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How To Do An Amended Return

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How To Do An Amended Return

How to do an amended return Tax Changes for Individuals Table of Contents 2001 ChangesNew 5-Year Carryback Rule for Net Operating Losses (NOLs) Wash Sale Rules Do Not Apply to Section 1256 Contracts Other 2001 Changes 2002 ChangesDeduction for Educator Expenses Personal Credits Still Allowed Against Alternative Minimum Tax Later ChangeChild and Dependent Care Expenses 2001 Changes New 5-Year Carryback Rule for Net Operating Losses (NOLs) If you have an NOL from a tax year ending during 2001 or 2002, you must generally carry back the entire amount of the NOL to the 5 tax years before the NOL year (the carryback period). How to do an amended return However, you can still choose to use the previous carryback period. How to do an amended return You also can choose not to carry back an NOL and only carry it forward. How to do an amended return Individuals, estates, and trusts can file Form 1045, Application for Tentative Refund. How to do an amended return The instructions for this form will be revised to reflect the new law. How to do an amended return Wash Sale Rules Do Not Apply to Section 1256 Contracts The wash sale rules that generally apply to losses from the sale of stock or securities, do not apply to any loss arising from a section 1256 contract. How to do an amended return A section 1256 contract is any: Regulated futures contract, Foreign currency contract, Nonequity option, Dealer equity option, or Dealer securities futures contract. How to do an amended return Wash sales and section 1256 contracts are explained in detail in Publication 550, Investment Income and Expenses. How to do an amended return Other 2001 Changes Other changes are discussed in the following chapters. How to do an amended return Chapter 4 Car Expenses Chapter 5 Depreciation 2002 Changes Deduction for Educator Expenses If you are an eligible educator, you can deduct as an adjustment to income up to $250 in qualified expenses. How to do an amended return You can deduct these expenses even if you do not itemize deductions on Schedule A (Form 1040). How to do an amended return This adjustment to income is for expenses paid or incurred in tax years beginning during 2002 or 2003. How to do an amended return Previously, these expenses were deductible only as a miscellaneous itemized deduction subject to the 2% of adjusted gross income limit. How to do an amended return Eligible educator. How to do an amended return   You are an eligible educator if, for the tax year, you meet the following requirements. How to do an amended return You are a kindergarten through grade 12: Teacher, Instructor, Counselor, Principal, or Aide. How to do an amended return You work at least 900 hours during a school year in a school that provides elementary or secondary education, as determined under state law. How to do an amended return Qualified expenses. How to do an amended return   These are unreimbursed expenses you paid or incurred for books, supplies, computer equipment (including related software and services), other equipment, and supplementary materials that you use in the classroom. How to do an amended return For courses in health and physical education, expenses for supplies are qualified expenses only if they are related to athletics. How to do an amended return   To be deductible as an adjustment to income, the qualified expenses must be more than the following amounts for the tax year. How to do an amended return The interest on qualified U. How to do an amended return S. How to do an amended return savings bonds that you excluded from income because you paid qualified higher education expenses, Any distribution from a qualified tuition program that you excluded from income, or Any tax-free withdrawals from your Coverdell education savings account. How to do an amended return Personal Credits Still Allowed Against Alternative Minimum Tax The provision that allowed certain nonrefundable personal credits to reduce both your regular tax and any alternative minimum tax (AMT) has been extended and will be in effect for 2002 and 2003. How to do an amended return This provision, as it applies to the AMT, was originally scheduled to expire after 2001. How to do an amended return Without the extension, these credits could not have been used to reduce any AMT in 2002 or 2003. How to do an amended return Later Change Child and Dependent Care Expenses For the purpose of figuring the child and dependent care credit, your spouse is treated as having at least a minimum amount of earned income for any month that he or she is a full-time student or not able to care for himself or herself. How to do an amended return Beginning in 2003, this amount is increased to $250 a month if there is one qualifying person and to $500 a month if there are two or more qualifying persons. How to do an amended return Before 2003, the amounts were $200 and $400. How to do an amended return The same rule applies for the exclusion of employer-provided dependent care benefits. How to do an amended return For more information about the credit and exclusion, see Publication 503, Child and Dependent Care Expenses. How to do an amended return Prev  Up  Next   Home   More Online Publications
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The How To Do An Amended Return

How to do an amended return 4. How to do an amended return   Figuring Depreciation Under MACRS Table of Contents Introduction Useful Items - You may want to see: Which Depreciation System (GDS or ADS) Applies? Which Property Class Applies Under GDS?Rent-to-own dealer. How to do an amended return Rent-to-own contract. How to do an amended return What Is the Placed in Service Date? What Is the Basis for Depreciation? Which Recovery Period Applies?Recovery Periods Under GDS Recovery Periods Under ADS Additions and Improvements Which Convention Applies? Which Depreciation Method Applies?Depreciation Methods for Farm Property Electing a Different Method How Is the Depreciation Deduction Figured?Using the MACRS Percentage Tables Figuring the Deduction Without Using the Tables Figuring the Deduction for Property Acquired in a Nontaxable Exchange Figuring the Deduction for a Short Tax Year How Do You Use General Asset Accounts?Grouping Property Figuring Depreciation for a GAA Disposing of GAA Property Terminating GAA Treatment Electing To Use a GAA When Do You Recapture MACRS Depreciation? Introduction The Modified Accelerated Cost Recovery System (MACRS) is used to recover the basis of most business and investment property placed in service after 1986. How to do an amended return MACRS consists of two depreciation systems, the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). How to do an amended return Generally, these systems provide different methods and recovery periods to use in figuring depreciation deductions. How to do an amended return To be sure you can use MACRS to figure depreciation for your property, see What Method Can You Use To Depreciate Your Property in chapter 1. How to do an amended return This chapter explains how to determine which MACRS depreciation system applies to your property. How to do an amended return It also discusses other information you need to know before you can figure depreciation under MACRS. How to do an amended return This information includes the property's recovery class, placed in service date, and basis, as well as the applicable recovery period, convention, and depreciation method. How to do an amended return It explains how to use this information to figure your depreciation deduction and how to use a general asset account to depreciate a group of properties. How to do an amended return Finally, it explains when and how to recapture MACRS depreciation. How to do an amended return Useful Items - You may want to see: Publication 225 Farmer's Tax Guide 463 Travel, Entertainment, Gift, and Car  Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization See chapter 6 for information about getting publications and forms. How to do an amended return Which Depreciation System (GDS or ADS) Applies? Your use of either the General Depreciation System (GDS) or the Alternative Depreciation System (ADS) to depreciate property under MACRS determines what depreciation method and recovery period you use. How to do an amended return You generally must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. How to do an amended return If you placed your property in service in 2013, complete Part III of Form 4562 to report depreciation using MACRS. How to do an amended return Complete section B of Part III to report depreciation using GDS, and complete section C of Part III to report depreciation using ADS. How to do an amended return If you placed your property in service before 2013 and are required to file Form 4562, report depreciation using either GDS or ADS on line 17 in Part III. How to do an amended return Required use of ADS. How to do an amended return   You must use ADS for the following property. How to do an amended return Listed property used 50% or less in a qualified business use. How to do an amended return See chapter 5 for information on listed property. How to do an amended return Any tangible property used predominantly outside the United States during the year. How to do an amended return Any tax-exempt use property. How to do an amended return Any tax-exempt bond-financed property. How to do an amended return All property used predominantly in a farming business and placed in service in any tax year during which an election not to apply the uniform capitalization rules to certain farming costs is in effect. How to do an amended return Any property imported from a foreign country for which an Executive Order is in effect because the country maintains trade restrictions or engages in other discriminatory acts. How to do an amended return If you are required to use ADS to depreciate your property, you cannot claim any special depreciation allowance (discussed in chapter 3) for the property. How to do an amended return Electing ADS. How to do an amended return   Although your property may qualify for GDS, you can elect to use ADS. How to do an amended return The election generally must cover all property in the same property class that you placed in service during the year. How to do an amended return However, the election for residential rental property and nonresidential real property can be made on a property-by-property basis. How to do an amended return Once you make this election, you can never revoke it. How to do an amended return   You make the election by completing line 20 in Part III of Form 4562. How to do an amended return Which Property Class Applies Under GDS? The following is a list of the nine property classifications under GDS and examples of the types of property included in each class. How to do an amended return These property classes are also listed under column (a) in section B, Part III, of Form 4562. How to do an amended return For detailed information on property classes, see Appendix B, Table of Class Lives and Recovery Periods, in this publication. How to do an amended return 3-year property. How to do an amended return Tractor units for over-the-road use. How to do an amended return Any race horse over 2 years old when placed in service. How to do an amended return (All race horses placed in service after December 31, 2008, and before January 1, 2014, are deemed to be 3-year property, regardless of age. How to do an amended return ) Any other horse (other than a race horse) over 12 years old when placed in service. How to do an amended return Qualified rent-to-own property (defined later). How to do an amended return 5-year property. How to do an amended return Automobiles, taxis, buses, and trucks. How to do an amended return Computers and peripheral equipment. How to do an amended return Office machinery (such as typewriters, calculators, and copiers). How to do an amended return Any property used in research and experimentation. How to do an amended return Breeding cattle and dairy cattle. How to do an amended return Appliances, carpets, furniture, etc. How to do an amended return , used in a residential rental real estate activity. How to do an amended return Certain geothermal, solar, and wind energy property. How to do an amended return 7-year property. How to do an amended return Office furniture and fixtures (such as desks, files, and safes). How to do an amended return Agricultural machinery and equipment. How to do an amended return Any property that does not have a class life and has not been designated by law as being in any other class. How to do an amended return Certain motorsports entertainment complex property (defined later) placed in service before January 1, 2014. How to do an amended return Any natural gas gathering line placed in service after April 11, 2005. How to do an amended return See Natural gas gathering line and electric transmission property , later. How to do an amended return 10-year property. How to do an amended return Vessels, barges, tugs, and similar water transportation equipment. How to do an amended return Any single purpose agricultural or horticultural structure. How to do an amended return Any tree or vine bearing fruits or nuts. How to do an amended return Qualified small electric meter and qualified smart electric grid system (defined later) placed in service on or after October 3, 2008. How to do an amended return 15-year property. How to do an amended return Certain improvements made directly to land or added to it (such as shrubbery, fences, roads, sidewalks, and bridges). How to do an amended return Any retail motor fuels outlet (defined later), such as a convenience store. How to do an amended return Any municipal wastewater treatment plant. How to do an amended return Any qualified leasehold improvement property (defined later) placed in service before January 1, 2014. How to do an amended return Any qualified restaurant property (defined later) placed in service before January 1, 2014. How to do an amended return Initial clearing and grading land improvements for gas utility property. How to do an amended return Electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity placed in service after April 11, 2005. How to do an amended return See Natural gas gathering line and electric transmission property , later. How to do an amended return Any natural gas distribution line placed in service after April 11, 2005 and before January 1, 2011. How to do an amended return Any qualified retail improvement property placed in service before January 1, 2014. How to do an amended return 20-year property. How to do an amended return Farm buildings (other than single purpose agricultural or horticultural structures). How to do an amended return Municipal sewers not classified as 25-year property. How to do an amended return Initial clearing and grading land improvements for electric utility transmission and distribution plants. How to do an amended return 25-year property. How to do an amended return This class is water utility property, which is either of the following. How to do an amended return Property that is an integral part of the gathering, treatment, or commercial distribution of water, and that, without regard to this provision, would be 20-year property. How to do an amended return Municipal sewers other than property placed in service under a binding contract in effect at all times since June 9, 1996. How to do an amended return Residential rental property. How to do an amended return This is any building or structure, such as a rental home (including a mobile home), if 80% or more of its gross rental income for the tax year is from dwelling units. How to do an amended return A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. How to do an amended return It does not include a unit in a hotel, motel, or other establishment where more than half the units are used on a transient basis. How to do an amended return If you occupy any part of the building or structure for personal use, its gross rental income includes the fair rental value of the part you occupy. How to do an amended return Nonresidential real property. How to do an amended return This is section 1250 property, such as an office building, store, or warehouse, that is neither residential rental property nor property with a class life of less than 27. How to do an amended return 5 years. How to do an amended return Qualified rent-to-own property. How to do an amended return   Qualified rent-to-own property is property held by a rent-to-own dealer for purposes of being subject to a rent-to-own contract. How to do an amended return It is tangible personal property generally used in the home for personal use. How to do an amended return It includes computers and peripheral equipment, televisions, videocassette recorders, stereos, camcorders, appliances, furniture, washing machines and dryers, refrigerators, and other similar consumer durable property. How to do an amended return Consumer durable property does not include real property, aircraft, boats, motor vehicles, or trailers. How to do an amended return   If some of the property you rent to others under a rent-to-own agreement is of a type that may be used by the renters for either personal or business purposes, you still can treat this property as qualified property as long as it does not represent a significant portion of your leasing property. How to do an amended return However, if this dual-use property does represent a significant portion of your leasing property, you must prove that this property is qualified rent-to-own property. How to do an amended return Rent-to-own dealer. How to do an amended return   You are a rent-to-own dealer if you meet all the following requirements. How to do an amended return You regularly enter into rent-to-own contracts (defined below) in the ordinary course of your business for the use of consumer property. How to do an amended return A substantial portion of these contracts end with the customer returning the property before making all the payments required to transfer ownership. How to do an amended return The property is tangible personal property of a type generally used within the home for personal use. How to do an amended return Rent-to-own contract. How to do an amended return   This is any lease for the use of consumer property between a rent-to-own dealer and a customer who is an individual which— Is titled “Rent-to-Own Agreement,” “Lease Agreement with Ownership Option,” or other similar language. How to do an amended return Provides a beginning date and a maximum period of time, not to exceed 156 weeks or 36 months from the beginning date, for which the contract can be in effect (including renewals or options to extend). How to do an amended return Provides for regular periodic (weekly or monthly) payments that can be either level or decreasing. How to do an amended return If the payments are decreasing, no payment can be less than 40% of the largest payment. How to do an amended return Provides for total payments that generally exceed the normal retail price of the property plus interest. How to do an amended return Provides for total payments that do not exceed $10,000 for each item of property. How to do an amended return Provides that the customer has no legal obligation to make all payments outlined in the contract and that, at the end of each weekly or monthly payment period, the customer can either continue to use the property by making the next payment or return the property in good working order with no further obligations and no entitlement to a return of any prior payments. How to do an amended return Provides that legal title to the property remains with the rent-to-own dealer until the customer makes either all the required payments or the early purchase payments required under the contract to acquire legal title. How to do an amended return Provides that the customer has no right to sell, sublease, mortgage, pawn, pledge, or otherwise dispose of the property until all contract payments have been made. How to do an amended return Motorsports entertainment complex. How to do an amended return   This is a racing track facility permanently situated on land that hosts one or more racing events for automobiles, trucks, or motorcycles during the 36-month period after the first day of the month in which the facility is placed in service. How to do an amended return The events must be open to the public for the price of admission. How to do an amended return Qualified smart electric grid system. How to do an amended return   A qualified smart electric grid system means any smart grid property used as part of a system for electric distribution grid communications, monitoring, and management placed in service after October 3, 2008, by a taxpayer who is a supplier of electrical energy or a provider of electrical energy services. How to do an amended return Smart grid property includes electronics and related equipment that is capable of: Sensing, collecting, and monitoring data of or from all portions of a utility's electric distribution grid, Providing real-time, two-way communications to monitor or to manage the grid, and Providing real-time analysis of an event prediction based on collected data that can be used to provide electric distribution system reliability, quality, and performance. How to do an amended return Retail motor fuels outlet. How to do an amended return   Real property is a retail motor fuels outlet if it is used to a substantial extent in the retail marketing of petroleum or petroleum products (whether or not it is also used to sell food or other convenience items) and meets any one of the following three tests. How to do an amended return It is not larger than 1,400 square feet. How to do an amended return 50% or more of the gross revenues generated from the property are derived from petroleum sales. How to do an amended return 50% or more of the floor space in the property is devoted to petroleum marketing sales. How to do an amended return A retail motor fuels outlet does not include any facility related to petroleum and natural gas trunk pipelines. How to do an amended return Qualified leasehold improvement property. How to do an amended return    Generally, this is any improvement to an interior part of a building (placed in service before January 1, 2014) that is nonresidential real property, provided all of the requirements discussed in chapter 3 under Qualified leasehold improvement property are met. How to do an amended return   In addition, an improvement made by the lessor does not qualify as qualified leasehold improvement property to any subsequent owner unless it is acquired from the original lessor by reason of the lessor's death or in any of the following types of transactions. How to do an amended return A transaction to which section 381(a) applies, A mere change in the form of conducting the trade or business so long as the property is retained in the trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in the trade or business, A like-kind exchange, involuntary conversion, or reacquisition of real property to the extent that the basis in the property represents the carryover basis, or Certain nonrecognition transactions to the extent that your basis in the property is determined by reference to the transferor's or distributor's basis in the property. How to do an amended return Examples include the following. How to do an amended return A complete liquidation of a subsidiary. How to do an amended return A transfer to a corporation controlled by the transferor. How to do an amended return An exchange of property by a corporation solely for stock or securities in another corporation in a reorganization. How to do an amended return Qualified restaurant property. How to do an amended return   Qualified restaurant property is any section 1250 property that is a building placed in service after December 31, 2008, and before January 1, 2014. How to do an amended return Also, more than 50% of the building's square footage must be devoted to preparation of meals and seating for on-premises consumption of prepared meals. How to do an amended return Qualified smart electric meter. How to do an amended return   A qualified smart electric meter is any time-based meter and related communication equipment which is placed in service by a supplier of electric energy or a provider of electric energy services and which is capable of being used by you as part of a system that: Measures and records electricity usage data on a time-differentiated basis in at least 24 separate time segments per day; Provides for the exchange of information between the supplier or provider and the customer's smart electric meter in support of time-based rates or other forms of demand response; Provides data to the supplier or provider so that the supplier or provider can provide energy usage information to customers electronically, and Provides all commercial and residential customers of such supplier or provider with net metering. How to do an amended return Net metering means allowing a customer a credit, if any, as complies with applicable federal and state laws and regulations for providing electricity to the supplier or provider. How to do an amended return Natural gas gathering line and electric transmission property. How to do an amended return   Any natural gas gathering line placed in service after April 11, 2005, is treated as 7-year property, and electric transmission property (that is section 1245 property) used in the transmission at 69 or more kilovolts of electricity and any natural gas distribution line placed in service after April 11, 2005, are treated as 15-year property, if the following requirements are met. How to do an amended return The original use of the property must have begun with you after April 11, 2005. How to do an amended return Original use means the first use to which the property is put, whether or not by you. How to do an amended return Therefore, property used by any person before April 12, 2005, is not original use. How to do an amended return Original use includes additional capital expenditures you incurred to recondition or rebuild your property. How to do an amended return However, original use does not include the cost of reconditioned or rebuilt property you acquired. How to do an amended return Property containing used parts will not be treated as reconditioned or rebuilt if the cost of the used parts is not more than 20% of the total cost of the property. How to do an amended return The property must not be placed in service under a binding contract in effect before April 12, 2005. How to do an amended return The property must not be self-constructed property (property you manufacture, construct, or produce for your own use), if you began the manufacture, construction, or production of the property before April 12, 2005. How to do an amended return Property that is manufactured, constructed, or produced for your use by another person under a written binding contract entered into by you or a related party before the manufacture, construction, or production of the property is considered to be manufactured, constructed, or produced by you. How to do an amended return What Is the Placed in Service Date? You begin to claim depreciation when your property is placed in service for either use in a trade or business or the production of income. How to do an amended return The placed in service date for your property is the date the property is ready and available for a specific use. How to do an amended return It is therefore not necessarily the date it is first used. How to do an amended return If you converted property held for personal use to use in a trade or business or for the production of income, treat the property as being placed in service on the conversion date. How to do an amended return See Placed in Service under When Does Depreciation Begin and End in chapter 1 for examples illustrating when property is placed in service. How to do an amended return What Is the Basis for Depreciation? The basis for depreciation of MACRS property is the property's cost or other basis multiplied by the percentage of business/investment use. How to do an amended return For a discussion of business/investment use, see Partial business or investment use under Property Used in Your Business or Income-Producing Activity in chapter 1 . How to do an amended return Reduce that amount by any credits and deductions allocable to the property. How to do an amended return The following are examples of some credits and deductions that reduce basis. How to do an amended return Any deduction for section 179 property. How to do an amended return Any deduction under section 179B of the Internal Revenue Code for capital costs to comply with Environmental Protection Agency sulfur regulations. How to do an amended return Any deduction under section 179C of the Internal Revenue Code for certain qualified refinery property placed in service after August 8, 2005, and before January 1, 2014. How to do an amended return Any deduction under section 179D of the Internal Revenue Code for certain energy efficient commercial building property placed in service after December 31, 2005, and before January 1, 2014. How to do an amended return Any deduction under section 179E of the Internal Revenue Code for qualified advanced mine safety equipment property placed in service after December 20, 2006, and before January 1, 2014 . How to do an amended return Any deduction for removal of barriers to the disabled and the elderly. How to do an amended return Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. How to do an amended return Any special depreciation allowance. How to do an amended return Basis adjustment for investment credit property under section 50(c) of the Internal Revenue Code. How to do an amended return For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. How to do an amended return Enter the basis for depreciation under column (c) in Part III of Form 4562. How to do an amended return For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property in chapter 1 . How to do an amended return Which Recovery Period Applies? The recovery period of property is the number of years over which you recover its cost or other basis. How to do an amended return It is determined based on the depreciation system (GDS or ADS) used. How to do an amended return Recovery Periods Under GDS Under GDS, property that is not qualified Indian reservation property is depreciated over one of the following recovery periods. How to do an amended return Property Class Recovery Period 3-year property   3 years 1   5-year property   5 years     7-year property   7 years     10-year property   10 years     15-year property   15 years 2   20-year property   20 years     25-year property   25 years 3   Residential rental property   27. How to do an amended return 5 years     Nonresidential real property   39 years 4   15 years for qualified rent-to-own property placed in service before August 6, 1997. How to do an amended return 239 years for property that is a retail motor fuels outlet placed in service before August 20, 1996 (31. How to do an amended return 5 years if placed in service before May 13, 1993), unless you elected to depreciate it over 15 years. How to do an amended return 320 years for property placed in service before June 13, 1996, or under a binding contract in effect before June 10, 1996. How to do an amended return 431. How to do an amended return 5 years for property placed in service before May 13, 1993 (or before January 1, 1994, if the purchase or construction of the property is under a binding contract in effect before May 13, 1993, or if construction began before May 13, 1993). How to do an amended return The GDS recovery periods for property not listed above can be found in Appendix B, Table of Class Lives and Recovery Periods. How to do an amended return Residential rental property and nonresidential real property are defined earlier under Which Depreciation System (GDS or ADS) Applies. How to do an amended return Enter the appropriate recovery period on Form 4562 under column (d) in section B of Part III, unless already shown (for 25-year property, residential rental property, and nonresidential real property). How to do an amended return Office in the home. How to do an amended return   If your home is a personal-use single family residence and you begin to use part of your home as an office, depreciate that part of your home as nonresidential real property over 39 years (31. How to do an amended return 5 years if you began using it for business before May 13, 1993). How to do an amended return However, if your home is an apartment in an apartment building that you own and the building is residential rental property as defined earlier under Which Depreciation System (GDS or ADS) Applies , depreciate the part used as an office as residential rental property over 27. How to do an amended return 5 years. How to do an amended return See Publication 587 for a discussion of the tests you must meet to claim expenses, including depreciation, for the business use of your home. How to do an amended return Home changed to rental use. How to do an amended return   If you begin to rent a home that was your personal home before 1987, you depreciate it as residential rental property over 27. How to do an amended return 5 years. How to do an amended return Indian Reservation Property The recovery periods for qualified property you placed in service on an Indian reservation after 1993 and before 2014 are shorter than those listed earlier. How to do an amended return The following table shows these shorter recovery periods. How to do an amended return Property Class Recovery  Period 3-year property 2 years 5-year property 3 years 7-year property 4 years 10-year property 6 years 15-year property 9 years 20-year property 12 years Nonresidential real property 22 years Nonresidential real property is defined earlier under Which Property Class Applies Under GDS . How to do an amended return Use this chart to find the correct percentage table to use for qualified Indian reservation property. How to do an amended return IF your recovery period is: THEN use the following table in Appendix A: 2 years A-21 3 years A-1, A-2, A-3, A-4, or A-5 4 years A-22 6 years A-23 9 years A-14, A-15, A-16, A-17, or A-18 12 years A-14, A-15, A-16, A-17, or A-18 22 years A-24 Qualified property. How to do an amended return   Property eligible for the shorter recovery periods are 3-, 5-, 7-, 10-, 15-, and 20-year property and nonresidential real property. How to do an amended return You must use this property predominantly in the active conduct of a trade or business within an Indian reservation. How to do an amended return The rental of real property that is located on an Indian reservation is treated as the active conduct of a trade or business within an Indian reservation. How to do an amended return   The following property is not qualified property. How to do an amended return Property used or located outside an Indian reservation on a regular basis, other than qualified infrastructure property. How to do an amended return Property acquired directly or indirectly from a related person. How to do an amended return Property placed in service for purposes of conducting or housing class I, II, or III gaming activities. How to do an amended return These activities are defined in section 4 of the Indian Regulatory Act (25 U. How to do an amended return S. How to do an amended return C. How to do an amended return 2703). How to do an amended return Any property you must depreciate under ADS. How to do an amended return Determine whether property is qualified without regard to the election to use ADS and after applying the special rules for listed property not used predominantly for qualified business use (discussed in chapter 5). How to do an amended return Qualified infrastructure property. How to do an amended return   Item (1) above does not apply to qualified infrastructure property located outside the reservation that is used to connect with qualified infrastructure property within the reservation. How to do an amended return Qualified infrastructure property is property that meets all the following rules. How to do an amended return It is qualified property, as defined earlier, except that it is outside the reservation. How to do an amended return It benefits the tribal infrastructure. How to do an amended return It is available to the general public. How to do an amended return It is placed in service in connection with the active conduct of a trade or business within a reservation. How to do an amended return Infrastructure property includes, but is not limited to, roads, power lines, water systems, railroad spurs, and communications facilities. How to do an amended return Related person. How to do an amended return   For purposes of item (2) above, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 for a description of related persons. How to do an amended return Indian reservation. How to do an amended return   The term Indian reservation means a reservation as defined in section 3(d) of the Indian Financing Act of 1974 (25 U. How to do an amended return S. How to do an amended return C. How to do an amended return 1452(d)) or section 4(10) of the Indian Child Welfare Act of 1978 (25 U. How to do an amended return S. How to do an amended return C. How to do an amended return 1903(10)). How to do an amended return Section 3(d) of the Indian Financing Act of 1974 defines reservation to include former Indian reservations in Oklahoma. How to do an amended return For a definition of the term “former Indian reservations in Oklahoma,” see Notice 98-45 in Internal Revenue Bulletin 1998-35. How to do an amended return Recovery Periods Under ADS The recovery periods for most property generally are longer under ADS than they are under GDS. How to do an amended return The following table shows some of the ADS recovery periods. How to do an amended return Property Recovery  Period Rent-to-own property 4 years Automobiles and light duty trucks 5 years Computers and peripheral equipment 5 years High technology telephone station equipment installed on customer premises 5 years High technology medical equipment 5 years Personal property with no class life 12 years Natural gas gathering lines 14 years Single purpose agricultural and horticultural structures 15 years Any tree or vine bearing fruit or nuts 20 years Initial clearing and grading land  improvements for gas utility property 20 years Initial clearing and grading land  improvements for electric utility  transmission and distribution plants 25 years Electric transmission property used in the transmission at 69 or more kilovolts of electricity 30 years Natural gas distribution lines 35 years Any qualified leasehold improvement property 39 years Any qualified restaurant property 39 years Nonresidential real property 40 years Residential rental property 40 years Section 1245 real property not listed in Appendix B 40 years Railroad grading and tunnel bore 50 years The ADS recovery periods for property not listed above can be found in the tables in Appendix B. How to do an amended return Rent-to-own property, qualified leasehold improvement property, qualified restaurant property, residential rental property, and nonresidential real property are defined earlier under Which Property Class Applies Under GDS . How to do an amended return Tax-exempt use property subject to a lease. How to do an amended return   The ADS recovery period for any property leased under a lease agreement to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership) cannot be less than 125% of the lease term. How to do an amended return Additions and Improvements An addition or improvement you make to depreciable property is treated as separate depreciable property. How to do an amended return See How Do You Treat Repairs and Improvements in chapter 1 for a definition of improvements. How to do an amended return Its property class and recovery period are the same as those that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. How to do an amended return The recovery period begins on the later of the following dates. How to do an amended return The date you place the addition or improvement in service. How to do an amended return The date you place in service the property to which you made the addition or improvement. How to do an amended return If the improvement you make is qualified leasehold improvement property, qualified restaurant property, or qualified retail improvement property, the GDS recovery period is 15 years (39 years under ADS). How to do an amended return Example. How to do an amended return You own a rental home that you have been renting out since 1981. How to do an amended return If you put an addition on the home and place the addition in service this year, you would use MACRS to figure your depreciation deduction for the addition. How to do an amended return Under GDS, the property class for the addition is residential rental property and its recovery period is 27. How to do an amended return 5 years because the home to which the addition is made would be residential rental property if you had placed it in service this year. How to do an amended return Which Convention Applies? Under MACRS, averaging conventions establish when the recovery period begins and ends. How to do an amended return The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. How to do an amended return The mid-month convention. How to do an amended return   Use this convention for nonresidential real property, residential rental property, and any railroad grading or tunnel bore. How to do an amended return   Under this convention, you treat all property placed in service or disposed of during a month as placed in service or disposed of at the midpoint of the month. How to do an amended return This means that a one-half month of depreciation is allowed for the month the property is placed in service or disposed of. How to do an amended return   Your use of the mid-month convention is indicated by the “MM” already shown under column (e) in Part III of Form 4562. How to do an amended return The mid-quarter convention. How to do an amended return   Use this convention if the mid-month convention does not apply and the total depreciable bases of MACRS property you placed in service during the last 3 months of the tax year (excluding nonresidential real property, residential rental property, any railroad grading or tunnel bore, property placed in service and disposed of in the same year, and property that is being depreciated under a method other than MACRS) are more than 40% of the total depreciable bases of all MACRS property you placed in service during the entire year. How to do an amended return   Under this convention, you treat all property placed in service or disposed of during any quarter of the tax year as placed in service or disposed of at the midpoint of that quarter. How to do an amended return This means that 1½ months of depreciation is allowed for the quarter the property is placed in service or disposed of. How to do an amended return   If you use this convention, enter “MQ” under column (e) in Part III of Form 4562. How to do an amended return    For purposes of determining whether the mid-quarter convention applies, the depreciable basis of property you placed in service during the tax year reflects the reduction in basis for amounts expensed under section 179 and the part of the basis of property attributable to personal use. How to do an amended return However, it does not reflect any reduction in basis for any special depreciation allowance. How to do an amended return The half-year convention. How to do an amended return   Use this convention if neither the mid-quarter convention nor the mid-month convention applies. How to do an amended return   Under this convention, you treat all property placed in service or disposed of during a tax year as placed in service or disposed of at the midpoint of the year. How to do an amended return This means that a one-half year of depreciation is allowed for the year the property is placed in service or disposed of. How to do an amended return   If you use this convention, enter “HY” under column (e) in Part III of Form 4562. How to do an amended return Which Depreciation Method Applies? MACRS provides three depreciation methods under GDS and one depreciation method under ADS. How to do an amended return The 200% declining balance method over a GDS recovery period. How to do an amended return The 150% declining balance method over a GDS recovery period. How to do an amended return The straight line method over a GDS recovery period. How to do an amended return The straight line method over an ADS recovery period. How to do an amended return For property placed in service before 1999, you could have elected the 150% declining balance method using the ADS recovery periods for certain property classes. How to do an amended return If you made this election, continue to use the same method and recovery period for that property. How to do an amended return Table 4–1 lists the types of property you can depreciate under each method. How to do an amended return It also gives a brief explanation of the method, including any benefits that may apply. How to do an amended return Depreciation Methods for Farm Property If you place personal property in service in a farming business after 1988, you generally must depreciate it under GDS using the 150% declining balance method unless you are a farmer who must depreciate the property under ADS using the straight line method or you elect to depreciate the property under GDS or ADS using the straight line method. How to do an amended return You can depreciate real property using the straight line method under either GDS or ADS. How to do an amended return Fruit or nut trees and vines. How to do an amended return   Depreciate trees and vines bearing fruit or nuts under GDS using the straight line method over a recovery period of 10 years. How to do an amended return ADS required for some farmers. How to do an amended return   If you elect not to apply the uniform capitalization rules to any plant produced in your farming business, you must use ADS. How to do an amended return You must use ADS for all property you place in service in any year the election is in effect. How to do an amended return See the regulations under section 263A of the Internal Revenue Code for information on the uniform capitalization rules that apply to farm property. How to do an amended return Electing a Different Method As shown in Table 4–1 , you can elect a different method for depreciation for certain types of property. How to do an amended return You must make the election by the due date of the return (including extensions) for the year you placed the property in service. How to do an amended return However, if you timely filed your return for the year without making the election, you still can make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). How to do an amended return Attach the election to the amended return and write “Filed pursuant to section 301. How to do an amended return 9100-2” on the election statement. How to do an amended return File the amended return at the same address you filed the original return. How to do an amended return Once you make the election, you cannot change it. How to do an amended return If you elect to use a different method for one item in a property class, you must apply the same method to all property in that class placed in service during the year of the election. How to do an amended return However, you can make the election on a property-by-property basis for nonresidential real and residential rental property. How to do an amended return 150% election. How to do an amended return   Instead of using the 200% declining balance method over the GDS recovery period for nonfarm property in the 3-, 5-, 7-, and 10-year property classes, you can elect to use the 150% declining balance method. How to do an amended return Make the election by entering “150 DB” under column (f) in Part III of Form 4562. How to do an amended return Straight line election. How to do an amended return   Instead of using either the 200% or 150% declining balance methods over the GDS recovery period, you can elect to use the straight line method over the GDS recovery period. How to do an amended return Make the election by entering  “S/L” under column (f) in Part III of Form 4562. How to do an amended return Election of ADS. How to do an amended return   As explained earlier under Which Depreciation System (GDS or ADS) Applies , you can elect to use ADS even though your property may come under GDS. How to do an amended return ADS uses the straight line method of depreciation over fixed ADS recovery periods. How to do an amended return Most ADS recovery periods are listed in Appendix B, or see the table under Recovery Periods Under ADS , earlier. How to do an amended return   Make the election by completing line 20 in Part III of Form 4562. How to do an amended return Farm property. How to do an amended return   Instead of using the 150% declining balance method over a GDS recovery period for property you use in a farming business (other than real property), you can elect to depreciate it using either of the following methods. How to do an amended return The straight line method over a GDS recovery period. How to do an amended return The straight line method over an ADS recovery period. How to do an amended return Table 4-1. How to do an amended return Depreciation Methods Note. How to do an amended return The declining balance method is abbreviated as DB and the straight line method is abbreviated as SL. How to do an amended return Method Type of Property Benefit GDS using 200% DB • Nonfarm 3-, 5-, 7-, and 10-year property • Provides a greater deduction during the earlier recovery years • Changes to SL when that method provides an equal or greater deduction GDS using 150% DB • All farm property (except real property) • All 15- and 20-year property (except qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property placed in service before January 1, 2014) • Nonfarm 3-, 5-, 7-, and 10-year property • Provides a greater deduction during the earlier recovery years • Changes to SL when that method provides an equal or greater deduction1 GDS using SL • Nonresidential real property • Qualified leasehold improvement property placed in service before January 1, 2014 • Qualified restaurant property placed in service before January 1, 2014 • Qualified retail improvement property placed in service before January 1, 2014 • Residential rental property • Trees or vines bearing fruit or nuts • Water utility property • All 3-, 5-, 7-, 10-, 15-, and 20-year property2 • Property for which you elected section 168(k)(4) • Provides for equal yearly deductions (except for the first and last years) ADS using SL • Listed property used 50% or less for business • Property used predominantly outside the U. How to do an amended return S. How to do an amended return  • Tax-exempt property • Tax-exempt bond-financed property • Farm property used when an election not to apply the uniform capitalization rules is in effect • Imported property3 • Any property for which you elect to use this method4 • Provides for equal yearly deductions (except for the first and last years) 1The MACRS percentage tables in Appendix A have the switch to the straight line method built into their rates 2See section 168(b)(5) of the Internal Revenue Code. How to do an amended return 3See section 168(g)(6) of the Internal Revenue Code 4See section 168(g)(7) of the Internal Revenue Code How Is the Depreciation Deduction Figured? To figure your depreciation deduction under MACRS, you first determine the depreciation system, property class, placed in service date, basis amount, recovery period, convention, and depreciation method that applies to your property. How to do an amended return Then, you are ready to figure your depreciation deduction. How to do an amended return You can figure it using a percentage table provided by the IRS, or you can figure it yourself without using the table. How to do an amended return Using the MACRS Percentage Tables To help you figure your deduction under MACRS, the IRS has established percentage tables that incorporate the applicable convention and depreciation method. How to do an amended return These percentage tables are in Appendix A near the end of this publication. How to do an amended return Which table to use. How to do an amended return    Appendix A contains the MACRS Percentage Table Guide, which is designed to help you locate the correct percentage table to use for depreciating your property. How to do an amended return The percentage tables immediately follow the guide. How to do an amended return Rules Covering the Use of the Tables The following rules cover the use of the percentage tables. How to do an amended return You must apply the rates in the percentage tables to your property's unadjusted basis. How to do an amended return You cannot use the percentage tables for a short tax year. How to do an amended return See Figuring the Deduction for a Short Tax Year, later, for information on the short tax year rules. How to do an amended return Once you start using the percentage tables for any item of property, you generally must continue to use them for the entire recovery period of the property. How to do an amended return You must stop using the tables if you adjust the basis of the property for any reason other than— Depreciation allowed or allowable, or An addition or improvement to that property that is depreciated as a separate item of property. How to do an amended return Basis adjustments other than those made due to the items listed in (4) include an increase in basis for the recapture of a clean-fuel deduction or credit and a reduction in basis for a casualty loss. How to do an amended return Basis adjustment due to recapture of clean-fuel vehicle deduction or credit. How to do an amended return   If you increase the basis of your property because of the recapture of part or all of a deduction for clean-fuel vehicles or the credit for clean-fuel vehicle refueling property placed in service before January 1, 2006, you cannot continue to use the percentage tables. How to do an amended return For the year of the adjustment and the remaining recovery period, you must figure the depreciation deduction yourself using the property's adjusted basis at the end of the year. How to do an amended return See Figuring the Deduction Without Using the Tables, later. How to do an amended return Basis adjustment due to casualty loss. How to do an amended return   If you reduce the basis of your property because of a casualty, you cannot continue to use the percentage tables. How to do an amended return For the year of the adjustment and the remaining recovery period, you must figure the depreciation yourself using the property's adjusted basis at the end of the year. How to do an amended return See Figuring the Deduction Without Using the Tables, later. How to do an amended return Example. How to do an amended return On October 26, 2012, Sandra Elm, a calendar year taxpayer, bought and placed in service in her business a new item of 7-year property. How to do an amended return It cost $39,000 and she elected a section 179 deduction of $24,000. How to do an amended return She also took a special depreciation allowance of $7,500 [50% of $15,000 ($39,000 − $24,000)]. How to do an amended return Her unadjusted basis after the section 179 deduction and special depreciation allowance was $7,500 ($15,000 − $7,500). How to do an amended return She figured her MACRS depreciation deduction using the percentage tables. How to do an amended return For 2012, her MACRS depreciation deduction was $268. How to do an amended return In July 2013, the property was vandalized and Sandra had a deductible casualty loss of $3,000. How to do an amended return She must adjust the property's basis for the casualty loss, so she can no longer use the percentage tables. How to do an amended return Her adjusted basis at the end of 2013, before figuring her 2013 depreciation, is $4,232. How to do an amended return She figures that amount by subtracting the 2012 MACRS depreciation of $268 and the casualty loss of $3,000 from the unadjusted basis of $7,500. How to do an amended return She must now figure her depreciation for 2013 without using the percentage tables. How to do an amended return Figuring the Unadjusted Basis of Your Property You must apply the table rates to your property's unadjusted basis each year of the recovery period. How to do an amended return Unadjusted basis is the same basis amount you would use to figure gain on a sale, but you figure it without reducing your original basis by any MACRS depreciation taken in earlier years. How to do an amended return However, you do reduce your original basis by other amounts, including the following. How to do an amended return Any amortization taken on the property. How to do an amended return Any section 179 deduction claimed. How to do an amended return Any special depreciation allowance taken on the property. How to do an amended return For business property you purchase during the year, the unadjusted basis is its cost minus these and other applicable adjustments. How to do an amended return If you trade property, your unadjusted basis in the property received is the cash paid plus the adjusted basis of the property traded minus these adjustments. How to do an amended return MACRS Worksheet You can use this worksheet to help you figure your depreciation deduction using the percentage tables. How to do an amended return Use a separate worksheet for each item of property. How to do an amended return Then, use the information from this worksheet to prepare Form 4562. How to do an amended return Do not use this worksheet for automobiles. How to do an amended return Use the Depreciation Worksheet for Passenger Automobiles in chapter 5. How to do an amended return MACRS Worksheet Part I   1. How to do an amended return MACRS system (GDS or ADS)   2. How to do an amended return Property class   3. How to do an amended return Date placed in service   4. How to do an amended return Recovery period   5. How to do an amended return Method and convention   6. How to do an amended return Depreciation rate (from tables)   Part II   7. How to do an amended return Cost or other basis* $     8. How to do an amended return Business/investment use   %   9. How to do an amended return Multiply line 7 by line 8   $ 10. How to do an amended return Total claimed for section 179 deduction and other items   $ 11. How to do an amended return Subtract line 10 from line 9. How to do an amended return This is your tentative basis for depreciation   $ 12. How to do an amended return Multiply line 11 by . How to do an amended return 50 if the 50% special depreciation allowance applies. How to do an amended return This is your special depreciation allowance. How to do an amended return Enter -0- if this is not the year you placed the property in service, the property is not qualified property, or you elected not to claim a special allowance   $ 13. How to do an amended return Subtract line 12 from line 11. How to do an amended return This is your basis for depreciation     14. How to do an amended return Depreciation rate (from line 6)     15. How to do an amended return Multiply line 13 by line 14. How to do an amended return This is your MACRS depreciation deduction   $ *If real estate, do not include cost (basis) of land. How to do an amended return The following example shows how to figure your MACRS depreciation deduction using the percentage tables and the MACRS worksheet. How to do an amended return Example. How to do an amended return You bought office furniture (7-year property) for $10,000 and placed it in service on August 11, 2013. How to do an amended return You use the furniture only for business. How to do an amended return This is the only property you placed in service this year. How to do an amended return You did not elect a section 179 deduction and the property is not qualified property for purposes of claiming a special depreciation allowance so your property's unadjusted basis is its cost, $10,000. How to do an amended return You use GDS and the half-year convention to figure your depreciation. How to do an amended return You refer to the MACRS Percentage Table Guide in Appendix A and find that you should use Table A-1. How to do an amended return Multiply your property's unadjusted basis each year by the percentage for 7-year property given in Table A-1. How to do an amended return You figure your depreciation deduction using the MACRS worksheet as follows. How to do an amended return MACRS Worksheet Part I 1. How to do an amended return MACRS system (GDS or ADS) GDS 2. How to do an amended return Property class 7-year 3. How to do an amended return Date placed in service 8/11/13 4. How to do an amended return Recovery period 7-Year 5. How to do an amended return Method and convention 200%DB/Half-Year 6. How to do an amended return Depreciation rate (from tables) . How to do an amended return 1429 Part II 7. How to do an amended return Cost or other basis* $10,000     8. How to do an amended return Business/investment use 100 %   9. How to do an amended return Multiply line 7 by line 8   $10,000 10. How to do an amended return Total claimed for section 179 deduction and other items   -0- 11. How to do an amended return Subtract line 10 from line 9. How to do an amended return This is your tentative basis for depreciation   $10,000 12. How to do an amended return Multiply line 11 by . How to do an amended return 50 if the 50% special depreciation allowance applies. How to do an amended return This is your special depreciation allowance. How to do an amended return Enter -0- if this is not the year you placed the property in service, the property is not qualified property, or you elected not to claim a special allowance   -0- 13. How to do an amended return Subtract line 12 from line 11. How to do an amended return This is your basis for depreciation   $10,000 14. How to do an amended return Depreciation rate (from line 6)   . How to do an amended return 1429 15. How to do an amended return Multiply line 13 by line 14. How to do an amended return This is your MACRS depreciation deduction   $1,429 *If real estate, do not include cost (basis) of land. How to do an amended return If there are no adjustments to the basis of the property other than depreciation, your depreciation deduction for each subsequent year of the recovery period will be as follows. How to do an amended return Year   Basis Percentage Deduction 2014 $ 10,000 24. How to do an amended return 49%   $2,449   2015   10,000 17. How to do an amended return 49   1,749   2016   10,000 12. How to do an amended return 49   1,249   2017   10,000 8. How to do an amended return 93   893   2018   10,000 8. How to do an amended return 92   892   2019   10,000 8. How to do an amended return 93   893   2020   10,000 4. How to do an amended return 46   446   Examples The following examples are provided to show you how to use the percentage tables. How to do an amended return In both examples, assume the following. How to do an amended return You use the property only for business. How to do an amended return You use the calendar year as your tax year. How to do an amended return You use GDS for all the properties. How to do an amended return Example 1. How to do an amended return You bought a building and land for $120,000 and placed it in service on March 8. How to do an amended return The sales contract showed that the building cost $100,000 and the land cost $20,000. How to do an amended return It is nonresidential real property. How to do an amended return The building's unadjusted basis is its original cost, $100,000. How to do an amended return You refer to the MACRS Percentage Table Guide in Appendix A and find that you should use Table A-7a. How to do an amended return March is the third month of your tax year, so multiply the building's unadjusted basis, $100,000, by the percentages for the third month in Table A-7a. How to do an amended return Your depreciation deduction for each of the first 3 years is as follows: Year   Basis Percentage Deduction 1st $ 100,000 2. How to do an amended return 033%   $2,033   2nd   100,000 2. How to do an amended return 564   2,564   3rd   100,000 2. How to do an amended return 564   2,564   Example 2. How to do an amended return During the year, you bought a machine (7-year property) for $4,000, office furniture (7-year property) for $1,000, and a computer (5-year property) for $5,000. How to do an amended return You placed the machine in service in January, the furniture in September, and the computer in October. How to do an amended return You do not elect a section 179 deduction and none of these items is qualified property for purposes of claiming a special depreciation allowance. How to do an amended return You placed property in service during the last 3 months of the year, so you must first determine if you have to use the mid-quarter convention. How to do an amended return The total bases of all property you placed in service during the year is $10,000. How to do an amended return The $5,000 basis of the computer, which you placed in service during the last 3 months (the fourth quarter) of your tax year, is more than 40% of the total bases of all property ($10,000) you placed in service during the year. How to do an amended return Therefore, you must use the mid-quarter convention for all three items. How to do an amended return You refer to the MACRS Percentage Table Guide in Appendix A to determine which table you should use under the mid-quarter convention. How to do an amended return The machine is 7-year property placed in service in the first quarter, so you use Table A-2. How to do an amended return The furniture is 7-year property placed in service in the third quarter, so you use Table A-4. How to do an amended return Finally, because the computer is 5-year property placed in service in the fourth quarter, you use Table A-6. How to do an amended return Knowing what table to use for each property, you figure the depreciation for the first 2 years as follows. How to do an amended return Year Property Basis Percentage Deduction 1st Machine $4,000 25. How to do an amended return 00 $1,000   2nd Machine 4,000 21. How to do an amended return 43 857   1st Furniture 1,000 10. How to do an amended return 71 107   2nd Furniture 1,000 25. How to do an amended return 51 255   1st Computer 5,000 5. How to do an amended return 00 250   2nd Computer 5,000 38. How to do an amended return 00 1,900   Sale or Other Disposition Before the Recovery Period Ends If you sell or otherwise dispose of your property before the end of its recovery period, your depreciation deduction for the year of the disposition will be only part of the depreciation amount for the full year. How to do an amended return You have disposed of your property if you have permanently withdrawn it from use in your business or income-producing activity because of its sale, exchange, retirement, abandonment, involuntary conversion, or destruction. How to do an amended return After you figure the full-year depreciation amount, figure the deductible part using the convention that applies to the property. How to do an amended return Half-year convention used. How to do an amended return   For property for which you used a half-year convention, the depreciation deduction for the year of the disposition is half the depreciation determined for the full year. How to do an amended return Mid-quarter convention used. How to do an amended return   For property for which you used the mid-quarter convention, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by the percentage listed below for the quarter in which you disposed of the property. How to do an amended return Quarter Percentage First 12. How to do an amended return 5% Second 37. How to do an amended return 5 Third 62. How to do an amended return 5 Fourth 87. How to do an amended return 5 Example. How to do an amended return On December 2, 2010, you placed in service an item of 5-year property costing $10,000. How to do an amended return You did not claim a section 179 deduction and the property does not qualify for a special depreciation allowance. How to do an amended return Your unadjusted basis for the property was $10,000. How to do an amended return You used the mid-quarter convention because this was the only item of business property you placed in service in 2010 and it was placed in service during the last 3 months of your tax year. How to do an amended return Your property is in the 5-year property class, so you used Table A-5 to figure your depreciation deduction. How to do an amended return Your deductions for 2010, 2011, and 2012 were $500 (5% of $10,000), $3,800 (38% of $10,000), and $2,280 (22. How to do an amended return 80% of $10,000). How to do an amended return You disposed of the property on April 6, 2013. How to do an amended return To determine your depreciation deduction for 2013, first figure the deduction for the full year. How to do an amended return This is $1,368 (13. How to do an amended return 68% of $10,000). How to do an amended return April is in the second quarter of the year, so you multiply $1,368 by 37. How to do an amended return 5% to get your depreciation deduction of $513 for 2013. How to do an amended return Mid-month convention used. How to do an amended return   If you dispose of residential rental or nonresidential real property, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by a fraction. How to do an amended return The numerator of the fraction is the number of months (including partial months) in the year that the property is considered in service. How to do an amended return The denominator is 12. How to do an amended return Example. How to do an amended return On July 2, 2011, you purchased and placed in service residential rental property. How to do an amended return The property cost $100,000, not including the cost of land. How to do an amended return You used Table A-6 to figure your MACRS depreciation for this property. How to do an amended return You sold the property on March 2, 2013. How to do an amended return You file your tax return based on the calendar year. How to do an amended return A full year of depreciation for 2013 is $3,636. How to do an amended return This is $100,000 multiplied by . How to do an amended return 03636 (the percentage for the seventh month of the third recovery year) from Table A-6 . How to do an amended return You then apply the mid-month convention for the 2½ months of use in 2013. How to do an amended return Treat the month of disposition as one-half month of use. How to do an amended return Multiply $3,636 by the fraction, 2. How to do an amended return 5 over 12, to get your 2013 depreciation deduction of $757. How to do an amended return 50. How to do an amended return Figuring the Deduction Without Using the Tables Instead of using the rates in the percentage tables to figure your depreciation deduction, you can figure it yourself. How to do an amended return Before making the computation each year, you must reduce your adjusted basis in the property by the depreciation claimed the previous year. How to do an amended return Figuring MACRS deductions without using the tables generally will result in a slightly different amount than using the tables. How to do an amended return Declining Balance Method When using a declining balance method, you apply the same depreciation rate each year to the adjusted basis of your property. How to do an amended return You must use the applicable convention for the first tax year and you must switch to the straight line method beginning in the first year for which it will give an equal or greater deduction. How to do an amended return The straight line method is explained later. How to do an amended return You figure depreciation for the year you place property in service as follows. How to do an amended return Multiply your adjusted basis in the property by the declining balance rate. How to do an amended return Apply the applicable convention. How to do an amended return You figure depreciation for all other years (before the year you switch to the straight line method) as follows. How to do an amended return Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years. How to do an amended return Multiply this new adjusted basis by the same declining balance rate used in earlier years. How to do an amended return If you dispose of property before the end of its recovery period, see Using the Applicable Convention, later, for information on how to figure depreciation for the year you dispose of it. How to do an amended return Figuring depreciation under the declining balance method and switching to the straight line method is illustrated in Example 1 , later, under Examples. How to do an amended return Declining balance rate. How to do an amended return   You figure your declining balance rate by dividing the specified declining balance percentage (150% or 200% changed to a decimal) by the number of years in the property's recovery period. How to do an amended return For example, for 3-year property depreciated using the 200% declining balance method, divide 2. How to do an amended return 00 (200%) by 3 to get 0. How to do an amended return 6667, or a 66. How to do an amended return 67% declining balance rate. How to do an amended return For 15-year property depreciated using the 150% declining balance method, divide 1. How to do an amended return 50 (150%) by 15 to get 0. How to do an amended return 10, or a 10% declining balance rate. How to do an amended return   The following table shows the declining balance rate for each property class and the first year for which the straight line method gives an equal or greater deduction. How to do an amended return Property Class Method Declining Balance Rate Year 3-year 200% DB 66. How to do an amended return 667% 3rd 5-year 200% DB 40. How to do an amended return 0 4th 7-year 200% DB 28. How to do an amended return 571 5th 10-year 200% DB 20. How to do an amended return 0 7th 15-year 150% DB 10. How to do an amended return 0 7th 20-year 150% DB 7. How to do an amended return 5 9th Straight Line Method When using the straight line method, you apply a different depreciation rate each year to the adjusted basis of your property. How to do an amended return You must use the applicable convention in the year you place the property in service and the year you dispose of the property. How to do an amended return You figure depreciation for the year you place property in service as follows. How to do an amended return Multiply your adjusted basis in the property by the straight line rate. How to do an amended return Apply the applicable convention. How to do an amended return You figure depreciation for all other years (including the year you switch from the declining balance method to the straight line method) as follows. How to do an amended return Reduce your adjusted basis in the property by the depreciation allowed or allowable in earlier years (under any method). How to do an amended return Determine the depreciation rate for the year. How to do an amended return Multiply the adjusted basis figured in (1) by the depreciation rate figured in (2). How to do an amended return If you dispose of property before the end of its recovery period, see Using the Applicable Convention , later, for information on how to figure depreciation for the year you dispose of it. How to do an amended return Straight line rate. How to do an amended return   You determine the straight line depreciation rate for any tax year by dividing the number 1 by the years remaining in the recovery period at the beginning of that year. How to do an amended return When figuring the number of years remaining, you must take into account the convention used in the year you placed the property in service. How to do an amended return If the number of years remaining is less than 1, the depreciation rate for that tax year is 1. How to do an amended return 0 (100%). How to do an amended return Using the Applicable Convention The applicable convention (discussed earlier under Which Convention Applies ) affects how you figure your depreciation deduction for the year you place your property in service and for the year you dispose of it. How to do an amended return It determines how much of the recovery period remains at the beginning of each year, so it also affects the depreciation rate for property you depreciate under the straight line method. How to do an amended return See Straight line rate in the previous discussion. How to do an amended return Use the applicable convention as explained in the following discussions. How to do an amended return Half-year convention. How to do an amended return   If this convention applies, you deduct a half-year of depreciation for the first year and the last year that you depreciate the property. How to do an amended return You deduct a full year of depreciation for any other year during the recovery period. How to do an amended return   Figure your depreciation deduction for the year you place the property in service by dividing the depreciation for a full year by 2. How to do an amended return If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition the same way. How to do an amended return If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final 6 months of the recovery period is the amount of your unrecovered basis in the property. How to do an amended return Mid-quarter convention. How to do an amended return   If this convention applies, the depreciation you can deduct for the first year you depreciate the property depends on the quarter in which you place the property in service. How to do an amended return   A quarter of a full 12-month tax year is a period of 3 months. How to do an amended return The first quarter in a year begins on the first day of the tax year. How to do an amended return The second quarter begins on the first day of the fourth month of the tax year. How to do an amended return The third quarter begins on the first day of the seventh month of the tax year. How to do an amended return The fourth quarter begins on the first day of the tenth month of the tax year. How to do an amended return A calendar year is divided into the following quarters. How to do an amended return Quarter Months First January, February, March Second April, May, June Third July, August, September Fourth October, November, December   Figure your depreciation deduction for the year you place the property in service by multiplying the depreciation for a full year by the percentage listed below for the quarter you place the property in service. How to do an amended return Quarter Percentage First 87. How to do an amended return 5% Second 62. How to do an amended return 5 Third 37. How to do an amended return 5 Fourth 12. How to do an amended return 5   If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition by multiplying a full year of depreciation by the percentage listed below for the quarter you dispose of the property. How to do an amended return Quarter Percentage First 12. How to do an amended return 5% Second 37. How to do an amended return 5 Third 62. How to do an amended return 5 Fourth 87. How to do an amended return 5   If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final quarter of the recovery period is the amount of your unrecovered basis in the property. How to do an amended return Mid-month convention. How to do an amended return   If this convention applies, the depreciation you can deduct for the first year that you depreciate the property depends on the month in which you place the property in service. How to do an amended return Figure your depreciation deduction for the year you place the property in service by multiplying the depreciation for a full year by a fraction. How to do an amended return The numerator of the fraction is the number of full months in the year that the property is in service plus ½ (or 0. How to do an amended return 5). How to do an amended return The denominator is 12. How to do an amended return   If you dispose of the property before the end of the recovery period, figure your depreciation deduction for the year of the disposition the same way. How to do an amended return If you hold the property for the entire recovery period, your depreciation deduction for the year that includes the final month of the recovery period is the amount of your unrecovered basis in the property. How to do an amended return Example. How to do an amended return You use the calendar year and place nonresidential real property in service in August. How to do an amended return The property is in service 4 full months (September, October, November, and December). How to do an amended return Your numerator is 4. How to do an amended return 5 (4 full months plus 0. How to do an amended return 5). How to do an amended return You multiply the depreciation for a full year by 4. How to do an amended return 5/12, or 0. How to do an amended return 375. How to do an amended return Examples The following examples show how to figure depreciation under MACRS without using the percentage tables. How to do an amended return Figures are rounded for purposes of the examples. How to do an amended return Assume for all the examples that you use a calendar year as your tax year. How to do an amended return Example 1—200% DB method and half-year convention. How to do an amended return In February, you placed in service depreciable property with a 5-year recovery period and a basis of $1,000. How to do an amended return You do not elect to take the section 179 deduction and the property does not qualify for a special depreciation allowance. How to do an amended return You use GDS and the 200% declining balance (DB) method to figure your depreciation. How to do an amended return When the straight line (SL) method results in an equal or larger deduction, you switch to the SL method. How to do an amended return You did not place any property in service in the last 3 months of the year, so you must use the half-year convention. How to do an amended return First year. How to do an amended return You figure the depreciation rate under the 200% DB method by dividing 2 (200%) by 5 (the number of years in the recovery period). How to do an amended return The result is 40%. How to do an amended return You multiply the adjusted basis of the property ($1,000) by the 40% DB rate. How to do an amended return You apply the half-year convention by dividing the result ($400) by 2. How to do an amended return Depreciation for the first year under the 200% DB method is $200. How to do an amended return You figure the depreciation rate under the straight line (SL) method by dividing 1 by 5, the number of years in the recovery period. How to do an amended return The result is 20%. How to do an amended return You multiply the adjusted basis of the property ($1,000) by the 20% SL rate. How to do an amended return You apply the half-year convention by dividing the result ($200) by 2. How to do an amended return Depreciation for the first year under the SL method is $100. How to do an amended return The DB method provides a larger deduction, so you deduct the $200 figured under the 200% DB method. How to do an amended return Second year. How to do an amended return You reduce the adjusted basis ($1,000) by the depreciation claimed in the first year ($200). How to do an amended return You multiply the result ($800) by the DB rate (40%). How to do an amended return Depreciation for the second year under the 200% DB method is $320. How to do an amended return You figure the SL depreciation rate by dividing 1 by 4. How to do an amended return 5, the number of years remaining in the recovery period. How to do an amended return (Based on the half-year convention, you used only half a year of the recovery period in the first year. How to do an amended return ) You multiply the reduced adjusted basis ($800) by the result (22. How to do an amended return 22%). How to do an amended return Depreciation under the SL method for the second year is $178. How to do an amended return The DB method provides a larger deduction, so you deduct the $320 figured under the 200% DB method. How to do an amended return Third year. How to do an amended return You reduce the adjusted basis ($800) by the depreciation claimed in the second year ($320). How to do an amended return You multiply the result ($480) by the DB rate (40%). How to do an amended return Depreciation for the third year under the 200% DB method is $192. How to do an amended return You figure the SL depreciation rate by dividing 1 by 3. How to do an amended return 5. How to do an amended return You multiply the reduced adjusted basis ($480) by the result (28. How to do an amended return 57%). How to do an amended return Depreciation under the SL method for the third year is $137. How to do an amended return The DB method provides a larger deduction, so you deduct the $192 figured under the 200% DB method. How to do an amended return Fourth year. How to do an amended return You reduce the adjusted basis ($480) by the de