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Free online tax Publication 517 - Introductory Material Table of Contents What's New Reminders IntroductionOrdering forms and publications. Free online tax Tax questions. Free online tax Useful Items - You may want to see: What's New SE tax rate. Free online tax  For 2013 and 2014, the Old Age, Survivors, and Disability Insurance (OASDI) portion of the SE tax is 12. Free online tax 4%. Free online tax The Medicare (HI) portion of the SE tax remains 2. Free online tax 9%. Free online tax As a result, the SE tax rate returns to 15. Free online tax 3%. Free online tax For more information, see the Instructions for Schedule SE (Form 1040). Free online tax Earnings subject to social security. Free online tax  For 2013, the maximum wages and self-employment income subject to social security tax increases from $110,100 to $113,700. Free online tax For 2014, the maximum wages and self-employment income subject to social security tax is $117,000. Free online tax Additional Medicare Tax. Free online tax  Beginning in 2013, a 0. Free online tax 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Free online tax For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Free online tax Modified AGI limit for traditional IRA contributions increased. Free online tax  For 2013, you may be able to take an IRA deduction if you were covered by a retirement plan at work and your modified AGI is: Less than $115,000 if married filing jointly or qualifying widow(er), Less than $69,000 if single or head of household, or Less than $10,000 if married filing separately. Free online tax If you file a joint return and either you or your spouse was not covered by a retirement plan at work, you may be able to take an IRA deduction if your modified AGI is less than $188,000. Free online tax Modified AGI limit for Roth IRA contributions increased. Free online tax  For 2013, you may be able to contribute to your Roth IRA if your modified AGI is: Less than $188,000 if married filing jointly or qualifying widow(er), Less than $127,000 if single, head of household, or married filing separately and you did not live with your spouse at any time during the year, or Less than $10,000 if married filing separately and you lived with your spouse at any time during the year. Free online tax Earned income credit (EIC). Free online tax  For 2013, the maximum amount of income you can earn and still claim the EIC has increased. Free online tax You may be able to take the EIC if you earned less than $46,227 ($51,567 for married filing jointly) and you have three or more qualifying children; $43,038 ($48,378 for married filing jointly) and you have two qualifying children; $37,870 ($43,210 for married filing jointly) and you have one qualifying child; and $14,340 ($19,680 for married filing jointly) and you do not have any qualifying children. Free online tax Reminders Future developments. Free online tax . Free online tax   For the latest information about developments related to Publication 517, such as legislation enacted after it was published, go to www. Free online tax irs. Free online tax gov/pub517. Free online tax Photographs of missing children. Free online tax  The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children. Free online tax Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free online tax 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. Free online tax Introduction Three federal taxes are paid on wages and self-employment income—income tax, social security tax, and Medicare tax. Free online tax Social security and Medicare taxes are collected under one of two systems. Free online tax Under the Self-Employment Contributions Act (SECA), the self-employed person pays all the taxes. Free online tax Under the Federal Insurance Contributions Act (FICA), the employee and the employer each pay half of the social security and Medicare taxes. Free online tax No earnings are subject to both systems. Free online tax Table 1. Free online tax Are Your Ministerial Earnings* Covered Under FICA or SECA? Find the class to which you belong in the left column and read across the table to find if you are covered under FICA or SECA. Free online tax Do not rely on this table alone. Free online tax Also read the discussion for the class in the following pages. Free online tax Class Covered under FICA? Covered under SECA? Minister NO. Free online tax Your ministerial earnings are exempt. Free online tax YES, if you do not have an approved exemption from the IRS. Free online tax   NO, if you have an approved exemption. Free online tax Member of a religious order who has not taken a vow of poverty NO. Free online tax Your ministerial earnings are exempt. Free online tax YES, if you do not have an approved exemption from the IRS. Free online tax   NO, if you have an approved exemption. Free online tax Member of a religious order who has taken a vow of poverty YES, if: Your order elected FICA coverage for its members, or You worked outside the order and the work was not required by, or done on behalf of, the order. Free online tax   NO, if neither of the above applies. Free online tax NO. Free online tax Your ministerial earnings are exempt. Free online tax Christian Science practitioner or reader NO. Free online tax Your ministerial earnings are exempt. Free online tax YES, if you do not have an approved exemption from the IRS. Free online tax   NO, if you have an approved exemption. Free online tax Religious worker (church employee) YES, if your employer did not elect to exclude you. Free online tax    NO, if your employer elected to exclude you. Free online tax YES, if your employer elected to exclude you from FICA. Free online tax   NO, if you are covered under FICA. Free online tax Member of a recognized religious sect YES, if you are an employee and do not have an approved exemption from the IRS. Free online tax    NO, if you have an approved exemption. Free online tax YES, if you are self-employed and do not have an approved exemption from the IRS. Free online tax   NO, if you have an approved exemption. Free online tax * Ministerial earnings are the self-employment earnings that result from ministerial services, defined and discussed later. Free online tax In addition, all wages and self-employment income that are subject to Medicare tax are subject to a 0. Free online tax 9% Additional Medicare Tax if they are paid in excess of the applicable threshold for an individual's filing status. Free online tax Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Free online tax Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Free online tax A self-employment loss is not considered for purposes of this tax. Free online tax RRTA compensation is separately compared to the threshold. Free online tax There is no employer match for Additional Medicare Tax. Free online tax For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Free online tax This publication contains information for the following classes of taxpayers. Free online tax Ministers. Free online tax Members of a religious order. Free online tax Christian Science practitioners and readers. Free online tax Religious workers (church employees). Free online tax Members of a recognized religious sect. Free online tax Note. Free online tax Unless otherwise noted, in this publication references to members of the clergy include ministers, members of a religious order (but not members of a recognized religious sect), and Christian Science practitioners and readers. Free online tax This publication covers the following topics about the collection of social security and Medicare taxes from members of the clergy, religious workers, and members of a recognized religious sect. Free online tax Which earnings are taxed under FICA and which under SECA. Free online tax See Table 1 above. Free online tax How a member of the clergy can apply for an exemption from self-employment tax. Free online tax How a member of a recognized religious sect can apply for an exemption from both self-employment tax and FICA taxes. Free online tax How a member of the clergy or religious worker figures net earnings from self-employment. Free online tax This publication also covers certain income tax rules of interest to ministers and members of a religious order. Free online tax A Comprehensive Example shows filled-in forms for a minister who has income taxed under SECA, other income taxed under FICA, and income tax reporting of items specific to a minister. Free online tax In the back of Publication 517 is a set of worksheets that you can use to figure the amount of your taxable ministerial income and allowable deductions. Free online tax You will find these worksheets right after the Comprehensive Example . Free online tax Note. Free online tax In this publication, the term “church” is generally used in its generic sense and not in reference to any particular religion. Free online tax Comments and suggestions. Free online tax   We welcome your comments about this publication and your suggestions for future editions. Free online tax   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free online tax NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free online tax Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free online tax   You can send your comments from www. Free online tax irs. Free online tax gov/formspubs/. Free online tax Click on “More Information” and then on “Give us feedback”. Free online tax   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. Free online tax Ordering forms and publications. Free online tax   Visit www. Free online tax irs. Free online tax 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. Free online tax Internal Revenue Service 1201 N. Free online tax Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free online tax   If you have a tax question, check the information available on IRS. Free online tax gov or call 1-800-829-1040. Free online tax We cannot answer tax questions sent to either of the above addresses. Free online tax Useful Items - You may want to see: Publication 54 Tax Guide for U. Free online tax S. Free online tax Citizens and Resident Aliens Abroad 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 590 Individual Retirement Arrangements (IRAs) 596 Earned Income Credit (EIC) Form (and Instructions) SS-8 Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding SS-16 Certificate of Election of Coverage Under the Federal Insurance Contributions Act Schedule C (Form 1040) Profit or Loss From Business (Sole Proprietorship) Schedule C-EZ (Form 1040) Net Profit From Business (Sole Proprietorship) Schedule SE (Form 1040) Self-Employment Tax 1040-ES Estimated Tax for Individuals 1040X Amended U. Free online tax S. Free online tax Individual Income Tax Return 4029 Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits 4361 Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners 8274 Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption From Employer Social Security and Medicare Taxes 8959 Additional Medicare Tax Ordering publications and forms. Free online tax   See How To Get Tax Help , near the end of this publication, for information about getting these publications and forms. Free online tax Prev  Up  Next   Home   More Online Publications
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Free online tax 3. Free online tax   Rent Expense Table of Contents Introduction Topics - This chapter discusses: RentConditional sales contract. Free online tax Leveraged leases. Free online tax Leveraged leases of limited-use property. Free online tax Taxes on Leased Property Cost of Getting a Lease Improvements by Lessee Capitalizing Rent Expenses Introduction This chapter discusses the tax treatment of rent or lease payments you make for property you use in your business but do not own. Free online tax It also discusses how to treat other kinds of payments you make that are related to your use of this property. Free online tax These include payments you make for taxes on the property. Free online tax Topics - This chapter discusses: The definition of rent Taxes on leased property The cost of getting a lease Improvements by the lessee Capitalizing rent expenses Rent Rent is any amount you pay for the use of property you do not own. Free online tax In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. Free online tax If you have or will receive equity in or title to the property, the rent is not deductible. Free online tax Unreasonable rent. Free online tax   You cannot take a rental deduction for unreasonable rent. Free online tax Ordinarily, the issue of reasonableness arises only if you and the lessor are related. Free online tax Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. Free online tax Rent is not unreasonable just because it is figured as a percentage of gross sales. Free online tax For examples of related persons, see Related persons in chapter 2, Publication 544. Free online tax Rent on your home. Free online tax   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. Free online tax You must meet the requirements for business use of your home. Free online tax For more information, see Business use of your home in chapter 1. Free online tax Rent paid in advance. Free online tax   Generally, rent paid in your trade or business is deductible in the year paid or accrued. Free online tax If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. Free online tax You can deduct the rest of your payment only over the period to which it applies. Free online tax Example 1. Free online tax You are a calendar year taxpayer and you leased a building for 5 years beginning July 1. Free online tax Your rent is $12,000 per year. Free online tax You paid the first year's rent ($12,000) on June 30. Free online tax You can deduct only $6,000 (6/12 × $12,000) for the rent that applies to the first year. Free online tax Example 2. Free online tax You are a calendar year taxpayer. Free online tax Last January you leased property for 3 years for $6,000 a year. Free online tax You paid the full $18,000 (3 × $6,000) during the first year of the lease. Free online tax Each year you can deduct only $6,000, the part of the lease that applies to that year. Free online tax Canceling a lease. Free online tax   You generally can deduct as rent an amount you pay to cancel a business lease. Free online tax Lease or purchase. Free online tax   There may be instances in which you must determine whether your payments are for rent or for the purchase of the property. Free online tax You must first determine whether your agreement is a lease or a conditional sales contract. Free online tax Payments made under a conditional sales contract are not deductible as rent expense. Free online tax Conditional sales contract. Free online tax   Whether an agreement is a conditional sales contract depends on the intent of the parties. Free online tax Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. Free online tax No single test, or special combination of tests, always applies. Free online tax However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. Free online tax The agreement applies part of each payment toward an equity interest you will receive. Free online tax You get title to the property after you make a stated amount of required payments. Free online tax The amount you must pay to use the property for a short time is a large part of the amount you would pay to get title to the property. Free online tax You pay much more than the current fair rental value of the property. Free online tax You have an option to buy the property at a nominal price compared to the value of the property when you may exercise the option. Free online tax Determine this value when you make the agreement. Free online tax You have an option to buy the property at a nominal price compared to the total amount you have to pay under the agreement. Free online tax The agreement designates part of the payments as interest, or that part is easy to recognize as interest. Free online tax Leveraged leases. Free online tax   Leveraged lease transactions may not be considered leases. Free online tax Leveraged leases generally involve three parties: a lessor, a lessee, and a lender to the lessor. Free online tax Usually the lease term covers a large part of the useful life of the leased property, and the lessee's payments to the lessor are enough to cover the lessor's payments to the lender. Free online tax   If you plan to take part in what appears to be a leveraged lease, you may want to get an advance ruling. Free online tax Revenue Procedure 2001-28 on page 1156 of Internal Revenue Bulletin 2001-19 contains the guidelines the IRS will use to determine if a leveraged lease is a lease for federal income tax purposes. Free online tax Revenue Procedure 2001-29 on page 1160 of the same Internal Revenue Bulletin provides the information required to be furnished in a request for an advance ruling on a leveraged lease transaction. Free online tax Internal Revenue Bulletin 2001-19 is available at www. Free online tax irs. Free online tax gov/pub/irs-irbs/irb01-19. Free online tax pdf. Free online tax   In general, Revenue Procedure 2001-28 provides that, for advance ruling purposes only, the IRS will consider the lessor in a leveraged lease transaction to be the owner of the property and the transaction to be a valid lease if all the factors in the revenue procedure are met, including the following. Free online tax The lessor must maintain a minimum unconditional “at risk” equity investment in the property (at least 20% of the cost of the property) during the entire lease term. Free online tax The lessee may not have a contractual right to buy the property from the lessor at less than fair market value when the right is exercised. Free online tax The lessee may not invest in the property, except as provided by Revenue Procedure 2001-28. Free online tax The lessee may not lend any money to the lessor to buy the property or guarantee the loan used by the lessor to buy the property. Free online tax The lessor must show that it expects to receive a profit apart from the tax deductions, allowances, credits, and other tax attributes. Free online tax   The IRS may charge you a user fee for issuing a tax ruling. Free online tax For more information, see Revenue Procedure 2014-1 available at  www. Free online tax irs. Free online tax gov/irb/2014-1_IRB/ar05. Free online tax html. Free online tax Leveraged leases of limited-use property. Free online tax   The IRS will not issue advance rulings on leveraged leases of so-called limited-use property. Free online tax Limited-use property is property not expected to be either useful to or usable by a lessor at the end of the lease term except for continued leasing or transfer to a lessee. Free online tax See Revenue Procedure 2001-28 for examples of limited-use property and property that is not limited-use property. Free online tax Leases over $250,000. Free online tax   Special rules are provided for certain leases of tangible property. Free online tax The rules apply if the lease calls for total payments of more than $250,000 and any of the following apply. Free online tax Rents increase during the lease. Free online tax Rents decrease during the lease. Free online tax Rents are deferred (rent is payable after the end of the calendar year following the calendar year in which the use occurs and the rent is allocated). Free online tax Rents are prepaid (rent is payable before the end of the calendar year preceding the calendar year in which the use occurs and the rent is allocated). Free online tax These rules do not apply if your lease specifies equal amounts of rent for each month in the lease term and all rent payments are due in the calendar year to which the rent relates (or in the preceding or following calendar year). Free online tax   Generally, if the special rules apply, you must use an accrual method of accounting (and time value of money principles) for your rental expenses, regardless of your overall method of accounting. Free online tax In addition, in certain cases in which the IRS has determined that a lease was designed to achieve tax avoidance, you must take rent and stated or imputed interest into account under a constant rental accrual method in which the rent is treated as accruing ratably over the entire lease term. Free online tax For details, see section 467 of the Internal Revenue Code. Free online tax Taxes on Leased Property If you lease business property, you can deduct as additional rent any taxes you have to pay to or for the lessor. Free online tax When you can deduct these taxes as additional rent depends on your accounting method. Free online tax Cash method. Free online tax   If you use the cash method of accounting, you can deduct the taxes as additional rent only for the tax year in which you pay them. Free online tax Accrual method. Free online tax   If you use an accrual method of accounting, you can deduct taxes as additional rent for the tax year in which you can determine all the following. Free online tax That you have a liability for taxes on the leased property. Free online tax How much the liability is. Free online tax That economic performance occurred. Free online tax   The liability and amount of taxes are determined by state or local law and the lease agreement. Free online tax Economic performance occurs as you use the property. Free online tax Example 1. Free online tax Oak Corporation is a calendar year taxpayer that uses an accrual method of accounting. Free online tax Oak leases land for use in its business. Free online tax Under state law, owners of real property become liable (incur a lien on the property) for real estate taxes for the year on January 1 of that year. Free online tax However, they do not have to pay these taxes until July 1 of the next year (18 months later) when tax bills are issued. Free online tax Under the terms of the lease, Oak becomes liable for the real estate taxes in the later year when the tax bills are issued. Free online tax If the lease ends before the tax bill for a year is issued, Oak is not liable for the taxes for that year. Free online tax Oak cannot deduct the real estate taxes as rent until the tax bill is issued. Free online tax This is when Oak's liability under the lease becomes fixed. Free online tax Example 2. Free online tax The facts are the same as in Example 1 except that, according to the terms of the lease, Oak becomes liable for the real estate taxes when the owner of the property becomes liable for them. Free online tax As a result, Oak will deduct the real estate taxes as rent on its tax return for the earlier year. Free online tax This is the year in which Oak's liability under the lease becomes fixed. Free online tax Cost of Getting a Lease You may either enter into a new lease with the lessor of the property or get an existing lease from another lessee. Free online tax Very often when you get an existing lease from another lessee, you must pay the previous lessee money to get the lease, besides having to pay the rent on the lease. Free online tax If you get an existing lease on property or equipment for your business, you generally must amortize any amount you pay to get that lease over the remaining term of the lease. Free online tax For example, if you pay $10,000 to get a lease and there are 10 years remaining on the lease with no option to renew, you can deduct $1,000 each year. Free online tax The cost of getting an existing lease of tangible property is not subject to the amortization rules for section 197 intangibles discussed in chapter 8. Free online tax Option to renew. Free online tax   The term of the lease for amortization includes all renewal options plus any other period for which you and the lessor reasonably expect the lease to be renewed. Free online tax However, this applies only if less than 75% of the cost of getting the lease is for the term remaining on the purchase date (not including any period for which you may choose to renew, extend, or continue the lease). Free online tax Allocate the lease cost to the original term and any option term based on the facts and circumstances. Free online tax In some cases, it may be appropriate to make the allocation using a present value computation. Free online tax For more information, see Regulations section 1. Free online tax 178-1(b)(5). Free online tax Example 1. Free online tax You paid $10,000 to get a lease with 20 years remaining on it and two options to renew for 5 years each. Free online tax Of this cost, you paid $7,000 for the original lease and $3,000 for the renewal options. Free online tax Because $7,000 is less than 75% of the total $10,000 cost of the lease (or $7,500), you must amortize the $10,000 over 30 years. Free online tax That is the remaining life of your present lease plus the periods for renewal. Free online tax Example 2. Free online tax The facts are the same as in Example 1, except that you paid $8,000 for the original lease and $2,000 for the renewal options. Free online tax You can amortize the entire $10,000 over the 20-year remaining life of the original lease. Free online tax The $8,000 cost of getting the original lease was not less than 75% of the total cost of the lease (or $7,500). Free online tax Cost of a modification agreement. Free online tax   You may have to pay an additional “rent” amount over part of the lease period to change certain provisions in your lease. Free online tax You must capitalize these payments and amortize them over the remaining period of the lease. Free online tax You cannot deduct the payments as additional rent, even if they are described as rent in the agreement. Free online tax Example. Free online tax You are a calendar year taxpayer and sign a 20-year lease to rent part of a building starting on January 1. Free online tax However, before you occupy it, you decide that you really need less space. Free online tax The lessor agrees to reduce your rent from $7,000 to $6,000 per year and to release the excess space from the original lease. Free online tax In exchange, you agree to pay an additional rent amount of $3,000, payable in 60 monthly installments of $50 each. Free online tax   You must capitalize the $3,000 and amortize it over the 20-year term of the lease. Free online tax Your amortization deduction each year will be $150 ($3,000 ÷ 20). Free online tax You cannot deduct the $600 (12 × $50) that you will pay during each of the first 5 years as rent. Free online tax Commissions, bonuses, and fees. Free online tax   Commissions, bonuses, fees, and other amounts you pay to get a lease on property you use in your business are capital costs. Free online tax You must amortize these costs over the term of the lease. Free online tax Loss on merchandise and fixtures. Free online tax   If you sell at a loss merchandise and fixtures that you bought solely to get a lease, the loss is a cost of getting the lease. Free online tax You must capitalize the loss and amortize it over the remaining term of the lease. Free online tax Improvements by Lessee If you add buildings or make other permanent improvements to leased property, depreciate the cost of the improvements using the modified accelerated cost recovery system (MACRS). Free online tax Depreciate the property over its appropriate recovery period. Free online tax You cannot amortize the cost over the remaining term of the lease. Free online tax If you do not keep the improvements when you end the lease, figure your gain or loss based on your adjusted basis in the improvements at that time. Free online tax For more information, see the discussion of MACRS in Publication 946, How To Depreciate Property. Free online tax Assignment of a lease. Free online tax   If a long-term lessee who makes permanent improvements to land later assigns all lease rights to you for money and you pay the rent required by the lease, the amount you pay for the assignment is a capital investment. Free online tax If the rental value of the leased land increased since the lease began, part of your capital investment is for that increase in the rental value. Free online tax The rest is for your investment in the permanent improvements. Free online tax   The part that is for the increased rental value of the land is a cost of getting a lease, and you amortize it over the remaining term of the lease. Free online tax You can depreciate the part that is for your investment in the improvements over the recovery period of the property as discussed earlier, without regard to the lease term. Free online tax Capitalizing Rent Expenses Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Free online tax Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Free online tax You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Free online tax Indirect costs include amounts incurred for renting or leasing equipment, facilities, or land. Free online tax Uniform capitalization rules. Free online tax   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Free online tax Produce real property or tangible personal property. Free online tax For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Free online tax Acquire property for resale. Free online tax However, these rules do not apply to the following property. Free online tax Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. Free online tax Property you produce if you meet either of the following conditions. Free online tax Your indirect costs of producing the property are $200,000 or less. Free online tax You use the cash method of accounting and do not account for inventories. Free online tax Example 1. Free online tax You rent construction equipment to build a storage facility. Free online tax If you are subject to the uniform capitalization rules, you must capitalize as part of the cost of the building the rent you paid for the equipment. Free online tax You recover your cost by claiming a deduction for depreciation on the building. Free online tax Example 2. Free online tax You rent space in a facility to conduct your business of manufacturing tools. Free online tax If you are subject to the uniform capitalization rules, you must include the rent you paid to occupy the facility in the cost of the tools you produce. Free online tax More information. Free online tax   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. Free online tax Prev  Up  Next   Home   More Online Publications