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Free E File 2011

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Free E File 2011

Free e file 2011 Index A Abandonment of home, Abandonment. Free e file 2011 Absence, temporary, Temporary absence. Free e file 2011 Abstract fees, Settlement fees or closing costs. Free e file 2011 Address, change of, Reminders Adjusted basis, Adjusted Basis, Adjusted Basis Definition of, Determining Basis Worksheet 1 to figure, Determining Basis, Worksheet 1. Free e file 2011 Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 1. Free e file 2011 Adjusted Basis of Home Sold—Illustrated Example 3 for Emily White, Worksheet 1 Instructions. Free e file 2011 Adjusted Basis of Home Sold Adoption Adjusted basis of home for credit claimed, Decreases to Basis Advertising fees, Selling expenses. Free e file 2011 Amount realized, Amount Realized Appraisal fees, Settlement fees or closing costs. Free e file 2011 Architect's fees, Construction. Free e file 2011 Armed forces Ownership and use tests, Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Free e file 2011 Assistance (see Tax help) B Back interest, Settlement fees or closing costs. Free e file 2011 Basis Adjusted basis (see Adjusted basis) Determination of, Determining Basis, Adjusted Basis Other than cost, Basis Other Than Cost Building permit fees, Construction. Free e file 2011 Business use of home, Business Use or Rental of Home, Use test met for business part (with no business use in year of sale). Free e file 2011 C Casualties Amounts spent after to restore damaged property, Increases to Basis Deductible casualty losses, Decreases to Basis Disaster as cause of, Specific event safe harbors. Free e file 2011 Insurance payments for casualty losses, Decreases to Basis Change of address, Reminders Closing costs, Settlement fees or closing costs. Free e file 2011 Commissions, Selling expenses. Free e file 2011 , Settlement fees or closing costs. Free e file 2011 Community property Basis determination, Community property. Free e file 2011 Condemnation Gain exclusion, Home destroyed or condemned. Free e file 2011 Ownership and use test when previous home condemned, Previous home destroyed or condemned. Free e file 2011 Condominiums As main home, Main Home Basis determination, Condominium. Free e file 2011 Construction costs, Construction. Free e file 2011 Built by you, Built by you. Free e file 2011 Cooperative apartments As main home, Main Home Basis determination, Cooperative apartment. Free e file 2011 Ownership and use tests, Cooperative apartment. Free e file 2011 Cost as basis, Cost As Basis Credit reports Cost of obtaining, Settlement fees or closing costs. Free e file 2011 D Date of sale, Date of sale. Free e file 2011 Death Sale due to, Specific event safe harbors. Free e file 2011 Spouse's death before sale, ownership and use tests, Sale of main home by surviving spouse. Free e file 2011 Decreases to basis, Decreases to Basis Depreciation After May 6, 1997, Depreciation after May 6, 1997. Free e file 2011 Home used for business or rental purposes, Decreases to Basis Destroyed homes Gain exclusion, Home destroyed or condemned. Free e file 2011 Ownership and use test when previous home destroyed, Previous home destroyed or condemned. Free e file 2011 Disabilities, individuals with Ownership and use test, Exception for individuals with a disability. Free e file 2011 Disasters, Specific event safe harbors. Free e file 2011 Discharge of qualified principal residence indebtedness, Adjusted Basis Divorce Home received from spouse, Home received from spouse. Free e file 2011 Home transferred to spouse, Transfer to spouse. Free e file 2011 Ownership and use tests, Home transferred from spouse. Free e file 2011 Sale due to, Specific event safe harbors. Free e file 2011 Transfers after July 18, 1984, Transfers after July 18, 1984. Free e file 2011 Transfers before July 19, 1984, Transfers before July 19, 1984. Free e file 2011 Use of home after divorce, Use of home after divorce. Free e file 2011 Doctor's recommendation for sale, Doctor's recommendation safe harbor. Free e file 2011 E Easements, Decreases to Basis Employee of the intelligence community, Employee of the intelligence community. Free e file 2011 Employment Change in place of employment, Change in Place of Employment Payment by employer, when job transfer involved, Payment by employer. Free e file 2011 Energy Conservation subsidies, Decreases to Basis Credit, Decreases to Basis Exclusion of gain, Excluding the Gain, Nonqualified Use Reduced maximum exclusion, Reduced Maximum Exclusion Expatriates, Expatriates. Free e file 2011 F Federal mortgage subsidies Recapture of, Recapturing (Paying Back) a Federal Mortgage Subsidy Figuring gain or loss, Figuring Gain or Loss, More information. Free e file 2011 Fire insurance premiums, Settlement fees or closing costs. Free e file 2011 Foreclosure, Foreclosure or repossession. Free e file 2011 Foreign Service, Foreign Service member. Free e file 2011 Ownership and use tests, Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Free e file 2011 Form 1040 Reporting sale of home, Reporting the Sale Seller-financed mortgages, Seller-financed mortgage. Free e file 2011 Form 1040, Schedule A Real estate taxes, Real estate taxes. Free e file 2011 Form 1040, Schedule D Reporting sale of home, Reporting the Sale Form 1099-S Proceeds from real estate transactions, Date of sale. Free e file 2011 , Form 1099-S. Free e file 2011 , Form 1099-S. Free e file 2011 Form 2119 Sale of home, Adjusted Basis Form 6252 Installment sale income, Installment sale. Free e file 2011 Form 8828 Recapture tax, How to figure and report the recapture. Free e file 2011 Form 8960 Net Investment Income Tax, Net Investment Income Tax (NIIT). Free e file 2011 NIIT, Net Investment Income Tax (NIIT). Free e file 2011 Form 982 Discharge of indebtedness, Adjusted Basis Free tax services, Free help with your tax return. Free e file 2011 Future developments, Future Developments G Gain or loss Basis determination, Determining Basis, Adjusted Basis Exclusion of gain, Excluding the Gain Exclusion of gain, nonqualified use, Nonqualified Use Gain on sale, Gain on sale. Free e file 2011 Loss on sale, Loss on sale. Free e file 2011 Postponed from sale of previous home before May 7, 1997, Decreases to Basis Worksheet 2 to figure, Worksheet 2. Free e file 2011 Taxable Gain on Sale of Home—Completed Example 1 for Amy, Worksheet 1. Free e file 2011 Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 2. Free e file 2011 Taxable Gain on Sale of Home—Illustrated Example 2 for Peter and Betty Clark, Worksheet 2. Free e file 2011 Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White, Worksheet 2. Free e file 2011 Taxable Gain on Sale of Home Gifts Home received as, Home received as gift. Free e file 2011 H Health Sale of home due to, Health Help (see Tax help) Homebuyer credit Recapture, Recapture of the post-2008 first-time homebuyer credit. Free e file 2011 Houseboats As main home, Main Home I Important reminders Change of address, Reminders Home sold with undeducted points, Reminders Improvements Adjusted basis determination, Improvements. Free e file 2011 Charges for, Settlement fees or closing costs. Free e file 2011 Receipts and other records, Adjusted Basis Useful life of more than 1 year, Increases to Basis Increases to basis, Increases to Basis Individual taxpayer identification numbers (ITINs), Individual taxpayer identification number (ITIN). Free e file 2011 Inheritance Home received as, Home acquired from a decedent who died before or after 2010. Free e file 2011 Installment sales, Installment sale. Free e file 2011 Involuntary conversion, Specific event safe harbors. Free e file 2011 ITINs (Individual taxpayer identification numbers), Individual taxpayer identification number (ITIN). Free e file 2011 J Joint owners not married, Joint owners not married. Free e file 2011 Joint returns, Jointly owned home. Free e file 2011 Ownership and use tests, Married Persons L Land Sale of land on which home located, Land. Free e file 2011 Sale of vacant land, Vacant land. Free e file 2011 Legal fees, Selling expenses. Free e file 2011 , Settlement fees or closing costs. Free e file 2011 , Construction. Free e file 2011 Legal separation Sale due to, Specific event safe harbors. Free e file 2011 Like-kind exchange, Sale of home acquired in a like-kind exchange. Free e file 2011 Living expenses, Reasonable basic living expenses. Free e file 2011 Loan assumption fees, Settlement fees or closing costs. Free e file 2011 Loan placement fees, Selling expenses. Free e file 2011 Loss (see Gain or loss) M Main home Defined, Main Home Factors used to determine, Factors used to determine main home. Free e file 2011 Property used partly as, Property used partly as your main home. Free e file 2011 , Property Used Partly for Business or Rental Married taxpayers (see Joint returns) Maximum exclusion, Maximum Exclusion Reduced, Reduced Maximum Exclusion Military (see Armed forces) Missing children, photographs of, Reminders Mobile homes As main home, Main Home More than one home, More than one home. Free e file 2011 Mortgage fees, Settlement fees or closing costs. Free e file 2011 Mortgage insurance premiums, Settlement fees or closing costs. Free e file 2011 Mortgage subsidies Recapturing (paying back) federal mortgage subsidy, Recapturing (Paying Back) a Federal Mortgage Subsidy Mortgages, seller-financed, Seller-financed mortgage. Free e file 2011 Moving expense, Settlement fees or closing costs. Free e file 2011 Multiple births Sale due to, Specific event safe harbors. Free e file 2011 N Nonqualified use, Nonqualified Use Nonresident aliens Spouse as, transfer of home to, Exception. Free e file 2011 O Option to buy home, Option to buy. Free e file 2011 Ownership and use tests, Ownership and Use Tests, Ownership and use tests met at different times. Free e file 2011 P Partly used for business, Property Used Partly for Business or Rental Personal property Selling price of home not to include, Personal property. Free e file 2011 Points, Selling expenses. Free e file 2011 Home sold with undeducted points, Reminders Seller-paid, Seller-paid points. Free e file 2011 Publications (see Tax help) R Real estate taxes, Settlement fees or closing costs. Free e file 2011 , Real estate taxes. Free e file 2011 Deducting in year of sale, Deducting Taxes in the Year of Sale Recapture of federal mortgage subsidy, Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of first-time homebuyer credit, Recapture of First-Time Homebuyer Credit Recording fees, Settlement fees or closing costs. Free e file 2011 Recordkeeping, Adjusted Basis Reduced maximum exclusion, Reduced Maximum Exclusion Worksheet 3, Worksheet 3. Free e file 2011 Reduced Maximum Exclusion Refinancing, Settlement fees or closing costs. Free e file 2011 Relatives Sale of home to, Exception for sales to related persons. Free e file 2011 Remainder interest Sale of, Sale of remainder interest. Free e file 2011 Remodeling, Improvements. Free e file 2011 , Exception. Free e file 2011 (see also Improvements) Rental of home, Business Use or Rental of Home, Use test met for business part (with no business use in year of sale). Free e file 2011 Before closing, by buyer, Settlement fees or closing costs. Free e file 2011 Partial use, Property Used Partly for Business or Rental Repairs, Settlement fees or closing costs. Free e file 2011 , Improvements. Free e file 2011 , Repairs. Free e file 2011 (see also Improvements) Reporting the sale, Reporting the Sale, Worksheet 2. Free e file 2011 Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White Repossession, Foreclosure or repossession. Free e file 2011 Right-of-ways, Decreases to Basis S Safe harbors Distance safe harbor, Distance safe harbor. Free e file 2011 Doctor's recommendation for sale, Doctor's recommendation safe harbor. Free e file 2011 Unforeseeable events, Specific event safe harbors. Free e file 2011 Sales commissions, Selling expenses. Free e file 2011 , Settlement fees or closing costs. Free e file 2011 Sales to related persons, Exception for sales to related persons. Free e file 2011 Self-employed persons Change in status causing inability to pay basic expenses, Specific event safe harbors. Free e file 2011 Seller-financed mortgages, Seller-financed mortgage. Free e file 2011 Seller-paid points, Seller-paid points. Free e file 2011 Selling expenses, Selling expenses. Free e file 2011 Selling price, Selling Price Separate returns, Separate returns. Free e file 2011 Settlement fees, Settlement fees or closing costs. Free e file 2011 Spouse Death of (see Surviving spouse) Divorce, transfers subsequent to (see Divorce) Survey fees, Settlement fees or closing costs. Free e file 2011 Surviving spouse Basis determination, Surviving spouse. Free e file 2011 Ownership and use tests, Sale of main home by surviving spouse. Free e file 2011 T Tax help, How To Get Tax Help Temporary absence, Temporary absence. Free e file 2011 Temporary housing, Temporary housing. Free e file 2011 Title insurance, Settlement fees or closing costs. Free e file 2011 Title search fees, Settlement fees or closing costs. Free e file 2011 Trading homes, Trading (exchanging) homes. Free e file 2011 , Home received as trade. Free e file 2011 Transfer taxes, Settlement fees or closing costs. Free e file 2011 , Transfer taxes. Free e file 2011 Transfer to spouse, Transfer to spouse. Free e file 2011 After July 18, 1984, Transfers after July 18, 1984. Free e file 2011 Before July 19, 1984, Transfers before July 19, 1984. Free e file 2011 TTY/TDD information, How To Get Tax Help U Unemployment, Specific event safe harbors. Free e file 2011 Unforeseen circumstances, Unforeseen Circumstances Uniformed services (see Armed forces) Use tests, Ownership and Use Tests, Ownership and use tests met at different times. Free e file 2011 Utilities Charges for installing, Settlement fees or closing costs. Free e file 2011 Charges related to occupancy of house before closing, Settlement fees or closing costs. Free e file 2011 Energy conservation subsidy, Decreases to Basis Meter and connection charges for construction, Construction. Free e file 2011 V Vacant land Sale of, Vacant land. Free e file 2011 W Worksheets, Worksheets. Free e file 2011 Adjusted basis (Worksheet 1), Determining Basis, Worksheet 1. Free e file 2011 Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 1. Free e file 2011 Adjusted Basis of Home Sold—Illustrated Example 3 for Emily White, Worksheet 1 Instructions. Free e file 2011 Adjusted Basis of Home Sold Gain (or loss), exclusion, and taxable gain (Worksheet 2), Worksheet 2. Free e file 2011 Taxable Gain on Sale of Home—Completed Example 1 for Amy, Worksheet 1. Free e file 2011 Adjusted Basis of Home Sold—Illustrated Example 1 for Peter and Betty Clark, Worksheet 2. Free e file 2011 Taxable Gain on Sale of Home—Illustrated Example 2 for Peter and Betty Clark, Worksheet 2. Free e file 2011 Taxable Gain on Sale of Home—Illustrated Example 3 for Emily White, Worksheet 2. Free e file 2011 Taxable Gain on Sale of Home Recordkeeping and, Adjusted Basis Reduced maximum exclusion (Worksheet 3), Worksheet 3. Free e file 2011 Reduced Maximum Exclusion Prev  Up     Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

California Department of Consumer Affairs

Website: California Department of Consumer Affairs

Address: California Department of Consumer Affairs
Consumer Information Division
1625 N. Market Blvd., Suite N 112
Sacramento, CA 95834

Phone Number: 916- 445-1254

Toll-free: 1-800-952-5210

TTY: 916-928-1227; 1-800-326-2297

California Office of the Attorney General

Website: California Office of the Attorney General

Address: California Office of the Attorney General
Public Inquiry Unit
PO Box 944255
Sacramento, CA 94244-2550

Phone Number: 916-322-3360

Toll-free: 1-800-952-5225 (CA)

TTY: 1-800-735-2929

Contractors State License Board

Website: Contractors State License Board

Address: Contractors State License Board
9821 Business Park Dr.
Sacramento, CA 95827

Phone Number: 916-255-3900 (Headquarters) 916-255-2924 (Northern CA.) 562-345-7600 (Southern CA.)

Toll-free: 1-800-321-2752

California Bureau of Automotive Repair

Website: California Bureau of Automotive Repair

Address: California Bureau of Automotive Repair
Department of Consumer Affairs
10949 N. Mather Blvd.
Rancho Cordova, CA 95670

Toll-free: 1-800-952-5210 (Consumer Questions) 1-866-799-3811 (Complaint Intake)

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County Consumer Protection Offices

Stanislaus County District Attorney's Office

Website: Stanislaus County District Attorney's Office

Address: Stanislaus County District Attorney's Office
Consumer Protection Unit
832 12th St., Suite 300
Modesto, CA 95354

Phone Number: 209-525-5550

Ventura County District Attorney's Office

Website: Ventura County District Attorney's Office

Address: Ventura County District Attorney's Office
Consumer Mediation Section
800 S. Victoria Ave.
Ventura, CA 93009

Phone Number: 805-654-3110

Toll-free: 1-800-660-5474 ext 3110 (Ventura)

Contra Costa County District Attorneys Office

Website: Contra Costa County District Attorneys Office (Consumer protection division of Contra Costa)

Address: Contra Costa County District Attorneys Office
Special Operations Division- Consumer Division
900 Ward St., 4th Floor
Martinez, CA 94553

Phone Number: 925-957-8604

Fresno County District Attorney's Office

Website: Fresno County District Attorney's Office

Address: Fresno County District Attorney's Office
Consumer Protection Division
929 L St.
Fresno, CA 93721

Phone Number: 559-600-3156

Kern County District Attorney's Office

Website: Kern County District Attorney's Office

Address: Kern County District Attorney's Office
Consumer Protection Unit
Justice Building

1215 Truxtun Ave., 4th Floor
Bakersfield, CA 93301

Phone Number: 661-868-7600

Los Angeles County Department of Consumer Affairs

Website: Los Angeles County Department of Consumer Affairs

Address: Los Angeles County Department of Consumer Affairs
500 W. Temple St., Room B-96
Los Angeles, CA 90012-2722

Phone Number: 213-974-1452

Toll-free: 1-800-593-8222 (L.A. County)

TTY: 213-626-0913

Marin County District Attorney's Office

Website: Marin County District Attorney's Office

Address: Marin County District Attorney's Office
Consumer Protection Unit
Hall of Justice, Room 130
3501 Civic Center Dr.
San Rafael, CA 94903

Phone Number: 415-473-6450 415-473-6495 (Mediation)

Monterey County District Attorney's Office

Website: Monterey County District Attorney's Office (District attorneys page)

Address: Monterey County District Attorney's Office
Consumer Protection Division
1200 Aguajito Rd., Room 301
Monterey, CA 93940

Phone Number: 831-755-5073 (Salinas) 831-647-7770 (Monterey) 831-385-8373 (King City)

Napa County District Attorney's Office

Website: Napa County District Attorney's Office (Napa County website)

Address: Napa County District Attorney's Office
Consumer Affairs
931 Parkway Mall
Napa, CA 94559

Phone Number: 707-253-4059 (Hotline)

Orange County District Attorney's Office

Website: Orange County District Attorney's Office

Address: Orange County District Attorney's Office
Consumer Protection Unit
401 Civic Center Dr., W
Santa Ana, CA 92701

Phone Number: 714-834-6553

San Diego County District Attorney's Office

Website: San Diego County District Attorney's Office

Address: San Diego County District Attorney's Office
Consumer Protection Unit
330 W. Broadway
San Diego, CA 92101

Phone Number: 619-531-4040 619-531-3507 (Consumer Fraud Hotline)

San Francisco County District Attorney's Office

Website: San Francisco County District Attorney's Office

Address: San Francisco County District Attorney's Office
Special Operations Division- Consumer Protection Unit
732 Brannan St.
San Francisco, CA 94102

Phone Number: 415-551-9595 (Hotline)

San Luis Obispo County District Attorneys Office

Website: San Luis Obispo County District Attorneys Office

Address: San Luis Obispo County District Attorneys Office
Economic Crime Unit
Consumer Advisory

County Courthouse Annex
1050 Monterey St., Room 223
San Luis Obispo, CA 93408

Phone Number: 805-781-5856

San Mateo County District Attorneys Office

Website: San Mateo County District Attorneys Office

Address: San Mateo County District Attorneys Office
Consumer Environmental & Protection Unit
Hall of Justice and Records
400 County Center, 3rd Floor
Redwood City, CA 94063

Phone Number: 650-363-4651 650-363-4636 (Complaints)

Santa Barbara County District Attorney's Office

Website: Santa Barbara County District Attorney's Office

Address: Santa Barbara County District Attorney's Office
Consumer Mediation Services
1112 Santa Barbara St.
Santa Maria, CA 93101

Phone Number: 805-568-2300

Santa Clara County District Attorney's Office

Website: Santa Clara County District Attorney's Office

Address: Santa Clara County District Attorney's Office
Consumer Protection Unit
70 W. Hedding St.
West Wing
San Jose, CA 95110

Phone Number: 408-792-2880

Santa Cruz County District Attorney's Office

Website: Santa Cruz County District Attorney's Office

Address: Santa Cruz County District Attorney's Office
Consumer Affairs Unit
701 Ocean St., Room 200
Santa Cruz, CA 95060

Phone Number: 831-454-2050

TTY: 831-454-2123

Solano County District Attorney's Office

Website: Solano County District Attorney's Office

Phone Number: 707-784-6859

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City Consumer Protection Offices

Los Angeles City Attorney's Office

Website: Los Angeles City Attorney's Office

Address: Los Angeles City Attorney's Office
Consumer Protection Unit
200 N. Main St.,
800 City Hall East
Los Angeles, CA 90012

Phone Number: 213-978-8070

TTY: 213-978-8310

San Diego City Attorney's Office

Website: San Diego City Attorney's Office

Address: San Diego City Attorney's Office
Consumer and Environmental Protection Unit
1200 Third Ave., #1620
San Diego, CA 92101

Phone Number: 619-533-5600

TTY: 619-702-7198

Santa Monica City Attorneys Office

Website: Santa Monica City Attorneys Office

Address: Santa Monica City Attorneys Office
Consumer Protection Unit
1685 Main St., 3rd Floor
Santa Monica, CA 90401

Phone Number: 310-458-8336

TTY: 310-458-8696

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Business Oversight

Website: Department of Business Oversight

Address: Department of Business Oversight
Consumer Services
1515 K St., Suite 200
Sacramento, CA 95814

Phone Number: 916-327-7585

Toll-free: 1-866-275-2677 (CA)

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Department of Insurance

Website: Department of Insurance

Address: Department of Insurance
Consumer Services Division
300 S. Spring St., South Tower
Los Angeles, CA 90013

Phone Number: 213-897-8921

Toll-free: 1-800-927-4357 (CA)

TTY: 1-800-482-4833

Department of Managed Health Care, California HMO Help Center

Website: Department of Managed Health Care, California HMO Help Center

Address: Department of Managed Health Care, California HMO Help Center
980 9th St., Suite 500
Sacramento, CA 95814-2725

Toll-free: 1-888-466-2219

TTY: 1-877-688-9891

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Department of Business Oversight

Website: Department of Business Oversight

Address: Department of Business Oversight
Consumer Services
1515 K St., Suite 200
Sacramento, CA 95814

Toll-free: 1-866-275-2677

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Public Utilities Commission

Website: Public Utilities Commission

Address: Public Utilities Commission
Consumer Affairs Branch
505 Van Ness Ave.
San Francisco, CA 94102

Phone Number: 415-703-2782

Toll-free: 1-800-649-7570 (CA)

TTY: 1-866-836-7825

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The Free E File 2011

Free e file 2011 1. Free e file 2011   Deducting Business Expenses Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: What Can I Deduct?Cost of Goods Sold Capital Expenses Capital versus Deductible Expenses Personal versus Business Expenses How Much Can I Deduct?Not-for-profit limits. Free e file 2011 At-risk limits. Free e file 2011 Passive activities. Free e file 2011 Net operating loss. Free e file 2011 When Can I Deduct an Expense?Economic performance. Free e file 2011 Not-for-Profit ActivitiesGross Income Limit on Deductions What's New Optional safe harbor method to determine the business use of a home deduction. Free e file 2011  Beginning in 2013, you can use the optional safe harbor method to determine the deduction for the business use of your home. Free e file 2011 See Optional safe harbor method under Business use of your home , later. Free e file 2011 Introduction This chapter covers the general rules for deducting business expenses. Free e file 2011 Business expenses are the costs of carrying on a trade or business, and they are usually deductible if the business is operated to make a profit. Free e file 2011 Topics - This chapter discusses: What you can deduct How much you can deduct When you can deduct Not-for-profit activities Useful Items - You may want to see: Publication 334 Tax Guide for Small Business 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts 538 Accounting Periods and Methods 542 Corporations 547 Casualties, Disasters, and Thefts 587 Business Use of Your Home 925 Passive Activity and At-Risk Rules 936 Home Mortgage Interest Deduction 946 How To Depreciate Property Form (and Instructions) Sch A (Form 1040) Itemized Deductions 5213 Election To Postpone Determination as To Whether the Presumption Applies That an Activity Is Engaged in for Profit See chapter 12 for information about getting publications and forms. Free e file 2011 What Can I Deduct? To be deductible, a business expense must be both ordinary and necessary. Free e file 2011 An ordinary expense is one that is common and accepted in your industry. Free e file 2011 A necessary expense is one that is helpful and appropriate for your trade or business. Free e file 2011 An expense does not have to be indispensable to be considered necessary. Free e file 2011 Even though an expense may be ordinary and necessary, you may not be allowed to deduct the expense in the year you paid or incurred it. Free e file 2011 In some cases you may not be allowed to deduct the expense at all. Free e file 2011 Therefore, it is important to distinguish usual business expenses from expenses that include the following. Free e file 2011 The expenses used to figure cost of goods sold, Capital expenses, and Personal expenses. Free e file 2011 Cost of Goods Sold If your business manufactures products or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold. Free e file 2011 Some of your business expenses may be included in figuring cost of goods sold. Free e file 2011 Cost of goods sold is deducted from your gross receipts to figure your gross profit for the year. Free e file 2011 If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense. Free e file 2011 The following are types of expenses that go into figuring cost of goods sold. Free e file 2011 The cost of products or raw materials, including freight. Free e file 2011 Storage. Free e file 2011 Direct labor (including contributions to pension or annuity plans) for workers who produce the products. Free e file 2011 Factory overhead. Free e file 2011 Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Free e file 2011 Indirect costs include rent, interest, taxes, storage, purchasing, processing, repackaging, handling, and administrative costs. Free e file 2011 This rule does not apply to personal property you acquire for resale if your average annual gross receipts (or those of your predecessor) for the preceding 3 tax years are not more than $10 million. Free e file 2011 For more information, see the following sources. Free e file 2011 Cost of goods sold—chapter 6 of Publication 334. Free e file 2011 Inventories—Publication 538. Free e file 2011 Uniform capitalization rules—Publication 538 and section 263A of the Internal Revenue Code and the related regulations. Free e file 2011 Capital Expenses You must capitalize, rather than deduct, some costs. Free e file 2011 These costs are a part of your investment in your business and are called “capital expenses. Free e file 2011 ” Capital expenses are considered assets in your business. Free e file 2011 In general, you capitalize three types of costs. Free e file 2011 Business start-up costs (See Tip below). Free e file 2011 Business assets. Free e file 2011 Improvements. Free e file 2011 You can elect to deduct or amortize certain business start-up costs. Free e file 2011 See chapters 7 and 8. Free e file 2011 Cost recovery. Free e file 2011   Although you generally cannot take a current deduction for a capital expense, you may be able to recover the amount you spend through depreciation, amortization, or depletion. Free e file 2011 These recovery methods allow you to deduct part of your cost each year. Free e file 2011 In this way, you are able to recover your capital expense. Free e file 2011 See Amortization (chapter 8) and Depletion (chapter 9) in this publication. Free e file 2011 A taxpayer can elect to deduct a portion of the costs of certain depreciable property as a section 179 deduction. Free e file 2011 A greater portion of these costs can be deducted if the property is qualified disaster assistance property. Free e file 2011 See Publication 946 for details. Free e file 2011 Going Into Business The costs of getting started in business, before you actually begin business operations, are capital expenses. Free e file 2011 These costs may include expenses for advertising, travel, or wages for training employees. Free e file 2011 If you go into business. Free e file 2011   When you go into business, treat all costs you had to get your business started as capital expenses. Free e file 2011   Usually you recover costs for a particular asset through depreciation. Free e file 2011 Generally, you cannot recover other costs until you sell the business or otherwise go out of business. Free e file 2011 However, you can choose to amortize certain costs for setting up your business. Free e file 2011 See Starting a Business in chapter 8 for more information on business start-up costs. Free e file 2011 If your attempt to go into business is unsuccessful. Free e file 2011   If you are an individual and your attempt to go into business is not successful, the expenses you had in trying to establish yourself in business fall into two categories. Free e file 2011 The costs you had before making a decision to acquire or begin a specific business. Free e file 2011 These costs are personal and nondeductible. Free e file 2011 They include any costs incurred during a general search for, or preliminary investigation of, a business or investment possibility. Free e file 2011 The costs you had in your attempt to acquire or begin a specific business. Free e file 2011 These costs are capital expenses and you can deduct them as a capital loss. Free e file 2011   If you are a corporation and your attempt to go into a new trade or business is not successful, you may be able to deduct all investigatory costs as a loss. Free e file 2011   The costs of any assets acquired during your unsuccessful attempt to go into business are a part of your basis in the assets. Free e file 2011 You cannot take a deduction for these costs. Free e file 2011 You will recover the costs of these assets when you dispose of them. Free e file 2011 Business Assets There are many different kinds of business assets; for example, land, buildings, machinery, furniture, trucks, patents, and franchise rights. Free e file 2011 You must fully capitalize the cost of these assets, including freight and installation charges. Free e file 2011 Certain property you produce for use in your trade or business must be capitalized under the uniform capitalization rules. Free e file 2011 See Regulations section 1. Free e file 2011 263A-2 for information on these rules. Free e file 2011 Improvements Improvements are generally major expenditures. Free e file 2011 Some examples are: new electric wiring, a new roof, a new floor, new plumbing, bricking up windows to strengthen a wall, and lighting improvements. Free e file 2011 The costs of making improvements to a business asset are capital expenses if the improvements add to the value of the asset, appreciably lengthen the time you can use it, or adapt it to a different use. Free e file 2011 Beginning in 2014, you must capitalize as improvements costs that are for the betterment of a unit of property, restore the unit of property, or adapt the unit of property to a new or different use. Free e file 2011 Temporary regulations allow you to capitalize costs meeting the above criteria for tax years beginning after 2011. Free e file 2011 However, you can currently deduct repairs that keep your property in a normal efficient operating condition as a business expense. Free e file 2011 Treat as repairs amounts paid to replace parts of a machine that only keep it in a normal operating condition. Free e file 2011 Restoration plan. Free e file 2011   Capitalize the cost of reconditioning, improving, or altering your property as part of a general restoration plan to make it suitable for your business. Free e file 2011 This applies even if some of the work would by itself be classified as repairs. Free e file 2011 Capital versus Deductible Expenses To help you distinguish between capital and deductible expenses, different examples are given below. Free e file 2011 Motor vehicles. Free e file 2011   You usually capitalize the cost of a motor vehicle you use in your business. Free e file 2011 You can recover its cost through annual deductions for depreciation. Free e file 2011   There are dollar limits on the depreciation you can claim each year on passenger automobiles used in your business. Free e file 2011 See Publication 463. Free e file 2011   Generally, repairs you make to your business vehicle are currently deductible. Free e file 2011 However, amounts you pay to recondition and overhaul a business vehicle are capital expenses and are recovered through depreciation. Free e file 2011 Roads and driveways. Free e file 2011    The cost of building a private road on your business property and the cost of replacing a gravel driveway with a concrete one are capital expenses you may be able to depreciate. Free e file 2011 The cost of maintaining a private road on your business property is a deductible expense. Free e file 2011 Tools. Free e file 2011   Unless the uniform capitalization rules apply, amounts spent for tools used in your business are deductible expenses if the tools have a life expectancy of less than 1 year or their cost is minor. Free e file 2011 Machinery parts. Free e file 2011   Unless the uniform capitalization rules apply, the cost of replacing short-lived parts of a machine to keep it in good working condition, but not add to its life, is a deductible expense. Free e file 2011 Heating equipment. Free e file 2011   The cost of changing from one heating system to another is a capital expense. Free e file 2011 Personal versus Business Expenses Generally, you cannot deduct personal, living, or family expenses. Free e file 2011 However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. Free e file 2011 You can deduct the business part. Free e file 2011 For example, if you borrow money and use 70% of it for business and the other 30% for a family vacation, you generally can deduct 70% of the interest as a business expense. Free e file 2011 The remaining 30% is personal interest and generally is not deductible. Free e file 2011 See chapter 4 for information on deducting interest and the allocation rules. Free e file 2011 Business use of your home. Free e file 2011   If you use part of your home for business, you may be able to deduct expenses for the business use of your home. Free e file 2011 These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Free e file 2011   To qualify to claim expenses for the business use of your home, you must meet both of the following tests. Free e file 2011 The business part of your home must be used exclusively and regularly for your trade or business. Free e file 2011 The business part of your home must be: Your principal place of business, or A place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, or A separate structure (not attached to your home) used in connection with your trade or business. Free e file 2011   You generally do not have to meet the exclusive use test for the part of your home that you regularly use either for the storage of inventory or product samples, or as a daycare facility. Free e file 2011   Your home office qualifies as your principal place of business if you meet the following requirements. Free e file 2011 You use the office exclusively and regularly for administrative or management activities of your trade or business. Free e file 2011 You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Free e file 2011   If you have more than one business location, determine your principal place of business based on the following factors. Free e file 2011 The relative importance of the activities performed at each location. Free e file 2011 If the relative importance factor does not determine your principal place of business, consider the time spent at each location. Free e file 2011 Optional safe harbor method. Free e file 2011   Beginning in 2013, individual taxpayers can use the optional safe harbor method to determine the amount of deductible expenses attributable to certain business use of a residence during the tax year. Free e file 2011 This method is an alternative to the calculation, allocation, and substantiation of actual expenses. Free e file 2011   The deduction under the optional method is limited to $1,500 per year based on $5 a square foot for up to 300 square feet. Free e file 2011 Under this method, you claim your allowable mortgage interest, real estate taxes, and casualty losses on the home as itemized deductions on Schedule A (Form 1040). Free e file 2011 You are not required to allocate these deductions between personal and business use, as is required under the regular method. Free e file 2011 If you use the optional method, you cannot depreciate the portion of your home used in a trade or business. Free e file 2011   Business expenses unrelated to the home, such as advertising, supplies, and wages paid to employees, are still fully deductible. Free e file 2011 All of the requirements discussed earlier under Business use of your home still apply. Free e file 2011   For more information on the deduction for business use of your home, including the optional safe harbor method, see Publication 587. Free e file 2011    If you were entitled to deduct depreciation on the part of your home used for business, you cannot exclude the part of the gain from the sale of your home that equals any depreciation you deducted (or could have deducted) for periods after May 6, 1997. Free e file 2011 Business use of your car. Free e file 2011   If you use your car exclusively in your business, you can deduct car expenses. Free e file 2011 If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Free e file 2011 Generally, commuting expenses between your home and your business location, within the area of your tax home, are not deductible. Free e file 2011   You can deduct actual car expenses, which include depreciation (or lease payments), gas and oil, tires, repairs, tune-ups, insurance, and registration fees. Free e file 2011 Or, instead of figuring the business part of these actual expenses, you may be able to use the standard mileage rate to figure your deduction. Free e file 2011 Beginning in 2013, the standard mileage rate is 56. Free e file 2011 5 cents per mile. Free e file 2011   If you are self-employed, you can also deduct the business part of interest on your car loan, state and local personal property tax on the car, parking fees, and tolls, whether or not you claim the standard mileage rate. Free e file 2011   For more information on car expenses and the rules for using the standard mileage rate, see Publication 463. Free e file 2011 How Much Can I Deduct? Generally, you can deduct the full amount of a business expense if it meets the criteria of ordinary and necessary and it is not a capital expense. Free e file 2011 Recovery of amount deducted (tax benefit rule). Free e file 2011   If you recover part of an expense in the same tax year in which you would have claimed a deduction, reduce your current year expense by the amount of the recovery. Free e file 2011 If you have a recovery in a later year, include the recovered amount in income in that year. Free e file 2011 However, if part of the deduction for the expense did not reduce your tax, you do not have to include that part of the recovered amount in income. Free e file 2011   For more information on recoveries and the tax benefit rule, see Publication 525. Free e file 2011 Payments in kind. Free e file 2011   If you provide services to pay a business expense, the amount you can deduct is limited to your out-of-pocket costs. Free e file 2011 You cannot deduct the cost of your own labor. Free e file 2011   Similarly, if you pay a business expense in goods or other property, you can deduct only what the property costs you. Free e file 2011 If these costs are included in the cost of goods sold, do not deduct them again as a business expense. Free e file 2011 Limits on losses. Free e file 2011   If your deductions for an investment or business activity are more than the income it brings in, you have a loss. Free e file 2011 There may be limits on how much of the loss you can deduct. Free e file 2011 Not-for-profit limits. Free e file 2011   If you carry on your business activity without the intention of making a profit, you cannot use a loss from it to offset other income. Free e file 2011 See Not-for-Profit Activities , later. Free e file 2011 At-risk limits. Free e file 2011   Generally, a deductible loss from a trade or business or other income-producing activity is limited to the investment you have “at risk” in the activity. Free e file 2011 You are at risk in any activity for the following. Free e file 2011 The money and adjusted basis of property you contribute to the activity. Free e file 2011 Amounts you borrow for use in the activity if: You are personally liable for repayment, or You pledge property (other than property used in the activity) as security for the loan. Free e file 2011 For more information, see Publication 925. Free e file 2011 Passive activities. Free e file 2011   Generally, you are in a passive activity if you have a trade or business activity in which you do not materially participate, or a rental activity. Free e file 2011 In general, deductions for losses from passive activities only offset income from passive activities. Free e file 2011 You cannot use any excess deductions to offset other income. Free e file 2011 In addition, passive activity credits can only offset the tax on net passive income. Free e file 2011 Any excess loss or credits are carried over to later years. Free e file 2011 Suspended passive losses are fully deductible in the year you completely dispose of the activity. Free e file 2011 For more information, see Publication 925. Free e file 2011 Net operating loss. Free e file 2011   If your deductions are more than your income for the year, you may have a “net operating loss. Free e file 2011 ” You can use a net operating loss to lower your taxes in other years. Free e file 2011 See Publication 536 for more information. Free e file 2011   See Publication 542 for information about net operating losses of corporations. Free e file 2011 When Can I Deduct an Expense? When you can deduct an expense depends on your accounting method. Free e file 2011 An accounting method is a set of rules used to determine when and how income and expenses are reported. Free e file 2011 The two basic methods are the cash method and the accrual method. Free e file 2011 Whichever method you choose must clearly reflect income. Free e file 2011 For more information on accounting methods, see Publication 538. Free e file 2011 Cash method. Free e file 2011   Under the cash method of accounting, you generally deduct business expenses in the tax year you pay them. Free e file 2011 Accrual method. Free e file 2011   Under an accrual method of accounting, you generally deduct business expenses when both of the following apply. Free e file 2011 The all-events test has been met. Free e file 2011 The test is met when: All events have occurred that fix the fact of liability, and The liability can be determined with reasonable accuracy. Free e file 2011 Economic performance has occurred. Free e file 2011 Economic performance. Free e file 2011   You generally cannot deduct or capitalize a business expense until economic performance occurs. Free e file 2011 If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided, or the property is used. Free e file 2011 If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. Free e file 2011 Example. Free e file 2011 Your tax year is the calendar year. Free e file 2011 In December 2013, the Field Plumbing Company did some repair work at your place of business and sent you a bill for $600. Free e file 2011 You paid it by check in January 2014. Free e file 2011 If you use the accrual method of accounting, deduct the $600 on your tax return for 2013 because all events have occurred to “fix” the fact of liability (in this case the work was completed), the liability can be determined, and economic performance occurred in that year. Free e file 2011 If you use the cash method of accounting, deduct the expense on your 2014 return. Free e file 2011 Prepayment. Free e file 2011   You generally cannot deduct expenses in advance, even if you pay them in advance. Free e file 2011 This rule applies to both the cash and accrual methods. Free e file 2011 It applies to prepaid interest, prepaid insurance premiums, and any other expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. Free e file 2011 Example. Free e file 2011 In 2013, you sign a 10-year lease and immediately pay your rent for the first 3 years. Free e file 2011 Even though you paid the rent for 2013, 2014, and 2015, you can only deduct the rent for 2013 on your 2013 tax return. Free e file 2011 You can deduct the rent for 2014 and 2015 on your tax returns for those years. Free e file 2011 Contested liability. Free e file 2011   Under the cash method, you can deduct a contested liability only in the year you pay the liability. Free e file 2011 Under the accrual method, you can deduct contested liabilities such as taxes (except foreign or U. Free e file 2011 S. Free e file 2011 possession income, war profits, and excess profits taxes) either in the tax year you pay the liability (or transfer money or other property to satisfy the obligation) or in the tax year you settle the contest. Free e file 2011 However, to take the deduction in the year of payment or transfer, you must meet certain conditions. Free e file 2011 See Regulations section 1. Free e file 2011 461-2. Free e file 2011 Related person. Free e file 2011   Under an accrual method of accounting, you generally deduct expenses when you incur them, even if you have not yet paid them. Free e file 2011 However, if you and the person you owe are related and that person uses the cash method of accounting, you must pay the expense before you can deduct it. Free e file 2011 Your deduction is allowed when the amount is includible in income by the related cash method payee. Free e file 2011 See Related Persons in Publication 538. Free e file 2011 Not-for-Profit Activities If you do not carry on your business or investment activity to make a profit, you cannot use a loss from the activity to offset other income. Free e file 2011 Activities you do as a hobby, or mainly for sport or recreation, are often not entered into for profit. Free e file 2011 The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. Free e file 2011 It does not apply to corporations other than S corporations. Free e file 2011 In determining whether you are carrying on an activity for profit, several factors are taken into account. Free e file 2011 No one factor alone is decisive. Free e file 2011 Among the factors to consider are whether: You carry on the activity in a businesslike manner, The time and effort you put into the activity indicate you intend to make it profitable, You depend on the income for your livelihood, Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business), You change your methods of operation in an attempt to improve profitability, You (or your advisors) have the knowledge needed to carry on the activity as a successful business, You were successful in making a profit in similar activities in the past, The activity makes a profit in some years, and You can expect to make a future profit from the appreciation of the assets used in the activity. Free e file 2011 Presumption of profit. Free e file 2011   An activity is presumed carried on for profit if it produced a profit in at least 3 of the last 5 tax years, including the current year. Free e file 2011 Activities that consist primarily of breeding, training, showing, or racing horses are presumed carried on for profit if they produced a profit in at least 2 of the last 7 tax years, including the current year. Free e file 2011 The activity must be substantially the same for each year within this period. Free e file 2011 You have a profit when the gross income from an activity exceeds the deductions. Free e file 2011   If a taxpayer dies before the end of the 5-year (or 7-year) period, the “test” period ends on the date of the taxpayer's death. Free e file 2011   If your business or investment activity passes this 3- (or 2-) years-of-profit test, the IRS will presume it is carried on for profit. Free e file 2011 This means the limits discussed here will not apply. Free e file 2011 You can take all your business deductions from the activity, even for the years that you have a loss. Free e file 2011 You can rely on this presumption unless the IRS later shows it to be invalid. Free e file 2011 Using the presumption later. Free e file 2011   If you are starting an activity and do not have 3 (or 2) years showing a profit, you can elect to have the presumption made after you have the 5 (or 7) years of experience allowed by the test. Free e file 2011   You can elect to do this by filing Form 5213. Free e file 2011 Filing this form postpones any determination that your activity is not carried on for profit until 5 (or 7) years have passed since you started the activity. Free e file 2011   The benefit gained by making this election is that the IRS will not immediately question whether your activity is engaged in for profit. Free e file 2011 Accordingly, it will not restrict your deductions. Free e file 2011 Rather, you will gain time to earn a profit in the required number of years. Free e file 2011 If you show 3 (or 2) years of profit at the end of this period, your deductions are not limited under these rules. Free e file 2011 If you do not have 3 (or 2) years of profit, the limit can be applied retroactively to any year with a loss in the 5-year (or 7-year) period. Free e file 2011   Filing Form 5213 automatically extends the period of limitations on any year in the 5-year (or 7-year) period to 2 years after the due date of the return for the last year of the period. Free e file 2011 The period is extended only for deductions of the activity and any related deductions that might be affected. Free e file 2011    You must file Form 5213 within 3 years after the due date of your return (determined without extensions) for the year in which you first carried on the activity, or, if earlier, within 60 days after receiving written notice from the Internal Revenue Service proposing to disallow deductions attributable to the activity. Free e file 2011 Gross Income Gross income from a not-for-profit activity includes the total of all gains from the sale, exchange, or other disposition of property, and all other gross receipts derived from the activity. Free e file 2011 Gross income from the activity also includes capital gains and rents received for the use of property which is held in connection with the activity. Free e file 2011 You can determine gross income from any not-for-profit activity by subtracting the cost of goods sold from your gross receipts. Free e file 2011 However, if you determine gross income by subtracting cost of goods sold from gross receipts, you must do so consistently, and in a manner that follows generally accepted methods of accounting. Free e file 2011 Limit on Deductions If your activity is not carried on for profit, take deductions in the following order and only to the extent stated in the three categories. Free e file 2011 If you are an individual, these deductions may be taken only if you itemize. Free e file 2011 These deductions may be taken on Schedule A (Form 1040). Free e file 2011 Category 1. Free e file 2011   Deductions you can take for personal as well as for business activities are allowed in full. Free e file 2011 For individuals, all nonbusiness deductions, such as those for home mortgage interest, taxes, and casualty losses, belong in this category. Free e file 2011 Deduct them on the appropriate lines of Schedule A (Form 1040). Free e file 2011 For tax years beginning after December 31, 2008, you can deduct a casualty loss on property you own for personal use only to the extent it is more than $500 and exceeds 10% of your adjusted gross income (AGI). Free e file 2011 The 10% AGI limitation does not apply to net disaster losses resulting from federally declared disasters in 2008 and 2009, and individuals are allowed to claim the net disaster losses even if they do not itemize their deductions. Free e file 2011 The reduction amount returns to $100 for tax years beginning after December 31, 2009. Free e file 2011 See Publication 547 for more information on casualty losses. Free e file 2011 For the limits that apply to home mortgage interest, see Publication 936. Free e file 2011 Category 2. Free e file 2011   Deductions that do not result in an adjustment to the basis of property are allowed next, but only to the extent your gross income from the activity is more than your deductions under the first category. Free e file 2011 Most business deductions, such as those for advertising, insurance premiums, interest, utilities, and wages, belong in this category. Free e file 2011 Category 3. Free e file 2011   Business deductions that decrease the basis of property are allowed last, but only to the extent the gross income from the activity exceeds the deductions you take under the first two categories. Free e file 2011 Deductions for depreciation, amortization, and the part of a casualty loss an individual could not deduct in category (1) belong in this category. Free e file 2011 Where more than one asset is involved, allocate depreciation and these other deductions proportionally. Free e file 2011    Individuals must claim the amounts in categories (2) and (3) as miscellaneous deductions on Schedule A (Form 1040). Free e file 2011 They are subject to the 2%-of-adjusted-gross-income limit. Free e file 2011 See Publication 529 for information on this limit. Free e file 2011 Example. Free e file 2011 Adriana is engaged in a not-for-profit activity. Free e file 2011 The income and expenses of the activity are as follows. Free e file 2011 Gross income $3,200 Subtract:     Real estate taxes $700   Home mortgage interest 900   Insurance 400   Utilities 700   Maintenance 200   Depreciation on an automobile 600   Depreciation on a machine 200 3,700 Loss $(500)   Adriana must limit her deductions to $3,200, the gross income she earned from the activity. Free e file 2011 The limit is reached in category (3), as follows. Free e file 2011 Limit on deduction $3,200 Category 1: Taxes and interest $1,600   Category 2: Insurance, utilities, and maintenance 1,300 2,900 Available for Category 3 $ 300   The $800 of depreciation is allocated between the automobile and machine as follows. Free e file 2011 $600 $800 x $300 = $225 depreciation for the automobile             $200 $800 x $300 = $75 depreciation for the machine The basis of each asset is reduced accordingly. Free e file 2011 Adriana includes the $3,200 of gross income on line 21 (other income) of Form 1040. Free e file 2011 The $1,600 for category (1) is deductible in full on the appropriate lines for taxes and interest on Schedule A (Form 1040). Free e file 2011 Adriana deducts the remaining $1,600 ($1,300 for category (2) and $300 for category (3)) as other miscellaneous deductions on Schedule A (Form 1040) subject to the 2%-of-adjusted-gross-income limit. Free e file 2011 Partnerships and S corporations. Free e file 2011   If a partnership or S corporation carries on a not-for-profit activity, these limits apply at the partnership or S corporation level. Free e file 2011 They are reflected in the individual shareholder's or partner's distributive shares. Free e file 2011 More than one activity. Free e file 2011   If you have several undertakings, each may be a separate activity or several undertakings may be combined. Free e file 2011 The following are the most significant facts and circumstances in making this determination. Free e file 2011 The degree of organizational and economic interrelationship of various undertakings. Free e file 2011 The business purpose that is (or might be) served by carrying on the various undertakings separately or together in a business or investment setting. Free e file 2011 The similarity of the undertakings. Free e file 2011   The IRS will generally accept your characterization if it is supported by facts and circumstances. Free e file 2011    If you are carrying on two or more different activities, keep the deductions and income from each one separate. Free e file 2011 Figure separately whether each is a not-for-profit activity. Free e file 2011 Then figure the limit on deductions and losses separately for each activity that is not for profit. Free e file 2011 Prev  Up  Next   Home   More Online Publications