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Free taxes online 27. Free taxes online   Tax Benefits for Work-Related Education Table of Contents What's New Introduction Useful Items - You may want to see: Qualifying Work-Related EducationEducation Required by Employer or by Law Education To Maintain or Improve Skills Education To Meet Minimum Requirements Education That Qualifies You for a New Trade or Business What Expenses Can Be DeductedUnclaimed reimbursement. Free taxes online Transportation Expenses Travel Expenses No Double Benefit Allowed Reimbursements Deducting Business ExpensesSelf-Employed Persons Employees Performing Artists and Fee-Basis Officials Impairment-Related Work Expenses Recordkeeping What's New Standard mileage rate. Free taxes online  Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2013, through December 31, 2013, is 56½ cents per mile. Free taxes online For more information, see Transportation Expenses under What Expenses Can Be Deducted. Free taxes online Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. Free taxes online To claim such a deduction, you must: Itemize your deductions on Schedule A (Form 1040) if you are an employee, File Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040) if you are self-employed, and Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education . Free taxes online If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. Free taxes online Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses (except for impairment-related work expenses of disabled individuals) is greater than 2% of your adjusted gross income. Free taxes online See chapter 28. Free taxes online If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. Free taxes online Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits (see chapter 35). Free taxes online You may qualify for these other benefits even if you do not meet the requirements listed earlier. Free taxes online Also, keep in mind that your work-related education expenses may qualify you to claim more than one tax benefit. Free taxes online Generally, you may claim any number of benefits as long as you use different expenses to figure each one. Free taxes online When you figure your taxes, you may want to compare these tax benefits so you can choose the method(s) that give you the lowest tax liability. Free taxes online Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 970 Tax Benefits for Education Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Schedule A (Form 1040) Itemized Deductions Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. Free taxes online This is education that meets at least one of the following two tests. Free taxes online The education is required by your employer or the law to keep your present salary, status, or job. Free taxes online The required education must serve a bona fide business purpose of your employer. Free taxes online The education maintains or improves skills needed in your present work. Free taxes online However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. Free taxes online You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. Free taxes online Use Figure 27-A, later, as a quick check to see if your education qualifies. Free taxes online Education Required by Employer or by Law Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. Free taxes online This additional education is qualifying work-related education if all three of the following requirements are met. Free taxes online It is required for you to keep your present salary, status, or job, The requirement serves a bona fide business purpose of your employer, and The education is not part of a program that will qualify you for a new trade or business. Free taxes online When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work. Free taxes online See Education To Maintain or Improve Skills , later. Free taxes online Example. Free taxes online You are a teacher who has satisfied the minimum requirements for teaching. Free taxes online Your employer requires you to take an additional college course each year to keep your teaching job. Free taxes online If the courses will not qualify you for a new trade or business, they are qualifying work-related education even if you eventually receive a master's degree and an increase in salary because of this extra education. Free taxes online Education To Maintain or Improve Skills If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. Free taxes online This could include refresher courses, courses on current developments, and academic or vocational courses. Free taxes online Example. Free taxes online You repair televisions, radios, and stereo systems for XYZ Store. Free taxes online To keep up with the latest changes, you take special courses in radio and stereo service. Free taxes online These courses maintain and improve skills required in your work. Free taxes online Maintaining skills vs. Free taxes online qualifying for new job. Free taxes online   Education to maintain or improve skills needed in your present work is not qualifying education if it will also qualify you for a new trade or business. Free taxes online Education during temporary absence. Free taxes online   If you stop working for a year or less in order to get education to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. Free taxes online Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. Free taxes online Example. Free taxes online You quit your biology research job to become a full-time biology graduate student for one year. Free taxes online If you return to work in biology research after completing the courses, the education is related to your present work even if you do not go back to work with the same employer. Free taxes online Education during indefinite absence. Free taxes online   If you stop work for more than a year, your absence from your job is considered indefinite. Free taxes online Education during an indefinite absence, even if it maintains or improves skills needed in the work from which you are absent, is considered to qualify you for a new trade or business. Free taxes online Therefore, it is not qualifying work-related education. Free taxes online Education To Meet Minimum Requirements Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. Free taxes online The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. Free taxes online Once you have met the minimum educational requirements that were in effect when you were hired, you do not have to meet any new minimum educational requirements. Free taxes online This means that if the minimum requirements change after you were hired, any education you need to meet the new requirements can be qualifying education. Free taxes online You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. Free taxes online Example 1. Free taxes online You are a full-time engineering student. Free taxes online Although you have not received your degree or certification, you work part-time as an engineer for a firm that will employ you as a full-time engineer after you finish college. Free taxes online Although your college engineering courses improve your skills in your present job, they are also needed to meet the minimum job requirements for a full-time engineer. Free taxes online The education is not qualifying work-related education. Free taxes online Example 2. Free taxes online You are an accountant and you have met the minimum educational requirements of your employer. Free taxes online Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. Free taxes online These additional courses can be qualifying work-related education because you have already satisfied the minimum requirements that were in effect when you were hired. Free taxes online Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. Free taxes online The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. Free taxes online If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. Free taxes online The determination of whether you are a faculty member of an educational institution must be made on the basis of the particular practices of the institution. Free taxes online You generally will be considered a faculty member when one or more of the following occurs. Free taxes online You have tenure. Free taxes online Your years of service count toward obtaining tenure. Free taxes online You have a vote in faculty decisions. Free taxes online Your school makes contributions for you to a retirement plan other than social security or a similar program. Free taxes online Example 1. Free taxes online The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. Free taxes online In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. Free taxes online If the employing school certifies to the state Department of Education that qualified teachers cannot be found, the school can hire persons with only 3 years of college. Free taxes online However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. Free taxes online Under these facts, the bachelor's degree, whether or not it includes the 10 professional education courses, is considered the minimum educational requirement for qualification as a teacher in your state. Free taxes online If you have all the required education except the fifth year, you have met the minimum educational requirements. Free taxes online The fifth year of training is qualifying work-related education unless it is part of a program of study that will qualify you for a new trade or business. Free taxes online Figure 27-A Does Your Work-Related Education Qualify? Please click here for the text description of the image. Free taxes online Figure 27-A. Free taxes online Does Your Work-Related Education Qualify?" Example 2. Free taxes online Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. Free taxes online The additional four education courses can be qualifying work-related education. Free taxes online Although you do not have all the required courses, you have already met the minimum educational requirements. Free taxes online Example 3. Free taxes online Assume the same facts as in Example 1 except that you are hired with only 3 years of college. Free taxes online The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. Free taxes online They are needed to meet the minimum educational requirements for employment as a teacher. Free taxes online Example 4. Free taxes online You have a bachelor's degree and you work as a temporary instructor at a university. Free taxes online At the same time, you take graduate courses toward an advanced degree. Free taxes online The rules of the university state that you can become a faculty member only if you get a graduate degree. Free taxes online Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. Free taxes online You have not met the minimum educational requirements to qualify you as a faculty member. Free taxes online The graduate courses are not qualifying work-related education. Free taxes online Certification in a new state. Free taxes online   Once you have met the minimum educational requirements for teachers for your state, you are considered to have met the minimum educational requirements in all states. Free taxes online This is true even if you must get additional education to be certified in another state. Free taxes online Any additional education you need is qualifying work-related education. Free taxes online You have already met the minimum requirements for teaching. Free taxes online Teaching in another state is not a new trade or business. Free taxes online Example. Free taxes online You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. Free taxes online You move to State B and are promptly hired as a teacher. Free taxes online You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. Free taxes online These additional courses are qualifying work-related education because the teaching position in State B involves the same general kind of work for which you were qualified in State A. Free taxes online Education That Qualifies You for a New Trade or Business Education that is part of a program of study that will qualify you for a new trade or business is not qualifying work-related education. Free taxes online This is true even if you do not plan to enter that trade or business. Free taxes online If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. Free taxes online Example 1. Free taxes online You are an accountant. Free taxes online Your employer requires you to get a law degree at your own expense. Free taxes online You register at a law school for the regular curriculum that leads to a law degree. Free taxes online Even if you do not intend to become a lawyer, the education is not qualifying because the law degree will qualify you for a new trade or business. Free taxes online Example 2. Free taxes online You are a general practitioner of medicine. Free taxes online You take a 2-week course to review developments in several specialized fields of medicine. Free taxes online The course does not qualify you for a new profession. Free taxes online It is qualifying work-related education because it maintains or improves skills required in your present profession. Free taxes online Example 3. Free taxes online While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. Free taxes online The program will lead to qualifying you to practice psychoanalysis. Free taxes online The psychoanalytic training does not qualify you for a new profession. Free taxes online It is qualifying work-related education because it maintains or improves skills required in your present profession. Free taxes online Bar or CPA Review Course Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying work-related education. Free taxes online They are part of a program of study that can qualify you for a new profession. Free taxes online Teaching and Related Duties All teaching and related duties are considered the same general kind of work. Free taxes online A change in duties in any of the following ways is not considered a change to a new business. Free taxes online Elementary school teacher to secondary school teacher. Free taxes online Teacher of one subject, such as biology, to teacher of another subject, such as art. Free taxes online Classroom teacher to guidance counselor. Free taxes online Classroom teacher to school administrator. Free taxes online What Expenses Can Be Deducted If your education meets the requirements described earlier under Qualifying Work-Related Education , you can generally deduct your education expenses as business expenses. Free taxes online If you are not self-employed, you can deduct business expenses only if you itemize your deductions. Free taxes online You cannot deduct expenses related to tax-exempt and excluded income. Free taxes online Deductible expenses. Free taxes online   The following education expenses can be deducted. Free taxes online Tuition, books, supplies, lab fees, and similar items. Free taxes online Certain transportation and travel costs. Free taxes online Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. Free taxes online Nondeductible expenses. Free taxes online   You cannot deduct personal or capital expenses. Free taxes online For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. Free taxes online This amount is a personal expense. Free taxes online Unclaimed reimbursement. Free taxes online   If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses that apply to that unclaimed reimbursement. Free taxes online Example. Free taxes online Your employer agrees to pay your education expenses if you file a voucher showing your expenses. Free taxes online You do not file a voucher, and you do not get reimbursed. Free taxes online Because you did not file a voucher, you cannot deduct the expenses on your tax return. Free taxes online Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. Free taxes online If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. Free taxes online Temporary basis. Free taxes online   You go to school on a temporary basis if either of the following situations applies to you. Free taxes online Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. Free taxes online Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. Free taxes online Your attendance is temporary up to the date you determine it will last more than 1 year. Free taxes online Note. Free taxes online If you are in either situation (1) or (2), your attendance is not temporary if facts and circumstances indicate otherwise. Free taxes online Attendance not on a temporary basis. Free taxes online   You do not go to school on a temporary basis if either of the following situations apply to you. Free taxes online Your attendance at school is realistically expected to last more than 1 year. Free taxes online It does not matter how long you actually attend. Free taxes online Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. Free taxes online Your attendance is not temporary after the date you determine it will last more than 1 year. Free taxes online Deductible Transportation Expenses If you are regularly employed and go directly from home to school on a temporary basis, you can deduct the round-trip costs of transportation between your home and school. Free taxes online This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. Free taxes online Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. Free taxes online Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. Free taxes online Example 1. Free taxes online You regularly work in a nearby town, and go directly from work to home. Free taxes online You also attend school every work night for 3 months to take a course that improves your job skills. Free taxes online Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. Free taxes online This is true regardless of the distance traveled. Free taxes online Example 2. Free taxes online Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. Free taxes online You can deduct your transportation expenses from your regular work site to school and then home. Free taxes online Example 3. Free taxes online Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. Free taxes online Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. Free taxes online Example 4. Free taxes online Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. Free taxes online Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. Free taxes online If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. Free taxes online If you go from work to home to school and return home, your transportation expenses cannot be more than if you had gone directly from work to school. Free taxes online Using your car. Free taxes online   If you use your car (whether you own or lease it) for transportation to school, you can deduct your actual expenses or use the standard mileage rate to figure the amount you can deduct. Free taxes online The standard mileage rate for miles driven from January 1, 2013, through December 31, 2013 is 56½ cents per mile. Free taxes online Whichever method you use, you can also deduct parking fees and tolls. Free taxes online See chapter 26 for information on deducting your actual expenses of using a car. Free taxes online Travel Expenses You can deduct expenses for travel, meals (see 50% limit on meals , later), and lodging if you travel overnight mainly to obtain qualifying work-related education. Free taxes online Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. Free taxes online For more information, see chapter 26. Free taxes online You cannot deduct expenses for personal activities, such as sightseeing, visiting, or entertaining. Free taxes online Mainly personal travel. Free taxes online   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. Free taxes online You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. Free taxes online   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. Free taxes online An important factor is the comparison of time spent on personal activities with time spent on educational activities. Free taxes online If you spend more time on personal activities, the trip is considered mainly educational only if you can show a substantial nonpersonal reason for traveling to a particular location. Free taxes online Example 1. Free taxes online John works in Newark, New Jersey. Free taxes online He traveled to Chicago to take a deductible 1-week course at the request of his employer. Free taxes online His main reason for going to Chicago was to take the course. Free taxes online While there, he took a sight-seeing trip, entertained some friends, and took a side trip to Pleasantville for a day. Free taxes online Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. Free taxes online He cannot deduct his transportation expenses of going to Pleasantville. Free taxes online He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. Free taxes online Example 2. Free taxes online Sue works in Boston. Free taxes online She went to a university in Michigan to take a course for work. Free taxes online The course is qualifying work-related education. Free taxes online She took one course, which is one-fourth of a full course load of study. Free taxes online She spent the rest of the time on personal activities. Free taxes online Her reasons for taking the course in Michigan were all personal. Free taxes online Sue's trip is mainly personal because three-fourths of her time is considered personal time. Free taxes online She cannot deduct the cost of her round-trip train ticket to Michigan. Free taxes online She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. Free taxes online Example 3. Free taxes online Dave works in Nashville and recently traveled to California to take a 2-week seminar. Free taxes online The seminar is qualifying work-related education. Free taxes online While there, he spent an extra 8 weeks on personal activities. Free taxes online The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. Free taxes online Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. Free taxes online He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. Free taxes online Cruises and conventions. Free taxes online   Certain cruises and conventions offer seminars or courses as part of their itinerary. Free taxes online Even if the seminars or courses are work-related, your deduction for travel may be limited. Free taxes online This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. Free taxes online   For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and Conventions in chapter 1 of Publication 463. Free taxes online 50% limit on meals. Free taxes online   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. Free taxes online You cannot have been reimbursed for the meals. Free taxes online   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. Free taxes online Travel as Education You cannot deduct the cost of travel as a form of education even if it is directly related to your duties in your work or business. Free taxes online Example. Free taxes online You are a French language teacher. Free taxes online While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. Free taxes online You chose your itinerary and most of your activities to improve your French language skills. Free taxes online You cannot deduct your travel expenses as education expenses. Free taxes online This is true even if you spent most of your time learning French by visiting French schools and families, attending movies or plays, and engaging in similar activities. Free taxes online No Double Benefit Allowed You cannot do either of the following. Free taxes online Deduct work-related education expenses as business expenses if you benefit from these expenses under any other provision of the law, for example, the tuition and fees deduction (see chapter 35). Free taxes online Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. Free taxes online See Adjustments to Qualifying Work-Related Education Expenses , next. Free taxes online Adjustments to Qualifying Work-Related Education Expenses If you pay qualifying work-related education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. Free taxes online You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. Free taxes online For more information, see chapter 12 of Publication 970. Free taxes online Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see chapter 1 of Publication 970), The tax-free part of Pell grants (see chapter 1 of Publication 970), The tax-free part of employer-provided educational assistance (see chapter 11 of Publication 970), Veterans' educational assistance (see chapter 1 of Publication 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received for education assistance. Free taxes online Amounts that do not reduce qualifying work-related education expenses. Free taxes online   Do not reduce the qualifying work-related education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. Free taxes online   Also, do not reduce the qualifying work-related education expenses by any scholarship or fellowship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualifying work-related education expenses. Free taxes online Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. Free taxes online There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. Free taxes online You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. Free taxes online For information on how to treat reimbursements under both accountable and nonaccountable plans, see Reimbursements in chapter 26. Free taxes online Deducting Business Expenses Self-employed persons and employees report business expenses differently. Free taxes online The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. Free taxes online Self-Employed Persons If you are self-employed, report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses (generally Schedule C, C-EZ, or F). Free taxes online If your educational expenses include expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those items. Free taxes online See the instructions for the form you file for information on how to complete it. Free taxes online Employees If you are an employee, you can deduct the cost of qualifying work-related education only if you: Did not receive (and were not entitled to receive) any reimbursement from your employer, Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or Received reimbursement under an accountable plan, but the amount received was less than your expenses for which you claimed reimbursement. Free taxes online If either (1) or (2) applies, you can deduct the total qualifying cost. Free taxes online If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. Free taxes online In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your deduction for any other employee business expenses on Schedule A (Form 1040), line 21. Free taxes online (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. Free taxes online ) This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. Free taxes online See chapter 28. Free taxes online Form 2106 or 2106-EZ. Free taxes online   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or Form 2106-EZ. Free taxes online Form not required. Free taxes online   Do not complete either Form 2106 or Form 2106-EZ if: If amounts included in box 1 of your Form W-2, are not considered reimbursements, and You are not claiming travel, transportation, meal, or entertainment expenses. Free taxes online   If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21. Free taxes online (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. Free taxes online ) Using Form 2106-EZ. Free taxes online   This form is shorter and easier to use than Form 2106. Free taxes online Generally, you can use this form if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are using the standard mileage rate if you are claiming vehicle expenses. Free taxes online   If you do not meet both of these requirements, use Form 2106. Free taxes online Performing Artists and Fee-Basis Officials If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee basis, you can deduct the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction. Free taxes online Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24. Free taxes online You do not have to itemize your deductions on Schedule A (Form 1040), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. Free taxes online You must complete Form 2106 or 2106-EZ to figure your deduction, even if you meet the requirements described earlier under Form not required . Free taxes online For more information on qualified performing artists, see chapter 6 of Publication 463. Free taxes online Impairment-Related Work Expenses If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related education, you can deduct these expenses on Schedule A (Form 1040), line 28. Free taxes online They are not subject to the 2%-of-adjusted-gross-income limit. Free taxes online To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . Free taxes online For more information on impairment-related work expenses, see chapter 6 of Publication 463. Free taxes online Recordkeeping You must keep records as proof of any deduction claimed on your tax return. Free taxes online Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. Free taxes online For specific information about keeping records of business expenses, see Recordkeeping in chapter 26. 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IRS - Issuing Refunds

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Every year, the IRS issues refunds to millions of taxpayers. Refund data are reported in multiple ways, including by the number issued and refund amounts. Historical refund data are also available from 1987 to 2007.

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Fiscal Year Data

The tables below were originally published in the IRS Data Book, which is IRS Publication 55B, and are complied by various divisions throughout the IRS. The IRS's fiscal year runs from October 1 to September 30.

Refunds Issued and Refund Amounts

Number of Internal Revenue Refunds Issued
The number of refunds issued are shown for selected returns, including corporation, individual, employment, estate, gift, and excise taxes, by state.

• Prior to 2000, the number of refunds for selected tax return types are classified by Internal Revenue region and district.

Fiscal Years available:
1999     1998     1997     1996     1995

 

Amount of Internal Revenue Refunds Issued, Including Interest
These tables show the total dollar amount refunded, by state and type of tax.

• Prior to 2000, the total dollar amounts refunded are shown by Internal Revenue region and district and by type of tax return. 

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