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Irs Amended Forms

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Irs Amended Forms

Irs amended forms 4. Irs amended forms   General Business Credits Table of Contents Introduction Useful Items - You may want to see: Business Credits How To Claim the Credit Introduction Your general business credit for the year consists of your carryforward of business credits from prior years plus the total of your current year business credits. Irs amended forms In addition, your general business credit for the current year may be increased later by the carryback of business credits from later years. Irs amended forms You subtract this credit directly from your tax. Irs amended forms Useful Items - You may want to see: Form (and Instructions) 3800 General Business Credit 6251 Alternative Minimum Tax—Individuals See chapter 12 for information about getting publications and forms. Irs amended forms Business Credits All of the following credits are part of the general business credit. Irs amended forms The form you use to figure each credit is shown in parentheses. Irs amended forms You will also have to complete Form 3800. Irs amended forms Alternative fuel vehicle refueling property credit (Form 8911). Irs amended forms   This credit applies to the cost of any qualified fuel vehicle refueling property you placed in service. Irs amended forms For more information, see Form 8911. Irs amended forms Alternative motor vehicle credit (Form 8910). Irs amended forms   For more information, see Form 8910. Irs amended forms Biodiesel and renewable diesel fuels credit (Form 8864). Irs amended forms   For more information, see Form 8864. Irs amended forms Biofuel producer credit (Form 6478). Irs amended forms    For more information, see Form 6478. Irs amended forms Carbon dioxide sequestration credit (Form 8933). Irs amended forms   This credit is for carbon dioxide which is captured at a qualified facility and disposed of in a secure geological storage or used in a qualified enhanced oil or natural gas recovery project. Irs amended forms For more information, see Form 8933. Irs amended forms Credit for employer social security and Medicare taxes paid on certain employee tips (Form 8846). Irs amended forms   This credit is generally equal to your (employer's) portion of social security and Medicare taxes paid on tips received by employees of your food and beverage establishment where tipping is customary. Irs amended forms The credit applies regardless of whether the food is consumed on or off your business premises. Irs amended forms For more information, see Form 8846. Irs amended forms Credit for employer differential wage payments (Form 8932). Irs amended forms   This credit provides certain small businesses with an incentive to continue to pay wages to an employee performing services on active duty in the uniformed services of the United States for a period of more than 30 days. Irs amended forms For more information, see Form 8932. Irs amended forms Credit for employer-provided childcare facilities and services (Form 8882). Irs amended forms   This credit applies to the qualified expenses you paid for employee childcare and qualified expenses you paid for childcare resource and referral services. Irs amended forms For more information, see Form 8882. Irs amended forms Credit for increasing research activities (Form 6765). Irs amended forms   This credit is designed to encourage businesses to increase the amounts they spend on research and experimental activities, including energy research. Irs amended forms For more information, see Form 6765. Irs amended forms Credit for small employer health insurance premiums (Form 8941). Irs amended forms   This credit applies to the cost of certain health insurance coverage you provide to certain employees. Irs amended forms For more information, see Form 8941. Irs amended forms Credit for small employer pension plan startup costs (Form 8881). Irs amended forms   This credit applies to pension plan startup costs of a new qualified defined benefit or defined contribution plan (including a 401(k) plan), SIMPLE plan, or simplified employee pension. Irs amended forms For more information, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). Irs amended forms Disabled access credit (Form 8826). Irs amended forms   This credit is a nonrefundable tax credit for an eligible small business that pays or incurs expenses to provide access to persons who have disabilities. Irs amended forms You must pay or incur the expenses to enable your business to comply with the Americans with Disabilities Act of 1990. Irs amended forms For more information, see Form 8826. Irs amended forms Distilled spirits credit (Form 8906). Irs amended forms   This credit is available to distillers and importers of distilled spirits and eligible wholesalers of distilled spirits. Irs amended forms For more information, see Form 8906. Irs amended forms Empowerment zone employment credit (Form 8844). Irs amended forms   You may qualify for this credit if you have employees and are engaged in a business in an empowerment zone for which the credit is available. Irs amended forms For more information, see Form 8844. Irs amended forms Energy efficient appliance credit (Form 8909). Irs amended forms   This credit is available for manufacturers of eligible appliances. Irs amended forms For more information, see Form 8909. Irs amended forms Energy efficient home credit (Form 8908). Irs amended forms   This credit is available for eligible contractors of certain homes sold for use as a residence. Irs amended forms For more information, see Form 8908. Irs amended forms Indian employment credit (Form 8845). Irs amended forms   This credit applies to qualified wages and health insurance costs you paid or incurred for qualified employees. Irs amended forms For more information, see Form 8845. Irs amended forms Investment credit (Form 3468). Irs amended forms   The investment credit is the total of the following credits. Irs amended forms Rehabilitation credit. Irs amended forms Energy credit. Irs amended forms Qualifying advanced coal project credit. Irs amended forms Qualifying gasification project credit. Irs amended forms Qualifying advanced energy project credit. Irs amended forms   For more information, see Form 3468. Irs amended forms Low sulfur diesel fuel production credit (Form 8896). Irs amended forms    For more information, see Form 8896. Irs amended forms Low-income housing credit (Form 8586). Irs amended forms   This credit generally applies to each new qualified low-income building placed in service after 1986. Irs amended forms For more information, see Form 8586. Irs amended forms Mine rescue team training credit (Form 8923). Irs amended forms   This credit applies to training program costs you pay or incur for certain mine rescue team employees. Irs amended forms For more information, see Form 8923. Irs amended forms New markets credit (Form 8874). Irs amended forms   This credit is for qualified equity investments made in qualified community development entities. Irs amended forms For more information, see Form 8874. Irs amended forms Nonconventional source fuel credit (Form 8907). Irs amended forms   This credit is for qualified coke and coke gas you produced and sold to an unrelated person during the tax year. Irs amended forms For more information, see Form 8907. Irs amended forms Orphan drug credit (Form 8820). Irs amended forms   This credit applies to qualified expenses incurred in testing certain drugs for rare diseases and conditions. Irs amended forms For more information, see Form 8820. Irs amended forms Qualified plug-in electric drive motor vehicle credit (Form 8936). Irs amended forms   This credit is for certain new qualified plug-in electric vehicles placed in service during the tax year. Irs amended forms For more information, see Form 8936. Irs amended forms Qualified railroad track maintenance credit (Form 8900). Irs amended forms   This credit applies with respect to qualified railroad track maintenance expenditures paid or incurred during the tax year. Irs amended forms For more information, see Form 8900. Irs amended forms Renewable electricity, refined coal, and Indian coal production credit (Form 8835). Irs amended forms   This credit is for the sale of electricity, refined coal, or Indian coal produced in the United States or U. Irs amended forms S. Irs amended forms possessions from qualified energy resources at a qualified facility. Irs amended forms For more information, see Form 8835. Irs amended forms Work opportunity credit (Form 5884). Irs amended forms   This credit provides businesses with an incentive to hire individuals from targeted groups that have a particularly high unemployment rate or other special employment needs. Irs amended forms For more information, see Form 5884. Irs amended forms How To Claim the Credit To claim a general business credit, you will first have to get the forms you need to claim your current year business credits. Irs amended forms In addition to the credit form, you also need to file Form 3800. Irs amended forms Prev  Up  Next   Home   More Online Publications
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Help for Victims of Hurricane Sandy

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The IRS is providing help to the victims of Hurricane Sandy. Special tax relief and assistance is available to taxpayers in the Presidential Disaster Areas. 

So far, the IRS filing and payment relief applies to the following localities identified by FEMA for Individual Assistance due to Hurricane Sandy:

  • In Connecticut: Fairfield, Middlesex, New Haven, and New London Counties and the Mashantucket Pequot Tribal Nation and Mohegan Tribal Nation located within New London County;

  • In Maryland: Somerset County
  • In New Jersey: Atlantic, Bergen, Burlington, Camden, Cape May, Cumberland, Essex, Gloucester, Hudson, Hunterdon, Mercer, Middlesex, Monmouth, Morris, Ocean, Passaic, Salem, Somerset, Sussex, Union and Warren;
  • In New York: Bronx, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland, Sullivan, Suffolk, Ulster and Westchester;
  • In Rhode Island: Newport and Washington counties.

The IRS also announced additional tax relief to certain affected individuals and businesses, further extending tax deadlines of that relief until April 1 for the following localities:

  • In New Jersey: Monmouth and Ocean counties.
  • In New York: Nassau, Queens, Richmond and Suffolk counties.

We are monitoring the situation closely to resolve potential tax administration issues as they are identified. The IRS often updates its information on disaster relief efforts related to Hurricane Sandy. For the latest news, check this page frequently.

News Releases

  • IR-2013-16, IRS Extends Tax Relief to Some New Jersey and New York Victims of Hurricane Sandy; Return Filing and Tax Payment Deadline Extended to April 1, 2013
  • IR-2012-96, IRS Gives Additional Time to Small, Automatically Revoked Tax-Exempt Organizations Affected by Hurricane Sandy
  • IR-2012-94, IRS Extends Hurricane Sandy Diesel Fuel Penalty Waiver to Dec. 7 for New Jersey and Parts of New York
  • IR-2012-93, Retirement Plans Can Make Loans, Hardship Distributions to Sandy Victims
  • IR-2012-91, IRS Warns Consumers of Possible Scams Relating to Hurricane Sandy Relief
  • IR-2012-91SP, IRS Advierte a Consumidores de Posibles Estafas Relacionadas a las Ayudas por el Huracán Sandy
  • IR-2012-88, Treasury, IRS Announce Special Relief to Encourage Leave-Donation Programs for Victims of Hurricane Sandy
  • IR-2012-88SP, Tesoro y IRS Anuncian Alivio Especial para Estimular Programas Que Permitan la Donación de Días de Paga a Víctimas del Huracán Sandy
  • IR-2012-87, IRS Expedites Charity Applications, Urges Use of Existing Charities
  • IR-2012-87SP, El IRS Acelera Las Solicitudes de Organizaciones Benéficas, Recomienda el Uso de Caridades Existentes
  • IR-2012-86, Treasury and IRS Expand Availability of Housing for Hurricane Sandy Victims
  • IR-2012-85, IRS Waives Diesel Fuel Penalty Due to Hurricane Sandy
  • IR-2012-84, IRS Announces Qualified Disaster Treatment of Payments to Victims of Hurricane Sandy
  • IR-2012-84SP, El IRS Anuncia el Trato de Pagos Por un Desastre Calificado para las Víctimas del Huracán Sandy
  • IR-2012-83, IRS Provides Tax Relief to Victims of Hurricane Sandy; Return Filing and Tax Payment Deadline Extended to Feb. 1, 2013
  • IR-2012-83SP, IRS Ofrece Alivio a Víctimas del Huracán Sandy; Extiende Plazo de Presentación de Declaraciones de Impuestos y Pagos al 1 de Febrero de 2013
  • IR-2012-82, IRS Gives Additional Time to Taxpayers and Preparers Affected by Hurricane Sandy; File and Pay by Nov. 7

Legal Guidance

  • Notice 2013-21, Postponement of Deadline for Making an Election to Deduct for the Preceding Taxable Year Losses Attributable to Hurricane Sandy
  • Notice 2012-71, Postponement of Deadline for Transitional Relief under Notice 2011-43 for Certain Small Organizations Affected by Hurricane Sandy
  • Notice 2012-69, Treatment of Certain Amounts Paid to Section 170(c) Organizations under Certain Employer Leave-Based Donation Programs to Aid Victims of Hurricane Sandy
  • Notice 2012-68, Low-Income Housing Credit Disaster Relief for Hurricane Sandy

Other Resources

For additional information provided by the federal government on disaster recovery, visit DisasterAssistance.gov and the Hurricane Sandy Recovery page on USA.gov. The latest Federal Emergency Management Agency disaster declarations are also available.

Related Item: Hurricane Sandy News Releases and Legal Guidance

 

Page Last Reviewed or Updated: 05-Nov-2013

The Irs Amended Forms

Irs amended forms 2. Irs amended forms   Depreciation of Rental Property Table of Contents The BasicsWhat Rental Property Can Be Depreciated? When Does Depreciation Begin and End? Depreciation Methods Basis of Depreciable Property Claiming the Special Depreciation Allowance MACRS DepreciationDepreciation Systems Property Classes Under GDS Recovery Periods Under GDS Conventions Figuring Your Depreciation Deduction Figuring MACRS Depreciation Under ADS Claiming the Correct Amount of Depreciation You recover the cost of income producing property through yearly tax deductions. Irs amended forms You do this by depreciating the property; that is, by deducting some of the cost each year on your tax return. Irs amended forms Three factors determine how much depreciation you can deduct each year: (1) your basis in the property, (2) the recovery period for the property, and (3) the depreciation method used. Irs amended forms You cannot simply deduct your mortgage or principal payments, or the cost of furniture, fixtures and equipment, as an expense. Irs amended forms You can deduct depreciation only on the part of your property used for rental purposes. Irs amended forms Depreciation reduces your basis for figuring gain or loss on a later sale or exchange. Irs amended forms You may have to use Form 4562 to figure and report your depreciation. Irs amended forms See Which Forms To Use in chapter 3. Irs amended forms Also see Publication 946. Irs amended forms Section 179 deduction. Irs amended forms   The section 179 deduction is a means of recovering part or all of the cost of certain qualifying property in the year you place the property in service. Irs amended forms This deduction is not allowed for property used in connection with residential rental property. Irs amended forms See chapter 2 of Publication 946. Irs amended forms Alternative minimum tax (AMT). Irs amended forms   If you use accelerated depreciation, you may be subject to the AMT. Irs amended forms Accelerated depreciation allows you to deduct more depreciation earlier in the recovery period than you could deduct using a straight line method (same deduction each year). Irs amended forms   The prescribed depreciation methods for rental real estate are not accelerated, so the depreciation deduction is not adjusted for the AMT. Irs amended forms However, accelerated methods are generally used for other property connected with rental activities (for example, appliances and wall-to-wall carpeting). Irs amended forms   To find out if you are subject to the AMT, see the Instructions for Form 6251. Irs amended forms The Basics The following section discusses the information you will need to have about the rental property and the decisions to be made before figuring your depreciation deduction. Irs amended forms What Rental Property Can Be Depreciated? You can depreciate your property if it meets all the following requirements. Irs amended forms You own the property. Irs amended forms You use the property in your business or income-producing activity (such as rental property). Irs amended forms The property has a determinable useful life. Irs amended forms The property is expected to last more than one year. Irs amended forms Property you own. Irs amended forms   To claim depreciation, you usually must be the owner of the property. Irs amended forms You are considered as owning property even if it is subject to a debt. Irs amended forms Rented property. Irs amended forms   Generally, if you pay rent for property, you cannot depreciate that property. Irs amended forms Usually, only the owner can depreciate it. Irs amended forms However, if you make permanent improvements to leased property, you may be able to depreciate the improvements. Irs amended forms See Additions or improvements to property , later in this chapter, under Recovery Periods Under GDS. Irs amended forms Cooperative apartments. Irs amended forms   If you are a tenant-stockholder in a cooperative housing corporation and rent your cooperative apartment to others, you can deduct depreciation on your stock in the corporation. Irs amended forms See chapter 4, Special Situations. Irs amended forms Property having a determinable useful life. Irs amended forms   To be depreciable, your property must have a determinable useful life. Irs amended forms This means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Irs amended forms What Rental Property Cannot Be Depreciated? Certain property cannot be depreciated. Irs amended forms This includes land and certain excepted property. Irs amended forms Land. Irs amended forms   You cannot depreciate the cost of land because land generally does not wear out, become obsolete, or get used up. Irs amended forms But if it does, the loss is accounted for upon disposition. Irs amended forms The costs of clearing, grading, planting, and landscaping are usually all part of the cost of land and cannot be depreciated. Irs amended forms   Although you cannot depreciate land, you can depreciate certain land preparation costs, such as landscaping costs, incurred in preparing land for business use. Irs amended forms These costs must be so closely associated with other depreciable property that you can determine a life for them along with the life of the associated property. Irs amended forms Example. Irs amended forms You built a new house to use as a rental and paid for grading, clearing, seeding, and planting bushes and trees. Irs amended forms Some of the bushes and trees were planted right next to the house, while others were planted around the outer border of the lot. Irs amended forms If you replace the house, you would have to destroy the bushes and trees right next to it. Irs amended forms These bushes and trees are closely associated with the house, so they have a determinable useful life. Irs amended forms Therefore, you can depreciate them. Irs amended forms Add your other land preparation costs to the basis of your land because they have no determinable life and you cannot depreciate them. Irs amended forms Excepted property. Irs amended forms   Even if the property meets all the requirements listed earlier under What Rental Property Can Be Depreciated , you cannot depreciate the following property. Irs amended forms Property placed in service and disposed of (or taken out of business use) in the same year. Irs amended forms Equipment used to build capital improvements. Irs amended forms You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. Irs amended forms For more information, see chapter 1 of Publication 946. Irs amended forms When Does Depreciation Begin and End? You begin to depreciate your rental property when you place it in service for the production of income. Irs amended forms You stop depreciating it either when you have fully recovered your cost or other basis, or when you retire it from service, whichever happens first. Irs amended forms Placed in Service You place property in service in a rental activity when it is ready and available for a specific use in that activity. Irs amended forms Even if you are not using the property, it is in service when it is ready and available for its specific use. Irs amended forms Example 1. Irs amended forms On November 22 of last year, you purchased a dishwasher for your rental property. Irs amended forms The appliance was delivered on December 7, but was not installed and ready for use until January 3 of this year. Irs amended forms Because the dishwasher was not ready for use last year, it is not considered placed in service until this year. Irs amended forms If the appliance had been installed and ready for use when it was delivered in December of last year, it would have been considered placed in service in December, even if it was not actually used until this year. Irs amended forms Example 2. Irs amended forms On April 6, you purchased a house to use as residential rental property. Irs amended forms You made extensive repairs to the house and had it ready for rent on July 5. Irs amended forms You began to advertise the house for rent in July and actually rented it beginning September 1. Irs amended forms The house is considered placed in service in July when it was ready and available for rent. Irs amended forms You can begin to depreciate the house in July. Irs amended forms Example 3. Irs amended forms You moved from your home in July. Irs amended forms During August and September you made several repairs to the house. Irs amended forms On October 1, you listed the property for rent with a real estate company, which rented it on December 1. Irs amended forms The property is considered placed in service on October 1, the date when it was available for rent. Irs amended forms Conversion to business use. Irs amended forms   If you place property in service in a personal activity, you cannot claim depreciation. Irs amended forms However, if you change the property's use to business or the production of income, you can begin to depreciate it at the time of the change. Irs amended forms You place the property in service for business or income-producing use on the date of the change. Irs amended forms Example. Irs amended forms You bought a house and used it as your personal home several years before you converted it to rental property. Irs amended forms Although its specific use was personal and no depreciation was allowable, you placed the home in service when you began using it as your home. Irs amended forms You can begin to claim depreciation in the year you converted it to rental property because at that time its use changed to the production of income. Irs amended forms Idle Property Continue to claim a deduction for depreciation on property used in your rental activity even if it is temporarily idle (not in use). Irs amended forms For example, if you must make repairs after a tenant moves out, you still depreciate the rental property during the time it is not available for rent. Irs amended forms Cost or Other Basis Fully Recovered You must stop depreciating property when the total of your yearly depreciation deductions equals your cost or other basis of your property. Irs amended forms For this purpose, your yearly depreciation deductions include any depreciation that you were allowed to claim, even if you did not claim it. Irs amended forms See Basis of Depreciable Property , later. Irs amended forms Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. Irs amended forms You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. Irs amended forms You sell or exchange the property. Irs amended forms You convert the property to personal use. Irs amended forms You abandon the property. Irs amended forms The property is destroyed. Irs amended forms Depreciation Methods Generally, you must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate residential rental property placed in service after 1986. Irs amended forms If you placed rental property in service before 1987, you are using one of the following methods. Irs amended forms ACRS (Accelerated Cost Recovery System) for property placed in service after 1980 but before 1987. Irs amended forms Straight line or declining balance method over the useful life of property placed in service before 1981. Irs amended forms See MACRS Depreciation , later, for more information. Irs amended forms Rental property placed in service before 2013. Irs amended forms   Continue to use the same method of figuring depreciation that you used in the past. Irs amended forms Use of real property changed. Irs amended forms   Generally, you must use MACRS to depreciate real property that you acquired for personal use before 1987 and changed to business or income-producing use after 1986. Irs amended forms This includes your residence that you changed to rental use. Irs amended forms See Property Owned or Used in 1986 in Publication 946, chapter 1, for those situations in which MACRS is not allowed. Irs amended forms Improvements made after 1986. Irs amended forms   Treat an improvement made after 1986 to property you placed in service before 1987 as separate depreciable property. Irs amended forms As a result, you can depreciate that improvement as separate property under MACRS if it is the type of property that otherwise qualifies for MACRS depreciation. Irs amended forms For more information about improvements, see Additions or improvements to property , later in this chapter under Recovery Periods Under GDS. Irs amended forms This publication discusses MACRS depreciation only. Irs amended forms If you need information about depreciating property placed in service before 1987, see Publication 534. Irs amended forms Basis of Depreciable Property The basis of property used in a rental activity is generally its adjusted basis when you place it in service in that activity. Irs amended forms This is its cost or other basis when you acquired it, adjusted for certain items occurring before you place it in service in the rental activity. Irs amended forms If you depreciate your property under MACRS, you may also have to reduce your basis by certain deductions and credits with respect to the property. Irs amended forms Basis and adjusted basis are explained in the following discussions. Irs amended forms If you used the property for personal purposes before changing it to rental use, its basis for depreciation is the lesser of its adjusted basis or its fair market value when you change it to rental use. Irs amended forms See Basis of Property Changed to Rental Use in chapter 4. Irs amended forms Cost Basis The basis of property you buy is usually its cost. Irs amended forms The cost is the amount you pay for it in cash, in debt obligation, in other property, or in services. Irs amended forms Your cost also includes amounts you pay for: Sales tax charged on the purchase (but see Exception next), Freight charges to obtain the property, and Installation and testing charges. Irs amended forms Exception. Irs amended forms   If you deducted state and local general sales taxes as an itemized deduction on Schedule A (Form 1040), do not include those sales taxes as part of your cost basis. Irs amended forms Such taxes were deductible before 1987 and after 2003. Irs amended forms Loans with low or no interest. Irs amended forms   If you buy property on any time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, less the amount considered to be unstated interest. Irs amended forms See Unstated Interest and Original Issue Discount (OID) in Publication 537, Installment Sales. Irs amended forms Real property. Irs amended forms   If you buy real property, such as a building and land, certain fees and other expenses you pay are part of your cost basis in the property. Irs amended forms Real estate taxes. Irs amended forms   If you buy real property and agree to pay real estate taxes on it that were owed by the seller and the seller does not reimburse you, the taxes you pay are treated as part of your basis in the property. Irs amended forms You cannot deduct them as taxes paid. Irs amended forms   If you reimburse the seller for real estate taxes the seller paid for you, you can usually deduct that amount. Irs amended forms Do not include that amount in your basis in the property. Irs amended forms Settlement fees and other costs. Irs amended forms   The following settlement fees and closing costs for buying the property are part of your basis in the property. Irs amended forms Abstract fees. Irs amended forms Charges for installing utility services. Irs amended forms Legal fees. Irs amended forms Recording fees. Irs amended forms Surveys. Irs amended forms Transfer taxes. Irs amended forms Title insurance. Irs amended forms Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Irs amended forms   The following are settlement fees and closing costs you cannot include in your basis in the property. Irs amended forms Fire insurance premiums. Irs amended forms Rent or other charges relating to occupancy of the property before closing. Irs amended forms Charges connected with getting or refinancing a loan, such as: Points (discount points, loan origination fees), Mortgage insurance premiums, Loan assumption fees, Cost of a credit report, and Fees for an appraisal required by a lender. Irs amended forms   Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Irs amended forms Assumption of a mortgage. Irs amended forms   If you buy property and become liable for an existing mortgage on the property, your basis is the amount you pay for the property plus the amount remaining to be paid on the mortgage. Irs amended forms Example. Irs amended forms You buy a building for $60,000 cash and assume a mortgage of $240,000 on it. Irs amended forms Your basis is $300,000. Irs amended forms Separating cost of land and buildings. Irs amended forms   If you buy buildings and your cost includes the cost of the land on which they stand, you must divide the cost between the land and the buildings to figure the basis for depreciation of the buildings. Irs amended forms The part of the cost that you allocate to each asset is the ratio of the fair market value of that asset to the fair market value of the whole property at the time you buy it. Irs amended forms   If you are not certain of the fair market values of the land and the buildings, you can divide the cost between them based on their assessed values for real estate tax purposes. Irs amended forms Example. Irs amended forms You buy a house and land for $200,000. Irs amended forms The purchase contract does not specify how much of the purchase price is for the house and how much is for the land. Irs amended forms The latest real estate tax assessment on the property was based on an assessed value of $160,000, of which $136,000 was for the house and $24,000 was for the land. Irs amended forms You can allocate 85% ($136,000 ÷ $160,000) of the purchase price to the house and 15% ($24,000 ÷ $160,000) of the purchase price to the land. Irs amended forms Your basis in the house is $170,000 (85% of $200,000) and your basis in the land is $30,000 (15% of $200,000). Irs amended forms Basis Other Than Cost You cannot use cost as a basis for property that you received: In return for services you performed; In an exchange for other property; As a gift; From your spouse, or from your former spouse as the result of a divorce; or As an inheritance. Irs amended forms If you received property in one of these ways, see Publication 551 for information on how to figure your basis. Irs amended forms Adjusted Basis To figure your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service for business or the production of income. Irs amended forms The result of these adjustments to the basis is the adjusted basis. Irs amended forms Increases to basis. Irs amended forms   You must increase the basis of any property by the cost of all items properly added to a capital account. Irs amended forms These include the following. Irs amended forms The cost of any additions or improvements made before placing your property into service as a rental that have a useful life of more than 1 year. Irs amended forms Amounts spent after a casualty to restore the damaged property. Irs amended forms The cost of extending utility service lines to the property. Irs amended forms Legal fees, such as the cost of defending and perfecting title, or settling zoning issues. Irs amended forms Additions or improvements. Irs amended forms   Add to the basis of your property the amount an addition or improvement actually cost you, including any amount you borrowed to make the addition or improvement. Irs amended forms This includes all direct costs, such as material and labor, but does not include your own labor. Irs amended forms It also includes all expenses related to the addition or improvement. Irs amended forms   For example, if you had an architect draw up plans for remodeling your property, the architect's fee is a part of the cost of the remodeling. Irs amended forms Or, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. Irs amended forms   Keep separate accounts for depreciable additions or improvements made after you place the property in service in your rental activity. Irs amended forms For information on depreciating additions or improvements, see Additions or improvements to property , later in this chapter, under Recovery Periods Under GDS. Irs amended forms    The cost of landscaping improvements is usually treated as an addition to the basis of the land, which is not depreciable. Irs amended forms However, see What Rental Property Cannot Be Depreciated, earlier. Irs amended forms Assessments for local improvements. Irs amended forms   Assessments for items which tend to increase the value of property, such as streets and sidewalks, must be added to the basis of the property. Irs amended forms For example, if your city installs curbing on the street in front of your house, and assesses you and your neighbors for its cost, you must add the assessment to the basis of your property. Irs amended forms Also add the cost of legal fees paid to obtain a decrease in an assessment levied against property to pay for local improvements. Irs amended forms You cannot deduct these items as taxes or depreciate them. Irs amended forms    However, you can deduct as taxes, charges or assessments for maintenance, repairs, or interest charges related to the improvements. Irs amended forms Do not add them to your basis in the property. Irs amended forms Deducting vs. Irs amended forms capitalizing costs. Irs amended forms   Do not add to your basis costs you can deduct as current expenses. Irs amended forms However, there are certain costs you can choose either to deduct or to capitalize. Irs amended forms If you capitalize these costs, include them in your basis. Irs amended forms If you deduct them, do not include them in your basis. Irs amended forms   The costs you may choose to deduct or capitalize include carrying charges, such as interest and taxes, that you must pay to own property. Irs amended forms   For more information about deducting or capitalizing costs and how to make the election, see Carrying Charges in Publication 535, chapter 7. Irs amended forms Decreases to basis. Irs amended forms   You must decrease the basis of your property by any items that represent a return of your cost. Irs amended forms These include the following. Irs amended forms Insurance or other payment you receive as the result of a casualty or theft loss. Irs amended forms Casualty loss not covered by insurance for which you took a deduction. Irs amended forms Amount(s) you receive for granting an easement. Irs amended forms Residential energy credits you were allowed before 1986, or after 2005, if you added the cost of the energy items to the basis of your home. Irs amended forms Exclusion from income of subsidies for energy conservation measures. Irs amended forms Special depreciation allowance claimed on qualified property. Irs amended forms Depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you chose. Irs amended forms If you did not deduct enough or deducted too much in any year, see Depreciation under Decreases to Basis in Publication 551. Irs amended forms   If your rental property was previously used as your main home, you must also decrease the basis by the following. Irs amended forms Gain you postponed from the sale of your main home before May 7, 1997, if the replacement home was converted to your rental property. Irs amended forms District of Columbia first-time homebuyer credit allowed on the purchase of your main home after August 4, 1997 and before January 1, 2012. Irs amended forms Amount of qualified principal residence indebtedness discharged on or after January 1, 2007. Irs amended forms Claiming the Special Depreciation Allowance For 2013, your residential rental property may qualify for a special depreciation allowance. Irs amended forms This allowance is figured before you figure your regular depreciation deduction. Irs amended forms See Publication 946, chapter 3, for details. Irs amended forms Also see the Instructions for Form 4562, Line 14. Irs amended forms If you qualify for, but choose not to take, a special depreciation allowance, you must attach a statement to your return. Irs amended forms The details of this election are in Publication 946, chapter 3, and the Instructions for Form 4562, Line 14. Irs amended forms MACRS Depreciation Most business and investment property placed in service after 1986 is depreciated using MACRS. Irs amended forms This section explains how to determine which MACRS depreciation system applies to your property. Irs amended forms It also discusses other information you need to know before you can figure depreciation under MACRS. Irs amended forms This information includes the property's: Recovery class, Applicable recovery period, Convention, Placed-in-service date, Basis for depreciation, and Depreciation method. Irs amended forms Depreciation Systems MACRS consists of two systems that determine how you depreciate your property—the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Irs amended forms You must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. Irs amended forms Excluded Property You cannot use MACRS for certain personal property (such as furniture or appliances) placed in service in your rental property in 2013 if it had been previously placed in service before 1987 when MACRS became effective. Irs amended forms In most cases, personal property is excluded from MACRS if you (or a person related to you) owned or used it in 1986 or if your tenant is a person (or someone related to the person) who owned or used it in 1986. Irs amended forms However, the property is not excluded if your 2013 deduction under MACRS (using a half-year convention) is less than the deduction you would have under ACRS. Irs amended forms For more information, see What Method Can You Use To Depreciate Your Property? in Publication 946, chapter 1. Irs amended forms Electing ADS If you choose, you can use the ADS method for most property. Irs amended forms Under ADS, you use the straight line method of depreciation. Irs amended forms The election of ADS for one item in a class of property generally applies to all property in that class that is placed in service during the tax year of the election. Irs amended forms However, the election applies on a property-by-property basis for residential rental property and nonresidential real property. Irs amended forms If you choose to use ADS for your residential rental property, the election must be made in the first year the property is placed in service. Irs amended forms Once you make this election, you can never revoke it. Irs amended forms For property placed in service during 2013, you make the election to use ADS by entering the depreciation on Form 4562, Part III, Section C, line 20c. Irs amended forms Property Classes Under GDS Each item of property that can be depreciated under MACRS is assigned to a property class, determined by its class life. Irs amended forms The property class generally determines the depreciation method, recovery period, and convention. Irs amended forms The property classes under GDS are: 3-year property, 5-year property, 7-year property, 10-year property, 15-year property, 20-year property, Nonresidential real property, and Residential rental property. Irs amended forms Under MACRS, property that you placed in service during 2013 in your rental activities generally falls into one of the following classes. Irs amended forms 5-year property. Irs amended forms This class includes computers and peripheral equipment, office machinery (typewriters, calculators, copiers, etc. Irs amended forms ), automobiles, and light trucks. Irs amended forms This class also includes appliances, carpeting, furniture, etc. Irs amended forms , used in a residential rental real estate activity. Irs amended forms Depreciation on automobiles, other property used for transportation, computers and related peripheral equipment, and property of a type generally used for entertainment, recreation, or amusement is limited. Irs amended forms See chapter 5 of Publication 946. Irs amended forms 7-year property. Irs amended forms This class includes office furniture and equipment (desks, file cabinets, etc. Irs amended forms ). Irs amended forms This class also includes any property that does not have a class life and that has not been designated by law as being in any other class. Irs amended forms 15-year property. Irs amended forms This class includes roads, fences, and shrubbery (if depreciable). Irs amended forms Residential rental property. Irs amended forms This class includes any real property that is a rental building or structure (including a mobile home) for which 80% or more of the gross rental income for the tax year is from dwelling units. Irs amended forms It does not include a unit in a hotel, motel, inn, or other establishment where more than half of the units are used on a transient basis. Irs amended forms If you live in any part of the building or structure, the gross rental income includes the fair rental value of the part you live in. Irs amended forms The other property classes do not generally apply to property used in rental activities. Irs amended forms These classes are not discussed in this publication. Irs amended forms See Publication 946 for more information. Irs amended forms Recovery Periods Under GDS The recovery period of property is the number of years over which you recover its cost or other basis. Irs amended forms The recovery periods are generally longer under ADS than GDS. Irs amended forms The recovery period of property depends on its property class. Irs amended forms Under GDS, the recovery period of an asset is generally the same as its property class. Irs amended forms Class lives and recovery periods for most assets are listed in Appendix B of Publication 946. Irs amended forms See Table 2-1 for recovery periods of property commonly used in residential rental activities. Irs amended forms Qualified Indian reservation property. Irs amended forms   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations. Irs amended forms For more information, see chapter 4 of Publication 946. Irs amended forms Additions or improvements to property. Irs amended forms   Treat additions or improvements you make to your depreciable rental property as separate property items for depreciation purposes. Irs amended forms   The property class and recovery period of the addition or improvement is the one that would apply to the original property if you had placed it in service at the same time as the addition or improvement. Irs amended forms   The recovery period for an addition or improvement to property begins on the later of: The date the addition or improvement is placed in service, or The date the property to which the addition or improvement was made is placed in service. Irs amended forms Example. Irs amended forms You own a residential rental house that you have been renting since 1986 and depreciating under ACRS. Irs amended forms You built an addition onto the house and placed it in service in 2013. Irs amended forms You must use MACRS for the addition. Irs amended forms Under GDS, the addition is depreciated as residential rental property over 27. Irs amended forms 5 years. Irs amended forms Table 2-1. Irs amended forms MACRS Recovery Periods for Property Used in Rental Activities   MACRS Recovery Period   Type of Property General Depreciation System Alternative Depreciation System   Computers and their peripheral equipment 5 years 5 years   Office machinery, such as: Typewriters Calculators Copiers 5 years 6 years   Automobiles 5 years 5 years   Light trucks 5 years 5 years   Appliances, such as: Stoves Refrigerators 5 years 9 years   Carpets 5 years 9 years   Furniture used in rental property 5 years 9 years   Office furniture and equipment, such as: Desks Files 7 years 10 years   Any property that does not have a class life and that has not been designated by law as being in any other class 7 years 12 years   Roads 15 years 20 years   Shrubbery 15 years 20 years   Fences 15 years 20 years   Residential rental property (buildings or structures) and structural components such as furnaces, waterpipes, venting, etc. Irs amended forms 27. Irs amended forms 5 years 40 years   Additions and improvements, such as a new roof The same recovery period as that of the property to which the addition or improvement is made, determined as if the property were placed in service at the same time as the addition or improvement. Irs amended forms   Conventions A convention is a method established under MACRS to set the beginning and end of the recovery period. Irs amended forms 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. Irs amended forms Mid-month convention. Irs amended forms    A mid-month convention is used for all residential rental property and nonresidential real property. Irs amended forms Under this convention, you treat all property placed in service, or disposed of, during any month as placed in service, or disposed of, at the midpoint of that month. Irs amended forms Mid-quarter convention. Irs amended forms   A mid-quarter convention must be used if the mid-month convention does not apply and the total depreciable basis of MACRS property placed in service in the last 3 months of a tax year (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) is more than 40% of the total basis of all such property you place in service during the year. Irs amended forms   Under this convention, you treat all property placed in service, or disposed of, during any quarter of a tax year as placed in service, or disposed of, at the midpoint of the quarter. Irs amended forms Example. Irs amended forms During the tax year, Tom Martin purchased the following items to use in his rental property. Irs amended forms He elects not to claim the special depreciation allowance discussed earlier. Irs amended forms A dishwasher for $400 that he placed in service in January. Irs amended forms Used furniture for $100 that he placed in service in September. Irs amended forms A refrigerator for $800 that he placed in service in October. Irs amended forms Tom uses the calendar year as his tax year. Irs amended forms The total basis of all property placed in service that year is $1,300. Irs amended forms The $800 basis of the refrigerator placed in service during the last 3 months of his tax year exceeds $520 (40% × $1,300). Irs amended forms Tom must use the mid-quarter convention instead of the half-year convention for all three items. Irs amended forms Half-year convention. Irs amended forms    The half-year convention is used if neither the mid-quarter convention nor the mid-month convention applies. Irs amended forms 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 that tax year. Irs amended forms   If this convention applies, you deduct a half year of depreciation for the first year and the last year that you depreciate the property. Irs amended forms You deduct a full year of depreciation for any other year during the recovery period. Irs amended forms Figuring Your Depreciation Deduction You can figure your MACRS depreciation deduction in one of two ways. Irs amended forms The deduction is substantially the same both ways. Irs amended forms You can either: Actually compute the deduction using the depreciation method and convention that apply over the recovery period of the property, or Use the percentage from the MACRS percentage tables. Irs amended forms In this publication we will use the percentage tables. Irs amended forms For instructions on how to compute the deduction, see chapter 4 of Publication 946. Irs amended forms Residential rental property. Irs amended forms   You must use the straight line method and a mid-month convention for residential rental property. Irs amended forms In the first year that you claim depreciation for residential rental property, you can claim depreciation only for the number of months the property is in use, and you must use the mid-month convention (explained under Conventions , earlier). Irs amended forms 5-, 7-, or 15-year property. Irs amended forms   For property in the 5- or 7-year class, use the 200% declining balance method and a half-year convention. Irs amended forms However, in limited cases you must use the mid-quarter convention, if it applies. Irs amended forms For property in the 15-year class, use the 150% declining balance method and a half-year convention. Irs amended forms   You can also choose to use the 150% declining balance method for property in the 5- or 7-year class. Irs amended forms The choice to use the 150% method for one item in a class of property applies to all property in that class that is placed in service during the tax year of the election. Irs amended forms You make this election on Form 4562. Irs amended forms In Part III, column (f), enter “150 DB. Irs amended forms ” Once you make this election, you cannot change to another method. Irs amended forms   If you use either the 200% or 150% declining balance method, you figure your deduction using the straight line method in the first tax year that the straight line method gives you an equal or larger deduction. Irs amended forms   You can also choose to use the straight line method with a half-year or mid-quarter convention for 5-, 7-, or 15-year property. Irs amended forms The choice to use the straight line method for one item in a class of property applies to all property in that class that is placed in service during the tax year of the election. Irs amended forms You elect the straight line method on Form 4562. Irs amended forms In Part III, column (f), enter “S/L. Irs amended forms ” Once you make this election, you cannot change to another method. Irs amended forms MACRS Percentage Tables You can use the percentages in Table 2-2, earlier, to compute annual depreciation under MACRS. Irs amended forms The tables show the percentages for the first few years or until the change to the straight line method is made. Irs amended forms See Appendix A of Publication 946 for complete tables. Irs amended forms The percentages in Tables 2-2a, 2-2b, and 2-2c make the change from declining balance to straight line in the year that straight line will give a larger deduction. Irs amended forms If you elect to use the straight line method for 5-, 7-, or 15-year property, or the 150% declining balance method for 5- or 7-year property, use the tables in Appendix A of Publication 946. Irs amended forms How to use the percentage tables. Irs amended forms   You must apply the table rates to your property's unadjusted basis (defined below) each year of the recovery period. Irs amended forms   Once you begin using a percentage table to figure depreciation, you must continue to use it for the entire recovery period unless there is an adjustment to the basis of your property for a reason other than: Depreciation allowed or allowable, or An addition or improvement that is depreciated as a separate item of property. Irs amended forms   If there is an adjustment for any reason other than (1) or (2), for example, because of a deductible casualty loss, you can no longer use the table. Irs amended forms For the year of the adjustment and for the remaining recovery period, figure depreciation using the property's adjusted basis at the end of the year and the appropriate depreciation method, as explained earlier under Figuring Your Depreciation Deduction . Irs amended forms See Figuring the Deduction Without Using the Tables in Publication 946, chapter 4. Irs amended forms Unadjusted basis. Irs amended forms   This is the same basis you would use to figure gain on a sale (see Basis of Depreciable Property , earlier), but without reducing your original basis by any MACRS depreciation taken in earlier years. Irs amended forms   However, you do reduce your original basis by other amounts claimed on the property, including: Any amortization, Any section 179 deduction, and Any special depreciation allowance. Irs amended forms For more information, see chapter 4 of Publication 946. Irs amended forms Please click here for the text description of the image. Irs amended forms Table 2-2 Tables 2-2a, 2-2b, and 2-2c. Irs amended forms   The percentages in these tables take into account the half-year and mid-quarter conventions. Irs amended forms Use Table 2-2a for 5-year property, Table 2-2b for 7-year property, and Table 2-2c for 15-year property. Irs amended forms Use the percentage in the second column (half-year convention) unless you are required to use the mid-quarter convention (explained earlier). Irs amended forms If you must use the mid-quarter convention, use the column that corresponds to the calendar year quarter in which you placed the property in service. Irs amended forms Example 1. Irs amended forms You purchased a stove and refrigerator and placed them in service in June. Irs amended forms Your basis in the stove is $600 and your basis in the refrigerator is $1,000. Irs amended forms Both are 5-year property. Irs amended forms Using the half-year convention column in Table 2-2a, the depreciation percentage for Year 1 is 20%. Irs amended forms For that year your depreciation deduction is $120 ($600 × . Irs amended forms 20) for the stove and $200 ($1,000 × . Irs amended forms 20) for the refrigerator. Irs amended forms For Year 2, the depreciation percentage is 32%. Irs amended forms That year's depreciation deduction will be $192 ($600 × . Irs amended forms 32) for the stove and $320 ($1,000 × . Irs amended forms 32) for the refrigerator. Irs amended forms Example 2. Irs amended forms Assume the same facts as in Example 1, except you buy the refrigerator in October instead of June. Irs amended forms Since the refrigerator was placed in service in the last 3 months of the tax year, and its basis ($1,000) is more than 40% of the total basis of all property placed in service during the year ($1,600 × . Irs amended forms 40 = $640), you are required to use the mid-quarter convention to figure depreciation on both the stove and refrigerator. Irs amended forms Because you placed the refrigerator in service in October, you use the fourth quarter column of Table 2-2a and find the depreciation percentage for Year 1 is 5%. Irs amended forms Your depreciation deduction for the refrigerator is $50 ($1,000 x . Irs amended forms 05). Irs amended forms Because you placed the stove in service in June, you use the second quarter column of Table 2-2a and find the depreciation percentage for Year 1 is 25%. Irs amended forms For that year, your depreciation deduction for the stove is $150 ($600 x . Irs amended forms 25). Irs amended forms Table 2-2d. Irs amended forms    Use this table when you are using the GDS 27. Irs amended forms 5 year option for residential rental property. Irs amended forms Find the row for the month that you placed the property in service. Irs amended forms Use the percentages listed for that month to figure your depreciation deduction. Irs amended forms The mid-month convention is taken into account in the percentages shown in the table. Irs amended forms Continue to use the same row (month) under the column for the appropriate year. Irs amended forms Example. Irs amended forms You purchased a single family rental house for $185,000 and placed it in service on February 8. Irs amended forms The sales contract showed that the building cost $160,000 and the land cost $25,000. Irs amended forms Your basis for depreciation is its original cost, $160,000. Irs amended forms This is the first year of service for your residential rental property and you decide to use GDS which has a recovery period of 27. Irs amended forms 5 years. Irs amended forms Using Table 2-2d, you find that the percentage for property placed in service in February of Year 1 is 3. Irs amended forms 182%. Irs amended forms That year's depreciation deduction is $5,091 ($160,000 x . Irs amended forms 03182). Irs amended forms Figuring MACRS Depreciation Under ADS Table 2–1, earlier, shows the ADS recovery periods for property used in rental activities. Irs amended forms See Appendix B in Publication 946 for other property. Irs amended forms If your property is not listed in Appendix B, it is considered to have no class life. Irs amended forms Under ADS, personal property with no class life is depreciated using a recovery period of 12 years. Irs amended forms Use the mid-month convention for residential rental property and nonresidential real property. Irs amended forms For all other property, use the half-year or mid-quarter convention, as appropriate. Irs amended forms See Publication 946 for ADS depreciation tables. Irs amended forms Claiming the Correct Amount of Depreciation You should claim the correct amount of depreciation each tax year. Irs amended forms If you did not claim all the depreciation you were entitled to deduct, you must still reduce your basis in the property by the full amount of depreciation that you could have deducted. Irs amended forms For more information, see Depreciation under Decreases to Basis in Publication 551. Irs amended forms If you deducted an incorrect amount of depreciation for property in any year, you may be able to make a correction by filing Form 1040X, Amended U. Irs amended forms S. Irs amended forms Individual Income Tax Return. Irs amended forms If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amount of depreciation. Irs amended forms Filing an amended return. Irs amended forms   You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. Irs amended forms You claimed the incorrect amount because of a mathematical error made in any year. Irs amended forms You claimed the incorrect amount because of a posting error made in any year. Irs amended forms You have not adopted a method of accounting for property placed in service by you in tax years ending after December 29, 2003. Irs amended forms You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. Irs amended forms   Generally, you adopt a method of accounting for depreciation by using a permissible method of determining depreciation when you file your first tax return for the property used in your rental activity. Irs amended forms This also occurs when you use the same impermissible method of determining depreciation (for example, using the wrong MACRS recovery period) in two or more consecutively filed tax returns. Irs amended forms   If an amended return is allowed, you must file it by the later of the following dates. Irs amended forms 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. Irs amended forms A return filed before an unextended due date is considered filed on that due date. Irs amended forms 2 years from the time you paid your tax for that year. Irs amended forms Changing your accounting method. Irs amended forms   To change your accounting method, you generally must file Form 3115, Application for Change in Accounting Method, to get the consent of the IRS. Irs amended forms In some instances, that consent is automatic. Irs amended forms For more information, see Changing Your Accounting Method in Publication 946,  chapter 1. Irs amended forms Prev  Up  Next   Home   More Online Publications