File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Myfreetaxes Com Maine

How To Fill Out A 1040x Tax Amendment FormFree Tax Filing OnlineHow To File State Income Tax For FreeHr Block Tax FreeE File Taxes FreeCan I Amend My Taxes Online1040x Form 2011File 2011 Taxes TurbotaxHow Do You Amend Your Taxes OnlineHow To Amend TaxesFile Taxes Online For Free 20112010 Tax Amendment940 Tax Form 2012Tax Act Online 20092011 Form 1040 Ez1040ez2011Free State ReturnIrs 1040 FormTax Forms 2011Irs Gov 1040x FormFree State Tax Filing 20122009 Federal Tax FormsTaxact Com 2011Irs Free File Fillable FormsFree H&r BlockDidn't File Taxes Last YearAmending Your Taxes2011 Federal Tax Form 1040ezCan I Refile My TaxesH&r Block Free For MilitaryH And R Block Tax Software1040z Tax FormFile 2011 Taxes LateFiling State TaxesWhere To Get 2011 Tax Forms10 Ez FormFree Filing State TaxesFiling An Amendment2010 Ez Tax FormHow To Fill Out The 1040x Form

Myfreetaxes Com Maine

Myfreetaxes com maine 5. Myfreetaxes com maine   Additional Rules for Listed Property Table of Contents Introduction Useful Items - You may want to see: What Is Listed Property?Passenger Automobiles Other Property Used for Transportation Computers and Related Peripheral Equipment Can Employees Claim a Deduction? What Is the Business-Use Requirement?How To Allocate Use Qualified Business Use Recapture of Excess Depreciation Lessee's Inclusion Amount Do the Passenger Automobile Limits Apply?Maximum Depreciation Deduction Deductions After the Recovery Period Deductions For Passenger Automobiles Acquired in a Trade-in What Records Must Be Kept?Adequate Records How Is Listed Property Information Reported? Introduction This chapter discusses the deduction limits and other special rules that apply to certain listed property. Myfreetaxes com maine Listed property includes cars and other property used for transportation, property used for entertainment, and certain computers. Myfreetaxes com maine Deductions for listed property (other than certain leased property) are subject to the following special rules and limits. Myfreetaxes com maine Deduction for employees. Myfreetaxes com maine If your use of the property is not for your employer's convenience or is not required as a condition of your employment, you cannot deduct depreciation or rent expenses for your use of the property as an employee. Myfreetaxes com maine Business-use requirement. Myfreetaxes com maine If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. Myfreetaxes com maine In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. Myfreetaxes com maine You may also have to recapture (include in income) any excess depreciation claimed in previous years. Myfreetaxes com maine A similar inclusion amount applies to certain leased property. Myfreetaxes com maine Passenger automobile limits and rules. Myfreetaxes com maine Annual limits apply to depreciation deductions (including section 179 deductions and any special depreciation allowance) for certain passenger automobiles. Myfreetaxes com maine You can continue to deduct depreciation for the unrecovered basis resulting from these limits after the end of the recovery period. Myfreetaxes com maine This chapter defines listed property and explains the special rules and depreciation deduction limits that apply, including the special inclusion amount rule for leased property. Myfreetaxes com maine It also discusses the recordkeeping rules for listed property and explains how to report information about the property on your tax return. Myfreetaxes com maine Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 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 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. Myfreetaxes com maine What Is Listed Property? Listed property is any of the following. Myfreetaxes com maine Passenger automobiles (as defined later). Myfreetaxes com maine Any other property used for transportation, unless it is an excepted vehicle. Myfreetaxes com maine Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video-recording equipment). Myfreetaxes com maine Computers and related peripheral equipment, unless used only at a regular business establishment and owned or leased by the person operating the establishment. Myfreetaxes com maine A regular business establishment includes a portion of a dwelling unit that is used both regularly and exclusively for business as discussed in Publication 587. Myfreetaxes com maine Improvements to listed property. Myfreetaxes com maine   An improvement made to listed property that must be capitalized is treated as a new item of depreciable property. Myfreetaxes com maine The recovery period and method of depreciation that apply to the listed property as a whole also apply to the improvement. Myfreetaxes com maine For example, if you must depreciate the listed property using the straight line method, you also must depreciate the improvement using the straight line method. Myfreetaxes com maine Passenger Automobiles A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (6,000 pounds or less of gross vehicle weight for trucks and vans). Myfreetaxes com maine It includes any part, component, or other item physically attached to the automobile at the time of purchase or usually included in the purchase price of an automobile. Myfreetaxes com maine The following vehicles are not considered passenger automobiles for these purposes. Myfreetaxes com maine An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business. Myfreetaxes com maine A vehicle used directly in the trade or business of transporting persons or property for pay or hire. Myfreetaxes com maine A truck or van that is a qualified nonpersonal use vehicle. Myfreetaxes com maine Qualified nonpersonal use vehicles. Myfreetaxes com maine   Qualified nonpersonal use vehicles are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Myfreetaxes com maine They include the trucks and vans listed as excepted vehicles under Other Property Used for Transportation , next. Myfreetaxes com maine They also include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Myfreetaxes com maine For a detailed discussion of passenger automobiles, including leased passenger automobiles, see  Publication 463. Myfreetaxes com maine Other Property Used for Transportation Although vehicles used to transport persons or property for pay or hire and vehicles rated at more than the 6,000-pound threshold are not passenger automobiles, they are still “other property used for transportation” and are subject to the special rules for listed property. Myfreetaxes com maine Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles used to transport persons or goods. Myfreetaxes com maine Excepted vehicles. Myfreetaxes com maine   Other property used for transportation does not include the following qualified nonpersonal use vehicles (defined earlier under Passenger Automobiles ). Myfreetaxes com maine Clearly marked police and fire vehicles. Myfreetaxes com maine Unmarked vehicles used by law enforcement officers if the use is officially authorized. Myfreetaxes com maine Ambulances used as such and hearses used as such. Myfreetaxes com maine Any vehicle with a loaded gross vehicle weight of over 14,000 pounds that is designed to carry cargo. Myfreetaxes com maine Bucket trucks (cherry pickers), cement mixers, dump trucks (including garbage trucks), flatbed trucks, and refrigerated trucks. Myfreetaxes com maine Combines, cranes and derricks, and forklifts. Myfreetaxes com maine Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat. Myfreetaxes com maine Qualified moving vans. Myfreetaxes com maine Qualified specialized utility repair trucks. Myfreetaxes com maine School buses used in transporting students and employees of schools. Myfreetaxes com maine Other buses with a capacity of at least 20 passengers that are used as passenger buses. Myfreetaxes com maine Tractors and other special purpose farm vehicles. Myfreetaxes com maine Clearly marked police and fire vehicle. Myfreetaxes com maine   A clearly marked police or fire vehicle is a vehicle that meets all the following requirements. Myfreetaxes com maine It is owned or leased by a governmental unit or an agency or instrumentality of a governmental unit. Myfreetaxes com maine It is required to be used for commuting by a police officer or fire fighter who, when not on a regular shift, is on call at all times. Myfreetaxes com maine It is prohibited from being used for personal use (other than commuting) outside the limit of the police officer's arrest powers or the fire fighter's obligation to respond to an emergency. Myfreetaxes com maine It is clearly marked with painted insignia or words that make it readily apparent that it is a police or fire vehicle. Myfreetaxes com maine A marking on a license plate is not a clear marking for these purposes. Myfreetaxes com maine Qualified moving van. Myfreetaxes com maine   A qualified moving van is any truck or van used by a professional moving company for moving household or business goods if the following requirements are met. Myfreetaxes com maine No personal use of the van is allowed other than for travel to and from a move site or for minor personal use, such as a stop for lunch on the way from one move site to another. Myfreetaxes com maine Personal use for travel to and from a move site happens no more than five times a month on average. Myfreetaxes com maine Personal use is limited to situations in which it is more convenient to the employer, because of the location of the employee's residence in relation to the location of the move site, for the van not to be returned to the employer's business location. Myfreetaxes com maine Qualified specialized utility repair truck. Myfreetaxes com maine   A truck is a qualified specialized utility repair truck if it is not a van or pickup truck and all the following apply. Myfreetaxes com maine The truck was specifically designed for and is used to carry heavy tools, testing equipment, or parts. Myfreetaxes com maine Shelves, racks, or other permanent interior construction has been installed to carry and store the tools, equipment, or parts and would make it unlikely that the truck would be used, other than minimally, for personal purposes. Myfreetaxes com maine The employer requires the employee to drive the truck home in order to be able to respond in emergency situations for purposes of restoring or maintaining electricity, gas, telephone, water, sewer, or steam utility services. Myfreetaxes com maine Computers and Related Peripheral Equipment A computer is a programmable, electronically activated device capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention. Myfreetaxes com maine It consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. Myfreetaxes com maine Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. Myfreetaxes com maine The following are neither computers nor related peripheral equipment. Myfreetaxes com maine Any equipment that is an integral part of other property that is not a computer. Myfreetaxes com maine Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment. Myfreetaxes com maine Equipment of a kind used primarily for the user's amusement or entertainment, such as video games. Myfreetaxes com maine Can Employees Claim a Deduction? If you are an employee, you can claim a depreciation deduction for the use of your listed property (whether owned or rented) in performing services as an employee only if your use is a business use. Myfreetaxes com maine The use of your property in performing services as an employee is a business use only if both the following requirements are met. Myfreetaxes com maine The use is for your employer's convenience. Myfreetaxes com maine The use is required as a condition of your employment. Myfreetaxes com maine If these requirements are not met, you cannot deduct depreciation (including the section 179 deduction) or rent expenses for your use of the property as an employee. Myfreetaxes com maine Employer's convenience. Myfreetaxes com maine   Whether the use of listed property is for your employer's convenience must be determined from all the facts. Myfreetaxes com maine The use is for your employer's convenience if it is for a substantial business reason of the employer. Myfreetaxes com maine The use of listed property during your regular working hours to carry on your employer's business generally is for the employer's convenience. Myfreetaxes com maine Condition of employment. Myfreetaxes com maine   Whether the use of listed property is a condition of your employment depends on all the facts and circumstances. Myfreetaxes com maine The use of property must be required for you to perform your duties properly. Myfreetaxes com maine Your employer does not have to require explicitly that you use the property. Myfreetaxes com maine However, a mere statement by the employer that the use of the property is a condition of your employment is not sufficient. Myfreetaxes com maine Example 1. Myfreetaxes com maine Virginia Sycamore is employed as a courier with We Deliver, which provides local courier services. Myfreetaxes com maine She owns and uses a motorcycle to deliver packages to downtown offices. Myfreetaxes com maine We Deliver explicitly requires all delivery persons to own a car or motorcycle for use in their employment. Myfreetaxes com maine Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. Myfreetaxes com maine Example 2. Myfreetaxes com maine Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. Myfreetaxes com maine He must travel to these sites on a regular basis. Myfreetaxes com maine Uplift does not furnish an automobile or explicitly require him to use his own automobile. Myfreetaxes com maine However, it pays him for any costs he incurs in traveling to the various sites. Myfreetaxes com maine The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. Myfreetaxes com maine Example 3. Myfreetaxes com maine Assume the same facts as in Example 2 except that Uplift furnishes a car to Bill, who chooses to use his own car and receive payment for using it. Myfreetaxes com maine The use of his own car is neither for the convenience of Uplift nor required as a condition of employment. Myfreetaxes com maine Example 4. Myfreetaxes com maine Marilyn Lee is a pilot for Y Company, a small charter airline. Myfreetaxes com maine Y requires pilots to obtain 80 hours of flight time annually in addition to flight time spent with the airline. Myfreetaxes com maine Pilots usually can obtain these hours by flying with the Air Force Reserve or by flying part-time with another airline. Myfreetaxes com maine Marilyn owns her own airplane. Myfreetaxes com maine The use of her airplane to obtain the required flight hours is neither for the convenience of the employer nor required as a condition of employment. Myfreetaxes com maine Example 5. Myfreetaxes com maine David Rule is employed as an engineer with Zip, an engineering contracting firm. Myfreetaxes com maine He occasionally takes work home at night rather than work late in the office. Myfreetaxes com maine He owns and uses a home computer which is virtually identical to the office model. Myfreetaxes com maine His use of the computer is neither for the convenience of his employer nor required as a condition of employment. Myfreetaxes com maine What Is the Business-Use Requirement? You can claim the section 179 deduction and a special depreciation allowance for listed property and depreciate listed property using GDS and a declining balance method if the property meets the business-use requirement. Myfreetaxes com maine To meet this requirement, listed property must be used predominantly (more than 50% of its total use) for qualified business use. Myfreetaxes com maine If this requirement is not met, the following rules apply. Myfreetaxes com maine Property not used predominantly for qualified business use during the year it is placed in service does not qualify for the section 179 deduction. Myfreetaxes com maine Property not used predominantly for qualified business use during the year it is placed in service does not qualify for a special depreciation allowance. Myfreetaxes com maine Any depreciation deduction under MACRS for property not used predominantly for qualified business use during any year must be figured using the straight line method over the ADS recovery period. Myfreetaxes com maine This rule applies each year of the recovery period. Myfreetaxes com maine Excess depreciation on property previously used predominantly for qualified business use must be recaptured (included in income) in the first year in which it is no longer used predominantly for qualified business use. Myfreetaxes com maine A lessee must add an inclusion amount to income in the first year in which the leased property is not used predominantly for qualified business use. Myfreetaxes com maine Being required to use the straight line method for an item of listed property not used predominantly for qualified business use is not the same as electing the straight line method. Myfreetaxes com maine It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. Myfreetaxes com maine Exception for leased property. Myfreetaxes com maine   The business-use requirement generally does not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. Myfreetaxes com maine   You are considered regularly engaged in the business of leasing listed property only if you enter into contracts for the leasing of listed property with some frequency over a continuous period of time. Myfreetaxes com maine This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of your business in its entirety. Myfreetaxes com maine Occasional or incidental leasing activity is insufficient. Myfreetaxes com maine For example, if you lease only one passenger automobile during a tax year, you are not regularly engaged in the business of leasing automobiles. Myfreetaxes com maine An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. Myfreetaxes com maine How To Allocate Use To determine whether the business-use requirement is met, you must allocate the use of any item of listed property used for more than one purpose during the year among its various uses. Myfreetaxes com maine For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. Myfreetaxes com maine You determine the percentage of qualified business use by dividing the number of miles you drove the vehicle for business purposes during the year by the total number of miles you drove the vehicle for all purposes (including business miles) during the year. Myfreetaxes com maine For other listed property, allocate the property's use on the basis of the most appropriate unit of time the property is actually used (rather than merely being available for use). Myfreetaxes com maine For example, you can determine the percentage of business use of a computer by dividing the number of hours you used the computer for business purposes during the year by the total number of hours you used the computer for all purposes (including business use) during the year. Myfreetaxes com maine Entertainment use. Myfreetaxes com maine   Treat the use of listed property for entertainment, recreation, or amusement purposes as a business use only to the extent you can deduct expenses (other than interest and property tax expenses) due to its use as an ordinary and necessary business expense. Myfreetaxes com maine Commuting use. Myfreetaxes com maine   The use of an automobile for commuting is not business use, regardless of whether work is performed during the trip. Myfreetaxes com maine For example, a business telephone call made on a car telephone while commuting to work does not change the character of the trip from commuting to business. Myfreetaxes com maine This is also true for a business meeting held in a car while commuting to work. Myfreetaxes com maine Similarly, a business call made on an otherwise personal trip does not change the character of a trip from personal to business. Myfreetaxes com maine The fact that an automobile is used to display material that advertises the owner's or user's trade or business does not convert an otherwise personal use into business use. Myfreetaxes com maine Use of your automobile by another person. Myfreetaxes com maine   If someone else uses your automobile, do not treat that use as business use unless one of the following conditions applies. Myfreetaxes com maine That use is directly connected with your business. Myfreetaxes com maine You properly report the value of the use as income to the other person and withhold tax on the income where required. Myfreetaxes com maine You are paid a fair market rent. Myfreetaxes com maine Treat any payment to you for the use of the automobile as a rent payment for purposes of item (3). Myfreetaxes com maine Employee deductions. Myfreetaxes com maine   If you are an employee, do not treat your use of listed property as business use unless it is for your employer's convenience and is required as a condition of your employment. Myfreetaxes com maine See Can Employees Claim a Deduction , earlier. Myfreetaxes com maine Qualified Business Use Qualified business use of listed property is any use of the property in your trade or business. Myfreetaxes com maine However, it does not include the following uses. Myfreetaxes com maine The leasing of property to any 5% owner or related person (to the extent the property is used by a 5% owner or person related to the owner or lessee of the property). Myfreetaxes com maine The use of property as pay for the services of a 5% owner or related person. Myfreetaxes com maine The use of property as pay for services of any person (other than a 5% owner or related person), unless the value of the use is included in that person's gross income and income tax is withheld on that amount where required. Myfreetaxes com maine Property does not stop being used predominantly for qualified business use because of a transfer at death. Myfreetaxes com maine Exception for leasing or compensatory use of aircraft. Myfreetaxes com maine   Treat the leasing of any aircraft by a 5% owner or related person, or the compensatory use of any aircraft, as a qualified business use if at least 25% of the total use of the aircraft during the year is for a qualified business use. Myfreetaxes com maine 5% owner. Myfreetaxes com maine   For a business entity that is not a corporation, a 5% owner is any person who owns more than 5% of the capital or profits interest in the business. Myfreetaxes com maine   For a corporation, a 5% owner is any person who owns, or is considered to own, either of the following. Myfreetaxes com maine More than 5% of the outstanding stock of the corporation. Myfreetaxes com maine Stock possessing more than 5% of the total combined voting power of all stock in the corporation. Myfreetaxes com maine Related persons. Myfreetaxes com maine   For a description of related persons, 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 . Myfreetaxes com maine For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. Myfreetaxes com maine Examples. Myfreetaxes com maine   The following examples illustrate whether the use of business property is qualified business use. Myfreetaxes com maine Example 1. Myfreetaxes com maine John Maple is the sole proprietor of a plumbing contracting business. Myfreetaxes com maine John employs his brother, Richard, in the business. Myfreetaxes com maine As part of Richard's pay, he is allowed to use one of the company automobiles for personal use. Myfreetaxes com maine The company includes the value of the personal use of the automobile in Richard's gross income and properly withholds tax on it. Myfreetaxes com maine The use of the automobile is pay for the performance of services by a related person, so it is not a qualified business use. Myfreetaxes com maine Example 2. Myfreetaxes com maine John, in Example 1, allows unrelated employees to use company automobiles for personal purposes. Myfreetaxes com maine He does not include the value of the personal use of the company automobiles as part of their compensation and he does not withhold tax on the value of the use of the automobiles. Myfreetaxes com maine This use of company automobiles by employees is not a qualified business use. Myfreetaxes com maine Example 3. Myfreetaxes com maine James Company Inc. Myfreetaxes com maine owns several automobiles that its employees use for business purposes. Myfreetaxes com maine The employees also are allowed to take the automobiles home at night. Myfreetaxes com maine The fair market value of each employee's use of an automobile for any personal purpose, such as commuting to and from work, is reported as income to the employee and James Company withholds tax on it. Myfreetaxes com maine This use of company automobiles by employees, even for personal purposes, is a qualified business use for the company. Myfreetaxes com maine Investment Use The use of property to produce income in a nonbusiness activity (investment use) is not a qualified business use. Myfreetaxes com maine However, you can treat the investment use as business use to figure the depreciation deduction for the property in a given year. Myfreetaxes com maine Example 1. Myfreetaxes com maine Sarah Bradley uses a home computer 50% of the time to manage her investments. Myfreetaxes com maine She also uses the computer 40% of the time in her part-time consumer research business. Myfreetaxes com maine Sarah's home computer is listed property because it is not used at a regular business establishment. Myfreetaxes com maine She does not use the computer predominantly for qualified business use. Myfreetaxes com maine Therefore, she cannot elect a section 179 deduction or claim a special depreciation allowance for the computer. Myfreetaxes com maine She must depreciate it using the straight line method over the ADS recovery period. Myfreetaxes com maine Her combined business/investment use for determining her depreciation deduction is 90%. Myfreetaxes com maine Example 2. Myfreetaxes com maine If Sarah uses her computer 30% of the time to manage her investments and 60% of the time in her consumer research business, it is used predominantly for qualified business use. Myfreetaxes com maine She can elect a section 179 deduction and, if she does not deduct all the computer's cost, she can claim a special depreciation allowance and depreciate the computer using the 200% declining balance method over the GDS recovery period. Myfreetaxes com maine Her combined business/investment use for determining her depreciation deduction is 90%. Myfreetaxes com maine Recapture of Excess Depreciation If you used listed property more than 50% in a qualified business use in the year you placed it in service, you must recapture (include in income) excess depreciation in the first year you use it 50% or less. Myfreetaxes com maine You also increase the adjusted basis of your property by the same amount. Myfreetaxes com maine Excess depreciation is: The depreciation allowable for the property (including any section 179 deduction and special depreciation allowance claimed) for years before the first year you do not use the property predominantly for qualified business use, minus The depreciation that would have been allowable for those years if you had not used the property predominantly for qualified business use in the year you placed it in service. Myfreetaxes com maine To determine the amount in (2) above, you must refigure the depreciation using the straight line method and the ADS recovery period. Myfreetaxes com maine Example. Myfreetaxes com maine In June 2009, Ellen Rye purchased and placed in service a pickup truck that cost $18,000. Myfreetaxes com maine She used it only for qualified business use for 2009 through 2012. Myfreetaxes com maine Ellen claimed a section 179 deduction of $10,000 based on the purchase of the truck. Myfreetaxes com maine She began depreciating it using the 200% DB method over a 5-year GDS recovery period. Myfreetaxes com maine The pickup truck's gross vehicle weight was over 6,000 pounds, so it was not subject to the passenger automobile limits discussed later under Do the Passenger Automobile Limits Apply. Myfreetaxes com maine During 2013, she used the truck 50% for business and 50% for personal purposes. Myfreetaxes com maine She includes $4,018 excess depreciation in her gross income for 2013. Myfreetaxes com maine The excess depreciation is determined as follows. Myfreetaxes com maine Total section 179 deduction ($10,000) and depreciation claimed ($6,618) for 2009 through 2012. Myfreetaxes com maine (Depreciation is from Table A-1. Myfreetaxes com maine ) $16,618 Minus: Depreciation allowable (Table A-8):     2009 – 10% of $18,000 $1,800   2010 – 20% of $18,000 3,600   2011 – 20% of $18,000 3,600   2012 – 20% of $18,000 3,600 12,600 Excess depreciation $4,018 If Ellen's use of the truck does not change to 50% for business and 50% for personal purposes until 2015, there will be no excess depreciation. Myfreetaxes com maine The total depreciation allowable using Table A-8 through 2015 will be $18,000, which equals the total of the section 179 deduction and depreciation she will have claimed. Myfreetaxes com maine Where to figure and report recapture. Myfreetaxes com maine   Use Form 4797, Part IV, to figure the recapture amount. Myfreetaxes com maine Report the recapture amount as other income on the same form or schedule on which you took the depreciation deduction. Myfreetaxes com maine For example, report the recapture amount as other income on Schedule C (Form 1040) if you took the depreciation deduction on Schedule C. Myfreetaxes com maine If you took the depreciation deduction on Form 2106, report the recapture amount as other income on Form 1040, line 21. Myfreetaxes com maine Lessee's Inclusion Amount If you use leased listed property other than a passenger automobile for business/investment use, you must include an amount in your income in the first year your qualified business-use percentage is 50% or less. Myfreetaxes com maine Your qualified business-use percentage is the part of the property's total use that is qualified business use (defined earlier). Myfreetaxes com maine For the inclusion amount rules for a leased passenger automobile, see Leasing a Car in chapter 4 of Publication 463. Myfreetaxes com maine The inclusion amount is the sum of Amount A and Amount B, described next. Myfreetaxes com maine However, see the special rules for the inclusion amount, later, if your lease begins in the last 9 months of your tax year or is for less than one year. Myfreetaxes com maine Amount A. Myfreetaxes com maine   Amount A is: The fair market value of the property, multiplied by The business/investment use for the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A-19 in Appendix A . Myfreetaxes com maine   The fair market value of the property is the value on the first day of the lease term. Myfreetaxes com maine If the capitalized cost of an item of listed property is specified in the lease agreement, you must treat that amount as the fair market value. Myfreetaxes com maine Amount B. Myfreetaxes com maine   Amount B is: The fair market value of the property, multiplied by The average of the business/investment use for all tax years the property was leased that precede the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A–20 in Appendix A . Myfreetaxes com maine Maximum inclusion amount. Myfreetaxes com maine   The inclusion amount cannot be more than the sum of the deductible amounts of rent for the tax year in which the lessee must include the amount in gross income. Myfreetaxes com maine Inclusion amount worksheet. Myfreetaxes com maine   The following worksheet is provided to help you figure the inclusion amount for leased listed property. Myfreetaxes com maine Inclusion Amount Worksheet for Leased Listed Property 1. Myfreetaxes com maine Fair market value   2. Myfreetaxes com maine Business/investment use for first year business use is 50% or less   3. Myfreetaxes com maine Multiply line 1 by line 2. Myfreetaxes com maine   4. Myfreetaxes com maine Rate (%) from Table A-19   5. Myfreetaxes com maine Multiply line 3 by line 4. Myfreetaxes com maine This is Amount A. Myfreetaxes com maine   6. Myfreetaxes com maine Fair market value   7. Myfreetaxes com maine Average business/investment use for years property leased before the first year business use is 50% or less . Myfreetaxes com maine . Myfreetaxes com maine . Myfreetaxes com maine . Myfreetaxes com maine . Myfreetaxes com maine . Myfreetaxes com maine . Myfreetaxes com maine . Myfreetaxes com maine . Myfreetaxes com maine . Myfreetaxes com maine . Myfreetaxes com maine . Myfreetaxes com maine . Myfreetaxes com maine   8. Myfreetaxes com maine Multiply line 6 by line 7   9. Myfreetaxes com maine Rate (%) from Table A-20   10. Myfreetaxes com maine Multiply line 8 by line 9. Myfreetaxes com maine This is Amount B. Myfreetaxes com maine   11. Myfreetaxes com maine Add line 5 and line 10. Myfreetaxes com maine This is your inclusion amount. Myfreetaxes com maine Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Myfreetaxes com maine )         Example. Myfreetaxes com maine On February 1, 2011, Larry House, a calendar year taxpayer, leased and placed in service a computer with a fair market value of $3,000. Myfreetaxes com maine The lease is for a period of 5 years. Myfreetaxes com maine Larry does not use the computer at a regular business establishment, so it is listed property. Myfreetaxes com maine His business use of the property (all of which is qualified business use) is 80% in 2011, 60% in 2012, and 40% in 2013. Myfreetaxes com maine He must add an inclusion amount to gross income for 2013, the first tax year his qualified business-use percentage is 50% or less. Myfreetaxes com maine The computer has a 5-year recovery period under both GDS and ADS. Myfreetaxes com maine 2013 is the third tax year of the lease, so the applicable percentage from Table A-19 is −19. Myfreetaxes com maine 8%. Myfreetaxes com maine The applicable percentage from Table A-20 is 22. Myfreetaxes com maine 0%. Myfreetaxes com maine Larry's deductible rent for the computer for 2013 is $800. Myfreetaxes com maine Larry uses the Inclusion amount worksheet. Myfreetaxes com maine to figure the amount he must include in income for 2013. Myfreetaxes com maine His inclusion amount is $224, which is the sum of −$238 (Amount A) and $462 (Amount B). Myfreetaxes com maine Inclusion Amount Worksheet for Leased Listed Property 1. Myfreetaxes com maine Fair market value $3,000   2. Myfreetaxes com maine Business/investment use for first year business use is 50% or less 40 % 3. Myfreetaxes com maine Multiply line 1 by line 2. Myfreetaxes com maine 1,200   4. Myfreetaxes com maine Rate (%) from Table A-19 −19. Myfreetaxes com maine 8 % 5. Myfreetaxes com maine Multiply line 3 by line 4. Myfreetaxes com maine This is Amount A. Myfreetaxes com maine −238   6. Myfreetaxes com maine Fair market value 3,000   7. Myfreetaxes com maine Average business/investment use for years property leased before the first year business use is 50% or less 70 % 8. Myfreetaxes com maine Multiply line 6 by line 7 2,100   9. Myfreetaxes com maine Rate (%) from Table A-20 22. Myfreetaxes com maine 0 % 10. Myfreetaxes com maine Multiply line 8 by line 9. Myfreetaxes com maine This is Amount B. Myfreetaxes com maine 462   11. Myfreetaxes com maine Add line 5 and line 10. Myfreetaxes com maine This is your inclusion amount. Myfreetaxes com maine Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Myfreetaxes com maine ) $224           Lease beginning in the last 9 months of your tax year. Myfreetaxes com maine    The inclusion amount is subject to a special rule if all the following apply. Myfreetaxes com maine The lease term begins within 9 months before the close of your tax year. Myfreetaxes com maine You do not use the property predominantly (more than 50%) for qualified business use during that part of the tax year. Myfreetaxes com maine The lease term continues into your next tax year. Myfreetaxes com maine Under this special rule, add the inclusion amount to income in the next tax year. Myfreetaxes com maine Figure the inclusion amount by taking into account the average of the business/investment use for both tax years (line 2 of the Inclusion Amount Worksheet for Leased Listed Property) and the applicable percentage for the tax year the lease term begins. Myfreetaxes com maine Skip lines 6 through 9 of the worksheet and enter zero on line 10. Myfreetaxes com maine Example 1. Myfreetaxes com maine On August 1, 2012, Julie Rule, a calendar year taxpayer, leased and placed in service an item of listed property. Myfreetaxes com maine The property is 5-year property with a fair market value of $10,000. Myfreetaxes com maine Her property has a recovery period of 5 years under ADS. Myfreetaxes com maine The lease is for 5 years. Myfreetaxes com maine Her business use of the property was 50% in 2012 and 90% in 2013. Myfreetaxes com maine She paid rent of $3,600 for 2012, of which $3,240 is deductible. Myfreetaxes com maine She must include $147 in income in 2013. Myfreetaxes com maine The $147 is the sum of Amount A and Amount B. Myfreetaxes com maine Amount A is $147 ($10,000 × 70% × 2. Myfreetaxes com maine 1%), the product of the fair market value, the average business use for 2012 and 2013, and the applicable percentage for year one from Table A-19 . Myfreetaxes com maine Amount B is zero. Myfreetaxes com maine Lease for less than one year. Myfreetaxes com maine   A special rule for the inclusion amount applies if the lease term is less than one year and you do not use the property predominantly (more than 50%) for qualified business use. Myfreetaxes com maine The amount included in income is the inclusion amount (figured as described in the preceding discussions) multiplied by a fraction. Myfreetaxes com maine The numerator of the fraction is the number of days in the lease term and the denominator is 365 (or 366 for leap years). Myfreetaxes com maine   The lease term for listed property other than residential rental or nonresidential real property includes options to renew. Myfreetaxes com maine If you have two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property, treat them as one lease. Myfreetaxes com maine Example 2. Myfreetaxes com maine On October 1, 2012, John Joyce, a calendar year taxpayer, leased and placed in service an item of listed property that is 3-year property. Myfreetaxes com maine This property had a fair market value of $15,000 and a recovery period of 5 years under ADS. Myfreetaxes com maine The lease term was 6 months (ending on March 31, 2013), during which he used the property 45% in business. Myfreetaxes com maine He must include $71 in income in 2013. Myfreetaxes com maine The $71 is the sum of Amount A and Amount B. Myfreetaxes com maine Amount A is $71 ($15,000 × 45% × 2. Myfreetaxes com maine 1% × 183/365), the product of the fair market value, the average business use for both years, and the applicable percentage for year one from Table A-19 , prorated for the length of the lease. Myfreetaxes com maine Amount B is zero. Myfreetaxes com maine Where to report inclusion amount. Myfreetaxes com maine   Report the inclusion amount figured as described in the preceding discussions as other income on the same form or schedule on which you took the deduction for your rental costs. Myfreetaxes com maine For example, report the inclusion amount as other income on Schedule C (Form 1040) if you took the deduction on Schedule C. Myfreetaxes com maine If you took the deduction for rental costs on Form 2106, report the inclusion amount as other income on Form 1040, line 21. Myfreetaxes com maine Do the Passenger Automobile Limits Apply? The depreciation deduction, including the section 179 deduction and special depreciation allowance, you can claim for a passenger automobile (defined earlier) each year is limited. Myfreetaxes com maine This section describes the maximum depreciation deduction amounts for 2013 and explains how to deduct, after the recovery period, the unrecovered basis of your property that results from applying the passenger automobile limit. Myfreetaxes com maine Exception for leased cars. Myfreetaxes com maine   The passenger automobile limits generally do not apply to passenger automobiles leased or held for leasing by anyone regularly engaged in the business of leasing passenger automobiles. Myfreetaxes com maine For information on when you are considered regularly engaged in the business of leasing listed property, including passenger automobiles, see Exception for leased property , earlier, under What Is the Business-Use Requirement . Myfreetaxes com maine Maximum Depreciation Deduction The passenger automobile limits are the maximum depreciation amounts you can deduct for a passenger automobile. Myfreetaxes com maine They are based on the date you placed the automobile in service. Myfreetaxes com maine Passenger Automobiles The maximum deduction amounts for most passenger automobiles are shown in the following table. Myfreetaxes com maine Maximum Depreciation Deduction for Passenger Automobiles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,1601 $5,100 $3,050 $1,875 2012 11,1601 5,100 3,050 1,875 2011 11,0602 4,900 2,950 1,775 2010 11,0602  4,900 2,950 1,775 2009 10,9603 4,800 2,850 1,775 2008 10,9603  4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6104 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7105 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6606 4,900 2,950 1,775 1If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Myfreetaxes com maine 2If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,060. Myfreetaxes com maine 3If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $2,960. Myfreetaxes com maine 4If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $2,960. Myfreetaxes com maine 5If you acquired the vehicle before 5/06/03, the maximum deduction is $7,660. Myfreetaxes com maine If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Myfreetaxes com maine 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Myfreetaxes com maine If your business/investment use of the automobile is less than 100%, you must reduce the maximum deduction amount by multiplying the maximum amount by the percentage of business/investment use determined on an annual basis during the tax year. Myfreetaxes com maine If you have a short tax year, you must reduce the maximum deduction amount by multiplying the maximum amount by a fraction. Myfreetaxes com maine The numerator of the fraction is the number of months and partial months in the short tax year and the denominator is 12. Myfreetaxes com maine Example. Myfreetaxes com maine On April 15, 2013, Virginia Hart bought and placed in service a new car for $14,500. Myfreetaxes com maine She used the car only in her business. Myfreetaxes com maine She files her tax return based on the calendar year. Myfreetaxes com maine She does not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Myfreetaxes com maine Under MACRS, a car is 5-year property. Myfreetaxes com maine Since she placed her car in service on April 15 and used it only for business, she uses the percentages in Table A-1 to figure her MACRS depreciation on the car. Myfreetaxes com maine Virginia multiplies the $14,500 unadjusted basis of her car by 0. Myfreetaxes com maine 20 to get her MACRS depreciation of $2,900 for 2013. Myfreetaxes com maine This $2,900 is below the maximum depreciation deduction of $3,160 for passenger automobiles placed in service in 2013. Myfreetaxes com maine She can deduct the full $2,900. Myfreetaxes com maine Electric Vehicles The maximum depreciation deductions for passenger automobiles that are produced to run primarily on electricity are higher than those for other automobiles. Myfreetaxes com maine The maximum deduction amounts for electric vehicles placed in service after August 5, 1997, and before January 1, 2007, are shown in the following table. Myfreetaxes com maine Owners of electric vehicles placed in service after December 31, 2006, should use the table of maximum deduction amounts later for electric vehicles classified as passenger automobiles or use the table of maximum deduction amounts for trucks and vans later, for electric vehicles classified as trucks and vans. Myfreetaxes com maine Maximum Depreciation Deduction For Electric Vehicles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2006 $8,980 $14,400 $8,650 $5,225 2005 8,880 14,200 8,450 5,125 2004 31,8301 14,300 8,550 5,125 5/06/2003– 12/31/2003 32,0302 14,600 8,750 5,225 1/01/2003– 5/05/2003 22,8803 14,600 8,750 5,225 1If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $8,880. Myfreetaxes com maine 2If you acquired the vehicle before 5/06/03, the maximum deduction is $22,880. Myfreetaxes com maine If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Myfreetaxes com maine 3 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Myfreetaxes com maine Trucks and Vans The maximum depreciation deductions for trucks and vans placed in service after 2002 are higher than those for other passenger automobiles. Myfreetaxes com maine The maximum deduction amounts for trucks and vans are shown in the following table. Myfreetaxes com maine Maximum Depreciation Deduction For Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 11,3601 5,300 3,150 1,875 2011 11,2602 5,200 3,150 1,875 2010 11,1603 5,100 3,050 1,875 2009 11,0604 4,900 2,950 1,775 2008 11,1605 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2006 3,260 5,200 3,150 1,875 2005 3,260 5,200 3,150 1,875 2004 10,9106 5,300 3,150 1,875 5/06/2003– 12/31/2003 11,0107 5,400 3,250 1,975 1/01/2003– 5/05/2003 7,9608 5,400 3,250 1,975 1 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,360. Myfreetaxes com maine 2 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,260. Myfreetaxes com maine 3 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Myfreetaxes com maine 4 If you elect not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,060. Myfreetaxes com maine 5If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,160. Myfreetaxes com maine 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, or the maximum deduction is $3,260. Myfreetaxes com maine 7 If you acquired the vehicle before 5/06/03, the maximum deduction is $7,960. Myfreetaxes com maine If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Myfreetaxes com maine 8 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Myfreetaxes com maine Depreciation Worksheet for Passenger Automobiles You can use the following worksheet to figure your depreciation deduction using the percentage tables. Myfreetaxes com maine Then use the information from this worksheet to prepare Form 4562. Myfreetaxes com maine Depreciation Worksheet for Passenger Automobiles   Part I   1. Myfreetaxes com maine MACRS system (GDS or ADS)     2. Myfreetaxes com maine Property class     3. Myfreetaxes com maine Date placed in service     4. Myfreetaxes com maine Recovery period     5. Myfreetaxes com maine Method and convention     6. Myfreetaxes com maine Depreciation rate (from tables)     7. Myfreetaxes com maine Maximum depreciation deduction for this year from the appropriate table       8. Myfreetaxes com maine Business/investment-use percentage       9. Myfreetaxes com maine Multiply line 7 by line 8. Myfreetaxes com maine This is your adjusted maximum depreciation deduction       10. Myfreetaxes com maine Section 179 deduction claimed this year (not more than line 9). Myfreetaxes com maine Enter -0- if this is not the year you placed the car in service. Myfreetaxes com maine         Note. Myfreetaxes com maine  1) If line 10 is equal to line 9, stop here. Myfreetaxes com maine Your combined section 179 and depreciation deduction (including your special depreciation allowance) is limited to the amount on line 9. Myfreetaxes com maine  2) If line 10 is less than line 9, complete Part II. Myfreetaxes com maine   Part II   11. Myfreetaxes com maine Subtract line 10 from line 9. Myfreetaxes com maine This is the limit on the amount you can deduct for depreciation (including any special depreciation allowance )       12. Myfreetaxes com maine Cost or other basis (reduced by any alternative motor vehicle credit 1or credit for electric vehicles 2)       13. Myfreetaxes com maine Multiply line 12 by line 8. Myfreetaxes com maine This is your business/investment cost       14. Myfreetaxes com maine Section 179 deduction claimed in the year you placed the car in service       15. Myfreetaxes com maine Subtract line 14 from line 13. Myfreetaxes com maine This is your tentative basis for depreciation       16. Myfreetaxes com maine Multiply line 15 by . Myfreetaxes com maine 50 if the 50% special depreciation allowance applies. Myfreetaxes com maine This is your special depreciation allowance. Myfreetaxes com maine Enter -0- if this is not the year you placed the car in service, the car is not qualified property, or you elected not to claim a special depreciation allowance       Note 1) If line 16 is equal to line 11, stop here. Myfreetaxes com maine Your depreciation deduction (including your special depreciation allowance) is limited to the amount on line 11. Myfreetaxes com maine  2) If line 16 is less than line 11, complete Part III. Myfreetaxes com maine   Part III   17. Myfreetaxes com maine Subtract line 16 from 11. Myfreetaxes com maine This is the limit on the amount you can deduct for MACRS depreciation       18. Myfreetaxes com maine Subtract line 16 from line 15. Myfreetaxes com maine This is your basis for depreciation. Myfreetaxes com maine       19. Myfreetaxes com maine Multiply line 18 by line 6. Myfreetaxes com maine This is your tentative MACRS depreciation deduction. Myfreetaxes com maine       20. Myfreetaxes com maine Enter the lesser of line 17 or line 19. Myfreetaxes com maine This is your MACRS depreciation deduction. Myfreetaxes com maine     1 When figuring the amount to enter on line 12, do not reduce your cost or other basis by any section 179 deduction you claimed for your car. Myfreetaxes com maine 2 Reduce the basis by the lesser of $4,000 or 10% of the cost of the vehicle even if the credit is less than that amount. Myfreetaxes com maine             Deductions After the Recovery Period If the depreciation deductions for your automobile are reduced under the passenger automobile limits, you will have unrecovered basis in your automobile at the end of the recovery period. Myfreetaxes com maine If you continue to use the automobile for business, you can deduct that unrecovered basis after the recovery period ends. Myfreetaxes com maine You can claim a depreciation deduction in each succeeding tax year until you recover your full basis in the car. Myfreetaxes com maine The maximum amount you can deduct each year is determined by the date you placed the car in service and your business/investment-use percentage. Myfreetaxes com maine See Maximum Depreciation Deduction , earlier. Myfreetaxes com maine Unrecovered basis is the cost or other basis of the passenger automobile reduced by any clean-fuel vehicle deduction, electric vehicle credit, depreciation, and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use and the passenger automobile limits had not applied. Myfreetaxes com maine You cannot claim a depreciation deduction for listed property other than passenger automobiles after the recovery period ends. Myfreetaxes com maine There is no unrecovered basis at the end of the recovery period because you are considered to have used this property 100% for business and investment purposes during all of the recovery period. Myfreetaxes com maine Example. Myfreetaxes com maine In May 2007, you bought and placed in service a car costing $31,500. Myfreetaxes com maine The car was 5-year property under GDS (MACRS). Myfreetaxes com maine You did not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Myfreetaxes com maine You used the car exclusively for business during the recovery period (2007 through 2012). Myfreetaxes com maine You figured your depreciation as shown below. Myfreetaxes com maine Year Percentage Amount Limit   Allowed 2007 20. Myfreetaxes com maine 0% $6,300 $2,960   $2,960 2008 32. Myfreetaxes com maine 0 10,080 4,800   4,800 2009 19. Myfreetaxes com maine 2 6,048 2,850   2,850 2010 11. Myfreetaxes com maine 52 3,629 1,675   1,675 2011 11. Myfreetaxes com maine 52 3,629 1,675   1,675 2012 5. Myfreetaxes com maine 76 1,814 1,675   1,675 Total   $15,635 At the end of 2012, you had an unrecovered basis of $15,865 ($31,500 − $15,635). Myfreetaxes com maine If in 2013 and later years you continue to use the car 100% for business, you can deduct each year the lesser of $1,675 or your remaining unrecovered basis. Myfreetaxes com maine If your business use of the car had been less than 100% during any year, your depreciation deduction would have been less than the maximum amount allowable for that year. Myfreetaxes com maine However, in figuring your unrecovered basis in the car, you would still reduce your basis by the maximum amount allowable as if the business use had been 100%. Myfreetaxes com maine For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $9,519 ($15,865 × 60%), but you still would have to reduce your basis by $15,865 to determine your unrecovered basis. Myfreetaxes com maine Deductions For Passenger Automobiles Acquired in a Trade-in If you acquire a passenger automobile in a trade-in, depreciate the carryover basis separately as if the trade-in did not occur. Myfreetaxes com maine Depreciate the part of the new automobile's basis that exceeds its carryover basis (excess basis) as if it were newly placed in service property. Myfreetaxes com maine This excess basis is the additional cash paid for the new automobile in the trade-in. Myfreetaxes com maine The depreciation figured for the two components of the basis (carryover basis and excess basis) is subject to a single passenger automobile limit. Myfreetaxes com maine Special rules apply in determining the passenger automobile limits. Myfreetaxes com maine These rules and examples are discussed in section 1. Myfreetaxes com maine 168(i)-6(d)(3) of the regulations. Myfreetaxes com maine Instead of figuring depreciation for the carryover basis and the excess basis separately, you can elect to treat the old automobile as disposed of and both of the basis components for the new automobile as if placed in service at the time of the trade-in. Myfreetaxes com maine For more information, including how to make this election, see Election out under Property Acquired in a Like-kind Exchange or Involuntary Conversion in chapter 4 and sections 1. Myfreetaxes com maine 168(i)-6(i) and 1. Myfreetaxes com maine 168(i)-6(j) of the regulations. Myfreetaxes com maine What Records Must Be Kept? You cannot take any depreciation or section 179 deduction for the use of listed property unless you can prove your business/investment use with adequate records or with sufficient evidence to support your own statements. Myfreetaxes com maine For listed property, you must keep records for as long as any recapture can still occur. Myfreetaxes com maine Recapture can occur in any tax year of the recovery period. Myfreetaxes com maine Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. Myfreetaxes com maine You do not have to record information in an account book, diary, or similar record if the information is already shown on the receipt. Myfreetaxes com maine However, your records should back up your receipts in an orderly manner. Myfreetaxes com maine Elements of expenditure or use. Myfreetaxes com maine   Your records or other documentary evidence must support all the following. Myfreetaxes com maine The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses. Myfreetaxes com maine The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year. Myfreetaxes com maine The date of the expenditure or use. Myfreetaxes com maine The business or investment purpose for the expenditure or use. Myfreetaxes com maine   Written documents of your expenditure or use are generally better evidence than oral statements alone. Myfreetaxes com maine You do not have to keep a daily log. Myfreetaxes com maine However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time of the expenditure or use and backed up by other documents is preferable to a statement you prepare later. Myfreetaxes com maine Timeliness. Myfreetaxes com maine   You must record the elements of an expenditure or use at the time you have full knowledge of the elements. Myfreetaxes com maine An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use generally is considered a timely record if, in the regular course of business: The statement is given by an employee to the employer, or The statement is given by an independent contractor to the client or customer. Myfreetaxes com maine   For example, a log maintained on a weekly basis, that accounts for use during the week, will be considered a record made at or near the time of use. Myfreetaxes com maine Business purpose supported. Myfreetaxes com maine   Generally, an adequate record of business purpose must be in the form of a written statement. Myfreetaxes com maine However, the amount of detail necessary to establish a business purpose depends on the facts and circumstances of each case. Myfreetaxes com maine A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. Myfreetaxes com maine For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. Myfreetaxes com maine Business use supported. Myfreetaxes com maine   An adequate record contains enough information on each element of every business or investment use. Myfreetaxes com maine The amount of detail required to support the use depends on the facts and circumstances. Myfreetaxes com maine For example, a taxpayer who uses a truck for both business and personal purposes and whose only business use of the truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. Myfreetaxes com maine   Although you generally must prepare an adequate written record, you can prepare a record of the business use of listed property in a computer memory device that uses a logging program. Myfreetaxes com maine Separate or combined expenditures or uses. Myfreetaxes com maine   Each use by you normally is considered a separate use. Myfreetaxes com maine However, you can combine repeated uses as a single item. Myfreetaxes com maine   Record each expenditure as a separate item. Myfreetaxes com maine Do not combine it with other expenditures. Myfreetaxes com maine If you choose, however, you can combine amounts you spent for the use of listed property during a tax year, such as for gasoline or automobile repairs. Myfreetaxes com maine If you combine these expenses, you do not need to support the business purpose of each expense. Myfreetaxes com maine Instead, you can divide the expenses based on the total business use of the listed property. Myfreetaxes com maine   You can account for uses that can be considered part of a single use, such as a round trip or uninterrupted business use, by a single record. Myfreetaxes com maine For example, you can account for the use of a truck to make deliveries at several locations that begin and end at the business premises and can include a stop at the business in between deliveries by a single record of miles driven. Myfreetaxes com maine You can account for the use of a passenger automobile by a salesperson for a business trip away from home over a period of time by a single record of miles traveled. Myfreetaxes com maine Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. Myfreetaxes com maine Confidential information. Myfreetaxes com maine   If any of the information on the elements of an expenditure or use is confidential, you do not need to include it in the account book or similar record if you record it at or near the time of the expenditure or use. Myfreetaxes com maine You must keep it elsewhere and make it available as support to the IRS director for your area on request. Myfreetaxes com maine Substantial compliance. Myfreetaxes com maine   If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the satisfaction of the IRS director for your area, you can establish this element by any evidence the IRS director for your area deems adequate. Myfreetaxes com maine   If you fail to establish to the satisfaction of the IRS director for your area that you have substantially complied with the adequate records requirement for an element of an expenditure or use, you must establish the element as follows. Myfreetaxes com maine By your own oral or written statement containing detailed information as to the element. Myfreetaxes com maine By other evidence sufficient to establish the element. Myfreetaxes com maine   If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct evidence, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. Myfreetaxes com maine If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. Myfreetaxes com maine Sampling. Myfreetaxes com maine   You can maintain an adequate record for part of a tax year and use that record to support your business and investment use of listed property for the entire tax year if it can be shown by other evidence that the periods for which you maintain an adequate record are representative of the use throughout the year. Myfreetaxes com maine Example 1. Myfreetaxes com maine Denise Williams, a sole proprietor and calendar year taxpayer, operates an interior decorating business out of her home. Myfreetaxes com maine She uses her automobile for local business visits to the homes or offices of clients, for meetings with suppliers and subcontractors, and to pick up and deliver items to clients. Myfreetaxes com maine There is no other business use of the automobile, but she and family members also use it for personal purposes. Myfreetaxes com maine She maintains adequate records for the first 3 months of the year showing that 75% of the automobile use was for business. Myfreetaxes com maine Subcontractor invoices and paid bills show that her business continued at approximately the same rate for the rest of the year. Myfreetaxes com maine If there is no change in circumstances, such as the purchase of a second car for exclusive use in her business, the determination that her combined business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Myfreetaxes com maine Example 2. Myfreetaxes com maine Assume the same facts as in Example 1, except that Denise maintains adequate records during the first week of every month showing that 75% of her use of the automobile is for business. Myfreetaxes com maine Her business invoices show that her business continued at the same rate during the later weeks of each month so that her weekly records are representative of the automobile's business use throughout the month. Myfreetaxes com maine The determination that her business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Myfreetaxes com maine Example 3. Myfreetaxes com maine Bill Baker, a sole proprietor and calendar year taxpayer, is a salesman in a large metropolitan area for a company that manufactures household products. Myfreetaxes com maine For the first 3 weeks of each month, he occasionally uses his own automobile for business travel within the metropolitan area. Myfreetaxes com maine During these weeks, his business use of the automobile does not follow a consistent pattern. Myfreetaxes com maine During the fourth week of each month, he delivers all business orders taken during the previous month. Myfreetaxes com maine The business use of his automobile, as supported by adequate records, is 70% of its total use during that fourth week. Myfreetaxes com maine The determination based on the record maintained during the fourth week of the month that his business/investment use of the automobile for the tax year is 70% does not rest on sufficient supporting evidence because his use during that week is not representative of use during other periods. Myfreetaxes com maine Loss of records. Myfreetaxes com maine   When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. Myfreetaxes com maine How Is Listed Property Information Reported? You must provide the information about your listed property requested in Part V of Form 4562, Section A, if you claim either of the following deductions. Myfreetaxes com maine Any deduction for a vehicle. Myfreetaxes com maine A depreciation deduction for any other listed property. Myfreetaxes com maine If you claim any deduction for a vehicle, you also must provide the information requested in Section B. Myfreetaxes com maine If you provide the vehicle for your employee's use, the employee must give you this information. Myfreetaxes com maine If you provide any vehicle for use by an employee, you must first answer the questions in Section C to see if you meet an exception to completing Section B for that vehicle. Myfreetaxes com maine Vehicles used by your employees. Myfreetaxes com maine   You do not have to complete Section B, Part V, for vehicles used by your employees who are not more-than-5% owners or related persons if you meet at least one of the following requirements. Myfreetaxes com maine You maintain a written policy statement that prohibits one of the following uses of the vehicles. Myfreetaxes com maine All personal use including commuting. Myfreetaxes com maine Personal use, other than commuting, by employees who are not officers, directors, or 1%-or-more owners. Myfreetaxes com maine You treat all use of the vehicles by your employees as personal use. Myfreetaxes com maine You provide more than five vehicles for use by your employees, and you keep in your records the information on their use given to you by the employees. Myfreetaxes com maine For demonstrator automobiles provided to full-time salespersons, you maintain a written policy statement that limits the total mileage outside the salesperson's normal working hours and prohibits use of the automobile by anyone else, for vacation trips, or to store personal possessions. Myfreetaxes com maine Exceptions. Myfreetaxes com maine   If you file Form 2106, 2106-EZ, or Schedule C-EZ (Form 1040), and you are not required to file Form 4562, report information about listed property on that form and not on Form 4562. Myfreetaxes com maine Also, if you file Schedule C (Form 1040) and are claiming the standard mileage rate or actual vehicle expenses (except depreciation) and you are not required to file Form 4562 for any other reason, report vehicle information in Part IV of Schedule C and not on Form 4562. Myfreetaxes com maine Prev  Up  Next   Home   More Online Publications
Español

External Link Disclaimer

Thank you for visiting USA.gov, the U.S. government's official web portal.

You are now exiting our site.

The information that you are being directed to is an external site.

It is not official U.S. government information nor does it reflect the views of the United States government.

Go to the jPodder site.

Return to USA.gov.

The Myfreetaxes Com Maine

Myfreetaxes com maine 3. Myfreetaxes com maine   Reporting Rental Income, Expenses, and Losses Table of Contents Which Forms To UseSchedule E (Form 1040) Schedule C (Form 1040), Profit or Loss From Business Qualified Joint Venture Limits on Rental LossesAt-Risk Rules Passive Activity Limits Casualties and Thefts Example Figuring the net income or loss for a residential rental activity may involve more than just listing the income and deductions on Schedule E (Form 1040). Myfreetaxes com maine There are activities which do not qualify to use Schedule E, such as when the activity is not engaged in to make a profit or when you provide substantial services in conjunction with the property. Myfreetaxes com maine There are also the limitations which may need to be applied if you have a net loss on Schedule E. Myfreetaxes com maine There are two: (1) the limitation based on the amount of investment you have at risk in your rental activity, and (2) the special limits imposed on passive activities. Myfreetaxes com maine You may also have a gain or loss related to your rental property from a casualty or theft. Myfreetaxes com maine This is considered separately from the income and expense information you report on Schedule E. Myfreetaxes com maine Which Forms To Use The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). Myfreetaxes com maine However, do not use that schedule to report a not-for-profit activity. Myfreetaxes com maine See Not Rented for Profit , in chapter 4. Myfreetaxes com maine There are also other rental situations in which forms other than Schedule E would be used. Myfreetaxes com maine Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. Myfreetaxes com maine , you normally report your rental income and expenses on Schedule E, Part I. Myfreetaxes com maine List your total income, expenses, and depreciation for each rental property. Myfreetaxes com maine Be sure to enter the number of fair rental and personal use days on line 2. Myfreetaxes com maine If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. Myfreetaxes com maine Complete lines 1 and 2 for each property. Myfreetaxes com maine However, fill in lines 23a through 26 on only one Schedule E. Myfreetaxes com maine On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. Myfreetaxes com maine To find out if you need to attach Form 4562, see Form 4562 , later. Myfreetaxes com maine If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. Myfreetaxes com maine Form 6198, At-Risk Limitations. Myfreetaxes com maine See At-Risk Rules , later. Myfreetaxes com maine Also see Publication 925. Myfreetaxes com maine Form 8582, Passive Activity Loss Limitations. Myfreetaxes com maine See Passive Activity Limits , later. Myfreetaxes com maine Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. Myfreetaxes com maine If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. Myfreetaxes com maine Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). Myfreetaxes com maine Form 4562. Myfreetaxes com maine   You must complete and attach Form 4562 for rental activities only if you are claiming: Depreciation, including the special depreciation allowance, on property placed in service during 2013; Depreciation on listed property (such as a car), regardless of when it was placed in service; or Any other car expenses, including the standard mileage rate or lease expenses. Myfreetaxes com maine Otherwise, figure your depreciation on your own worksheet. Myfreetaxes com maine You do not have to attach these computations to your return, but you should keep them in your records for future reference. Myfreetaxes com maine   See Publication 946 for information on preparing Form 4562. Myfreetaxes com maine Schedule C (Form 1040), Profit or Loss From Business Generally, Schedule C is used when you provide substantial services in conjunction with the property or the rental is part of a trade or business as a real estate dealer. Myfreetaxes com maine Providing substantial services. Myfreetaxes com maine   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Myfreetaxes com maine Use Form 1065, U. Myfreetaxes com maine S. Myfreetaxes com maine Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). Myfreetaxes com maine Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. Myfreetaxes com maine For information, see Publication 334, Tax Guide for Small Business. Myfreetaxes com maine Also, you may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. Myfreetaxes com maine For a discussion of “substantial services,” see Real Estate Rents in Publication 334, chapter 5. Myfreetaxes com maine Qualified Joint Venture If you and your spouse each materially participate (see Material participation under Passive Activity Limits, later) as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Myfreetaxes com maine This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. Myfreetaxes com maine If you make this election, you must report rental real estate income on Schedule E (or Schedule C if you provide substantial services). Myfreetaxes com maine You will not be required to file Form 1065 for any year the election is in effect. Myfreetaxes com maine Rental real estate income generally is not included in net earnings from self-employment subject to self-employment tax and generally is subject to the passive activity limits. Myfreetaxes com maine If you and your spouse filed a Form 1065 for the year prior to the election, the partnership terminates at the end of the tax year immediately preceding the year the election takes effect. Myfreetaxes com maine For more information on qualified joint ventures, go to IRS. Myfreetaxes com maine gov and enter “qualified joint venture” in the search box. Myfreetaxes com maine Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. Myfreetaxes com maine You must consider these rules in the order shown below. Myfreetaxes com maine Both are discussed in this section. Myfreetaxes com maine At-risk rules. Myfreetaxes com maine These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. Myfreetaxes com maine This applies only if the real property was placed in service after 1986. Myfreetaxes com maine Passive activity limits. Myfreetaxes com maine Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. Myfreetaxes com maine However, there are exceptions. Myfreetaxes com maine At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. Myfreetaxes com maine Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. Myfreetaxes com maine In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. Myfreetaxes com maine You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. Myfreetaxes com maine Any loss that is disallowed because of the at-risk limits is treated as a deduction from the same activity in the next tax year. Myfreetaxes com maine See Publication 925 for a discussion of the at-risk rules. Myfreetaxes com maine Form 6198. Myfreetaxes com maine   If you are subject to the at-risk rules, file Form 6198, At-Risk Limitations, with your tax return. Myfreetaxes com maine Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. Myfreetaxes com maine For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. Myfreetaxes com maine For a discussion of activities that are not considered rental activities, see Rental Activities in Publication 925. Myfreetaxes com maine Deductions or losses from passive activities are limited. Myfreetaxes com maine You generally cannot offset income, other than passive income, with losses from passive activities. Myfreetaxes com maine Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. Myfreetaxes com maine Any excess loss or credit is carried forward to the next tax year. Myfreetaxes com maine Exceptions to the rules for figuring passive activity limits for personal use of a dwelling unit and for rental real estate with active participation are discussed later. Myfreetaxes com maine For a detailed discussion of these rules, see Publication 925. Myfreetaxes com maine Real estate professionals. Myfreetaxes com maine   If you are a real estate professional, complete line 43 of Schedule E. Myfreetaxes com maine      You qualify as a real estate professional for the tax year if you meet both of the following requirements. Myfreetaxes com maine More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate. Myfreetaxes com maine You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate. Myfreetaxes com maine If you qualify as a real estate professional, rental real estate activities in which you materially participated are not passive activities. Myfreetaxes com maine For purposes of determining whether you materially participated in your rental real estate activities, each interest in rental real estate is a separate activity unless you elect to treat all your interests in rental real estate as one activity. Myfreetaxes com maine   Do not count personal services you perform as an employee in real property trades or businesses unless you are a 5% owner of your employer. Myfreetaxes com maine You are a 5% owner if you own (or are considered to own) more than 5% of your employer's outstanding stock, or capital or profits interest. Myfreetaxes com maine   Do not count your spouse's personal services to determine whether you met the requirements listed earlier to qualify as a real estate professional. Myfreetaxes com maine However, you can count your spouse's participation in an activity in determining if you materially participated. Myfreetaxes com maine Real property trades or businesses. Myfreetaxes com maine   A real property trade or business is a trade or business that does any of the following with real property. Myfreetaxes com maine Develops or redevelops it. Myfreetaxes com maine Constructs or reconstructs it. Myfreetaxes com maine Acquires it. Myfreetaxes com maine Converts it. Myfreetaxes com maine Rents or leases it. Myfreetaxes com maine Operates or manages it. Myfreetaxes com maine Brokers it. Myfreetaxes com maine Choice to treat all interests as one activity. Myfreetaxes com maine   If you were a real estate professional and had more than one rental real estate interest during the year, you can choose to treat all the interests as one activity. Myfreetaxes com maine You can make this choice for any year that you qualify as a real estate professional. Myfreetaxes com maine If you forgo making the choice for one year, you can still make it for a later year. Myfreetaxes com maine   If you make the choice, it is binding for the tax year you make it and for any later year that you are a real estate professional. Myfreetaxes com maine This is true even if you are not a real estate professional in any intervening year. Myfreetaxes com maine (For that year, the exception for real estate professionals will not apply in determining whether your activity is subject to the passive activity rules. Myfreetaxes com maine )   See the Instructions for Schedule E for information about making this choice. Myfreetaxes com maine Material participation. Myfreetaxes com maine   Generally, you materially participated in an activity for the tax year if you were involved in its operations on a regular, continuous, and substantial basis during the year. Myfreetaxes com maine For details, see Publication 925 or the Instructions for Schedule C. Myfreetaxes com maine Participating spouse. Myfreetaxes com maine   If you are married, determine whether you materially participated in an activity by also counting any participation in the activity by your spouse during the year. Myfreetaxes com maine Do this even if your spouse owns no interest in the activity or files a separate return for the year. Myfreetaxes com maine Form 8582. Myfreetaxes com maine    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. Myfreetaxes com maine See Form 8582 not required , later in this chapter, to determine if you must complete Form 8582. Myfreetaxes com maine   If you are required to complete Form 8582 and are also subject to the at-risk rules, include the amount from Form 6198, line 21 (deductible loss) in column (b) of Form 8582, Worksheet 1 or 3, as required. Myfreetaxes com maine Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. Myfreetaxes com maine Instead, follow the rules explained in chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Myfreetaxes com maine Exception for Rental Real Estate With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. Myfreetaxes com maine This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. Myfreetaxes com maine Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. Myfreetaxes com maine Example. Myfreetaxes com maine Jane is single and has $40,000 in wages, $2,000 of passive income from a limited partnership, and $3,500 of passive loss from a rental real estate activity in which she actively participated. Myfreetaxes com maine $2,000 of Jane's $3,500 loss offsets her passive income. Myfreetaxes com maine The remaining $1,500 loss can be deducted from her $40,000 wages. Myfreetaxes com maine The special allowance is not available if you were married, lived with your spouse at any time during the year, and are filing a separate return. Myfreetaxes com maine Active participation. Myfreetaxes com maine   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Myfreetaxes com maine Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions. Myfreetaxes com maine Example. Myfreetaxes com maine Mike is single and had the following income and losses during the tax year:   Salary $42,300     Dividends 300     Interest 1,400     Rental loss (4,000)   The rental loss was from the rental of a house Mike owned. Myfreetaxes com maine Mike had advertised and rented the house to the current tenant himself. Myfreetaxes com maine He also collected the rents, which usually came by mail. Myfreetaxes com maine All repairs were either made or contracted out by Mike. Myfreetaxes com maine Although the rental loss is from a passive activity, because Mike actively participated in the rental property management he can use the entire $4,000 loss to offset his other income. Myfreetaxes com maine Maximum special allowance. Myfreetaxes com maine   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. Myfreetaxes com maine   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. Myfreetaxes com maine If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. Myfreetaxes com maine   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. Myfreetaxes com maine Modified adjusted gross income (MAGI). Myfreetaxes com maine   This is your adjusted gross income from Form 1040, U. Myfreetaxes com maine S. Myfreetaxes com maine Individual Income Tax Return, line 38, or Form 1040NR, U. Myfreetaxes com maine S. Myfreetaxes com maine Nonresident Alien Income Tax Return, line 37, figured without taking into account: The taxable amount of social security or equivalent tier 1 railroad retirement benefits, The deductible contributions to traditional individual retirement accounts (IRAs) and section 501(c)(18) pension plans, The exclusion from income of interest from Series EE and I U. Myfreetaxes com maine S. Myfreetaxes com maine savings bonds used to pay higher educational expenses, The exclusion of amounts received under an employer's adoption assistance program, Any passive activity income or loss included on Form 8582, Any rental real estate loss allowed to real estate professionals, Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the Instructions for Form 8582), The deduction allowed for one-half of self-employment tax, The deduction allowed for interest paid on student loans, The deduction for qualified tuition and related fees, and The domestic production activities deduction (see the Instructions for Form 8903). Myfreetaxes com maine Form 8582 not required. Myfreetaxes com maine   Do not complete Form 8582 if you meet all of the following conditions. Myfreetaxes com maine Your only passive activities were rental real estate activities in which you actively participated. Myfreetaxes com maine Your overall net loss from these activities is $25,000 or less ($12,500 or less if married filing separately and you lived apart from your spouse all year). Myfreetaxes com maine If married filing separately, you lived apart from your spouse all year. Myfreetaxes com maine You have no prior year unallowed losses from these (or any other passive) activities. Myfreetaxes com maine You have no current or prior year unallowed credits from passive activities. Myfreetaxes com maine Your MAGI is $100,000 or less ($50,000 or less if married filing separately and you lived apart from your spouse all year). Myfreetaxes com maine You do not hold any interest in a rental real estate activity as a limited partner or as a beneficiary of an estate or a trust. Myfreetaxes com maine   If you meet all of the conditions listed above, your rental real estate activities are not limited by the passive activity rules and you do not have to complete Form 8582. Myfreetaxes com maine On lines 23a through 23e of your Schedule E, enter the applicable amounts. Myfreetaxes com maine Casualties and Thefts As a result of a casualty or theft, you may have a loss related to your rental property. Myfreetaxes com maine You may be able to deduct the loss on your income tax return. Myfreetaxes com maine Casualty. Myfreetaxes com maine   This is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Myfreetaxes com maine Such events include a storm, fire, or earthquake. Myfreetaxes com maine Theft. Myfreetaxes com maine   This is defined as the unlawful taking and removing of your money or property with the intent to deprive you of it. Myfreetaxes com maine Gain from casualty or theft. Myfreetaxes com maine   It is also possible to have a gain from a casualty or theft if you receive money, including insurance, that is more than your adjusted basis in the property. Myfreetaxes com maine Generally, you must report this gain. Myfreetaxes com maine However, under certain circumstances, you may defer paying tax by choosing to postpone reporting the gain. Myfreetaxes com maine To do this, you generally must buy replacement property within 2 years after the close of the first tax year in which any part of your gain is realized. Myfreetaxes com maine In certain circumstances, the replacement period can be greater than 2 years; see Replacement Period in Publication 547 for more information. Myfreetaxes com maine The cost of the replacement property must be equal to or more than the net insurance or other payment you received. Myfreetaxes com maine More information. Myfreetaxes com maine   For information on business and nonbusiness casualty and theft losses, see Publication 547. Myfreetaxes com maine How to report. Myfreetaxes com maine    If you had a casualty or theft that involved property used in your rental activity, figure the net gain or loss in Section B of Form 4684, Casualties and Thefts. Myfreetaxes com maine Follow the Instructions for Form 4684 for where to carry your net gain or loss. Myfreetaxes com maine Example In February 2008, Marie Pfister bought a rental house for $135,000 (house $120,000 and land $15,000) and immediately began renting it out. Myfreetaxes com maine In 2013, she rented it all 12 months for a monthly rental fee of $1,125. Myfreetaxes com maine In addition to her rental income of $13,500 (12 x $1,125), Marie had the following expenses. Myfreetaxes com maine Mortgage interest $8,000 Fire insurance (1-year policy) 250 Miscellaneous repairs 400 Real estate taxes imposed and paid 500 Maintenance 200 Marie depreciates the residential rental property under MACRS GDS. Myfreetaxes com maine This means using the straight line method over a recovery period of 27. Myfreetaxes com maine 5 years. Myfreetaxes com maine She uses Table 2-2d to find her depreciation percentage. Myfreetaxes com maine Because she placed the property in service in February 2008, she continues to use that row of Table 2-2d. Myfreetaxes com maine For year 6, the rate is 3. Myfreetaxes com maine 636%. Myfreetaxes com maine Marie figures her net rental income or loss for the house as follows: Total rental income received  ($1,125 × 12) $13,500 Minus: Expenses     Mortgage interest $8,000   Fire insurance 250   Miscellaneous repairs 400   Real estate taxes 500   Maintenance 200   Total expenses 9,350 Balance $4,150 Minus: Depreciation ($120,000 x 3. Myfreetaxes com maine 636%) 4,363 Net rental (loss) for house ($213)       Marie had a net loss for the year. Myfreetaxes com maine Because she actively participated in her passive rental real estate activity and her loss was less than $25,000, she can deduct the loss on her return. Myfreetaxes com maine Marie also meets all of the requirements for not having to file Form 8582. Myfreetaxes com maine She uses Schedule E, Part I, to report her rental income and expenses. Myfreetaxes com maine She enters her income, expenses, and depreciation for the house in the column for Property A and enters her loss on line 22. Myfreetaxes com maine Form 4562 is not required. Myfreetaxes com maine Prev  Up  Next   Home   More Online Publications