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Form 1040x For 2012

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Form 1040x For 2012

Form 1040x for 2012 7. Form 1040x for 2012   Depreciation, Depletion, and Amortization Table of Contents What's New for 2013 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Overview of DepreciationWhat Property Can Be Depreciated? What Property Cannot Be Depreciated? When Does Depreciation Begin and End? Can You Use MACRS To Depreciate Your Property? What Is the Basis of Your Depreciable Property? How Do You Treat Repairs and Improvements? Do You Have To File Form 4562? How Do You Correct Depreciation Deductions? Section 179 Expense DeductionWhat Property Qualifies? What Property Does Not Qualify? How Much Can You Deduct? How Do You Elect the Deduction? When Must You Recapture the Deduction? Claiming the Special Depreciation AllowanceWhat is Qualified Property? How Can You Elect Not To Claim the Allowance? When Must You Recapture an Allowance Figuring Depreciation Under MACRSWhich Depreciation System (GDS or ADS) Applies? Which Property Class Applies Under GDS? What Is the Placed-in-Service Date? What Is the Basis for Depreciation? Which Recovery Period Applies? Which Convention Applies? Which Depreciation Method Applies? How Is the Depreciation Deduction Figured? How Do You Use General Asset Accounts? When Do You Recapture MACRS Depreciation? Additional Rules for Listed PropertyWhat Is Listed Property? What Is the Business-Use Requirement? Do the Passenger Automobile Limits Apply? Depletion Who Can Claim Depletion? Figuring Depletion AmortizationBusiness Start-Up Costs Reforestation Costs Section 197 Intangibles What's New for 2013 Increased section 179 expense deduction dollar limits. Form 1040x for 2012  The maximum amount you can elect to deduct for most section 179 property you placed in service in 2013 is $500,000. Form 1040x for 2012 This limit is reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. Form 1040x for 2012 See Dollar Limits under Section 179 Expense Deduction , later. Form 1040x for 2012 Extension of special depreciation allowance for certain qualified property acquired after December 31, 2007. Form 1040x for 2012 . Form 1040x for 2012  You may be able to take a 50% special depreciation allowance for certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Form 1040x for 2012 See Claiming the Special Depreciation Allowance , later. Form 1040x for 2012 Expiration of the 3- year recovery period for certain race horses. Form 1040x for 2012  The 3-year recovery period for race horses two years old or younger will expire for such horses placed in service after December 31, 2013. Form 1040x for 2012 Introduction If you buy or make improvements to farm property such as machinery, equipment, livestock, or a structure with a useful life of more than a year, you generally cannot deduct its entire cost in one year. Form 1040x for 2012 Instead, you must spread the cost over the time you use the property and deduct part of it each year. Form 1040x for 2012 For most types of property, this is called depreciation. Form 1040x for 2012 This chapter gives information on depreciation methods that generally apply to property placed in service after 1986. Form 1040x for 2012 For information on depreciating pre-1987 property, see Publication 534, Depreciating Property Placed in Service Before 1987. Form 1040x for 2012 Topics - This chapter discusses: Overview of depreciation Section 179 expense deduction Special depreciation allowance Modified Accelerated Cost Recovery System (MACRS) Listed property Basic information on cost depletion (including timber depletion) and percentage depletion Amortization of the costs of going into business, reforestation costs, the costs of pollution control facilities, and the costs of section 197 intangibles Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property Form (and Instructions) T (Timber), Forest Activities Schedule 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Form 1040x for 2012 It is important to keep good records for property you depreciate. Form 1040x for 2012 Do not file these records with your return. Form 1040x for 2012 Instead, you should keep them as part of the permanent records of the depreciated property. Form 1040x for 2012 They will help you verify the accuracy of the depreciation of assets placed in service in the current and previous tax years. Form 1040x for 2012 For general information on recordkeeping, see Publication 583, Starting a Business and Keeping Records. Form 1040x for 2012 For specific information on keeping records for section 179 property and listed property, see Publication 946, How To Depreciate Property. Form 1040x for 2012 Overview of Depreciation This overview discusses basic information on the following. Form 1040x for 2012 What property can be depreciated. Form 1040x for 2012 What property cannot be depreciated. Form 1040x for 2012 When depreciation begins and ends. Form 1040x for 2012 Whether MACRS can be used to figure depreciation. Form 1040x for 2012 What is the basis of your depreciable property. Form 1040x for 2012 How to treat repairs and improvements. Form 1040x for 2012 When you must file Form 4562. Form 1040x for 2012 How you can correct depreciation claimed incorrectly. Form 1040x for 2012 What Property Can Be Depreciated? You can depreciate most types of tangible property (except land), such as buildings, machinery, equipment, vehicles, certain livestock, and furniture. Form 1040x for 2012 You can also depreciate certain intangible property, such as copyrights, patents, and computer software. Form 1040x for 2012 To be depreciable, the property must meet all the following requirements. Form 1040x for 2012 It must be property you own. Form 1040x for 2012 It must be used in your business or income-producing activity. Form 1040x for 2012 It must have a determinable useful life. Form 1040x for 2012 It must have a useful life that extends substantially beyond the year you place it in service. Form 1040x for 2012 Property You Own To claim depreciation, you usually must be the owner of the property. Form 1040x for 2012 You are considered as owning property even if it is subject to a debt. Form 1040x for 2012 Leased property. Form 1040x for 2012   You can depreciate leased property only if you retain the incidents of ownership in the property. Form 1040x for 2012 This means you bear the burden of exhaustion of the capital investment in the property. Form 1040x for 2012 Therefore, if you lease property from someone to use in your trade or business or for the production of income, you generally cannot depreciate its cost because you do not retain the incidents of ownership. Form 1040x for 2012 You can, however, depreciate any capital improvements you make to the leased property. Form 1040x for 2012 See Additions and Improvements under Which Recovery Period Applies in chapter 4 of Publication 946. Form 1040x for 2012   If you lease property to someone, you generally can depreciate its cost even if the lessee (the person leasing from you) has agreed to preserve, replace, renew, and maintain the property. Form 1040x for 2012 However, you cannot depreciate the cost of the property if the lease provides that the lessee is to maintain the property and return to you the same property or its equivalent in value at the expiration of the lease in as good condition and value as when leased. Form 1040x for 2012 Life tenant. Form 1040x for 2012   Generally, if you hold business or investment property as a life tenant, you can depreciate it as if you were the absolute owner of the property. Form 1040x for 2012 See Certain term interests in property , later, for an exception. Form 1040x for 2012 Property Used in Your Business or Income-Producing Activity To claim depreciation on property, you must use it in your business or income-producing activity. Form 1040x for 2012 If you use property to produce income (investment use), the income must be taxable. Form 1040x for 2012 You cannot depreciate property that you use solely for personal activities. Form 1040x for 2012 However, if you use property for business or investment purposes and for personal purposes, you can deduct depreciation based only on the percentage of business or investment use. Form 1040x for 2012 Example 1. Form 1040x for 2012   If you use your car for farm business, you can deduct depreciation based on its percentage of use in farming. Form 1040x for 2012 If you also use it for investment purposes, you can depreciate it based on its percentage of investment use. Form 1040x for 2012 Example 2. Form 1040x for 2012   If you use part of your home for business, you may be able to deduct depreciation on that part based on its business use. Form 1040x for 2012 For more information, see Business Use of Your Home in chapter 4. Form 1040x for 2012 Inventory. Form 1040x for 2012   You can never depreciate inventory because it is not held for use in your business. Form 1040x for 2012 Inventory is any property you hold primarily for sale to customers in the ordinary course of your business. Form 1040x for 2012 Livestock. Form 1040x for 2012   Livestock purchased for draft, breeding, or dairy purposes can be depreciated only if they are not kept in an inventory account. Form 1040x for 2012 Livestock you raise usually has no depreciable basis because the costs of raising them are deducted and not added to their basis. Form 1040x for 2012 However, see Immature livestock under When Does Depreciation Begin and End , later, for a special rule. Form 1040x for 2012 Property Having a Determinable Useful Life To be depreciable, your property must have a determinable useful life. Form 1040x for 2012 This means it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Form 1040x for 2012 Irrigation systems and water wells. Form 1040x for 2012   Irrigation systems and wells used in a trade or business can be depreciated if their useful life can be determined. Form 1040x for 2012 You can depreciate irrigation systems and wells composed of masonry, concrete, tile, metal, or wood. Form 1040x for 2012 In addition, you can depreciate costs for moving dirt to construct irrigation systems and water wells composed of these materials. Form 1040x for 2012 However, land preparation costs for center pivot irrigation systems are not depreciable. Form 1040x for 2012 Dams, ponds, and terraces. Form 1040x for 2012   In general, you cannot depreciate earthen dams, ponds, and terraces unless the structures have a determinable useful life. Form 1040x for 2012 What Property Cannot Be Depreciated? Certain property cannot be depreciated, even if the requirements explained earlier are met. Form 1040x for 2012 This includes the following. Form 1040x for 2012 Land. Form 1040x for 2012 You can never depreciate the cost of land because land does not wear out, become obsolete, or get used up. Form 1040x for 2012 The cost of land generally includes the cost of clearing, grading, planting, and landscaping. Form 1040x for 2012 Although you cannot depreciate land, you can depreciate certain costs incurred in preparing land for business use. Form 1040x for 2012 See chapter 1 of Publication 946. Form 1040x for 2012 Property placed in service and disposed of in the same year. Form 1040x for 2012 Determining when property is placed in service is explained later. Form 1040x for 2012 Equipment used to build capital improvements. Form 1040x for 2012 You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. Form 1040x for 2012 Intangible property such as section 197 intangibles. Form 1040x for 2012 This property does not have a determinable useful life and generally cannot be depreciated. Form 1040x for 2012 However, see Amortization , later. Form 1040x for 2012 Special rules apply to computer software (discussed below). Form 1040x for 2012 Certain term interests (discussed below). Form 1040x for 2012 Computer software. Form 1040x for 2012   Computer software is generally not a section 197 intangible even if acquired in connection with the acquisition of a business, if it meets all of the following tests. Form 1040x for 2012 It is readily available for purchase by the general public. Form 1040x for 2012 It is subject to a nonexclusive license. Form 1040x for 2012 It has not been substantially modified. Form 1040x for 2012   If the software meets the tests above, it can be depreciated and may qualify for the section 179 expense deduction and the special depreciation allowance (if applicable), discussed later. Form 1040x for 2012 Certain term interests in property. Form 1040x for 2012   You cannot depreciate a term interest in property created or acquired after July 27, 1989, for any period during which the remainder interest is held, directly or indirectly, by a person related to you. Form 1040x for 2012 This rule does not apply to the holder of a term interest in property acquired by gift, bequest, or inheritance. Form 1040x for 2012 For more information, see chapter 1 of Publication 946. Form 1040x for 2012 When Does Depreciation Begin and End? You begin to depreciate your property when you place it in service for use in your trade or business or for the production of income. Form 1040x for 2012 You stop depreciating property either when you have fully recovered your cost or other basis or when you retire it from service, whichever happens first. Form 1040x for 2012 Placed in Service Property is placed in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. Form 1040x for 2012 Even if you are not using the property, it is in service when it is ready and available for its specific use. Form 1040x for 2012 Example. Form 1040x for 2012 You bought a planter for use in your farm business. Form 1040x for 2012 The planter was delivered in December 2012 after harvest was over. Form 1040x for 2012 You begin to depreciate the planter for 2012 because it was ready and available for its specific use in 2012, even though it will not be used until the spring of 2013. Form 1040x for 2012 If your planter comes unassembled in December 2012 and is put together in February 2013, it is not placed in service until 2013. Form 1040x for 2012 You begin to depreciate it in 2013. Form 1040x for 2012 If your planter was delivered and assembled in February 2013 but not used until April 2013, it is placed in service in February 2013, because this is when the planter was ready for its specified use. Form 1040x for 2012 You begin to depreciate it in 2013. Form 1040x for 2012 Fruit or nut trees and vines. Form 1040x for 2012   If you acquire an orchard, grove, or vineyard before the trees or vines have reached the income-producing stage, and they have a preproductive period of more than 2 years, you must capitalize the preproductive-period costs under the uniform capitalization rules (unless you elect not to use these rules). Form 1040x for 2012 See chapter 6 for information about the uniform capitalization rules. Form 1040x for 2012 Your depreciation begins when the trees and vines reach the income-producing stage (that is, when they bear fruit, nuts, or grapes in quantities sufficient to commercially warrant harvesting). Form 1040x for 2012 Immature livestock. Form 1040x for 2012   Depreciation for livestock begins when the livestock reaches the age of maturity. Form 1040x for 2012 If you bought immature livestock for drafting purposes, depreciation begins when they can be worked. Form 1040x for 2012 If you bought immature livestock for dairy purposes, depreciation begins when they can be milked. Form 1040x for 2012 If you bought immature livestock for breeding purposes, depreciation begins when they can be bred. Form 1040x for 2012 Your basis for depreciation is your initial cost for the immature livestock. Form 1040x for 2012 Idle Property Continue to claim a deduction for depreciation on property used in your business or for the production of income even if it is temporarily idle. Form 1040x for 2012 For example, if you stop using a machine because there is a temporary lack of a market for a product made with that machine, continue to deduct depreciation on the machine. Form 1040x for 2012 Cost or Other Basis Fully Recovered You stop depreciating property when you have fully recovered your cost or other basis. Form 1040x for 2012 This happens when your section 179 and allowed or allowable depreciation deductions equal your cost or investment in the property. Form 1040x for 2012 Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. Form 1040x for 2012 You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. Form 1040x for 2012 You sell or exchange the property. Form 1040x for 2012 You convert the property to personal use. Form 1040x for 2012 You abandon the property. Form 1040x for 2012 You transfer the property to a supplies or scrap account. Form 1040x for 2012 The property is destroyed. Form 1040x for 2012 For information on abandonment of property, see chapter 8. Form 1040x for 2012 For information on destroyed property, see chapter 11 and Publication 547, Casualties, Disasters, and Thefts. Form 1040x for 2012 Can You Use MACRS To Depreciate Your Property? You must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate most business and investment property placed in service after 1986. Form 1040x for 2012 MACRS is explained later under Figuring Depreciation Under MACRS . Form 1040x for 2012 You cannot use MACRS to depreciate the following property. Form 1040x for 2012 Property you placed in service before 1987. Form 1040x for 2012 Use the methods discussed in Publication 534. Form 1040x for 2012 Certain property owned or used in 1986. Form 1040x for 2012 See chapter 1 of Publication 946. Form 1040x for 2012 Intangible property. Form 1040x for 2012 Films, video tapes, and recordings. Form 1040x for 2012 Certain corporate or partnership property acquired in a nontaxable transfer. Form 1040x for 2012 Property you elected to exclude from MACRS. Form 1040x for 2012 For more information, see chapter 1 of Publication 946. Form 1040x for 2012 What Is the Basis of Your Depreciable Property? To figure your depreciation deduction, you must determine the basis of your property. Form 1040x for 2012 To determine basis, you need to know the cost or other basis of your property. Form 1040x for 2012 Cost or other basis. Form 1040x for 2012   The basis of property you buy is usually its cost plus amounts you paid for items such as sales tax, freight charges, and installation and testing fees. Form 1040x for 2012 The cost includes the amount you pay in cash, debt obligations, other property, or services. Form 1040x for 2012   There are times when you cannot use cost as basis. Form 1040x for 2012 In these situations, the fair market value (FMV) or the adjusted basis of the property may be used. Form 1040x for 2012 Adjusted basis. Form 1040x for 2012   To find your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service. Form 1040x for 2012 Basis adjustment for depreciation allowed or allowable. Form 1040x for 2012   After you place your property in service, you must reduce the basis of the property by the depreciation allowed or allowable, whichever is greater. Form 1040x for 2012 Depreciation allowed is depreciation you actually deducted (from which you received a tax benefit). Form 1040x for 2012 Depreciation allowable is depreciation you are entitled to deduct. Form 1040x for 2012   If you do not claim depreciation you are entitled to deduct, you must still reduce the basis of the property by the full amount of depreciation allowable. Form 1040x for 2012   If you deduct more depreciation than you should, you must reduce your basis by any amount deducted from which you received a tax benefit (the depreciation allowed). Form 1040x for 2012   For more information, see chapter 6. Form 1040x for 2012 How Do You Treat Repairs and Improvements? You generally deduct the cost of repairing business property in the same way as any other business expense. Form 1040x for 2012 However, if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it. Form 1040x for 2012 Treat improvements as separate depreciable property. Form 1040x for 2012 See chapter 1 of Publication 946 for more information. Form 1040x for 2012 Example. Form 1040x for 2012 You repair a small section on a corner of the roof of a barn that you rent to others. Form 1040x for 2012 You deduct the cost of the repair as a business expense. Form 1040x for 2012 However, if you replace the entire roof, the new roof is considered to be an improvement because it increases the value and lengthens the life for the property. Form 1040x for 2012 You depreciate the cost of the new roof. Form 1040x for 2012 Improvements to rented property. Form 1040x for 2012   You can depreciate permanent improvements you make to business property you rent from someone else. Form 1040x for 2012 Do You Have To File Form 4562? Use Form 4562 to claim your deduction for depreciation and amortization. Form 1040x for 2012 You must complete and attach Form 4562 to your tax return if you are claiming any of the following. Form 1040x for 2012 A section 179 expense deduction for the current year or a section 179 carryover from a prior year. Form 1040x for 2012 Depreciation for property placed in service during the current year. Form 1040x for 2012 Depreciation on any vehicle or other listed property, regardless of when it was placed in service. Form 1040x for 2012 Amortization of costs that began in the current year. Form 1040x for 2012 For more information, see the Instructions for Form 4562. Form 1040x for 2012 How Do You Correct Depreciation Deductions? If you deducted an incorrect amount of depreciation in any year, you may be able to make a correction by filing an amended return for that year. Form 1040x for 2012 You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. Form 1040x for 2012 You claimed the incorrect amount because of a mathematical error made in any year. Form 1040x for 2012 You claimed the incorrect amount because of a posting error made in any year, for example, omitting an asset from the depreciation schedule. Form 1040x for 2012 You have not adopted a method of accounting for the property placed in service by you in tax years ending after December 29, 2003. Form 1040x for 2012 You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. Form 1040x for 2012 Note. Form 1040x for 2012 You have adopted a method of accounting if you used the same incorrect method of depreciation for two or more consecutively filed returns. Form 1040x for 2012 If you are not allowed to make the correction on an amended return, you may be able to change your accounting method to claim the correct amount of depreciation. Form 1040x for 2012 See the Instructions for Form 3115. Form 1040x for 2012 Section 179 Expense Deduction You can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. Form 1040x for 2012 This is the section 179 expense deduction. Form 1040x for 2012 You can elect the section 179 expense deduction instead of recovering the cost by taking depreciation deductions. Form 1040x for 2012 This part of the chapter explains the rules for the section 179 expense deduction. Form 1040x for 2012 It explains what property qualifies for the deduction, what property does not qualify for the deduction, the limits that may apply, how to elect the deduction, and when you may have to recapture the deduction. Form 1040x for 2012 For more information, see chapter 2 of Publication 946. Form 1040x for 2012 What Property Qualifies? To qualify for the section 179 expense deduction, your property must meet all the following requirements. Form 1040x for 2012 It must be eligible property. Form 1040x for 2012 It must be acquired for business use. Form 1040x for 2012 It must have been acquired by purchase. Form 1040x for 2012 Eligible Property To qualify for the section 179 expense deduction, your property must be one of the following types of depreciable property. Form 1040x for 2012 Tangible personal property. Form 1040x for 2012 Qualified real property. Form 1040x for 2012 (Special rules apply to qualified real property that you elect to treat as qualified section 179 real property. Form 1040x for 2012 For more information, see chapter 2 of Publication 946 and section 179(f) of the Internal Revenue Code. Form 1040x for 2012 ) Other tangible property (except buildings and their structural components) used as: An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services; A research facility used in connection with any of the activities in (a) above; or A facility used in connection with any of the activities in (a) for the bulk storage of fungible commodities. Form 1040x for 2012 Single purpose agricultural (livestock) or horticultural structures. Form 1040x for 2012 Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum. Form 1040x for 2012 Off-the-shelf computer software that is readily available for purchase by the general public, is subject to a nonexclusive lease, and has not been substantially modified. Form 1040x for 2012 Tangible personal property. Form 1040x for 2012   Tangible personal property is any tangible property that is not real property. Form 1040x for 2012 It includes the following property. Form 1040x for 2012 Machinery and equipment. Form 1040x for 2012 Property contained in or attached to a building (other than structural components), such as milk tanks, automatic feeders, barn cleaners, and office equipment. Form 1040x for 2012 Gasoline storage tanks and pumps at retail service stations. Form 1040x for 2012 Livestock, including horses, cattle, hogs, sheep, goats, and mink and other fur-bearing animals. Form 1040x for 2012 Facility used for the bulk storage of fungible commodities. Form 1040x for 2012   A facility used for the bulk storage of fungible commodities is qualifying property for purposes of the section 179 expense deduction if it is used in connection with any of the activities listed earlier in item (3)(a). Form 1040x for 2012 Bulk storage means the storage of a commodity in a large mass before it is used. Form 1040x for 2012 Grain bins. Form 1040x for 2012   A grain bin is an example of a storage facility that is qualifying section 179 property. Form 1040x for 2012 It is a facility used in connection with the production of grain or livestock for the bulk storage of fungible commodities. Form 1040x for 2012 Single purpose agricultural or horticultural structures. Form 1040x for 2012   A single purpose agricultural (livestock) or horticultural structure is qualifying property for purposes of the section 179 expense deduction. Form 1040x for 2012 Agricultural structure. Form 1040x for 2012   A single purpose agricultural (livestock) structure is any building or enclosure specifically designed, constructed, and used for both the following reasons. Form 1040x for 2012 To house, raise, and feed a particular type of livestock and its produce. Form 1040x for 2012 To house the equipment, including any replacements, needed to house, raise, or feed the livestock. Form 1040x for 2012 For this purpose, livestock includes poultry. Form 1040x for 2012   Single purpose structures are qualifying property if used, for example, to breed chickens or hogs, produce milk from dairy cattle, or produce feeder cattle or pigs, broiler chickens, or eggs. Form 1040x for 2012 The facility must include, as an integral part of the structure or enclosure, equipment necessary to house, raise, and feed the livestock. Form 1040x for 2012 Horticultural structure. Form 1040x for 2012   A single purpose horticultural structure is either of the following. Form 1040x for 2012 A greenhouse specifically designed, constructed, and used for the commercial production of plants. Form 1040x for 2012 A structure specifically designed, constructed, and used for the commercial production of mushrooms. Form 1040x for 2012 Use of structure. Form 1040x for 2012   A structure must be used only for the purpose that qualified it. Form 1040x for 2012 For example, a hog barn will not be qualifying property if you use it to house poultry. Form 1040x for 2012 Similarly, using part of your greenhouse to sell plants will make the greenhouse nonqualifying property. Form 1040x for 2012   If a structure includes work space, the work space can be used only for the following activities. Form 1040x for 2012 Stocking, caring for, or collecting livestock or plants or their produce. Form 1040x for 2012 Maintaining the enclosure or structure. Form 1040x for 2012 Maintaining or replacing the equipment or stock enclosed or housed in the structure. Form 1040x for 2012 Property Acquired by Purchase To qualify for the section 179 expense deduction, your property must have been acquired by purchase. Form 1040x for 2012 For example, property acquired by gift or inheritance does not qualify. Form 1040x for 2012 Property acquired from a related person (that is, your spouse, ancestors, or lineal descendants) is not considered acquired by purchase. Form 1040x for 2012 Example. Form 1040x for 2012 Ken is a farmer. Form 1040x for 2012 He purchased two tractors, one from his brother and one from his father. Form 1040x for 2012 He placed both tractors in service in the same year he bought them. Form 1040x for 2012 The tractor purchased from his father does not qualify for the section 179 expense deduction because he is a related person (as defined above). Form 1040x for 2012 The tractor purchased from his brother does qualify for the deduction because Ken is not a related person (as defined above). Form 1040x for 2012 What Property Does Not Qualify? Land and improvements. Form 1040x for 2012   Land and land improvements, do not qualify as section 179 property. Form 1040x for 2012 Land improvements include nonagricultural fences, swimming pools, paved parking areas, wharves, docks, bridges, and fences. Form 1040x for 2012 However, agricultural fences do qualify as section 179 property. Form 1040x for 2012 Similarly, field drainage tile also qualifies as section 179 property. Form 1040x for 2012 Excepted property. Form 1040x for 2012   Even if the requirements explained in the preceding discussions are met, farmers cannot elect the section 179 expense deduction for the following property. Form 1040x for 2012 Certain property you lease to others (if you are a noncorporate lessor). Form 1040x for 2012 Certain property used predominantly to furnish lodging or in connection with the furnishing of lodging. Form 1040x for 2012 Property used by a tax-exempt organization (other than a tax-exempt farmers' cooperative) unless the property is used mainly in a taxable unrelated trade or business. Form 1040x for 2012 Property used by governmental units or foreign persons or entities (except property used under a lease with a term of less than 6 months). Form 1040x for 2012 How Much Can You Deduct? Your section 179 expense deduction is generally the cost of the qualifying property. Form 1040x for 2012 However, the total amount you can elect to deduct under section 179 is subject to a dollar limit and a business income limit. Form 1040x for 2012 These limits apply to each taxpayer, not to each business. Form 1040x for 2012 However, see Married individuals under Dollar Limits , later. Form 1040x for 2012 See also the special rules for applying the limits for partnerships and S corporations under Partnerships and S Corporations , later. Form 1040x for 2012 If you deduct only part of the cost of qualifying property as a section 179 expense deduction, you can generally depreciate the cost you do not deduct. Form 1040x for 2012 Use Part I of Form 4562 to figure your section 179 expense deduction. Form 1040x for 2012 Partial business use. Form 1040x for 2012   When you use property for business and nonbusiness purposes, you can elect the section 179 expense deduction only if you use it more than 50% for business in the year you place it in service. Form 1040x for 2012 If you used the property more than 50% for business, multiply the cost of the property by the percentage of business use. Form 1040x for 2012 Use the resulting business cost to figure your section 179 expense deduction. Form 1040x for 2012 Trade-in of other property. Form 1040x for 2012   If you buy qualifying property with cash and a trade-in, its cost for purposes of the section 179 expense deduction includes only the cash you paid. Form 1040x for 2012 For example, if you buy (for cash and a trade-in) a new tractor for use in your business, your cost for the section 179 expense deduction is the cash you paid. Form 1040x for 2012 It does not include the adjusted basis of the old tractor you trade for the new tractor. Form 1040x for 2012 Example. Form 1040x for 2012 J-Bar Farms traded two cultivators having a total adjusted basis of $6,800 for a new cultivator costing $13,200. Form 1040x for 2012 They received an $8,000 trade-in allowance for the old cultivators and paid $5,200 cash for the new cultivator. Form 1040x for 2012 J-Bar also traded a used pickup truck with an adjusted basis of $8,000 for a new pickup truck costing $35,000. Form 1040x for 2012 They received a $5,000 trade-in allowance and paid $30,000 cash for the new pickup truck. Form 1040x for 2012 Only the cash paid by J-Bar qualifies for the section 179 expense deduction. Form 1040x for 2012 J-Bar's business costs that qualify for a section 179 expense deduction are $35,200 ($5,200 + $30,000). Form 1040x for 2012 Dollar Limits The total amount you can elect to deduct under section 179 for most property placed in service in 2013 is $500,000. Form 1040x for 2012 If you acquire and place in service more than one item of qualifying property during the year, you can allocate the section 179 expense deduction among the items in any way, as long as the total deduction is not more than $500,000. Form 1040x for 2012 Qualified real property that you elect to treat as section 179 property is limited to $250,000 of the maximum section 179 deduction of $500,000 for 2013. Form 1040x for 2012 You do not have to claim the full $500,000. Form 1040x for 2012 For specific information on the section 179 dollar limits, see chapter 2 of Publication 946. Form 1040x for 2012 Reduced dollar limit for cost exceeding $2 million. Form 1040x for 2012   If the cost of your qualifying section 179 property placed in service in 2013 is over $2 million, you must reduce the dollar limit (but not below zero) by the amount of cost over $2 million. Form 1040x for 2012 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 expense deduction and you cannot carry over the cost that is more than $2,500,000. Form 1040x for 2012 Example. Form 1040x for 2012 This year, James Smith placed in service machinery costing $2,050,000. Form 1040x for 2012 Because this cost is $50,000 more than $2 million, he must reduce his dollar limit to $450,000 ($500,000 − $50,000). Form 1040x for 2012 Limits for sport utility vehicles. Form 1040x for 2012   The total amount you can elect to deduct for certain sport utility vehicles and certain other vehicles placed in service in 2013 is $25,000. Form 1040x for 2012 This rule applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, and highways that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. Form 1040x for 2012   For more information, see chapter 2 of Publication 946. Form 1040x for 2012 Limits for passenger automobiles. Form 1040x for 2012   For a passenger automobile that is placed in service in 2013, the total section 179 and depreciation deduction is limited. Form 1040x for 2012 See Do the Passenger Automobile Limits Apply , later. Form 1040x for 2012 Married individuals. Form 1040x for 2012   If you are married, how you figure your section 179 expense deduction depends on whether you file jointly or separately. Form 1040x for 2012 If you 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. Form 1040x for 2012 If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit, including the reduction for costs over $2 million. Form 1040x for 2012 You must allocate the dollar limit (after any reduction) equally between you, unless you both elect a different allocation. Form 1040x for 2012 If the percentages elected by each of you do not total 100%, 50% will be allocated to each of you. Form 1040x for 2012 Joint return after separate returns. Form 1040x for 2012   If you and your spouse elect to amend your separate returns by filing a joint return after the due date for filing your return, the dollar limit on the joint return is the lesser of the following amounts. Form 1040x for 2012 The dollar limit (after reduction for any cost of section 179 property over $2 million). Form 1040x for 2012 The total cost of section 179 property you and your spouse elected to expense on your separate returns. Form 1040x for 2012 Business Income Limit The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Form 1040x for 2012 Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the management or operations of the trade or business. Form 1040x for 2012 Any cost not deductible in one year under section 179 because of this limit can be carried to the next year. Form 1040x for 2012 See Carryover of disallowed deduction , later. Form 1040x for 2012 Taxable income. Form 1040x for 2012   In general, figure taxable income for this purpose by totaling the net income and losses from all trades and businesses you actively conducted during the year. Form 1040x for 2012 In addition to net income or loss from a sole proprietorship, partnership, or S corporation, net income or loss derived from a trade or business also includes the following items. Form 1040x for 2012 Section 1231 gains (or losses) as discussed in chapter 9. Form 1040x for 2012 Interest from working capital of your trade or business. Form 1040x for 2012 Wages, salaries, tips, or other pay earned by you (or your spouse if you file a joint return) as an employee of any employer. Form 1040x for 2012   In addition, figure taxable income without regard to any of the following. Form 1040x for 2012 The section 179 expense deduction. Form 1040x for 2012 The self-employment tax deduction. Form 1040x for 2012 Any net operating loss carryback or carryforward. Form 1040x for 2012 Any unreimbursed employee business expenses. Form 1040x for 2012 Two different taxable income limits. Form 1040x for 2012   In addition to the business income limit for your section 179 expense deduction, you may have a taxable income limit for some other deduction (for example, charitable contributions). Form 1040x for 2012 You may have to figure the limit for this other deduction taking into account the section 179 expense deduction. Form 1040x for 2012 If so, complete the following steps. Form 1040x for 2012 Step Action 1 Figure taxable income without the section 179 expense deduction or the other deduction. Form 1040x for 2012 2 Figure a hypothetical section 179 expense deduction using the taxable income figured in Step 1. Form 1040x for 2012 3 Subtract the hypothetical section 179 expense deduction figured in Step 2 from the taxable income figured in Step 1. Form 1040x for 2012 4 Figure a hypothetical amount for the other deduction using the amount figured in Step 3 as taxable income. Form 1040x for 2012 5 Subtract the hypothetical other deduction figured in Step 4 from the taxable income figured in  Step 1. Form 1040x for 2012 6 Figure your actual section 179 expense deduction using the taxable income figured in Step 5. Form 1040x for 2012 7 Subtract your actual section 179 expense deduction figured in Step 6 from the taxable income figured in Step 1. Form 1040x for 2012 8 Figure your actual other deduction using the taxable income figured in Step 7. Form 1040x for 2012 Example. Form 1040x for 2012 On February 1, 2013, the XYZ farm corporation purchased and placed in service qualifying section 179 property that cost $500,000. Form 1040x for 2012 It elects to expense the entire $500,000 cost under section 179. Form 1040x for 2012 In June, the corporation gave a charitable contribution of $10,000. Form 1040x for 2012 A corporation's limit on charitable contributions is figured after subtracting any section 179 expense deduction. Form 1040x for 2012 The business income limit for the section 179 expense deduction is figured after subtracting any allowable charitable contributions. Form 1040x for 2012 XYZ's taxable income figured without the section 179 expense deduction or the deduction for charitable contributions is $520,000. Form 1040x for 2012 XYZ figures its section 179 expense deduction and its deduction for charitable contributions as follows. Form 1040x for 2012 Step 1. Form 1040x for 2012 Taxable income figured without either deduction is $520,000. Form 1040x for 2012 Step 2. Form 1040x for 2012 Using $520,000 as taxable income, XYZ's hypothetical section 179 expense deduction is $500,000. Form 1040x for 2012 Step 3. Form 1040x for 2012 $20,000 ($520,000 − $500,000). Form 1040x for 2012 Step 4. Form 1040x for 2012 Using $20,000 (from Step 3) as taxable income, XYZ's hypothetical charitable contribution (limited to 10% of taxable income) is $2,000. Form 1040x for 2012 Step 5. Form 1040x for 2012 $518,000 ($520,000 − $2,000). Form 1040x for 2012 Step 6. Form 1040x for 2012 Using $518,000 (from Step 5) as taxable income, XYZ figures the actual section 179 expense deduction. Form 1040x for 2012 Because the taxable income is at least $500,000, XYZ can take a $500,000 section 179 expense deduction. Form 1040x for 2012 Step 7. Form 1040x for 2012 $20,000 ($520,000 − $500,000). Form 1040x for 2012 Step 8. Form 1040x for 2012 Using $20,000 (from Step 7) as taxable income, XYZ's actual charitable contribution (limited to 10% of taxable income) is $2,000. Form 1040x for 2012 Carryover of disallowed deduction. Form 1040x for 2012   You can carry over for an unlimited number of years the cost of any section 179 property you elected to expense but were unable to because of the business income limit. Form 1040x for 2012   The amount you carry over is used in determining your section 179 expense deduction in the next year. Form 1040x for 2012 However, it is subject to the limits in that year. Form 1040x for 2012 If you place more than one property in service in a year, you can select the properties for which all or a part of the cost will be carried forward. Form 1040x for 2012 Your selections must be shown in your books and records. Form 1040x for 2012 Example. Form 1040x for 2012 Last year, Joyce Jones placed in service a machine that cost $8,000 and elected to deduct all $8,000 under section 179. Form 1040x for 2012 The taxable income from her business (determined without regard to both a section 179 expense deduction for the cost of the machine and the self-employment tax deduction) was $6,000. Form 1040x for 2012 Her section 179 expense deduction was limited to $6,000. Form 1040x for 2012 The $2,000 cost that was not allowed as a section 179 expense deduction (because of the business income limit) is carried to this year. Form 1040x for 2012 This year, Joyce placed another machine in service that cost $9,000. Form 1040x for 2012 Her taxable income from business (determined without regard to both a section 179 expense deduction for the cost of the machine and the self-employment tax deduction) is $10,000. Form 1040x for 2012 Joyce can deduct the full cost of the machine ($9,000) but only $1,000 of the carryover from last year because of the business income limit. Form 1040x for 2012 She can carry over the balance of $1,000 to next year. Form 1040x for 2012 Partnerships and S Corporations The section 179 expense deduction limits apply both to the partnership or S corporation and to each partner or shareholder. Form 1040x for 2012 The partnership or S corporation determines its section 179 expense deduction subject to the limits. Form 1040x for 2012 It then allocates the deduction among its partners or shareholders. Form 1040x for 2012 If you are a partner in a partnership or shareholder of an S corporation, you add the amount allocated from the partnership or S corporation to any section 179 costs not related to the partnership or S corporation and then apply the dollar limit to this total. Form 1040x for 2012 To determine any reduction in the dollar limit for costs over $560,000, you do not include any of the cost of section 179 property placed in service by the partnership or S corporation. Form 1040x for 2012 After you apply the dollar limit, you apply the business income limit to any remaining section 179 costs. Form 1040x for 2012 For more information, see chapter 2 of Publication 946. Form 1040x for 2012 Example. Form 1040x for 2012 In 2013, Partnership P placed in service section 179 property with a total cost of $2,160,000. Form 1040x for 2012 P must reduce its dollar limit by $160,000 ($2,160,000 − $2,000,000). Form 1040x for 2012 Its maximum section 179 expense deduction is $340,000 ($500,000 − $160,000), and it elects to expense that amount. Form 1040x for 2012 Because P's taxable income from the active conduct of all its trades or businesses for the year was $400,000, it can deduct the full $340,000. Form 1040x for 2012 P allocates $100,000 of its section 179 expense deduction and $110,000 of its taxable income to John, one of its partners. Form 1040x for 2012 John also conducts a business as a sole proprietor and in 2013, placed in service in that business, section 179 property costing $28,000. Form 1040x for 2012 John's taxable income from that business was $10,000. Form 1040x for 2012 In addition to the $100,000 allocated from P, he elects to expense the $28,000 of his sole proprietorship's section 179 costs. Form 1040x for 2012 However, John's deduction is limited to his business taxable income of $120,000 ($110,000 from P plus $10,000 from his sole proprietorship). Form 1040x for 2012 He carries over $8,000 ($128,000 − $120,000) of the elected section 179 costs to 2014. Form 1040x for 2012 How Do You Elect the Deduction? You elect to take the section 179 expense deduction by completing Part I of Form 4562. Form 1040x for 2012 If you elect the deduction for listed property, complete Part V of  Form 4562 before completing Part I. Form 1040x for 2012   File Form 4562 with either of the following: Your original tax return (whether or not you filed it timely), or An amended return filed within the time prescribed by law. Form 1040x for 2012 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. Form 1040x for 2012 The amended return must also include any resulting adjustments to taxable income. Form 1040x for 2012 Revoking an election. Form 1040x for 2012   An election (or any specification made in the election) to take a section 179 expense deduction for 2013 can be revoked without IRS approval by filing an amended return. Form 1040x for 2012 The amended return must be filed within the time prescribed by law. Form 1040x for 2012 The amended return must also include any resulting adjustments to taxable income (for example, allowable depreciation in that tax year for the item of section 179 property for which the election pertains. Form 1040x for 2012 ) Once made, the revocation is irrevocable. Form 1040x for 2012 When Must You Recapture the Deduction? You may have to recapture the section 179 expense deduction if, in any year during the property's recovery period, the percentage of business use drops to 50% or less. Form 1040x for 2012 In the year the business use drops to 50% or less, you include the recapture amount as ordinary income. Form 1040x for 2012 You also increase the basis of the property by the recapture amount. Form 1040x for 2012 Recovery periods for property are discussed later. Form 1040x for 2012 If you sell, exchange, or otherwise dispose of the property, do not figure the recapture amount under the rules explained in this discussion. Form 1040x for 2012 Instead, use the rules for recapturing depreciation explained in  chapter 9 under Section 1245 Property. Form 1040x for 2012   If the property is listed property, do not figure the recapture amount under the rules explained in this discussion when the percentage of business use drops to 50% or less. Form 1040x for 2012 Instead, use the rules for recapturing depreciation explained in chapter 5 of Publication 946 under Recapture of Excess Depreciation. Form 1040x for 2012 Figuring the recapture amount. Form 1040x for 2012   To figure the amount to recapture, take the following steps. Form 1040x for 2012 Figure the allowable depreciation for the section 179 expense deduction you claimed. Form 1040x for 2012 Begin with the year you placed the property in service and include the year of recapture. Form 1040x for 2012 Subtract the depreciation figured in (1) from the section 179 expense deduction you actually claimed. Form 1040x for 2012 The result is the amount you must recapture. Form 1040x for 2012 Example. Form 1040x for 2012 In January 2011, Paul Lamb, a calendar year taxpayer, bought and placed in service section 179 property costing $10,000. Form 1040x for 2012 The property is not listed property. Form 1040x for 2012 He elected a $5,000 section 179 expense deduction for the property and also elected not to claim a special depreciation allowance. Form 1040x for 2012 He used the property only for business in 2011 and 2012. Form 1040x for 2012 During 2013, he used the property 40% for business and 60% for personal use. Form 1040x for 2012 He figures his recapture amount as follows. Form 1040x for 2012 Section 179 expense deduction claimed (2011) $5,000 Minus: Allowable depreciation (instead of section 179 expense deduction):   2011 $1,250   2012 1,875   2013 ($1,250 × 40% (business)) 500 3,625 2013 — Recapture amount $1,375     Paul must include $1,375 in income for 2013. Form 1040x for 2012 Where to report recapture. Form 1040x for 2012   Report any recapture of the section 179 expense deduction as ordinary income in Part IV of Form 4797 and include it in income on Schedule F (Form 1040). Form 1040x for 2012 Recapture for qualified section 179 GO Zone property. Form 1040x for 2012   If any qualified section 179 GO Zone property ceases to be used in the GO Zone in a later year, you must recapture the benefit of the increased section 179 expense deduction as “other income. Form 1040x for 2012 ” Claiming the Special Depreciation Allowance For qualified property (defined below) placed in service in 2013, you can take an additional 50% special depreciation allowance. Form 1040x for 2012 The allowance is an additional deduction you can take after any section 179 expense deduction and before you figure regular depreciation under MACRS. Form 1040x for 2012 Figure the special depreciation allowance by multiplying the depreciable basis of the qualified property by 50%. Form 1040x for 2012 What is Qualified Property? For farmers, qualified property generally is certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Form 1040x for 2012 Certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Form 1040x for 2012   Certain qualified property (defined below) acquired after December 31, 2007, and before January 1, 2014, is eligible for a 50% special depreciation allowance. Form 1040x for 2012   Qualified property includes the following: Tangible property depreciated under the Modified Accelerated Cost Recovery System (MACRS) with a recovery period of 20 years or less. Form 1040x for 2012 Water utility property. Form 1040x for 2012 Off-the-shelf computer software. Form 1040x for 2012 Qualified leasehold improvement property. Form 1040x for 2012   Qualified property must also meet all of the following tests: You must have acquired qualified property by purchase after December 31, 2007. Form 1040x for 2012 If a binding contract to acquire the property existed before January 1, 2008, the property does not qualify. Form 1040x for 2012 Qualified property must be placed in service after December 31, 2007 and placed in service before January 1, 2014 (before January 1, 2015 for certain property with a long production period and for certain aircraft). Form 1040x for 2012 The original use of the property must begin with you after December 31, 2007. Form 1040x for 2012 For more information, see chapter 3 of Publication 946. Form 1040x for 2012 How Can You Elect Not To Claim the Allowance? You can elect, for any class of property, not to deduct the special depreciation allowance for all property in such class placed in service during the tax year. Form 1040x for 2012 To make the election, attach a statement to your return indicating the class of property for which you are making the election. Form 1040x for 2012 Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. Form 1040x for 2012 However, if you timely filed your return for the year without making the election, you still can make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). Form 1040x for 2012 Attach the election statement to the amended return. Form 1040x for 2012 On the amended return, write “Filed pursuant to section 301. Form 1040x for 2012 9100-2. Form 1040x for 2012 ” Once made, the election may not be revoked without IRS consent. Form 1040x for 2012 If you elect not to have the special depreciation allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation. Form 1040x for 2012 When Must You Recapture an Allowance When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. Form 1040x for 2012 For more information, see chapter 3 of Publication 946. Form 1040x for 2012 Figuring Depreciation Under MACRS The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. Form 1040x for 2012 MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Form 1040x for 2012 Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. Form 1040x for 2012 To be sure you can use MACRS to figure depreciation for your property, see Can You Use MACRS To Depreciate Your Property, earlier. Form 1040x for 2012 This part explains how to determine which MACRS depreciation system applies to your property. Form 1040x for 2012 It also discusses the following information that you need to know before you can figure depreciation under MACRS. Form 1040x for 2012 Property's recovery class. Form 1040x for 2012 Placed-in-service date. Form 1040x for 2012 Basis for depreciation. Form 1040x for 2012 Recovery period. Form 1040x for 2012 Convention. Form 1040x for 2012 Depreciation method. Form 1040x for 2012 Finally, this part explains how to use this information to figure your depreciation deduction. Form 1040x for 2012 Which Depreciation System (GDS or ADS) Applies? Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. Form 1040x for 2012 You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. Form 1040x for 2012 Required use of ADS. Form 1040x for 2012   You must use ADS for the following property. Form 1040x for 2012 All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect. Form 1040x for 2012 Listed property used 50% or less in a qualified business use. Form 1040x for 2012 See Additional Rules for Listed Property , later. Form 1040x for 2012 Any tax-exempt use property. Form 1040x for 2012 Any tax-exempt bond-financed property. Form 1040x for 2012 Any property imported from a foreign country for which an Executive Order is in effect because the country maintains trade restrictions or engages in other discriminatory acts. Form 1040x for 2012 Any tangible property used predominantly outside the United States during the year. Form 1040x for 2012 If you are required to use ADS to depreciate your property, you cannot claim the special depreciation allowance. Form 1040x for 2012 Electing ADS. Form 1040x for 2012   Although your property may qualify for GDS, you can elect to use ADS. Form 1040x for 2012 The election generally must cover all property in the same property class you placed in service during the year. Form 1040x for 2012 However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. Form 1040x for 2012 Once you make this election, you can never revoke it. Form 1040x for 2012   You make the election by completing line 20 in Part III of Form 4562. Form 1040x for 2012 Which Property Class Applies Under GDS? The following is a list of the nine property classes under GDS. Form 1040x for 2012 3-year property. Form 1040x for 2012 5-year property. Form 1040x for 2012 7-year property. Form 1040x for 2012 10-year property. Form 1040x for 2012 15-year property. Form 1040x for 2012 20-year property. Form 1040x for 2012 25-year property. Form 1040x for 2012 Residential rental property. Form 1040x for 2012 Nonresidential real property. Form 1040x for 2012 See Which Property Class Applies Under GDS in chapter 4 of Publication 946 for examples of the types of property included in each class. Form 1040x for 2012 What Is the Placed-in-Service Date? You begin to claim depreciation when your property is placed in service for use either in a trade or business or for the production of income. Form 1040x for 2012 The placed-in-service date for your property is the date the property is ready and available for a specific use. Form 1040x for 2012 It is therefore not necessarily the date it is first used. Form 1040x for 2012 If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date. Form 1040x for 2012 See Placed in Service under When Does Depreciation Begin and End , earlier, for examples illustrating when property is placed in service. Form 1040x for 2012 What Is the Basis for Depreciation? The basis for depreciation of MACRS property is the property's cost or other basis multiplied by the percentage of business/investment use. Form 1040x for 2012 Reduce that amount by any credits and deductions allocable to the property. Form 1040x for 2012 The following are examples of some of the credits and deductions that reduce basis. Form 1040x for 2012 Any deduction for section 179 property. Form 1040x for 2012 Any deduction for removal of barriers to the disabled and the elderly. Form 1040x for 2012 Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. Form 1040x for 2012 Any special depreciation allowance. Form 1040x for 2012 Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. Form 1040x for 2012 For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property , earlier. Form 1040x for 2012 Also, see chapter 6. Form 1040x for 2012 For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. Form 1040x for 2012 Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. Form 1040x for 2012 It is determined based on the depreciation system (GDS or ADS) used. Form 1040x for 2012 See Table 7-1 for recovery periods under both GDS and ADS for some commonly used assets. Form 1040x for 2012 For a complete list of recovery periods, see the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. Form 1040x for 2012 House trailers for farm laborers. Form 1040x for 2012   To depreciate a house trailer you supply as housing for those who work on your farm, use one of the following recovery periods if the house trailer is mobile (it has wheels and a history of movement). Form 1040x for 2012 A 7-year recovery period under GDS. Form 1040x for 2012 A 10-year recovery period under ADS. Form 1040x for 2012   However, if the house trailer is not mobile (its wheels have been removed and permanent utilities and pipes attached to it), use one of the following recovery periods. Form 1040x for 2012 A 20-year recovery period under GDS. Form 1040x for 2012 A 25-year recovery period under ADS. Form 1040x for 2012 Water wells. Form 1040x for 2012   Water wells used to provide water for raising poultry and livestock are land improvements. Form 1040x for 2012 If they are depreciable, use one of the following recovery periods. Form 1040x for 2012 A 15-year recovery period under GDS. Form 1040x for 2012 A 20-year recovery period under ADS. Form 1040x for 2012   The types of water wells that can be depreciated were discussed earlier in Irrigation systems and water wells under Property Having a Determinable Useful Life . Form 1040x for 2012 Table 7-1. Form 1040x for 2012 Farm Property Recovery Periods   Recovery Period in Years Assets GDS ADS Agricultural structures (single purpose) 10 15 Automobiles 5 5 Calculators and copiers 5 6 Cattle (dairy or breeding) 5 7 Communication equipment1 7 10 Computer and peripheral equipment 5 5 Drainage facilities 15 20 Farm buildings2 20 25 Farm machinery and equipment 7 10 Fences (agricultural) 7 10 Goats and sheep (breeding) 5 5 Grain bin 7 10 Hogs (breeding) 3 3 Horses (age when placed in service)     Breeding and working (12 years or less) 7 10 Breeding and working (more than 12 years) 3 10 Racing horses 3 12 Horticultural structures (single purpose) 10 15 Logging machinery and equipment3 5 6 Nonresidential real property 394 40 Office furniture, fixtures, and equipment (not calculators, copiers, or typewriters) 7 10 Paved lots 15 20 Residential rental property 27. Form 1040x for 2012 5 40 Tractor units (over-the-road) 3 4 Trees or vines bearing fruit or nuts 10 20 Truck (heavy duty, unloaded weight 13,000 lbs. Form 1040x for 2012 or more) 5 6 Truck (actual weight less than 13,000 lbs) 5 5 Water wells 15 20 1 Not including communication equipment listed in other classes. Form 1040x for 2012 2 Not including single purpose agricultural or horticultural structures. Form 1040x for 2012 3 Used by logging and sawmill operators for cutting of timber. Form 1040x for 2012 4 For property placed in service after May 12, 1993; for property placed in service before May 13, 1993,  the recovery period is 31. Form 1040x for 2012 5 years. Form 1040x for 2012 Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. Form 1040x for 2012 The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. Form 1040x for 2012 Use one of the following conventions. Form 1040x for 2012 The half-year convention. Form 1040x for 2012 The mid-month convention. Form 1040x for 2012 The mid-quarter convention. Form 1040x for 2012 For a detailed explanation of each convention, see Which Convention Applies in chapter 4 of Publication 946. Form 1040x for 2012 Also, see the Instructions for Form 4562. Form 1040x for 2012 Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. Form 1040x for 2012 The 200% declining balance method over a GDS recovery period. Form 1040x for 2012 The 150% declining balance method over a GDS recovery period. Form 1040x for 2012 The straight line method over a GDS recovery period. Form 1040x for 2012 The straight line method over an ADS recovery period. Form 1040x for 2012 Depreciation Table. Form 1040x for 2012   The following table lists the types of property you can depreciate under each method. Form 1040x for 2012 The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. Form 1040x for 2012 Depreciation Table System/Method   Type of Property GDS using  150% DB • All property used in a farming business (except real property)   • All 15- and 20-year property   • Nonfarm 3-, 5-, 7-, and 10-year property1 GDS using SL • Nonresidential real property   • Residential rental property   • Trees or vines bearing fruit or nuts   • All 3-, 5-, 7-, 10-, 15-, and 20-year property1 ADS using SL • Property used predomi- nantly outside the United States   • Farm property used when an election not to apply the uniform capitalization rules is in effect   • Tax-exempt property   • Tax-exempt bond-financed property   • Imported property2   • Any property for which you elect to use this method1 GDS using  200% DB • Nonfarm 3-, 5-, 7-, and 10-year property 1Elective method 2See section 168(g)(6) of the Internal Revenue  Code Property used in farming business. Form 1040x for 2012   For personal property placed in service after 1988 in a farming business, you must use the 150% declining balance method over a GDS recovery period or you can elect one of the following methods. Form 1040x for 2012 The straight line method over a GDS recovery period. Form 1040x for 2012 The straight line method over an ADS recovery period. Form 1040x for 2012 For property placed in service before 1999, you could have elected to use the 150% declining balance method using the ADS recovery periods for certain property classes. Form 1040x for 2012 If you made this election, continue to use the same method and recovery period for that property. Form 1040x for 2012 Real property. Form 1040x for 2012   You can depreciate real property using the straight line method under either GDS or ADS. Form 1040x for 2012 Switching to straight line. Form 1040x for 2012   If you use a declining balance method, you switch to the straight line method in the year it provides an equal or greater deduction. Form 1040x for 2012 If you use the MACRS percentage tables, discussed later under How Is the Depreciation Deduction Figured , you do not need to determine in which year your deduction is greater using the straight line method. Form 1040x for 2012 The tables have the switch to the straight line method built into their rates. Form 1040x for 2012 Fruit or nut trees and vines. Form 1040x for 2012   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a 10-year recovery period. Form 1040x for 2012 ADS required for some farmers. Form 1040x for 2012   If you elect not to apply the uniform capitalization rules to any plant shown in Table 6-1 of chapter 6 and produced in your farming business, you must use ADS for all property you place in service in any year the election is in effect. Form 1040x for 2012 See chapter 6 for a discussion of the application of the uniform capitalization rules to farm property. Form 1040x for 2012 Electing a different method. Form 1040x for 2012   As shown in the Depreciation Table , you can elect a different method for depreciation for certain types of property. Form 1040x for 2012 You must make the election by the due date of the return (including extensions) for the year you placed the property in service. Form 1040x for 2012 However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of your return (excluding extensions). Form 1040x for 2012 Attach the election to the amended return and write “Filed pursuant to section 301. Form 1040x for 2012 9100-2” on the election statement. Form 1040x for 2012 File the amended return at the same address you filed the original return. Form 1040x for 2012 Once you make the election, you cannot change it. Form 1040x for 2012    If you elect to use a different method for one item in a property class, you must apply the same method to all property in that class placed in service during the year of the election. Form 1040x for 2012 However, you can make the election on a property-by-property basis for residential rental and nonresidential real property. Form 1040x for 2012 Straight line election. Form 1040x for 2012   Instead of using the declining balance method, you can elect to use the straight line method over the GDS recovery period. Form 1040x for 2012 Make the election by entering “S/L” under column (f) in Part III of Form 4562. Form 1040x for 2012 ADS election. Form 1040x for 2012   As explained earlier under Which Depreciation System (GDS or ADS) Applies , you can elect to use ADS even though your property may come under GDS. Form 1040x for 2012 ADS uses the straight line method of depreciation over the ADS recovery periods, which are generally longer than the GDS recovery periods. Form 1040x for 2012 The ADS recovery periods for many assets used in the business of farming are listed in Table 7–1. Form 1040x for 2012 Additional ADS recovery periods for other classes of property may be found in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946. Form 1040x for 2012 How Is the Depreciation Deduction Figured? To figure your depreciation deduction under MACRS, you first determine the depreciation system, property class, placed-in-service date, basis amount, recovery period, convention, and depreciation method that applies to your property. Form 1040x for 2012 Then you are ready to figure your depreciation deduction. Form 1040x for 2012 You can figure it in one of two ways. Form 1040x for 2012 You can use the percentage tables provided by the IRS. Form 1040x for 2012 You can figure your own deduction without using the tables. Form 1040x for 2012 Figuring your own MACRS deduction will generally result in a slightly different amount than using the tables. Form 1040x for 2012 Using the MACRS Percentage Tables To help you figure your deduction under MACRS, the IRS has established percentage tables that incorporate the applicable convention and depreciation method. Form 1040x for 2012 These percentage tables are in Appendix A of Publication 946. Form 1040x for 2012 Rules for using the tables. Form 1040x for 2012   The following rules cover the use of the percentage tables. Form 1040x for 2012 You must apply the rates in the percentage tables to your property's unadjusted basis. Form 1040x for 2012 Unadjusted basis is the same basis amount you would use to figure gain on a sale but figured without reducing your original basis by any MACRS depreciation taken in earlier years. Form 1040x for 2012 You cannot use the percentage tables for a short tax year. Form 1040x for 2012 See chapter 4 of Publication 946 for information on how to figure the deduction for a short tax year. Form 1040x for 2012 You generally must continue to use them for the entire recovery period of the property. Form 1040x for 2012 You must stop using the tables if you adjust the basis of the property for any reason other than— Depreciation allowed or allowable, or An addition or improvement to the property, which is depreciated as a separate property. Form 1040x for 2012 Basis adjustment due to casualty loss. Form 1040x for 2012   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. Form 1040x for 2012 For the year of the adjustment and the remaining recovery period, you must figure the depreciation yourself using the property's adjusted basis at the end of the year. Form 1040x for 2012 See Figuring the Deduction Without Using the Tables in chapter 4 of Publication 946. Form 1040x for 2012 Figuring depreciation using the 150% DB method and half-year convention. Form 1040x for 2012    Table 7-2 has the percentages for 3-, 5-, 7-, and 20-year property. Form 1040x for 2012 The percentages are based on the 150% declining balance method with a change to the straight line method. Form 1040x for 2012 This table covers only the half-year convention and the first 8 years for 20-year property. Form 1040x for 2012 See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. Form 1040x for 2012   The following examples show how to figure depreciation under MACRS using the percentages in Table 7-2 . Form 1040x for 2012 Example 1. Form 1040x for 2012 During the year, you bought an item of 7-year property for $10,000 and placed it in service. Form 1040x for 2012 You do not elect a section 179 expense deduction for this property. Form 1040x for 2012 In addition, the property is not qualified property for purposes of the special depreciation allowance. Form 1040x for 2012 The unadjusted basis of the property is $10,000. Form 1040x for 2012 You use the percentages in Table 7-2 to figure your deduction. Form 1040x for 2012 Since this is 7-year property, you multiply $10,000 by 10. Form 1040x for 2012 71% to get this year's depreciation of $1,071. Form 1040x for 2012 For next year, your depreciation will be $1,913 ($10,000 × 19. Form 1040x for 2012 13%). Form 1040x for 2012 Example 2. Form 1040x for 2012 You had a barn constructed on your farm at a cost of $20,000. Form 1040x for 2012 You placed the barn in service this year. Form 1040x for 2012 You elect not to claim the special depreciation allowance. Form 1040x for 2012 The barn is 20-year property and you use the table percentages to figure your deduction. Form 1040x for 2012 You figure this year's depreciation by multiplying $20,000 (unadjusted basis) by 3. Form 1040x for 2012 75% to get $750. Form 1040x for 2012 For next year, your depreciation will be $1,443. Form 1040x for 2012 80 ($20,000 × 7. Form 1040x for 2012 219%). Form 1040x for 2012 Table 7-2. Form 1040x for 2012 150% Declining Balance Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 25. Form 1040x for 2012 0 % 15. Form 1040x for 2012 00 % 10. Form 1040x for 2012 71 % 3. Form 1040x for 2012 750 % 2 37. Form 1040x for 2012 5   25. Form 1040x for 2012 50   19. Form 1040x for 2012 13   7. Form 1040x for 2012 219   3 25. Form 1040x for 2012 0   17. Form 1040x for 2012 85   15. Form 1040x for 2012 03   6. Form 1040x for 2012 677   4 12. Form 1040x for 2012 5   16. Form 1040x for 2012 66   12. Form 1040x for 2012 25   6. Form 1040x for 2012 177   5     16. Form 1040x for 2012 66   12. Form 1040x for 2012 25   5. Form 1040x for 2012 713   6     8. Form 1040x for 2012 33   12. Form 1040x for 2012 25   5. Form 1040x for 2012 285   7         12. Form 1040x for 2012 25   4. Form 1040x for 2012 888   8         6. Form 1040x for 2012 13   4. Form 1040x for 2012 522   Figuring depreciation using the straight line method and half-year convention. Form 1040x for 2012   The following table has the straight line percentages for 3-, 5-, 7-, and 20-year property using the half-year convention. Form 1040x for 2012 The table covers only the first 8 years for 20-year property. Form 1040x for 2012 See Appendix A in Publication 946 for complete MACRS tables, including tables for the mid-quarter and mid-month convention. Form 1040x for 2012 Table 7-3. Form 1040x for 2012 Straight Line Method (Half-Year Convention) Year 3-Year 5-Year 7-Year 20-Year 1 16. Form 1040x for 2012 67 % 10 % 7. Form 1040x for 2012 14 % 2. Form 1040x for 2012 5 % 2 33. Form 1040x for 2012 33   20   14. Form 1040x for 2012 29   5. Form 1040x for 2012 0   3 33. Form 1040x for 2012 33   20   14. Form 1040x for 2012 29   5. Form 1040x for 2012 0   4 16. Form 1040x for 2012 67   20   14. Form 1040x for 2012 28   5. Form 1040x for 2012 0   5     20   14. Form 1040x for 2012 29   5. Form 1040x for 2012 0   6     10   14. Form 1040x for 2012 28   5. Form 1040x for 2012 0   7         14. Form 1040x for 2012 29   5. Form 1040x for 2012 0   8         7. Form 1040x for 2012 14   5. Form 1040x for 2012 0    
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IRA One-Rollover-Per-Year Rule

Beginning as early as January 1, 2015, you can make only one rollover from a traditional IRA to another (or the same) traditional IRA in any 12-month period, regardless of the number of IRAs you own (Announcement  2014-15). A similar limitation will apply to rollovers between Roth IRAs. You can, however, continue to make as many trustee-to-trustee transfers between IRAs as you want. Amounts transferred between traditional IRAs, either by rollover or trustee-to-trustee transfer, are excluded from your gross income.

Current law

You don’t have to include in your gross income any amount distributed to you from a traditional IRA if you deposit the amount into another (or the same) traditional IRA within 60 days (Internal Revenue Code Section 408(d)(3)). Under Internal Revenue Code Section 408(d)(3)(B), only one IRA-to-IRA rollover can be made in any 12-month period. Proposed Treasury Regulation Section 1.408-4(b)(4)(ii), published in 1981, and IRS Publication 590, Individual Retirement Arrangements (IRAs) interpret this limitation as applying on an IRA-by-IRA basis, meaning a rollover from one IRA to another would not affect a rollover involving other IRAs of the same individual.

U.S. Tax Court decision

The Tax Court recently held that you can’t make a non-taxable rollover from one IRA to another if you have already made a rollover from any of your IRAs in the preceding 1-year period (Bobrow v. Commissioner, T.C. Memo. 2014-21). Following the holding in this decision means:

  • you must include in gross income any previously untaxed amounts distributed from an IRA if you made an IRA-to-IRA rollover in the preceding 12 months, and
  • you may be subject to the 10% early withdrawal tax on the amount you include in gross income.

Additionally, if you pay these amounts into another (or the same) IRA, they may be:

Prospective application

The IRS intends to follow the Tax Court’s interpretation of Internal Revenue Code Section 408(d)(3)(B). However, to give IRA owners and trustees time to adjust, the IRS will delay implementation until January 1, 2015, at the earliest. Proposed Treasury Regulation Section 1.408-4(b)(4)(ii) will be withdrawn and Publication 590 will be revised to reflect the new interpretation.

Only rollovers will be affected

This change won’t affect your ability to transfer funds from one IRA trustee directly to another, because this type of transfer isn’t a rollover (Revenue Ruling 78-406, 1978-2 C.B. 157). The one-rollover-per-year rule of Internal Revenue Code Section 408(d)(3)(B) applies only to rollovers.

Additional resources

Page Last Reviewed or Updated: 26-Mar-2014

The Form 1040x For 2012

Form 1040x for 2012 Publication 225 - Introductory Material Table of Contents IntroductionOrdering forms and publications. Form 1040x for 2012 Tax questions. Form 1040x for 2012 Future Developments What's New for 2013 What's New for 2014 Reminders Introduction You are in the business of farming if you cultivate, operate, or manage a farm for profit, either as owner or tenant. Form 1040x for 2012 A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. Form 1040x for 2012 It also includes plantations, ranches, ranges, and orchards. Form 1040x for 2012 This publication explains how the federal tax laws apply to farming. Form 1040x for 2012 Use this publication as a guide to figure your taxes and complete your farm tax return. Form 1040x for 2012 If you need more information on a subject, get the specific IRS tax publication covering that subject. Form 1040x for 2012 We refer to many of these free publications throughout this publication. Form 1040x for 2012 See chapter 16 for information on ordering these publications. Form 1040x for 2012 The explanations and examples in this publication reflect the Internal Revenue Service's interpretation of tax laws enacted by Congress, Treasury regulations, and court decisions. Form 1040x for 2012 However, the information given does not cover every situation and is not intended to replace the law or change its meaning. Form 1040x for 2012 This publication covers subjects on which a court may have made a decision more favorable to taxpayers than the interpretation of the Service. Form 1040x for 2012 Until these differing interpretations are resolved by higher court decisions, or in some other way, this publication will continue to present the interpretation of the Service. Form 1040x for 2012 The IRS Mission. Form 1040x for 2012   Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. Form 1040x for 2012 Comments and suggestions. Form 1040x for 2012   We welcome your comments about this publication and your suggestions for future editions. Form 1040x for 2012   You can write to us at the following address: Internal Revenue Service Business Forms and Publications Branch SE:W:CAR:MP:T:B 1111 Constitution Ave. Form 1040x for 2012 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Form 1040x for 2012 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Form 1040x for 2012   You can email us at taxforms@irs. Form 1040x for 2012 gov. Form 1040x for 2012 Please put “Publications Comment” on the subject line. Form 1040x for 2012 You can also send us comments from www. Form 1040x for 2012 irs. Form 1040x for 2012 gov/formspubs/, select “Comment on Tax Forms and Publications” under “More Information. Form 1040x for 2012 ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Form 1040x for 2012 Ordering forms and publications. Form 1040x for 2012   Visit www. Form 1040x for 2012 irs. Form 1040x for 2012 gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Form 1040x for 2012 Internal Revenue Service 1201 N. Form 1040x for 2012 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Form 1040x for 2012   If you have a tax question, check the information available on IRS. Form 1040x for 2012 gov or call 1-800-829-1040. Form 1040x for 2012 We cannot answer tax questions sent to either of the above addresses. Form 1040x for 2012 Comments on IRS enforcement actions. Form 1040x for 2012   The Small Business and Agricultural Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards were established to receive comments from small business about federal agency enforcement actions. Form 1040x for 2012 The Ombudsman will annually evaluate the enforcement activities of each agency and rate its responsiveness to small business. Form 1040x for 2012 If you wish to comment on the enforcement actions of the IRS, you can: Call 1-888-734-3247, Fax your comments to 202-481-5719, Write to Office of the National Ombudsman U. Form 1040x for 2012 S. Form 1040x for 2012 Small Business Administration 409 3rd Street, S. Form 1040x for 2012 W. Form 1040x for 2012  Washington, DC 20416 Send an email to ombudsman@sba. Form 1040x for 2012 gov, or Download the appraisal form at  www. Form 1040x for 2012 sba. Form 1040x for 2012 gov/ombudsman. Form 1040x for 2012 Treasury Inspector General for Tax Administration. Form 1040x for 2012   If you want to confidentially report misconduct, waste, fraud, or abuse by an IRS employee, you can call 1-800-366-4484 (1-800-877-8339 for TTY/TDD users). Form 1040x for 2012 You can remain anonymous. Form 1040x for 2012 Farm tax classes. Form 1040x for 2012   Many state Cooperative Extension Services conduct farm tax workshops in conjunction with the IRS. Form 1040x for 2012 Contact your county extension office for more information. Form 1040x for 2012 Rural tax education website. Form 1040x for 2012   The Rural Tax Education website is a source for information concerning agriculturally related income and deductions and self-employment tax. Form 1040x for 2012 The website is available for farmers and ranchers, other agricultural producers, Extension educators, and any one interested in learning about the tax side of the agricultural community. Form 1040x for 2012 Members of the National Farm Income Tax Extension Committee are contributors for the website and the website is hosted by Utah State University Cooperative Extension. Form 1040x for 2012 You can visit the website at www. Form 1040x for 2012 ruraltax. Form 1040x for 2012 org. Form 1040x for 2012 Future Developments The IRS has created a page on IRS. Form 1040x for 2012 gov for information about Publication 225, at  www. Form 1040x for 2012 irs. Form 1040x for 2012 gov/pub225. Form 1040x for 2012 Information about recent developments affecting Publication 225 will be posted on that page. Form 1040x for 2012 What's New for 2013 The following items highlight a number of administrative and tax law changes for 2013. Form 1040x for 2012 They are discussed in more detail throughout the publication. Form 1040x for 2012 Standard mileage rate. Form 1040x for 2012  For 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56. Form 1040x for 2012 5 cents. Form 1040x for 2012 See chapter 4. Form 1040x for 2012 Simplified method for business use of home deduction. Form 1040x for 2012  The IRS now provides a simplified method to determine your expenses for business use of your home. Form 1040x for 2012 For more information, see Schedule C (Form 1040), Part II, and its instructions. Form 1040x for 2012 See chapter 4. Form 1040x for 2012 Increased section 179 expense deduction dollar limits. Form 1040x for 2012  The maximum amount you can elect to deduct for most section 179 property you placed in service in 2013 is $500,000. Form 1040x for 2012 This limit is reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. Form 1040x for 2012 See chapter 7. Form 1040x for 2012 Extension of special depreciation allowance for certain qualified property acquired after December 31, 2007. Form 1040x for 2012  You may be able to take a 50% special depreciation allowance for certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Form 1040x for 2012 See chapter 7. Form 1040x for 2012 Expiration of the 3-year recovery period for certain race horses. Form 1040x for 2012 . Form 1040x for 2012  The 3-year recovery period for race horses two years old or younger will expire for such horses placed in service after December 31, 2013. Form 1040x for 2012 See chapter 7. Form 1040x for 2012 Tax rates. Form 1040x for 2012  For tax years beginning in 2013, the social security part of the self-employment tax increases from 10. Form 1040x for 2012 4% to 12. Form 1040x for 2012 4%. Form 1040x for 2012 As a result, the self-employment tax is increased from 13. Form 1040x for 2012 3% to 15. Form 1040x for 2012 3%. Form 1040x for 2012 See chapter 12. Form 1040x for 2012 Maximum net earnings. Form 1040x for 2012  The maximum net self-employment earnings subject to the social security part (12. Form 1040x for 2012 4%) of the self-employment tax increased to $113,700 for 2013. Form 1040x for 2012 There is no maximum limit on earnings subject to the Medicare part (2. Form 1040x for 2012 9%). Form 1040x for 2012 See chapter 12. Form 1040x for 2012 Net investment income tax. Form 1040x for 2012  For tax years beginning in 2013, individuals, estates, and trusts may be subject to the net investment income tax (NIIT). Form 1040x for 2012 If you are a trader in financial instruments and commodities and required to file Schedule C (Form 1040), your investment income (for purposes of the NIIT) may be reduced by your interest and other investment expenses to the extent those expenses are not used to reduce your self-employment income. Form 1040x for 2012 For information about NIIT and the special rule for traders in financial instruments and commodities, see the Instructions for Form 8960. Form 1040x for 2012 Social Security and Medicare Tax for 2013. Form 1040x for 2012  The employee tax rate for social security is 6. Form 1040x for 2012 2%. Form 1040x for 2012 The employer tax rate for social security remains unchanged at 6. Form 1040x for 2012 2%. Form 1040x for 2012 The social security wage base limit is $113,700. Form 1040x for 2012 The Medicare tax rate is 1. Form 1040x for 2012 45% each for the employee and employer, unchanged from 2012. Form 1040x for 2012 There is no wage base limit for Medicare tax. Form 1040x for 2012 See chapter 13. Form 1040x for 2012 Additional Medicare Tax. Form 1040x for 2012  For tax years beginning in 2013, a 0. Form 1040x for 2012 9% Additional Medicare Tax applies to your Medicare wages, Railroad Tax Act (RRTA) compensation, and self-employment income above a threshold amount. Form 1040x for 2012 Use Form 8959, Additional Medicare Tax, to figure this tax. Form 1040x for 2012 For more information, see the Instructions for Form 8959 and the Instructions for Schedule SE (Form 1040). Form 1040x for 2012 In addition to withholding Medicare tax at 1. Form 1040x for 2012 45%, you must withhold a 0. Form 1040x for 2012 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Form 1040x for 2012 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. Form 1040x for 2012 Additional Medicare Tax is only imposed on the employee. Form 1040x for 2012 There is no employer share of Additional Medicare Tax. Form 1040x for 2012 All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Form 1040x for 2012 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. Form 1040x for 2012 For more information on Additional Medicare Tax, visit IRS. Form 1040x for 2012 gov and enter “Additional Medicare Tax” in the search box. Form 1040x for 2012 See chapter 13. Form 1040x for 2012 Leave-Based donation programs to aid victims of Hurricane Sandy. Form 1040x for 2012  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. Form 1040x for 2012 The donated leave will not be included in the income or wages of the employee. Form 1040x for 2012 The employer may deduct the cash payments as business expenses or charitable contributions. Form 1040x for 2012 See chapter 13. Form 1040x for 2012 Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans extended. Form 1040x for 2012  The work opportunity tax credit is now available for eligible unemployed veterans who begin work before January 1, 2014. Form 1040x for 2012 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. Form 1040x for 2012 For more information, visit IRS. Form 1040x for 2012 gov and enter “work opportunity credit” in the search box. Form 1040x for 2012 See chapter 13. Form 1040x for 2012 Estimated tax. Form 1040x for 2012  For tax years beginning in 2013, the Net Investment Income Tax (NIIT) may need to be included when calculating your estimated tax. Form 1040x for 2012 Also, when figuring your estimated tax, you may need to include the 0. Form 1040x for 2012 9% Additional Medicare Tax applicable to Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income above the threshold amount based on your filing status. Form 1040x for 2012 For more information, see Publication 505. Form 1040x for 2012 What's New for 2014 Maximum net earnings. Form 1040x for 2012  The maximum net self-employment earnings subject to the social security part of the self-employment tax for 2014 will be discussed in the 2013 Publication 334. Form 1040x for 2012 See chapter 12. Form 1040x for 2012 Social security and Medicare tax for 2014. Form 1040x for 2012  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). Form 1040x for 2012 The Medicare tax rate for 2014 will also be discussed in Publication 51 (Circular A) (For use in 2014). Form 1040x for 2012 There is no limit on the amount of wages subject to Medicare tax. Form 1040x for 2012 See chapter 13. Form 1040x for 2012 Reminders The following reminders and other items may help you file your tax return. Form 1040x for 2012   IRS e-file (Electronic Filing) You can file your tax returns electronically using an IRS e-file option. Form 1040x for 2012 The benefits of IRS e-file include faster refunds, increased accuracy, and acknowledgment of IRS receipt of your return. Form 1040x for 2012 You can use one of the following IRS e-file options. Form 1040x for 2012 Use an authorized IRS e-file provider. Form 1040x for 2012 Use a personal computer. Form 1040x for 2012 Visit a Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) site. Form 1040x for 2012 For details on these fast filing methods, see your income tax package. Form 1040x for 2012 Principal agricultural activity codes. Form 1040x for 2012  You must enter on line B of Schedule F (Form 1040) a code that identifies your principal agricultural activity. Form 1040x for 2012 It is important to use the correct code because this information will identify market segments of the public for IRS Taxpayer Education programs. Form 1040x for 2012 The U. Form 1040x for 2012 S. Form 1040x for 2012 Census Bureau also uses this information for its economic census. Form 1040x for 2012 See the list of Principal Agricultural Activity Codes on page 2 of Schedule F (Form 1040). Form 1040x for 2012 Publication on employer identification numbers (EIN). Form 1040x for 2012  Publication 1635, Understanding Your Employer Identification Number, provides general information on employer identification numbers. Form 1040x for 2012 Topics include how to apply for an EIN and how to complete Form SS-4. Form 1040x for 2012 Change of address. Form 1040x for 2012  If you change your home address, you should use Form 8822, Change of Addres, to notify the IRS. Form 1040x for 2012 If you change your business address, you should use Form 8822-B, Change of Address or Responsible Party — Business, to notify the IRS. Form 1040x for 2012 Be sure to include your suite, room, or other unit number. Form 1040x for 2012 Reportable transactions. Form 1040x for 2012  You must file Form 8886, Reportable Transaction Disclosure Statement, to report certain transactions. Form 1040x for 2012 You may have to pay a penalty if you are required to file Form 8886 but do not do so. Form 1040x for 2012 Reportable transactions include (1) transactions the same as or substantially similar to tax avoidance transactions identified by the IRS, (2) transactions offered to you under conditions of confidentiality and for which you paid an advisor a minimum fee, (3) transactions for which you have or a related party has a right to a full or partial refund of fees if all or part of the intended tax consequences from the transaction are not sustained, (4) transactions that result in losses of at least $2 million in any single year or $4 million in any combination of years, and (5) transactions with asset holding periods of 45 days or less and that result in a tax credit of more than $250,000. Form 1040x for 2012 For more information, see the Instructions for Form 8886. Form 1040x for 2012 Form W-4 for 2014. Form 1040x for 2012  You should make new Forms W-4 available to your employees and encourage them to check their income tax withholding for 2014. Form 1040x for 2012 Those employees who owed a large amount of tax or received a large refund for 2013 may need to submit a new Form W-4. Form 1040x for 2012 See Publication 919, How Do I Adjust My Tax Withholding. Form 1040x for 2012 Form 1099-MISC. Form 1040x for 2012  Generally, file Form 1099-MISC if you pay at least $600 in rents, services, and other miscellaneous payments in your farming business to an individual (for example, an accountant, an attorney, or a veterinarian) who is not your employee. Form 1040x for 2012 Limited Liability Company (LLC). Form 1040x for 2012  For purposes of this publication, a limited liability company (LLC) is a business entity organized in the United States under state law. Form 1040x for 2012 Unlike a partnership, all of the members of an LLC have limited personal liability for its debts. Form 1040x for 2012 An LLC may be classified for federal income tax purposes as a partnership, corporation, or an entity disregarded as separate from its owner by applying the rules in Regulations section 301. Form 1040x for 2012 7701-3. Form 1040x for 2012 See Publication 3402 for more details. Form 1040x for 2012 Photographs of missing children. Form 1040x for 2012  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Form 1040x for 2012 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Form 1040x for 2012 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Form 1040x for 2012 Prev  Up  Next   Home   More Online Publications