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State Income Tax Free Filing

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State Income Tax Free Filing

State income tax free filing 2. State income tax free filing   Possession Source Income Table of Contents Types of IncomeCompensation for Labor or Personal Services Investment Income Sales or Other Dispositions of Property Scholarships, Fellowships, Grants, Prizes, and Awards Effectively Connected Income In order to determine where to file your return and which form(s) you need to complete, you must determine the source of each item of income you received during the tax year. State income tax free filing Income you received from sources within, or that was effectively connected with the conduct of a trade or business within, the relevant possession must be identified separately from U. State income tax free filing S. State income tax free filing or foreign source income. State income tax free filing This chapter discusses the rules for determining if the source of your income is from: American Samoa, The Commonwealth of the Northern Mariana Islands (CNMI), The Commonwealth of Puerto Rico (Puerto Rico), Guam, or The U. State income tax free filing S. State income tax free filing Virgin Islands (USVI). State income tax free filing Generally, the same rules that apply for determining U. State income tax free filing S. State income tax free filing source income also apply for determining possession source income. State income tax free filing However, there are some important exceptions to these rules. State income tax free filing Both the general rules and the exceptions are discussed in this chapter. State income tax free filing U. State income tax free filing S. State income tax free filing income rule. State income tax free filing   This rule states that income is not possession source income if, under the rules of Internal Revenue Code sections 861–865, it is treated as income: From sources within the United States, or Effectively connected with the conduct of a trade or business within the United States. State income tax free filing Table 2-1 shows the general rules for determining whether income is from sources within the United States. State income tax free filing Table 2-1. State income tax free filing General Rules for Determining U. State income tax free filing S. State income tax free filing Source of Income Item of Income Factor Determining Source Salaries, wages, and other compensation for labor or personal services Where labor or services performed Pensions Contributions: Where services were performed that earned the pension Investment earnings: Where pension trust is located Interest Residence of payer Dividends Where corporation created or organized Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. State income tax free filing Where property is used Sale of business inventory—purchased Where sold Sale of business inventory—produced Allocation if produced and sold in different locations Sale of real property Location of property Sale of personal property Seller's tax home (but see Special Rules for Gains From Dispositions of Certain Property , later, for exceptions) Sale of natural resources Allocation based on fair market value of product at export terminal. State income tax free filing For more information, see Regulations section 1. State income tax free filing 863-1(b). State income tax free filing Types of Income This section looks at the most common types of income received by individuals, and the rules for determining the source of the income. State income tax free filing Generally, the same rules shown in Table 2-1 are used to determine if you have possession source income. State income tax free filing Compensation for Labor or Personal Services Income from labor or personal services includes wages, salaries, commissions, fees, per diem allowances, employee allowances and bonuses, and fringe benefits. State income tax free filing It also includes income earned by sole proprietors and general partners from providing personal services in the course of their trade or business. State income tax free filing Services performed wholly within a relevant possession. State income tax free filing   Generally, all pay you receive for services performed in a relevant possession is considered to be from sources within that possession. State income tax free filing However, there is an exception for income earned as a member of the U. State income tax free filing S. State income tax free filing Armed Forces or a civilian spouse. State income tax free filing U. State income tax free filing S. State income tax free filing Armed Forces. State income tax free filing   If you are a bona fide resident of a relevant possession, your military service pay will be sourced in that possession even if you perform the services in the United States or another possession. State income tax free filing However, if you are not a bona fide resident of a possession, your military service pay will be income from the  United States even if you perform services in a possession. State income tax free filing Civilian spouse of active duty member of the U. State income tax free filing S. State income tax free filing Armed Forces. State income tax free filing   If you are a bona fide resident of a U. State income tax free filing S. State income tax free filing possession and choose to keep that possession as your tax residence under MSRRA when relocating with your servicemember spouse under military orders, the source of income for your labor or personal services is considered to be that possession. State income tax free filing Likewise, if your tax residence is in one of the 50 states or the District of Columbia before relocating and you choose to keep it as your tax residence, the source of income for services performed in any of the U. State income tax free filing S. State income tax free filing possessions is considered to be the United States and, specifically, your state of residence or the District of Columbia. State income tax free filing Services performed partly inside and partly outside a relevant possession. State income tax free filing   If you are an employee and receive compensation for labor or personal services performed both inside and outside the relevant possession, special rules apply in determining the source of the compensation. State income tax free filing Compensation (other than certain fringe benefits) is sourced on a time basis. State income tax free filing Certain fringe benefits (such as housing and education) are sourced on a geographical basis. State income tax free filing   Or, you may be permitted to use an alternative basis to determine the source of compensation. State income tax free filing See Alternative basis , later. State income tax free filing   If you are self-employed, determine the source of your income for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. State income tax free filing In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. State income tax free filing Time basis. State income tax free filing   Use a time basis to figure your compensation for labor or personal services from the relevant possession (other than the fringe benefits discussed later). State income tax free filing Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed  services in the relevant  possession during the year     Total number of days you  performed services during the year           You can use a unit of time less than a day in the above fraction, if appropriate. State income tax free filing The time period for which the income is made does not have to be a year. State income tax free filing Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. State income tax free filing Example. State income tax free filing In 2013, you worked in your employer's office in the United States for 60 days and in the Puerto Rico office for 180 days, earning a total of $80,000 for the year. State income tax free filing Your Puerto Rico source income is $60,000, figured as follows. State income tax free filing       180 days 240 days × $80,000 = $60,000                 Multi-year compensation. State income tax free filing   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. State income tax free filing Multi-year compensation is compensation that is included in your income in 1 tax year but is attributable to a period that includes 2 or more tax years. State income tax free filing You determine the period to which the income is attributable based on the facts and circumstances of your case. State income tax free filing For more information on multi-year compensation, see Treasury Decision (T. State income tax free filing D. State income tax free filing ) 9212 and Regulations section 1. State income tax free filing 861-4, 2005-35 I. State income tax free filing R. State income tax free filing B. State income tax free filing 429, available at www. State income tax free filing irs. State income tax free filing gov/irb/2005-35_IRB/ar14. State income tax free filing html. State income tax free filing Certain fringe benefits sourced on a geographical basis. State income tax free filing   If you received any of the following fringe benefits as compensation for labor or services performed as an employee partly inside and partly outside a relevant possession, you must source that income on a geographical basis. State income tax free filing Housing. State income tax free filing Education. State income tax free filing Local transportation. State income tax free filing Tax reimbursement. State income tax free filing Hazardous or hardship duty pay. State income tax free filing Moving expense reimbursement. State income tax free filing For information on determining the source of the fringe benefits listed above, see Regulations section 1. State income tax free filing 861-4. State income tax free filing Alternative basis. State income tax free filing   You can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your income than the time or geographical basis. State income tax free filing If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your income. State income tax free filing De minimis exception. State income tax free filing   There is an exception to the rule for determining the source of income earned in a possession. State income tax free filing Generally, you will not have income from a possession if during a tax year you: Are a U. State income tax free filing S. State income tax free filing citizen or resident, Are not a bona fide resident of that possession, Are not employed by or under contract with an individual, partnership, or corporation that is engaged in a trade or business in that possession, Temporarily perform services in that possession for 90 days or less, and Earned $3,000 or less from such services. State income tax free filing This exception began with income earned during your 2008 tax year. State income tax free filing Pensions. State income tax free filing   Generally, pension income has two components: contributions to the pension plan and the earnings accrued from investing those contributions. State income tax free filing The contribution portion is sourced according to where services were performed that earned the pension. State income tax free filing The investment earnings portion is sourced according to the location of the pension trust. State income tax free filing Example. State income tax free filing You are a U. State income tax free filing S. State income tax free filing citizen who worked in Puerto Rico for a U. State income tax free filing S. State income tax free filing company. State income tax free filing All services were performed in Puerto Rico. State income tax free filing Upon retirement you remained in Puerto Rico and began receiving your pension from the U. State income tax free filing S. State income tax free filing pension trust of your employer. State income tax free filing Distributions from the U. State income tax free filing S. State income tax free filing pension trust must be allocated between (1) contributions, which are Puerto Rico source income, and (2) investment earnings, which are U. State income tax free filing S. State income tax free filing source income. State income tax free filing Investment Income This category includes such income as interest, dividends, rents, and royalties. State income tax free filing Interest income. State income tax free filing   The source of interest income is generally determined by the residence of the payer. State income tax free filing Interest paid by corporations created or organized in a relevant possession (possession corporation) or by individuals who are bona fide residents of a relevant possession is considered income from sources within that possession. State income tax free filing   However, there is an exception to this rule if you are a bona fide resident of a relevant possession, receive interest from a corporation created or organized in that possession, and are a shareholder of that corporation who owns, directly or indirectly, at least 10% of the total voting stock of the corporation. State income tax free filing See Regulations section 1. State income tax free filing 937-2(i) for more information. State income tax free filing Dividends. State income tax free filing   Generally, dividends paid by a corporation created or organized in a relevant possession will be considered income from sources within that possession. State income tax free filing There are additional rules for bona fide residents of a relevant possession who receive dividend income from possession corporations, and who own, directly or indirectly, at least 10% of the voting stock of the corporation. State income tax free filing For more information, see Regulations section 1. State income tax free filing 937-2(g). State income tax free filing Rental income. State income tax free filing   Rents from property located in a relevant possession are treated as income from sources within that possession. State income tax free filing Royalties. State income tax free filing   Royalties from natural resources located in a relevant possession are considered income from sources within that possession. State income tax free filing   Also considered possession source income are royalties received for the use of, or for the privilege of using, in a relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property. State income tax free filing Sales or Other Dispositions of Property The source rules for sales or other dispositions of property are varied. State income tax free filing The most common situations are discussed below. State income tax free filing Real property. State income tax free filing   Real property includes land and buildings, and generally anything built on, growing on, or attached to land. State income tax free filing The location of the property generally determines the source of income from the sale. State income tax free filing For example, if you are a bona fide resident of Guam and sell your home that is located in Guam, the gain on the sale is sourced in Guam. State income tax free filing If, however, the home you sold was located in the United States, the gain is U. State income tax free filing S. State income tax free filing source income. State income tax free filing Personal property. State income tax free filing   The term “personal property” refers to property (such as machinery, equipment, or furniture) that is not real property. State income tax free filing Generally, gain (or loss) from the sale or other disposition is sourced according to the seller's tax home. State income tax free filing If personal property is sold by a bona fide resident of a relevant possession, the gain (or loss) from the sale is treated as sourced within that possession. State income tax free filing   This rule does not apply to the sale of inventory, intangible property, depreciable personal property, or property sold through a foreign office or fixed place of business. State income tax free filing The rules applying to sales of inventory are discussed below. State income tax free filing For information on sales of the other types of property mentioned, see Internal Revenue Code section 865. State income tax free filing Inventory. State income tax free filing   Your inventory is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. State income tax free filing The source of income from the sale of inventory depends on whether the inventory was purchased or produced. State income tax free filing Purchased. State income tax free filing   Income from the sale of inventory that you purchased is sourced where you sell the property. State income tax free filing Generally, this is where title to the property passes to the buyer. State income tax free filing Produced. State income tax free filing   Income from the sale of inventory that you produced in a relevant possession and sold outside that possession (or vice versa) is sourced based on an allocation. State income tax free filing For information on making the allocation, see Regulations section 1. State income tax free filing 863-3(f). State income tax free filing Special Rules for Gains From Dispositions of Certain Property There are special rules for gains from dispositions of certain investment property (for example, stocks, bonds, debt instruments, diamonds, and gold) owned by a U. State income tax free filing S. State income tax free filing citizen or resident alien prior to becoming a bona fide resident of a possession. State income tax free filing You are subject to these special rules if you meet both of the following conditions. State income tax free filing For the tax year for which the source of the gain must be determined, you are a bona fide resident of the relevant possession. State income tax free filing For any of the 10 years preceding that year, you were a citizen or resident alien of the United States (other than a bona fide resident of the relevant possession). State income tax free filing If you meet these conditions, gains from the disposition of this property will not be treated as income from sources within the relevant possession for purposes of the Internal Revenue Code. State income tax free filing Accordingly, bona fide residents of American Samoa and Puerto Rico, for example, may not exclude the gain on their U. State income tax free filing S. State income tax free filing tax return. State income tax free filing (See chapter 3 for additional filing information. State income tax free filing ) With respect to the CNMI, Guam, and the USVI, the gain from the disposition of this property will not meet the requirements for certain tax rules that may allow bona fide residents of those possessions to reduce or obtain a rebate of taxes on income from sources within the relevant possessions. State income tax free filing These rules apply to dispositions after April 11, 2005. State income tax free filing For details, see Regulations section 1. State income tax free filing 937-2(f)(1) and Examples 1 and 2 of section 1. State income tax free filing 937-2(k). State income tax free filing Example 1. State income tax free filing In 2007, Cheryl Jones, a U. State income tax free filing S. State income tax free filing citizen, lived in the United States and paid $1,000 for 100 shares of stock in the Rose Corporation, a U. State income tax free filing S. State income tax free filing corporation listed on the New York Stock Exchange. State income tax free filing On March 1, 2010, she moved to Puerto Rico and changed her tax home to Puerto Rico on the same date. State income tax free filing Cheryl satisfied the presence test in 2010 and, under the year-of-move exception, she was considered a bona fide resident of Puerto Rico for the rest of 2010. State income tax free filing On March 1, 2010, the closing value of Cheryl's stock in the Rose Corporation was $2,000. State income tax free filing On January 5, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold all her Rose Corporation stock for $7,000. State income tax free filing Under the earlier rules, none of Cheryl's $6,000 gain will be treated as income from sources within Puerto Rico. State income tax free filing The source rules discussed in the preceding paragraphs supplement, and may apply in conjunction with, an existing special rule. State income tax free filing This existing special rule applies if you are a U. State income tax free filing S. State income tax free filing citizen or resident alien who becomes a bona fide resident of American Samoa, the CNMI, or Guam, and who has gain from the disposition of certain U. State income tax free filing S. State income tax free filing assets during the 10-year period beginning when you became a bona fide resident. State income tax free filing The gain is U. State income tax free filing S. State income tax free filing source income that generally is subject to U. State income tax free filing S. State income tax free filing tax if the property is either (1) located in the United States; (2) stock issued by a U. State income tax free filing S. State income tax free filing corporation or a debt obligation of a U. State income tax free filing S. State income tax free filing person or of the United States, a state (or political subdivision), or the District of Columbia; or (3) property that has a basis in whole or in part by reference to property described in (1) or (2). State income tax free filing See chapter 3 for filing information. State income tax free filing Special election. State income tax free filing   For dispositions after April 11, 2005, you can choose to treat the part of gain (or loss) attributable to the time you held the property while a bona fide resident of the relevant possession (the possession holding period) as gain (or loss) from sources within that possession. State income tax free filing Make the election by reporting the gain attributable to the possession holding period on your income tax return for the year of disposition. State income tax free filing This election overrides both of the special rules discussed earlier. State income tax free filing   There are two methods for figuring the gain for the possession holding period, one for marketable securities and another for other types of investment property. State income tax free filing Marketable securities. State income tax free filing   Marketable securities are those actively traded on an established financial market, such as stock in a publicly held corporation. State income tax free filing Under the special election, allocate the gain (or loss) by figuring the appreciation separately for your possession and U. State income tax free filing S. State income tax free filing holding periods. State income tax free filing   Your possession holding period begins on the first day you do not have a tax home outside the relevant possession. State income tax free filing The gain (or loss) attributable to the possession holding period is the difference in fair market value of the security at the close of the market on the first and last days of this holding period. State income tax free filing This is your gain (or loss) that is treated as being from sources within the relevant possession. State income tax free filing If you were a bona fide resident of the relevant possession for more than one continuous period, combine the gains (or losses) from each possession holding period. State income tax free filing Example 2. State income tax free filing Assume the same facts as in Example 1, except that Cheryl makes the special election to allocate the gain between her U. State income tax free filing S. State income tax free filing and possession holding periods. State income tax free filing Cheryl's possession holding period began March 1, 2010, the date her tax home changed to Puerto Rico. State income tax free filing Therefore, the portion of gain attributable to her possession holding period is $5,000 ($7,000 sale price – $2,000 closing value on first day of the possession holding period). State income tax free filing By reporting $5,000 of her $6,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. State income tax free filing Other personal property. State income tax free filing   For personal property other than marketable securities, use a time-based allocation. State income tax free filing Figure the gain (or loss) attributable to the possession holding period by multiplying your total gain (or loss) by the following fraction. State income tax free filing      Number of days in the  possession holding period     Total number of days  in your holding period         The result is your gain (or loss) that is treated as being from sources within the relevant possession. State income tax free filing Example 3. State income tax free filing In addition to the stock in Rose Corporation, Cheryl acquired a 5% interest in the Alder Partnership on January 1, 2009. State income tax free filing On March 1, 2010, when she established bona fide residency in Puerto Rico, her partnership interest was not considered a marketable security. State income tax free filing On September 16, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold her interest in Alder Partnership for a $100,000 gain. State income tax free filing She had owned the interest for a total of 1,720 days. State income tax free filing Cheryl's possession holding period (from March 1, 2010, through September 16, 2013) is 1,296 days. State income tax free filing The portion of her gain attributable to Puerto Rico is $75,349 ($100,000 x (1,296 Puerto Rico days ÷ 1,720 total days)). State income tax free filing By reporting $75,349 of her $100,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. State income tax free filing Scholarships, Fellowships, Grants, Prizes, and Awards The source of these types of income is generally the residence of the payer, regardless of who actually disburses the funds. State income tax free filing Therefore, in order to be possession source income, the payer must be a resident of the relevant possession, such as an individual who is a bona fide resident or a corporation created or organized in that possession. State income tax free filing These rules do not apply to amounts paid as salary or other compensation for services. State income tax free filing See Compensation for Labor or Personal Services, earlier in this chapter, for the source rules that apply. State income tax free filing Effectively Connected Income In limited circumstances, some kinds of income from sources outside the relevant possession must be treated as effectively connected with a trade or business in that possession. State income tax free filing These circumstances are listed below. State income tax free filing You have an office or other fixed place of business in the relevant possession to which the income can be attributed. State income tax free filing That office or place of business is a material factor in producing the income. State income tax free filing The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. State income tax free filing An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. State income tax free filing The three kinds of income from sources outside the relevant possession to which these rules apply are the following. State income tax free filing Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the relevant possession or from any interest in such property. State income tax free filing Included are rents or royalties for the use of, or for the privilege of using, outside the relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the relevant possession. State income tax free filing Dividends or interest from the active conduct of a banking, financing, or similar business in the relevant possession. State income tax free filing Income, gain, or loss from the sale or exchange outside the relevant possession, through the office or other fixed place of business in the relevant possession, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. State income tax free filing Item (3) will not apply if you sold the property for use, consumption, or disposition outside the relevant possession and an office or other fixed place of business in a foreign country was a material factor in the sale. State income tax free filing Example. State income tax free filing Marcy Jackson is a bona fide resident of American Samoa. State income tax free filing Her business, which she conducts from an office in American Samoa, is developing and selling specialized computer software. State income tax free filing A software purchaser will frequently pay Marcy an additional amount to install the software on the purchaser's operating system and to ensure that the software is functioning properly. State income tax free filing Marcy installs the software at the purchaser's place of business, which may be in American Samoa, in the United States, or in another country. State income tax free filing The income from selling the software is effectively connected with the conduct of Marcy's business in American Samoa, even though the product's destination may be outside the possession. State income tax free filing However, the compensation she receives for installing the software (personal services) outside of American Samoa is not effectively connected with the conduct of her business in the possession—the income is sourced where she performs the services. State income tax free filing Prev  Up  Next   Home   More Online Publications
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The State Income Tax Free Filing

State income tax free filing Internal Revenue Bulletin:  2012-14  April 2, 2012  Rev. State income tax free filing Proc. State income tax free filing 2012-23 Table of Contents SECTION 1. State income tax free filing PURPOSE SECTION 2. State income tax free filing BACKGROUND SECTION 3. State income tax free filing SCOPE SECTION 4. State income tax free filing APPLICATION. State income tax free filing 01 Limitations on Depreciation Deductions for Certain Automobiles. State income tax free filing . State income tax free filing 02 Inclusions in Income of Lessees of Passenger Automobiles. State income tax free filing SECTION 5. State income tax free filing EFFECTIVE DATE SECTION 6. State income tax free filing DRAFTING INFORMATION SECTION 1. State income tax free filing PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2012, including separate tables of limitations on depreciation deductions for trucks and vans; and (2) the amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2012, including a separate table of inclusion amounts for lessees of trucks and vans. State income tax free filing The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. State income tax free filing SECTION 2. State income tax free filing BACKGROUND . State income tax free filing 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. State income tax free filing For passenger automobiles placed in service after 1988, § 280F(d)(7) requires the Internal Revenue Service to increase the amounts allowable as depreciation deductions by a price inflation adjustment amount. State income tax free filing The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. State income tax free filing This change reflects the higher rate of price inflation for trucks and vans since 1988. State income tax free filing . State income tax free filing 02 Section 401(a) of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, Pub. State income tax free filing L. State income tax free filing No. State income tax free filing 111-312, 124 Stat. State income tax free filing 3296 (Dec. State income tax free filing 17, 2010) (the “Act”) extended the 50 percent additional first year depreciation deduction under § 168(k) to qualified property acquired by the taxpayer after December 31, 2007, and before January 1, 2013, if no written binding contract for the acquisition of the property existed before January 1, 2008, and if the taxpayer places the property in service generally before January 1, 2013. State income tax free filing Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A)(i) by $8,000 for passenger automobiles to which the additional first year depreciation deduction under § 168(k) (hereinafter, referred to as “§ 168(k) additional first year depreciation deduction”) applies. State income tax free filing . State income tax free filing 03 Section 168(k)(2)(D)(i) provides that the § 168(k) additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). State income tax free filing Section 168(k)(2)(D)(iii) permits a taxpayer to elect out of the § 168(k) additional first year depreciation deduction for any class of property. State income tax free filing Section 168(k)(4), as amended by the Act, permits a corporation to elect to increase the alternative minimum tax (“AMT”) credit limitation under § 53(c), instead of claiming the § 168(k) additional first year depreciation deduction for all eligible qualified property placed in service after December 31, 2010, that is round 2 extension property (as defined in § 168(k)(4)(I)(iv)). State income tax free filing Accordingly, this revenue procedure provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction applies. State income tax free filing This revenue procedure also provides tables for passenger automobiles for which the § 168(k) additional first year depreciation deduction does not apply, either because taxpayer (1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2012 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation. State income tax free filing . State income tax free filing 04 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. State income tax free filing The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. State income tax free filing Under § 1. State income tax free filing 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an amount determined by applying a formula to the amount obtained from a table. State income tax free filing One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. State income tax free filing Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. State income tax free filing SECTION 3. State income tax free filing SCOPE . State income tax free filing 01 The limitations on depreciation deductions in section 4. State income tax free filing 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2012, and continue to apply for each taxable year that the passenger automobile remains in service. State income tax free filing . State income tax free filing 02 The tables in section 4. State income tax free filing 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2012. State income tax free filing Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. State income tax free filing See Rev. State income tax free filing Proc. State income tax free filing 2007-30, 2007-1 C. State income tax free filing B. State income tax free filing 1104, for passenger automobiles first leased during calendar year 2007; Rev. State income tax free filing Proc. State income tax free filing 2008-22, 2008-1 C. State income tax free filing B. State income tax free filing 658, for passenger automobiles first leased during calendar year 2008; Rev. State income tax free filing Proc. State income tax free filing 2009-24, 2009-17 I. State income tax free filing R. State income tax free filing B. State income tax free filing 885, for passenger automobiles first leased during calendar year 2009; Rev. State income tax free filing Proc. State income tax free filing 2010-18, 2010-9 I. State income tax free filing R. State income tax free filing B. State income tax free filing 427, as amplified and modified by section 4. State income tax free filing 03 of Rev. State income tax free filing Proc. State income tax free filing 2011-21, 2011-12 I. State income tax free filing R. State income tax free filing B. State income tax free filing 560, for passenger automobiles first leased during calendar year 2010; and Rev. State income tax free filing Proc. State income tax free filing 2011-21, for passenger automobiles first leased during calendar year 2011. State income tax free filing SECTION 4. State income tax free filing APPLICATION . State income tax free filing 01 Limitations on Depreciation Deductions for Certain Automobiles. State income tax free filing (1) Amount of the inflation adjustment. State income tax free filing (a) Passenger automobiles (other than trucks or vans). State income tax free filing Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. State income tax free filing Section 280F(d)(7)(B)(ii) defines the term “CPI automobile component” as the automobile component of the Consumer Price Index for all Urban Consumers published by the Department of Labor. State income tax free filing The new car component of the CPI was 115. State income tax free filing 2 for October 1987 and 143. State income tax free filing 419 for October 2011. State income tax free filing The October 2011 index exceeded the October 1987 index by 28. State income tax free filing 219. State income tax free filing Therefore, the automobile price inflation adjustment for 2012 for passenger automobiles (other than trucks and vans) is 24. State income tax free filing 5 percent (28. State income tax free filing 219/115. State income tax free filing 2 x 100%). State income tax free filing The dollar limitations in § 280F(a) are multiplied by a factor of 0. State income tax free filing 245, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2012. State income tax free filing This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2012. State income tax free filing (b) Trucks and vans. State income tax free filing To determine the dollar limitations for trucks and vans first placed in service during calendar year 2012, the Service uses the new truck component of the CPI instead of the new car component. State income tax free filing The new truck component of the CPI was 112. State income tax free filing 4 for October 1987 and 146. State income tax free filing 607 for October 2011. State income tax free filing The October 2011 index exceeded the October 1987 index by 34. State income tax free filing 207. State income tax free filing Therefore, the automobile price inflation adjustment for 2012 for trucks and vans is 30. State income tax free filing 43 percent (34. State income tax free filing 207/112. State income tax free filing 4 x 100%). State income tax free filing The dollar limitations in § 280F(a) are multiplied by a factor of 0. State income tax free filing 3043, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. State income tax free filing This adjustment applies to all trucks and vans that are first placed in service in calendar year 2012. State income tax free filing (2) Amount of the limitation. State income tax free filing Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2012. State income tax free filing Use Table 1 for a passenger automobile (other than a truck or van), and Table 2 for a truck or van, placed in service in calendar year 2012 for which the § 168(k) additional first year depreciation deduction applies. State income tax free filing Use Table 3 for a passenger automobile (other than a truck or van), and Table 4 for a truck or van, placed in service in calendar year 2012 for which the § 168(k) additional first year depreciation deduction does not apply. State income tax free filing REV. State income tax free filing PROC. State income tax free filing 2012-23 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. State income tax free filing PROC. State income tax free filing 2012-23 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,360 2nd Tax Year $5,300 3rd Tax Year $3,150 Each Succeeding Year $1,875 REV. State income tax free filing PROC. State income tax free filing 2012-23 TABLE 3 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 REV. State income tax free filing PROC. State income tax free filing 2012-23 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2012 FOR WHICH THE § 168(k) ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,360 2nd Tax Year $5,300 3rd Tax Year $3,150 Each Succeeding Year $1,875 . State income tax free filing 02 Inclusions in Income of Lessees of Passenger Automobiles. State income tax free filing A taxpayer must follow the procedures in § 1. State income tax free filing 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2012. State income tax free filing In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure, while lessees of trucks and vans should use Table 6 of this revenue procedure. State income tax free filing REV. State income tax free filing PROC. State income tax free filing 2012-23 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $18,500 $19,000 2 4 5 6 8 19,000 19,500 2 4 7 7 9 19,500 20,000 2 5 8 8 10 20,000 20,500 3 5 9 10 11 20,500 21,000 3 6 9 12 12 21,000 21,500 3 7 10 12 14 21,500 22,000 3 8 11 13 16 22,000 23,000 4 8 13 15 17 23,000 24,000 4 10 15 17 20 24,000 25,000 5 11 17 19 23 25,000 26,000 6 12 19 21 26 26,000 27,000 6 14 20 24 28 27,000 28,000 7 15 22 26 31 28,000 29,000 7 16 25 28 33 29,000 30,000 8 18 25 32 35 30,000 31,000 9 19 27 34 38 31,000 32,000 9 20 30 36 41 32,000 33,000 10 21 32 38 43 33,000 34,000 10 23 33 41 46 34,000 35,000 11 24 35 43 49 35,000 36,000 12 25 37 45 52 36,000 37,000 12 27 39 47 54 37,000 38,000 13 28 41 49 57 38,000 39,000 13 29 43 52 59 39,000 40,000 14 30 45 54 62 40,000 41,000 14 32 47 56 65 41,000 42,000 15 33 49 58 68 42,000 43,000 16 34 51 61 70 43,000 44,000 16 36 52 63 73 44,000 45,000 17 37 54 66 75 45,000 46,000 17 38 57 67 78 46,000 47,000 18 39 59 70 80 47,000 48,000 19 40 61 72 83 48,000 49,000 19 42 62 75 86 49,000 50,000 20 43 64 77 89 50,000 51,000 20 45 66 79 91 51,000 52,000 21 46 68 81 94 52,000 53,000 21 47 70 84 96 53,000 54,000 22 48 72 86 99 54,000 55,000 23 49 74 88 102 55,000 56,000 23 51 76 90 104 56,000 57,000 24 52 78 92 107 57,000 58,000 24 54 79 95 110 58,000 59,000 25 55 81 97 113 59,000 60,000 26 56 83 100 115 60,000 62,000 26 58 86 103 119 62,000 64,000 28 60 90 108 124 64,000 66,000 29 63 94 112 129 66,000 68,000 30 66 97 117 135 68,000 70,000 31 68 102 121 140 70,000 72,000 32 71 105 126 145 72,000 74,000 33 74 109 130 151 74,000 76,000 35 76 113 135 156 76,000 78,000 36 78 117 140 161 78,000 80,000 37 81 120 145 166 80,000 85,000 39 86 127 152 176 85,000 90,000 42 92 137 163 189 90,000 95,000 45 98 147 175 202 95,000 100,000 48 105 155 187 215 100,000 110,000 52 115 170 203 235 110,000 120,000 58 127 189 227 262 120,000 130,000 64 140 208 250 288 130,000 140,000 70 153 227 272 315 140,000 150,000 75 166 246 296 340 150,000 160,000 81 179 265 318 368 160,000 170,000 87 192 284 341 394 170,000 180,000 93 204 304 364 420 180,000 190,000 99 217 323 387 446 190,000 200,000 105 230 342 409 473 200,000 210,000 111 243 361 432 499 210,000 220,000 116 256 380 455 526 220,000 230,000 122 269 399 478 552 230,000 240,000 128 282 418 501 578 240,000 and up 134 294 437 524 605 REV. State income tax free filing PROC. State income tax free filing 2012-23 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2012 Fair Market Value of Truck or Van Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $19,000 $19,500 1 4 5 6 7 19,500 20,000 2 4 6 7 9 20,000 20,500 2 5 7 8 10 20,500 21,000 2 5 8 10 11 21,000 21,500 3 6 9 10 13 21,500 22,000 3 6 10 12 14 22,000 23,000 3 8 11 14 15 23,000 24,000 4 9 13 16 18 24,000 25,000 4 10 15 19 21 25,000 26,000 5 11 17 21 24 26,000 27,000 6 12 19 23 26 27,000 28,000 6 14 21 25 29 28,000 29,000 7 15 23 27 32 29,000 30,000 7 17 24 30 34 30,000 31,000 8 18 26 32 37 31,000 32,000 9 19 28 34 40 32,000 33,000 9 20 31 36 42 33,000 34,000 10 21 33 39 44 34,000 35,000 10 23 34 41 48 35,000 36,000 11 24 36 44 50 36,000 37,000 12 25 38 46 53 37,000 38,000 12 27 40 48 55 38,000 39,000 13 28 42 50 58 39,000 40,000 13 29 44 53 60 40,000 41,000 14 31 45 55 63 41,000 42,000 14 32 48 57 66 42,000 43,000 15 33 50 59 69 43,000 44,000 16 34 52 61 72 44,000 45,000 16 36 53 64 74 45,000 46,000 17 37 55 66 77 46,000 47,000 17 38 58 68 79 47,000 48,000 18 40 59 70 82 48,000 49,000 19 41 61 73 84 49,000 50,000 19 42 63 75 87 50,000 51,000 20 43 65 78 89 51,000 52,000 20 45 66 80 93 52,000 53,000 21 46 68 83 95 53,000 54,000 21 48 70 84 98 54,000 55,000 22 49 72 87 100 55,000 56,000 23 50 74 89 103 56,000 57,000 23 51 76 92 105 57,000 58,000 24 52 78 94 108 58,000 59,000 24 54 80 96 111 59,000 60,000 25 55 82 98 114 60,000 62,000 26 57 85 101 118 62,000 64,000 27 60 88 106 123 64,000 66,000 28 62 93 110 128 66,000 68,000 29 65 96 115 134 68,000 70,000 30 67 100 120 139 70,000 72,000 32 70 103 125 144 72,000 74,000 33 72 108 129 149 74,000 76,000 34 75 111 134 155 76,000 78,000 35 78 115 138 160 78,000 80,000 36 80 119 143 165 80,000 85,000 38 85 125 151 175 85,000 90,000 41 91 135 163 187 90,000 95,000 44 98 144 174 201 95,000 100,000 47 104 154 185 214 100,000 110,000 52 113 169 202 234 110,000 120,000 57 127 187 225 261 120,000 130,000 63 139 207 248 287 130,000 140,000 69 152 226 271 313 140,000 150,000 75 165 245 294 339 150,000 160,000 81 178 264 316 366 160,000 170,000 87 190 283 340 392 170,000 180,000 92 204 302 362 419 180,000 190,000 98 216 322 385 445 190,000 200,000 104 229 340 409 471 200,000 210,000 110 242 359 431 498 210,000 220,000 116 255 378 454 524 220,000 230,000 122 267 398 477 551 230,000 240,000 127 281 416 500 577 240,000 and up 133 294 435 523 603 SECTION 5. State income tax free filing EFFECTIVE DATE This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2012. State income tax free filing SECTION 6. State income tax free filing DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. State income tax free filing Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). State income tax free filing For further information regarding this revenue procedure, contact Mr. State income tax free filing Harvey at (202) 622-4930 (not a toll-free call). State income tax free filing Prev  Up  Next   Home   More Internal Revenue Bulletins