed earlier), you will have unrecovered basis in your car at the end of the recovery period. Filing 2012 taxes late If you continue to use your car for business, you can deduct that unrecovered basis (subject to depreciation limits) after the recovery period ends. Filing 2012 taxes late Unrecovered basis. Filing 2012 taxes late   This is your cost or other basis in the car reduced by any clean-fuel vehicle deduction (for vehicles placed in service before January 1, 2006), alternative motor vehicle credit, electric vehicle credit, gas guzzler tax, and depreciation (including any special depreciation allowance , discussed earlier, unless you elect not to claim it) and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use. Filing 2012 taxes late The recovery period. Filing 2012 taxes late   For 5-year property, your recovery period is 6 calendar years. Filing 2012 taxes late A part year's depreciation is allowed in the first calendar year, a full year's depreciation is allowed in each of the next 4 calendar years, and a part year's depreciation is allowed in the 6th calendar year. Filing 2012 taxes late   Under MACRS, your recovery period is the same whether you use declining balance or straight line depreciation. Filing 2012 taxes late You determine your unrecovered basis in the 7th year after you placed the car in service. Filing 2012 taxes late How to treat unrecovered basis. Filing 2012 taxes late   If you continue to use your car for business after the recovery period, you can claim a depreciation deduction in each succeeding tax year until you recover your basis in the car. Filing 2012 taxes late The maximum amount you can deduct each year is determined by the date you placed the car in service and your business-use percentage. Filing 2012 taxes late For example, no deduction is allowed for a year you use your car 100% for personal purposes. Filing 2012 taxes late Example. Filing 2012 taxes late In April 2007, Bob bought and placed in service a car he used exclusively in his business. Filing 2012 taxes late The car cost $31,500. Filing 2012 taxes late Bob did not claim a section 179 deduction or the special depreciation allowance for the car. Filing 2012 taxes late He continued to use the car 100% in his business throughout the recovery period (2007 through 2012). Filing 2012 taxes late For those years, Bob used the MACRS Depreciation Chart (200% declining balance method) and the Maximum Depreciation Deduction for Cars table, earlier, for the applicable tax year to compute his depreciation deductions during the recovery period. Filing 2012 taxes late Bob's depreciation deductions were subject to the depreciation limits so he will have unrecovered basis at the end of the recovery period as shown in the following table. Filing 2012 taxes late      MACRS     Deprec. Filing 2012 taxes late Year % Amount Limit Allowed 2007 20. Filing 2012 taxes late 00 $6,300 $3,060 $ 3,060 2008 32. Filing 2012 taxes late 00 10,080 4,900 4,900 2009 19. Filing 2012 taxes late 20 6,048 2,850 2,850 2010 11. Filing 2012 taxes late 52 3,629 1,775 1,775 2011 11. Filing 2012 taxes late 52 3,629 1,775 1,775 2012 5. Filing 2012 taxes late 76 1,814 1,775 1,775 Total $31,500   16,135 For the correct limit, see Maximum Depreciation Deduction for Cars under “Depreciation Limits,” earlier, for the maximum amount of depreciation allowed each year. Filing 2012 taxes late   At the end of 2012, Bob had an unrecovered basis in the car of $15,365 ($31,500 – $16,135). Filing 2012 taxes late If Bob continued to use the car 100% for business in 2013 and later years, he can claim a depreciation deduction equal to the lesser of $1,775 or his remaining unrecovered basis. Filing 2012 taxes late   If Bob's business use of the car was less than 100% during any year, his depreciation deduction would be less than the maximum amount allowable for that year. Filing 2012 taxes late However, in determining his unrecovered basis in the car, he would still reduce his original basis by the maximum amount allowable as if the business use had been 100%. Filing 2012 taxes late For example, if Bob had used his car 60% for business instead of 100%, his allowable depreciation deductions would have been $9,681 ($16,135 × 60%), but he still would have to reduce his basis by $16,135 to determine his unrecovered basis. Filing 2012 taxes late Table 4-1. Filing 2012 taxes late 2013 MACRS Depreciation Chart (Use to Figure Depreciation for 2013. Filing 2012 taxes late ) If you claim actual expenses for your car, use the chart below to find the depreciation method and percentage to use for your 2013 return for cars placed in service in 2013. Filing 2012 taxes late   First, using the left column, find the date you first placed the car in service in 2013. Filing 2012 taxes late Then select the depreciation method and percentage from column (a), (b), or (c) following the rules explained in this chapter. Filing 2012 taxes late For cars placed in service before 2013, you must use the same method you used on last year's return unless a decline in your business use requires you to change to the straight line method. Filing 2012 taxes late Refer back to the MACRS Depreciation Chart for the year you placed the car in service. Filing 2012 taxes late (See Car Used 50% or Less for Business . Filing 2012 taxes late )  Multiply the unadjusted basis of your car by your business use percentage. Filing 2012 taxes late Multiply the result by the percentage you found in the chart to find the amount of your depreciation deduction for 2013. Filing 2012 taxes late (Also see Depreciation Limits . Filing 2012 taxes late )   If you placed your car in service after September of any year and you placed other business property in service during the same year, you may have to use the Jan. Filing 2012 taxes late 1—Sept. Filing 2012 taxes late 30 percentage instead of the Oct. Filing 2012 taxes late 1—Dec. Filing 2012 taxes late 31 percentage for your car. Filing 2012 taxes late               To find out if this applies to you, determine: 1) the basis of all business property you placed in service after September of that year and 2) the basis of all business property you placed in service during that entire year. Filing 2012 taxes late If the basis of the property placed in service after September is not more than 40% of the basis of all property (certain property is excluded) placed in service for the entire year, use the percentage for Jan. Filing 2012 taxes late 1—Sept. Filing 2012 taxes late 30 for figuring depreciation for your car. Filing 2012 taxes late See Which Convention Applies? in chapter 4 of Publication 946 for more details. Filing 2012 taxes late               Example. Filing 2012 taxes late You buy machinery (basis of $32,000) in May 2013 and a new van (basis of $20,000) in October 2013, both used 100% in your business. Filing 2012 taxes late You